Deeper research

Before I start: Q3 earnings are 2nd June BASICS: Palo Alto is no longer just a seller of hardware devices (firewalls). They have completely transformed into a software AI giant, the only one in the world capable of covering the three main pillars of security under one roof: 1 Strata (Network Security): Advanced next-generation network firewalls (NGFWs), which are now being deployed on a massive scale in AI data centers to protect massive data flows. 2 Prisma (Cloud Security): Protection for cloud infrastructures (AWS, Azure, Google Cloud). This is crucial, as most AI applications today run in the cloud. 3 Cortex (Security Operations): An AI platform that automatically analyzes threats within the company, detects hackers, and can respond to attacks in seconds without human intervention. PEAK MOVE: Some time ago (2024), Palo Alto adopted an aggressive strategy: they told companies they would give them a host of security tools for free at the outset, just to get them onto their platform and force them to abandon products from smaller competitors. At the time, Wall Street feared that Palo Alto would destroy its margins, and its stock price plummeted. But now these deals are actually starting to pay off, customers are signing massive long-term contracts, and the company’s numbers are skyrocketing. BIG CONTRACTS AFTERWARDS: The main driver of the company’s growth is that its “platformization” strategy offering customers discounts and bonuses if they switch everything over to them and abandon competing software from smaller companies is working perfectly. Closing massive contracts (Million-Dollar Deals): Large corporations are signing so-called Consolidation Deals en masse. According to data from major enterprise contracts for 2026, if a company signs a contract for all three platforms (Strata + Prisma + Cortex) for 3 to 5 years, it receives a “Platform Discount” of 40% to 55% off the list price. For large companies (Global 2000), these are contracts worth $11 million to $18 million. For Palo Alto, this means they “lock in” the customer for half a decade in advance. Acquisition of the Year – CyberArk (Completed in early 2026): Palo Alto successfully completed the massive integration and acquisition of the leader in Identity and Access Management (IAM) CyberArk. In February 2026, Palo Alto officially assumed their financial obligations (convertible notes). With this move, they acquired the missing piece of the puzzle: now they can secure not only the network and the cloud, but also the identities of users and AI bots themselves. AI Partnership: In May 2026, there is a lot of buzz in the market about the update to Anthropic’s (the creators of Claude) Glasswing project, where Palo Alto plays a key role as a security layer to protect corporate secrets from leaking into LLM models. FINANCIALS+EARNINGS Palo Alto is reporting excellent results. The latest quarterly results (Q2 of fiscal year 2026, reported in late February) showed tremendous strength: Revenue: Increased 15% year-over-year to $2.6 billion for the quarter. The outlook for the upcoming Q3 2026 (which they will report in a few days—>June 2, 2026) is $2.94 billion (a year-over-year increase of 28–29%). Profitability (EPS Beat): Non-GAAP earnings per share (EPS) in the latest report reached $1.03, completely crushing analysts’ estimates, which had expected only $0.76. RPO (Remaining Performance Obligation): This is the most important metric for software companies it represents the value of signed but not yet billed future contracts. RPO jumped to an incredible $16 billion (up 23% year-over-year). For the coming weeks, they expect RPO to rise to $17.9 billion. The company essentially has guaranteed revenue for years to come. Margins: The operating margin remains at an excellent 28.5–29%, and management has confirmed its outlook that by 2028, they aim to have an Adjusted Free Cash Flow Margin of over 40%. FUTURE (IN AI): Management sees the future solely in AI-driven autonomous security (Next-Gen Security ARR). Next-Gen ARR Target (2026): The goal is for annual recurring revenue (ARR) from their new AI and cloud products alone to reach $8.52 to $8.62 billion by the end of the year (a staggering year-over-year jump of 53–54%). Protecting AI ecosystems: The plan is clear - to become an infrastructure necessity. Just as a data center needs an Eaton transformer, it also needs software security against attacks on LLM models. Palo Alto is building modules that prevent hackers from sending so-called prompt injections (malicious commands) to corporate AI systems. RISKS (WATCH CLOSELY): Premium Valuation (P/E ~144): Trading at such a high earnings multiple means the market expects absolutely flawless execution. The company has no room for even the slightest misstep. Looming volatility (Earnings): Results for fiscal Q3 2026 will be announced on Tuesday, June 2, 2026, after the markets close. Investors should expect increased short-term volatility. Wall Street will be closely scrutinizing margins following the CyberArk acquisition and any potential adjustment to the full-year ARR outlook. SUMMARY: $PANW⁠ currently represents the absolute pinnacle of the tech sector. While other software (SaaS) companies are facing headwinds, Palo Alto is thriving because cybersecurity is a "mandatory utility" that corporations simply cannot cut during a slowdown. Their aggressive "platformization" strategy (hooking clients with upfront discounts) has proven to be a stroke of genius, as evidenced by a massive backlog of future contracts (RPO) topping $16 billion. Furthermore, with the acquisition of CyberArk, they have dominated the AI identity and bot security space, turning the company into a true monopoly for the upcoming era of autonomous intelligence. While the stock isn't cheap (GAAP P/E ~144), the stellar operating metrics and a projected 40% Free Cash Flow margin by 2028 make it a premier cash-flow monster. For long-term investors, this is the ideal software counterpart to the AI hardware boom.

Another stock added

I purchased today on palo Nancy Pelosi has held this 12/02/24 and is coming in nearly at her entry point and she held Let see how gos fingers crossed

Positive earnings

Looks like it was worth buying the dip!