Palo Alto Networks beats fiscal Q4 estimates as AI-driven cybersecurity demand intensifies

For the full fiscal year, adjusted EPS rose 7%. The company's next-generation security annual recurring revenue, a closely watched metric, grew 63% year over year in the quarter, accelerating from 60% in the previous quarter and exceeding expectations, CNBC reported.

Shares fell almost 2% in extended trading after initially rising by several percentage points. CNBC said the reversal could reflect profit-taking after a recent rally and OpenAI's announcement that its upcoming AI model, Astra, meets the "Critical" cybersecurity threshold under the company's Preparedness Framework. OpenAI said Astra is the first model designated at that level; with the right tools and access, it could find previously unknown security flaws and develop ways to exploit them across many well-protected systems without a person guiding each step. OpenAI added that Astra will have throttled-back cyber capabilities when released.

Palo Alto CEO Nikesh Arora told CNBC's Jim Cramer on "Mad Money" that "you cannot deploy AI successfully if you do not get cybersecurity right," adding that AI improves the industry's long-term growth rate. On the earnings call, Arora said there is "approximately $1 trillion of global cybersecurity debt that must be modernized to defend against automated threats," referring to infrastructure installed in the pre-generative-AI era that is not equipped for agentic AI systems that can complete multi-step tasks with minimal human intervention.

The earnings come at a time when AI is boosting productivity but also increasing risks to sensitive data, especially on legacy systems that predate agentic AI, CNBC said. The security industry is seeing demand for consolidated platforms, a trend known as "platformization," with Palo Alto and CrowdStrike positioned as leaders. CNBC's investment club said it raised its price target on Palo Alto's stock.