Palo Alto Networks Q2 FY26 earnings call PANW

The company's platformization strategy continues to drive strong results, with a record 110 net new platformizations in Q2, bringing the total to approximately 1,550, up 35%. This approach has led to a best-in-class net retention rate of 119% among platformized customers, demonstrating sustained investment and low churn. The strategy is validated by major deals, including a $50 million deal with a global automotive leader for SASE and XSIAM, and a $40 million deal with a global technology supplier for XSIAM and SASE expansion.

Palo Alto Networks is actively addressing the evolving AI threat landscape, viewing security as an enabling layer for AI adoption. The company's Unit 42 research indicates end-to-end attacks are 4x faster than a year ago, with 90% of breaches preventable by better visibility and controls. This necessitates a real-time, data-driven platform approach. The intent to acquire Koi, a pioneer in securing agentic endpoints, highlights the focus on protecting new AI layers of software and ephemeral code that bypass traditional security.

The recent acquisitions of Chronosphere and CyberArk, along with the announced intent to acquire Koi, are central to the company's strategy to address new market inflections in observability, identity, and agentic endpoint security. Chronosphere, with $200 million ARR, provides massive-scale observability, evidenced by a multi-year 9-figure expansion deal with a leading AI model provider. CyberArk, acquired early in Q3, brings a strong identity security platform, with plans to build a next-generation solution protecting humans, machines, and AI agents.

The SASE business continues its strong growth, surpassing $1.5 billion in ARR and growing approximately 40% year-over-year. This growth is fueled by customers seeking comprehensive platform solutions over first-generation point products. The secure browser, Prisma Browser, has been adopted by over 1,500 customers, with an additional 2 million licenses sold in Q2. Software firewall ARR grew approximately 25%, complemented by nearly 10% growth in hardware revenue, driven by Gen 5 firewalls.

The Cortex platform, particularly XSIAM, has surpassed $0.5 billion in ARR, with over 600 customers paying an average of nearly $1 million in ARR. XSIAM's success is attributed to its AI-driven SOC capabilities, enabling over 60% of deployed customers to achieve mean time to remediation of less than 10 minutes. The development of AgentiX further enhances automation by enabling autonomous AI agents to remediate issues across diverse infrastructure, extending beyond traditional security ecosystems.

Palo Alto Networks is preparing customers for the post-quantum era, recognizing the "harvest now, decrypt later" threat. The company's quantum summit attracted nearly 5,000 attendees, confirming broad interest. The focus is on guiding customers through this architectural uplift, with new capabilities being built to address cryptography and certificate management, leveraging technology for discovery and automated remediation across enterprise infrastructure.