What Palo Alto Networks’ Q4 Says About The Security Market In The Agentic AI Era

Vendor consolidation, agentic AI and secure browser opportunities were among the biggest topics on Palo Alto Networks’ latest quarterly earnings call.

Palo Alto Networks’ fourth fiscal quarter results and forecast for the 2026 fiscal year didn’t only showcase success for the vendor–they were a signal to the channel about emerging trends in the security field in the age of artificial intelligence.

Customers looking to consolidate their security vendors, growing opportunity in the secure browser market and how a combined Palo Alto Networks and CyberArk can shake up the industry were some of the topics the Santa Clara, Calif.-based company covered on the earnings call Monday.

The vendor’s total revenue of $2.54 billion exceeded Wall Street’s expectation of $2.5 billion and remaining performance obligation (RPO) of $15.8 billion exceeded Wall Street’s estimate of $15.26 billion, according to a report Tuesday by investment firm Wedbush. The vendor has also now surpassed a $10 billion run rate.

Palo Alto Networks 4Q

The vendor’s investment in software-based products instead of hardware and signs of a growing presence of agentic AI in the business security conversation–for good, bad or a mix of the two–were also big topics of conversation on the call, which covered the vendor’s fourth fiscal quarter, ended July 31.

“In this new era, security is no longer a bolt on,” Palo Alto Networks CEO Nikesh Arora told analysts on the call. “It is a foundational enabler of transformational success.”

Read on for some of our biggest takeaways from Palo Alto Networks’ latest quarterly earnings call.

Security Vendor Consolidation

Arora has touted the vendor’s “platformization” approach to selling customers on buying a security platform to improve their posture instead of stitching together a group of point solutions.

The platformization strategy has proven “prescient” for the vendor, with multiple eight-figure deals won thanks to a broader consolidated set of products, according to a William Blair report Tuesday.

Palo Alto Networks customers appear sold by security through a unified platform more so than any discounting, according to the investment firm. Platformization gives the vendor the potential “to capture much larger wallet share from enterprise customers looking to rationalize point solution providers.”

“In our view, many of these deals are not necessarily ELAs and typically represent the starting point for a relationship that can grow much larger over time, as many enterprises cannot make a wholesale change in their security structure overnight,” according to the firm.

Palo Alto Networks’ innovation-driven strategy and broad portfolio sets it up for success, according to the firm. But for long-term success, the vendor needs “large training sets of data and broad-based coverage that can improve the effectiveness of next-generation products.”

In its own report Tuesday, Wedbush said that Palo Alto Networks saw about 150 net-net platformization deals during the quarter compared to about 90 the prior quarter.

The vendor saw a 51 percent increase year on year in $5 million-plus accounts and 50 percent year on year in $10 million-plus accounts thanks to platformization, with an increase in the average ARR per platformized customer, according to the investment firm.

Secure Browsers A New OS?

On the call, Arora called enterprise browsers a “new operating system for the enterprise” and “the primary interface for AI and cloud applications.”

This trend bodes well for Palo Alto Networks’ Prisma Access Browser, which saw seat licenses double quarter over quarter to more than 6 million. The vendor’s secure browser offer comes from its 2023 acquisition of Talon Cyber Security.

“It will become impossible to allow employees access to non-secure browsers in the future,” Arora said. “As more and more critical applications and data reside within the browser, it naturally becomes a target for cyberattacks.”

Prisma Access Browser “is strategically positioned to be the future OS in enabling secure and productive work in an AI-driven world,” Arora added. AI vendors relying more on consumer browsers for AI agents will increase enterprises’ desire to put employees on secure browsers, the CEO said.

“If you believe that agentic’s true future is coming through browsers in the future for the desktop, then you have to believe that the case for secure browser just became a mainstream case in the enterprise use case,” he said.

Security In The Agentic AI Era

Although Palo Alto Networks started investing in the enterprise browser opportunity to reach virtual desktop infrastructure, mobile devices and other use cases not covered by secure access service edge (SASE), in the past six to eight months, the vendor has seen browsers leveraged for successful consumer AI agent deployment, Arora said on the call.

Palo Alto Networks “will have significant advantages as agentic AI becomes a critical growth area over time” due to the foundation formed by its network security, XSIAM, AI, cloud and SASE portfolio, according to investment firm William Blair’s Tuesday report.

Palo Alto Networks’ AI annual recurring revenue (ARR) was about $545 million, up almost threefold year over year, according to Wedbush’s Tuesday report.

“Cybersecurity is a clear 2nd/3rd derivative play in the AI Revolution,” according to Wedbush, which described the vendor as “in the driver’s seat to gain market/mind share.”

Cloud hyperscalers such as Microsoft have also pointed to data showing growth in the agentic AI market.

In their most recent quarterly earnings call, Microsoft executives said that Azure AI Foundry Agent Service now has 14,000 customers, that tens of thousands of organizations have already used Microsoft researcher and analyst deep-reasoning AI agents in the first weeks of availability this year and that customers have created 3 million agents using SharePoint and Copilot Studio.

Microsoft’s GitHub code review agent performs millions of code reviews each month, the tech giant revealed on the July call.

CyberArk Gives Palo Alto Networks Identity Boost

Arora offered some roadmap on the call for how a combined Palo Alto Networks and CyberArk push further into the security market, especially as artificial intelligence use grows.

Palo Alto Networks still expects to close the deal in the second half of its fiscal year and adjusted free cash flow of 40-plus percent for the combined company by fiscal year 2028.

He sees the identity market that CyberArk serves hitting an inflection point in the next 12 to 24 months as agentic AI grows, the CEO said on the call. More than 90 percent of breaches involve stolen or mismanaged credentials, meaning that every user machine and AI agent should be considered privileged users rather than just a small set of IT administrators.

CyberArk has about 3,000 channel partners worldwide, according to CRN’s 2025 Channel Chiefs. That’s about a fifth the size of Palo Alto Networks’ ecosystem.

As a part of Palo Alto Networks, CyberArk will deepen privileged access management (PAM) penetration and attract a larger base of global identity and access management (IAM) users and machine identities, the CEO said.

Palo Alto Networks has nearly 10 times the number of core sellers as CyberArks and a much larger, 75,000 customer base. Palo Alto Networks aims to double the value of the joint businesses over the next five years.

CyberArk’s telemetry data has synergy potential with Palo Alto Networks’ XSIAM extended security intelligence and automation management platform, and identity combined with SASE and extended detection and response (XDR) as a unified agent has cross-selling potential for the 100 million endpoint footprint, KeyBanc said in its Tuesday report. However, integrating CyberArk and the timing of the agentic AI market were some of the investment firm’s concerns around the deal.

In its report Tuesday, William Blair praised the CyberArk deal, saying that “Palo Alto’s value proposition as a core platform only becomes stronger.”

“CyberArk represents an incremental opportunity to Palo Alto’s NGS ARR target of $15 billion for fiscal 2030,” according to the report. “Existing customers that have already signed onto its platform are likely to also shift to adopt its identity solutions as well, in our view.”

Software Investment Avoids Network Security Headwinds

Palo Alto Networks’ diverse portfolio, especially with software firewall form factors, appears to have saved it from weakness experienced by competitors more aligned with the hardware network security space in the second calendar quarter, KeyBanc said in its Tuesday report.

More than 60 percent of Palo Alto Networks’ network security bookings in the quarter came from software and SASE. Software firewall grew about 20 percent on an ARR basis while hardware product revenue declined year on year.

Although KeyBanc didn’t name a specific competitor, Cisco’s security segment notably saw disappointing results when it reported quarterly earnings in August.

The 9 percent growth year on year Cisco reported came in about $160 million below what Wall Street wanted, according to a Thursday report by Melius Research. That number also came in below Cisco’s 15 percent target. (Cisco executives on the call did say that growth would have been double digits excluding its U.S. federal government business.)

Another network security rival, Fortinet, disappointed analysts earlier this month when it revealed that it was already almost halfway done with its firewall refresh cycle and that the cycle would likely not bring in the $400 million to $450 million forecasted.

It turned out that more boxes were no longer active in the 650,000 unit installed base and more units at lower average selling prices (ASPs) were present, according to a report by Morgan Stanley.

Palo Alto Networks’ greater mix of software deals compared to hardware was reflected in software accounting for about 56 percent of product revenues compared to a 44 percent mix last year, according to Bank of America’s Tuesday note. The vendor has a 50 percent market share in virtual firewalls, firewall-as-a-service (FWaaS) and other software offers.

Palo Alto Networks continues to see hardware as a mid-single digit grower in the 2026 fiscal year, executives said on Monday’s call.