TD Cowen reiterated a Buy rating on Palo Alto Networks and kept a $255.00 price target after the cybersecurity firm released its second-quarter fiscal 2026 results. That target implies approximately 56% upside from a reference price of $163.50, and analyst consensus remains broadly positive with a 1.71 Strong Buy rating.
The company reported 33% year-over-year growth in next-generation security annual recurring revenue for the quarter and a 23% increase in remaining performance obligations. Management reaffirmed its free cash flow targets for the upcoming periods. Data from InvestingPro indicate Palo Alto Networks generated $3.69 billion in levered free cash flow over the last twelve months, yielding about 3% on a free cash flow basis.
During the quarter Palo Alto Networks completed the acquisitions of CyberArk and Chronosphere. Management has folded both deals into its adjusted free cash flow margin outlook, which calls for a 37% margin in fiscal years 2026 and 2027, rising to 40% in fiscal year 2028. InvestingPro characterizes the company as carrying a moderate level of debt, with cash flows adequate to cover interest expenses.
TD Cowen highlighted continued healthy demand and singled out artificial intelligence as a meaningful growth accelerator for the business. The firm’s own survey work supported the view that AI-related opportunities remain a catalyst for Palo Alto’s product adoption and customer spending.
Still, the market reaction was negative in extended trading, with the stock down about 7% after hours despite the quarter’s strong metrics.
Other analyst responses
Several other brokerages published reactions or adjusted targets following the results:
- Truist Securities upheld a Buy rating and set a $200 price target, praising the company’s strong quarter.
- Needham cut its price target to $200 from $230, explicitly citing acquisition-related costs tied to Chronosphere and CyberArk.
- BMO Capital trimmed its target to $200 from $230 but maintained an Outperform rating, and projected 13% to 15% organic growth in next-generation security revenue over the next two quarters.
- Piper Sandler reiterated an Overweight rating with a $265 price target, noting durable growth and guidance that was in line with expectations.
- Scotiabank lowered its price target to $180 from $228 while keeping a Sector Outperform rating, pointing to heightened complexity and an absence of upward organic momentum.
Across firms, the consensus view included recognition that the company’s quarterly performance beat expectations, with revenue, margins, and annual recurring revenue all tracking favorably. Momentum in specific product areas such as SASE, XSIAM, and virtual firewalls was cited as contributing to the results.
Bottom line
Palo Alto Networks delivered a quarter marked by solid top-line ARR growth and reinforcement of its cash-flow outlook while absorbing two acquisitions into its margin plan. Analysts remain largely constructive, but the equity experienced a notable after-hours selloff. The range of updated price targets and ratings underscores differing views on near-term acquisition costs, organic momentum, and the degree to which recent deals will affect longer-term profitability.