DA Davidson has reduced its 12-month price target on Palo Alto Networks to $190 from $210 but left its Buy rating unchanged, following the company’s second fiscal quarter disclosure. The analyst emphasized that the quarter showed limited organic expansion in next‑generation security ARR and less RPO upside than investors had hoped for.
The stock is trading around $148.46, close to its 52‑week low of $144.15, while InvestingPro analysis indicates the cybersecurity vendor may be trading below intrinsic value.
On the quarter, Palo Alto Networks reiterated its fiscal 2026 guidance for next‑generation security ARR and remaining performance obligations on an organic basis. DA Davidson noted the company will need an acceleration in organic net new ARR growth to meet expectations; it also described the fourth quarter net new ARR that appears to be expected from acquisitions as conservative. The firm further pointed out that, despite the headwinds around organic additions, Palo Alto has delivered 15.3% revenue growth over the past twelve months.
The analyst highlighted a number of positive operational developments amid the more cautious outlook. These include an acceleration in SASE ARR growth, continued momentum for XSIAM, faster platformization efforts across the product set, and a significant commercial expansion by Chronosphere - a nine‑figure total contract value multi‑year expansion with a customer the analyst believes is likely OpenAI. DA Davidson concluded these improvements did not justify maintaining the prior $210 target.
Broader market reaction and analyst moves
Palo Alto Networks’ second‑quarter fiscal 2026 results were also described elsewhere as outperforming expectations, with strengths noted in revenue, margins, and next‑generation security ARR. Growth was particularly pronounced in SASE, XSIAM and virtual firewall segments, which supported the overall beat.
Following the results, a number of other brokerages revised price targets while keeping positive stances. Needham and BMO Capital each trimmed their targets to $200, citing concerns tied respectively to acquisition costs and the growth outlook, though both retained favorable ratings. TD Cowen and Truist Securities reiterated Buy ratings with price targets of $255 and $200 respectively, pointing to ongoing momentum and reaffirmed free cash flow objectives. Piper Sandler kept an Overweight rating and a $265 price target, noting the quarter modestly beat expectations and showed durable growth.
Analysts pointed to Palo Alto’s recent acquisitions, including Chronosphere and CyberArk, as contributors to the updated price targets and the company’s revised outlook. Overall, the updated fiscal 2026 guidance largely reiterated organic expectations, which market watchers interpreted as a steady, if cautious, forward view.
Summary
DA Davidson lowered its Palo Alto Networks price target to $190 from $210 but kept a Buy rating after Q2 results that showed weaker‑than‑expected organic next‑generation security ARR and limited RPO upside. The company reiterated its fiscal 2026 organic guidance, while several product areas showed clear momentum. Other brokerages made mixed target adjustments but largely retained positive ratings.
Key points
- DA Davidson cut its price target to $190 from $210 and maintained a Buy rating.
- Q2 results reflected constrained organic next‑generation security ARR growth and less RPO upside than investors expected; fiscal 2026 organic guidance was reiterated.
- Product strength was noted in SASE, XSIAM and virtual firewall segments; notable commercial wins include a nine‑figure Chronosphere expansion with a customer likely to be OpenAI.
Risks and uncertainties
- Slower organic net new ARR growth could pressure future revenue and valuation assumptions - impacting cybersecurity sector valuations and software subscription cash flows.
- Acquisition costs and integration outcomes (referenced by Needham and BMO Capital) pose execution risk and could affect free cash flow and margin profiles in the near term.