Palo Alto Networks (NASDAQ: PANW) stock has been hot this year, but it took a step back this week. The company's share price declined 10.3% across the stretch of trading, which saw the S&P 500 and the Nasdaq Composite rise 0.3% and 0.2%, respectively.
After the market closed on Tuesday, Palo Alto published results for the fourth quarter of its 2026 fiscal year -- which ended July 31. The cybersecurity stock sold off after the report, even though the company posted sales and earnings beats and strong forward guidance.
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Palo Alto's revenue increased roughly 34% year over year in fiscal Q4 to reach $3.41 billion -- a performance that beat the average Wall Street analyst estimate by $60 million. Meanwhile, non-GAAP (adjusted) earnings per share came in at $1.02 -- improving from $0.95 per share in the prior-year quarter and beating the average analyst estimate by $0.04 per share.
Annualized recurring revenue for the company's next-generation security segment increased 63% year over year to $9.1 billion at the end of the quarter, and remaining performance obligations rose 34% to $21.2 billion. By virtually all measures, it was a strong quarter for the business -- but expectations were very high heading into the report.
For the current fiscal year, Palo Alto is guiding for sales between $14.1 billion and $14.2 billion. The guidance range came in significantly ahead of the average Wall Street analyst estimate, which had called for sales of $13.83 billion prior to the recent business update.
Meanwhile, adjusted earnings per share are projected to be between $4.16 and $4.19 -- topping the average analyst forecast for per-share earnings of $4.11. Along with the fiscal Q4 report, Palo Alto also announced that it had acquired Console -- an agentic artificial intelligence platform for managing and resolving alerts, issues, and requests for enterprises.
Despite this week's pullback, Palo Alto stock is still up roughly 81% year to date. AI-driven demand has become central to the company's valuation story, but elevated expectations also mean that the stock has the potential for downside volatility even when its results and guidance look strong.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.
Why Palo Alto Networks Stock Plummeted This Week was originally published by The Motley Fool