Palo Alto Networks CEO Says Markets 'Have It Wrong' About Earnings

Speakers

Nikesh Arora — CEO, Palo Alto Networks

Summary

Market Misinterpretation of Earnings: Arora argues the market is punishing PANW for lower EPS guidance without understanding it is caused by the dilution from a recent major acquisition (transcribed as "CyberArk," likely referring to IBM's QRadar assets in reality) and conservative ARR accounting.
AI Usage Explosion: Cites a customer (a "popular LLM") where usage is "doubling almost every quarter," signaling massive underlying demand for AI infrastructure.
New Security Vector (AI Coding): Identifies "Vibe Coding" (AI-assisted coding via Cursor, Codex, etc.) as a major new security risk at the developer endpoint, driving demand for their new specific security tools.

Trade Ideas

Ticker	Direction	Speaker	Thesis	Time
GOOGL /AMZN /MSFT	LONG	Nikesh Arora CEO, Palo Alto Networks	When discussing a "popular LLM" customer, Arora notes, "The usage continues to double almost every quarter." While Arora is pitching his security product, the second-order inference is that the underlying AI Model Providers (likely OpenAI/Microsoft, Anthropic/Amazon, or Google) are seeing exponential volume growth ("doubling quarterly"). This confirms the AI infrastructure bull case is not slowing down. LONG. Confirms the "Hypergrowth" thesis for the Hyperscalers hosting these models. AI monetization saturation or regulatory hurdles for model providers.	—
CRWD	WATCH	Nikesh Arora CEO, Palo Alto Networks	Arora distinguishes his new acquisition's capability from standard industry tools: "This is different than other endpoint security, both us and other players in the industry sell called ADR [EDR]." Arora is explicitly targeting the "developer endpoint" (laptops running AI coding agents) as a gap in current EDR coverage. If PANW successfully corners the "AI Coding Security" market, it could pressure traditional EDR incumbents like CrowdStrike (CRWD) to innovate or lose share in the developer segment. WATCH. Monitor if CrowdStrike launches competing "Agentic Security" features for AI coding workflows. PANW's solution may be niche; CRWD has a sticky install base.	—
PANW	LONG	Nikesh Arora CEO, Palo Alto Networks	Arora states, "The market is not paying attention to our numbers carefully... The market hasn't understood the dilution of shares... If you take that out and add it back, we're actually doing better collectively." The market sold off the stock based on headline EPS guidance. However, the CEO clarifies that this drop is purely due to acquisition accounting (stripping out acquired ARR to align with conservative metrics) and share dilution. The organic growth remains near 20%, and the "combined" entity is guiding above consensus. LONG. The sell-off is an arbitrage opportunity between "headline guidance" and "actual operational performance." The market may not accept the "adjusted" math; integration of the large acquisition could take longer than expected.	3:32