Palo Alto Networks Shares Slide 8.6% After AI Threat, Q3 EPS Miss
Palo Alto Networks shares dropped 8.6% after Anthropic’s Claude Code Security launch raised concerns over automated vulnerability scanning cutting into cybersecurity margins. The company also reported a Q3 EPS miss driven by share dilution and forecasted $1.6 billion in RPO from M&A in 2H FY2026 as organic RPO growth decelerates.
1. AI Threat Sparks Share Drop
On February 20, Anthropic unveiled Claude Code Security, an AI-driven code-scanning tool, triggering an 8.6% selloff in Palo Alto Networks shares as investors questioned whether automated scanning could compress cybersecurity margins.
2. Q3 Earnings Overview
In its latest quarter, Palo Alto Networks reported an EPS miss primarily due to share dilution, with non-GAAP earnings falling short of consensus driven by a 9% increase in diluted share count year-over-year.
3. Guidance and M&A Contribution
Management projects $1.6 billion of remaining performance obligations from recent acquisitions will bolster revenue in the second half of FY2026, helping to sustain Rule of 40 metrics despite organic headwinds.
4. Organic Growth Outlook
Organic RPO growth is expected to decelerate from first-half levels as large enterprise deal cycles normalize, reflecting a shift toward integrating acquired portfolios and maturing subscription renewals.