Analyst(s): Fernando Montenegro
Publication Date: May 22, 2025
Palo Alto Networks’ Q3 2025 results indicate persistent topline growth and continued engagement with its platform and AI-centric strategies. As the company advances toward long-term targets, its progress emerges within a competitive market where platformization and AI are increasingly industry-wide themes.
What is Covered in this Article:
- Palo Alto Networks Q3 FY2025 financial performance highlights (revenue, profit, ARR, cash flow)
- Key trend: Platformization and customer consolidation traction
- Key trend: Expansion of AI-enabled security offerings and operational metrics
- Key trend: Product mix evolution within network, cloud, and security operations
- Guidance for next quarter/year and initial market reaction
The News: Palo Alto Networks reported fiscal third quarter 2025 revenue of $2.29 billion, an increase of 15% year over year, with GAAP net income of $262 million ($0.37 diluted EPS) and non-GAAP net income of $561 million ($0.80 diluted EPS). The company’s Next-Generation Security ARR reached $5.09 billion, up 34% from a year ago, while remaining performance obligation (RPO) advanced 19% to $13.5 billion. Q3 brought approximately 90 net new large platformization deals and a reported 1,250 platformization deals among the company’s largest accounts. Product revenue grew 16%, subscription revenue climbed 18%, and services continued to increase as a proportion of total sales. Palo Alto Networks ended the quarter with $2.4 billion in cash and equivalents and adjusted free cash flow of $578 million.
For Q4 2025, the company projects revenue of $2.49–$2.51 billion (up 14–15%), NGS ARR of $5.52–$5.57 billion, and non-GAAP EPS of $0.87–$0.89. Full-year revenue guidance was reaffirmed at $9.17–$9.19 billion.
“In Q3, we continued to make progress on our platformization strategy and achieved an important milestone in crossing $5 billion in Next-Gen Security ARR,” said Nikesh Arora, chairman and CEO. “Our scale and platform breadth makes us a leading consolidator of choice in cybersecurity.”
Palo Alto Networks Q3 2025 Results Indicate Sustained Platform and AI Momentum
Analyst Take: Palo Alto Networks’ third quarter performance indicates ongoing traction with its platformization and AI strategies, supported by double-digit revenue growth and robust expansion in Next-Generation Security ARR. The quarter’s results suggest a combination of solid execution and alignment to several macro themes shaping today’s cybersecurity market.
The company’s ability to surpass the $5 billion mark in NGS ARR and maintain a healthy mix of recurring revenues and free cash flow points to durable demand across its core customer base. Notably, platformization continues to register with larger clients: reported net new deals and the increasing share of multi-product customers indicate buyers may find value in integration and operational efficiencies, especially as cybersecurity complexity grows. Examples from the quarter included a $90 million global consulting firm deal and multiple financial services wins, each involving four or more products consolidated onto the Palo Alto Networks portfolio.
The company reported that Q3 also saw XSIAM ARR growth of over 200%, and customer examples showed product consolidation drove material cost and operational benefits. The company highlighted several large transactions in which legacy endpoint and SIEM tools were displaced, and average ARR per XSIAM client exceeded $1 million. These figures underscore the progress Palo Alto Networks is making as it seeks to expand its footprint into security operations and adjacent markets.
AI, as a strategic pivot, remains a central theme. The company now reports an AI-related ARR of $400 million, with continued expansion in detection/response use cases and security for AI-driven workloads. This focus is consistent with broader industry sentiment, as reflected in recent RSAC Conference coverage: AI in security, security for AI, and the evolving role of agentic workflows were top of mind for buyers and industry participants. Palo Alto Networks’ acquisition of Protect AI (pending close) and the launch of Prisma AIRS further illustrate management’s view that AI’s impact on security architectures and product portfolios will be profound and multi-dimensional. Customers and the industry have elevated expectations around the efficacy and explainability of AI-based security features.
Geographically, revenue growth was balanced across regions, with the Americas, EMEA, and JAPAC all registering double-digit increases. Operating margin trends and cost discipline were visible as the company managed input cost pressures, continued R&D investments, and benefited from scale efficiencies on larger platform deals.
While these results indicate a well-executed strategy, they should be considered in light of industry-wide platformization trends and increasingly capable competitors. Nearly all major cybersecurity providers—whether established “pure plays” like CrowdStrike, Fortinet, Trend Micro, SentinelOne, and others, or larger portfolio vendors like Microsoft and Cisco—are investing aggressively in platform offerings and embedding AI across their suites.
The Q3 call and accompanying materials point to Palo Alto Networks taking share in SASE and SIEM, yet the competitive environment remains active. For example, Microsoft’s Defender, Sentinel, and Copilot expansion continues, with advantages of ecosystem integration and software attach rates; Cisco has moved to integrate security and observability via the Splunk platform and is expanding its AI-enabled posture; CrowdStrike and SentinelOne are both evolving cloud and operational security offerings with AI at the core. Meanwhile, Trend Micro remains notably active in the broader international security platform arena, and Fortinet’s hardware-software integration and value positioning underpin its momentum in network and cloud segments.
Product revenue grew 16%, and the company noted an inflection in software firewall demand, now accounting for a greater share of new deployments, especially as public cloud adoption accelerates. SASE posted 36% ARR growth, with active customer count up 22% and strong contributions from new business. Security operations remain a growth pillar, with XSIAM emerging as a flagship product in deals that span legacy SIEM replacements and new SecOps use cases. These shifts illustrate the degree to which Palo Alto Networks engages customers across a broad architecture, supporting hybrid and cloud-native environments while positioning for changing browser, identity, and exposure management requirements.
The broader context is that platform-centric strategies, customer consolidation, and AI-driven features are now table stakes for leading security vendors. In this climate, Palo Alto Networks’ strong Q3 performance reflects successful execution, but it is unlikely to escape the pressures and pace of innovation across the broader market. The sustainability of its current momentum will increasingly depend on continuous product innovation, effective differentiation, and an ability to address customer procurement and integration challenges—factors also shaping the outlook of its key competitors.
Management provided Q4 and full-year 2025 guidance consistent with prior expectations, anticipating Q4 revenue of $2.49–$2.51 billion and NGS ARR reaching $5.52–$5.57 billion. Non-GAAP EPS and margin targets imply ongoing operating discipline. These forecasts indicate confidence in the underlying demand environment and in Palo Alto Networks’ ability to drive further platform adoption. As is typical, immediate market reaction focused on the strength of the near-term pipeline and the sustainment of margin and ARR momentum. However, investors will continue to monitor the pace of platform wins and progress in higher-growth areas like AI and security operations.
The full details are available in Palo Alto Networks’ Q3 2025 earnings press release.
Disclosures: While preparing this work, the author used OpenAI services to summarize source material. After using this service, the author reviewed and edited the content as needed. The author takes full responsibility for the publication’s content.
Futurum is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
Other insights from Futurum:
Trends at the RSAC Conference Point to the High-Stakes Nature of Cybersecurity – Report Summary
At Ignite OnTour, Palo Alto Networks Makes Its Case for Platformization
The Clash of Two Competing Visions for Cloud Security – Report Summary
Author Information
Fernando Montenegro serves as the Vice President & Practice Lead for Cybersecurity at The Futurum Group. In this role, he leads the development and execution of the Cybersecurity research agenda, working closely with the team to drive the practice's growth. His research focuses on addressing critical topics in modern cybersecurity. These include the multifaceted role of AI in cybersecurity, strategies for managing an ever-expanding attack surface, and the evolution of cybersecurity architectures toward more platform-oriented solutions.
Before joining The Futurum Group, Fernando held senior industry analyst roles at Omdia, S&P Global, and 451 Research. His career also includes diverse roles in customer support, security, IT operations, professional services, and sales engineering. He has worked with pioneering Internet Service Providers, established security vendors, and startups across North and South America.
Fernando holds a Bachelor’s degree in Computer Science from Universidade Federal do Rio Grande do Sul in Brazil and various industry certifications. Although he is originally from Brazil, he has been based in Toronto, Canada, for many years.
