Why Palo Alto Networks Stock Is Sinking Today

Shares of Palo Alto Networks Inc (NASDAQ: PANW) are trading lower on Friday. The company's stock lost 0.9% as of market close but lost as much as 6.5% earlier in the day. The drop comes as the S&P 500 lost 0.1% while the Nasdaq composite was up 0.4%.

Palo Alto, a leading cybersecurity company, released its second-quarter 2025 earnings report on Thursday. The company met or exceeded Wall Street's targets, but the stock still slipped due to its high valuation and somewhat underwhelming guidance.

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »

The numbers

The tech company delivered earnings per share (EPS) of $0.81 on revenue of $2.26 billion, beating consensus estimates of $0.78 per share on $2.24 billion in sales.

The company expects 2025 EPS of $3.18 to $3.24. The consensus estimate was $3.23. While this falls within the company's range, it appears that considering the premium the company's stock carries, investors were hoping for more. Shares of Palo Alto are currently trading at 52 times earnings. Given this high valuation, delivering outsized growth is a must.

Other news

A vulnerability in Palo Alto's security software was discovered recently, and on Wednesday the company released a patch fixing the issue. While discovering and patching vulnerabilities isn't unusual in cybersecurity, technical details of the update were released that have made it easier to exploit the new version. The new vulnerability is considered "high severity," and as of this morning, it was facing exploitation attempts by malicious actors. The misstep may have put further pressure on the company's stock today.

Should you invest $1,000 in Palo Alto Networks right now?

Before you buy stock in Palo Alto Networks, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palo Alto Networks wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $829,128!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

Learn more »

*Stock Advisor returns as of February 7, 2025

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.