Palo Alto Networks (PANW +9.20%) stock lost ground in Wednesday's trading. The company's share price closed out the daily session down 3.2% and had been down as much as 5.3% earlier in the session.
While there wasn't any business-specific news dragging Palo Alto Networks stock lower today, its valuation moved lower in response to an earnings report from another player in the cybersecurity industry. Despite the sell-off, Palo Alto is still up roughly 35% across 2026's trading.
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Zscaler's quarterly report spurred sell-offs for Palo Alto
Zscaler published its latest quarterly results after the market closed yesterday, and its share price fell 31.5% in today's trading. The company's report had spillover valuation impacts for Palo Alto Networks.
Zscaler's non-GAAP (adjusted) earnings of $1.08 per share and revenue of $850.48 million last quarter actually beat the average Wall Street estimate's call for adjusted earnings per share of $1.01 and revenue of $835.66 million. The company also issued a narrow increase for its full-year sales guidance, but Wall Street was expecting a much stronger outlook. With a weaker-than-anticipated expansion forecast, some investors are wondering whether other cybersecurity plays may be overvalued.
NASDAQ: PANW
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What's next for Palo Alto Networks?
After the market closes on June 2, Palo Alto is set to publish results for the third quarter of its 2026 fiscal year -- which ended April 30. Expectations are high.
With its last quarterly update, Palo Alto guided for sales between $2.941 billion and $2.945 billion -- suggesting growth of roughly 28.5% year over year. Meanwhile, adjusted earnings are projected to be between $0.78 and $0.80. Zscaler's post-earnings sell-off doesn't mean that Palo Alto Networks will face a similar post-earnings valuation contraction, but investors are understandably showing some concerns that Palo Alto could post significant sales and earnings beats in fiscal Q3 and still get hit with a pullback.
