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Cybersecurity platform supplier Palo Alto Networks reported Q3 revenue of $2.29bn, marking a 15% yoy increase, as client demand for consolidating security products and a desire to implement AI securely helped drive growth.
Product revenue rose 16%, while services revenue, including subscriptions and support, climbed 15%. Software now accounts for nearly 40% of product revenue, boosted by growth in virtual form factors and SD-WAN. Regional performance was strong, with EMEA up 20%, JAPAC up 23%, and the Americas up 12%.
The standout figure was in next-generation security (NGS), with annual recurring revenue (ARR) reaching $5.09bn, up 34% yoy. AI-led offerings such as Cortex and XSIAM drove momentum, with AI-specific ARR hitting $400m, more than 2.5x higher yoy. XSIAM, hailed by CEO Nikesh Arora as a “game changer,” now has over 270 customers and over $1m in ARR per customer. Its ARR grew over 200% yoy, making it the fastest-growing product in the company’s history.
In network security, product revenue rose 16% and software firewall ARR grew 20%, fuelled by cloud adoption. SASE was another highlight, with ARR up 36% and 40% of new customers net new to the company. The firm also announced plans last month to acquire Protect.ai to bolster AI security capabilities (See - AI security focus of new solutions from Palo Alto Networks and CrowdStrike)
Palo Alto Networks highlighted customers continue to make significant commitments through platformisation deals, particularly when adopting XSIAM to transform their security operations centre. CEO Nikesh Arora said, “It is becoming increasingly clear that as organisations aspire to simplify and modernise their security architectures in the age of AI with data at the centre, our strategy is resonating, resulting in larger deals.”
He also highlighted how the volume and complexity of threats are not slowing down. Bad actors are using AI to move faster than ever. Recently, its threat intelligence ‘Unit 42’ team was able to simulate an entire ransomware attack in under 25 minutes using AI at every stage of the attack chain.
The business closed over 90 net new deals in Q3, including a $90m deal with a global consultancy and major wins with financial firms, consolidating multiple products and displacing legacy vendors. Large customers are expanding rapidly with 130 clients now generating over $5m in NGS ARR, up 40% yoy. Looking ahead, Palo Alto expects FY25 NGS ARR to grow 31–32% with total revenue expected to grow 14%.
Posted by: Simon Baxter at 09:40