Palo Alto Networks (NASDAQ: PANW) grew non-GAAP net income by 26.7% year over year in fiscal Q4 2026, but reported non-GAAP diluted earnings per share (EPS) rose only 7.4%: more shares participated in those earnings. The matching weighted-average diluted share count increased 17.7%, so growth in company-wide profit did not translate one-for-one into growth per share. This is a reconstruction of disclosed per-share results, not a verdict on acquisition value or whether the stock is cheap.[1]
Research review: October 6, 2026, 22:36:41 Asia/Shanghai (UTC+08:00). The subject is a U.S.-listed company; financial inputs cover the quarter ended July 31, 2026 and were released on September 1, 2026. No current market quotations are used, so intraday/closing and quote-delay classifications are not applicable. The review timestamp is not a price timestamp.
Match the profit measure to its share count
All inputs below come from the company's non-GAAP reconciliation. “Adjusted” means company-defined non-GAAP, not GAAP net income.[1]
| Metric | FY2025 Q4 | FY2026 Q4 | Our year-over-year calculation |
|---|---|---|---|
| Non-GAAP net income, USD million | 673 | 853 | +26.7% |
| Weighted-average diluted shares used for non-GAAP EPS, million | 707 | 832 | +17.7% |
| Reported non-GAAP diluted EPS, USD per share | 0.95 | 1.02 | +7.4% |
The release also gives GAAP share counts; do not pair those with non-GAAP profit or substitute period-end shares for a quarterly weighted average. We use the denominator specifically disclosed for non-GAAP EPS, rather than selecting a smaller share count.
Do not simply subtract 17.7% from 26.7%
For consistently defined inputs:
EPS growth = (1 + net income growth) / (1 + weighted-average diluted share growth) - 1
Using the figures reported in millions gives (853 / 673) / (832 / 707) - 1 = 7.70%. Using reported EPS, rounded to cents, gives 1.02 / 0.95 - 1 = 7.37%. The difference is about 0.34 percentage points: profit, shares and EPS are all disclosed at limited precision, so rounded inputs should not be expected to reproduce an exact bridge. We retain the discrepancy. Our headline uses the 7.4% change in reported EPS, not the reconstructed 7.7% as if it were a company-reported figure.
The useful distinction is between numerator and denominator, not an assumed contribution from a particular transaction. Profit increased, but so did the share count; per-share growth consequently lagged total profit growth substantially.
What this test can and cannot establish
It explains the different growth rates, but does not establish whether an acquisition created or destroyed value. An acquisition can change both earnings and shares. Keeping USD 853 million of profit while assuming shares never increased is not a valid forecast of a world without acquisitions. Attribution requires separate evidence on share issuance, employee equity awards, repurchases and acquired earnings. We do not attribute the entire 17.7% change to any one cause.
The accounting basis also matters: the same quarter had a GAAP net loss of USD 282 million, versus non-GAAP net income of USD 853 million.[1] The denominator calculation explains adjusted EPS; it does not remove the need to scrutinize the adjustments between GAAP and non-GAAP results.
How to test the next earnings release
Treat “profit keeps growing” and “per-share growth accelerates” as separate questions. Track consistently defined net income and weighted-average diluted shares each quarter, alongside the GAAP reconciliation and cash flow.
A purely mathematical scenario illustrates the threshold. If profit grows 15% and shares grow 5%, EPS grows approximately 9.52%. If profit still grows 15% but shares grow 10%, EPS grows only about 4.55%. Neither case is company guidance or a forecast. Slower share growth would let the same profit growth translate more readily into faster per-share growth; if profit and shares grow at the same year-over-year rate, EPS is unchanged. These are testable conditions, not trading signals.
Source
[1] Palo Alto Networks: fiscal Q4 and full-year 2026 results, September 1, 2026, particularly the GAAP/non-GAAP reconciliation and weighted-average share notes. Only public financial facts are referenced; percentages and scenarios are our calculations. Research commentary, not investment advice.