Just like Gross Margin %, it is important to see a company maintains its operating margin over time. Among the same industry, a company with higher operating margin is more efficient in its operation. It is also more stable during industry slowdown or recessions. Peter Lynch prefers those with higher margins than those with lower margins.
Be Aware
Operating Margin % can be manipulated by adjusting the rate of depreciation, depletion and amortization (DDA).
If a company is facing competition, its Operating Margin % may decline. Often the Operating Margin % declines well before the company's Revenue or even profit decline. Therefore, Operating Margin % is a very important indicator of whether the company is facing problems.
For instance, by 2012, Nokia (NOK)'s problems were well known and its stock had lost more than 90% of its market value since 2007. But Nokias Operating Margin % had already been in decline since 2002, although its Earnings per Share (Diluted) were still rising. Investors who paid attention to Operating Margin % would have avoided this huge loss. The same can be said for Research-in-Motion (RIMM).
Therefore, Operating Margin % is a very important screening filter for GuruFocus. GuruFocus's Buffett-Munger screener requires that the profit margin is either consistent or expanding. The Model Portfolio of the Buffett-Munger screener has outperformed the market every year since inception in 2009.
Palo Alto Networks Operating Margin % Related Terms
Palo Alto Networks Operating Margin % Historical Data
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The historical data trend for Palo Alto Networks's Operating Margin % can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
XTER:5AP vs CRWD, FTNT, SNPS: Operating Margin % Comparison
For the Software - Infrastructure subindustry, Palo Alto Networks's Operating Margin %, along with its competitors' market caps and Operating Margin % data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Palo Alto Networks Operating Margin % vs Software Industry
For the Software industry and Technology sector, Palo Alto Networks's Operating Margin % distribution charts can be found below:
* The bar in red indicates where Palo Alto Networks's Operating Margin % falls into.
Operating Margin % - also known as operating income margin, operating profit margin and return on sales (ROS) - is the ratio of Operating Income divided by net sales or Revenue, usually presented in percent.
Palo Alto Networks's Operating Margin % for the fiscal year that ended in Jul. 2025 is calculated as
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Palo Alto Networks (XTER:5AP) has a Operating Margin % of -6.10% as of Apr. 2026. Operating margin is the ratio of total operating income to net sales. View historical data on Palo Alto Networks and its competitors. According to the industry distribution chart, Palo Alto Networks ranks #881 out of 2818 companies in the Software industry, placing it in the top 31.3%.
Is Palo Alto Networks' Operating Margin % too high?
Palo Alto Networks' current Operating Margin % is -6.10%. Based on the distribution chart, Palo Alto Networks ranks #881 out of 2818 companies in the Software industry, which is above the industry midpoint. Overall, Palo Alto Networks has a GF Score™ of 68/100 and is considered Significantly Overvalued, reflecting its overall financial health beyond just this single metric.
How does Palo Alto Networks' Operating Margin % compare to CRWD and FTNT?
According to the Software industry distribution chart, Palo Alto Networks ranks #881 out of 2818 companies for Operating Margin %. This puts Palo Alto Networks in the upper half of its industry. The industry median Operating Margin % is 3.87. See the competitive comparison table and distribution chart on this page for a detailed peer-by-peer breakdown.
What is a good Operating Margin % for a Software company?
The median Operating Margin % among Software companies is 3.87, based on 2,818 companies in the industry. Companies in the top quartile (top 25%) have a Operating Margin % significantly above this median, while those in the bottom quartile fall well below. However, Operating Margin % should not be evaluated in isolation — investors should consider it alongside profitability, growth, and financial strength metrics. Use the industry distribution chart on this page to see where any company falls relative to its peers.
What does a high Operating Margin % mean?
A high Operating Margin % can signal that a stock is expensive relative to its fundamentals. Operating margin is the ratio of total operating income to net sales. View historical data on Palo Alto Networks and its competitors. For the Software industry, the median Operating Margin % is 3.87 — values significantly above this may indicate overvaluation, while values below may suggest a bargain or underlying issues. Palo Alto Networks's current Operating Margin % is -6.10%. However, context matters — high-growth companies often justify higher valuations. Always evaluate alongside other metrics like GF Score™ and GF Value™.
Is Palo Alto Networks stock overvalued right now?
Based on GuruFocus' analysis, Palo Alto Networks (XTER:5AP) is currently considered Significantly Overvalued. The stock's GF Value™ is €188.12, compared to a current price of €252.75 — trading 34.4% above its estimated fair value. The current Operating Margin % is -6.10%. Palo Alto Networks' overall GF Score™ is 68/100 with 7 warning signs to review. Investors should evaluate multiple metrics — including profitability, growth, and financial strength — before making a decision.
How is Operating Margin % calculated?
Operating Margin % is calculated from a company's financial statements. For Palo Alto Networks (XTER:5AP), the current Operating Margin % is -6.10% as of Apr. 2026. GuruFocus calculates this using data sourced from SEC filings and annual reports. See the calculation section and 30-year financial data on this page for the full breakdown.
Is Palo Alto Networks (XTER:5AP) Overvalued in 2026?
Based on GuruFocus' analysis, Palo Alto Networks stock appears to be overvalued.
The current stock price of €252.75 is trading 34.4% above its estimated GF Value™ of €188.12.
GuruFocus considers Palo Alto Networks to be Significantly Overvalued.
Key valuation signals for XTER:5AP:
Operating Margin %: -6.10%
GF Value™: €188.12 vs. price of €252.75 (34.4% above fair value)
No single metric tells the full story. See the XTER:5AP stock analysis page for a complete view including 30-year financials, guru trades, and insider activity.
Palo Alto Networks is a platform-based cybersecurity vendor with product offerings covering network security, cloud security, and security operations. The California-based firm has more than 80,000 enterprise customers across the world, including more than three-fourths of the Global 2000.
68GF Score
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Operating Margin % is just one metric. See GF Value™, 30-year financials, guru trades, warning signs, and more.
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