CyberArk Software Ltd. ( CYBR ) reported better-than-expected quarterly results and expanding subscription revenue, highlighting accelerated business fundamentals even as acquisition-related costs weighed on free cash flow ahead of its combination with Palo Alto Networks ( PANW ) .

D.A. Davidson analysts, led by Rudy Kessinger, maintained their Buy rating and $518 price forecast, which tied to Palo Alto Networks’ $215 forecast, noting that consensus estimates are now outdated given the pending PANW acquisition and withdrawn guidance.

Davidson noted that CyberArk reported revenue of $342.8 million, operating profit of $64.8 million, and EPS of $1.20, beating their estimates of $338.3 million, $54.3 million, and $1.04, respectively.

Also Read: CyberArk Stock Is Rising After Hours: Here’s Why

Subscription Strength Drives Growth

Subscription revenue rose 60% year-over-year to $280.1 million, now comprising 82% of total revenue. Total recurring revenue reached $326.3 million, representing 95% of total revenue, and increased 46% year-over-year. Operating margins of roughly 19% exceeded the firm’s 16% forecast.

Free Cash Flow Impacted By Acquisition Costs

Free cash flow was $42.4 million with a 12% margin, versus estimates of $66.3 million and a 20% margin. Adjusted for headquarters buildout and acquisition-related costs, FCF improved to $51.3 million, or a 15% margin.

ARR Momentum

Analysts stated that the total annual recurring revenue (ARR) came in at $1.341 billion, up 45% year-over-year, or 24% organically, surpassing expectations of $1.334 billion. Total net new ARR (NNARR) of $67 million rose 16% year-over-year.

Subscription ARR stood at $1.16 billion, representing 86% of total ARR, up 58% year-over-year or 32% organically, ahead of the firm’s $1.15 billion estimate. Subscription NNARR reached $70 million, up 21% year-over-year, while organic subscription NNARR grew 4%.

Updated Forecasts

D.A. Davidson has updated its 2025 and 2026 estimates to reflect the latest performance, projecting 2025 EPS of $4.48 and revenue of $1.36 billion, rising to $5.56 EPS and $1.58 billion in revenue for 2026.

Price Action: CYBR shares were trading lower by 1.19% to $496.45 at last check Friday.

Read Next:

IREN CEO Teases Deals Even Bigger Than Microsoft