Palo Alto Networks (PANW -5.79%) stock tumbled 6.6% through 11 a.m. ET Wednesday despite beating analyst expectations for fiscal Q3 2025 earnings last night.

Heading into the report, Wall Street analysts forecast Palo Alto to earn $0.77 per share, adjusted for one-time items, on sales of just under $2.3 billion. Palo Alto edged out the sales forecast, however, and reported $0.80 per share.

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Palo Alto Networks' Q3 earnings

Palo Alto grew its sales 15% year over year in fiscal Q3 2025, and grew its "remaining performance obligation" (i.e., backlog) 19% to $13.5 billion, foreshadowing continued strong revenue growth.

Earnings were another story. While "adjusted" earnings were $0.80 for the quarter, earnings as calculated according to generally accepted accounting principles (GAAP) were less than half that at $0.37 per share, and actually $0.02 less than the company earned a year ago.

Cost of revenue grew 20%, and general and administrative spending ballooned 38%, hurting profit margins and preventing earnings from growing.

Why investors are selling Palo Alto stock

Despite the growing backlog of work, Palo Alto forecast revenue growth to slow slightly in fiscal Q4 2025, ranging from 14% to 15%. Earnings -- adjusted earnings at least -- should improve about 10% to about $0.88 per share. For the full year similarly, revenue growth is forecast to slow to 14%, and adjusted profits may range from $3.26 to $3.28 per share.

The good news is that Palo Alto's revenue numbers track almost precisely with Wall Street expectations, while the company's adjusted earnings forecast is slightly ahead of estimates. The bad news is that revenue growth does appear to be slowing, belying the strong reported backlog of work to be done.

The cognitive dissonance of this guidance may be what's upsetting investors today.