Palo Alto Networks, Inc. (PANW)
NEUTRALFundamental
61
Price
$348.65
Market Cap
$285.98B
Part 1 · What the company is worth
Overview
Palo Alto Networks builds the systems that companies use to stop network intrusions, protect cloud workloads, and give security teams one console instead of a dozen. It started by selling firewall appliances that inspect traffic entering a company's network, then expanded into protecting cloud infrastructure and using AI to spot and respond to attacks across a company's whole environment. Its pitch to customers is consolidation: replace a patchwork of point security tools from different vendors with one connected platform.
How it makes money
Most revenue is recurring: subscription and support fees for software and cloud services, sold on multi-year contracts and recognized over the life of the agreement, made up about four-fifths of fiscal 2025 revenue. The rest is upfront hardware and license sales, mainly the firewall appliances that still anchor many customer relationships. Palo Alto's stated strategy, "platformization," bundles products at a discount to win the whole security budget rather than one line item, trading near-term margin for a larger long-term contract.
Revenue by segment
Cloud security, SASE, AI-driven security operations software and the support contracts attached to them, billed as recurring multi-year subscriptions.
Firewall hardware appliances and software licenses, including SD-WAN and virtual firewall products, sold upfront rather than as a subscription.
Competitive moat
Switching costs · NarrowOnce a security operations team has wired its firewalls, cloud sensors and analytics into one Palo Alto console, replacing any single piece means re-training staff and re-testing detection rules across the whole stack. That inertia helps retention, but the cybersecurity market has several credible full-stack rivals and large customers routinely run more than one vendor at once.
What drives demand
Moderately cyclicalSecurity budgets are treated as close to non-discretionary by most large enterprises, since a breach is costly and boards now expect visible investment in defense. But spending is not immune to the economy: deals can be delayed or shrunk in a downturn, and growth depends on convincing customers to consolidate tools rather than simply add new ones.
Key risks
- Heavy reliance on channel partners — Most sales go through resellers, distributors and system integrators rather than direct to customers, so a partner's underperformance or a disrupted channel relationship can limit reach into a market.
- Intensifying price and feature competition — Rivals compete aggressively on price and increasingly bundle security features into broader cloud or productivity suites, pressuring Palo Alto to keep discounting through its platformization bundles to win deals.
- Complexity of integrating many acquisitions — Growth has come partly through acquiring other security companies; folding their products, engineers and customers into one platform carries execution risk and can distract from core development.
- Exposure to customer credit and macro risk — Multi-year subscription contracts depend on customers' ability and willingness to keep paying; a weaker economy or a customer's financial distress can shrink renewals and delay new sales.
- Geopolitical exposure through Israel operations — A meaningful part of engineering and operations sits in Israel, so regional political instability or conflict can disrupt product development and staff availability.
The case for
Buyers argue that platformization is working, since large customers keep consolidating security spend onto Palo Alto's stack, that subscription revenue now dominates the mix and compounds predictably, and that AI-driven security operations gives it a credible answer to a threat landscape that is itself increasingly automated.
The case against
Sellers fear that platformization is really discounting dressed up as strategy, that well-funded rivals in cloud security and endpoint protection can match the bundle at a lower price, and that a large enterprise customer base makes Palo Alto's growth rate structurally harder to sustain as the easy consolidation deals run out.
Written by the editors, published on August 18, 2026
Direct competitors
Who this company fights with for the same customers
No editorial profile for this company yet
No competitor list for this company yet.
Balance Sheet & Liquidity
Revenue
$10.61B
Trailing 12 months (through 4/30/2026)
Net Income
$843M
Trailing 12 months (through 4/30/2026)
Free Cash Flow
$3.47B
Total Equity
$7.82B
Total Liabilities
$15.75B
Current Ratio
0.86
Interest Coverage
414.30
Debt/EBITDA
1.31
Earnings Per Share
Revenue & Net Income
Free Cash Flow
Income Breakdown
Historical statement
Margins over time
Debt over time
How heavy the debt is
Growth grid
Growth — Revenue
Fair Value Estimation
Fair Value
$257.27
Current Price
$348.65
Margin of Safety
-35.5%
Fair Value Range
$167.22 - $347.31
Estimation Methods
Valuation Metrics
P/E Ratio
287.62
ROE
14.5%
P/B Ratio
10.34
P/FCF
75.38
Gross Margin
71.9%
ROIC
2.2%
Profitability Radar
Value Creation (Economic Moat)
ROIC
2.2%
WACC
9.6%
ROIC − WACC
-7.4 pp
ROIC is below the cost of capital — the company is destroying value for every dollar invested.
Fundamental Analysis Criteria
Passed (17)
- EPS shows upward trend
- Price CAGR 32.89%
- Gross Margin 71.9%
- Debt/Equity ratio
- Operating Margin 9.6%
- Positive Free Cash Flow
- CapEx intensity
- Current Ratio
- Interest Coverage
- Debt/EBITDA
- Return on Tangible Assets
- Revenue Growth 5Y 22.0%
- Analyst Consensus 79% Buy
- Earnings Surprise avg 4.9%
- Earnings Quality (OCF/NI) 5.00
- Share Dilution 0.1%
- Piotroski F-Score 6/9
Failed (8)
- ROIC 2.2%
- P/FCF 75.38
- P/B Ratio 10.34
- Low reliance on intangibles
- Price below Graham Number
- DCF valuation (Overvalued)
- ROE 6.3%
- Net Margin Trend 7.9% vs 13.9%
Unavailable (2)
- Dividend Payout NaN%
- PEG Ratio (need PE > 0 and growth > 0)
Piotroski F-Score
Mixed signals: some areas need attention
Earnings Quality
High quality: earnings backed by cash
Share Dilution
Share count is stable
Governance
Executive Team
| Name | Title | Age |
|---|---|---|
| Mr. Nikesh Arora C.F.A. | Chairman & CEO | 57 |
| Mr. William D. Jenkins Jr. | President | 59 |
| Mr. Elad Koren | Vice President of Product Management | - |
Audit Risk
1
Board Risk
9
Compensation Risk
10
Shareholder Rights Risk
9
Part 2 · The price and when to enter
This part won't tell you whether the company is worth owning: it helps you choose when to buy it, once the fundamentals have convinced you. Inside: technical analysis, potential, historical drawdowns, gamma exposure.
Latest News
Recent headlines for PANW, sourced from Markets Gazette.
- 7/1/2026NEUTRALCEO of $248 billion cybersecurity company says workers are about to face a ‘Darwinian moment’ thanks to AI: Evolve or get cut
Palo Alto Networks CEO Nikesh Arora has issued a stark warning regarding the impact of Artificial Intelligence on the workforce, stating that 90% of employees currently lack sufficient AI savviness. Arora described the upcoming period as a 'Darwinian moment' for workers, implying that those who do not adapt and acquire AI skills face potential career obsolescence. This statement, while not directly impacting the company's current financials, highlights a significant industry-wide trend that could influence future talent acquisition, employee training strategies, and operational efficiency within the cybersecurity sector and beyond.
- 6/3/2026NEGATIVE3 reasons why Palo Alto Networks’ stock fell despite upbeat earnings
Palo Alto Networks Inc. experienced a stock decline despite reporting positive earnings, a situation attributed by analysts to several factors. Profit-taking by investors appears to be a primary driver, suggesting that recent gains may have been realized. Additionally, the timing of contributions from artificial intelligence (AI) initiatives and adjustments in the company's reporting conventions are cited as reasons for the market's muted reaction. Investors will be closely monitoring future reports for clearer indications of AI's impact and the stability of the new reporting structure.
- 6/3/2026POSITIVEPalo Alto Networks’ earnings show AI is a friend, not a foe, to revenue outlook
Palo Alto Networks' CEO highlighted that recent AI advancements are accelerating the demand for cybersecurity solutions, framing AI as a catalyst for revenue growth rather than a threat. This perspective suggests that the company is well-positioned to capitalize on the increasing urgency for robust security measures driven by the proliferation of AI technologies. Investors may see this as a positive indicator for future earnings, as the company leverages emerging tech trends to drive its business forward.
- 6/2/2026POSITIVEPalo Alto Networks’ stock is rising as earnings show AI is a friend, not a foe
Palo Alto Networks Inc. saw its stock price surge following its latest earnings report, which highlighted the growing demand for cybersecurity solutions driven by advancements in artificial intelligence. CEO Nikesh Arora stated that the latest AI developments have amplified the urgency for robust cybersecurity measures. This narrative suggests that AI, often perceived as a threat, is in fact a significant growth catalyst for the company. Investors are likely reacting positively to the prospect of increased demand for Palo Alto Networks' services as businesses globally seek to bolster their defenses against AI-driven threats.
- 6/2/2026NEUTRALPalo Alto, CrowdStrike Earnings to Put 37% Cyber Rally to Test
Palo Alto Networks and CrowdStrike are set to release their earnings reports, which will be a key test for the recent 37% surge in cybersecurity stocks. Investors are closely watching these reports to gauge the sustainability of the sector's rally. The market's reaction to these earnings will provide crucial insights into the underlying demand and growth prospects for cybersecurity solutions, potentially influencing investment strategies in the tech sector.
via Markets Gazette