When Palo Alto Networks (PANW) announced its ambitious $25 billion acquisition of CyberArk (CYBR), it caught Wall Street off guard. What was shaping up to be a steady climb for Palo Alto stock turned into a sudden slide. Since the July 30 announcement, shares have dropped over 11%, despite trading near 52-week highs just days before.
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That reaction has left investors asking if Palo Alto overextended itself, or whether this is just a short-term hit that could prime the company for a stronger long-term payoff.
Did Palo Alto Overpay?
The main concern came down to the price tag. Palo Alto is funding the deal with $2.5 billion in cash and issuing over 100 million new shares. That takes the company’s total share count to around 785 million, leading to roughly 13.5% earnings dilution. In simple terms, shareholders are now holding a smaller piece of the profit pie.
This kind of drop isn’t unusual when a company pays for an acquisition using stock. The market tends to price in that dilution immediately, and that’s likely what we saw in Palo Alto’s case. Still, the fall was sharper than expected. Some analysts argue that if you simply do the math based on CyberArk’s expected earnings contribution, Palo Alto’s share price would need to fall by just a few percentage points. That discrepancy suggests a deeper level of skepticism from investors.
But Could the CyberArk Deal Pay Off Big?
Despite the rocky reception, the potential upside is significant. CyberArk gives Palo Alto a strong foothold in identity security, a fast-growing segment of the cybersecurity market. It’s not just about buying more revenue. It’s about enhancing the value of the entire product suite. If Palo Alto can cross-sell identity security to its massive customer base, it could unlock far more value than CyberArk brings on its own.
Mizuho’s Gregg Moskowitz described the deal as “highly synergistic,” pointing to revenue opportunities and a more comprehensive security offering. Similarly, BTIG analyst Gray Powell sees long-term cost benefits, projecting a boost in operating profit margin from under 28% in 2026 to over 32% by 2028.
So while the upfront cost is high, the earnings payoff could be meaningful over time.
Palo Alto’s Earnings Could Be a Turning Point
That brings us to Palo Alto’s next big moment: earnings on August 18. The company is expected to report $2.5 billion in sales and 89 cents in profit per share. Given that the stock is now trading around 46 times forward earnings, a strong print could offer some redemption. It could also help reset investor expectations around the CyberArk acquisition.
While that valuation multiple may seem steep, it’s actually down from 55 before the deal and now sits closer to the lower end of its historical range. If Palo Alto can continue to execute and reassure investors about its long-term strategy, there’s room for that multiple to climb again.
So is it all doom and gloom? Not quite. The initial stock drop may reflect short-term discomfort rather than long-term value erosion. The CyberArk deal was a surprise, and surprises often bring volatility. But if the promised synergies and earnings growth materialize, Palo Alto may bounce back even stronger.
Is Palo Alto a Buy or Sell?
Despite the volatility sparked by the CyberArk deal, Wall Street analysts remain supportive of Palo Alto Networks. The stock currently holds a Moderate Buy rating based on 37 analyst reviews in the past three months. Of those, 28 analysts recommend Buy, while eight say Hold and just one has issued a Sell rating.
The consensus 12-month PANW price target sits at $216.32, which implies a 25.12% upside from the recent price of $172.89.
