Palo Alto Networks (PANW) AI Stock Analysis

• Market Cap: $134.57B
• Dividend Yield: N/A
• Average Volume (3M): 4.48M
• Price to Earnings (P/E): 115.5
• Beta (1Y): 1.27
• Revenue Growth: 13.91%
• EPS Growth: -50.96%
• Country: US
• Employees: 15,758
• Sector: Technology
• Sector Strength: 87
• Industry: Software - Infrastructure
• EPS (TTM): 0.80
• Shares Outstanding: 666,800,000
• 10 Day Avg. Volume: 4,866,162
• 30 Day Avg. Volume: 4,477,386
• PEG Ratio: -50.32
• Price to Book (P/B): 18.33
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 54.44
• Enterprise Value/Market Cap: 0.98
• Enterprise Value/Revenue: 3.89
• Enterprise Value/Gross Profit: 20.11
• Enterprise Value/Ebitda: 22.60
• 1Y Price Target: $215.69
• Price Target Upside: 6.87% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 38

• Rating: 78 Outperform
• Price Target: $227.00 ▲(12.48%Upside)

Palo Alto Networks scores strongly on financial performance and earnings call, reflecting robust growth and strategic initiatives in next-generation security and AI. However, high valuation metrics and slightly elevated technical indicators suggest some caution is warranted. Overall, the company is well-positioned for future growth with strong fundamentals, albeit at a premium valuation.

Positive Factors

NGS ARR

Net new NGS ARR was better than expected, driven by broad-based demand, and there is slightly more confidence in NGS ARR durability.

Platformization and Key Solutions

Momentum in Platformization, key solution categories (XSIAM) and improving margins keeps analysts constructive on PANW.

Product Revenue Growth

Product revenue growth estimates have been increased to 5% year-over-year, suggesting a stronger outlook than previously anticipated.

Negative Factors

Revenue Growth Expectations

Revenue growth expectations for FY26 are now lower, with a revised estimate of 12% year-over-year compared to a previous forecast of 13%.

RPO and Subscription/Support Revenue

Shares traded down ~4% in after-hours trading given some offsetting metrics (RPO grew 19%-Y/Y at the low-end of guidance and below expectations, and Subscription/Support revenue, gross-margin, and CFFO/FCF were also below expectations).

Subscription Revenue Growth

Subscription revenue growth is not expected to accelerate, with a new model of 13.5% year-over-year growth, down from almost 16% previously.

Palo Alto Networks Business Overview & Revenue Model

Company Description

Palo Alto Networks, Inc. provides cybersecurity solutions worldwide. The company offers firewall appliances and software; Panorama, a security management solution for the control of firewall appliances and software deployed on an end-customer's network and instances in public or private cloud environments, as a virtual or a physical appliance; and virtual system upgrades, which are available as extensions to the virtual system capacity that ships with physical appliances. It also provides subscription services covering the areas of threat prevention, malware and persistent threat, uniform resource locator filtering, laptop and mobile device protection, and firewall; and DNS security, Internet of Things security, SaaS security API, and SaaS security inline, as well as threat intelligence, and data loss prevention. In addition, the company offers cloud security, secure access, security analytics and automation, and threat intelligence and cyber security consulting; professional services, including architecture design and planning, implementation, configuration, and firewall migration; education services, such as certifications, as well as online and in-classroom training; and support services. Palo Alto Networks, Inc. sells its products and services through its channel partners, as well as directly to medium to large enterprises, service providers, and government entities operating in various industries, including education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications. The company was incorporated in 2005 and is headquartered in Santa Clara, California.

How the Company Makes Money

Palo Alto Networks generates revenue primarily through the sale of its cybersecurity products and services. The company's revenue model is based on a combination of product sales, subscription services, and support and maintenance contracts. Product sales include advanced firewall systems and other hardware components. Subscription services, which are a significant and growing part of the company's revenue, encompass cloud-based security offerings, threat intelligence updates, and software licenses. Support and maintenance contracts provide ongoing technical assistance and updates for hardware and software products. Additionally, Palo Alto Networks has strategic partnerships with cloud service providers and cybersecurity technology firms, which further contribute to its earnings by expanding its product offerings and market reach.

Palo Alto Networks Financial Statement Overview

Summary

Palo Alto Networks demonstrates strong financial health with significant improvements in profitability and cash flow generation. The company has increased its revenue and profit margins, while maintaining a solid balance sheet with low leverage. Areas for improvement include EBIT margin enhancement and managing high liabilities.

Income Statement

Palo Alto Networks has shown a solid financial performance with a strong gross profit margin of 73.6% for TTM (Trailing-Twelve-Months) and a robust revenue growth rate of 10.6% compared to the previous year. The net profit margin improved significantly from a negative margin in earlier years to 13.9%, indicating enhanced profitability. EBITDA margin also stands strong at 18.7%. These metrics reflect the company's successful revenue growth and cost management strategies, although there is room for improving the EBIT margin which is currently at 11.1%.

Balance Sheet

The company's balance sheet shows a healthy debt-to-equity ratio of 0.11, indicating low leverage and risk. The return on equity (ROE) has significantly improved to 17.1% for TTM, reflecting efficient use of equity capital. The equity ratio has also increased to 32.9%, suggesting a strengthening financial position. However, the overall liabilities remain high, indicating a need for continued focus on debt management.

Cash Flow

Palo Alto Networks exhibits strong cash flow management with a free cash flow growth rate of -3.2%, indicating a slight decline from the previous period but still a robust free cash flow of $3 billion. The operating cash flow to net income ratio is 2.59, demonstrating strong cash generation capability relative to net income. Free cash flow to net income ratio at 2.42 further highlights strong cash earnings, supporting operational and financial flexibility.

Breakdown	TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Income Statement
Total Revenue	8.87B	8.03B	6.89B	5.50B	4.26B	3.41B
Gross Profit	6.53B	5.97B	4.98B	3.78B	2.98B	2.41B
EBITDA	1.66B	1.28B	387.30M	95.60M	-46.60M	364.80M
Net Income	1.24B	2.58B	439.70M	-267.00M	-498.90M	-267.00M
Balance Sheet
Total Assets	22.00B	19.99B	14.50B	12.25B	10.24B	9.07B
Cash, Cash Equivalents and Short-Term Investments	3.30B	2.58B	2.39B	3.63B	2.90B	3.75B
Total Debt	806.00M	1.41B	2.27B	3.95B	3.54B	3.42B
Total Liabilities	14.77B	14.82B	12.75B	12.04B	9.48B	7.96B
Stockholders Equity	7.23B	5.17B	1.75B	210.00M	763.60M	1.10B
Cash Flow
Free Cash Flow	3.00B	3.10B	2.63B	1.79B	1.39B	821.30M
Operating Cash Flow	3.21B	3.26B	2.78B	1.98B	1.50B	1.04B
Investing Cash Flow	-1.61B	-1.51B	-2.03B	-933.40M	-1.48B	288.00M
Financing Cash Flow	-584.10M	-1.34B	-1.73B	-806.60M	-1.10B	673.00M

Palo Alto Networks Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 201.82
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PANW, the sentiment is Positive. The current price of 201.82 is above the 20-day moving average (MA) of 199.49, above the 50-day MA of 192.55, and above the 200-day MA of 185.81, indicating a bullish trend. The MACD of 2.60 indicates Positive momentum. The RSI at 56.10 is Neutral, neither overbought nor oversold. The STOCH value of 32.42 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PANW.

Palo Alto Networks Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FTNT	79 Outperform	$80.87B	43.49	205.91%	―	13.83%	58.13%
PANW	78 Outperform	$134.57B	115.49	21.16%	―	13.91%	-50.96%
CHKP	76 Outperform	$24.23B	29.53	30.92%	―	6.40%	6.49%
CRWD	74 Outperform	$128.14B	721.64	-5.76%	―	25.94%	-226.80%
ZS	72 Outperform	$49.01B	―	-2.68%	―	25.46%	49.20%
NET	64 Neutral	$66.30B	―	-7.35%	―	27.79%	56.19%
Sector *	63 Neutral	$34.07B	6.13	-11.73%	1.80%	5.33%	-18.31%

Palo Alto Networks Corporate Events

Palo Alto Networks Expands Board with Notable Appointments

On February 12, 2025, Palo Alto Networks appointed Helle Thorning-Schmidt, former Prime Minister of Denmark, and Ralph Hamers, former CEO of UBS Group AG and ING Group, to its Board of Directors as Class II directors. With these appointments, the board expands from nine to eleven members, reflecting the company’s strategic effort to enhance its global reach and secure its position as a cybersecurity leader. Both appointees bring extensive experience in political and business landscapes, expected to influence the company’s strategic direction and strengthen its industry position.