Palo Alto Networks (PANW) AI Stock Analysis

• Market Cap: $135.54B
• Dividend Yield: N/A
• Average Volume (3M): 4.36M
• Price to Earnings (P/E): 116.3
• Beta (1Y): 1.30
• Revenue Growth: 13.91%
• EPS Growth: -50.96%
• Country: US
• Employees: 15,758
• Sector: Technology
• Sector Strength: 92
• Industry: Software - Infrastructure
• EPS (TTM): 0.80
• Shares Outstanding: 666,800,000
• 10 Day Avg. Volume: 4,011,059
• 30 Day Avg. Volume: 4,361,060
• PEG Ratio: -51.55
• Price to Book (P/B): 18.78
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 55.78
• Enterprise Value/Market Cap: 0.99
• Enterprise Value/Revenue: 30.64
• Enterprise Value/Gross Profit: 198.01
• Enterprise Value/Ebitda: -290.40
• 1Y Price Target: $216.00
• Price Target Upside: 5.62% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 35

• Rating: 74 Outperform
• Price Target: $220.00 ▲(7.58%Upside)

Palo Alto Networks is well-positioned for growth with strong financial health and strategic initiatives in next-gen security and AI, as highlighted in the earnings call. However, high valuation multiples and lack of momentum pose risks. The company's ability to manage liabilities and maintain growth will be crucial moving forward.

Positive Factors

Earnings and Growth Guidance

Management is raising the low end of its FY25 revenue and FY25 adjusted FCF margin guides.

Platformization Strategy

Palo saw continued traction with its platformization strategy, focus areas (XSIAM/AI/virtual firewalls), growth across geographies, and a stable firewall demand environment.

Product Revenue Growth

Analyst revised the model to anticipate a 15.5% product revenue growth, which is an increase from the previous estimate.

Negative Factors

After-Hours Trading Impact

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).

Revenue Estimates Reduction

The full-year fiscal 2026 revenue estimate has been lowered from $10.44 billion to $10.36 billion due to assumptions of lower subscription and support revenue.

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 a solid gross profit margin, improved net profit margin, and strong cash flow management. The balance sheet shows low leverage, but high liabilities need attention. Overall, the company is positioned for growth with room for improvement in EBIT margin.

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

Palo Alto Networks Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 204.50
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

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 204.5 is above the 20-day moving average (MA) of 198.02, above the 50-day MA of 196.16, and above the 200-day MA of 187.92, indicating a bullish trend. The MACD of 0.88 indicates Negative momentum. The RSI at 57.67 is Neutral, neither overbought nor oversold. The STOCH value of 83.91 is Negative, 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
PANW	74 Outperform	$135.54B	116.32	21.16%	―	13.91%	-50.96%
CHKP	74 Outperform	$23.85B	29.07	30.92%	―	6.40%	6.49%
FTNT	74 Outperform	$80.23B	43.14	205.91%	―	13.83%	58.13%
CRWD	74 Outperform	$116.63B	721.64	-5.76%	―	25.94%	-226.80%
ZS	72 Outperform	$44.56B	―	-2.68%	―	25.46%	49.20%
NET	69 Neutral	$68.77B	―	-7.35%	―	27.79%	56.19%
Sector *	57 Neutral	HK$14.36B	5.83	-5.77%	4.76%	9.65%	-43.80%

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.