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Palo Alto Networks (PANW)
NASDAQ:PANW

Palo Alto Networks (PANW) AI Stock Analysis

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Palo Alto Networks

(NASDAQ:PANW)

Rating:78Outperform
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 (PANW) vs. SPDR S&P 500 ETF (SPY)

Palo Alto Networks Business Overview & Revenue Model

Company DescriptionPalo 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 MoneyPalo 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 Key Performance Indicators (KPIs)

Any
Any
Billings
Billings
Reflects the total value of invoices sent to customers, indicating sales momentum and future revenue potential as these billings convert to recognized revenue.
Chart InsightsPalo Alto Networks' billings have shown strong growth, particularly in the latest quarter, reflecting strategic advancements and robust demand for their Next-Generation Security offerings. The earnings call highlighted a 37% increase in NGS ARR, supporting this momentum. However, concerns about gross margin pressures and deferred payments affecting cash flow visibility could pose risks. The company's focus on platformization and AI-driven initiatives is expected to sustain growth, but investors should watch for how these factors impact long-term profitability and cash flow management.
Data provided by:Main Street Data

Palo Alto Networks Earnings Call Summary

Earnings Call Date:May 20, 2025
(Q3-2025)
|
% Change Since: 3.77%|
Next Earnings Date:Aug 25, 2025
Earnings Call Sentiment Positive
The earnings call primarily highlighted significant growth in ARR, especially in next-generation security and AI-driven innovations, despite some geopolitical uncertainties and challenges with contract durations.
Q3-2025 Updates
Positive Updates
Record-Breaking ARR in Next-Generation Security
Palo Alto Networks crossed $5 billion in next-generation security ARR, a growth of 34% year-over-year.
Strong Momentum with XSIAM
XSIAM ARR grew over 200% year-over-year in Q3. It is noted as the fastest-growing product in the company's history with an ARR per customer of over $1 million.
Significant Growth in SASE
SASE ARR grew 36% year-over-year, more than twice the market rate, with approximately 6,000 SASE customers.
Platformization Strategy Success
Achieved over 90 net new platformization deals in Q3, with the number of customers with multiple platformizations growing nearly 70% year-over-year.
AI-Driven Innovations
Introduction of Prisma AIRS and acquisition of Protect.ai to strengthen AI security offerings; strong pipeline and early customer interest indicated.
Robust Financial Performance
Total revenue of $2.29 billion, a 15% increase, with product revenue growing 16% and services revenue 15%.
Negative Updates
Geopolitical and Market Uncertainties
April was marked by geopolitical tensions and tariff discussions that caused temporary market uncertainty.
Challenges with Contract Durations
Slight decrease in contract duration both year-over-year and quarter-over-quarter, indicating potential challenges in securing longer commitments.
Company Guidance
During the Palo Alto Networks fiscal third quarter 2025 earnings call, the company reported significant growth and set ambitious targets. They achieved a next-generation security ARR milestone of $5 billion, marking a 34% increase year-over-year, and they aim for a $15 billion ARR target by FY '30. Their Q3 revenue reached $2.29 billion, growing 15% from the previous year, and they maintained a strong gross margin of 76%. The product revenue saw a 16% increase, while total services revenue grew by 15%. The company's remaining performance obligation grew 19% to $13.5 billion. Looking ahead, they project Q4 revenue between $2.49 billion and $2.51 billion and non-GAAP EPS of $0.87 to $0.89. Their strategic focus on AI-driven solutions, platformization, and integration across their product offerings underpins their confidence in sustainable growth and industry leadership.

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
85
Very Positive
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
78
Positive
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
82
Very Positive
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.
BreakdownTTMSep 2024Sep 2023Sep 2022Sep 2021Sep 2020
Income Statement
Total Revenue8.87B8.03B6.89B5.50B4.26B3.41B
Gross Profit6.53B5.97B4.98B3.78B2.98B2.41B
EBITDA1.66B1.28B387.30M95.60M-46.60M364.80M
Net Income1.24B2.58B439.70M-267.00M-498.90M-267.00M
Balance Sheet
Total Assets22.00B19.99B14.50B12.25B10.24B9.07B
Cash, Cash Equivalents and Short-Term Investments3.30B2.58B2.39B3.63B2.90B3.75B
Total Debt806.00M1.41B2.27B3.95B3.54B3.42B
Total Liabilities14.77B14.82B12.75B12.04B9.48B7.96B
Stockholders Equity7.23B5.17B1.75B210.00M763.60M1.10B
Cash Flow
Free Cash Flow3.00B3.10B2.63B1.79B1.39B821.30M
Operating Cash Flow3.21B3.26B2.78B1.98B1.50B1.04B
Investing Cash Flow-1.61B-1.51B-2.03B-933.40M-1.48B288.00M
Financing Cash Flow-584.10M-1.34B-1.73B-806.60M-1.10B673.00M

Palo Alto Networks Technical Analysis

Technical Analysis Sentiment
Positive
Last Price201.82
Price Trends
50DMA
192.55
Positive
100DMA
186.53
Positive
200DMA
185.81
Positive
Market Momentum
MACD
2.60
Positive
RSI
56.10
Neutral
STOCH
32.42
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 Risk Analysis

Palo Alto Networks disclosed 47 risk factors in its most recent earnings report. Palo Alto Networks reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Palo Alto Networks Peers Comparison

Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
79
Outperform
$80.87B43.49205.91%13.83%58.13%
78
Outperform
$134.57B115.4921.16%13.91%-50.96%
76
Outperform
$24.23B29.5330.92%6.40%6.49%
74
Outperform
$128.14B721.64-5.76%25.94%-226.80%
ZSZS
72
Outperform
$49.01B-2.68%25.46%49.20%
NENET
64
Neutral
$66.30B-7.35%27.79%56.19%
63
Neutral
$34.07B6.13-11.73%1.80%5.33%-18.31%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
PANW
Palo Alto Networks
201.82
33.00
19.55%
CHKP
Check Point
223.63
54.23
32.01%
FTNT
Fortinet
105.66
45.55
75.78%
ZS
Zscaler
314.77
113.14
56.11%
CRWD
CrowdStrike Holdings
514.10
123.39
31.58%
NET
Cloudflare
191.27
106.39
125.34%

Palo Alto Networks Corporate Events

Executive/Board ChangesBusiness Operations and Strategy
Palo Alto Networks Expands Board with Notable Appointments
Positive
Feb 13, 2025

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.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jun 21, 2025