Palo Alto Networks Rises 16% in a Month: Time to Hold or Book Profits?

Palo Alto Networks, Inc. PANW shares have gained 15.6% in the past month, outperforming the Zacks Security industry’s growth of 6.5%. The stock has also outperformed its industry peers and competitors, including Fortinet FTNT, Qualys QLYS and Okta Inc. OKTA. In the past month, shares of Fortinet, Qualys and Okta have gained 5.7%, 5.5%, and 3.4%, respectively.The outperformance of Palo Alto Networks’ share price raises the question: Should investors continue holding the stock or book profits?One-Month Price Return PerformanceImage Source: Zacks Investment ResearchPositive Industry Tailwinds Boost PANW’s ProspectsPalo Alto Networks is well-positioned to capitalize on the growing demand for advanced cybersecurity solutions. According to Fortune Business Insights, the global cybersecurity market is projected to expand from $193.73 billion in 2024 to $562.77 billion by 2032, representing a massive addressable market. As cyber threats become more sophisticated, enterprises are increasingly prioritizing multi-layered security platforms, which directly contribute to Palo Alto Networks’ strengths.The company’s continued innovation in AI, automation and cloud security reinforces its competitive lead. AI is increasingly embedded in Palo Alto Networks’ offerings, which is helping it win multi-product deals through platforms like Cortex XSIAM and Prisma. Palo Alto Networks recently launched Prisma AI-Ready Security (Prisma AIRS), which aims to protect AI models from build to deployment across hybrid and multi-cloud setups. Just weeks after launch, Prisma AIRS has already built an eight-figure sales pipeline. Additionally, in the fourth quarter of fiscal 2025, Prisma AIRS secured an eight-figure deal with a global professional services company.Palo Alto Networks’ transition to a platform-based model has been a game-changer. By bundling multiple security products into a comprehensive cybersecurity platform, the company generates recurring revenue streams, boosting financial stability and customer stickiness. Large platform commitments are also increasing. During the fourth quarter, customers with more than $5 million and $10 million ARR grew about 50% year over year, while those above $20 million ARR increased 80% year over year. The company also closed a $100 million-plus deal with a global consulting firm that is now fully platformized, contributing $50 million in ARR.XSIAM, Palo Alto Networks’ AI-based Security Operations Centre platform, continued rapid adoption. It now has around 400 customers, most generating more than $1 million in ARR. Moreover, around 25% of these customers were Global 2000 companies, which shows strong adoption among large enterprises. During the fourth quarter, a leading European bank signed a $60 million-plus deal, which included the adoption of XSIAM. The bank wanted to reduce security complexity and manage costs, and as a result, the customer now utilizes three Palo Alto Networks platforms.Additionally, the pending acquisition of CyberArk would strengthen Palo Alto Networks’ foothold in a category where it currently lacks scale. PANW has already built out capabilities in endpoint and network security through its Cortex and Prisma platforms. However, identity-driven threat protection has remained a weaker link. By integrating CyberArk’s capabilities, Palo Alto Networks would be able to deliver a more comprehensive and unified platform that spans cloud, endpoint, network and identity protection.PANW’s Sluggish Sales Growth Remains a Key ConcernPalo Alto Networks is experiencing a slowdown in its sales growth. Notably, the company’s revenue growth rate has been in the mid-teen percentage range over the past year, a sharp contrast from the mid-20s percentage in fiscal 2023. This deceleration is expected to continue into fiscal 2026, with the company forecasting full-year revenue growth of just 14% in the range of $10.475-$10.525 billion. In the recently reported financial results for the fourth quarter of fiscal 2025, revenues grew 16% year over year. The Zacks Consensus Estimate for fiscal 2026 and 2027 indicates revenue growth to remain in the mid-teen percentage range.Image Source: Zacks Investment ResearchAnother concern is the slowing growth of Next-Generation Security (NGS) annual recurring revenues (ARR), a key metric for Palo Alto Networks' long-term financial health. The company has reported six consecutive quarters of decelerating NGS ARR growth, with fiscal 2026 projections suggesting a further slowdown to 26-27% growth compared to the 45%+ growth in previous years. While this is still impressive, the decelerating momentum has disappointed investors, considering the rising demand for cloud security and AI-powered solutions.Image Source: Palo Alto Networks, Inc.PANW Stock Trades at Premium ValuationPalo Alto Networks is currently trading at a higher price-to-sales (P/S) multiple compared to the industry. PANW’s forward 12-month P/S ratio sits at 12.27X, higher than the industry’s forward 12-month P/S ratio of 12.03X.PANW Forward 12-Month P/S RatioImage Source: Zacks Investment ResearchPalo Alto Networks stock also trades at a higher P/S multiple compared with other industry peers, including Fortinet, Qualys and Okta. At present, Fortinet, Qualys and Okta have P/S multiples of 8.83X, 7.1X and 5.27X, respectively.Conclusion: Hold PANW Stock for NowPalo Alto Networks remains a leader in cybersecurity, with a strong long-term growth trajectory, continued AI-driven innovation and a shift toward a more predictable recurring revenue model. However, slowing revenue and NGS ARR growth rates warrant a cautious approach to the stock. So, it is prudent for existing investors to remain invested, while new investors should wait for a better entry point.Currently, Palo Alto Networks carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Names #1 Semiconductor StockThis under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fortinet, Inc. (FTNT): Free Stock Analysis Report Palo Alto Networks, Inc. (PANW): Free Stock Analysis Report Qualys, Inc. (QLYS): Free Stock Analysis Report Okta, Inc. (OKTA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks