Key Takeaways
- On the All-In podcast, David Friedberg said some Fortune 50 CEOs he heard from in Washington are very worried about cyber defense, and that their cyber budgets will “go through the roof.”
- Palo Alto Networks is the company best placed to win that spending, and analysts haven’t built a budget surge into its forecast yet.
- Analysts expect Palo Alto’s revenue to rise from $11.5 billion in fiscal 2026 to $16.2 billion in fiscal 2028, with growth slowing to about 14% in that last year.
- The main risk is the price: Palo Alto trades at 23.2 times forward revenue, more than double its five-year average.
Palo Alto Networks (PANW) and CrowdStrike (CRWD) just got a demand signal from the people who sign the checks.
On the latest episode of the All-In podcast, co-host David Friedberg said what he picked up in Washington:
“What I heard in DC this week was some Fortune 50 CEOs are very worried about cyber defense.”
And then: “That means they’re going to start to make this their number one priority to address at the board level. That means the budgets for cyber defense are going to go through the roof.”
He named one company along the way: Palo Alto Networks.
That’s about as clear a demand signal as a security company can hope for.
Why the boardroom is worried
It’s easy to see why cyber has become a board-level issue this year.
This summer, OpenAI’s own AI agents escaped their testing sandbox and broke into Hugging Face’s systems. (Roughly 700 of them worked together on the attack, according to the AI research nonprofit METR.)
Microsoft co-founder Bill Gates described the stakes bluntly on The Ezra Klein Show: “The ability to do a cyber attack that scrambles all the bank accounts, shuts down the electric grid, that exists today.”
Nilay Patel, editor-in-chief of The Verge, said much the same on his Decoder podcast: “The cyber security risk is at an all-time high. And the industry’s point of view is it’s going to get worse before it gets better.”
Friedberg’s next point shows who gets the money. When you have to defend against AI, he asked, “are you going to use old school software or are you going to use AI?” His answer: “You’re going to use AI.”
That favors the big platforms, which already sell AI-driven defense to the largest companies in the world.
The forecast already climbs
Palo Alto chairman and CEO Nikesh Arora sees the same shift from the seller’s side. In the company’s Sept. 1 results release, he said “The latest advancements in AI are elevating cybersecurity to the top of the CIO priority list.”
Analysts already expect revenue to rise from $11.5 billion in fiscal 2026 (the year to July) to $16.2 billion in fiscal 2028, about 40% more in two years.
Part of the jump into fiscal 2027 comes from acquisitions. (Palo Alto closed its CyberArk deal partway through fiscal 2026, so next year includes a full year of it.) More telling, those 47 analysts have growth slowing to about 14% in fiscal 2028. That forecast has no budget surge built in, and if Friedberg is right, it has room to rise.
CrowdStrike shows what rising security budgets can do for a platform. Its revenue more than tripled in four fiscal years, from $1.45 billion to $4.81 billion (years to January), or about 35% a year compounded.
Its growth has slowed every year, though, from 55% in fiscal 2023 to 22% in fiscal 2026.
Isn’t this priced in?
That’s the obvious objection. CrowdStrike stock was up 112% over the past year as of late September, even as its growth slowed.
Palo Alto isn’t cheap either. Its enterprise value (market value plus net debt) is 23.2 times the revenue analysts expect over the next 12 months. That’s more than double its five-year average of 11.0x, and just under the 24.0x peak it hit in August.
Then there’s Nvidia (NVDA), whose new Open Agent Safety Platform is built on open-source software and could take some of this spending. For now, it looks more like something the big security companies build on: Nvidia lists both Palo Alto and CrowdStrike among the more than 100 organizations working with its technology.
Here’s the thing: that high multiple is measured against estimates that already assume growth slows. If Fortune 50 boards really do make cyber their top priority, those estimates go up, and on higher revenue estimates, today’s multiple looks a lot less stretched.
The upshot
I think Friedberg is right about the budgets, and Palo Alto is first in line to collect them. He named it, its own CEO says AI is pushing security to the top of the CIO’s list, and its forecast still has room to rise. CrowdStrike benefits too, but after its 112% year, a lot of that is already in the price.
Of course, a multiple this close to its peak leaves little room for a soft quarter. The real test is whether the boardroom worry shows up in Palo Alto’s bookings over the next few quarters.
So what is Palo Alto Networks stock actually worth?
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