Key Takeaways
- Palo Alto Networks rose 6.5% today, CrowdStrike rose 6.7%, Okta rose 5%, Cloudflare rose 6% and Zscaler rose 4%, after an Evercore ISI survey of cybersecurity channel partners found security budgets getting stronger.
- The rally started Wednesday, when the PHP Foundation disclosed critical flaws found with AI’s help and Palo Alto CEO Nikesh Arora warned more are coming.
- Analysts expect Palo Alto’s revenue to grow 23% in the fiscal year ending July 2027, but its normalized EPS to grow only 9% as its share count rises.
- Palo Alto traded at 85x forward earnings before today’s move, with estimates already at the top of guidance, so its next report has to show the spending.
Palo Alto Networks (PANW) stock is up 6.5% today, and the cybersecurity group is up with it: CrowdStrike (CRWD) is up 6.7%, Okta (OKTA) 5%, Cloudflare (NET) 6% and Zscaler (ZS) 4%.
The trigger: a reseller survey showing security budgets getting stronger into year-end, in a week already dominated by a security scare.
Resellers are seeing the spending
Security stocks started rallying on Wednesday after the PHP Foundation disclosed critical flaws, found with AI’s help, in code much of the web runs on. That afternoon, Palo Alto CEO Nikesh Arora told the TBPN podcast: “We’re gonna see more of these, not less.”
This morning, Evercore ISI’s quarterly survey of cybersecurity channel partners added a demand read on top of that. Partners resell and install the products, so they see purchases first. They described:
- Budgets getting stronger into year-end
- Healthy pipelines, with no sign of demand dropping off
- Spending on securing data and AI, identities and cloud environments
Okta had the strongest pipeline momentum of any vendor surveyed, and Evercore named it one of two stocks to highlight.
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Palo Alto’s numbers have to follow
Analysts expect Palo Alto’s revenue to reach $14.2 billion in the fiscal year ending July 2027, up 23% from $11.5 billion in fiscal 2026.
Normalized EPS grows a slower 9%, to $4.19, largely because Palo Alto guided to about 11% more diluted shares this year (844 million to 847 million, from 764 million).
PANW Normalized EPS and Consensus Estimates: FY2024-FY2028 (TIKR)
Both estimates sit at the top of that September 1 guidance ($14.1 billion to $14.2 billion in revenue, $4.16 to $4.19 in EPS). One survey won’t raise them. The fiscal first-quarter report, expected in November, might.
Investors aren’t waiting
Palo Alto traded at 85x forward earnings at Thursday’s close, well above its five-year average of 57x.
After today’s move, it’s closer to 90x. (It peaked at 101x as recently as August.)
A survey measures sentiment, and those deals still have to show up in results. Amazon also made AWS Continuum for code vulnerabilities generally available on Thursday, adding a hyperscaler tool that finds, validates and fixes security flaws.
Evercore’s survey says security budgets are getting stronger into year-end, and that’s good news for the group, whatever role this week’s scare plays in it. But at roughly 90x, with estimates already at the top of guidance, Palo Alto’s price assumes they go higher, and November has to deliver.
If Arora is right about more flaws to come, they could climb fast.
So what is Palo Alto Networks stock actually worth?
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