Key Takeaways
- Palo Alto Networks fell 10% today, along with Okta, as the AI sell-off hit this year’s software winners.
- Palo Alto went into today far above its five-year average multiple, for about 9% EPS growth in fiscal 2027.
- It paid for its biggest deals largely in stock, and it’s reportedly buying again.
- Palo Alto’s Nov. 18 report has to show organic growth and a share count that holds.
Palo Alto Networks (PANW) fell 10% today as the AI sell-off spread to this year’s software winners. The trigger: Democrats won both chambers of Congress on Tuesday, after candidates in both parties took aim at AI data centers.
Okta (OKTA), which had more than doubled in 2026, fell 11%.
Priced for much more than 9%
Palo Alto had gained nearly 90% this year before today. Analysts expect normalized EPS to climb from $3.84 in fiscal 2026 to $4.88 in fiscal 2028:
That’s about 9% growth in fiscal 2027, then 17%. Yet the stock went into today at 84x forward earnings, against a five-year average of 57x:
Growth, paid for in stock
Revenue grew 24% in fiscal 2026, to $11.48 billion. But Palo Alto paid $18.5 billion in stock for CyberArk, and its share count rose 22%, to 818 million from 668 million in July 2025.
And it’s still shopping: Palo Alto is in talks to buy Clutch Security, which tracks the passwords AI agents use, for about $500 million, The Information reported Wednesday.
That pushes Palo Alto deeper into Okta’s market, and Okta guides only 10% to 11% revenue growth this fiscal year. It went into today at 45x forward earnings, so its next report has to show Palo Alto isn’t slowing its deals.
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What Palo Alto has to show on Nov. 18
Cloudflare (NET), down 8% today, reports first, tonight. It’s coming off 36% revenue growth in the second quarter and guided to $736 million to $737 million for the third, so its report is the group’s first read on AI demand.
Palo Alto reports its fiscal first quarter on Nov. 18. I’d watch organic ARR growth, and whether diluted shares stay inside the 844 million to 847 million it guided for the year.
At more than 70x forward earnings even after today, I’d wait for that report before buying the dip. Of course, AI attacks are still pushing security budgets higher, and a clean beat would make today’s drop look like a gift.
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