We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can Platformization Continue Fueling PANW's NGS ARR Growth?
Read MoreHide Full Article
Key Takeaways
PANW's NGS ARR grew 29% year over year to $5.85B in Q1 fiscal 2026, led by platform adoption.
Platform customers are scaling fast, with those above $5M and $10M in NGS ARR up about 50%.
Large XSIAM and SASE deals show enterprises are replacing legacy tools with PANW's unified platform.
Palo Alto Networks (PANW - Free Report) is seeing steady growth in its next-generation security (NGS) business, where the company’s platformization strategy plays a key role. The platformization strategy involves getting customers to adopt multiple Palo Alto Networks’ products spanning across network, cloud, and security operations, enabling customers to adopt its full security platform.
In the first quarter of fiscal 2026, PANW’s NGS annual recurring revenue (ARR) grew 29% year over year to $5.85 billion, where platformization was a key driver. This growth came mainly from software firewalls, Secure Access Service Edge (SASE) and Cortex Extended Security Intelligence and Automation Management (XSIAM), which continued to see more customer use. More customers are choosing to use multiple Palo Alto Networks products together instead of using many different vendors.
In the first quarter, the company added about 60 net new platform customers. The number of customers with more than $5 million in NGS ARR rose to nearly 170, and those with over $10 million increased to 50. Both groups grew about 50% compared with last year. This shows deeper use of the platform by larger customers.
Large deals also supported growth. A U.S. telecom company signed an $85 million XSIAM deal, the largest ever XSIAM deal. Another deal includes a U.S. federal agency that signed a $33 million SASE deal after replacing older tools with the platform. These examples show that customers want fewer tools and simpler security operations, which bodes well for PANW’s prospects.
The company is also expanding its platform through pending acquisitions of CybreArk Software and Chronosphere. CyberArk will boost identity security, while Chronosphere will enhance the observability portfolio. Management believes both areas will become more important as AI usage increases.
Current results show stable demand and growing platform use, but continued execution will be needed to maintain this growth. The Zacks Consensus Estimate for fiscal 2026 and 2027 indicates revenue growth of around 14.1% and 13.3%, respectively.
How Competitors Fare Against PANW
Competitors like CrowdStrike (CRWD - Free Report) and SentinelOne (S - Free Report) are also gaining ground through platform expansion and AI innovation.
CrowdStrike armed Falcon Next-Generation Security Information and Event Management (SIEM) with features like fast search, AI integration, a cloud-native offering with scalability of up to one petabyte of data ingestion per day. In the third quarter of fiscal 2026, Next-Generation SIEM posted record net new ARR, showing that more customers are choosing it over older SIEM tools that are costly and slow.
Though comparatively a small competitor, SentinelOne posted third-quarter fiscal 2026 year-over-year growth of 23% in its ARR. The growth was fueled by the rising adoption of SentinelOne’s AI-first Singularity platform and Purple AI.
PANW’s Price Performance, Valuation & Estimates
Shares of Palo Alto Networks have lost 15.6% in the past three months compared with the Zacks Security industry’s decline of 14%.
PANW 3-month Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Palo Alto Networks trades at a forward price-to-sales ratio of 11.24X compared with the industry’s average of 12.17X.
PANW Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Palo Alto Networks’ fiscal 2026 and 2027 earnings implies year-over-year growth of 15% and 12%, respectively. Estimates for fiscal 2026 have been revised upward by 5 cents over the past 60 days, while the estimates for fiscal 2027 have been revised downward by a penny over the past 30 days.
Image: Bigstock
Can Platformization Continue Fueling PANW's NGS ARR Growth?
Key Takeaways
Palo Alto Networks (PANW - Free Report) is seeing steady growth in its next-generation security (NGS) business, where the company’s platformization strategy plays a key role. The platformization strategy involves getting customers to adopt multiple Palo Alto Networks’ products spanning across network, cloud, and security operations, enabling customers to adopt its full security platform.
In the first quarter of fiscal 2026, PANW’s NGS annual recurring revenue (ARR) grew 29% year over year to $5.85 billion, where platformization was a key driver. This growth came mainly from software firewalls, Secure Access Service Edge (SASE) and Cortex Extended Security Intelligence and Automation Management (XSIAM), which continued to see more customer use. More customers are choosing to use multiple Palo Alto Networks products together instead of using many different vendors.
In the first quarter, the company added about 60 net new platform customers. The number of customers with more than $5 million in NGS ARR rose to nearly 170, and those with over $10 million increased to 50. Both groups grew about 50% compared with last year. This shows deeper use of the platform by larger customers.
Large deals also supported growth. A U.S. telecom company signed an $85 million XSIAM deal, the largest ever XSIAM deal. Another deal includes a U.S. federal agency that signed a $33 million SASE deal after replacing older tools with the platform. These examples show that customers want fewer tools and simpler security operations, which bodes well for PANW’s prospects.
The company is also expanding its platform through pending acquisitions of CybreArk Software and Chronosphere. CyberArk will boost identity security, while Chronosphere will enhance the observability portfolio. Management believes both areas will become more important as AI usage increases.
Current results show stable demand and growing platform use, but continued execution will be needed to maintain this growth. The Zacks Consensus Estimate for fiscal 2026 and 2027 indicates revenue growth of around 14.1% and 13.3%, respectively.
How Competitors Fare Against PANW
Competitors like CrowdStrike (CRWD - Free Report) and SentinelOne (S - Free Report) are also gaining ground through platform expansion and AI innovation.
CrowdStrike armed Falcon Next-Generation Security Information and Event Management (SIEM) with features like fast search, AI integration, a cloud-native offering with scalability of up to one petabyte of data ingestion per day. In the third quarter of fiscal 2026, Next-Generation SIEM posted record net new ARR, showing that more customers are choosing it over older SIEM tools that are costly and slow.
Though comparatively a small competitor, SentinelOne posted third-quarter fiscal 2026 year-over-year growth of 23% in its ARR. The growth was fueled by the rising adoption of SentinelOne’s AI-first Singularity platform and Purple AI.
PANW’s Price Performance, Valuation & Estimates
Shares of Palo Alto Networks have lost 15.6% in the past three months compared with the Zacks Security industry’s decline of 14%.
PANW 3-month Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Palo Alto Networks trades at a forward price-to-sales ratio of 11.24X compared with the industry’s average of 12.17X.
PANW Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Palo Alto Networks’ fiscal 2026 and 2027 earnings implies year-over-year growth of 15% and 12%, respectively. Estimates for fiscal 2026 have been revised upward by 5 cents over the past 60 days, while the estimates for fiscal 2027 have been revised downward by a penny over the past 30 days.
Image Source: Zacks Investment Research
Palo Alto Networks currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.