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Palo Alto Networks vs. Zscaler: Which Cybersecurity Stock Has an Edge?
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Key Takeaways
PANW faces near-term pressure from acquisition costs, EPS cuts and share dilution.
ZS is seeing strong Zero Trust Everywhere adoption, driving higher ARR potential per customer.
ZS trades at a lower valuation than PANW, offering better value and stability.
Palo Alto Networks (PANW - Free Report) and Zscaler (ZS - Free Report) are both at the forefront of the cybersecurity space, playing key roles in guarding organizations from extensive cyberattacks. While PANW focuses broadly on next-generation firewalls, cloud security and AI-driven threat detection, Zscaler is a leader in zero trust security and specializes in secure access service edge and cloud security.
Palo Alto Networks and Zscaler are capitalizing on the rapid improvement of the cybersecurity space, fueled by the rise of complex attacks, including credential theft and abuse, remote desktop protocol attacks and social engineering-based initial access. Per a Mordor Intelligence report, the cybersecurity market is projected to witness a CAGR of 12.28% from 2026 to 2031.
With this strong industry growth forecast, the question remains: Which stock has more upside potential? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
The Case for PANW Stock
Palo Alto Networks remains a cybersecurity leader, offering solutions for network security, cloud security and endpoint solutions for customers who need full enterprise security support. Its next-generation firewalls and advanced threat detection technologies are widely recognized and adopted globally.
Palo Alto Networks’ wide range of innovative products, strong customer base and growing opportunities in areas like Zero Trust, Secure Access Service Edge (SASE) and private 5G security continue to support its long-term growth potential. For example, in the second quarter of fiscal 2026, SASE was Palo Alto Networks’ fastest-growing segment, with SASE Annual recurring revenues (ARR) increasing 40% year over year. Growth is mainly coming from customers who want to reduce the number of security tools they use.
Many organizations are moving away from older SASE products that do not provide a full view of their networks, cloud workloads and remote users. A notable example during the second quarter includes a global automotive leader selecting PANW for a major security transformation. The deal was worth over $50 million, including about $30 million for SASE and $20 million for XSIAM to run the company’s global security operations center.
PANW's near-term prospects are expected to be weighed down due to integration and acquisition-related costs. PANW recently completed two major acquisitions, which include its $25 billion CyberArk deal and $3.35 billion Chronosphere acquisition. As a result, PANW is incurring high integration-related costs, including onboarding employees, aligning go-to-market teams and integrating systems and operations. Acquisition-related costs in the second quarter amounted to $24 million, a whopping increase from $5 million incurred in the prior quarter. These costs are expected to hurt the company's profitability before the benefits of synergies from acquisitions are fully realized.
Equity dilution effect is expected to significantly hurt PANW’s bottom line. In the second quarter of fiscal 2026, PANW issued 112 million shares as part of the CyberArk deal. This is expected to result in a significant equity dilution effect, hurting the company’s bottom-line results. Management expects fiscal 2026 earnings per share (EPS) to be in the range of $3.65-$3.70, down from its prior guidance of $3.80-$3.90 per share.
The Case for Zscaler Stock
Zscaler’s Zero Trust Everywhere strategy is becoming an important growth driver for the company. Zero Trust Everywhere is one of the key growth pillars for ZS, which goes beyond securing users and expands Zscaler’s platform across branches and cloud workloads. In the second quarter of fiscal 2026, Zero Trust Everywhere enterprise customers rose to more than 550, up sharply from over 130 in the year-ago quarter. This shows that Zero Trust Everywhere is supporting the rising adoption of Zscaler’s platform.
What makes this trend important is the revenue opportunity. Management noted that customers who adopt Zero Trust Everywhere can drive roughly 2x to 3x ARR uplift. That means these deals can materially increase customer spending over time. The company’s Zero Trust Everywhere offering includes Zero Trust Users, Zero Trust Branch and Zero Trust Cloud, giving customers a wider security platform and Zscaler more room to expand wallet share.
The company is also seeing good traction in both Zero Trust Branch and Zero Trust Cloud. In the second quarter, 45% of customers who bought Zero Trust Branch were new logos, showing that this offering is helping Zscaler win new customers as well. Zscaler also highlighted a large retailer subsidiary that expanded Zero Trust Branch to more than 1,000 sites in a seven-figure upsell deal. On the cloud side, a Global 2000 financial services customer signed a seven-figure Zero Trust Cloud deal that lifted its ARR to more than $5 million.
Zero Trust Everywhere also supports Zscaler’s broader growth story because it creates follow-on demand for AI Security and Data Security offerings. As more customers adopt multiple parts of the platform, Zscaler gets a better chance to deepen enterprise spending over time. If current adoption trends continue, Zero Trust Everywhere could become a bigger contributor to Zscaler’s long-term growth.
PANW vs. ZS: Earnings Estimate Trend
The earnings estimate revision trend for the two companies reflects that analysts are turning more bullish toward ZS.
The Zacks Consensus Estimate for PANW’s fiscal 2026 and 2027 EPS is pegged at $3.72 and $4.03, respectively. The estimates for fiscal 2026 have been revised down by 12 cents over the past 60 days, while the same for fiscal 2027 have been revised downward by 2 cents over the past 30 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Zscaler’s fiscal 2026 and 2027 EPS is pinned at $4.00 and $4.53, respectively. The estimates for fiscal 2027 and 2028 have both been revised upward by 17 cents and 10 cents, respectively, over the past 60 days.
Image Source: Zacks Investment Research
PANW vs. ZS: Price Performance and Valuation
Year to date, shares of PANW and ZS have plunged 15.4% and 47.5%, respectively.
PANW Vs. ZS: YTD Price Return Performance
Image Source: Zacks Investment Research
Currently, ZS is trading at a forward sales multiple of 5.04X, lower than Palo Alto Networks’ forward sales multiple of 10.02X. ZS’ reasonable valuation makes it more attractive for investors looking for value and stability.
PANW vs. ZS: Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
Conclusion: ZS Has an Edge Over PANW
Both Palo Alto Networks and Zscaler are key players in the cybersecurity space, but their near-term outlooks are quite different. Palo Alto Networks faces near-term risks from rising integration costs due to large acquisitions, share dilution is meaningful and downward revision of EPS guidance for fiscal 2026. These could hurt PANW’s prospects in the near term.
Zscaler shows steadier execution, where the company is witnessing strong adoption of its security product and its earnings estimates are being revised upward. ZS’s reasonable valuation offers some downside protection as well, giving ZS a clear edge over PANW for investors seeking exposure to cybersecurity growth at a fair price.
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Palo Alto Networks vs. Zscaler: Which Cybersecurity Stock Has an Edge?
Key Takeaways
Palo Alto Networks (PANW - Free Report) and Zscaler (ZS - Free Report) are both at the forefront of the cybersecurity space, playing key roles in guarding organizations from extensive cyberattacks. While PANW focuses broadly on next-generation firewalls, cloud security and AI-driven threat detection, Zscaler is a leader in zero trust security and specializes in secure access service edge and cloud security.
Palo Alto Networks and Zscaler are capitalizing on the rapid improvement of the cybersecurity space, fueled by the rise of complex attacks, including credential theft and abuse, remote desktop protocol attacks and social engineering-based initial access. Per a Mordor Intelligence report, the cybersecurity market is projected to witness a CAGR of 12.28% from 2026 to 2031.
With this strong industry growth forecast, the question remains: Which stock has more upside potential? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
The Case for PANW Stock
Palo Alto Networks remains a cybersecurity leader, offering solutions for network security, cloud security and endpoint solutions for customers who need full enterprise security support. Its next-generation firewalls and advanced threat detection technologies are widely recognized and adopted globally.
Palo Alto Networks’ wide range of innovative products, strong customer base and growing opportunities in areas like Zero Trust, Secure Access Service Edge (SASE) and private 5G security continue to support its long-term growth potential. For example, in the second quarter of fiscal 2026, SASE was Palo Alto Networks’ fastest-growing segment, with SASE Annual recurring revenues (ARR) increasing 40% year over year. Growth is mainly coming from customers who want to reduce the number of security tools they use.
Many organizations are moving away from older SASE products that do not provide a full view of their networks, cloud workloads and remote users. A notable example during the second quarter includes a global automotive leader selecting PANW for a major security transformation. The deal was worth over $50 million, including about $30 million for SASE and $20 million for XSIAM to run the company’s global security operations center.
PANW's near-term prospects are expected to be weighed down due to integration and acquisition-related costs. PANW recently completed two major acquisitions, which include its $25 billion CyberArk deal and $3.35 billion Chronosphere acquisition. As a result, PANW is incurring high integration-related costs, including onboarding employees, aligning go-to-market teams and integrating systems and operations. Acquisition-related costs in the second quarter amounted to $24 million, a whopping increase from $5 million incurred in the prior quarter. These costs are expected to hurt the company's profitability before the benefits of synergies from acquisitions are fully realized.
Equity dilution effect is expected to significantly hurt PANW’s bottom line. In the second quarter of fiscal 2026, PANW issued 112 million shares as part of the CyberArk deal. This is expected to result in a significant equity dilution effect, hurting the company’s bottom-line results. Management expects fiscal 2026 earnings per share (EPS) to be in the range of $3.65-$3.70, down from its prior guidance of $3.80-$3.90 per share.
The Case for Zscaler Stock
Zscaler’s Zero Trust Everywhere strategy is becoming an important growth driver for the company. Zero Trust Everywhere is one of the key growth pillars for ZS, which goes beyond securing users and expands Zscaler’s platform across branches and cloud workloads. In the second quarter of fiscal 2026, Zero Trust Everywhere enterprise customers rose to more than 550, up sharply from over 130 in the year-ago quarter. This shows that Zero Trust Everywhere is supporting the rising adoption of Zscaler’s platform.
What makes this trend important is the revenue opportunity. Management noted that customers who adopt Zero Trust Everywhere can drive roughly 2x to 3x ARR uplift. That means these deals can materially increase customer spending over time. The company’s Zero Trust Everywhere offering includes Zero Trust Users, Zero Trust Branch and Zero Trust Cloud, giving customers a wider security platform and Zscaler more room to expand wallet share.
The company is also seeing good traction in both Zero Trust Branch and Zero Trust Cloud. In the second quarter, 45% of customers who bought Zero Trust Branch were new logos, showing that this offering is helping Zscaler win new customers as well. Zscaler also highlighted a large retailer subsidiary that expanded Zero Trust Branch to more than 1,000 sites in a seven-figure upsell deal. On the cloud side, a Global 2000 financial services customer signed a seven-figure Zero Trust Cloud deal that lifted its ARR to more than $5 million.
Zero Trust Everywhere also supports Zscaler’s broader growth story because it creates follow-on demand for AI Security and Data Security offerings. As more customers adopt multiple parts of the platform, Zscaler gets a better chance to deepen enterprise spending over time. If current adoption trends continue, Zero Trust Everywhere could become a bigger contributor to Zscaler’s long-term growth.
PANW vs. ZS: Earnings Estimate Trend
The earnings estimate revision trend for the two companies reflects that analysts are turning more bullish toward ZS.
The Zacks Consensus Estimate for PANW’s fiscal 2026 and 2027 EPS is pegged at $3.72 and $4.03, respectively. The estimates for fiscal 2026 have been revised down by 12 cents over the past 60 days, while the same for fiscal 2027 have been revised downward by 2 cents over the past 30 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Zscaler’s fiscal 2026 and 2027 EPS is pinned at $4.00 and $4.53, respectively. The estimates for fiscal 2027 and 2028 have both been revised upward by 17 cents and 10 cents, respectively, over the past 60 days.
Image Source: Zacks Investment Research
PANW vs. ZS: Price Performance and Valuation
Year to date, shares of PANW and ZS have plunged 15.4% and 47.5%, respectively.
PANW Vs. ZS: YTD Price Return Performance
Image Source: Zacks Investment Research
Currently, ZS is trading at a forward sales multiple of 5.04X, lower than Palo Alto Networks’ forward sales multiple of 10.02X. ZS’ reasonable valuation makes it more attractive for investors looking for value and stability.
PANW vs. ZS: Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
Conclusion: ZS Has an Edge Over PANW
Both Palo Alto Networks and Zscaler are key players in the cybersecurity space, but their near-term outlooks are quite different. Palo Alto Networks faces near-term risks from rising integration costs due to large acquisitions, share dilution is meaningful and downward revision of EPS guidance for fiscal 2026. These could hurt PANW’s prospects in the near term.
Zscaler shows steadier execution, where the company is witnessing strong adoption of its security product and its earnings estimates are being revised upward. ZS’s reasonable valuation offers some downside protection as well, giving ZS a clear edge over PANW for investors seeking exposure to cybersecurity growth at a fair price.
Currently, Zscaler and Palo Alto Networks carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.