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PANW vs. NET: Which Cybersecurity Stock Has an Edge Right Now?
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Key Takeaways
PANW's SASE ARR grew 40%, while Secure Browser licenses reached 11 million in the third quarter.
NET's AI-agent traffic is driving security demand while raising infrastructure costs and pressuring margins.
PANW trades at a 22.63X forward sales multiple, well below NET's 33.04X, offering an attractive valuation.
Palo Alto Networks (PANW - Free Report) and Cloudflare (NET - Free Report) are both at the forefront of the cybersecurity space, playing key roles in guarding organizations from extensive cyberattacks. PANW focuses broadly on next-generation firewalls, cloud security and AI-driven threat detection. Cloudflare provides a cloud-native platform spanning network security, application security and connectivity.
Both PANW and NET are riding the key industry trends, driven by the mounting incidents of credential theft, remote desktop protocol breaches and social engineering-based strikes by malicious actors. However, from an investment point of view, one stock offers a more favorable outlook than the other right now. Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which stock 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 third quarter of fiscal 2026, SASE was Palo Alto Networks’ fastest-growing segment, with SASE Annual recurring revenues (ARR) increasing 40% year over year. PANW's SASE business is benefiting from strong customer demand for cloud-delivered networking and security solutions as enterprises continue to support hybrid work environments and secure access to cloud applications.
Customer wins remain a key contributor to growth. Year to date, PANW recorded nearly 50 displacement wins worth $200 million in contract value. These wins came from customers replacing competing networking and security products with PANW's platform. Management noted that many enterprises are increasingly looking to reduce the number of vendors they work with and prefer a single platform that combines networking, security and policy management capabilities. This trend is helping PANW gain market share in the SASE market.
Another growth driver is strong momentum in Secure Browser adoption as organizations are adopting browser security solutions to improve visibility and control over employee activity and data access. Secure Browser reached 11 million licenses in the third quarter, up four times compared with the year-ago period, as more employees increase their usage of cloud applications and AI tools through web browsers.
PANW also benefits from its large installed base of firewall customers. Existing customers can extend the same security policies across their networks and SASE environments without adding another vendor. With $1.6 billion in SASE ARR, 40% year-over-year growth, strong competitive wins and rising Secure Browser adoption, SASE is becoming a larger and more meaningful contributor to Palo Alto Networks' long-term growth.
The Case for NET Stock
Cloudflare is seeing stronger demand for its SASE and Zero Trust offerings as companies look to adopt AI more securely. Management said the key reason big companies are approaching Cloudflare is that they know they need AI but want to deploy it securely. This is creating new opportunities for the company’s SASE and Zero Trust platforms, particularly as enterprises need to secure AI agents in addition to human users.
Cloudflare believes its developer-focused approach gives it an advantage in this market. Management said companies will have more AI agents working across their organizations and will need a security model designed for these agents. In one example, a large U.K. government agency was evaluating a first-generation Zero Trust provider but reconsidered the project after discussing its plans for AI agents with Cloudflare. Management said the agency canceled its existing request for proposal and is now reevaluating the project with an agents-first approach. Cloudflare believes its developer-focused approach has helped its SASE and Zero Trust platforms gain significant share over the past six months.
Customer wins in the quarter also show demand for Cloudflare’s security platform. A Fortune 100 technology company signed a $5.2 million, three-year contract for Cloudflare’s full SASE portfolio. The customer is replacing legacy VPNs and virtual desktops and moving its global workforce to a single Zero Trust platform. Cloudflare beat two first-generation Zero Trust vendors in the deal because of its network performance and unified management, with the customer expecting to operate the services with roughly one-third the staff.
In the second quarter, more than 50% of the traffic flowing across NET’s network was nonhuman, reflecting the rapid increase in AI-agent and machine-to-machine traffic. However, higher traffic also means Cloudflare needs to support more compute, storage, networking and infrastructure capacity, all of which would incur higher costs. These higher costs are weighing on Cloudflare's gross margins. In the second quarter of 2026, NET’s gross margin declined 320 basis points on a year-over-year basis. If this trend persists, strong revenue growth may not translate into similar growth in gross profit.
How do Earnings Estimates Compare for PANW & NET?
The Zacks Consensus Estimate for PANW’s fiscal 2026 and 2027 EPS is pegged at $3.77 and $4.10, respectively. The estimates for fiscal 2026 have remained unchanged over the past 30 days, while the same for fiscal 2027 have been revised up by 2 cents over the past 30 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NET’s 2026 and 2027 EPS is pegged at $1.21 and $1.66, respectively. The estimates for 2026 and 2027 have been revised up by a penny and 2 cents, respectively, over the past 30 days.
Image Source: Zacks Investment Research
PANW vs. NET: Price Performance and Valuation
Year to date, shares of PANW have surged 108.6%, while NET shares have returned 60.2%.
PANW Vs. NET: YTD Price Return Performance
Image Source: Zacks Investment Research
Currently, PANW is trading at a forward sales multiple of 22.63X, significantly lower than NET’s forward sales multiple of 33.04X. PANW’s reasonable valuation makes it more attractive for investors looking for value and stability.
PANW vs. NET: Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
Conclusion: PANW Has an Edge Over NET
Both Palo Alto Networks and Cloudflare are key players in the cybersecurity space, but their near-term outlooks are quite different. Cloudflare faces near-term risks from rising costs due to the rapid rise of AI-agent traffic, which is hurting the company’s margins.
In contrast, PANW shows steadier execution, where the company is witnessing strong adoption of its security products. Further, PANW’s reasonable valuation offers some downside protection as well, giving PANW a clear edge over NET for investors seeking exposure to cybersecurity growth at a fair price.
Currently, PANW carries a Zacks Rank #2 (Buy), giving the stock a clear edge compared to Cloudflare, which has a Zacks Rank #4 (Sell).
View the Zacks #1 Rank List
Image: Bigstock
PANW vs. NET: Which Cybersecurity Stock Has an Edge Right Now?
Key Takeaways
Palo Alto Networks (PANW - Free Report) and Cloudflare (NET - Free Report) are both at the forefront of the cybersecurity space, playing key roles in guarding organizations from extensive cyberattacks. PANW focuses broadly on next-generation firewalls, cloud security and AI-driven threat detection. Cloudflare provides a cloud-native platform spanning network security, application security and connectivity.
Both PANW and NET are riding the key industry trends, driven by the mounting incidents of credential theft, remote desktop protocol breaches and social engineering-based strikes by malicious actors. However, from an investment point of view, one stock offers a more favorable outlook than the other right now. Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which stock 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 third quarter of fiscal 2026, SASE was Palo Alto Networks’ fastest-growing segment, with SASE Annual recurring revenues (ARR) increasing 40% year over year. PANW's SASE business is benefiting from strong customer demand for cloud-delivered networking and security solutions as enterprises continue to support hybrid work environments and secure access to cloud applications.
Customer wins remain a key contributor to growth. Year to date, PANW recorded nearly 50 displacement wins worth $200 million in contract value. These wins came from customers replacing competing networking and security products with PANW's platform. Management noted that many enterprises are increasingly looking to reduce the number of vendors they work with and prefer a single platform that combines networking, security and policy management capabilities. This trend is helping PANW gain market share in the SASE market.
Another growth driver is strong momentum in Secure Browser adoption as organizations are adopting browser security solutions to improve visibility and control over employee activity and data access. Secure Browser reached 11 million licenses in the third quarter, up four times compared with the year-ago period, as more employees increase their usage of cloud applications and AI tools through web browsers.
PANW also benefits from its large installed base of firewall customers. Existing customers can extend the same security policies across their networks and SASE environments without adding another vendor. With $1.6 billion in SASE ARR, 40% year-over-year growth, strong competitive wins and rising Secure Browser adoption, SASE is becoming a larger and more meaningful contributor to Palo Alto Networks' long-term growth.
The Case for NET Stock
Cloudflare is seeing stronger demand for its SASE and Zero Trust offerings as companies look to adopt AI more securely. Management said the key reason big companies are approaching Cloudflare is that they know they need AI but want to deploy it securely. This is creating new opportunities for the company’s SASE and Zero Trust platforms, particularly as enterprises need to secure AI agents in addition to human users.
Cloudflare believes its developer-focused approach gives it an advantage in this market. Management said companies will have more AI agents working across their organizations and will need a security model designed for these agents. In one example, a large U.K. government agency was evaluating a first-generation Zero Trust provider but reconsidered the project after discussing its plans for AI agents with Cloudflare. Management said the agency canceled its existing request for proposal and is now reevaluating the project with an agents-first approach. Cloudflare believes its developer-focused approach has helped its SASE and Zero Trust platforms gain significant share over the past six months.
Customer wins in the quarter also show demand for Cloudflare’s security platform. A Fortune 100 technology company signed a $5.2 million, three-year contract for Cloudflare’s full SASE portfolio. The customer is replacing legacy VPNs and virtual desktops and moving its global workforce to a single Zero Trust platform. Cloudflare beat two first-generation Zero Trust vendors in the deal because of its network performance and unified management, with the customer expecting to operate the services with roughly one-third the staff.
In the second quarter, more than 50% of the traffic flowing across NET’s network was nonhuman, reflecting the rapid increase in AI-agent and machine-to-machine traffic. However, higher traffic also means Cloudflare needs to support more compute, storage, networking and infrastructure capacity, all of which would incur higher costs. These higher costs are weighing on Cloudflare's gross margins. In the second quarter of 2026, NET’s gross margin declined 320 basis points on a year-over-year basis. If this trend persists, strong revenue growth may not translate into similar growth in gross profit.
How do Earnings Estimates Compare for PANW & NET?
The Zacks Consensus Estimate for PANW’s fiscal 2026 and 2027 EPS is pegged at $3.77 and $4.10, respectively. The estimates for fiscal 2026 have remained unchanged over the past 30 days, while the same for fiscal 2027 have been revised up by 2 cents over the past 30 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NET’s 2026 and 2027 EPS is pegged at $1.21 and $1.66, respectively. The estimates for 2026 and 2027 have been revised up by a penny and 2 cents, respectively, over the past 30 days.
Image Source: Zacks Investment Research
PANW vs. NET: Price Performance and Valuation
Year to date, shares of PANW have surged 108.6%, while NET shares have returned 60.2%.
PANW Vs. NET: YTD Price Return Performance
Image Source: Zacks Investment Research
Currently, PANW is trading at a forward sales multiple of 22.63X, significantly lower than NET’s forward sales multiple of 33.04X. PANW’s reasonable valuation makes it more attractive for investors looking for value and stability.
PANW vs. NET: Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
Conclusion: PANW Has an Edge Over NET
Both Palo Alto Networks and Cloudflare are key players in the cybersecurity space, but their near-term outlooks are quite different. Cloudflare faces near-term risks from rising costs due to the rapid rise of AI-agent traffic, which is hurting the company’s margins.
In contrast, PANW shows steadier execution, where the company is witnessing strong adoption of its security products. Further, PANW’s reasonable valuation offers some downside protection as well, giving PANW a clear edge over NET for investors seeking exposure to cybersecurity growth at a fair price.
Currently, PANW carries a Zacks Rank #2 (Buy), giving the stock a clear edge compared to Cloudflare, which has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.