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Prisma AIRS customers rose to more than 300, while XSIAM ARR surged 100% year over year.
Palo Alto Networks targets more than 4,000 platformized customers and $20 billion in ARR by fiscal 2030.
Palo Alto Networks (PANW - Free Report) believes the shift toward enterprise AI adoption is creating new cybersecurity needs across networks, applications, identities and security operations. In the third quarter of fiscal 2026, management said AI is increasing network traffic, creating more machine and AI-agent identities, and allowing attackers to find vulnerabilities and launch attacks faster. PANW is directly benefiting from this trend of strong demand for enterprise AI adoption, which should help the company strengthen its position against cybersecurity rivals, such as CrowdStrike (CRWD - Free Report) and Zscaler (ZS - Free Report) .
The company's Network Security business is already benefiting from higher AI-related traffic. Next-generation firewall bookings grew nearly 40% year over year, while hardware had its best quarter in a decade. Software firewall annual recurring revenues (ARR) also increased 25% year over year as customers expanded capacity to inspect traffic between cloud and AI workloads. PANW reported early wins in AI data centers, including an $80 million deal with a U.S. power producer that selected next-generation firewalls and SASE.
Enterprise AI adoption is also creating opportunities in other parts of PANW's portfolio. Prisma AIRS had more than 300 customers in the third quarter, up from 100 in the second quarter. Management expects the product to reach $100 million in ARR within the next couple of quarters. XSIAM ARR surged 100% year over year, with more than 740 customers, and Observability ARR surpassed $300 million as AI workloads increased the amount of data that companies need to monitor. Further, integration of CyberArk's abilities is also helping PANW address the growing number of machine and AI-agent identities.
These businesses give PANW several ways to benefit from enterprise AI adoption instead of relying on a single product. The company is combining network security, AI security, security operations, identity and observability on a single platform and aims to reach more than 4,000 platformized customers and $20 billion in Next-Generation Security ARR by fiscal 2030. If AI adoption continues to increase demand across these product areas, it could help PANW expand its addressable market and support its long-term ARR target.
How Competitors Fare Against PANW
CrowdStrike is also benefiting from rising AI-related cybersecurity demand. CrowdStrike is seeing strong demand for its AI Detection and Response (AIDR) solution. CRWD's AIDR solution is designed to help companies monitor and secure AI applications, agents and workloads as AI adoption grows across enterprises. Management highlighted AIDR as one of the company's fastest-growing products in the first quarter of fiscal 2027. In the first quarter, AIDR's ending ARR grew more than 250% sequentially. Further, AIDR has already secured a pipeline of more than $50 million for the second quarter of fiscal 2027.
Zscaler is seeing strong adoption of its Zero Trust Everywhere strategy, which is helping the company expand beyond its traditional user security offerings. The strategy combines security for users, cloud workloads and branch locations on a single platform. The company ended the third quarter of fiscal 2026 with more than 700 Zero Trust Everywhere enterprises, up from over 550 in the previous quarter. As more customers adopt multiple products across the platform, Zero Trust Everywhere could help Zscaler increase customer spending, win larger deals and support long-term growth.
PANW’s Price Performance, Valuation & Estimates
Shares of Palo Alto Networks have jumped 95.3% in the year-to-date period compared with the Zacks Security industry’s appreciation of 79.9%.
PANW’s YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Palo Alto Networks trades at a forward price-to-sales ratio of 21.17X compared with the industry’s average of 18.29X. The Zacks Value Score of F suggests that PANW stock is overvalued.
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 12.9% and 8.6%, 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.
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Image: Bigstock
Can Strong Enterprise AI Adoption Help PANW Challenge CRWD & ZS?
Key Takeaways
Palo Alto Networks (PANW - Free Report) believes the shift toward enterprise AI adoption is creating new cybersecurity needs across networks, applications, identities and security operations. In the third quarter of fiscal 2026, management said AI is increasing network traffic, creating more machine and AI-agent identities, and allowing attackers to find vulnerabilities and launch attacks faster. PANW is directly benefiting from this trend of strong demand for enterprise AI adoption, which should help the company strengthen its position against cybersecurity rivals, such as CrowdStrike (CRWD - Free Report) and Zscaler (ZS - Free Report) .
The company's Network Security business is already benefiting from higher AI-related traffic. Next-generation firewall bookings grew nearly 40% year over year, while hardware had its best quarter in a decade. Software firewall annual recurring revenues (ARR) also increased 25% year over year as customers expanded capacity to inspect traffic between cloud and AI workloads. PANW reported early wins in AI data centers, including an $80 million deal with a U.S. power producer that selected next-generation firewalls and SASE.
Enterprise AI adoption is also creating opportunities in other parts of PANW's portfolio. Prisma AIRS had more than 300 customers in the third quarter, up from 100 in the second quarter. Management expects the product to reach $100 million in ARR within the next couple of quarters. XSIAM ARR surged 100% year over year, with more than 740 customers, and Observability ARR surpassed $300 million as AI workloads increased the amount of data that companies need to monitor. Further, integration of CyberArk's abilities is also helping PANW address the growing number of machine and AI-agent identities.
These businesses give PANW several ways to benefit from enterprise AI adoption instead of relying on a single product. The company is combining network security, AI security, security operations, identity and observability on a single platform and aims to reach more than 4,000 platformized customers and $20 billion in Next-Generation Security ARR by fiscal 2030. If AI adoption continues to increase demand across these product areas, it could help PANW expand its addressable market and support its long-term ARR target.
How Competitors Fare Against PANW
CrowdStrike is also benefiting from rising AI-related cybersecurity demand. CrowdStrike is seeing strong demand for its AI Detection and Response (AIDR) solution. CRWD's AIDR solution is designed to help companies monitor and secure AI applications, agents and workloads as AI adoption grows across enterprises. Management highlighted AIDR as one of the company's fastest-growing products in the first quarter of fiscal 2027. In the first quarter, AIDR's ending ARR grew more than 250% sequentially. Further, AIDR has already secured a pipeline of more than $50 million for the second quarter of fiscal 2027.
Zscaler is seeing strong adoption of its Zero Trust Everywhere strategy, which is helping the company expand beyond its traditional user security offerings. The strategy combines security for users, cloud workloads and branch locations on a single platform. The company ended the third quarter of fiscal 2026 with more than 700 Zero Trust Everywhere enterprises, up from over 550 in the previous quarter. As more customers adopt multiple products across the platform, Zero Trust Everywhere could help Zscaler increase customer spending, win larger deals and support long-term growth.
PANW’s Price Performance, Valuation & Estimates
Shares of Palo Alto Networks have jumped 95.3% in the year-to-date period compared with the Zacks Security industry’s appreciation of 79.9%.
PANW’s YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Palo Alto Networks trades at a forward price-to-sales ratio of 21.17X compared with the industry’s average of 18.29X. The Zacks Value Score of F suggests that PANW stock is overvalued.
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 12.9% and 8.6%, 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
Palo Alto Networks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.