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PANW Surges 102% in 6 Months: Should You Buy, Sell or Hold the Stock?
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Key Takeaways
Palo Alto Networks' SASE bookings grew 40% as it displaced legacy vendors in nearly 100 accounts.
Agentic traffic on PANW's SASE platform increased 9x in nine months, boosting AI-driven security demand.
PANW's rising costs and 18.97X forward P/S multiple warrant a cautious approach despite strong growth.
Palo Alto Networks (PANW - Free Report) shares have soared 101.8% in the past six months, outperforming the Zacks Security industry’s 85% growth. The stock has outperformed other industry peers as well, including Qualys Inc. (QLYS - Free Report) , Zscaler (ZS - Free Report) and Check Point Software (CHKP - Free Report) . In the past six months, shares of Qualys and Zscaler have returned 78.1% and 4.4%, respectively, while Check Point Software shares have plunged 14.8%.
Palo Alto Networks has been riding on strong enterprise demand for Artificial Intelligence (AI)-native cybersecurity solutions. But with the stock outperforming the industry and peers, the question arises: Does it still have room to run, or is it time for investors to consider taking profits? Let’s find out.
6-Month Price Return Performance
Image Source: Zacks Investment Research
PANW Benefits From Positive Industry Tailwinds
Palo Alto Networks is well-positioned to capitalize on the growing demand for advanced cybersecurity solutions. According to Fortune Business Insights, the global cybersecurity market is projected to grow from $248.28 billion in 2026 to $699.39 billion by 2034, representing a massive addressable market. As cyber threats become more sophisticated, enterprises are increasingly prioritizing multi-layered security platforms, which directly contribute to PANW’s strengths.
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 instance, the company’s SASE bookings grew 40% in fiscal 2026, supported by growth across Access, SD-WAN and secure browser. PANW displaced legacy vendors in nearly 100 customer accounts, representing more than $400 million in total contract value. The displacement volume was nearly double that of the prior year.
Palo Alto Networks’ platform strategy is helping it win these customers. The company integrates SASE with its firewall, SD-WAN and other security products, allowing existing customers to add SASE without bringing in another vendor. Management said this makes platform standardization a simpler choice for customers. In the fourth quarter of fiscal 2026, a global telecom leader signed a $126 million agreement to expand its next-generation firewall footprint while replacing legacy proxy providers with Prisma Access for SASE.
PANW has also benefited from its earlier acquisition of CloudGenix and its integration of SD-WAN into the company’s SASE platform. Management said integrating SASE with its firewall and SD-WAN products gives customers an easier path to platform standardization, helping PANW win business from existing SASE vendors. Per management, PANW is currently the No. 2 player in SASE and aims to become the market leader over the next five to seven years. Continued customer consolidation could support this goal as enterprises look to reduce the number of security vendors they use.
AI could provide another source of SASE demand. PANW said agentic traffic on its SASE platform has increased 9x over the past nine months. As companies deploy more AI agents, the amount of network traffic and data that needs to be monitored and secured is likely to increase. Overall, strong SASE bookings, rising competitive displacements and PANW’s broader security platform give the company a solid base to gain more share. The Zacks Consensus Estimate for fiscal 2027 and 2028 indicates revenue growth of around 23.4% and 14.4%, respectively.
Image Source: Zacks Investment Research
Rising Costs Weigh on PANW’s Prospects
PANW’s non-GAAP gross margin fell 100 basis points year over year to 74.8% in the fourth quarter of fiscal 2026, while non-GAAP gross margin for fiscal 2026 declined 60 basis points to 75.8%. The decline was mainly due to the growing mix of SaaS offerings, which are still scaling toward mature margin levels. Management expects cloud hosting costs to grow faster than revenues in fiscal 2027, which could weigh on gross-margin expansion.
Further, Palo Alto Networks expects higher commodity costs, particularly for memory and storage, to persist in its hardware business. While strong demand for its Gen 5 firewall appliances remains positive, higher component costs could weigh on hardware profitability.
PANW’s Premium Valuation Warrants a Cautious Approach
Palo Alto Networks is currently trading at a high price-to-sales (P/S) multiple, above the Zacks Security industry. Palo Alto Networks’ forward 12-month P/S ratio sits at 18.97X, higher than the Zacks Security industry’s forward 12-month P/S ratio of 17.14X. The Zacks Value Score of F also suggests that PANW stock is overvalued.
PANW Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The stock trades at a premium valuation to other industry peers, including Qualys, Zscaler and Check Point Software. At present, Qualys, Zscaler and Check Point Software have P/S multiples of 7.68X, 6.96X and 4.79X, respectively.
Conclusion: Hold PANW Stock Right Now
Palo Alto Networks remains a leader in cybersecurity, with a strong long-term growth trajectory, continued AI-driven innovation and a shift toward a more predictable recurring revenue model. Growth in areas such as SASE and platform-based security offerings remains strong, supported by large enterprise deals and increasing customer adoption, which provides a favorable long-term growth opportunity for the company.
However, Palo Alto Networks’ rising costs and premium valuation warrant a cautious approach to the stock.
View the Zacks #1 Rank List
Image: Bigstock
PANW Surges 102% in 6 Months: Should You Buy, Sell or Hold the Stock?
Key Takeaways
Palo Alto Networks (PANW - Free Report) shares have soared 101.8% in the past six months, outperforming the Zacks Security industry’s 85% growth. The stock has outperformed other industry peers as well, including Qualys Inc. (QLYS - Free Report) , Zscaler (ZS - Free Report) and Check Point Software (CHKP - Free Report) . In the past six months, shares of Qualys and Zscaler have returned 78.1% and 4.4%, respectively, while Check Point Software shares have plunged 14.8%.
Palo Alto Networks has been riding on strong enterprise demand for Artificial Intelligence (AI)-native cybersecurity solutions. But with the stock outperforming the industry and peers, the question arises: Does it still have room to run, or is it time for investors to consider taking profits? Let’s find out.
6-Month Price Return Performance
Image Source: Zacks Investment Research
PANW Benefits From Positive Industry Tailwinds
Palo Alto Networks is well-positioned to capitalize on the growing demand for advanced cybersecurity solutions. According to Fortune Business Insights, the global cybersecurity market is projected to grow from $248.28 billion in 2026 to $699.39 billion by 2034, representing a massive addressable market. As cyber threats become more sophisticated, enterprises are increasingly prioritizing multi-layered security platforms, which directly contribute to PANW’s strengths.
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 instance, the company’s SASE bookings grew 40% in fiscal 2026, supported by growth across Access, SD-WAN and secure browser. PANW displaced legacy vendors in nearly 100 customer accounts, representing more than $400 million in total contract value. The displacement volume was nearly double that of the prior year.
Palo Alto Networks’ platform strategy is helping it win these customers. The company integrates SASE with its firewall, SD-WAN and other security products, allowing existing customers to add SASE without bringing in another vendor. Management said this makes platform standardization a simpler choice for customers. In the fourth quarter of fiscal 2026, a global telecom leader signed a $126 million agreement to expand its next-generation firewall footprint while replacing legacy proxy providers with Prisma Access for SASE.
PANW has also benefited from its earlier acquisition of CloudGenix and its integration of SD-WAN into the company’s SASE platform. Management said integrating SASE with its firewall and SD-WAN products gives customers an easier path to platform standardization, helping PANW win business from existing SASE vendors. Per management, PANW is currently the No. 2 player in SASE and aims to become the market leader over the next five to seven years. Continued customer consolidation could support this goal as enterprises look to reduce the number of security vendors they use.
AI could provide another source of SASE demand. PANW said agentic traffic on its SASE platform has increased 9x over the past nine months. As companies deploy more AI agents, the amount of network traffic and data that needs to be monitored and secured is likely to increase. Overall, strong SASE bookings, rising competitive displacements and PANW’s broader security platform give the company a solid base to gain more share. The Zacks Consensus Estimate for fiscal 2027 and 2028 indicates revenue growth of around 23.4% and 14.4%, respectively.
Image Source: Zacks Investment Research
Rising Costs Weigh on PANW’s Prospects
PANW’s non-GAAP gross margin fell 100 basis points year over year to 74.8% in the fourth quarter of fiscal 2026, while non-GAAP gross margin for fiscal 2026 declined 60 basis points to 75.8%. The decline was mainly due to the growing mix of SaaS offerings, which are still scaling toward mature margin levels. Management expects cloud hosting costs to grow faster than revenues in fiscal 2027, which could weigh on gross-margin expansion.
Further, Palo Alto Networks expects higher commodity costs, particularly for memory and storage, to persist in its hardware business. While strong demand for its Gen 5 firewall appliances remains positive, higher component costs could weigh on hardware profitability.
PANW’s Premium Valuation Warrants a Cautious Approach
Palo Alto Networks is currently trading at a high price-to-sales (P/S) multiple, above the Zacks Security industry. Palo Alto Networks’ forward 12-month P/S ratio sits at 18.97X, higher than the Zacks Security industry’s forward 12-month P/S ratio of 17.14X. The Zacks Value Score of F also suggests that PANW stock is overvalued.
PANW Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The stock trades at a premium valuation to other industry peers, including Qualys, Zscaler and Check Point Software. At present, Qualys, Zscaler and Check Point Software have P/S multiples of 7.68X, 6.96X and 4.79X, respectively.
Conclusion: Hold PANW Stock Right Now
Palo Alto Networks remains a leader in cybersecurity, with a strong long-term growth trajectory, continued AI-driven innovation and a shift toward a more predictable recurring revenue model. Growth in areas such as SASE and platform-based security offerings remains strong, supported by large enterprise deals and increasing customer adoption, which provides a favorable long-term growth opportunity for the company.
However, Palo Alto Networks’ rising costs and premium valuation warrant a cautious approach to the stock.
Currently, Palo Alto Networks carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.