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Can PANW Turn Frontier AI Defense Into a Key Growth Driver?
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Key Takeaways
PANW's new service continuously tests applications, APIs, cloud systems and code for vulnerabilities.
PANW combines AI models from Anthropic and OpenAI with prioritized fixes and virtual patching options.
PANW's Next-Generation Security ARR rose 63% to $9.1 billion in fiscal Q4 2026.
Palo Alto Networks (PANW - Free Report) is expanding its AI security offerings with Unit 42 Continuous Frontier AI Defense. PANW’s Continuous Frontier AI Defense uses advanced AI models from Anthropic and OpenAI, along with open-weight models, to identify security weaknesses, test whether attackers can exploit them and help businesses fix them. The service builds on the company's earlier Frontier AI Defense offering introduced in April 2026.
Cyber attackers are increasingly using AI to find and exploit security weaknesses. This is increasing the need for faster and more frequent security testing. PANW's new service continuously checks applications, APIs, cloud infrastructure, source code repositories and network assets for vulnerabilities. It also provides prioritized recommendations, code-level fixes and virtual patching options to help businesses address security gaps before attackers can exploit them.
The new offering could help PANW expand its Unit 42 security services and address the growing need for AI-driven cybersecurity. The service is available globally through annual subscriptions, giving the company an opportunity to generate recurring revenues as more businesses adopt it. PANW is already seeing strong growth across its broader security business. In the fourth quarter of fiscal 2026, Next-Generation Security annual recurring revenue (ARR) reached $9.1 billion, up 63% year over year.
Remaining performance obligations also increased 34% to $21.2 billion, reflecting growth in contracted business. While these figures do not directly measure demand for Continuous Frontier AI Defense, they highlight the company's broader growth momentum. As AI-related threats increase, the new service could provide another growth opportunity for PANW, with its long-term impact depending on customer adoption and the company's ability to turn its security capabilities into measurable results.
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 is expanding its security offerings as AI adoption increases the risk of cyberattacks. In the second quarter of fiscal 2027, its Falcon Exposure Management business gained momentum as companies faced growing difficulty in identifying and fixing vulnerabilities before attackers could exploit them. The product provides real-time detection and continuous prioritization of security exposures. CrowdStrike's AI Detection and Response ending ARR nearly tripled from the previous quarter as customers sought better visibility and control over AI usage.
SentinelOne is expanding its AI security capabilities through Prompt Security and Purple AI. Prompt Security helps businesses monitor AI usage and apply security controls, while Purple AI automates security investigations and helps teams detect and respond to threats faster. SentinelOne reported that ARR from its Prompt Security and Purple AI offerings tripled year over year in the second quarter of fiscal 2027.
PANW’s Price Performance, Valuation & Estimates
Shares of Palo Alto Networks have jumped 112.2% in the year-to-date period compared with the Zacks Security industry’s appreciation of 103.3%.
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 21.77X compared with the industry’s average of 19.83X. 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 2027 and 2028 earnings implies year-over-year growth of 8.9% and 17.6%, respectively. The estimates for fiscal 2027 and 2028 have remained unchanged over the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
Can PANW Turn Frontier AI Defense Into a Key Growth Driver?
Key Takeaways
Palo Alto Networks (PANW - Free Report) is expanding its AI security offerings with Unit 42 Continuous Frontier AI Defense. PANW’s Continuous Frontier AI Defense uses advanced AI models from Anthropic and OpenAI, along with open-weight models, to identify security weaknesses, test whether attackers can exploit them and help businesses fix them. The service builds on the company's earlier Frontier AI Defense offering introduced in April 2026.
Cyber attackers are increasingly using AI to find and exploit security weaknesses. This is increasing the need for faster and more frequent security testing. PANW's new service continuously checks applications, APIs, cloud infrastructure, source code repositories and network assets for vulnerabilities. It also provides prioritized recommendations, code-level fixes and virtual patching options to help businesses address security gaps before attackers can exploit them.
The new offering could help PANW expand its Unit 42 security services and address the growing need for AI-driven cybersecurity. The service is available globally through annual subscriptions, giving the company an opportunity to generate recurring revenues as more businesses adopt it. PANW is already seeing strong growth across its broader security business. In the fourth quarter of fiscal 2026, Next-Generation Security annual recurring revenue (ARR) reached $9.1 billion, up 63% year over year.
Remaining performance obligations also increased 34% to $21.2 billion, reflecting growth in contracted business. While these figures do not directly measure demand for Continuous Frontier AI Defense, they highlight the company's broader growth momentum. As AI-related threats increase, the new service could provide another growth opportunity for PANW, with its long-term impact depending on customer adoption and the company's ability to turn its security capabilities into measurable results.
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 is expanding its security offerings as AI adoption increases the risk of cyberattacks. In the second quarter of fiscal 2027, its Falcon Exposure Management business gained momentum as companies faced growing difficulty in identifying and fixing vulnerabilities before attackers could exploit them. The product provides real-time detection and continuous prioritization of security exposures. CrowdStrike's AI Detection and Response ending ARR nearly tripled from the previous quarter as customers sought better visibility and control over AI usage.
SentinelOne is expanding its AI security capabilities through Prompt Security and Purple AI. Prompt Security helps businesses monitor AI usage and apply security controls, while Purple AI automates security investigations and helps teams detect and respond to threats faster. SentinelOne reported that ARR from its Prompt Security and Purple AI offerings tripled year over year in the second quarter of fiscal 2027.
PANW’s Price Performance, Valuation & Estimates
Shares of Palo Alto Networks have jumped 112.2% in the year-to-date period compared with the Zacks Security industry’s appreciation of 103.3%.
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 21.77X compared with the industry’s average of 19.83X. 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 2027 and 2028 earnings implies year-over-year growth of 8.9% and 17.6%, respectively. The estimates for fiscal 2027 and 2028 have remained unchanged 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.