Key Factors
Palo Alto Networks’ inventory has dipped in 2026 to date, however this could possibly be a chance for savvy traders.
The cybersecurity market is on observe to extend considerably in the long term, pushed by such catalysts as AI.
The inventory appears poised for wholesome positive aspects in coming years because of the double-digit development it may ship.
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Synthetic intelligence (AI) is having a constructive affect on the cybersecurity business, serving to firms on this sector automate menace detection, analyze massive datasets rapidly, and enhance response occasions to cybersecurity incidents.
Grand View Analysis predicts that the worldwide cybersecurity market may hit a whopping $500 billion in income by 2030. The market is poised to clock a compound annual development price (CAGR) of just about 13% between 2025 and 2030, suggesting it’ll double from a dimension of round $241 billion in 2024. The analysis agency additionally factors out that the adoption of AI within the cybersecurity area may enhance at a CAGR of 24% throughout this era.
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That is not shocking, given some great benefits of AI in cybersecurity. In consequence, now looks as if a superb time to purchase shares of Palo Alto Networks (NASDAQ: PANW), one of many main names within the cybersecurity business that is on observe to learn from the rising adoption of AI on this area.
Let’s have a look at why Palo Alto could also be the perfect cybersecurity-oriented AI inventory to purchase proper now.
Picture supply: Getty Photographs.
Palo Alto Networks is already capitalizing on AI adoption in cybersecurity
Palo Alto inventory has been below strain of late. The corporate’s weaker-than-expected earnings steerage for the present quarter and considerations that Anthropic’s cybersecurity-focused mannequin will disrupt the cybersecurity business and produce ache for conventional firms reminiscent of Palo Alto have despatched its shares south in 2026.
The cybersecurity inventory has misplaced virtually 22% of its worth this yr. Nonetheless, this is a chance for savvy traders to purchase Palo Alto. The corporate has been integrating AI-focused instruments into its cybersecurity choices for years now. Not surprisingly, Palo Alto is now witnessing wholesome adoption of its AI-based cybersecurity merchandise.
For example, Palo Alto’s Prisma AIRS platform, which helps enterprises safe their numerous AI property, reminiscent of functions, brokers, fashions, and knowledge, by the complete life cycle from improvement to deployment, noticed a 3x sequential enhance within the variety of prospects within the second quarter of fiscal 2026 (which ended on Jan. 31).
What’s extra, Palo Alto is positioning itself to capitalize on the wholesome development within the AI cybersecurity market by buying new firms. Its not too long ago introduced acquisition of Koi is poised to additional improve the Prisma AIRS platform, as it’ll now enable Palo Alto to safe AI brokers and instruments.
In the meantime, the not too long ago concluded acquisition of Chronosphere is ready to be one other catalyst for Palo Alto. Chronosphere offers an observability platform that allows prospects to observe their AI property, and it paves the best way for Palo Alto to dive right into a market anticipated to clock a 25% annual development price by the tip of the last decade.
The nice half is that the assorted AI-focused instruments that Palo Alto is providing to prospects are serving to it construct a stable income pipeline. Its remaining efficiency obligations (RPO) elevated by 23% yr over yr in fiscal Q2 to $16 billion, up two factors over the year-ago interval.
RPO is the whole worth of an organization’s contracts but to be fulfilled on the finish of a interval. The truth that this metric elevated at a stronger tempo than the 15% development in Palo Alto’s income final quarter means that the corporate’s top-line development is on observe to get higher. The excellent news for Palo Alto traders is that it’s forecasting a 28% enhance in its RPO this fiscal yr to simply over $20 billion.
The corporate’s total income development is anticipated to leap by 22% to 23% in fiscal 2026 to $11.29 billion, a pleasant acceleration over final yr’s 15% soar. Wanting forward, analysts anticipate wholesome double-digit income development from Palo Alto. It could possibly do higher than that on the again of its bettering income pipeline and the potential development of the AI-driven cybersecurity market.
PANW Income Estimates for Present Fiscal 12 months knowledge by YCharts
Traders can anticipate a turnaround within the inventory’s fortunes
Palo Alto’s accelerating development is more likely to be rewarded with extra upside by the market, particularly given its potential to outpace analysts’ expectations. Assuming Palo Alto manages to develop income at an annual price of 25% over the following 4 years, its prime line may attain $27.5 billion by 2030.
The inventory is buying and selling at 12 occasions gross sales proper now, a premium to the U.S. expertise sector’s common gross sales a number of of 8.2. Even when it trades in step with the tech sector’s common in 2030, its market capitalization may soar to $225 billion (primarily based on the projected income seen within the earlier paragraph). That factors towards potential positive aspects of 94% from present ranges, which is why traders can take into account shopping for this tech inventory whereas it’s overwhelmed down.
Do you have to purchase inventory in Palo Alto Networks proper now?
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Harsh Chauhan has no place in any of the shares talked about. The Motley Idiot recommends Palo Alto Networks. The Motley Idiot has a disclosure coverage.
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
