Cybersecurity firms Palo Alto Networks, Inc. (NASDAQ:PANW) and CrowdStrike Holdings, Inc. (NASDAQ:CRWD) are among the stocks that Jim Cramer has consistently advocated over the past couple of months. Over the year, the two stocks are up by more than 80%. The priimary narrative drivers for both firms are their initiatives to operate in a software industry driven by AI. One major factor that has troubled the sector is AI’s ability to discover vulernabilities in networks and software. The stocks struggled earlier in the year after Anthropic’s announcements of the cybersecurity features of its AI products. On Monday, he referred to this trend again:
“I was with Mr. Brockman of OpenAI. And if you talk to Anthropic, they’re going to say the same thing. That we really have to worry much more about cybersecurity. Now back in February we had Anthropic telling us, you don’t have to worry. . .which is ridiculous, the insurance companies won’t let the same company doing the same model, therefore, do the protection. But, TD Cowen, and this is a good example of coming in higher, recommends that we buy Palo Alto, which is a Club name, and CrowdStrike, Palo Alto,175, 235, CrowdStrike, 360, goes to 400. Because these are the companies, that really, they have the technology to protect us. You know this is again, an example, do you come in at a 170%? This is a market, that I wrote this weekend, is different from any other. Because we always heard, the most dangerous words are this time it’s different. And you never buy stocks up this much. But we have this problem, and the problem is that the earnings are exploding for these companies. So therefore we have to take the PEs up. Even if we don’t want to, we take their PEs up. And the PEs are so low. Not, well these are historically high PE stocks. But they’re lower than we see them. And then when we look at a company like Micron, the PE could be incredibly low. And so what are you going to do? You’re just saying you know what, this is just like Ford Motor? Ford Motor and Micron saying no, no.”
As for the shares’ performance, Cramer later added that a selling signal might be when you didn’t believe there won’t be any hacks.
While they both operate in the same industry, Palo Alto Networks, Inc. (NASDAQ:PANW) and CrowdStrike Holdings, Inc. (NASDAQ:CRWD) have different approaches to their products. For CrowdStrike, the fact that its annual recurring revenue jumped by 24% to $5.51 billion in its Q1 fiscal 2027. The jump came courtesy of net new ARR of $256 million in the quarter. Similarly, the firm’s revenue als jumped by 26% annually to $1.4 billion.
More crucially, as part of its earnings, CrowdStrike Holdings, Inc. (NASDAQ:CRWD)’s management outlined that 51% of its customers adopted six or more modules of its Falcon platform. This adoption is key, as the firm has based a large portion of its strategy on the AI agent platform. Yet, worries about growth persist as the firm’s full-year revenue guidance of $5.91 billion to $5.95 billion fell short of analyst estimates of $6 billion. Additionally, CrowdStrike Holdings, Inc. (NASDAQ:CRWD)’s ARR growth of 24% lags its revenue growth of 26% to potentially indicate at a future slowdown.
For Palo Alto Networks, Inc. (NASDAQ:PANW), while CRWD is focused on a single platform, the firm is combining its AI and non-AI platforms in a single bundle. Starting from its growth, its Q3 FY26’s NGS ARR grew by 60% to $8.13 billion. However, the ARR growth was roughly similar to CRWD’s on an acquisition-adjusted basis as it sat at 28%.
Supporting Cramer’s view, CEO Nitesh Arora commented in the conference call that Palo Alto Networks, Inc. (NASDAQ:PANW) received calls from more than 1,200 customers after the cybersecurity potential of the Mythos model was revealed. The firm’s backlog jumepd by 36% in the quarter as well. Yet, Palo Alto Networks, Inc. (NASDAQ:PANW)’s focus on aggressive growth have also impacted the bottom line to push it towards a $177 million net loss.
Valuation wise, CRWD’s forward P/E ratio of 181.81 is significantly higher than PANW’s 86.96 while short interest as a percentage of float hovers around 2.5% to 2.9%. The hedge fund interest in PANW is higher, with 87 funds in Q1 holding a stake as opposed to 79 for CRWD. One of these stocks is also in our list of 10 Blue Chip Stocks Jim Cramer is Crazy About.
While Insider Monkey acknowledges the risk and potential of CRWD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than CRWD that has 100x upside potential, check out our report about the cheapest AI stock.
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Disclosure: None.
