Palo Alto Networks, Inc. (NASDAQ:PANW) and CrowdStrike Holdings, Inc. (NASDAQ:CRWD) continue to be part of one of Jim Cramer’s favorite technology sectors, cybersecurity. For more than a year, the CNBC TV host has remained quite optimistic about cybersecurity firms. With 2026 in its second half, Cramer has been vindicated after fears of AI’s effects on cybersecurity have taken a backseat. In his morning appearance on August 28th, he mentioned CrowdStrike Holdings, Inc. (NASDAQ:CRWD)’s Fal.Con Conference, which kicked off on the 31st and the overall utility for the two firms’ business models in the AI era:
“No and I talked about it with George Kurtz last night, who’s the CEO of CrowdStrike, which by the way has a really big trade meeting next week, Fal.Con, that I think is gonna show us some of these things which make us feel a little more at ease. You cannot count on any of these AI companies to protect themselves, and you cannot count on the agents to not go haywire. But, one of the things, that both Palo Alto Networks was up very big, and CrowdStrike have, are ways to be able to protect yourself from rogue agents. I like the technology.
“You’ve raised the greatest point in the world which is how many of these companies have even thought about it. I mean one of the things that George Kurtz was saying is that the vast majority of companies aren’t even aware that it’s out there. They have some sort of cybersecurity stuff that’s left over from the last couple of years. This is an all new threat and you kind of have to redo everything. Particularly if you have any sort of legacy cybersecurity, just not gonna hold up on any close scrutiny whatsoever. . .you have to kind of galvanize them which is what he’s hoping next week when he has his conference. Is that maybe people recognize, it’s here, it’s now, you gotta do something. . .one of the things that George Kurtz told me, the bad guys know, the bad guys know who’s bad, now the agents are even better at knowing who’s the weakest link.”
As Fal.Con kicked off and Palo Alto Networks, Inc. reported its earnings, Cramer discussed both firms in a series of tweets:
“PANW up a lot ahead of the print, but a strong q.
“Liking this suite of Crowdstrike products. Duopoly?
“Crowdstrike is in the best part of the AI trade right now… MongoDB was actually fine. Palo Alto was very good..”
Naturally, with Cramer being optimistic before the Fal.Con conference, he was also impressed by the event’s announcements. Among others, CrowdStrike Holdings, Inc.’s key announcements at the event covered AI security initiatives, identity management integration into the Falcon platform and a special focus on agentic platforms and security. These announcements tie directly into the narrative for CrowdStrike Holdings, Inc., which is focused on the sustainability of the firm’s AI initiatives.
On the bullish front, the firm’s revenue and recurring revenue are already experiencing the impacts of AI-generated tailwinds. For instance, in the firm’s second quarter, the firm grew revenue by 26% and net new ARR by 51% annually. Additionally, the Falcon Flex platform also generated healthy figures as it grew ARR by 101% annually. ARR is a key figure in software valuation as it lets investors determine the size of regular, margin-friendly revenue. Yet, with CrowdStrike Holdings, Inc. trading at a forward P/E multiple of 185 leaves little room for error in execution. Additionally, Falcon Flex’s $2.29 billion ARR represents 39% of the firm’s overall ARR, which could create headwinds for future growth. Other risk factors include tighter IT spending stemming from macroeconomic troubles.
Shifting towards Palo Alto Networks, Inc., the concern about CRWD having to rely on discounts for further Falcon Flex ARR growth is also present in the bearish argument for the firm. The company has bundled its Cortex XSIAM, Prisma Cloud, and Strata NGFW platforms under the NGS branding. During its fiscal fourth quarter, Palo Alto Networks, Inc. reported $172 million in operating income on a GAAP basis, affected primarily by items such as compensation and platform incentive programs.
Additionally, while Palo Alto Networks, Inc.’s non-GAAP operating margin jumped sequentially in Q4, it dropped by 70 basis points over the second quarter and 60 points over Q1. Yet, the firm is also growing as its Q4 revenue jumped by 34% to $3.41 billion and ARR jumped to $9.10 billion for a 63% growth for its NGS platform. These figures demonstrate that Palo Alto Networks, Inc. is achieving growth from its AI initiatives.
On the valuation front, Palo Alto Networks, Inc.’s forward P/E ratio of 92.59 is significantly lower than CRWD’s. Hedge fund interest in both firms in Q2 was exactly similar, courtesy of 89 stakeholders each. However, the rise was higher for CRWD as 79 funds had held a stake in Q1, compared to 87 for PANW.
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