Palo Alto Networks, Inc. (PANW): A Bull Case Theory

We came across a bullish thesis on Palo Alto Networks, Inc. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on PANW. Palo Alto Networks, Inc.’s share was trading at $171.00 as of August 4^th. PANW’s trailing and forward P/E were 99.36 and 47.62, respectively according to Yahoo Finance.

Palo Alto Networks (PANW), a global cybersecurity leader with 85,000+ customers in 150 countries, is executing a strategic pivot—offering select products for free to drive platform adoption and long-term retention, even at the cost of short-term revenue. With a $110B total addressable market and only 4% penetration via $4.8B ARR, PANW has substantial growth potential. The company’s strength lies in its wide economic moat—built on high switching costs, powerful network effects, economies of scale, and deep integration across cloud, network, and security operations. Non-GAAP gross margins above 70% and industry-leading positions in Gartner’s Magic Quadrants for SASE, SSE, and Endpoint Protection validate its leadership.

Growth momentum is returning after a temporary slowdown. Q1 revenue grew +13.3% YoY, RPO surged +19.5%, and net new ARR rose +8% YoY, with NGS ARR expanding +35%, outpacing total revenue growth. Platform adoption is accelerating: Prisma SASE ARR grew 36%, adding 1,000+ customers, while Cortex XSIAM, the fastest-growing product in company history, achieved 200% ARR growth and $400M+ AI-driven revenue. Major enterprise wins, including $90M and $46M multi-product deals, underscore growing consolidation trends and wallet share expansion.

Innovation remains core, with AI-powered products like Prisma AIRS for AI model security, advanced email security, and agentic automation. While valuation is rich—Forward EV/Sales of 12.6 and P/E of 55.3—it appears justified by robust leading indicators and a strong moat. With revenue stabilization, accelerating ARR growth, and deepening customer platformization, PANW offers a compelling long-term growth story in a rapidly evolving cybersecurity landscape.

Previously, we covered a bullish thesis on Palo Alto Networks, Inc. by Magnus Ofstad in October 2024, which highlighted the company’s platformization strategy, AI-driven innovations, and strong NGS ARR growth as key drivers. The company’s stock price has depreciated approximately 53% since our coverage. This is because the thesis didn’t play out as expected amid valuation pressures. The thesis still stands as long-term growth potential remains intact. Sergey shares a similar view but emphasizes a strategic pivot toward offering free products to drive retention.

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Disclosure: None.