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

We came across a bullish thesis on Palo Alto Networks, Inc. on LongYield’s Substack. In this article, we will summarize the bulls’ thesis on PANW. Palo Alto Networks, Inc.’s share was trading at $176.20 as of January 29th. PANW’s trailing and forward P/E were 111.52 and 45.66 respectively according to Yahoo Finance.

Palo Alto Networks (PANW) has evolved from a next-generation firewall vendor into a leading integrated cybersecurity platform, spanning network security, cloud security, DevSecOps, and security operations. Its platformization strategy—bundling firewalls, SASE, endpoint protection, identity, AI security, and observability into interoperable solutions—aims to simplify security stacks, accelerate response times, and reduce total cost of ownership.

Fiscal Q1 FY26 results highlighted strong momentum, with revenue up 16% YoY to $2.47 billion, Next-Generation Security (NGS) ARR rising 29% to $5.85 billion, and robust operating margins of 30.2%. Adoption of software firewalls, SASE, and Cortex XSIAM is accelerating, while management reported significant platform expansion, including 60 net new platformizations and 170 customers with NGS ARR above $5 million.

Strategically, PANW is pursuing large acquisitions to enhance its platform. The $25 billion CyberArk deal integrates identity security as a fourth pillar, while the $3.35 billion Chronosphere acquisition unifies observability with security telemetry, enabling AI-driven agentic remediation. Complementary AI-focused tuck-ins, including Protect AI, feed Prisma AIRS 2.0 and Cortex AgentiX, allowing autonomous AI agents to investigate alerts, orchestrate remediation, and secure AI workloads. These moves position PANW to address AI-driven threats, agentic security needs, and platform consolidation trends.

Despite strong fundamentals, shares faced short-term pressure due to acquisition costs, integration risk, and valuation concerns. PANW’s competitive moat relies on integrating identity, network, cloud, and observability data into a unified AI layer, differentiating it from rivals like CrowdStrike, Zscaler, Fortinet, and emerging AI-security start-ups. Execution risk remains in M&A integration, AI adoption, and evolving regulatory requirements. If successful, PANW could solidify its position as the dominant AI-driven cybersecurity platform, capturing a disproportionate share of expanding cybersecurity budgets while reducing customers’ tool sprawl.

Previously we covered a bullish thesis on Palo Alto Networks, Inc. (PANW) by Magnus Ofstad in October 2024, which highlighted the company’s AI-driven innovations, platformization strategy, and strong NGS ARR growth targeting $15 billion by 2030. The stock has depreciated approximately 51.67% since our coverage as the market adjusted for elevated expectations. The thesis still stands, and LongYield shares a similar perspective but emphasizes recent acquisitions and accelerated agentic AI adoption.

Palo Alto Networks, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 77 hedge fund portfolios held PANW at the end of the second quarter which was 77 in the previous quarter. While we acknowledge the risk and potential of PANW as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PANW and that has 10,000% upside potential, check out our report about this cheapest AI stock.

READ NEXT: 30 Stocks That Should Double in 3 Years and 11 Hidden AI Stocks to Buy NOW 

Disclosure: None.