Starting the lightning round on September 14, when a caller inquired about SentinelOne, Inc. (NYSE:S), Mad Money host Jim Cramer remarked:
No, look, I think you don’t need, look, my Charitable Trust owns both Palo Alto and CrowdStrike. It’s already too many. I think either one of those two is superior to letter S.
The latest results show a large difference in scale. SentinelOne’s fiscal second-quarter 2027 revenue rose 21% year over year to $292 million, while annualized recurring revenue increased 22% to $1.218 billion. Palo Alto Networks, Inc.’s (NASDAQ:PANW) fiscal fourth-quarter 2026 revenue rose 34% to $3.41 billion, while Next-Generation Security ARR increased 63% to $9.10 billion. Additionally, we have discussed CRWD in our recent article, “Jim Cramer Highlights CrowdStrike (CRWD) as AI Security Concerns Lift Cybersecurity Stocks.”
SentinelOne is Improving While PANW Generates More Cash
SentinelOne, Inc. non-GAAP operating margin reached 10% in fiscal Q2 2027, up from 2% a year earlier, while its GAAP operating margin improved to negative 31% from negative 33%. The company guided for fiscal third-quarter revenue of $309 million to $311 million and full-year revenue of $1.202 billion to $1.207 billion.
Palo Alto Networks, Inc. reported approximately $1 billion of non-GAAP operating income in its fiscal fourth quarter of 2026, compared with $768 million a year earlier. Adjusted free cash flow reached approximately $1.3 billion, while GAAP operating income was $172 million versus $497 million a year earlier. Palo Alto CEO Nikesh Arora said in the September 1 earnings release that the latest advances in AI are “elevating cybersecurity to the top of the CIO priority list.”
Bear Case for SentinelOne and PANW
For SentinelOne, Inc., the bear case is that improving non-GAAP profitability has not yet translated into GAAP profitability, while the company operates in a cybersecurity market it describes as intensely competitive, fragmented and rapidly evolving. The company says SentinelOne must continue adapting its platform as technology and customer requirements evolve, and that failing to respond effectively could weaken its competitive position and hurt revenue growth. That challenge is visible in its latest results: GAAP gross margin fell to 72% from 75% a year earlier, non-GAAP gross margin declined to 77% from 79%, and the company still reported a GAAP operating margin of negative 31%.
For Palo Alto Networks, Inc., the bear case is about margin pressure as the company expands its platform. Total gross margin fell to 70.4% in fiscal 2026 from 73.4% a year earlier, while subscription and support gross margin declined to 69.2% from 72.5%. PANW said the decline was primarily due to higher amortization of intangible assets from acquisitions and increased costs related to its cloud-based offerings. The company also warns that intense competition, including lower pricing and broader bundled offerings from rivals, could pressure revenue and gross margins.
Hedge Funds Hold More PANW Than S
According to Insider Monkey’s tracking of more than 1,000 hedge funds, 41 hedge funds held SentinelOne in the second quarter of 2026, up from 37 in the first quarter. Palo Alto Networks was held by 89 hedge funds, up from 87. Additionally, short interest for SentinelOne was 5.5% of the public float and approximately 2.7% of Palo Alto Networks’ public float. SentinelOne, Inc. faces the more immediate challenge of converting improving non-GAAP profitability into GAAP profitability, while Palo Alto Networks, Inc. is dealing with margin pressure and the costs of operating a much broader platform.
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