Palo Alto's AI Momentum Make It A Top Cybersecurity Pick, Analyst Says

Wedbush analyst Daniel Ives maintained an Outperform rating on Palo Alto Networks, Inc PANW with a price forecast of $225 on Wednesday.

On Tuesday, Palo Alto Networks delivered its fiscal third-quarter results, which featured beats in revenue, EPS, and NGS ARR. At the same time, RPO came in line with the Street as the company accelerates its platformization strategy heading into fiscal 2026, and beyond, more customers are looking to consolidate their security vendors, Ives noted.

Total revenues were $2.29 billion, at the high end of the guidance range of $2.26 billion—$2.29 billion and slightly above the Street’s estimate of $2.28 billion.

Also Read: PANW CEO Warns Traditional IT Can’t Handle AI’s Next Phase: ‘…The Conversation Is Shifting To Agentic AI’

In comparison, RPO accelerated 19% to $13.5 billion, compared to guidance of $13.50 billion—$13.60 billion and the Street’s estimate of $13.54 billion, as the company’s platformization continues to take hold.

As per the analyst, significant growth continues to be seen in XSIAM (Cortex), SASE (Prisma), and Product (Firewall) despite an uneasy macro in April.

NGS ARR grew to $5.09 billion (up 34%), which was above guidance of $5.03 billion-$5.08 billion and the Street’s estimate of $5.06 billion.

Palo Alto Networks reaffirmed that both its fiscal fourth-quarter NextGen Security ARR guidance of $5.52 billion-$5.57 billion (up 31%-32%) and RPO guide of $15.2 billion-$15.3 billion (up 19%-20%), as it is laying the foundation for its platformization approach heading into fiscal 2026 with AI front and center, the analyst noted.

Palo Alto Networks also provided fiscal fourth-quarter revenue guidance of $2.49 billion-$2.51 billion versus the Street of $2.50 billion, while EPS guidance of $0.87-$0.89 versus the Street of $0.87 as the company’s demand has stabilized after an uneasy April heading into the end of fiscal 2025, he said.

Overall, Palo Alto Networks continues to be one of Ives’ favorite cybersecurity names to own over the next 12-18 months as he noted 2025 as a transition year for the company as platformization deals with cloud penetration are leading to strong deal flow and a more stable pipeline while being a prime beneficiary of AI spending as cybersecurity is a clear second or third derivative play on the AI Revolution as the company is in the driver’s seat to gain market or mind share in the cybersecurity landscape with the continued shift to the cloud.

Price Action: PANW is trading lower by 6.99% to $180.90 at last check Wednesday.

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