Last Update 13 Dec 25

PANW: AI Platform And M&A Expansion Will Drive Long-Term Share Gains

The analyst price target for Palo Alto Networks has edged higher by $0 to approximately $225 per share, as analysts balance concerns over decelerating growth and acquisition costs with confidence in the company’s expanding AI driven security platform, strategic M&A, and growing next generation security revenue opportunity.

Analyst Commentary

Street research on Palo Alto Networks remains divided, with most firms constructive on the company’s long term AI and platform strategy while a minority flag the risk that revenue growth deceleration and rich valuation could cap upside.

Bullish Takeaways

Bullish analysts highlight consistent price target increases into the mid to high $200s, reflecting confidence that platformization, AI driven security offerings, and observability expansion can sustain double digit next generation security ARR growth through the end of the decade.
Several firms view the Chronosphere and CyberArk deals as strategically important, arguing that broader coverage of observability and identity, combined with Palo Alto’s scale, enhances its ability to win wallet share as security, observability, and AI workloads converge.
Positive channel checks and strong remaining performance obligations are cited as evidence of healthy underlying demand and execution, supporting the view that current volatility around acquisitions and integration is more narrative than fundamental.
Supportive research notes point to rising enterprise security budgets and AI related project pipelines as catalysts that can justify premium valuation multiples and support a path toward significantly higher long term ARR targets.

Bearish Takeaways

Bearish analysts stress that decelerating revenue growth and limited visibility into upward estimate revisions for fiscal 2026 and 2027 raise the risk of a negative share re rating from current levels.
There is concern that the Chronosphere acquisition price is not cheap and that overlapping large deals, including the pending CyberArk transaction, could weigh on near term margin profile and add integration execution risk.
Some research highlights pricing compression risk in observability, noting that Chronosphere’s lower cost positioning could re ignite broader pricing debates and pressure peers, creating uncertainty around the profitability of Palo Alto’s expanded platform.
A subset of cautious views argue that with valuation already incorporating substantial AI and platformization success, any stumble in cross sell, integration, or reacceleration of services growth could trigger a reset in expectations and multiples.

What's in the News

Palo Alto Networks issued a presentation urging shareholders to support a classified Board structure, arguing it strengthens governance, supports major acquisitions and AI driven strategy, and reduces vulnerability to hostile takeovers while recommending a vote against a shareholder proposal at the upcoming annual meeting (company presentation).
The company confirmed fiscal second quarter 2026 revenue guidance of $2.57 billion to $2.59 billion and full year 2026 revenue of $10.50 billion to $10.54 billion, indicating approximately 14% to 15% year over year growth (company guidance).
Palo Alto Networks and IBM announced a joint Quantum Safe Readiness solution that combines IBM consulting services with Palo Alto’s quantum readiness platform to help enterprises inventory cryptographic assets and transition to quantum safe security starting in early 2026 (company announcement).
The company launched Cortex AgentiX and Cortex Cloud 2.0, expanding its autonomous AI agent capabilities across security operations and cloud environments to automate investigations, reduce mean time to remediation, and unify cloud risk management (product announcements).
Palo Alto Networks released Prisma AIRS 2.0, integrating Protect AI to deliver end to end AI security across agents, models, and data, including continuous AI red teaming and model security to address growing AI adoption risks (product announcement).

Valuation Changes

Fair Value Estimate remains unchanged at approximately $224.53 per share, indicating no adjustment to the intrinsic value assessment.
The Discount Rate has risen slightly from 8.41% to about 8.46%, implying a modestly higher required return and marginally more conservative risk assumptions.
Revenue Growth has edged up from roughly 13.78% to 13.80%, reflecting a very small increase in long term top line expectations.
The Net Profit Margin has increased slightly from about 16.41% to 16.52%, signaling a modest improvement in forecasted profitability.
The Future P/E has decreased marginally from approximately 103.4x to 102.8x, suggesting a slightly lower multiple applied to forward earnings.

Leadership in AI-driven, integrated cloud security platforms supports strong recurring revenue growth and positions the company for expanding market share as enterprises modernize cybersecurity.
Industry consolidation and platformization trends drive larger deal sizes, improved retention, and higher margins through increased software focus and operational efficiency.
Heightened integration, competition, regulatory and R&D pressures threaten profitability, revenue stability, and long-term international expansion by raising costs and amplifying operational and market risks.

Catalysts

About Palo Alto Networks

Provides cybersecurity solutions worldwide.What are the underlying business or industry changes driving this perspective?

Accelerated enterprise adoption of AI and cloud technologies is dramatically expanding the attack surface, driving sustained and growing demand for comprehensive cybersecurity solutions. Palo Alto Networks' leadership in integrated, AI-powered security platforms positions the company to capture a higher share of security budgets, directly supporting robust, long-term revenue growth.
The proliferation of multi-cloud and hybrid environments, along with the rapid increase in connected devices, is fueling enterprise need for unified, cloud-native security solutions. Palo Alto Networks' deep integration with all major public clouds and shift to software
and SaaS-based offerings provide clear visibility and predictability on recurring revenues and cash flows.
Ongoing industry consolidation, as enterprises seek to simplify and maximize the effectiveness of their security stack, has strengthened the trend towards platformization, resulting in larger multi-platform deal sizes, improved cross-sell, higher net retention rates (120%), and near zero churn among platformized clients-all of which support future margin expansion and earnings growth.
Strategic investments in AI-driven security, automation, and differentiated product innovation (e.g., AI firewalls, SASE, secure browser, Cortex Cloud, XSIAM) are driving rapid ARR growth in high-value segments (>32% NGS ARR growth and over 2.5x AI ARR YoY)-supporting a move towards higher-margin, recurring revenue streams, and improved long-term net margins.
Enhanced operating efficiencies from scale, a higher mix of software sales, prudent cost controls, and a strong deferred payments portfolio have already led to expanding operating margins (now above 30%) and high free cash flow margins (38%+ with structural visibility to 40%+), directly benefiting future earnings, free cash flow, and shareholder returns.

Palo Alto Networks Earnings and Revenue Growth

Palo Alto Networks Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Palo Alto Networks's revenue will grow by 13.1% annually over the next 3 years.
Analysts assume that profit margins will increase from 12.3% today to 15.0% in 3 years time.
Analysts expect earnings to reach $2.0 billion (and earnings per share of $2.7) by about September 2028, up from $1.1 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.5 billion in earnings, and the most bearish expecting $1.5 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 99.0x on those 2028 earnings, down from 116.5x today. This future PE is greater than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to grow by 2.72% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.4%, as per the Simply Wall St company report.

Palo Alto Networks Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Ongoing platform integration and acquisition risks-including the proposed CyberArk acquisition-may lead to product cohesion and operational challenges, potentially slowing innovation and increasing customer churn, thereby impacting long-term revenue growth and earnings stability.
Escalating R&D requirements and the constant need to remain at the forefront of AI, identity, and cloud-native security could result in sustained high operating expenses, which may limit operating leverage and put downward pressure on net margins over time.
Increasing industry competition, including the proliferation of open-source security solutions, democratization of AI security tools, and moves by cloud providers to embed native security features, could compress pricing, commoditize offerings at the lower end, and erode gross margins and revenue growth.
Rising regulatory demands and global data sovereignty laws may increase compliance costs, complexity, and restrict entry into key international markets, which could curtail Palo Alto Networks' long-term international revenue expansion and elevate liability exposure, negatively affecting profit margins.
Heavy reliance on large-scale enterprise "platformization" deals and customer consolidation exposes the company to greater deal volatility; any slowdown in new large deals or retention among these major customers could reduce revenue predictability and increase earnings risk.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $214.209 for Palo Alto Networks based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $240.0, and the most bearish reporting a price target of just $131.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $13.3 billion, earnings will come to $2.0 billion, and it would be trading on a PE ratio of 99.0x, assuming you use a discount rate of 8.4%.
Given the current share price of $197.55, the analyst price target of $214.21 is 7.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Have other thoughts on Palo Alto Networks?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

PANW: AI Security Leadership Will Shape Future Outlook Amid New Challenges