PANW's NGS ARR Hits $5.58B in Q4: What's Fueling the Growth?

Palo Alto Networks PANW ended the fourth quarter of fiscal 2025, showing strong growth in its Next-Generation Security (NGS) business. The company’s NGS annual recurring revenue (ARR) grew 32% year over year to $5.58 billion. Moreover, the company added about $490 million in new NGS ARR during the quarter.

The growth came from three main areas. First, the demand in the Security Access Service Edge (SASE) business stayed strong, where its ARR grew 35% year over year. Palo Alto Networks won its largest SASE contract ever with a global professional services firm, worth $60 million, spanning across 200,000 users. Its Prisma Access Browser also gained adoption, adding more than three million licenses in the fourth quarter, which grew twofold on a sequential basis, pushing the total above six million.

Second, software firewalls grew nearly 20% year over year. Palo Alto Networks now holds about a 50% share in this market, and its products are available in all major public clouds. Third, XSIAM, Palo Alto Networks’ AI-based Security Operations Centre platform, continued rapid adoption. It now has around 400 customers, most generating more than $1 million in ARR. Moreover, around 25% of these customers were Global 2000 companies, which shows strong adoption among large enterprises.

AI security is also becoming a key factor in supporting the company’s revenue growth. In the fourth quarter, AI-related ARR climbed to $545 million, more than 2.5 times higher than a year ago. This was helped by the launch of new products, such as Prisma AIRS and the acquisition of Protect AI, both aimed at securing AI apps, models, and data. 

Management believes that these growth drivers will support its long-term growth trajectory and help it reach its target of $15 billion in NGS ARR by 2030.

How Competitors Fare Against PANW

Competitors like CrowdStrike CRWD and Zscaler ZS are also gaining ground through platform expansion and AI innovation.

CrowdStrike ended its second quarter of fiscal 2026 with $4.66 billion in ARR, reflecting 20% year-over-year growth. The robust increase was fueled by the growing adoption of CrowdStrike’s Falcon Flex subscription model.

Zscaler ended its third quarter of fiscal 2025 with $2.9 billion in ARR, reflecting 23% year-over-year growth. The robust growth was driven by Z-Flex and rapid traction across Zscaler’s three strategic growth pillars, which include Zero Trust Everywhere, Data Security Everywhere and Agentic Operations.

PANW’s Price Performance, Valuation and Estimates

Shares of Palo Alto Networks have gained 4.7% year to date compared with the Security industry’s growth of 10.2%.

PANW YTD Price Return Performance

From a valuation standpoint, Palo Alto Networks trades at a forward price-to-sales ratio of 12.05X, slightly lower than the industry’s average of 12.23X.

PANW Forward 12-Month P/S Ratio

The Zacks Consensus Estimate for Palo Alto Networks’ fiscal 2026 and 2027 earnings implies year-over-year growth of 12.9% and 13.6%, respectively. The estimates for fiscal 2026 and 2027 earnings have been revised upward over the past 30 days.

Palo Alto Networks currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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