PANW vs. CRWD: Which Cybersecurity Stock is a Better Buy?

Palo Alto Networks PANW and CrowdStrike CRWD are both at the forefront of the cybersecurity space, playing key roles in guarding organizations from extensive cyberattacks. While Palo Alto Networks focuses broadly on next-generation firewalls, cloud security and AI-driven threat detection, CrowdStrike specializes in endpoint protection and extended detection and response (XDR), offering AI-native cloud security through its Falcon platform. Both players are taking active roles in enabling enterprises against cloud and endpoint security.

Palo Alto Networks and CrowdStrike are riding the key industry trends, driven by the mounting incidents of credential theft, remote desktop protocol breaches and social engineering-based strikes by malicious actors. Per a Mordor Intelligence report, the cybersecurity space is expected to witness a CAGR of 12.45% from 2025 to 2030.

With this strong growth forecast for the cybersecurity market, the question remains: Which stock has more upside potential? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.

The Case for Palo Alto Networks

Palo Alto Networks remains a cybersecurity leader, offering solutions for network security, cloud security and endpoint solutions for customers who need full enterprise security support. Its next-generation firewalls and advanced threat detection technologies are widely recognized and adopted globally.

Palo Alto Networks’ wide range of innovative products, strong customer base and growing opportunities in areas like Zero Trust, Secure Access Service Edge (SASE) and private 5G security continue to support its long-term growth potential. Palo Alto Networks’ ongoing technology advancements make it a compelling long-term investment.

For example, in the fourth quarter of fiscal 2025, SASE was Palo Alto Networks’ fastest-growing segment, with SASE Annual recurring revenues increasing 35% year over year. Palo Alto Networks also 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.

However, Palo Alto Networks is encountering some near-term challenges. The company is experiencing shortened contract durations and a slowdown in the transition to Palo Alto Networks’ cloud-based AI-powered platforms from its legacy platforms. Moreover, PANW’s $1 million-plus deals are shifting from multi-year payments to annual payments, resulting in a shorter sales cycle and affecting top-line stability.

This can cause a deceleration in Palo Alto Networks’ top-line growth. Notably, the company’s revenue growth rate has been in the mid-teen percentage range over the past year, a sharp contrast from the mid-20s percentage in fiscal 2023. In the financial results for the fourth quarter of fiscal 2025, its sales and non-GAAP EPS grew 16% and 27%, respectively, year over year. The Zacks Consensus Estimate for both fiscal 2026 and 2027 revenues indicates a year-over-year increase of approximately 13.1%. The consensus mark for fiscal 2026 and 2027 EPS indicates year-over-year growth of mid-teens percentage.

The Case for CrowdStrike

CrowdStrike provides its cybersecurity services mainly through its Falcon platform. CrowdStrike’s Falcon platform is renowned for being the industry’s first multi-tenant, cloud native, intelligent security solution. The Falcon platform helps in securing workloads across on-premise, cloud-based and virtualized environments running on several endpoints, such as desktops, laptops, servers, virtual machines and IoT devices.

CrowdStrike’s cloud-based Falcon platform currently provides 29 cloud modules via a SaaS subscription model that is categorised under three categories — Endpoint Security, Security & IT Operations, and Threat Intelligence. The share of subscription-based sales to CrowdStrike’s total revenues grew from 72% in fiscal 2017 to 95% in fiscal 2025.

A key driver of CrowdStrike’s customer growth is its Falcon Flex subscription model, which streamlines security adoption with modular and scalable solutions. This flexibility fosters long-term customer commitments, fueling steady revenue growth and deeper platform integration. CrowdStrike’s subscription customers, who adopted six or more cloud modules, represented 48% of the total subscription customers at the end of the second quarter of fiscal 2026. Those with seven or more cloud modules accounted for 33% and those with eight or more cloud modules represented 23% as of July 31, 2025.

In the second quarter, CrowdStrike added a record $221 million in net new annual recurring revenue (ARR). This pushed up CrowdStrike’s total ARR to $4.66 billion, representing an increase of 20% from last year. A big part of this growth came from CrowdStrike’s Falcon Flex subscription model. The company now has over 1,000 Falcon Flex customers, and more than 100 have already signed follow-on re-Flex deals before their contracts ended. These re-Flex deals are important because they show that customers are expanding faster than expected, often boosting ARR by nearly 50%.

Many customers are also using Falcon Flex to replace several legacy tools and choosing to consolidate around CrowdStrike. One such example is a Fortune 500 software firm that signed an eight-figure re-Flex deal to modernize its security operations center, where the firm renewed its contract 18 months before the expiration of the initial Falcon Flex subscription.

In the second quarter, CrowdStrike’s sales and non-GAAP EPS grew 21% and 5.7%, respectively, year over year. The Zacks Consensus Estimate for both fiscal 2026 and 2027 revenues indicates a year-over-year increase of approximately 21%. Though the consensus mark for fiscal 2026 EPS suggests a decline of 9.9%, it is forecasted to mark a strong recovery in fiscal 2027 with a jump of 33.4%.

Price Performance and Valuation of PANW and CRWD

Year to date, CrowdStrike shares have appreciated 23.9%, while Palo Alto Networks shares have gained 4.7%.

YTD Price Return Performance

Palo Alto Networks is trading at a forward sales multiple of 12.04X, below the security industry’s 12.22X. CrowdStrike is trading at a forward sales multiple of 19.68X. CrowdStrike does seem pricey compared with Palo Alto Networks. However, CrowdStrike’s valuations also reflect higher growth expectations for the company.

Forward 12-Month P/S Ratio

Conclusion: Buy CRWD Right Now

Both CrowdStrike and Palo Alto Networks are key players in the cybersecurity space, but Palo Alto Networks is facing near-term challenges, including shortened contract durations and slowing sales growth. Moreover, as businesses continue to prioritize AI-driven cybersecurity solutions, CrowdStrike’s leadership in threat prevention, response and recovery will only strengthen. With stronger growth momentum and a sharper focus on emerging threats, CrowdStrike appears better positioned and more attractive for investors at present.

Currently, CrowdStrike flaunts a Zacks Rank #1 (Strong Buy), making the stock a must-pick compared to Palo Alto Networks, which has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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

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