Palo Alto Networks, Inc. (PANW): A Bull Case Theory

We came across a bullish thesis on Palo Alto Networks, Inc. on Disruptive analytics’ Substack by Magnus Ofstad. In this article, we will summarize the bulls’ thesis on PANW. Palo Alto Networks, Inc.'s share was trading at $190.52 as of August 29^th. PANW’s trailing and forward P/E were 119.08 and 50.00 respectively according to Yahoo Finance.

Palo Alto Networks (PANW) reinforced its leadership in cybersecurity with 16% year-over-year revenue growth in Q4 fiscal 2025, underpinned by a 32% surge in annual recurring revenue (ARR) and a 24% rise in remaining performance obligations (RPO). These metrics validated its platformization strategy and supported stronger-than-expected fiscal 2026 guidance, which was well received by the market. The cybersecurity sector is undergoing rapid vendor consolidation as enterprises increasingly prefer comprehensive solutions from fewer providers.

PANW’s scale, resources, and acquisition strategy position it as the leading one-stop shop. The $25 billion acquisition of CyberArk exemplifies this, adding critical identity security capabilities, particularly in privileged access management (PAM)—a high-risk area often neglected by traditional security models. By integrating CyberArk’s advanced PAM technology with its AI-powered security offerings, PANW will deliver a uniquely comprehensive platform that secures human, machine, and AI identities across enterprises. The deal is expected to be immediately accretive to revenue growth and gross margins, with free cash flow per share accretion anticipated by fiscal 2028.

Post-acquisition, PANW will offer an extensive portfolio covering endpoints, networks, cloud, AI, identity, and open ecosystems, fully aligned with its platformization strategy. This breadth enhances security efficacy for customers, drives high ARR growth, and strengthens long-term customer relationships. While integration challenges remain, the CyberArk transaction significantly bolsters PANW’s competitive moat, creating multiple catalysts for sustained growth. With momentum in execution, rising recurring revenues, and strategic alignment, the company’s valuation could rerate higher, with the potential for shares to move past $200 in the near term.

Previously we covered a bullish thesis on Palo Alto Networks, Inc. (PANW) by Magnus Ofstad in October 2024, which highlighted its platformization strategy, AI innovations, and strong ARR growth. The stock has depreciated ~48% since then as revenue growth lagged lofty expectations. The thesis still stands given continued platform adoption. Magnus Ofstad shares an identical view but emphasizes CyberArk’s acquisition as a major catalyst.

Palo Alto Networks, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 77 hedge fund portfolios held PANW at the end of the first quarter which was 83 in the previous quarter. While we acknowledge the potential of PANW as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.