Bernstein Lowers Palo Alto (PANW) Price Target, Maintains Outperform Rating

On Wednesday, May 21, Bernstein SocGen Group reduced its price target for Palo Alto Networks, Inc. (NASDAQ:PANW) from $229 to $225 from $229 and kept an “Outperform” rating. Analyst Peter Weed noted that the company slightly beat expectations for its Next-Gen Security (NGS) Annual Recurring Revenue (ARR) in its fiscal Q3 2025. Although the beat was smaller than in previous quarters, the company has forecasted strong quarter-over-quarter growth in NGS ARR for its fiscal Q4 2025. This forecasted growth is the strongest since the company began its platformization strategy.

Weed said Palo Alto Networks, Inc.’s (NASDAQ:PANW) confidence is supported by channel checks. Management’s comments also confirmed that sales that were delayed by tariffs in April started to close rapidly after tariff concerns eased in mid-May. This indicates that the weak NGS ARR is not a big concern.

Additionally, Weed believes that other companies closing their quarters in April could experience similar weakness. He pointed out some positive signs for Palo Alto Networks, Inc. (NASDAQ:PANW), assuming there will not be a recession. He believes Microsoft’s fast cloud migrations and AI projects could support the company’s software firewall business to grow by more than 20%. Although hardware firewalls are growing slowly at a low single-digit rate, software firewalls made up more than 40% of product revenue this quarter. This is expected to help overall product revenue grow in the mid-teens, which is better than the mid-single-digit growth seen in the last 6 quarters.

Weed expects Palo Alto Networks, Inc. (NASDAQ:PANW) to finish the fourth quarter with more than 15% revenue growth in revenue and possibly an improvement of an additional 200 basis points or more in fiscal year 2026.

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