Palo Alto Networks vs. Okta: Which Cybersecurity Stock is a Smart Buy?

Palo Alto Networks PANW and Okta OKTA are both U.S.-based cybersecurity companies that specialize in protecting enterprises from evolving digital threats. While PANW focuses broadly on next-gen firewalls, cloud security and AI-driven threat detection, OKTA focuses on identity and access management, providing cloud-based solutions that help businesses safeguard user data.

Palo Alto Networks and Okta are capitalizing on the rapid improvement of the cybersecurity space, fueled by the rise of complex attacks, including credential theft and abuse, remote desktop protocol attacks and social engineering-based initial access. Per a Mordor Intelligence report, the cybersecurity market is projected to witness a CAGR of 12.63% from 2025 to 2030.

With this strong industry growth forecast, 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

PANW 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 globally recognized and widely adopted.

PANW’s wide range of innovative products, strong customer base and growing opportunities in areas like Zero Trust and private 5G security continue to support its long-term growth potential. Palo Alto Networks’ strategic direction and ongoing technology advancements make it a compelling long-term investment.

For example, PANW has upgraded its Prisma Cloud platform by adding Prisma Cloud Copilot, a generative AI-powered assistant. This enables security teams to understand and respond to user queries in plain natural language more effectively. Additionally, Prisma Cloud’s recent FedRAMP authorization is expected to help attract a growing number of federal agencies.

However, Palo Alto Networks is encountering some near-term challenges. The company is experiencing shortened contract durations and a slowdown in the transition to PANW’s cloud-based AI-powered platforms from its legacy platforms. Moreover, Palo Alto Networks’ $1 million-plus deals are shifting from multi-year payments to annual payments, causing the shortening of the 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 third quarter of fiscal 2025, its sales and non-GAAP EPS grew 15.7% and 21.2%, respectively, year over year. The Zacks Consensus Estimate for fiscal 2025 revenues and EPS indicates a year-over-year increase of 14.4% and 15.1%, respectively.

The Case for OKTA Stock

Okta’s latest financial results for the first quarter of fiscal 2026 highlight its strengthening position as a leader in identity security. Its broad portfolio, which includes Okta Identity Governance, Privileged Access, Device Access, Identity Security Posture Management, Identity Threat Protection with Okta AI, and Auth for GenAI, continues to drive customer wins and expand its addressable market.

In the first quarter, Okta’s revenues and EPS soared 12% and 32.3%, respectively, year over year. It exited the quarter with roughly 20,000 customers and $4.08 billion in remaining performance obligations, reflecting strong growth prospects for subscription revenues. Customers with more than $100K in Annual Contract Value increased 7% year over year to 4,870.

Okta’s growing ability to help organizations secure both human and non-human identities is becoming a major competitive advantage. During its last earnings call, the company highlighted that the recent boom in AI agents has resulted in a tremendous rise in machine identities, and its Identity Security Posture Management and Privileged Access solutions have the capabilities to address this problem. Also, Okta’s newly introduced suite-based pricing model is expected to encourage customers to consolidate identity solutions with Okta, driving cross-sell opportunities for the company.

Okta is also benefiting from a rich partner base that includes the likes of Amazon Web Services, CrowdStrike, Google, LexisNexis Risk Solutions, Microsoft, Netskope, Palo Alto Networks, Plaid, Proofpoint, Salesforce, ServiceNow, VMware, Workday, Yubico and Zscaler.
These factors are likely to continue driving growth in OKTA’s top and bottom lines. The Zacks Consensus Estimate for Okta’s fiscal 2026 revenues and earnings indicates year-over-year growth of 9.4% and 16.7%, respectively.

PANW vs. OKTA: Price Performance & Valuation

Year to date, OKTA shares have jumped 24.5% compared with the 8.3% rise in Palo Alto Networks shares.

YTD Price Performance

PANW is trading at a forward sales multiple of 12.7X, higher than OKTA’s 5.81X. PANW does seem pricey compared with OKTA.

Forward 12 Month P/S Valuation

Conclusion: OKTA is the Smarter Pick Right Now

Both Palo Alto Networks and Okta are key players in the cybersecurity space, but PANW is facing near-term challenges, including shortened contract durations and slowing sales growth. OKTA’s focus on identity solutions, stronger earnings growth potential and low valuations make the stock more attractive for investors seeking growth in the cybersecurity space.

Currently, Okta carries a Zacks Rank #2 (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 (Strong Buy) stocks here.

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

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