Last Update17 Oct 25Fair value Increased 0.62%
The analyst price target for Palo Alto Networks has increased by $1.34 to $216.33. Analysts cite continued strong execution, revenue growth, and positive channel dynamics as key drivers for their upward revision.
Analyst Commentary
Recent commentary from Wall Street highlights ongoing debates about Palo Alto Networks' growth trajectory, execution, and valuation following its latest earnings and M&A developments. While sentiment is broadly positive, analysts also note areas of caution that investors should consider.
Bullish Takeaways- Bullish analysts point to upward revisions in price targets, some to as high as $245. This reflects continued optimism about Palo Alto Networks' ability to deliver revenue upside and expand fiscal year guidance.
- Solid quarterly execution, particularly outperformance on both top and bottom lines, is seen as reinforcing the company's reputation for strong operational discipline and sustained business quality.
- The company's aggressive push into platformization and AI-powered security solutions is expected to drive significant revenue growth and long-term competitive advantage. This is especially relevant as cybersecurity continues to be a core focus for enterprises amid digital transformation trends.
- Recent acquisitions, such as the pending CyberArk deal, are viewed as accretive and likely to enhance the company's product portfolio and cross-sell opportunities. Further momentum is expected in subscription-based offerings.
- Bearish analysts caution that the increasingly robust valuation may reflect elevated expectations, which could leave limited margin for execution missteps or macro headwinds.
- There is some skepticism about whether recent performance improvements and guidance are sustainable, particularly as segments like agentic AI security become more crowded and competitive.
- Analysts also point to mixed feedback from industry checks, suggesting some variability in pipeline health and market reception for new offerings.
- A handful of recent target price reductions, albeit modest, indicate that not all observers see a clear path to outsized near-term gains. Some cite potential headwinds from integration risk and the need to prove synergies from large acquisitions.
What's in the News
- Palo Alto Networks suffered a data breach that exposed customer information and support cases through compromised OAuth tokens in a widespread supply-chain attack (BleepingComputer).
- Palo Alto Networks is in advanced talks to acquire CyberArk, with the potential deal valuing CyberArk well over $20 billion. Shares of CyberArk surged following these reports, while Palo Alto Networks' shares declined (Wall Street Journal).
- Palo Alto Networks denied rumors of acquisition talks with SentinelOne after industry reports suggested possible negotiations, stating there is "no truth" to the claims (CNBC).
- Speculation around a potential Palo Alto Networks acquisition of SentinelOne caused a jump in SentinelOne's share price, fueled by reports from Hebrew-language Calcalist (Calcalist).
- Palo Alto Networks launched Prisma SASE 4.0, an advanced AI-driven security solution for enterprise browsers and private applications. This highlights continued innovation and market leadership (Company announcement).
Valuation Changes
- Fair Value has risen slightly from $214.99 to $216.33 per share.
- The discount rate has declined modestly from 8.47% to 8.43%.
- Revenue growth is nearly unchanged, shifting fractionally from 13.31% to 13.30%.
- Net profit margin has improved slightly from 15.54% to 15.56%.
- The future P/E ratio has increased marginally from 93.18x to 93.57x.
Key Takeaways
- Leadership in AI-driven, integrated cloud security platforms supports strong recurring revenue growth and positions the company for expanding market share as enterprises modernize cybersecurity.
- Industry consolidation and platformization trends drive larger deal sizes, improved retention, and higher margins through increased software focus and operational efficiency.
- Heightened integration, competition, regulatory and R&D pressures threaten profitability, revenue stability, and long-term international expansion by raising costs and amplifying operational and market risks.
Catalysts
About Palo Alto Networks- Provides cybersecurity solutions worldwide.
- Accelerated enterprise adoption of AI and cloud technologies is dramatically expanding the attack surface, driving sustained and growing demand for comprehensive cybersecurity solutions. Palo Alto Networks' leadership in integrated, AI-powered security platforms positions the company to capture a higher share of security budgets, directly supporting robust, long-term revenue growth.
- The proliferation of multi-cloud and hybrid environments, along with the rapid increase in connected devices, is fueling enterprise need for unified, cloud-native security solutions. Palo Alto Networks' deep integration with all major public clouds and shift to software
- and SaaS-based offerings provide clear visibility and predictability on recurring revenues and cash flows.
- Ongoing industry consolidation, as enterprises seek to simplify and maximize the effectiveness of their security stack, has strengthened the trend towards platformization, resulting in larger multi-platform deal sizes, improved cross-sell, higher net retention rates (120%), and near zero churn among platformized clients-all of which support future margin expansion and earnings growth.
- Strategic investments in AI-driven security, automation, and differentiated product innovation (e.g., AI firewalls, SASE, secure browser, Cortex Cloud, XSIAM) are driving rapid ARR growth in high-value segments (>32% NGS ARR growth and over 2.5x AI ARR YoY)-supporting a move towards higher-margin, recurring revenue streams, and improved long-term net margins.
- Enhanced operating efficiencies from scale, a higher mix of software sales, prudent cost controls, and a strong deferred payments portfolio have already led to expanding operating margins (now above 30%) and high free cash flow margins (38%+ with structural visibility to 40%+), directly benefiting future earnings, free cash flow, and shareholder returns.
Palo Alto Networks Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Palo Alto Networks's revenue will grow by 13.1% annually over the next 3 years.
- Analysts assume that profit margins will increase from 12.3% today to 15.0% in 3 years time.
- Analysts expect earnings to reach $2.0 billion (and earnings per share of $2.7) by about September 2028, up from $1.1 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.5 billion in earnings, and the most bearish expecting $1.5 billion.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 99.0x on those 2028 earnings, down from 116.5x today. This future PE is greater than the current PE for the US Software industry at 36.2x.
- Analysts expect the number of shares outstanding to grow by 2.72% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.4%, as per the Simply Wall St company report.
Palo Alto Networks Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Ongoing platform integration and acquisition risks-including the proposed CyberArk acquisition-may lead to product cohesion and operational challenges, potentially slowing innovation and increasing customer churn, thereby impacting long-term revenue growth and earnings stability.
- Escalating R&D requirements and the constant need to remain at the forefront of AI, identity, and cloud-native security could result in sustained high operating expenses, which may limit operating leverage and put downward pressure on net margins over time.
- Increasing industry competition, including the proliferation of open-source security solutions, democratization of AI security tools, and moves by cloud providers to embed native security features, could compress pricing, commoditize offerings at the lower end, and erode gross margins and revenue growth.
- Rising regulatory demands and global data sovereignty laws may increase compliance costs, complexity, and restrict entry into key international markets, which could curtail Palo Alto Networks' long-term international revenue expansion and elevate liability exposure, negatively affecting profit margins.
- Heavy reliance on large-scale enterprise "platformization" deals and customer consolidation exposes the company to greater deal volatility; any slowdown in new large deals or retention among these major customers could reduce revenue predictability and increase earnings risk.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $214.209 for Palo Alto Networks based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $240.0, and the most bearish reporting a price target of just $131.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $13.3 billion, earnings will come to $2.0 billion, and it would be trading on a PE ratio of 99.0x, assuming you use a discount rate of 8.4%.
- Given the current share price of $197.55, the analyst price target of $214.21 is 7.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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US$240.06
FV
10.7% undervalued intrinsic discount14.00%
Revenue growth p.a.
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