What’s Next For Palo Alto Networks (PANW) Stock?

August 19th, 2025 by Trefis Team
PANW: Palo Alto Networks logo
PANW
Palo Alto Networks

Palo Alto Networks (NASDAQ:PANW) recently released its Q4 results for fiscal 2025 (which ended in July), reporting earnings that surpassed estimates while the top line met expectations. An optimistic guidance for fiscal 2026 helped the stock gain more than 6% in after-hours trading. This isn’t a new trend for the company, though. As we discussed in our previous analysis, PANW stock has a history of positive one-day returns post its earnings announcements.

So, is PANW a buy after its recent results and a stock price rise to around $185? We believe it is. While the stock is trading at a premium, its strong operating performance and financial health justify the valuation. Our analysis of Palo Alto Networks across key metrics—Growth, Profitability, Financial Stability, and Downturn Resilience—confirms the company’s robust performance.

That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative — having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

How Does Palo Alto Networks’ Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, PANW stock looks very expensive compared to the broader market.

  • Palo Alto Networks has a price-to-sales (P/S) ratio of 14.3 vs. a figure of 3.2 for the S&P 500
  • Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 41.0 compared to 21.4 for S&P 500
  • And, it has a price-to-earnings (P/E) ratio of 116 vs. the benchmark’s 23.6

How Have Palo Alto Networks’ Revenues Grown Over Recent Years?

Palo Alto Networks’ Revenues have seen notable growth over recent years.

  • Palo Alto Networks has seen its top line grow at an average rate of 18.9% over the last 3 years (vs. an increase of 5.4% for the S&P 500)
  • Its revenues have grown 14.9% from $8.0 Bil to $9.2 Bil in the last 12 months (vs. growth of 5.1% for the S&P 500)
  • Also, its quarterly revenues grew 16% to $2.5 Bil in the most recent quarter from $2.2 Bil a year ago (vs. 6.0% improvement for S&P 500)

How Profitable Is Palo Alto Networks?

Palo Alto Networks’ profit margins are higher than most companies in the Trefis coverage universe.

  • Palo Alto Networks’ Operating Income over the last four quarters was $1.2 Bil, which represents a moderate Operating Margin of 13.5% (vs. 18.8% for the S&P 500)
  • For the last four-quarter period, Palo Alto Networks’ Net Income was $1.1 Bil — indicating a moderate Net Income Margin of 12.3% (vs. 12.8% for S&P 500)
  • On an adjusted basis, Palo Alto Networks’ net income was $2.3 billion for the last twelve months, resulting in a strong margin of 25.4%.

Does Palo Alto Networks Look Financially Stable?

Palo Alto Networks’ balance sheet looks very strong.

  • Palo Alto Networks’ Debt figure was $338 Mil at the end of the most recent quarter, while its market capitalization is $132 Bil. This implies a very strong Debt-to-Equity Ratio of 0.3%(vs. 21.2% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
  • Cash (including cash equivalents) makes up $2.9 Bil of the $24 Bil in Total Assets for Palo Alto Networks.  This yields a strong Cash-to-Assets Ratio of 12.3% (vs. 7.0% for S&P 500)

How Resilient Is PANW Stock During A Downturn?

PANW stock has been more resilient than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on PANW stock? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

  • PANW stock fell 36.0% from a high of $104.83 on 13 April 2022 to $67.09 on 10 January 2023, vs. a peak-to-trough decline of 25.4% for the S&P 500
  • The stock fully recovered to its pre-Crisis peak by 26 May 2023
  • Since then, the stock has increased to a high of $208.28 on 18 February 2025 and currently trades at around $175

COVID-19 Pandemic (2020)

  • PANW stock fell 46.8% from a high of $41.54 on 18 February 2020 to $22.10 on 18 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
  • The stock fully recovered to its pre-Crisis peak by 20 July 2020
  • Our dashboard on – Buy or Fear PANW Stock – has more details.

Putting All The Pieces Together: What It Means For PANW Stock

In summary, Palo Alto Networks’ performance across the parameters detailed above is as follows:

  • Growth: Strong
  • Profitability: Strong
  • Financial Stability: Very Strong
  • Downturn Resilience: Strong
  • Overall: Strong

The Verdict

Overall, Palo Alto Networks has performed exceptionally well based on our analysis. The stock is currently trading at a premium valuation of 14 times trailing revenue. However, this high multiple is not an anomaly for the company, given its four-year average price-to-sales ratio of 13x. Furthermore, its peers, including Fortinet and CrowdStrike, also command high multiples, trading between 10 to 25 times their revenues.

Based on the average analyst price target of $214, the stock has a potential 15% upside from its current level. There are risks as well, including increasing competition. This could make investors unwilling to pay such a high valuation. However, we believe that for investors with a high risk tolerance and a 3- to 5-year time horizon, PANW stock offers the potential for robust long-term returns even at its current price. Now, we apply a risk assessment framework while constructing the Trefis High Quality (HQ) Portfolio, which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

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