Palo Alto Networks (PANW 5.09%) -- the largest pure-play stock in cybersecurity -- threw investors for a head trip when it said it was releasing fourth-quarter fiscal 2023 earnings on a recent Friday after the market closed. Fear spread that some ugly numbers were forthcoming.

Turns out CEO Nikesh Arora and company just wanted to get the financial report out of the way ahead of a big weekend sales event. Not only were the fiscal 2023 (the 12 months ended in July) numbers good, but the outlook for the next few years was also pretty solid.

Palo Alto Networks is a leader in the current cybersecurity supercycle and remains a top buy for the long term in my book.

A wonderful 2023 and new secular growth trends

Palo Alto Networks had a vision back in 2018, spearheaded by then-new CEO Arora, to get the company back on track for a coming explosion in cybersecurity demand. Specifically, the need for new types of network protection, including public cloud (use of a remote data center accessed via the internet) and automation of security tasks using AI, were what Palo Alto Networks was hitching its future to then.

Suffice it to say, it's paid off. The company now touts itself as a full-fledged platform for all types of cybersecurity. It was a bumpy road, one that included over a dozen acquisitions of small start-ups along the way, culminating with the purchase of Cider Security, announced in late 2022. But since 2018, revenue has gone from about $2.5 billion to $6.9 billion in fiscal 2023, free cash flow remained positive all along the way, and net income is fast on the mend after the transformation.

PANW Revenue (TTM) Chart.

Data by YCharts.

As for the final numbers for fiscal 2023, revenue increased 25% year over year. Full-year GAAP net income was $440 million, compared to a loss of $267 million in 2022. And free cash flow (FCF) was $2.6 billion (a very good FCF profit margin of 38%), up a whopping 47% from 2022.

New year, new mid-term goals

Going forward, Palo Alto Networks thinks its cybersecurity platform will continue to be a winning formula. Indeed, the amount of digital data out there has exploded, as has the number of ways for employees to access it. Security priorities will revolve around expanding zero-trust architecture (rooted in the "never trust, always verify" principle that requires users to constantly validate their credentials), security built directly into apps themselves during the coding process (the rationale behind that latest acquisition of Cider Security), and more automation of real-time monitoring.

The last five years have been good, and it looks like management thinks they'll continue. Its goals through fiscal 2026 (which ends in July 2026) are for revenue to increase an average of 17% to 19% each year. And along the way, the adjusted operating profit margin is expected to expand to a range of 28% to 29%, up from 24% this past year.

A top bet on the cybersecurity boom

Of course, Palo Alto Networks will need to execute this plan to justify making a buy today. Its shares now trade for 30 times trailing-12-month free cash flow, a bit on the high side compared to where it has traded the last five years. And as good as the outlook is going forward, Arora and the top team do seem to be expecting a modest cooldown from recent growth.

PANW Price to Free Cash Flow Chart.

Data by YCharts.

A bit of a slowdown at the other cybersecurity pure-play leader Fortinet was also forecast during their last earnings update. Such is normal when the economy suddenly hits a patch of expected softness like has cropped up in 2023. 

Nevertheless, all indications point toward Palo Alto Networks continuing to lead the charge in the cybersecurity secular growth trend. I have a full position and don't plan on buying any more at this point, but that shouldn't deter investors from digging deeper into this business and understanding how they've come to play a leadership role in the cybersecurity software market.