Since launching its stock in 2012, Palo Alto Networks (PANW +1.90%) has dramatically overperformed the market. Its suite of cybersecurity products helped companies protect networks and devices as innovations such as cloud computing and smartphones dramatically transformed the cybersecurity needs of IT networks.
Unfortunately, cybersecurity has also become a highly competitive industry, and with questions surrounding its growth and recent acquisitions, its stock has struggled over the last year, falling by around 15%. Now the question for investors is whether the stock can get back on track over the next 12 months, or if investors should refrain from adding more shares.
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The state of Palo Alto and its stock
First, investors should understand that most analysts do not regard Palo Alto stock as a sell. Customers continue to turn to its integrated security platforms, and its offerings are adept at turning surging cyber threats into recurring revenue.
To that end, Palo Alto grew its revenue by 16% in the first quarter of fiscal 2026 (ended Oct. 31) and 15% in fiscal 2025. This is ahead of Grand View Research's estimated compound annual growth rate (CAGR) of 12% through 2033 for the cybersecurity industry.
Still, while Palo Alto's growth is ahead of the industry average, it has steadily decelerated from 2023 levels, when revenue grew by 25%. Analysts also expect the gradual slowing of growth to continue, with revenue increases forecast at 14% for fiscal 2026 and 13% in the following fiscal year.
NASDAQ: PANW
Key Data Points
Additionally, it has made some massive acquisitions recently, particularly its $25 billion purchase of CyberArk Software, expected to close in the second half of fiscal 2026. Some analysts question whether it can fully integrate that and Chronosphere, its $3.35 billion acquisition that closed in January.
Furthermore, valuation is a concern. The P/E ratio for the cybersecurity stock stands at 101, and even at a forward P/E of 41, its various earnings multiples are well above the S&P 500 average of 29.
Also, it sells at a price-to-sales (P/S) ratio of around 12. Such a sales multiple is not unusual for a tech growth stock, though that does make it more expensive than most of its peers. Considering the slowing revenue growth, that could cause concerns about whether it can again become a market-beating stock in the near term.
Data by YCharts.
Palo Alto stock in one year
Although Palo Alto stock should move higher in the long run, it will more than likely underperform the S&P 500 over the next year.
Palo Alto should remain a top cybersecurity stock. Unfortunately, its revenue growth has slowed significantly from a few years ago, and analysts expect that deceleration to continue.
Moreover, questions remain as to whether its recent acquisitions will succeed. Considering that its P/S ratio is higher than most of its peers, Palo Alto is offering investors few reasons to add shares at this time.
