Palo Alto Networks (PANW 0.92%), one of the world's largest cybersecurity companies with more than 80,000 enterprise customers, will post its next earnings release on Feb. 17. Let's review its business model and see whether its stock is worth buying right now.
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What does Palo Alto do?
Palo Alto splits its ecosystem into three main platforms: Strata, for on-site network security services; Prisma, for cloud-based security services; and Cortex, for AI-powered threat detection tools. Most of its recent growth has been driven by Prisma and Cortex, which it refers to as its "next-gen security" (NGS) services. It also recently acquired CyberArk, which protects companies against internal threats through its privileged access management (PAM) tools.
From fiscal 2025 (which ended last July) to fiscal 2028, analysts expect its revenue and EPS to grow at CAGRs of 13% and 22%, respectively. That growth should be driven by the expansion of its NGS services and its "platformization" strategy -- in which it's weaving its three main ecosystems together to reduce its fragmentation and improve its operating efficiency.
That outlook seems promising, but Palo Alto's stock isn't a bargain at 83 times this year's earnings. It could also face intense competition from diversified tech giants such as Microsoft (MSFT 1.49%) and cloud-first rivals such as CrowdStrike (CRWD 0.04%) over the next few years. Therefore, I'd personally wait to see how Palo Alto fares in its next earnings report -- and what it tells us about its recent acquisitions -- before pulling the trigger.
