Artificial intelligence (AI) is having a positive impact on the cybersecurity industry, helping companies in this sector automate threat detection, analyze large datasets quickly, and improve response times to cybersecurity incidents.
Grand View Research predicts that the global cybersecurity market could hit a whopping $500 billion in revenue by 2030. The market is poised to clock a compound annual growth rate (CAGR) of almost 13% between 2025 and 2030, suggesting it will double from a size of around $241 billion in 2024. The research firm also points out that the adoption of AI in the cybersecurity space could increase at a CAGR of 24% during this period.
That's not surprising, given the advantages of AI in cybersecurity. As a result, now seems like a good time to buy shares of Palo Alto Networks (PANW +1.31%), one of the leading names in the cybersecurity industry that's on track to benefit from the growing adoption of AI in this space.
Let's see why Palo Alto may be the best cybersecurity-oriented AI stock to buy right now.
Image source: Getty Images.
Palo Alto Networks is already capitalizing on AI adoption in cybersecurity
Palo Alto stock has been under pressure of late. The company's weaker-than-expected earnings guidance for the current quarter and concerns that Anthropic's cybersecurity-focused model will disrupt the cybersecurity industry and bring pain for traditional companies such as Palo Alto have sent its shares south in 2026.
The cybersecurity stock has lost almost 22% of its value this year. However, this is an opportunity for savvy investors to buy Palo Alto. The company has been integrating AI-focused tools into its cybersecurity offerings for years now. Not surprisingly, Palo Alto is now witnessing healthy adoption of its AI-based cybersecurity products.
For instance, Palo Alto's Prisma AIRS platform, which helps enterprises secure their various AI assets, such as applications, agents, models, and data, through the entire life cycle from development to deployment, saw a 3x sequential increase in the number of customers in the second quarter of fiscal 2026 (which ended on Jan. 31).
What's more, Palo Alto is positioning itself to capitalize on the healthy growth in the AI cybersecurity market by acquiring new companies. Its recently announced acquisition of Koi is poised to further enhance the Prisma AIRS platform, as it will now allow Palo Alto to secure AI agents and tools.
Meanwhile, the recently concluded acquisition of Chronosphere is set to be another catalyst for Palo Alto. Chronosphere provides an observability platform that enables customers to monitor their AI assets, and it paves the way for Palo Alto to dive into a market expected to clock a 25% annual growth rate through the end of the decade.
NASDAQ: PANW
Key Data Points
The good part is that the various AI-focused tools that Palo Alto is offering to customers are helping it build a solid revenue pipeline. Its remaining performance obligations (RPO) increased by 23% year over year in fiscal Q2 to $16 billion, up two points over the year-ago period.
RPO is the total value of a company's contracts yet to be fulfilled at the end of a period. The fact that this metric increased at a stronger pace than the 15% growth in Palo Alto's revenue last quarter suggests that the company's top-line growth is on track to get better. The good news for Palo Alto investors is that it is forecasting a 28% increase in its RPO this fiscal year to just over $20 billion.
The company's overall revenue growth is anticipated to jump by 22% to 23% in fiscal 2026 to $11.29 billion, a nice acceleration over last year's 15% jump. Looking ahead, analysts expect healthy double-digit revenue growth from Palo Alto. It can do better than that on the back of its improving revenue pipeline and the potential growth of the AI-driven cybersecurity market.
PANW Revenue Estimates for Current Fiscal Year data by YCharts
Investors can expect a turnaround in the stock's fortunes
Palo Alto's accelerating growth is likely to be rewarded with more upside by the market, especially given its potential to outpace analysts' expectations. Assuming Palo Alto manages to grow revenue at an annual rate of 25% over the next four years, its top line could reach $27.5 billion by 2030.
The stock is trading at 12 times sales right now, a premium to the U.S. technology sector's average sales multiple of 8.2. Even if it trades in line with the tech sector's average in 2030, its market capitalization could jump to $225 billion (based on the projected revenue seen in the previous paragraph). That points toward potential gains of 94% from current levels, which is why investors can consider buying this tech stock while it is beaten down.
