After an 80% Gain on the Year, Is Palo Alto Networks Stock a Buy on Its Recent Pullback as Revenue Surges?

Palo Alto Networks' (PANW) shares surged over 80% in 2026 after a rocky start to the year. The company's stock has benefited from the launch of Anthropic's Mythos models, which have exposed unknown software vulnerabilities. However, despite strong earnings and guidance, the stock price fell due to high expectations following its year-long rally.

Palo Alto's platformization strategy, which involves offering three cybersecurity platforms instead of point solutions, continues to pay off. The company saw a 220% increase in platformization additions in fiscal Q4, double the previous quarter's 110 additions. Net revenue retention among these customers surpassed 120%.

The company's Mythos models have driven platformization demand, as customers seek a unified platform to address AI threats. Palo Alto has bolstered its platform through acquisitions, including real-time data monitoring company Chronosphere and privileged access company CyberArk. Both acquisitions are exceeding early expectations.

Revenue for fiscal 2026 Q4 ended July 31 climbed 34% year over year to $3.41 billion, exceeding the forecasted range of $3.345 billion to $3.355 billion. Subscription and support revenue jumped 36% to $2.67 billion, while product revenue rose 29% to $738 million. Next-generation security ARR surged 63% to $9.1 billion. Network and AI security ARR rose 17% to $2.3 billion, while Cortex Platform ARR increased by 25% to $1.9 billion, with XSIAM ARR surging 70%.

Adjusted earnings per share increased by 7% year over year to $1.02, beating guidance of $0.96 to $0.98. For fiscal 2027 Q1, Palo Alto sees adjusted EPS between $0.96 and $0.98 and revenue between $3.3 billion and $3.31 billion. For the full fiscal year, the company anticipates adjusted EPS between $4.16 and $4.19 on a 23% to 24% revenue climb to between $14.1 billion and $14.2 billion.

Even after a dip in stock price, Palo Alto's forward P/S ratio is 19.5 times fiscal 2027 estimates, and its forward P/E ratio is 81 times 2027 estimates. Despite its strong position and growth tailwinds, the stock's high price-to-sales and price-to-earnings ratios suggest it may not be a buy on this dip.