Palo Alto Continues to Make Progress With New Strategy. Is Now the Time to Buy the Stock?

Core Viewpoint - Palo Alto Networks is progressing with its platformization strategy, which aims to consolidate customer solutions onto its cybersecurity platforms, despite short-term impacts on revenue growth [1][11]. Financial Performance - Fiscal Q2 2025 revenue increased by 14% year-over-year to $2.26 billion, slightly above the forecast range [5]. - Service revenue rose 16$4.78 billion, driven by advanced subscriptions, SASE, and Cortex solutions [6]. - Remaining performance obligations (RPO) grew 21% to $13 billion, with current RPO climbing 17$6.1 billion [7]. Future Guidance - For fiscal Q3, the company forecasts revenue growth of 14% to 15%, expecting revenue between $2.26 billion and$2.29 billion [8]. - Next-generation security ARR is projected to be between $5.03 billion and$5.08 billion, indicating year-over-year growth of 33% to 34% [8]. - Full-year revenue guidance has been raised to $9.14 billion to$9.19 billion, with adjusted EPS expected between $3.18 and$3.24 [9][10]. Strategic Initiatives - The platformization strategy has led to the addition of 75 new customers using one of its security platforms, totaling 1,150 platformizations among the top 5,000 customers [4]. - The company aims to have between 2,500 to 3,500 platformization customers by fiscal year 2030 [4]. - Palo Alto is integrating AI into its security solutions to enhance operational efficiencies and customer support [13]. Valuation Perspective - The stock trades at a forward price-to-sales ratio of 12.5 times fiscal 2025 estimates, which is a discount compared to CrowdStrike and a premium to SentinelOne [14]. - Despite current revenue growth appearing pricey, there is potential for a return to around 20% revenue growth, aligning with RPO growth [15].