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Palo Alto Networks Hits $5B in NGS ARR: What's Fueling the Surge?
ZACKSยท2025-06-05 17:01

Core Insights - Palo Alto Networks (PANW) achieved a significant milestone in Q3 of fiscal 2025, with annual recurring revenues (ARR) for its next-generation security (NGS) solutions reaching $5.09 billion, marking a year-over-year growth of 34% [1][9] - The company reported a substantial increase in high-value customers, with 130 customers generating over $5 million in NGS ARR, a 41% increase year-over-year, and 44 customers exceeding $10 million, a growth of 63% [2] - AI-related ARR has surged to approximately $400 million, which is 2.5 times higher than the same quarter last year, driven by the success of the XSIAM platform [2] NGS Platform Performance - XSIAM, an AI-powered NGS platform, saw bookings approach $1 billion on a trailing 12-month basis, with around 270 customers and an average ARR per customer exceeding $1 million [3] - The ARR from XSIAM grew over 200% year-over-year in Q3, just 30 months after its general availability [3] Future Growth Projections - Management has set an ambitious target of $15 billion in ARR by fiscal 2030, with NGS ARR expected to contribute approximately 60-70% of the total targeted ARR for fiscal 2023 [4] Competitive Landscape - Competitors like CrowdStrike and SentinelOne are also experiencing growth, with CrowdStrike reporting $4.44 billion in ARR (22% year-over-year growth) and SentinelOne reaching $948 million (24% year-over-year growth) [5][6] Valuation and Earnings Estimates - PANW's shares have increased by 6.7% year-to-date, compared to the industry's growth of 19.4% [7] - The company trades at a forward price-to-sales ratio of 12.6, which is below the Zacks Security industry's ratio of 14.47 [11] - The Zacks Consensus Estimate for PANW's fiscal 2025 earnings indicates a year-over-year increase of approximately 15%, while fiscal 2026 estimates suggest an 11% increase [14]