PANW vs. CRWD: Which Cybersecurity Stock is a Better Buy?

Core Insights - Palo Alto Networks (PANW) and CrowdStrike (CRWD) are leading companies in the cybersecurity sector, focusing on different aspects of security solutions [1][2] - The cybersecurity market is projected to grow at a CAGR of 12.45% from 2025 to 2030, driven by increasing cyber threats [2] - A comparison of fundamentals, growth prospects, market challenges, and valuations is necessary to determine which stock presents a better investment opportunity [3] Palo Alto Networks Overview - Palo Alto Networks is recognized for its comprehensive cybersecurity solutions, including next-generation firewalls and advanced threat detection technologies [4] - The company is experiencing growth in areas like Zero Trust, Secure Access Service Edge (SASE), and private 5G security, which supports its long-term growth potential [5] - In Q4 of fiscal 2025, SASE saw a 35% year-over-year increase in annual recurring revenues, and the company secured a $60 million contract for SASE services [6] - However, PANW faces challenges such as shortened contract durations and a slowdown in transitioning to cloud-based platforms, which may impact revenue growth [7][8] - The revenue growth rate has declined from mid-20s percentage in fiscal 2023 to mid-teens percentage recently, with Q4 fiscal 2025 sales and non-GAAP EPS growing 16% and 27% year-over-year, respectively [8] CrowdStrike Overview - CrowdStrike's Falcon platform is a cloud-native security solution that secures various environments and endpoints [11] - The share of subscription-based sales has increased significantly from 72% in fiscal 2017 to 95% in fiscal 2025, indicating strong customer adoption [12] - The Falcon Flex subscription model has driven customer growth, with 48% of subscription customers using six or more cloud modules by the end of Q2 fiscal 2026 [13] - In Q2, CrowdStrike added $221 million in net new annual recurring revenue (ARR), bringing total ARR to $4.66 billion, a 20% increase year-over-year [14] - The company’s sales and non-GAAP EPS grew 21% and 5.7% year-over-year, respectively, with revenue growth estimates for fiscal 2026 and 2027 around 21% [16] Price Performance and Valuation - Year-to-date, CrowdStrike shares have increased by 23.9%, while Palo Alto Networks shares have risen by 4.7% [18] - CrowdStrike is trading at a forward sales multiple of 19.68X, while Palo Alto Networks is at 12.04X, reflecting higher growth expectations for CrowdStrike [20] Conclusion - Despite both companies being key players in cybersecurity, Palo Alto Networks is currently facing challenges that may hinder its growth, while CrowdStrike is better positioned for future growth due to its innovative solutions and strong customer adoption [24][25]