ZACKS·2025-11-21 16:30Core Insights - Palo Alto Networks and Cisco Systems are prominent players in the cybersecurity sector, with Palo Alto focusing on next-generation firewalls and cloud security, while Cisco emphasizes Threat Intelligence and Secure Access Service Edge (SASE) offerings [1][2] Industry Overview - The cybersecurity market is expected to grow at a CAGR of 12.45% from 2025 to 2030, driven by increasing complex attacks such as credential theft and social engineering [2] Palo Alto Networks Analysis - Palo Alto Networks is recognized as a leader in cybersecurity, providing comprehensive solutions for network and cloud security [4] - The company is experiencing significant growth in its SASE segment, with Annual Recurring Revenues (ARR) increasing by 34% year over year [6] - Next Generation Security (NGS) ARR grew 29% year over year, reaching $5.85 billion, driven by a platformization strategy [7] - The number of customers with over $5 million in NGS ARR rose to nearly 170, indicating deeper platform usage [8] - Palo Alto Networks has raised its long-term NGS ARR target to $20 billion by fiscal 2030, up from a previous target of $15 billion [9] Cisco Systems Analysis - Cisco Systems is making progress in its security business with new product offerings, but its security revenues dropped 2% year over year due to declining demand for older products [10][14] - The company has seen good customer adoption of its new security solutions, with almost 3,000 customers purchasing these products in the first quarter of fiscal 2026 [11] - Cisco's next-generation firewalls orders grew in the mid-teens range, but the overall security business remains weaker compared to its networking segment [13][15] Comparative Growth Outlook - Palo Alto Networks is projected to have a stronger growth profile, with fiscal 2026 revenues and EPS expected to increase by 13% and 13.2%, respectively [16] - In contrast, Cisco Systems' fiscal 2026 estimates indicate a more modest growth of 7.3% for both revenues and EPS [19] Price Performance and Valuation - Year-to-date, Palo Alto Networks shares have appreciated by 1.7%, while Cisco Systems shares have surged by 27.5% [21] - Cisco is trading at a forward sales multiple of 4.89X, compared to Palo Alto Networks' 12.61X, reflecting higher growth expectations for Palo Alto [23] Conclusion - Palo Alto Networks' leadership in cybersecurity provides strong revenue visibility, justifying its higher valuation compared to Cisco Systems [27] - Cisco Systems faces execution risks and a slower growth trajectory, suggesting a hold or wait strategy for investors [27][28]