Key Takeaways FTNT delivered Q3 revenue growth of 14% to $1.72B, with record GAAP and non-GAAP operating margins.Fortinet's FortiSASE billings surge over 100% YoY, while unified SASE and SecOps billings rose sharply.FTNT faces pressure as service revenue growth slowed for a ninth straight quarter.Fortinet (FTNT) has emerged as a formidable player in the cybersecurity landscape, yet its current valuation metrics suggest investors should approach the stock with measured caution. The company's Price-to-Book ra ...

Key Takeaways CRWD outperforms PANW with stronger revenue growth and expanding adoption of its Falcon platform.CRWD's Falcon Flex ARR hit $1.35B in Q3 FY26, more than tripling year over year.PANW sees slowing growth as shorter contracts and platform transitions weigh on top-line momentum. Palo Alto Networks (PANW) and CrowdStrike (CRWD) are both at the forefront of the cybersecurity space, playing key roles in guarding organizations from extensive cyberattacks. While Palo Alto Networks focuses broadly on ne ...

Core Viewpoint - Zscaler Inc. is experiencing a balance between stabilizing growth and aggressive innovation as it approaches its first-quarter fiscal 2026 earnings report on November 25 [1] Management's Forecast: Margins And Milestones - Zscaler projects revenue between $772 million and $774 million, indicating approximately 23% year-over-year growth [2] - The company aims to recover gross margins to 80% after a decline in the previous quarter due to a one-time, hardware-heavy government deployment [2] Growth Vectors and Acquisitions - CEO Jay Chaudhry highlights three major growth areas: AI Security, Zero Trust Everywhere, and Data Security Everywhere, which have collectively surpassed $1 billion in Annual Recurring Revenue (ARR) [3] - The acquisition of Red Canary is expected to contribute $95 million in ARR for the fiscal year [3] Market Sentiment and Strategic Positioning - Wall Street sentiment is largely positive, with Cantor Fitzgerald raising its price target to $365, driven by confidence in the Secure Access Service Edge (SASE) opportunity and anticipated synergies from the Red Canary acquisition [4]

Core Insights - Netskope has announced the general availability of its enterprise security and AI integrations with Microsoft, enhancing data protection, threat prevention, and secure access for enterprise customers [1][9]. Integration with Microsoft Tools - The integration of Netskope One with Microsoft Purview provides comprehensive Data Loss Prevention (DLP) coverage, augmenting visibility and enforcement at the network layer with data classification and policies from Microsoft Purview [2]. - This integration expands Microsoft’s discovery and classification of sensitive data to tens of thousands of applications, including AI apps and unsanctioned cloud storage, ensuring increased consistency and policy enforcement across various environments [2]. - The Netskope One Advanced SSE integration with Microsoft Entra Global Secure Access (GSA) unifies security posture with Microsoft’s identity and access management, offering advanced DLP and Threat Protection capabilities [4]. CASB API for Microsoft 365 Copilot - The Netskope CASB API for Microsoft 365 Copilot is now available, providing advanced security and compliance controls for interactions with Microsoft 365 Copilot [6]. - This integration allows administrators to connect their managed Microsoft 365 Copilot instance to Netskope's CASB API, enhancing visibility and applying data-at-rest policies to ensure responsible AI adoption [6]. Industry Recognition - Netskope has been recognized as a leader in the 2025 Gartner Magic Quadrant for Security Service Edge and Secure Access Service Edge, as well as in the 2025 Forrester Wave for Secure Access Service Edge Solutions [7][8]. Strategic Collaboration - The collaboration between Netskope and Microsoft aims to empower organizations to embrace cloud and AI securely, facilitating a comprehensive Zero Trust architecture [9]. - The integrated solutions are available through the Microsoft Marketplace and Netskope Partners Worldwide, highlighting the commitment to meet the evolving needs of modern enterprises [9].

Fund Performance - Baron Discovery Fund reported a year-to-date return of 10.75% for Institutional Shares, underperforming the Russell 2000 Growth Index which returned 11.65% [1] - In the third quarter, the fund gained 2.85%, while the Index achieved a return of 12.19% [1] Company Highlight: Netskope, Inc. - Netskope, Inc. is a cybersecurity company that specializes in Secure Access Service Edge (SASE), a rapidly growing IT category that integrates various networking and security products [3] - The stock of Netskope, Inc. had a three-month return of 3.26% and closed at $23.41 per share on October 29, 2025, with a market capitalization of $8.944 billion [2] - The company serves over 4,300 customers, including more than 30% of the Fortune 100 [3]

Core Insights - Palo Alto Networks (PANW) is experiencing significant growth in its Secure Access Service Edge (SASE) business, particularly driven by its Prisma Access Browser, with SASE Annual Recurring Revenue (ARR) increasing by 35% year-over-year in Q4 of fiscal 2025, outpacing the overall market growth rate [1][9] - The Prisma Access Browser is becoming essential for secure access to cloud-based applications, positioning itself as a critical interface for enterprise operations in the AI era [2][3] - Management anticipates sustained long-term demand for SASE solutions, with large enterprises already adopting the Prisma Access Browser at scale [3] SASE Business Growth - SASE ARR for Palo Alto Networks grew 35% year-over-year in Q4, significantly exceeding the market's growth rate [1][9] - Over three million licenses of the Prisma Access Browser were sold in Q4, leading to a total seat count of over six million, which doubled sequentially [1][9] AI and Cloud Integration - The adoption of AI tools in the workplace is driving the need for enhanced browser security, with the Prisma Access Browser expected to become the primary operating system for enterprise applications [2][4] - As AI adoption accelerates, Palo Alto Networks' early investments in browser security may provide a competitive advantage in the evolving network protection landscape [4] Competitive Landscape - Zscaler and Fortinet are key competitors in the SASE market, with Zscaler expanding its browser-based security offerings and Fortinet's SASE ARR growing by 22% year-over-year in Q2 of 2025 [5][6] - Fortinet differentiates itself by providing all core SASE capabilities within a single operating system and offers tailored solutions for large enterprises [6] Financial Performance and Valuation - Palo Alto Networks' shares have increased by 16.5% year-to-date, compared to a 19.4% growth in the Zacks Security industry [7] - The forward price-to-sales ratio for Palo Alto Networks is 13.21X, slightly above the industry average of 13.04X [11] - The Zacks Consensus Estimate for fiscal 2026 total revenues is projected at $10.42 billion, reflecting a year-over-year increase of 13% [4][14]

Core Insights - Fortinet (FTNT) is focusing on two rapidly growing areas in cybersecurity: Secure Access Service Edge (SASE) and Security Operations (SecOps) to strengthen its position in integrated network security [1][12] Business Strategy - In late 2025, Fortinet advanced its unified SASE platform and AI-driven SecOps capabilities, being recognized as a Leader in the 2025 Gartner Magic Quadrant for SASE Platforms, with increased momentum from multi-product enterprise deals [2] - Fortinet expanded its partnership with Armis to enhance asset visibility and AI-led threat detection, emphasizing automation, scalability, and long-term growth in intelligent security solutions [3] - The company’s unified FortiOS architecture integrates all core SASE elements, simplifying deployment and improving operational efficiency for global customers [5] Financial Performance - Fortinet raised its full-year 2025 billing guidance by $100 million to $7.44 billion, indicating a 14% year-over-year growth driven by strong demand for FortiSASE and SecOps offerings [6][12] - In Q2 2025, SASE and SecOps billings increased by 21% and 31% year-over-year, respectively, showcasing accelerating enterprise adoption [7] Competitive Landscape - Fortinet's main competitor, Palo Alto Networks (PANW), utilizes advanced next-generation firewalls and AI-driven platforms, although its premium pricing may deter cost-sensitive organizations [8][9] - Cisco Systems (CSCO) competes by integrating security across its networking ecosystem, leveraging its scale and infrastructure, though it is less specialized in niche security domains compared to Fortinet [10] Valuation and Earnings Estimates - Fortinet's shares have declined by 8.6% year-to-date, underperforming the Zacks Security industry's 21% growth and the broader Computer and Technology sector's 22.7% increase [13] - The company appears overvalued with a forward 12-month price-to-sales ratio of 8.98, higher than the sector average of 6.94 [15] - The Zacks Consensus Estimate for Fortinet's earnings is $2.52 per share for 2025 and $2.78 per share for 2026, indicating year-over-year earnings growth of 6.33% for 2025 and 10.18% for 2026 [18]

Core Insights - Palo Alto Networks (PANW) and Qualys (QLYS) are leading companies in the cybersecurity sector, focusing on different areas 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] Palo Alto Networks Overview - Palo Alto Networks is recognized for its comprehensive cybersecurity solutions, including next-generation firewalls and cloud security [4] - The company is experiencing growth in areas like Zero Trust and Secure Access Service Edge (SASE), with SASE annual recurring revenues increasing by 35% year over year [5][6] - In Q4 of fiscal 2025, Palo Alto Networks reported a revenue growth rate of 16% and a non-GAAP EPS growth of 27% year over year [8] - However, the company faces challenges such as shortened contract durations and a shift from multi-year to annual payments, impacting revenue stability [7][8] Qualys Overview - Qualys specializes in Vulnerability Management, Detection and Response (VMDR) solutions, with a growing customer base and a net dollar retention rate of 104% [9][10] - The company has expanded its product offerings and enhanced its portfolio, including the launch of the Risk Operations Center and advanced AI security capabilities [10] - Qualys reported a sales growth of 10% and non-GAAP EPS growth of 11% year over year in Q2 of 2025 [13] - The company is also expanding internationally, with a 15% year-over-year growth rate in international revenue, representing 43% of total revenues [12] Valuation and Performance Comparison - Year-to-date, Palo Alto Networks shares have appreciated by 13.9%, while Qualys shares have decreased by 6.5% [14] - Qualys is currently trading at a forward 12-month sales multiple of 6.86X, which is significantly lower than Palo Alto Networks' 12.99X [17] - Qualys holds a Zacks Rank 1 (Strong Buy), making it a more attractive investment compared to Palo Alto Networks, which has a Zacks Rank 3 (Hold) [20][21]

Core Insights - The cybersecurity sector is characterized by a trend where startups are more likely to be acquired rather than going public, as exemplified by Wiz's decision to sell to Google instead of pursuing an IPO [1] - Netskope, a cloud cybersecurity platform, is set to become a public company, marking a rare significant debut in the cybersecurity space [2] Company Overview - Netskope is a 13-year-old startup backed by Lightspeed Venture Partners, which also invested in Rubrik [2][3] - The company is known for its Secure Access Service Edge (SASE) offerings, providing cybersecurity solutions for cloud infrastructure [5] Financial Performance - Netskope's revenue for the first half of the year reached $328.5 million, up from $251.3 million the previous year, while its net loss decreased to $169.5 million from $206.7 million [6] - The company aims for a valuation of up to $6.5 billion in its upcoming IPO, which would place it among other VC-backed companies that debuted below their last private market valuations [6] Investment Insights - Lightspeed Venture Partners holds a 19.3% stake in Netskope, which could yield approximately $1.1 billion if the IPO price is at the upper end of the proposed range of $15 to $17 per share [4] - Other major investors include ICONIQ Growth with 19.2% and Accel with nearly 9% [4] Market Context - The cybersecurity sector has seen few significant IPOs recently, with notable exceptions like SentinelOne and Rubrik [2] - Recent IPOs in the market have shown mixed results, with some companies like Figma and Circle performing well on their first trading day, while others have debuted below their private valuations [7]

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]