U.S. Enterprises Modernize Networks Through Managed ServicesJan 28, 2026 10:00 AM Eastern Standard Time# U.S. Enterprises Modernize Networks Through Managed ServicesShare---Organizations expand use of managed networks for reliable performance and security across hybrid mobile and cloud environments, ISG Provider Lens® report saysSTAMFORD, Conn.--([BUSINESS WIRE])--U.S. enterprises are rapidly adopting managed network services as network complexity, security exposure and regulatory pressure make advanced net ...

Core Insights - Palo Alto Networks (PANW) is experiencing consistent growth in its next-generation security (NGS) business, driven by its platformization strategy which encourages customers to adopt multiple products across network, cloud, and security operations [1] Financial Performance - In Q1 of fiscal 2026, PANW's NGS annual recurring revenue (ARR) increased by 29% year over year to $5.85 billion, with platformization being a significant factor [2] - The company added approximately 60 net new platform customers in the first quarter, with customers generating over $5 million in NGS ARR rising to nearly 170, and those over $10 million increasing to 50, both groups showing about 50% growth compared to the previous year [3] - The Zacks Consensus Estimate indicates revenue growth of approximately 14.1% for fiscal 2026 and 13.3% for fiscal 2027 [6] Major Deals and Customer Trends - Large deals contributed to growth, including an $85 million XSIAM deal with a U.S. telecom company and a $33 million SASE deal with a U.S. federal agency, indicating a trend towards fewer tools and simplified security operations [4] - The company is expanding its platform through pending acquisitions of CyberArk Software and Chronosphere, which are expected to enhance identity security and observability, respectively [5] Competitive Landscape - Competitors like CrowdStrike and SentinelOne are also expanding their platforms and innovating with AI, with CrowdStrike's Falcon SIEM showing record net new ARR and SentinelOne achieving 23% year-over-year growth in its ARR [7][9] Valuation and Estimates - PANW's shares have declined by 15.6% over the past three months, compared to a 14% decline in the Zacks Security industry [10] - The company trades at a forward price-to-sales ratio of 11.24X, below the industry's average of 12.17X [14] - Earnings estimates for fiscal 2026 and 2027 imply year-over-year growth of 15% and 12%, respectively, with recent revisions indicating a slight upward adjustment for fiscal 2026 and a downward adjustment for fiscal 2027 [17]

Summary of Cybersecurity Industry Conference Call Industry Overview - The conference call focused on the **cybersecurity industry** in North America, particularly the performance and outlook for 2026. - **Platforms** have been identified as the primary source of excess returns in 2025, with a notable performance disparity between platform companies and other cybersecurity names. Key Points Performance Metrics - Platforms (e.g., Palo Alto Networks (PANW), CrowdStrike (CRWD), Zscaler (ZS), CyberArk (CYBR)) saw an average return of **~30%** in 2025, while other cybersecurity names were down **~12%** [3][7]. - The overall cybersecurity market was largely flat, with platforms being viewed as multi-year compounders due to their growth potential [3][14]. Growth Expectations - Continued favor for platforms is expected, but M&A activities in the first half of 2026 may create volatility and present opportunities for other companies [4][31]. - Companies like Netskope (NTSK) and SailPoint (SAIL) are highlighted as potential outperformers with expected growth rates of **20%+** [3][9]. M&A Impact - The ongoing M&A activities, such as PANW's acquisition of CyberArk and ZS's acquisition of Red Canary, may create short-term noise around organic growth metrics [8][31]. - Despite the potential for dilution and integration challenges, these acquisitions are expected to enhance long-term growth prospects [8][31]. Valuation Insights - PANW is noted as a top pick due to its reasonable valuation at **25x EV/27e FCF**, which is in line with large-cap software [7][31]. - Other companies like SAIL and NTSK are seen as undervalued with significant upside potential, trading at lower multiples compared to their growth prospects [9][35]. Market Dynamics - The cybersecurity market is characterized by a trend towards consolidation, with enterprises increasingly looking to reduce the number of disparate security tools [54]. - The shift towards platformization is expected to continue, driven by the need for integrated solutions that enhance security effectiveness [54]. Additional Insights Emerging Opportunities - The AI security segment is growing rapidly, with Zscaler's AI Security revenue expected to exceed **$500 million** by year-end, reflecting a **80%+ YoY growth** [32]. - SailPoint is positioned to benefit from the transition to cloud and AI, with multiple avenues for growth including a **$2 billion+ legacy replacement opportunity** [35]. Cautionary Notes - Companies like Fortinet (FTNT) are viewed with caution due to potential downward revisions in growth expectations, particularly related to firewall refresh cycles [38][45]. - Qualys (QLYS) faces longer-term growth concerns despite recent performance, with a need for clearer visibility into future growth drivers [46]. Conclusion - The cybersecurity industry is poised for continued growth, particularly among platform companies, despite potential short-term challenges from M&A activities. - Investors are encouraged to consider both established platforms and emerging players with strong growth narratives as they navigate the evolving landscape of cybersecurity.

Core Viewpoint - Zscaler reported strong fiscal first-quarter results with earnings and sales exceeding Wall Street expectations, yet the stock price declined due to high market expectations prior to the report [1][2][4]. Financial Performance - Zscaler earned an adjusted 96 cents per share for the quarter ending October 31, a 25% increase from the previous year, surpassing analyst expectations of 86 cents [2]. - Sales rose 26% to $788 million, exceeding analyst estimates of $773 million [2]. - For the current quarter, Zscaler guided for sales of $798 million, slightly above the analyst forecast of $796 million, with earnings per share guidance between 89 cents and 90 cents aligning with estimates [3]. Market Response - Despite positive quarterly performance, Zscaler's stock fell over 10% to $258.80, contributing to a 21% decline in November, although it remains up 44% year-to-date [4][8]. - Analysts expressed mixed sentiments; while some noted the results met buy-side expectations, others highlighted the need for clearer disclosures regarding the performance of the recently acquired Red Canary [6][7]. Competitive Landscape - Zscaler operates in the cloud-based cybersecurity sector, competing with companies like Palo Alto Networks, Cloudflare, and Fortinet [5]. - The company is recognized for its Secure Access Service Edge (SASE) offering, which is crucial for securing corporate networks [5]. Analyst Insights - Morgan Stanley's analyst noted that Zscaler's results were largely in line with expectations, expressing confidence in growth prospects despite minor concerns [6]. - Mizuho's analyst pointed out two unwelcome surprises: lower guidance for net new annual recurring revenue (ARR) and lack of specific contribution details from the Red Canary acquisition, leading to a price target reduction [7]. Stock Ratings - Zscaler's stock had an IBD Composite Rating of 91 out of 99, indicating strong growth potential, although the recent stock slide raises questions about future performance [8].

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 - Fortinet reported third-quarter earnings that exceeded estimates, with earnings rising 17% to $0.74 per share and revenue increasing 14% to $1.72 billion, although guidance for future quarters fell short of analyst expectations [2][3][4] Financial Performance - For Q3, Fortinet's earnings were $0.74 per share on an adjusted basis, surpassing analyst expectations of $0.63 per share [2] - Revenue for the quarter reached $1.72 billion, compared to analyst estimates of $1.704 billion [2] - Billings for Q2 rose 14% to $1.81 billion, slightly below the expected $1.804 billion [2] Guidance and Market Reaction - Fortinet's guidance for the upcoming quarter is revenue between $1.825 billion and $1.885 billion, below the estimate of $1.875 billion [3] - Expected billings for the next quarter are projected to be between $2.185 billion and $2.285 billion, also below the estimate of $2.231 billion [3] - Following the earnings report, Fortinet's stock fell over 10% to $76.82, reflecting investor concerns over weak guidance [4] Competitive Landscape - Fortinet operates in the firewall network security market, competing with companies like Palo Alto Networks and Check Point Software Technologies [5] - Palo Alto Networks is planning to acquire CyberArk for $25 billion, indicating ongoing consolidation in the cybersecurity sector [5] Strategic Focus - Fortinet is shifting focus towards the Secure Access Service Edge (SASE) market, which is seen as a new growth opportunity for the company [6][7] - Analysts suggest that investors should concentrate on Fortinet's growing SASE and platform businesses rather than the traditional firewall refresh cycle [7] Stock Ratings - Fortinet holds a Composite Rating of 76 out of a possible 99, indicating a relatively strong position in the market [7] - The stock has an Accumulation/Distribution Rating of B, suggesting moderate institutional buying activity [8]

Core Insights - Palo Alto Networks, Inc. (NASDAQ:PANW) is highlighted as a top investment opportunity by analysts, with a focus on its strong position in the cybersecurity market [1] - The company has successfully leveraged its leading position in firewalls to expand into emerging segments such as Secure Access Service Edge (SASE), Security Information and Event Management (SIEM), and cloud security, contributing to a Next-Generation Security revenue exceeding $5 billion in annual run rate [1] - The ongoing prioritization of cybersecurity by customers is expected to support sustainable above-average revenue growth for Palo Alto Networks [1] Company Performance - Palo Alto Networks has established a significant presence in key cybersecurity segments, which are projected to drive future growth [1] - The company is recognized for its potential to benefit from advancements in AI, which is anticipated to influence cybersecurity strategies and decisions [1] Market Outlook - The cybersecurity sector is expected to remain a top priority for businesses, with Palo Alto Networks positioned to gain market share [1] - While there is recognition of Palo Alto's potential, some analysts believe that other AI stocks may offer higher returns with lower risk [1]

Financial Data and Key Metrics Changes - The company achieved revenue of $562 million, representing a year-over-year increase of 30.7% [5][21] - Gross margin was reported at 75.3%, within the long-term target range of 75% to 77% [5][23] - Operating profit reached $85.9 million, with an operating margin of 15.3%, an increase of 50 basis points year over year [5][25] - Free cash flow for the quarter was $75 million, or 13% of revenue, compared to $45.3 million, or 11% of revenue in the same period last year [26] Business Line Data and Key Metrics Changes - The number of large customers (those paying more than $100,000 per year) increased by 23% year over year, totaling 4,009 [5][22] - Revenue contribution from large customers grew to 73% of total revenue, up from 67% in the same quarter last year [5][22] - Dollar-based net retention rate improved to 119%, up 5 percentage points quarter over quarter [5][23] Market Data and Key Metrics Changes - U.S. revenue represented 50% of total revenue, increasing by 31% year over year [21][22] - EMEA accounted for 27% of revenue with a 26% year-over-year increase, while APAC represented 15% of revenue with a 43% year-over-year increase [21][22] Company Strategy and Development Direction - The company is transitioning from a product-led growth model to a true enterprise sales approach, which is driving larger deal sizes and increased sales productivity [6][33] - The focus on innovation and operational excellence is evident in the strong financial results and growth in customer metrics [20][28] - The company aims to achieve $5 billion in annualized revenue by Q4 2028, with a projected $3 billion annualized revenue run rate by Q4 2026 [29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the transformative potential of AI and the company's role in shaping the future of the internet [19][60] - The company is focused on ensuring that all businesses, regardless of size, can participate in the evolving digital landscape [63] Other Important Information - The company announced participation in upcoming technology conferences, indicating ongoing engagement with the industry [4] - A key executive, CJ Desai, is leaving the company to pursue a CEO role at another technology firm, which management views as a testament to the company's ability to develop leaders [6][9] Q&A Session Summary Question: What drove the acceleration in RPO growth this quarter? - Management attributed the acceleration to a transformation towards enterprise sales, increased average deal sizes, and strong performance from large customer cohorts [32][34] Question: Are sales productivity gains flattening out? - Management believes that sales productivity will continue to improve due to the caliber of new team members and the ramping up of sales capacity [39] Question: What advantages does the integration with Oracle OCI provide? - The integration allows Oracle customers to access Cloudflare's tools within OCI, facilitating a multi-cloud future with consistent security and network performance [40][41] Question: How is the company addressing capacity constraints in Workers? - Management stated that they are not capacity constrained due to their network architecture, which allows for efficient workload management across global resources [44][46] Question: What is the company's approach to quantum-safe security? - The company is proactively working on quantum-safe cryptography in partnership with Google, ensuring that security measures are in place ahead of potential future threats [73][75]

Company Performance - Check Point Software Technologies reported third quarter earnings that exceeded Wall Street estimates, with earnings rising 75% to $3.94 per share on an adjusted basis [1] - Revenue for the September quarter climbed 7% to $678 million, surpassing analyst expectations of $673 million [1][2] - Billings, a key sales growth metric, increased by 20% to $672 million, compared to the consensus estimate of $608 million [2] Future Outlook - For the current December quarter, analysts forecast earnings per share (EPS) of $2.88 on revenue of $741 million [2] - Check Point typically provides guidance during its earnings calls, which will be closely monitored by investors [2] Stock Market Reaction - Following the earnings report, Check Point stock surged 10% to near $211 in early trading [3] - Prior to the earnings announcement, Check Point stock had already increased by 4% in 2025 [3] Competitive Landscape - Check Point competes in the firewall network security market against companies like Palo Alto Networks and Fortinet [3] - The company is focusing on the Secure Access Service Edge (SASE) market, which is seen as a new growth opportunity [4] Technical Ratings - Check Point stock holds a Composite Rating of 64 out of a best-possible 99, indicating moderate performance [5] - The Accumulation/Distribution Rating for Check Point stock is C-plus, suggesting neutral institutional buying activity [5] Industry Context - The Computer Software-Security group ranks No. 90 out of 197 industry groups tracked, with some cybersecurity stocks like CrowdStrike and Zscaler outperforming the software sector in 2025 [6]

Core Insights - Cisco Systems' security business is experiencing significant growth, with revenues increasing by 59% in fiscal 2025 to $8.09 billion, representing 19.5% of total revenues [1][10] - The acquisition of Splunk has enhanced Cisco's security offerings, particularly in Threat Intelligence, Detection, and Response (TIDR) and Extended Detection and Response (XDR) [2][10] - Cisco's security revenues for Q4 fiscal 2025 reached $1.95 billion, a 9% year-over-year increase, driven by the integration of Splunk and the expansion of Secure Access Service Edge (SASE) solutions [3][10] Security Business Performance - The integration of Splunk has led to a 14% year-over-year growth in new logos for Splunk, with Cisco adding 750 new customers through its security solutions in the reported quarter [3][10] - Orders for Cisco's security business grew in the mid-single digits, indicating positive growth prospects [3] Future Estimates - The Zacks Consensus Estimate for Q1 fiscal 2026 service revenues is projected at $2.24 billion, reflecting an 11% growth compared to the previous year [4] - The earnings estimate for Q1 fiscal 2026 is set at 98 cents per share, suggesting a 7.7% increase from the same quarter last year [13] - For fiscal 2026, the earnings estimate is $4.04 per share, indicating a 6% growth from the prior year [14] Competitive Landscape - Cisco faces strong competition in the security sector from companies like Fortinet and Okta, which have established innovative portfolios and strong market positions [5][6][7] - Fortinet is recognized for its extensive AI capabilities and has evolved into a comprehensive security ecosystem [6] - Okta's AI-powered offerings are gaining traction, particularly in identity management and security [7] Stock Performance - Cisco's stock has appreciated by 18.6% year-to-date, underperforming the broader Zacks Computer and Technology sector, which has returned 24% [8][9] - Cisco's stock is currently trading at a premium, with a trailing 12-month price/book ratio of 5.93X compared to the industry's 5.69X [15]