Cybersecurity is a growth industry if there ever was one. A decade ago, only your computer or phone was connected to the Internet. Nowadays everything, from your toaster to your television, has an Internet connection.
To make matters worse, artificial intelligence (AI) has made the job of hackers much easier. Before, a hacker at least had to take a break to eat or sleep. But now they can have an AI program running while they get some rest after a long day stealing their data.
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Finally, quantum computers represent the digital equivalent of nuclear weapons in the cybersecurity arms race. Quantum machines have the theoretical ability to destroy even the best encryption in minutes.
Image source: Getty Images.
Fortunately, they are out of reach of the average hacker, but the United States is not the only country working on quantum computers, nor the only country with the technical capacity to build them.
Fortunately for all the individuals, companies and governments threatened by advances on the offensive side of the cybersecurity arms race, there are Palo Alto Networks(NASDAQ: PANW) prepared with a shield against all the unpleasant elements of the 21st century Internet.
Headquartered in Santa Clara, California, Palo Alto Networks is a leading cybersecurity company with enterprise and government clients around the world.
It offers three AI-powered and cloud-enabled platforms.
The first is the Strata Cloud Manager, which allows the customer to combine all the nodes in their network and manage security on all of them from a single program. Strata alone has 70,000 customers, including 94 Fortune 100 customers.
In second place is Prisma Cloud, which focuses primarily on one client’s AI applications and uses its own AI software to detect 1.5 million new attacks daily. Prisma is integrated with more than 700 partners, giving it a broad reach.
Third and last is Cortex, which is the offensive arm of Palo Alto’s product line. It is another AI-based program that can stop cyber threats in real time and shorten a customer’s response time by 98%. Cortex can also automate security responses, reducing manual work by 75% for cybersecurity teams.
In total, Palo Alto’s cybersecurity suite blocks 30.9 billion attacks per day, scans 480 billion security endpoints daily, and results in a 90% reduction in a customer’s average remediation time.
And the company’s software clearly works given its broad customer base, which includes sales force, Dellthe NHL, chipotleand NBC Universal (subsidiary of Comcast), to name a few. With a client list like that, you’d probably expect the bottom line to be equally impressive. And you would be right.
Let’s start with the end of the company’s fiscal 2025 and how Palo Alto continues its growth streak into fiscal 2026.
In the fourth quarter of 2025, the company generated $2.54 billion in revenue, up 16% year over year. Even higher, however, was the company’s annual recurring revenue (ARR) for the quarter, which topped $5.58 billion, a 32% year-over-year increase.
For full fiscal 2025, Palo Alto achieved an operating margin of 28.8%, an increase of 150 basis points year over year; its earnings per share (EPS) increased 18% during its fiscal 2024; and its free cash flow reached $3.51 billion, a year-on-year increase of 12%.
In Palo Alto’s first quarter of fiscal 2026, revenue grew 16% over the first quarter of 2025; its ARR grew 29% during the first quarter of 2025; its operating margin reached 30.2%, 140 basis points more than in the first quarter of 2025; its quarterly EPS grew 19% year over year; and its free cash flow grew 17% during the first quarter of 2025.
Palo Alto also increased its cash reserves to just over $3 billion, while its debt stands at just $346 million, down 8.9%. You have the ability to pay off your current debt several times over, which is always good to see.
The company has a goal of $20 billion in ARR by the end of the decade. If it keeps growing like this, it should be more than manageable. The company met or exceeded its Q1 2026 guidance (set on October 19, 2025) for total revenue, ARR and diluted EPS.
Palo Alto has more than doubled the S&P 500The return of the last five years. Despite its 3.8% loss over the last year, if it continues to put up growth numbers like it has, that drop will likely be nothing more than a small hurdle.
The company remains at the forefront. To counter threats from quantum computers (which it hopes to commercialize in 2029), it has partnered with International business machines to find a solution for post-quantum cryptography.
In an increasingly connected world where cyber threats multiply daily, Palo Alto has become a leader in the arms race against cybercriminals. Any company with numbers like these deserves a look.
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James Hires has no position in any of the stocks mentioned. The Motley Fool has posts and recommends Chipotle Mexican Grill, International Business Machines, and Salesforce. The Motley Fool recommends Comcast and Palo Alto Networks and recommends the following options: Short March 2026 calls for $42.50 on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
This Security Leader Is Turning Rising Cyber ​​Threats Into Recurring Revenue originally posted by The Motley Fool
