Cyber Security Comparisons Update

It has been a while since all earnings were out so I thought I would do an update on my quarterly Cloud Cyber security comparisons. For this,I will look at PANW, S, and CRWD as the leaders in this space. As I have said before, PANW can sometimes tend to get overlooked in this space because of the large Firewalled cyber security business they have (that is doing very nicely by the way). But for this post I will center on the Cloud space as this is the most exciting in terms of growth and is largely a SAAS type business which has a lot of aspects that can be extremely beneficial to a stock investor, ie repeat business, stickiness to the customer, extremely high gross margins, etc.

With that out of the way, I first will repeat last quarter’s comparison of a couple of key aspects, cloud ARR (Annual Recurring Revenue) and said growth rate. The first is important to show overall size of the cloud portion of the business and the second to show how it is growing. Then I will share the most recent quarters results. Here is the December ‘22 quarter for all three…

Company ARR ($M) % increase(yr/yr)
PANW……… 2,330…………. 63%

And here is the most recent March Qtr:

Company ARR ($M) % increase(yr/yr)
S……………….563.6……. ……75%
PANW……… 2,570……………60%

Now it seems like most of the conversation in this industry is either around Sentinel for its high growth or CRWD for its size. But not much around PANW. But it seems that PANW has the best of both worlds.

A couple of quarters ago, it was said that CRW was bigger with equal to or greater growth, but with the most recent results, PANW is both maintaining its growth (with CRWD continuing to drop off, (albeit good growth for any other industry ) and closing in on size. In fact with the numbers above you can see that PANW had a bigger actual increase in ARR, $240M versus $170M quarter over quarter. Think about that. From a lower base, PANW had more sales wins than CRWD. It is really hard for me to understand the logic that CRWD is winning the cloud cybersecurity space.

As for S, clearly the growth is still outstanding, but it is dropping pretty rapidly now and from a much smaller base, 75% versus 92%. And just as importantly, it is also 1/4 the size of PANW, with a growth rate that is dropping pretty fast. It is not surprising that it is dropping, but I am hard pressed to see how they get even close in size to CRWD or PANW with the lead in recurring sales that both have over S.

Now let’s look at Free cash flow, S is still negative which is not surprising due to thier size. CRWD is actually starting to turn this around showing $301 M in free cash flow last quarter, but PANW garnering $401M. These numbers are much closer than last quarter and I believe it has to do with the seasonal effects of the firewalled business more than the cloud security business but is something worth watching.

And to be fair, part of the free cash flow advantage is because of their sister Firewalled Cyber security business. But really, that in inself is an advantage in my opinion. They have built in existing firewall customers to add cloud services without needing new customers and as the entire industry matures, I have to believe that having both sides of the business helps to retain customers as you wouldn’t necessarily want to use two different companies for different aspects of the same business need.

In any event, as I have said for quite some time now, it seems to me that PANW is winning this race for customers in a land and expand market and they are my favorite in this space.

To be clear, I like all three and think it is a vital industry that is likely to keep growing in the future and there may be more than one winner. But to be open here, I will say I sold out of my small position in S after this last quarter and now hold a good position in PANW and a smaller position in CRWD.

My biggest concern with the space is how much market share the gorilla Microsoft can grab as they enter the fray. Like Amazon or Google, It is hard to ignore them in any venture they focus on.

What are your thoughts?
PANW Tickerguide and long CRWD, and PANW.


Thanks for the spot on review Randy,

As to SentinelOne… i have become most disenchanted with management which, to me, is a huge red flag.

They were interrogated by analysts on their last conference call as they tried to explain “a one-time adjustment to ARR” Annualized Recurring Revenue.

They offered some detail in the letter to shareholders.

Huge faux pas in my book.

i agree with you that Crowdstrike is doing well and i also sold out of my SentinelOne position and put those funds into Crowdstrike (and Zscaler) as the Crowdstrike management team, though, IMHO, is braggadocios at times, CRWD still offers a better outlook.

Had you considered adding Zscaler to your reviews (to replace SentinelOne, lol)
Jay Chaudhry is a dynamic leader and the CEO , Chairman, and Founder, so that offers us a founder lead organization.

Also, Zscaler is Leader in the 2023 Gartner Magic Quadrant for Security Service Edge (SSE)

Thanks again for your well thought out Cyber Security Comparisons and updates and looking Forward to more!

Best, kevin c


I think your basket of comparison stocks for cyber security can invite criticism and questions. PANW is generally regarded as a company deriving a significant chunk of SaaS revenue by transitioning old legacy security contracts to cloud-based. In other words, revenue growth artificially inflated as at least some proportion doesn’t represent true growth as it is coming at the expense of existing revenue.

So considering CRWD has FCF already at about 75% of PANW (I haven’t confirmed this, I’m using your numbers of 301M vs 401M) and is growing true de novo business much faster, I can easily see an argument for CRWD over PANW here. In addition, CRWD is unencumbered by old ways and structure (and bloat) around other non-SaaS related products the way PANW is - and when you’re buying PANW shares, you’re buying the whole enchilada, not just the SaaS business. It’s why sometimes it’s better to tear a house down and build anew rather than renovating.

I also think any comparison basket of cyber security is probably a little cherry picked by just including these three companies. At a minimum, I’d want to see ZS in the competition, and companies like OKTA and NET are probably even more relevant as a long-term, pure SaaS, cloud-based cyber security play than PANW.

Having said that, Im not trying to attack or come across heavy handed. Still a nice review of some factors of these three companies, and you seem firm in your conviction of PANW which is commendable at least insofar as you have a well thought out plan. Each of our mileage may vary!


Over the last 12 months, PANW generated $2.8 billion of FCF over $6.5 billion of revenues. That’s a 43% FCF margin.
CRWD generated $747 million of FCF over $2.4 billion of revenues, or a 31% FCF margin.
Plus, PANW have a $2.6 billion ARR vs. CRWD’s $2.7 billion. Pretty much equivalent.
The difference is that PANW have added $242 million in net new ARR in the last Q whereas CRWD have added $174 million. At this rate, PANW will surpass CRWD in ARR soon, unless CRWD’s net new ARR picks up again.
Just for the sake of completion (and precision).


Right. And thank you for pointing it out to me, I truly hadn’t compared these numbers yet.

My concern though, is are these numbers truly indicative of what we think they mean?

To wit:

What if CRWD added 174 million of new revenue full stop (new customer adds + growth in existing customer’s billings) whereas PANW added 242 million of new ARR but they cannibalized $100M of revenue from legacy business as those customers are converted to cloud?

I’m not even saying this is the case (I did not research these numbers yet) but my understanding is this is why PANW isn’t necessarily easy to compare vs. CRWD, ZS, etc.


Hi Robworldwide,
Cannibalism has been brought up before but is not born out by the facts. PANW total revenues for the quarter were $2.26 Billion up 26% yr over year. If you subtract out the ARR (divided by 4 to get a quarterly rate) you will see that the old firewalled business grew 10% in addition to the 60% growth for the SAAS portion. So it is also growing, albeit more slowly, but certainly not being cannibalized.

Now if you want to argue that the sales are easier to get because they were already a firewall customer prior, then I might agree with you but that doesn’t seem like a problem, but instead an advantage effectively used.

What you also have to understand is that PANW’s SAAS cloud software sales have seen little to no drop off over the past 8 quarters or so while CRWD’s sales growth has slowed dramatically. If you looked at the numbers (which I have presented in previous posts here) you would be hard pressed to argue that the growth is misleading, but instead consistent and seemingly much less affected by the business environment than CRWD or S.

But I certainly agree that everyone needs to make up their own mind. I am just supplying some facts and putting some commentary around them. And if you look back a few quarterly posts, you will see that I wasn’t even saying that PANW was better a year ago, I was just saying don’t count them out. The numbers have been what has convinced me.



Thanks Randy. I appreciate the response. I 100% want to delve into this a little further as I’m convinced that this is a sector I want to continue to own for decades and if I’ve got a blind spot for PANW because of my bias, the sooner I figure it out the better.

I’m gonna go listen to some of the recent earnings conference calls in the near term and get back to the board. I’ve no interest in being “right” about my opinions and beliefs; I’m more interested in some data to guide my future decisions. Stay tuned.


CRWD and PANW are not competing on the same product lines. There is overlap, but CRWD direct competitor is S, and PANW direct competitor is ZS.
I understand the comparison from a financial perspective, but not from a customer choice perspective.


Hi Rodatl, it so happens that I had earlier had a request to look at ZS. Not that this is a definitive answer but I did a quick comparison to PANW. Here is gist of that post…

Finally, there is Zscaler. I owned ZS at one point but they were struggling a little a while back and I was consolidating my holdings in cyber security and they didn’t make the cut. I also think that they are not a perfect comparison as their business is a little different. (But I could be wrong there).

If I do a quick look at them and compare to PANW’s cloud portion I see revenues of $418.8M with 46% growth and Free cash flow if $108M. Great numbers. Not quite on the PAR with PANW or CRWD, but pretty dang impressive. So again, maybe I should put them back in the radar. One comment though, I thought they were straight cloud based but they are the only cloud company not reporting ARR and only revenue. Not sure why that is.



You are right, Randy, they are not a perfect comparison. Just a better one than panw and crwd. ZS had a very good quarter, I’m looking forward to their earnings call on September. It’s my second largest position (crwd is third and I don’t have panw), and it’s 43% YTD (crwd is 50%). The reason I didn’t invest in PANW was because I saw a risk with customers going to the hyperscalers. Lots of the features offered by panw are also offered natively by the hyperscalers. I thought they would have severe pressure trying to renew their 3-year ELAs. Obviously, I was wrong. :smile: