Posted this on the premium boards yesterday so figured it would be of interest here as well……
It is time once again for my scintillating cyber security industry update. I am once again looking at PANW, S, CRWD, ZS and lately NET. I have decided to include Cloudflare (NET) because they keep promoting their cybersecurity services and it seems to be a significant and growing aspect of the company business. And I will admit that I also wanted to include them because I have been a long-time stockholder with a fairly large position and love the companies long time growth path.
As usual, I will center on the Cloud Cyber Security space as this is the most exciting in terms of growth and future potential and is the easiest to compare across the companies. Also, because PANW has a large traditional firewalled business, I have separated that out for this post’s purposes (as I have always done). Clearly this assumption and how to account for it is open to debate and disagreement, but I just do the best I can. So be it. I will also add now that because NET doesn’t report annualized ARR I have estimated it by taking the latest quarter’s revenues and multiplying by 4. Not perfectly accurate but the best I can do and allows us to compare the size of the businesses.
I also will again take a shot at valuing the firewalled version of PANW versus Crowdstrike and see how it is holding up overall.
With that out of the way, I first will repeat the last four 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 quarter’s results. Note: some of the companies actually use the latest qtr. (calendar Q1 2026) but they should be directly comparable.
Q4 2024 results
Company ARR ($M) % increase(yr/yr)
S………….…….920………………27%
PANW……… 4,800………….….37%
CRWD……….4,240………..……24%
ZS ………..….2,590………….….23%
Q1 2025
Company ARR ($M) % increase(yr/yr)
S………….…….948………………24%
PANW…….… 5,100………….….34%
CRWD……….4,440………..……22%
ZS ………..….2,900………….….23%
NET………….….1916……………..27% reported as revenue x4 (ARR not reported)
Q2 ‘2025
Company ARR ($M) % increase(yr/yr)
S………….……1,000………..……24%
PANW…….… 5,600………….….32%
CRWD……….4,660………..……20%
ZS ………..….3,015……….….….22%
NET………….….……2048……..28% reported as revenue x4 (ARR not reported)
And finally the most recent quarter for each:
Q3 ‘2025
Company ARR ($M) % increase(yr/yr)
S………….…….1,055……………..23%
PANW……… 5,900………….….29%
CRWD……….4,920………….….23%
ZS …………….3,204…………..…26%
NET………….….2248……………..31% reported as revenuex4 (ARR not reported)
Q4 ‘2025
Company ARR ($M) % increase(yr/yr)
S………….…….1,120……………..22%
PANW……… 6,300………….….33%
CRWD……….5,250……….…….24%
ZS …………….3,360….……….…25%
NET…………….2460…………..34% reported as revenue x4
Q1 2026 results
Company ARR ($M) % increase(yr/yr)
S………….…….1,160………………23%
PANW……… 8,100………….……28% (60 incl. acquisitions)%
CRWD……….5,510………………24%
ZS ………..…..3,525………….……25%
NET…2,560…34% (based on qtr rev x4)
Now after a few quarters of slower growth it looks like the industry in general is starting to accelerate again, or really just leveling out. PANW itself is a bit of an outlier here in that the organic growth looks like it slowed but I believe Q4 '25 included some acquisition growth and in this quarter it was there substantially (60%) but they also broke out the organic growth (28%) which was still substantial and greater than the traditional Cyber Security companies. Net once again has the highest growth rate at an estimated 34%.
As a shareholder in any of these companies you have to like the growth and trajectory starting to stabilize and maybe even turn up a little. Net is doing very well although still less than half the size of CRWD and one third the size of PANW. Depending on how much you like a company that uses acquisitions as growth, PANW continues to stand out. For me, using acquisitions alone is somewhat of a red flag but one that uses them to augment organic growth and has a history of successfully merging the companies together, I don’t mind and even like it.
So I still like PANW, great growth, very nice earnings and free cash flow with margins in the high 30% range and growing every year. CRWD is also doing very well and is the second largest and still showing good growth. We still aren’t seeing the promised 40% growth that was discussed in their previous reports but perhaps an acceleration is on the way and 24% while you’re waiting is not all bad!
And since I have added NET to this summary, a couple of sentences on their results. I do own them as well as CRWD and PANW and they are one of my bigger positions overall due mostly to their stock price appreciation but as you can see, they are a good-sized company, estimated ARR at almost $2.5B and growing at a substantial rate (34%! ) To be fair, cybersecurity is only one leg of a 3 legged stool of the company’s products but it is all around cloud internet services so I am (rightly or wrongly) thinking it is a reasonable comparison and getting better as the cloud cybersecurity continues to grow. An interesting stock if you are not familiar.
Finally, I will update my comparison in market cap between CRWD and PANW. As of today’s prices CRWD has a market cap of $171 B and PANW’s market cap is $233 B. Both of these are up substantially from last qtr, CRWD from price appreciation and PANW from both price appreciation and acquisitions. So you are paying a 36% premium for PANW now, but PANW’s ARR is 47% greater so PANW is cheaper on a straight ARR basis. This does not count neither the higher growth rates in ARR nor the very profitable fire walled business. It seems like this is still very undervalued in comparison.
So I am very comfortable having pretty big positions in PANW, CRWD and NET, with PANW being the largest.
But truthfully, in the end, this industry is a little bit of an embarrassment of riches. All of these companies are doing great and seems to have a bright future because it is hard for me to imagine a world where this doesn’t continue to grow in importance over time. And if you look at the last 4 quarters for all of them, the growth is really amazingly consistent.
Me, I own shares in both CRWD, PANW and NET and don’t plan on selling them anytime soon (although I did make a small reduction in CRWD this quarter just because of the large increase in price we saw. Totally just portfolio management.
What are your thoughts?
Randy
PANW Tickerguide and long PANW, CRWD and NET