So I put this out on the paid boards a couple days ago and thought everyone here would be interested as well…..
I am back from vacation and finally had time to put together the latest update on the major cyber security stocks. And before I start with the usual., What a quarter! After spending a little time in the doghouse because there was an assumption (I didn’t believe) that AI would be able to take over this industry, every company I follow had an amazing price performance this quarter.
Most recent stock price performance
Company 3 mo (% incr) 1 yr (% incr)
S………….…….49%………………23%
PANW……… 26%………….…. 77%
CRWD………. 38%………..……90%
ZS ………..…. 58%……….…. -32%
NET ………. 44%…………… 47%
The big hitters of PANW and CRWD were moving up before the last three months and ZS had a rough year but everyone had a great quarter it appears. Not sure if a pullback is in the cards or the run will continue but you have to like it!
Now onto my typical coverage….
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 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: ea h company has its own calendar year reporting but these are all directly comparable and are for the quarter ended in June 2026.
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 ($M) % increase(yr/yr)
S………….…….1,160………………23%
PANW……… 8,100………….……28% (60 incl. acquisitions)%
CRWD……….5,510………………24%
ZS ………..…..3,525………….……25%
NET…2,560…34% (based on qtr rev x4)
Q2 2026 results
Company ARR ($M) % increase(yr/yr)
S………….…….1.218 ……………22%
PANW……… 9.100…….…….…63%. (incl. acquisitions)%
CRWD…….….5,840…………. …25%
ZS ………..…..3,771……….……..25%
NET…………….2,784 ……………36%. (based on qtr rev x4)
So after a few quarters of slower growth it looks like the growth is now continuing unabated. For PANW, I didn’t see them break out the organic growth this quarter so it is much larger but includes acquisitions. I will say that the growth increased from 60 to 63% so I can’t really complain too loudly. NET once again has shown the strongest from a straight organic growth now up to 36%, not to mention impressively steadily increasing % growth over the 5 quarters shown.
As a shareholder in any of these companies you have to like the growth and trajectory starting to stabilize and even turning up depending on the specific company. 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 estimated at 38% for fiscal 2027! Wow! 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 now 25% while you’re waiting is not all bad and they also quoted net new ARR at 51% . Sounds great but not really sure how to square that with ARR growth at half that rate
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 $2.8B 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 $243 B and PANW’s market cap is $297 B. Both of these are again up a lot from last qtr, CRWD from price appreciation and PANW from both price appreciation and acquisitions. So you are paying a 22% premium for PANW now (down from 36% last quarter) but PANW’s ARR is 58% greater so PANW is cheaper on a straight ARR basis. This does not count either the higher growth rates in ARR nor the very profitable fire walled business. It seems like this is still very undervalued in comparison although the acquisition train does muddy the water a bit. On that note PANW announced another acquisition this quarter of Console, an AI-native platform that enables agentic workflows across enterprise operations. And seemingly more to come
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 and now growing again. Finally I also have to say with the AI scare concerns that are growing rapidly, this can do nothing but increase the importance of Cyber Security companies and their essential job within our world.
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 PANW this quarter because of the overalll size of my position, a nice problem to have). Totally just portfolio management.
What are your thoughts?
Randy
PANW Tickerguide and long PANW, CRWD and NET