Software Stocks Selloff Amid AI Tool Concerns
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Feb 23 2026
0mins
Source: stocktwits
- Market Sentiment Shift: Investors are pulling out of software stocks amid concerns that AI tools may reduce demand for niche enterprise software, with stocks like Palo Alto Networks and Zscaler dropping over 10% last week, indicating a waning confidence in traditional software solutions.
- Earnings Impact: Palo Alto Networks reported a third-quarter profit that missed expectations and lowered its 2026 profit outlook, leading to a stock price decline that reflects the company's vulnerability in the face of AI competition, potentially affecting its future market performance.
- New Tool Launch Impact: The release of Anthropic's Claude Code Security tool, which uncovered over 500 high-severity vulnerabilities during internal testing, has intensified market fears regarding traditional cybersecurity software, prompting investors to reassess the value of these companies.
- Diverging Analyst Views: Despite the bearish market sentiment, Barclays analysts argue that the selloff in cybersecurity stocks “seems incongruent,” asserting that Anthropic's tool does not directly replace the core offerings of major cybersecurity vendors, indicating a level of confidence in the industry.
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Analyst Views on PANW
Wall Street analysts forecast PANW stock price to fall
34 Analyst Rating
28 Buy
5 Hold
1 Sell
Strong Buy
Current: 293.090
Low
157.00
Averages
232.49
High
265.00
Current: 293.090
Low
157.00
Averages
232.49
High
265.00
About PANW
Palo Alto Networks, Inc. is a global artificial intelligence (AI) cybersecurity company, with a comprehensive portfolio of cybersecurity solutions and platforms across network, cloud, security operations, AI and Identity. Its network security platform includes Secure Access Service Edge (SASE), Next-Generation Firewalls, Cloud Delivered Security Services (CDSS), Prisma AIRS, and Strata Cloud Manager (SCM). It delivers security operations capabilities that unifies standalone Security Information and Event Management (SIEM) tools, endpoint security, security automation, cloud detection and response (CDR), as well as attack surface management (ASM) capabilities on its Cortex platform. It delivers comprehensive security across the cloud application development lifecycle through Cortex Cloud. Its Unit 42 brings together expertise across threat research, incident response, and security consulting to deliver intelligence-driven, response-ready outcomes that help customers reduce cyber risk.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Palo Alto Networks Stock Soars Amid Strong Cybersecurity Demand
- Significant Revenue Growth: Palo Alto Networks reported a 31% year-over-year increase in fiscal Q3 revenue to $3 billion, including $388 million from the acquisitions of Chronosphere and CyberArk, highlighting strong performance in the cybersecurity market.
- Growing Remaining Performance Obligations: The company's remaining performance obligations (RPO) surged 36% year-over-year to $18.4 billion, indicating that the business is securing more contracts than it can currently fulfill, driven by robust demand for its AI solutions.
- Successful Platformization Strategy: The number of platformized customers increased from 1,250 to 2,280 by the end of Q3, with a goal to exceed 4,000 by fiscal 2030, which is expected to propel annual recurring revenue (ARR) to $20 billion.
- Optimistic Market Outlook: The company raised its fiscal 2026 revenue growth guidance to 24%, significantly above the initial 14%, while also increasing RPO growth expectations from 17%-18% to 32%-33%, reflecting analysts' confidence in its future performance.
See More
Positive Outlook for Cybersecurity Spending in 2026
- Cybersecurity Budget Growth: Jefferies' survey of 40 executives indicates that cybersecurity budgets are expected to grow 6.2% year-over-year in 2026, aligning with IT and software budget growth, albeit slightly lower than the 6.6% growth in 2025, highlighting the continued prioritization of cybersecurity spending by enterprises.
- AI-Driven Spending: The survey reveals that spending on AI and machine learning is emerging as a positive catalyst for the cybersecurity sector, with analysts suggesting that companies like Palo Alto Networks and Okta will benefit, particularly in the identity management subsector.
- Spending Winners Analysis: In 2026, 56% of respondents expect to increase spending on Palo Alto Networks, although this is down from 66% in December 2025; CrowdStrike and Zscaler also show positive spending expectations at 44% and 43%, respectively, indicating a favorable outlook for these firms.
- Rising Cloud Security Demand: With cloud spending projected to rise from 9.6% growth in 2025 to 10.1% in 2026, this is expected to drive demand for cloud security solutions, particularly benefiting vendors like CRWD, PANW, and ZS, as security remains a critical factor in enterprises' cloud vendor selection.
See More
U.S. Stocks Close Lower on Friday, Chipmakers Weigh on Market
- Market Decline: The S&P 500 and Nasdaq 100 fell by 0.05% and 1.09% respectively on Friday, reaching two-week lows, indicating market sensitivity to the weak performance of chipmakers, which could undermine investor confidence.
- Chipmaker Sell-off: The significant drop in Samsung Electronics and SK Hynix shares led to a more than 5% decline in South Korea's Kospi Index, triggering a global downturn in semiconductor stocks and exacerbating market uncertainty.
- Oil Price Impact: WTI crude oil prices fell over 3% to a four-month low on Friday, which helps lower inflation expectations and supports the stock market, but also reflects potential slowdowns in global economic growth.
- Consumer Sentiment Revision: The University of Michigan's consumer sentiment index was revised upward by 0.6 to 49.5, although still below the expected 50.0, indicating a cautious consumer outlook that may affect future spending.
See More
IT Executives Survey Signals Budget Growth in 2026
- Accelerated Software Budget Growth: Jefferies' survey indicates a projected 6.2% increase in software budgets for 2026, up from 4.8% in 2025, with 83% of respondents expecting budget increases, highlighting strong demand despite negative investor sentiment.
- Stable Cybersecurity Spending: Cybersecurity budgets are expected to grow by 6.2% year-over-year in 2026, slightly below 6.6% in 2025, with 90% of CIOs anticipating increased spending, underscoring the continued priority of security.
- Rising Cloud Expenditure: CIOs expect cloud spending to rise by 10.1% in 2026, compared to 9.6% in 2025, with 95% of respondents forecasting budget increases, reflecting robust demand for cloud services.
- AI Budget Allocation Insights: Approximately 68% of CIOs now have dedicated AI budgets, with around 11% of overall IT budgets allocated to AI, and 73% of respondents noting that API spending is tracking above initial expectations, indicating a positive trend in AI investment.
See More
Trump Signs Executive Orders to Propel Quantum Computing Initiatives
- Quantum Innovation Strategy: Trump's executive orders mandate the delivery of a scientifically relevant quantum computer to the Department of Energy by 2028 and establish the Quantum Computer for Application Development and Discovery Science initiative (QC-ADDS), which will enhance U.S. leadership in quantum technology, ensuring national security and economic benefits.
- Funding Support: The government announced $2 billion in CHIPS Act grants to nine quantum companies, with IBM receiving $1 billion to build the nation's first pure-play quantum chip foundry, Anderon, in New York, while committing over $10 billion in total quantum investment over the next five years, demonstrating its strong commitment to quantum computing.
- Infrastructure Transformation: The second executive order requires all critical federal infrastructure to migrate to post-quantum cryptography (PQC) standards by 2030 and 2031, creating a procurement mandate that will directly drive demand for PQC products, with the market projected to grow from $420 million in 2025 to $2.84 billion by 2030.
- Market Opportunities: Companies like Palo Alto Networks have launched quantum-safe products, becoming one of the few large-cap cybersecurity firms with commercial PQC offerings, and as government compliance deadlines approach, demand for their products is expected to surge, further solidifying their market position in cybersecurity.
See More
Quantum Computing Drives Infrastructure Investment
- Government Investment Surge: President Trump's signing of two executive orders places quantum computing at the forefront of U.S. economic and national security policy, mandating the delivery of a scientifically relevant quantum computer to the Department of Energy by 2028, thereby accelerating the development of quantum infrastructure.
- IBM's Major Commitment: IBM has secured $1 billion in CHIPS Act funding to establish the nation's first pure-play quantum chip foundry in Albany, New York, and has pledged over $10 billion in total quantum investment over the next five years, aiming for a fault-tolerant quantum computer by 2029, three years ahead of the government's target.
- GlobalFoundries' Strategic Role: GlobalFoundries has signed a $375 million CHIPS Act letter of intent to create a dedicated Quantum Technology Solutions division, positioning itself as a key supplier of chips for various quantum architectures, thus supporting a diverse range of competing technologies in the quantum computing space.
- Cybersecurity Market Expansion: Palo Alto Networks' launch of quantum-safe security products is projected to drive the PQC market from $420 million in 2025 to $2.84 billion by 2030, with a compound annual growth rate exceeding 46%, creating new compliance demands and budget allocations within the cybersecurity sector.
See More
Palo Alto Networks Stock Soars Amid Strong Cybersecurity Demand
- Significant Revenue Growth: Palo Alto Networks reported a 31% year-over-year increase in fiscal Q3 revenue to $3 billion, including $388 million from the acquisitions of Chronosphere and CyberArk, highlighting strong performance in the cybersecurity market.
- Growing Remaining Performance Obligations: The company's remaining performance obligations (RPO) surged 36% year-over-year to $18.4 billion, indicating that the business is securing more contracts than it can currently fulfill, driven by robust demand for its AI solutions.
- Successful Platformization Strategy: The number of platformized customers increased from 1,250 to 2,280 by the end of Q3, with a goal to exceed 4,000 by fiscal 2030, which is expected to propel annual recurring revenue (ARR) to $20 billion.
- Optimistic Market Outlook: The company raised its fiscal 2026 revenue growth guidance to 24%, significantly above the initial 14%, while also increasing RPO growth expectations from 17%-18% to 32%-33%, reflecting analysts' confidence in its future performance.
See More
Positive Outlook for Cybersecurity Spending in 2026
- Cybersecurity Budget Growth: Jefferies' survey of 40 executives indicates that cybersecurity budgets are expected to grow 6.2% year-over-year in 2026, aligning with IT and software budget growth, albeit slightly lower than the 6.6% growth in 2025, highlighting the continued prioritization of cybersecurity spending by enterprises.
- AI-Driven Spending: The survey reveals that spending on AI and machine learning is emerging as a positive catalyst for the cybersecurity sector, with analysts suggesting that companies like Palo Alto Networks and Okta will benefit, particularly in the identity management subsector.
- Spending Winners Analysis: In 2026, 56% of respondents expect to increase spending on Palo Alto Networks, although this is down from 66% in December 2025; CrowdStrike and Zscaler also show positive spending expectations at 44% and 43%, respectively, indicating a favorable outlook for these firms.
- Rising Cloud Security Demand: With cloud spending projected to rise from 9.6% growth in 2025 to 10.1% in 2026, this is expected to drive demand for cloud security solutions, particularly benefiting vendors like CRWD, PANW, and ZS, as security remains a critical factor in enterprises' cloud vendor selection.
See More
U.S. Stocks Close Lower on Friday, Chipmakers Weigh on Market
- Market Decline: The S&P 500 and Nasdaq 100 fell by 0.05% and 1.09% respectively on Friday, reaching two-week lows, indicating market sensitivity to the weak performance of chipmakers, which could undermine investor confidence.
- Chipmaker Sell-off: The significant drop in Samsung Electronics and SK Hynix shares led to a more than 5% decline in South Korea's Kospi Index, triggering a global downturn in semiconductor stocks and exacerbating market uncertainty.
- Oil Price Impact: WTI crude oil prices fell over 3% to a four-month low on Friday, which helps lower inflation expectations and supports the stock market, but also reflects potential slowdowns in global economic growth.
- Consumer Sentiment Revision: The University of Michigan's consumer sentiment index was revised upward by 0.6 to 49.5, although still below the expected 50.0, indicating a cautious consumer outlook that may affect future spending.
See More
IT Executives Survey Signals Budget Growth in 2026
- Accelerated Software Budget Growth: Jefferies' survey indicates a projected 6.2% increase in software budgets for 2026, up from 4.8% in 2025, with 83% of respondents expecting budget increases, highlighting strong demand despite negative investor sentiment.
- Stable Cybersecurity Spending: Cybersecurity budgets are expected to grow by 6.2% year-over-year in 2026, slightly below 6.6% in 2025, with 90% of CIOs anticipating increased spending, underscoring the continued priority of security.
- Rising Cloud Expenditure: CIOs expect cloud spending to rise by 10.1% in 2026, compared to 9.6% in 2025, with 95% of respondents forecasting budget increases, reflecting robust demand for cloud services.
- AI Budget Allocation Insights: Approximately 68% of CIOs now have dedicated AI budgets, with around 11% of overall IT budgets allocated to AI, and 73% of respondents noting that API spending is tracking above initial expectations, indicating a positive trend in AI investment.
See More
Trump Signs Executive Orders to Propel Quantum Computing Initiatives
- Quantum Innovation Strategy: Trump's executive orders mandate the delivery of a scientifically relevant quantum computer to the Department of Energy by 2028 and establish the Quantum Computer for Application Development and Discovery Science initiative (QC-ADDS), which will enhance U.S. leadership in quantum technology, ensuring national security and economic benefits.
- Funding Support: The government announced $2 billion in CHIPS Act grants to nine quantum companies, with IBM receiving $1 billion to build the nation's first pure-play quantum chip foundry, Anderon, in New York, while committing over $10 billion in total quantum investment over the next five years, demonstrating its strong commitment to quantum computing.
- Infrastructure Transformation: The second executive order requires all critical federal infrastructure to migrate to post-quantum cryptography (PQC) standards by 2030 and 2031, creating a procurement mandate that will directly drive demand for PQC products, with the market projected to grow from $420 million in 2025 to $2.84 billion by 2030.
- Market Opportunities: Companies like Palo Alto Networks have launched quantum-safe products, becoming one of the few large-cap cybersecurity firms with commercial PQC offerings, and as government compliance deadlines approach, demand for their products is expected to surge, further solidifying their market position in cybersecurity.
See More
Quantum Computing Drives Infrastructure Investment
- Government Investment Surge: President Trump's signing of two executive orders places quantum computing at the forefront of U.S. economic and national security policy, mandating the delivery of a scientifically relevant quantum computer to the Department of Energy by 2028, thereby accelerating the development of quantum infrastructure.
- IBM's Major Commitment: IBM has secured $1 billion in CHIPS Act funding to establish the nation's first pure-play quantum chip foundry in Albany, New York, and has pledged over $10 billion in total quantum investment over the next five years, aiming for a fault-tolerant quantum computer by 2029, three years ahead of the government's target.
- GlobalFoundries' Strategic Role: GlobalFoundries has signed a $375 million CHIPS Act letter of intent to create a dedicated Quantum Technology Solutions division, positioning itself as a key supplier of chips for various quantum architectures, thus supporting a diverse range of competing technologies in the quantum computing space.
- Cybersecurity Market Expansion: Palo Alto Networks' launch of quantum-safe security products is projected to drive the PQC market from $420 million in 2025 to $2.84 billion by 2030, with a compound annual growth rate exceeding 46%, creating new compliance demands and budget allocations within the cybersecurity sector.
See More
