Software Stocks Selloff Amid AI Tool Concerns
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Should l Buy PANW?
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 rise
34 Analyst Rating
28 Buy
5 Hold
1 Sell
Strong Buy
Current: 150.990
Low
157.00
Averages
232.49
High
265.00
Current: 150.990
Low
157.00
Averages
232.49
High
265.00
About PANW
Palo Alto Networks, Inc. provides comprehensive artificial intelligence (AI)-powered security solutions across network, cloud, security operations and AI. The Company focuses on four areas: Network Security, Cloud Security, Security Operations and Threat Intelligence and Advisory Services (Unit 42). Its network security platform comprises ML-powered firewalls, AI Runtime Security, and a Secure Access Service Edge (SASE) framework, which includes Prisma Access, Prisma SD-WAN, and Prisma Access Browser to secure remote workforces and branch offices. Its Cloud security is delivered via Prisma Cloud, a Code to Cloud platform that protects applications, data, GenAI environments, and the cloud-native stack throughout the development lifecycle. Its Unit 42 division provides intelligence-led consulting, incident response, managed detection and response, and threat hunting services. Its Prisma AIRS is an AI security platform which secures applications, agents, models and data.
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 Accelerates Acquisitions Amidst Positive Outlook
- Strong Earnings Report: Palo Alto Networks reported a 15% year-over-year revenue increase for Q2 FY2026, reaching $2.59 billion, exceeding the forecast range of $2.57 billion to $2.59 billion, indicating robust performance in the cybersecurity sector.
- Acquisition Strategy: The company has recently completed acquisitions of real-time data monitoring firm Chronosphere and privileged access company CyberArk, and announced plans to acquire Koi, which provides AI-driven enterprise endpoint security solutions; these moves will enhance its platformization strategy but may pressure EPS in the short term.
- Future Guidance: Palo Alto updated its full-year guidance, projecting revenue of $11.28 billion to $11.31 billion for FY2026, although it lowered EPS expectations, reflecting the impact of recent acquisitions on profitability.
- Attractive Valuation: Despite a stock price decline of over 25%, Palo Alto's forward price-to-sales ratio stands at 9 times fiscal 2027 estimates and a forward price-to-earnings ratio of 33 times, making the current valuation more attractive than in the past, suggesting investors may consider accumulating shares at this dip.
See More
Software Stocks Selloff Amid AI Tool Concerns
- 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.
See More
Palo Alto Networks Sees Significant Growth in AI Security Products
- Accelerated Cyber Attacks: According to Palo Alto Networks' Unit 42 research, severe cyberattacks are now occurring four times faster than last year, with hackers breaching networks and stealing data in under an hour, creating new attack surfaces as businesses develop AI chatbots, thus increasing security risks.
- XSIAM Platform Success: Palo Alto's Cortex XSIAM platform had 600 customers by the end of Q2 FY2026, a 200% increase from the previous year, with each customer spending nearly $1 million annually, and 60% of them remediating threats in under 10 minutes, significantly enhancing response speed.
- Strong Revenue Growth: Palo Alto generated $2.6 billion in total revenue during Q2 FY2026, a 15% increase year-over-year, while its next-generation security portfolio's annual recurring revenue (ARR) reached $6.3 billion, growing 33%, indicating strong demand for AI products.
- Platformization Strategy: The company expects total revenue of $11.3 billion for FY2026, a 23% increase, with next-generation security ARR projected to grow by 54%, as management believes platformization is key to driving performance, with a net revenue retention rate of 119% among customers.
See More
Palo Alto Networks Sees Significant Growth in Cybersecurity Products
- Strong Revenue Growth: Palo Alto Networks generated $2.6 billion in total revenue during fiscal Q2 2026, marking a 15% year-over-year increase, with its next-generation security products achieving an annual recurring revenue (ARR) of $6.3 billion, reflecting a robust performance in the rapidly evolving cybersecurity market.
- Customer Platformization Trend: By the end of the second quarter, 1,550 customers were considered 'platformed,' a 35% increase from the previous year, with a net revenue retention rate of 119%, indicating that customers are significantly increasing their spending after adopting the company's solutions, thereby enhancing customer loyalty.
- AI Product Success: The Cortex XSIAM platform reached 600 customers, up 200% year-over-year, with an average annual spend of nearly $1 million per customer, demonstrating the company's significant success in leveraging AI technology to enhance security response times.
- Market Valuation Discrepancy: Palo Alto's price-to-sales (P/S) ratio stands at 11.1, which is 50% lower than its main competitor CrowdStrike, despite its next-generation security segment generating more ARR than CrowdStrike's entire business, indicating potential for market correction in its valuation.
See More
Anthropic Launches Claude Code Security Tool for AI-Driven Vulnerability Detection
- Tool Launch: Anthropic has unveiled Claude Code Security, an AI-driven tool designed to autonomously hunt for software vulnerabilities and propose fixes, marking a significant innovation in software security.
- Advanced AI Reasoning: The tool leverages Anthropic's latest Opus 4.6 model, which has already identified over 500 previously unknown high-severity vulnerabilities during internal testing, showcasing its powerful analytical capabilities.
- Increased Cybersecurity Competition: The introduction of Claude Code Security has intensified competition in the cybersecurity space, leading to a notable sell-off in cybersecurity stocks as investors weigh the implications of AI's deeper integration into security.
- Need for Human Oversight: While Claude Code Security can assess codebases and generate human-readable patch suggestions, all changes must be reviewed by developers, underscoring the continued importance of human intervention in security assessments.
See More
AI's Disruption Impact on Cybersecurity Sector
- Market Reaction: Concerns over AI's potential disruption of the cybersecurity industry led to a 1.5% drop in Palo Alto Networks (PANW) shares on Friday, indicating investor unease about the sector's future and potential short-term capital outflows.
- New Feature Launch: Anthropic PBC introduced the Claude Code Security feature, designed to scan codebases for security vulnerabilities and suggest software patches, labeled as a 'limited research preview,' showcasing AI's potential applications in cybersecurity.
- Challenge to Traditional Solutions: The launch of Claude Code Security directly targets legacy cybersecurity solutions, emphasizing its ability to identify security issues often missed by traditional methods, which could alter the competitive landscape and prompt existing firms to reassess their offerings.
- Market Outlook Observation: While the Claude models have a good reputation in the market, it remains to be seen whether this new feature is powerful enough to capture market share from incumbents; Palo Alto Networks shareholders need not panic, as market reactions require time to validate.
See More
Palo Alto Networks Accelerates Acquisitions Amidst Positive Outlook
- Strong Earnings Report: Palo Alto Networks reported a 15% year-over-year revenue increase for Q2 FY2026, reaching $2.59 billion, exceeding the forecast range of $2.57 billion to $2.59 billion, indicating robust performance in the cybersecurity sector.
- Acquisition Strategy: The company has recently completed acquisitions of real-time data monitoring firm Chronosphere and privileged access company CyberArk, and announced plans to acquire Koi, which provides AI-driven enterprise endpoint security solutions; these moves will enhance its platformization strategy but may pressure EPS in the short term.
- Future Guidance: Palo Alto updated its full-year guidance, projecting revenue of $11.28 billion to $11.31 billion for FY2026, although it lowered EPS expectations, reflecting the impact of recent acquisitions on profitability.
- Attractive Valuation: Despite a stock price decline of over 25%, Palo Alto's forward price-to-sales ratio stands at 9 times fiscal 2027 estimates and a forward price-to-earnings ratio of 33 times, making the current valuation more attractive than in the past, suggesting investors may consider accumulating shares at this dip.
See More
Software Stocks Selloff Amid AI Tool Concerns
- 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.
See More
Palo Alto Networks Sees Significant Growth in AI Security Products
- Accelerated Cyber Attacks: According to Palo Alto Networks' Unit 42 research, severe cyberattacks are now occurring four times faster than last year, with hackers breaching networks and stealing data in under an hour, creating new attack surfaces as businesses develop AI chatbots, thus increasing security risks.
- XSIAM Platform Success: Palo Alto's Cortex XSIAM platform had 600 customers by the end of Q2 FY2026, a 200% increase from the previous year, with each customer spending nearly $1 million annually, and 60% of them remediating threats in under 10 minutes, significantly enhancing response speed.
- Strong Revenue Growth: Palo Alto generated $2.6 billion in total revenue during Q2 FY2026, a 15% increase year-over-year, while its next-generation security portfolio's annual recurring revenue (ARR) reached $6.3 billion, growing 33%, indicating strong demand for AI products.
- Platformization Strategy: The company expects total revenue of $11.3 billion for FY2026, a 23% increase, with next-generation security ARR projected to grow by 54%, as management believes platformization is key to driving performance, with a net revenue retention rate of 119% among customers.
See More
Palo Alto Networks Sees Significant Growth in Cybersecurity Products
- Strong Revenue Growth: Palo Alto Networks generated $2.6 billion in total revenue during fiscal Q2 2026, marking a 15% year-over-year increase, with its next-generation security products achieving an annual recurring revenue (ARR) of $6.3 billion, reflecting a robust performance in the rapidly evolving cybersecurity market.
- Customer Platformization Trend: By the end of the second quarter, 1,550 customers were considered 'platformed,' a 35% increase from the previous year, with a net revenue retention rate of 119%, indicating that customers are significantly increasing their spending after adopting the company's solutions, thereby enhancing customer loyalty.
- AI Product Success: The Cortex XSIAM platform reached 600 customers, up 200% year-over-year, with an average annual spend of nearly $1 million per customer, demonstrating the company's significant success in leveraging AI technology to enhance security response times.
- Market Valuation Discrepancy: Palo Alto's price-to-sales (P/S) ratio stands at 11.1, which is 50% lower than its main competitor CrowdStrike, despite its next-generation security segment generating more ARR than CrowdStrike's entire business, indicating potential for market correction in its valuation.
See More
Anthropic Launches Claude Code Security Tool for AI-Driven Vulnerability Detection
- Tool Launch: Anthropic has unveiled Claude Code Security, an AI-driven tool designed to autonomously hunt for software vulnerabilities and propose fixes, marking a significant innovation in software security.
- Advanced AI Reasoning: The tool leverages Anthropic's latest Opus 4.6 model, which has already identified over 500 previously unknown high-severity vulnerabilities during internal testing, showcasing its powerful analytical capabilities.
- Increased Cybersecurity Competition: The introduction of Claude Code Security has intensified competition in the cybersecurity space, leading to a notable sell-off in cybersecurity stocks as investors weigh the implications of AI's deeper integration into security.
- Need for Human Oversight: While Claude Code Security can assess codebases and generate human-readable patch suggestions, all changes must be reviewed by developers, underscoring the continued importance of human intervention in security assessments.
See More
AI's Disruption Impact on Cybersecurity Sector
- Market Reaction: Concerns over AI's potential disruption of the cybersecurity industry led to a 1.5% drop in Palo Alto Networks (PANW) shares on Friday, indicating investor unease about the sector's future and potential short-term capital outflows.
- New Feature Launch: Anthropic PBC introduced the Claude Code Security feature, designed to scan codebases for security vulnerabilities and suggest software patches, labeled as a 'limited research preview,' showcasing AI's potential applications in cybersecurity.
- Challenge to Traditional Solutions: The launch of Claude Code Security directly targets legacy cybersecurity solutions, emphasizing its ability to identify security issues often missed by traditional methods, which could alter the competitive landscape and prompt existing firms to reassess their offerings.
- Market Outlook Observation: While the Claude models have a good reputation in the market, it remains to be seen whether this new feature is powerful enough to capture market share from incumbents; Palo Alto Networks shareholders need not panic, as market reactions require time to validate.
See More
