Palo Alto Networks (NASDAQ: PANW) and CrowdStrike (NASDAQ: CRWD) are closely monitored cybersecurity stocks. One of the world's largest cybersecurity companies, Palo Alto delivers next-gen firewalls, network security services, cloud-based security tools, and AI-powered threat detection. Not hardware, CrowdStrike offers cloud-native cybersecurity.
Palo Alto stock has increased 50% and CrowdStrike 150% in a year. Let's explore why CrowdStrike outperformed its larger opponent and whether it will remain the better cybersecurity choice.
Strata holds Palo Alto Networks' older on-premise network security products, Prisma delivers cloud-based services, and Cortex detects AI-powered threats.Revenue rose 29% in fiscal 2022 (ending July 2022) and 25% in fiscal 2023. Next-gen security (NGS) solutions Prisma and Cortex drove the growth.
In fiscal 2024, Palo Alto expects 15%-16% revenue growth. Analysts predict 16% full-year sales increase and 14% fiscal 2025 growth. The slowdown was caused by macro problems that made signing new clients tougher and cybersecurity competition.
Palo Alto is merging its customers into a single platform to remove their need for smaller cybersecurity companies for specific services. That method may make its environment stickier, but trials and deferred revenue partnerships won't boost billings quickly. Analysts expect its adjusted EPS to rise 24% in 2024 and 12% in 2025 as it decreases expenses.
That delay wasn't disastrous, but it frightened investors who expected Palo Alto to overcome macro and competitive challenges. Fortunately, platform consolidation is expected to boost NGS ARR to $15 billion by fiscal 2030. At least four times its $3.5 billion NGS ARR in the second quarter of fiscal 2024. It aims to maintain its seven-quarter GAAP profitability.
CrowdStrike expects trouble to ease. Falcon, CrowdStrike's cloud-native cybersecurity platform, replaced cumbersome, expensive, and hard-to-scale on-site hardware. Their simplified method affected Palo Alto and other cybersecurity firms.
Revenue rose 66% in fiscal 2022 (ending January 2022), 54% in 2023, and 36% in 2024 for CrowdStrike. Macro issues like Palo Alto lowered its net new ARR in the first half of fiscal 2024. Net new ARR growth improved in fiscal 2024's second half.
Market share growth, government sector development, and generative AI in its extended detection and response (XDR) platform drove this recovery. Cross-selling Falcon services: 43% of clients had at least six cloud-based modules, up from 4 and 39% at the end of fiscal 2023.
CrowdStrike expects fiscal 2025 revenue to rise 28%-31%. Not as much as Palo Alto, that slows from fiscal 2024. Burt Podbere, CFO, "While companies may be fatigued with other vendors, they have embraced CrowdStrike's platform strategy and want to buy more of the Falcon platform." That statement appeared to address Palo Alto CEO Nikesh Arora's conference call statement regarding consumers "facing spending fatigue in cybersecurity."
CrowdStrike outpaces Palo Alto with 30% revenue growth in 2025 and 27% in 2026. They expect 2025 adjusted EPS growth of 27% and 2026 of 25%. GAAP profitability has been maintained for four quarters, and it will continue.
The best buy: CrowdStrike Such stocks are expensive. CrowdStrike costs 83 times expected earnings, compared to 55 for Palo Alto Networks. I own both equities because they are "best in breed" in the growing cybersecurity industry. I prefer CrowdStrike to Palo Alto because its technology is more disruptive, it's growing faster, and it doesn't seem to face as much competition or "spending fatigue." Its strengths should help it outperform Palo Alto Networks in 12 months.
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