Palo Alto Networks' performance "explodes" but faces selling pressure. Wall Street remains optimistic about the early growth logic of AI security.

Although Palo Alto Networks (PANW.US) exceeded expectations in its third quarter performance, and analysts remain generally positive, the stock price still fell by about 3% in pre-market trading on Wednesday. However, Wall Street analysts are still bullish on the stock's future prospects and have raised their target price. Jefferies: Reiterates Buy, Emphasizes Cash Flow and M&A Returns Jefferies maintained a "buy" rating on Palo Alto Networks and raised its target price from $300 to $335. The analyst team led by Joseph Gallo pointed out, "Thanks to the strong development of AI, SIEM, and SASE businesses, the company's net new annual recurring revenue (NNARR) accelerated growth in the third fiscal quarter. While bears may point out that service revenue growth may slow down (management indicates stability), guidance for the fourth quarter shows NNARR will accelerate again, with the company having high visibility on this." The analysts further stated, "Palo Alto Networks will benefit from cross-selling synergies and emerging AI data center narratives in the fiscal year 2027, which will support the growth of the firewall business and enhance the visibility of performance and the robust development of AI business. In addition, the company has reaffirmed a 40% long-term free cash flow margin guidance, which is crucial as it strongly proves the rationality of recent M&A investment returns." Wedbush: AI Top 30 Pillar, Any Knee-Jerk Drop is a Buying Opportunity Wedbush maintained an "outperform" rating and raised its target price from $300 to $340. Star analyst Dan Ives and his team commented, "Palo Alto Networks' third quarter performance exceeded expectations across the board, and it raised revenue and profit guidance for fiscal year 2026, reflecting strong growth momentum as more organizations turn to the company to ensure the security of AI deployments within the enterprise." Ives emphasized, "We maintain our 'outperform' rating and raise our target price, reflecting our confidence in Palo Alto Networks winning deals through its AI-native integrated security platform, making it a strong pillar in the 'AI Top 30' list. We would buy on any dips caused by knee-jerk reactions." Analysts noted that Palo Alto Networks remains one of their favorite cybersecurity picks for 2026, as they believe the "platformization" strategy is still in the early stages of unfolding. As more companies turn to the company for advanced network AI solutions, industry consolidation is accelerating. Morgan Stanley: Top Pick for Cybersecurity in 2026, Short-term Consolidation Doesnt Change Long-term Logic Morgan Stanley maintained an "overweight" rating and significantly raised its target price from $253 to $320. Analyst Meta Marshall and the team stated, "Palo Alto Networks delivered an outperformance despite a high base, which is significant for expectations for the third and fourth quarters. While the company indicates that full adoption of the AI product portfolio will take time, which may lead to a temporary consolidation after the stock surged 60% last month, we still maintain an 'overweight' rating as it is a clear beneficiary of customers adopting AI technology." Morgan Stanley pointed out that the third quarter performance and guidance dispelled all potential risk points, with broad growth momentum and early synergies from the acquisitions of CyberArk and Chronosphere being eye-catching. While the hardware business performed better than expected, there was no clear sign of early overspend demand as seen in other enterprise companies. "We expect growth to accelerate next year, even if the company hints at pacing issues, which will continue to provide positive catalysts for the company. Although the post-market reaction is relatively muted, we view this as a normal consolidation after last month's 61% stock price surge. We are waiting for more signals of rapid adoption of AI security tools by customers (rather than whether they are adopting them)," the Marshall team added. They emphasized that Palo Alto Networks remains one of their top cybersecurity picks for 2026, as the platform strategy is still in the early stages and more companies are turning to the company for advanced network AI solutions.