This security leader is turning growing cyber threats into recurring revenue

cyber security it’s a growth industry if ever there was one. A decade ago, only your computer or phone was connected to the Internet. Today, everything from the toaster to the TV has an Internet connection.

To make matters worse, artificial intelligence (AI) has made a hacker’s job a lot easier. Before a hacker had to at least take a break to eat or sleep. But now, they can have an AI program running while they get some R&R after a long day of stealing your data.

Where to invest $1000 right now? Our team of analysts just revealed what they think they are 10 best stocks buy now, when you join Stock Advisor. View stocks »

Finally, quantum computers represent the digital equivalent of nuclear weapons in the cybersecurity arms race. Quantum machines have the theoretical ability to crack even the best encryption in minutes.

Representation of a digital padlock on computer code. — Image source: Getty Images.

Fortunately, they are beyond the reach of the average hacker, but the United States is not the only country working on quantum computers, nor is it the only country with the technical ability to build them.

Fortunately for all individuals, businesses, and governments threatened by advances on the offensive side of the cybersecurity arms race, there are Palo Alto Networks (NASDAQ: PANW) prepared with a shield against all the nasty elements of the 21st century Internet.

Headquartered in Santa Clara, California, Palo Alto Networks is a leading cybersecurity company with enterprise and government customers worldwide.

It offers three AI-powered, cloud-enabled platforms.

The first is the Strata Cloud Manager, which allows the customer to combine all the nodes in their network and manage security across them from a single program. Strata alone has 70,000 customers, including 94 of the Fortune 100.

The second is the Prisma Cloud, which focuses primarily on a customer’s AI applications and uses its own AI software to detect 1.5 million new attacks daily. Prisma is integrated with more than 700 partners, which gives it a wide reach.

Third and last is Cortex, which is the offensive arm of Palo Alto’s product line. It’s another AI-enabled program that can stop cyberthreats in real time and shorten a customer’s response time by 98%. Cortex can also automate security responses, reducing manual work by 75% for cybersecurity teams.

In total, Palo Alto’s cybersecurity suite blocks 30.9 billion attacks per day, scans 480 billion security endpoints daily, and results in a 90% reduction in a customer’s average time to resolution.

And the company’s software clearly works given its wide customer base, which includes Salesforce, Dellthe nhl, Chipotleand NBC Universal (subsidiary of Comcast), to name a few. With a client list like this, you’d probably expect the balance sheet to be just as impressive. And you would be right.

We start with the company’s 2025 fiscal year end and how Palo Alto continues its growth streak into fiscal 2026.

In the fourth quarter of 2025, the company had revenue of $2.54 billion, up 16% from the previous year. Even bigger was the company’s annualized recurring revenue (ARR) during the quarter, which topped $5.58 billion, up 32% year-over-year.

For the full fiscal year 2025, Palo Alto achieved an operating margin of 28.8%, up 150 basis points from the prior year; its earnings per share (EPS) rose 18% from its fiscal year 2024; and its free cash flow reached $3.51 billion, up 12% from the previous year.

In Palo Alto’s first quarter of fiscal 2026, revenue grew 16% over the first quarter of 2025; its ARR grew by 29% compared to the first quarter of 2025; its operating margin reached 30.2%, 140 basis points higher than the first quarter of 2025; its quarterly EPS grew 19% year-on-year; and its free cash flow grew 17% from the first quarter of 2025.

Palo Alto also increased its cash reserves to just over $3 billion, while its debt stands at just $346 million, down 8.9%. He has the ability to pay off his entire current debt several times over, which is always nice to see.

The company has a target of $20 billion in ARR by the end of the decade. If it keeps growing like this, it should be more than manageable. The company met or exceeded its Q1 2026 guidance (set on October 19, 2025) for total revenue, ARR and diluted EPS.

Palo Alto has more than doubled S&P 500return of the last five years. Despite its 3.8% loss over the past year, if it continues to put up growth numbers like it has been, this drop is likely nothing more than a small speed bump.

The company stays ahead of the game. To counter quantum computing threats (expected to be commercialized in 2029), it has partnered with International business machines to find a solution for post-quantum cryptography.

In an increasingly connected world with cyber threats multiplying daily, Palo Alto has become a leader in the arms race against cybercriminals. Any company with numbers like these is worth a look.

Before you buy stock in Palo Alto Networks, consider this:

The Motley Fool Stock Advisor The team of analysts has just identified what they think they are 10 best stocks because investors are buying now… and Palo Alto Networks was not one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you would have $450,256!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $1,171,666!*

Now, it’s worth noting Stock advisor The total average performance is 942%: A market-crushing outperformance compared to the S&P 500’s 196%. Don’t miss the latest top 10 list, available with Stock advisorand join an investment community created by individual investors for individual investors.

See the 10 actions »

* Stock Advisor returns from February 1, 2026.

James Hires has no position in any of the aforementioned stocks. The Motley Fool has positions in and recommends Chipotle Mexican Grill, International Business Machines and Salesforce. The Motley Fool recommends Comcast and Palo Alto Networks and recommends the following options: March 2026 $42.50 Chipotle Mexican Grill Short Calls. The Motley Fool has one disclosure policy.

This security leader is turning growing cyber threats into recurring revenue was originally published by The Motley Fool

Source link