After an 80% Gain on the Year, Is Palo Alto Networks Stock a Buy on Its Recent Pullback as Revenue Surges?

After sliding to start the year, Palo Alto Networks (NASDAQ: PANW) shares have come roaring back, trading up more than 80% so far in 2026. The cybersecurity stock benefits from the launch of Anthropic's Mythos models, which exposed previously unknown software vulnerabilities. The company said this has led to a shift in the security landscape and that it is just the start.

However, despite a strong recent earnings report and guidance, the stock price fell, as expectations were sky-high following its run-up this year. Let's dig into the company's latest earnings report and prospects to see if the stock's still a buy on this dip.

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Platformization strategy continues to pay off

While it was a bold move at the time, Palo Alto's platformization strategy, where it decided to forgo selling point solutions in favor of offering three cybersecurity platforms, continues to pay dividends. The company saw 220 net new platformization additions in fiscal Q4, double the 110 it saw in the prior quarter. Meanwhile, net revenue retention among these customers surpassed 120%.

Palo Alto said that Mythos has driven platformization demand, as customers are increasingly looking for a unified platform to tackle potential AI threats. Right now, there is a big push among organizations to have real-time defense, which it believes can only be achieved with a unified platform. As such, it sees AI as a significant growth tailwind for both itself and the broader cybersecurity industry.

During the year, the company also bolstered its platform through two large acquisitions to enhance its cybersecurity capabilities. First, it bought real-time data monitoring company Chronosphere, which it closed in January, and then it acquired privileged access company CyberArk. It said both are exceeding early expectations.

The combination of platformization and acquisitions helped drive strong growth for Palo Alto in its fiscal 2026 Q4, ended July 31. Revenue climbed 34% year over year to $3.41 billion, which was above the high end of its previous forecast for revenue of between $3.345 billion and $3.355 billion. Subscription and support revenue jumped by 36% to $2.67 billion, while product revenue rose by 29% to $738 million.

Next-generation security once again fueled Palo Alto's growth, with next-generation security annual recurring revenue (ARR) surging 63% to $9.1 billion. Network and AI security ARR rose 17% to $2.3 billion. Its Cortex Platform ARR rose 25% to $1.9 billion, with XSIAM (extended security intelligence and automation management) ARR surging 70%. Meanwhile, its Idira platform, which consists of its identity security platform from the CyberArk acquisition, contributed ARR of $644 million and was up 21% to $1.26 billion on an adjusted basis.

Adjusted earnings per share (EPS) increased by 7% year over year to $1.02, which was ahead of its guidance of $0.96 to $0.98.

Palo Alto forecasts fiscal 2027 Q1 adjusted EPS of between $0.96 and 0.98, with revenue rising 33% to 34% to between $3.3 billion and $3.31 billion. For the full fiscal year, it sees adjusted EPS coming in between $4.16 and $4.19 on a 23% to 24% climb in revenue to between $14.1 billion and $14.2 billion. It sees its next-gen security ARR rising 22% to 23% to a range of $11.075 billion to $11.175 billion.

Is Palo Alto stock a buy?

Even after the drop in its stock price, Palo Alto stock still trades at a hefty forward price-to-sales ratio (P/S) of 19.5 times fiscal 2027 estimates and a forward price-to-earnings ratio (P/E) of 81 times 2027 estimates. While the company is well-positioned and has some nice tailwinds behind it, that's a hefty price to pay for a company growing its ARR in the low- to mid-20% range, with acquisitions.

As such, I would not be a buyer on this recent dip.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.