PANW
Palo Alto Networks IncNasdaqValuation snapshot
Above bull casePrice is above even the bull case.
Price as of Aug 17, 2026 · Valuation Aug 13, 2026
What drives PANW's base case?
base-case thesisPalo Alto guided full-year sales to about $11.4 billion, up 24%, and last quarter's revenue was up 31% — though $388 million of that came from newly acquired CyberArk and Chronosphere, meaning the rest of the business grew about 14%. Because CyberArk only joined in February, next year still gets a large mechanical lift as a full year of those sales is counted, before growth settles back toward the underlying low-teens pace. On profits, the company actually reported a loss last quarter due to deal accounting, but management says it is ahead of schedule on integration and still expects to turn 40 cents of every sales dollar into cash by 2028. This case assumes that promise is broadly met, giving a business that grows steadily and becomes meaningfully more profitable than it looks today.
What shapes the assumptions
Full-year effect of the CyberArk acquisition on reported revenue
$388M of Q3 FY26 revenue from CyberArk/Chronosphere against a deal that closed February 11, 2026
Raises revenue growth
Contracted backlog gives revenue visibility
Remaining performance obligation up 36% to $18.4B, FY26 RPO guided to $20.9–$21.0B
Raises revenue growth
Management's reaffirmed FY28 cash-margin goal
40% adjusted free cash flow margin target for FY28
Raises operating margin
Ongoing tuck-in acquisitions to extend the platform
CyberArk, Chronosphere and Koi Security all acquired within FY26
Raises reinvestment
Underlying growth already decelerating pre-acquisition
Annual revenue growth of 16.5% in FY24 and 14.9% in FY25, down from 25.3% in FY23
Lowers terminal growth
Each driver links a business metric to the forecast assumption it shapes — the basis for this case, not investment advice.
Why the gap?
The market is pricing this as if revenue grows 88.5% a year. Over the last 5 years it grew 21.6% a year — so the price assumes far more than it has delivered.
What else could explain it?›
- How confident is this estimate?
- Robustness 45.0/10 (Moderate) — some of any gap is our own uncertainty rather than disagreement.
- What would change the answer?
- Which assumption this valuation swings on, and by how much.
- Share count is still growing
- Diluted shares grew 13.3% year on year. This valuation uses today's share count, not tomorrow's — continued dilution would spread the same value across more shares.
Many combinations of assumptions reproduce the same price. These are ways to read what the market might be expecting, not the market's actual view. How this is worked out
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
View details
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
Three independently researched cases generated automatically from published financials. Every assumption is justified and cited; the discount rate is computed from researched market inputs.
Base inputs from financials
source period →Base revenue (TTM)
$10.6B
Diluted shares
801,000,000
Net cash
—
Bear
medium confidence$16.03
IV / share
-95.8% vs $384.27
- Explicit cash flows
- $4.52
- Terminal value
- $11.50
- Net cash
- $0.00
- Intrinsic value / share
- $16.03
71.8% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth19.0% → 10.5% → 8.5% → 7.0% → 5.5%medium
How derived: Stripping the $388M of CyberArk/Chronosphere revenue out of Q3 FY26's $3.002B leaves ~$2.614B versus $2.289B a year earlier — roughly 14% organic growth, below FY25's 15% and well below the 31% headline — so the bear case assumes the acquisition carryover into the TTM base lifts year 1 to ~19% and then organic growth decays through the low teens into the mid single digits as the firewall refresh cycle fades and Fortinet, Check Point and Microsoft compress pricing on the bundled platform.
Why this confidence: Organic growth rate is computable directly from disclosed acquisition revenue ↑, Five-year horizon for a company mid-way through a $25B integration ↓, Company does not separately guide organic vs. acquired revenue ↓
Evidence for
- Excluding the $388M contributed by CyberArk and Chronosphere, Q3 FY26 revenue of $3.002B implies roughly 14% organic year-over-year growth, i.e. the 31% headline is largely acquired.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
- Reported annual revenue growth has decelerated every year since FY22: 29.3% (FY22), 25.3% (FY23), 16.5% (FY24), 14.9% (FY25), consistent with a maturing core business.[PANW historical annual revenue (company filings)]· primary
- Palo Alto competes in a crowded next-generation firewall market where Fortinet, Check Point and Cisco are also positioned as leaders, limiting pricing power in the hardware-attached base.[Hardware Firewall Market Outlook 2026-2031]· secondary
Evidence against
- Management raised FY26 revenue guidance to $11.415–$11.425B (24% growth) and guided Q4 to 32% growth, faster than this case's path implies.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
- Remaining performance obligation grew 36% to $18.4B, a contracted backlog that underpins revenue for several years regardless of near-term bookings softness.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
Operating margin14.0%medium
How derived: Q3 FY26 GAAP operating margin was -6.1% because purchase accounting from CyberArk swamped the 21.3% non-GAAP margin, and since stock-based compensation is a real cost that non-GAAP excludes, the bear case starts from a stock-comp-burdened, purchase-amortization-excluded margin of roughly 9% today and lets it improve only to 14% by year five, assuming integration costs linger and CyberArk's lower-scale cost base dilutes the consolidated margin longer than management expects.
Why this confidence: Both GAAP and non-GAAP margins are directly reported each quarter ↑, Purchase-accounting distortion makes the true underlying margin hard to isolate mid-integration ↓, Judgment call on how fast stock-based compensation falls as a share of revenue ↓
Evidence for
- Q3 FY26 GAAP operating margin was -6.1%, down from +9.6% in the year-ago quarter, as acquisition-related amortization and charges hit the income statement.[PANW Q3 FY2026 Form 10-Q]· primary
- Non-GAAP operating margin was 21.3% in Q3 FY26, flat versus Q3 FY25 — no year-over-year operating leverage despite 31% revenue growth.[PANW Q3 FY2026 earnings call transcript]· secondary
Evidence against
- Management said synergy capture and profitability convergence at CyberArk are running three to six months ahead of schedule, supporting margins earlier than planned.[PANW Q3 FY2026 earnings call transcript]· secondary
- The company reaffirmed a 40% adjusted free cash flow margin target for FY28, well above the profitability this case assumes.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
Tax rate24.0%medium
How derived: Palo Alto has used a 22% long-run non-GAAP effective tax rate, but the bear case uses 24% — slightly above it and near the blended U.S. federal-plus-state statutory marginal rate — because a lower share price shrinks the stock-based-compensation windfall deduction and the acquired Israeli CyberArk structure faces rising global minimum-tax floors.
Why this confidence: Anchored to a published statutory rate and the company's own stated non-GAAP convention ↑, Post-acquisition legal-entity structure and its jurisdictional mix are not yet disclosed in detail ↓
Evidence for
- The U.S. federal statutory corporate rate is 21%, and adding state taxes plus foreign jurisdictions puts a mature marginal rate in the low-to-mid 20s.[IRS Instructions for Form 1120]· primary
- PANW's reported tax provision is volatile because of acquisition accounting and discrete items, so a normalized statutory-anchored rate is the appropriate long-run input.[PANW Q3 FY2026 Form 10-Q]· primary
Evidence against
- Palo Alto's own non-GAAP model has assumed a 22% effective tax rate, below the 24% used here.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
Reinvestment rate40.0%medium
How derived: Palo Alto's growth has come substantially from bought capability rather than internally built product — $25B for CyberArk plus Chronosphere and Koi Security inside a single fiscal year — so even though physical capex is only a couple of percent of revenue, the bear case reinvests 40% of after-tax operating profit because staying current on identity, AI security and observability requires continuous acquisition spend that gets larger as the company gets larger.
Why this confidence: Acquisition spending is disclosed and unusually large relative to operating profit ↑, Future M&A cadence is inherently unforecastable ↓, Stock-funded deals blur the cash reinvestment figure ↓
Evidence for
- Palo Alto paid roughly $25B for CyberArk ($45.00 cash plus 2.2005 PANW shares per share), closing February 11, 2026 — an enormous reinvestment relative to its own operating profit.[PANW completes CyberArk acquisition]· primary
- Q3 FY26 revenue included contributions from three separate acquisitions (CyberArk, Chronosphere and Koi Security), evidencing an ongoing acquisition-led expansion strategy.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
Evidence against
- The cash portion of the CyberArk consideration was only $2.3 billion and was funded from cash on hand, with the rest paid in stock — so the recurring cash reinvestment burden is smaller than the headline price suggests.[PANW completes CyberArk acquisition]· primary
- A 40% adjusted free cash flow margin target for FY28 implies management expects cash conversion to be high, not consumed by reinvestment.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
Terminal growth1.9%medium
How derived: A perpetual growth rate cannot exceed the long-run growth of the economy, and in this case the bear view assumes Palo Alto's platform eventually behaves like mature infrastructure software facing open-source and hyperscaler-bundled substitutes, so terminal growth is set at 1.9% — below expected long-run nominal GDP and far below the 4.68% risk-free rate.
Why this confidence: Bounded above by an observable Treasury yield ↑, Perpetuity assumptions are unverifiable by construction ↓
Evidence for
- The 10-year Treasury yield of about 4.68% sets a hard ceiling on a defensible perpetual nominal growth rate; 1.9% sits comfortably below it.[10-Year Treasury Constant Maturity Rate (FRED DGS10)]· primary
- Reported revenue growth has already halved from 29.3% in FY22 to 14.9% in FY25, showing the natural fade toward economy-like growth.[PANW historical annual revenue (company filings)]· primary
Evidence against
- Cybersecurity end-market forecasts call for roughly 10% annual growth over 2026-2031, above a 1.9% perpetuity assumption.[Hardware Firewall Market Outlook 2026-2031]· secondary
Base
medium confidence$38.20
IV / share
-90.1% vs $384.27
- Explicit cash flows
- $9.43
- Terminal value
- $28.77
- Net cash
- $0.00
- Intrinsic value / share
- $38.20
75.3% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth25.0% → 16.5% → 14.0% → 12.0% → 10.5%high
How derived: The TTM base of $10.61B contains only about two and a half months of CyberArk, so year one carries both the ~14% organic rate implied by backing $388M of acquired revenue out of Q3 and roughly a full extra year of CyberArk/Chronosphere annualization — together about 25% — after which the path fades toward the low teens as the acquisition carryover disappears and only organic platform growth remains.
Why this confidence: Explicit management revenue guidance for FY26 and Q4 FY26 ↑, $18.4B contracted RPO underpins near-term revenue ↑, Years three through five extend well past any guided period ↓
Evidence for
- Management raised FY26 revenue guidance to $11.415–$11.425B, 24% growth, and guided Q4 FY26 revenue to $3.345–$3.355B, 32% growth.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
- Remaining performance obligation grew 36% year over year to $18.4B, and FY26 RPO guidance was raised to $20.9–$21.0B, giving multi-year revenue visibility.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
- CyberArk closed on February 11, 2026, meaning the trailing-twelve-month revenue base captures only a partial year of the acquired business and mechanically inflates next year's reported growth.[PANW completes CyberArk acquisition]· primary
Evidence against
- Organic growth excluding acquisitions was roughly 14% in Q3 FY26, essentially flat versus FY25's 14.9%, suggesting the core business is not accelerating on its own.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
- FY24 and FY25 growth of 16.5% and 14.9% was well below the mid-20s pace of FY22-FY23, showing the pre-acquisition trend was decelerating.[PANW historical annual revenue (company filings)]· primary
Operating margin21.0%medium
How derived: Non-GAAP operating margin is 21.3% today but excludes stock-based compensation running roughly 12-13% of revenue, so the honest current margin is closer to 9%; the base case takes management's reaffirmed 40% FY28 adjusted free cash flow margin as evidence of real operating leverage and lands at 21% by year five, assuming non-GAAP margin climbs toward the high 20s while stock compensation falls toward 8-9% of a much larger revenue base.
Why this confidence: Explicit long-term FY28 free cash flow margin target reaffirmed by management ↑, Pre-acquisition quarters demonstrate high-teens GAAP margin capability ↑, Requires a judgment on the pace of stock-based compensation decline ↓
Evidence for
- Management stated it is 'executing ahead of our M&A integration plans and improving profitability across our businesses,' keeping it on track for a 40% adjusted free cash flow margin in FY28.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
- Quarterly GAAP operating margin reached 19.6% in Q4 FY25 before the CyberArk deal closed, showing the pre-acquisition business could already produce high-teens reported profitability.[PANW Q4 FY2025 earnings release (8-K Ex-99.1)]· primary
- Synergy capture and profitability convergence at CyberArk are running three to six months ahead of schedule per management commentary on the Q3 FY26 call.[PANW Q3 FY2026 earnings call transcript]· secondary
Evidence against
- Non-GAAP operating margin of 21.3% in Q3 FY26 was flat versus the prior-year quarter, showing no operating leverage yet despite 31% revenue growth.[PANW Q3 FY2026 earnings call transcript]· secondary
- Q3 FY26 GAAP operating margin was -6.1%, so a 21% target requires roughly 27 points of improvement from the last reported quarter.[PANW Q3 FY2026 Form 10-Q]· primary
Tax rate22.0%medium
How derived: Palo Alto's own normalized planning rate for non-GAAP results has been 22%, sitting just above the 21% U.S. federal statutory rate once state taxes are added and net of the lower Israeli rates on the acquired CyberArk operations, so the base case adopts that figure as the steady-state cash tax rate.
Why this confidence: Anchored to a published statutory rate and the company's own non-GAAP convention ↑, Post-CyberArk jurisdictional mix not yet fully disclosed ↓
Evidence for
- The U.S. federal statutory corporate income tax rate is 21%, making a 22% blended rate a natural normalized anchor for a U.S.-domiciled filer with mixed foreign income.[IRS Instructions for Form 1120]· primary
- Palo Alto's reported tax provision reflects acquisition-related discrete items that make the GAAP effective rate unrepresentative of steady-state cash taxes.[PANW Q3 FY2026 Form 10-Q]· primary
Evidence against
- Large deferred tax assets and stock-compensation deductions can keep cash taxes below the book rate for several years, making 22% too high near term.[PANW Q3 FY2026 Form 10-Q]· primary
Reinvestment rate30.0%medium
How derived: Physical capital intensity is low for a software-and-appliance company, but Palo Alto has bought its way into identity (CyberArk), observability (Chronosphere) and AI security (Koi Security) within a single fiscal year, so the base case reinvests 30% of after-tax operating profit — enough to fund the tuck-in acquisitions and R&D that sustain a low-teens organic growth rate, but below the outsized pace of the CyberArk year.
Why this confidence: Acquisition history and deal terms are disclosed in company press releases and filings ↑, Future M&A pace and price cannot be forecast reliably ↓, Stock-funded consideration obscures the true cash reinvestment rate ↓
Evidence for
- Q3 FY26 revenue included contributions from CyberArk, Chronosphere and Koi Security — three acquisitions closed inside one fiscal year — indicating an ongoing acquisition-funded growth model.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
- Management built its M&A strategy and FY30 target around converting single-product customers into multi-product platform customers, which requires continued product-portfolio investment.[PANW outlines $20B ARR target by FY30]· secondary
Evidence against
- Only $2.3 billion of the CyberArk consideration was cash, funded from cash on hand, with 112 million shares making up the rest — so recurring cash reinvestment needs are lower than the deal headline implies.[PANW completes CyberArk acquisition]· primary
- A reaffirmed 40% adjusted free cash flow margin target for FY28 implies most operating profit converts to free cash rather than being reinvested.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
Terminal growth2.5%medium
How derived: Beyond year five no company can outgrow the economy forever, so terminal growth is set at 2.5% — roughly long-run U.S. nominal GDP growth and comfortably below the 4.68% risk-free rate — reflecting a Palo Alto that ends up a mature, embedded security platform growing slightly faster than inflation.
Why this confidence: Bounded above by an observable Treasury yield and published CBO long-run projections ↑, Perpetuity assumptions can never be directly verified ↓
Evidence for
- The 10-year Treasury yield of about 4.68% caps a defensible perpetual nominal growth rate well above 2.5%.[10-Year Treasury Constant Maturity Rate (FRED DGS10)]· primary
- CBO projects long-run U.S. real growth near 2% with roughly 2% inflation, framing a low-to-mid single-digit nominal ceiling for any mature business.[CBO Long-Term Budget Outlook]· primary
Evidence against
- The enterprise firewall and broader security market is forecast to compound at roughly 10% annually through 2031, above a 2.5% perpetuity rate.[Hardware Firewall Market Outlook 2026-2031]· secondary
Bull
low confidence$71.53
IV / share
-81.4% vs $384.27
- Explicit cash flows
- $15.70
- Terminal value
- $55.83
- Net cash
- $0.00
- Intrinsic value / share
- $71.53
78.1% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth29.0% → 22.5% → 19.0% → 16.5% → 14.5%medium
How derived: Management has publicly targeted $20B of Next-Generation Security ARR by FY30 against $8.13B today — roughly a 25% compound rate on the fastest-growing part of the business — so the bull case assumes platformization converts enough single-product customers into multi-product ones that consolidated revenue compounds in the high teens after the year-one acquisition annualization, rather than fading to the low teens.
Why this confidence: Company-published FY30 ARR target and current ARR growth of 60% ↑, A five-year target restated upward twice is itself an aggressive assumption ↓, Requires organic growth to accelerate above its recent 14-15% trend ↓
Evidence for
- Next-Generation Security ARR grew 60% year over year to $8.13B in Q3 FY26, with FY26 guidance raised to $8.90–$8.95B.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
- Palo Alto raised its long-term target to $20B of NGS ARR by FY30, underpinned by a goal of 4,000 platformized customers versus 2,280 today.[PANW outlines $20B ARR target by FY30]· secondary
- Q4 FY26 revenue guidance of $3.345–$3.355B implies 32% year-over-year growth, an acceleration versus the 15-16% quarterly rates throughout FY25.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
Evidence against
- Organic growth excluding acquired revenue was only about 14% in Q3 FY26, and every FY25 quarter grew 14-16%, so sustained high-teens organic compounding would be a break from trend.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
- Of the 110 net new platformizations in Q3 FY26, 20 came from CyberArk and Chronosphere, meaning part of the platformization progress is acquired rather than organically won.[PANW Q3 FY2026 earnings call transcript]· secondary
Operating margin27.0%medium
How derived: If management hits the reaffirmed 40% adjusted free cash flow margin in FY28 and keeps the operating leverage running past it, the current 21.3% non-GAAP operating margin can reach the mid-30s on a much larger revenue base, which after charging stock-based compensation as a genuine expense (falling toward 7-8% of revenue at scale) leaves a 27% economic operating margin by year five.
Why this confidence: Explicit, reaffirmed FY28 cash-margin target from management ↑, Ahead-of-schedule synergy commentary on the earnings call ↑, Requires a large gap versus the currently reported GAAP margin to close ↓
Evidence for
- Management said it is executing ahead of its M&A integration plans and improving profitability across its businesses, keeping it on track for a 40% adjusted free cash flow margin in FY28.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
- Synergy capture and profitability convergence at CyberArk are running three to six months ahead of schedule, supporting margins earlier than planned.[PANW Q3 FY2026 earnings call transcript]· secondary
- The pre-acquisition business already produced a 19.6% GAAP operating margin in Q4 FY25, demonstrating structural profitability once purchase accounting is excluded.[PANW Q4 FY2025 earnings release (8-K Ex-99.1)]· primary
Evidence against
- Non-GAAP operating margin was flat at 21.3% year over year in Q3 FY26, so the expansion this case requires has not begun to show up.[PANW Q3 FY2026 earnings call transcript]· secondary
- The most recently reported GAAP operating margin was -6.1%, more than 33 points below this case's target.[PANW Q3 FY2026 Form 10-Q]· primary
Tax rate20.0%low
How derived: Starting from the 22% long-run rate Palo Alto uses in its own non-GAAP model, the bull case shaves it to 20% because a growing share of profit sits in CyberArk's Israeli operations, which qualify for preferred technology enterprise rates below the U.S. statutory 21%, and because a rising share price enlarges the stock-compensation windfall deduction.
Why this confidence: Post-acquisition jurisdictional profit mix is not yet disclosed ↓, Global minimum-tax rules create policy risk against a sub-statutory rate ↓, Anchored to the company's own published non-GAAP rate as a starting point ↑
Evidence for
- CyberArk is an Israeli-domiciled company whose operations were acquired on February 11, 2026, adding a jurisdiction with technology-company tax incentives below the 21% U.S. federal rate.[PANW completes CyberArk acquisition]· primary
Evidence against
- The U.S. federal statutory rate alone is 21%, so a 20% blended effective rate requires meaningful and sustained foreign-rate benefit that global minimum-tax rules increasingly limit.[IRS Instructions for Form 1120]· primary
- Palo Alto's own non-GAAP planning rate has been 22%, above the 20% assumed here.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
Reinvestment rate22.0%medium
How derived: Because the CyberArk deal was funded with only $2.3 billion of cash on hand plus 112 million shares, and because a subscription software platform needs little physical capital, the bull case assumes Palo Alto can sustain high-teens growth while reinvesting just 22% of after-tax operating profit — the platformization flywheel selling more modules into an existing 2,280-customer platform base rather than buying each new dollar of revenue.
Why this confidence: Deal consideration structure is disclosed precisely ↑, Subscription software has low physical capital intensity ↑, Future M&A cadence is unforecastable and could exceed this level ↓
Evidence for
- The cash portion of the $25B CyberArk consideration was only $2.3 billion, funded from cash on hand, with 112 million shares making up the balance.[PANW completes CyberArk acquisition]· primary
- A reaffirmed 40% adjusted free cash flow margin target for FY28 implies most operating profit converts to free cash rather than being consumed by reinvestment.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
- Selling additional modules into 2,280 existing platformized customers requires less incremental capital than winning new logos.[PANW outlines $20B ARR target by FY30]· secondary
Evidence against
- Palo Alto closed three acquisitions inside FY26 (CyberArk, Chronosphere, Koi Security), suggesting reinvestment needs are structurally higher than an organic-only software model implies.[PANW Q3 FY2026 earnings release (8-K Ex-99.1)]· primary
- Management explicitly built its FY30 target around an M&A strategy, implying continued large capital deployment.[PANW outlines $20B ARR target by FY30]· secondary
Terminal growth3.0%medium
How derived: Terminal growth is set at 3.0% — above long-run nominal GDP but still well under the 4.68% risk-free rate — on the view that security spending structurally outgrows the wider economy and that a company with 120% net retention and an embedded platform keeps a small permanent edge over GDP.
Why this confidence: Capped below the observable 4.68% risk-free rate ↑, Assumes permanent outgrowth of GDP, which is theoretically fragile ↓
Evidence for
- The enterprise firewall market alone is projected to compound at about 10.5% annually from 2026 to 2031, faster than the overall economy.[Hardware Firewall Market Outlook 2026-2031]· secondary
- Palo Alto reports roughly 120% net retention, meaning existing customers spend more each year without new-logo wins.[PANW Q3 FY2026 earnings call transcript]· secondary
Evidence against
- CBO's long-run projections imply roughly 2% real U.S. growth, so 3% perpetual nominal growth assumes Palo Alto permanently outpaces the economy — an assumption no company can sustain indefinitely.[CBO Long-Term Budget Outlook]· primary
Valuation robustness
reliability of the estimate, not a stock rating45 / 100 · Moderate
Formula v1.0.0. Higher means a more reliable estimate — not a recommendation.
Quality checks
Automated model-risk flags — warnings, not recommendations.
- 75% of the intrinsic value rests on the terminal value — a small change to terminal growth moves the valuation a lot.→ terminal growth
- Diluted share count grew 13% year over year, which reduces per-share participation in business growth.→ per-share economics
Per-share economics
Business growth after changes in the diluted share count.
| Period | Revenue growth | FCF/share | FCF/share growth | Shares | Share growth |
|---|---|---|---|---|---|
| Q1 2025 | 13.9% | 2.07 | -51.4% | 709M | 102.7% |
| Q2 2025 | 14.3% | 0.72 | -21.6% | 709M | -0.8% |
| Q3 2025 | 15.3% | 0.79 | 14.3% | 707M | -0.3% |
| Q1 2026 | 15.7% | 2.38 | 15.1% | 709M | 0.0% |
| Q2 2026 | 14.9% | 0.54 | -24.8% | 711M | 0.3% |
| Q3 2026 | 31.1% | 0.98 | 24.2% | 801M | 13.3% |
Valuation history every run
Why intrinsic value changed
Sequential deterministic bridge · order-dependent contributions · exactly reconciled
Market inputs researched
The 10-year Treasury constant maturity yield stood at approximately 4.68% on August 12, 2026, and this nominal long-bond rate is the standard risk-free anchor for a USD-denominated DCF whose cash flows extend into perpetuity.
Published estimates for PANW's beta diverge by measurement window and return frequency — 1.29 from TradingView versus 0.89 on Yahoo Finance's 5-year monthly basis — so 1.15 is used as a midpoint tilted modestly above 1.0 to reflect that a high-multiple software issuer mid-way through a $25B acquisition integration carries above-market systematic risk.
Damodaran's forward-looking implied equity risk premium — backed out of current index prices and expected cash flows rather than measured from history — was 4.23% over the U.S. Treasury bond rate at the start of 2026, and a forward-looking premium is the internally consistent partner to a current spot risk-free rate.
PANW traded at $382.91 on August 12, 2026, within an intraday range of $376.33 to $386.57, and the latest close is the correct market reference against which a per-share intrinsic value is compared.
Palo Alto's only material borrowings are CyberArk's assumed 0.00% convertible senior notes due 2030, whose coupon understates economic cost, so the pre-tax cost of debt is built up as the 4.68% 10-year Treasury yield plus roughly 85 basis points of investment-grade corporate spread implied by the ICE BofA Single-A US Corporate Index, giving about 5.5%.
Generated 8/13/2026, 11:10:29 AM · pipeline v1.1.0