Recent discussions with Palo Alto Networks Inc’s (NASDAQ:PANW) management highlighted product-level growth drivers, following which "we see clear upside to both revenue and NGS ARR (next-generation security annual recurring revenue) in FY27," according to BTIG.

The Palo Alto Networks Analyst: Analyst Gray Powell reiterated a Buy rating and raised the price target from $404 to $425.

The Palo Alto Networks Thesis: The company should generate pro forma revenue growth of over 17% this year, ahead of Street expectations of 14.6%, Powell said in the note.

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The analyst mentioned the following key takeaways from the discussions with Palo Alto Networks’ management:

  • The products with the highest potential are Chronosphere, CyberArk, and Prisma AIRS.
  • Chronosphere – It has scaled rapidly to cross $500 million in ARR (annual recurring revenues) and seems poised to accelerate further through "cross-sell opportunities within PANW’s 1,000+ XSIAM customer base, expanded GTM reach, and continued adoption among large AI-natives," Powell wrote.
  • CyberArk – Early integration results are encouraging, "with strong cross-sell activity, accelerating ACV growth, and identity emerging as a foundational component of PANW’s AI security strategy," the analyst stated.
  • Prisma AIRS – It is gaining traction as the company expands beyond AI firewall and runtime security "into a more comprehensive platform spanning identity, endpoint security, and observability."

These businesses are drivers of "significant incremental growth," which could drive upside to the company’s NGS ARR in fiscal 2027, he noted.

Powell says Chronosphere could reach ARR of more than $800 million during fiscal 2027, driving upside to Palo Alto Networks’ current outlook for the Cortex line.

ARR from Prisma AIRS could grow from $120 million in the fourth quarter of 2026 to more than $400 million by the end of fiscal 2027, the analyst stated.

Software firewalls and Prisma AIRS are "underappreciated opportunities within Network & AI Security," he further wrote.

PANW Price Action: Shares of Palo Alto Networks had risen by 3.89% to $389.32 at the time of publication on Monday.

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