PANW vs. ZS: Which Cybersecurity Stock Has an Edge Right Now? – July 14, 2026
PANW vs. ZS: Which Cybersecurity Stock Has an Edge Right Now? – July 14, 2026
https://www.zacks.com/stock/news/2953002/panw-vs-zs-which-cybersecurity-stock-has-an-edge-right-now
Publish Date: 2026-07-14 08:23:00
Source Domain: www.zacks.com
Using an unordered list, summarize the following article with between 4 and 8 key points.
Key Takeaways Zscaler is expanding Zero Trust adoption with larger enterprise deals across users, workloads and branches. ZS trades at a much lower forward sales multiple than PANW, offering a more attractive valuation.PANW faces margin pressure from higher integration costs tied to multiple acquisitions.
Palo Alto Networks (PANW Quick QuotePANW – Free Report) and Zscaler (ZS Quick QuoteZS – Free Report) are both at the forefront of the cybersecurity space, playing key roles in guarding organizations from extensive cyberattacks. While PANW focuses broadly on next-generation firewalls, cloud security and AI-driven threat detection, Zscaler is a leader in zero-trust security and specializes in secure access service edge and cloud security.Both PANW and ZS are riding the key industry trends, driven by the mounting incidents of credential theft, remote desktop protocol breaches and social engineering-based strikes by malicious actors. However, from an investment point of view, one stock offers a more favorable outlook than the other right now. Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which stock offers a more compelling investment case.The Case for PANW StockPalo Alto Networks remains a cybersecurity leader, offering solutions for network security, cloud security and endpoint solutions for customers who need full enterprise security support. Its next-generation firewalls and advanced threat detection technologies are widely recognized and adopted globally.Palo Alto Networks’ wide range of innovative products, strong customer base and growing opportunities in areas like Zero Trust, Secure Access Service Edge (SASE) and private 5G security continue to support its long-term growth potential. For example, in the third quarter of fiscal 2026, SASE was Palo Alto Networks’ fastest-growing segment, with SASE Annual recurring revenues (ARR) increasing 40% year over year. PANW’s SASE business is benefiting from strong customer demand for cloud-delivered networking and security solutions as enterprises continue to support hybrid work environments and secure access to cloud applications.However, as a result of back-to-back acquisitions, PANW is incurring high integration-related costs, including onboarding employees, aligning go-to-market teams and integrating systems and operations. Acquisition-related costs in the third quarter of fiscal 2026 amounted to $113 million, a whopping increase from $5 million incurred in the prior quarter. These costs are expected to hurt the company’s profitability before the benefits of synergies from acquisitions are fully realized.Further, PANW’s non-GAAP operating expenses rose to $1.46 billion in the third quarter of fiscal 2026, up from $1.19 billion incurred in the prior quarter. As a percentage of revenues, operating expenses expanded 290 basis points sequentially. As a result, non-GAAP operating income margin contracted 320 basis points on a sequential basis. PANW is incurring rising costs, which could lead to slower operating leverage and warrant some caution about the company’s near-term prospects.The Case for Zscaler StockZscaler is seeing strong adoption of its Zero Trust Everywhere strategy, which is helping the company expand beyond its traditional user security offerings. The strategy combines security for users, cloud workloads and branch locations on a single platform, allowing customers to secure more parts of their IT environment through Zscaler.The company ended the third quarter of fiscal 2026 with more than 700 Zero Trust Everywhere enterprises, up from more than 550 in the previous quarter. Management stated that customers are increasingly looking for security solutions that protect users, workloads and branches together rather than using separate products. This trend should help Zero Trust Everywhere support the rising adoption of Zscaler’s platform.The strategy is also helping Zscaler win larger deals. During the third quarter, the company signed the largest branch deal in its history with a healthcare system that is deploying its Zero Trust Branch solution across 2,000 sites. Zscaler also won a seven-figure deal with a healthcare technology company that adopted Zero Trust Cloud, Zero Trust Branch and four data security modules. In another deal, a large automotive manufacturer expanded its use of Zero Trust Cloud to secure its multi-cloud environment.Management believes demand for Zero Trust Everywhere will continue to increase as enterprises adopt more cloud applications, connected devices and AI technologies. Customers are no longer focused only on securing users. They are also looking to secure workloads, branches and AI environments through a unified platform.Zscaler views this as an important competitive advantage over traditional firewall-based security vendors. As more customers adopt multiple products across the platform, Zero Trust Everywhere could help the company increase customer spending, win larger deals and support long-term growth.How do Earnings Estimates Compare for PANW & ZS?Zscaler has a steady earnings growth outlook compared with Palo Alto Networks.The Zacks Consensus Estimate for PANW’s fiscal 2026 and 2027 EPS is pegged at $3.77 and $4.08, respectively. The estimates for fiscal 2026 and 2027 have been revised up by 6 cents and 8 cents, respectively, over the past 60 days.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for Zscaler’s fiscal 2026 and 2027 EPS is pinned at $4.14 and $4.57, respectively. The estimates for fiscal 2026 and 2027 have been revised upward by 13 cents and 3 cents, respectively, over the past 60 days.Image Source: Zacks Investment ResearchPANW vs. ZS: Price Performance and ValuationYear to date, shares of PANW have surged 79.2%, while ZS shares have plunged 36.9%.PANW Vs. ZS: YTD Price Return PerformanceImage Source: Zacks Investment ResearchCurrently, ZS is trading at a forward sales multiple of 5.92X, significantly lower than Palo Alto Networks’ forward sales multiple of 19.79X. Zscaler’s reasonable valuation makes it more attractive for investors looking for value and stability.PANW vs. ZS: Forward 12-Month P/S RatioImage Source: Zacks Investment ResearchConclusion: ZS Has an Edge Over PANWBoth Palo Alto Networks and Zscaler are key players in the cybersecurity space, but their near-term outlooks are quite different. Palo Alto Networks faces near-term risks from rising integration costs due to large acquisitions, which are hurting the company’s margins.In contrast, Zscaler shows steadier execution, where the company is witnessing strong adoption of its security products. Further, ZS’ reasonable valuation offers some downside protection as well, giving ZS a clear edge over PANW for investors seeking exposure to cybersecurity growth at a fair price.Zscaler and Palo Alto Networks carry a Zacks Rank #3 (Hold) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
