Scotiabank has revised down its twelve-month price target on Palo Alto Networks (NASDAQ: PANW) to $180 from $228, while preserving a Sector Outperform rating. The new target sits between the analyst low of $157 and high of $265, and comes as the stock trades at a price-to-earnings multiple of 103.2, according to InvestingPro data.
Analyst Patrick Colville reaffirmed the buy recommendation following Palo Alto Networks' second-quarter fiscal 2026 results, keeping largely the same organic outlook for the full fiscal year. Colville noted that the company's latest quarterly performance did not produce fresh upward organic momentum, and he views that lack of acceleration as a factor weighing on investor sentiment and the share price.
On a trailing-twelve-month basis, Palo Alto Networks reported 15.3% revenue growth, taking revenue to $9.56 billion. The firm also generated $3.69 billion of free cash flow over the same period and carried a market capitalization of $114 billion. Scotiabank highlighted the company's moderate leverage position, with a debt-to-equity ratio of 0.05, which supports financial flexibility for its strategic transactions.
Several acquisitions are being integrated into Palo Alto Networks' business mix, including CyberArk and Chronosphere, together with a tuck-in deal for Koi. Scotiabank said investor feedback gathered on calls suggests some market participants perceive the company's expanding footprint as complex, which could suppress interest from new investors despite underlying strengths.
The bank continues to view Palo Alto Networks as one of the stronger mid- to long-term software stories, pointing to a sticky core business and advantageous positioning in fast-growing cybersecurity segments. InvestingPro metrics bolster that view, showing robust five-year returns and a Financial Health score categorized as "GOOD," with particularly strong growth indicators.
Scotiabank also flagged the company's potential to capture AI-related security spending. The analyst emphasized resources available for investment in AI-enabled security products, citing more than 130,000 employees and the company’s recent free cash flow generation as enabling factors for further innovation in AI security initiatives.
The second-quarter fiscal 2026 report included about 15% organic growth and a roughly $14 million revenue beat, aided by strong hardware firewall sales. Management also disclosed recent and planned acquisitions in the quarter's results, including Chronosphere and CyberArk. In addition, Palo Alto Networks announced its intent to acquire Koi, a firm focused on Agentic Endpoint Security. That acquisition is expected to integrate with the company’s Prisma AIRS platform and to enhance the Cortex XDR endpoint security solution.
Market analysts have adjusted their valuations in response to the company's performance and deal activity. Bernstein SocGen Group lowered its price target to $209 while maintaining an Outperform rating, and Morgan Stanley set a new target of $223, keeping an Overweight stance. Those moves reflect a range of views within the analyst community that balance confidence in long-term positioning with near-term execution and integration risks.
Beyond M&A and product roadmap updates, Palo Alto Networks introduced the Unit 42 Managed XSIAM 2.0 service, a managed security operations center offering that comes with a Breach Response Guarantee. That product is positioned to address a well-documented cybersecurity talent shortage by providing outsourced detection and response capabilities backed by contractual assurances.
Scotiabank’s target adjustment and the commentary from other brokerages underline the market’s balancing act: investors and analysts recognize the company’s solid growth and cash generation, but are also parsing the implications of multiple acquisitions and a more complex go-to-market and product set. The bank’s lowered target reflects these dynamics while its Sector Outperform rating and the broader analyst community’s retained optimistic stances point to confidence in Palo Alto Networks’ medium- to long-term prospects.
Analyst note: The observations and figures in this report reflect statements by Scotiabank and other analysts, and InvestingPro data as described by the reporting on the company’s financial results and strategic developments.