Palo Alto’s ARR Growth Cools, But PANW Stock’s Valuation Stays Hot

Palo Alto Networks (PANW) just delivered better-than-expected financial results for its fiscal third quarter of 2025. The cybersecurity leader continues to witness solid demand for its advanced security solutions, particularly in its Next-Generation Security (NGS) segment. However, beneath the top-line strength lies a deceleration in growth, which is a concern.

A key highlight this quarter was the NGS Annualized Recurring Revenue (ARR), which crossed a significant milestone. The company reported $5.09 billion in NGS ARR by the end of Q3, representing a 34% increase year over year. This reflects the ongoing demand for Palo Alto’s offerings, especially Cortex. Notably, the company’s AI ARR alone reached approximately $400 million, more than doubling over the past year and signaling growing traction for its AI offerings.