In short: Bernstein downgrade (39:44) — "not really a fundamental story, but more about maybe some crowding in that group." The committee stays constructive on cyber overall.
In short: The third doubled cyber name in Brown's "built in winners." Named with CrowdStrike and Fortinet: "all three of these stocks have doubled this year." Wapner notes Link also "really doesn't stop talking about the need for cyber."
In short: A house preference, confirmed by an outside list and a conference. On the Morgan Stanley non-AI picks: "Palo Alto, which we also like, is on the list." From the Goldman TMT conference: "cybersecurity again stood out as one of the most direct AI beneficiaries… Palo Alto's CEO also said that the AI security industry has not even been built yet. The market cap of the two [with CrowdStrike] is circa 490 billion versus AI companies in the trillions." The argument for why AI does not eat the category: "a multi-modal AI strategy is essential as different models, including Mythos, OpenAI and others, uncover different vulnerabilities and blind spots… while AI is highly effective for mainstream security tasks, it struggles with edge cases and contextual understanding, which is why you still need these cybersecurity companies."
Palo Alto Networks sells cybersecurity — firewalls, cloud security and tools to detect attacks. Singh says the house likes it, and it also appears on Morgan Stanley's list of favoured stocks that are not directly artificial-intelligence plays.
The argument from this month's Goldman Sachs technology conference is that AI makes security more necessary, not less. AI writes code faster, and every AI agent a company deploys is another identity that can be hijacked. AI tools can find software vulnerabilities much faster than people, but different AI models spot different weaknesses and still struggle with unusual situations — so companies need a security platform that combines several models and human judgement. Palo Alto's chief executive put it as "the AI security industry has not even been built yet," and the two leading security companies together are worth about $490 billion against AI companies valued in the trillions.
Full passage: premium transcript (PDF).
In short: The follow-through on Wednesday's 10½% single-day collapse: it did not bounce. Wapner: "Palo Alto down about 10% this week. It's not like their report was bad." That is the entire mention — and its brevity is the point. Terranova's warning on the day of the print was that full positioning would take time to work off and that this was "not a one day event"; two sessions later the weekly number confirms the drawdown persisted, with no member offering a bid.
Palo Alto is the largest cybersecurity company. Two sessions ago it reported record results and fell 10.5% in a day; here the only update is that the weekly loss is still about 10% — it did not bounce.
That confirmation matters more than a fresh opinion would. On the day of the print, the reading offered on this desk was that positioning was full and the unwind "will get worked off over the course of time," not in one session. A stock that stays down all week after a record quarter is the evidence for that view rather than against it, and nobody stepped up with a bid.
In short: The day's biggest single-stock event, and the direct sequel to the prior session's page (where Link expected "a great quarter" and Terranova warned the stock tends to fall post-earnings). It fell: "as of mid morning, the stock was on pace for its worst day in a couple years… down 10½ percent." Terranova, who holds it, does not spin it: "we highlighted that over the last several quarters, Palo Alto does not respond to good earnings… you go into this quarter, you get now record earnings, a quarter that they have never had before. It's historic — and it's evidence to how difficult this art of investing actually is. If you're relying purely on fundamentals, then this quarter would tell you that all the cybersecurity names should move higher. But there's more to it than that… you have to look at positioning, you have to look at sentiment." His conclusion is a duration warning, not a sale: "positioning is full and the expectations could not be exceeded no matter how well they actually performed… I don't think it's a one day event either… I'm going to sit long and painfully watch it." (It is still up 82% year to date, and down 12% in three months.) Weiss is the outright bear: "these stocks are very expensive — there's no way you can justify the valuation," and the moat is being attacked from above — "more announcements from OpenAI, from Alphabet, from Anthropic about their cyber tools… it's smelling a little bit like we saw with software… the competitive landscape's changed here as well."
Palo Alto is the largest cybersecurity company. It reported record results — a quarter, in Terranova's words, "they have never had before" — and the stock fell 10.5%, its worst day in about two and a half years, dragging CrowdStrike, Okta, Fortinet and Datadog down with it.
The explanation is positioning, and it is the single most useful idea on the page. A stock's price already contains what people expect. When everyone who wants to own a name already owns it — "positioning is full" — there is nobody left to buy on good news, and the only people who can act are sellers. So a genuinely excellent quarter produces a fall, and no amount of fundamental analysis would have predicted it, because the fundamentals were never the variable.
Two things follow. First, Terranova's honesty about duration: he holds the stock, he is not selling, and he expects this to take time — "I don't think it's a one day event either… I'm going to sit long and painfully watch it." Crowding unwinds over weeks, not sessions. Second, Weiss's separate and more serious charge: the AI labs themselves are now shipping security tools, so the competitive position — not just the positioning — may have changed, against valuations he thinks are indefensible either way.
In short: Reports after the bell (CEO Nikesh Arora on Mad Money), and the stock is down 6% on the day. Stephanie Link trimmed last week purely on size and run — "it's up 145% since the April low… it got to be a 6% position in my portfolio" — but the fundamental call is strongly positive: "I think it's going to be a great quarter. RPO is probably something like 33% growth, product revenues — the whisper number is 20 to 22%. You're going to see firewall strength… software firewalls do well… market share growth, total revenue growth of 32%, margin expansion… and I think guide is going to be too, especially since you're going to have M&A synergies." Her only reservation is "valuation and the fact that it's run up so much," and she is explicit she "would buy it back if it's down a lot… I do believe in the long term theme." Terranova confirms the fundamentals and warns on the reaction: "record quarter… you now have 11 straight quarterly revenue beats. The stock does not react well post earnings — if you go back over the last year, the stock tends to fall post earnings. So be prepared for that. Thematically, there's still fundamental strength surrounding the cybersecurity names. I wouldn't step away from that."
Palo Alto is the largest pure cybersecurity company, and it reports after the close. Link expects a strong quarter — she is looking for total revenue up 32%, margins expanding, and remaining performance obligations (contracted revenue not yet recognised, i.e. the visible future book) growing about 33% against a market whisper of 20–22%.
She trimmed the position last week, and it is important to hear why: not because she went off the company, but because after a 145% run from the April low it had become 6% of her portfolio — too large a share of one name. She says explicitly she would buy it back on a big drop.
Terranova supplies the useful pattern for anyone holding into the print: this company has beaten revenue expectations eleven quarters in a row and the stock has still tended to fall after earnings. Good results and a good stock reaction are different things, and expecting the second because you are confident of the first is how holders get surprised.
In short: Reports tomorrow, and Terranova expects the sector pattern to hold: "I think Palo Alto continues the trend that we are seeing. We saw it last week with CrowdStrike, we see it with Okta as well… cybersecurity — the trend is resilient. The positioning there is being rewarded for staying anchored. If you move away, which in past years I have done, you are punished for that aggressively — very difficult to get back in again." And the downside is a buy: "I would expect Palo Alto to deliver. If in fact they don't, I think the buyers show up aggressively on any correction." Wapner adds the M&A wrinkle — reporting that CEO Nikesh Arora had considered doing deals in the space.
Palo Alto is one of the biggest cybersecurity companies, and it reports tomorrow. Terranova expects good news, because the two cyber companies that reported last week — CrowdStrike and Okta — both beat comfortably and their shares jumped.
His more interesting point is about behaviour rather than fundamentals. Cybersecurity has been a group where simply staying invested has paid, and where selling out has been punished: "if you move away, which in past years I have done, you are punished for that aggressively — very difficult to get back in again." That is the professional's version of not trying to time a strong trend. And it makes the downside case easy: if the results disappoint, he expects buyers to arrive quickly on the dip rather than a lasting break.
In short: The other name on the calendar, and the test of whether last week's cybersecurity rally generalises: "Palo Alto Networks, cybersecurity… CrowdStrike and other cybersecurity names, Okta, etcetera, did really well last week." Reported without a position.
Full passage: premium transcript (PDF).
In short: Up ~5% last week and also at a record high today — the other half of the cyber move Terranova says he trusts, versus the rest of software he does not.
Palo Alto Networks is the other big cybersecurity name, also at a record high after a 5% week. It falls on the trusted side of Terranova's dividing line: he distrusts the software rally in general but believes the cyber move is real, because security budgets grow alongside AI adoption instead of being displaced by it.
In short: Deiya. The other larger cyber rival at north of 20× EV/sales — cited to size the discount on Tenable rather than as a view on Palo Alto itself.
28:28And keep in mind that versus some of the larger competitors in space, Teneal trades at four times EV to sales and Crowd Strike and Palo Alto are both north of 20 times EV to sales. So you're getting a huge discount on a player that may be better positioned than some of these larger rivals to do very very well given this platform shift. — And it is just starting to make money on an operating profit gap basis.
In short: Ives' other cybersecurity pick, named alongside CrowdStrike as the two best-positioned "from a product perspective and CEOs, what they've done." The March fear that Anthropic would "eat cyber security" with its own product was, in his read, backwards — agents multiply the attack surface and expand budgets.
Palo Alto Networks is the other name in Ives' cybersecurity pair — network and cloud security sold to large enterprises, increasingly as one bundled platform rather than a dozen separate tools.
Same thesis as CrowdStrike: budgets doubling as AI agents multiply what has to be defended, and management that has "been able to see around corners." Note the consistency with Luria's consolidation logic elsewhere in the episode — when a CIO cuts from a hundred software vendors to thirty, platforms that can absorb several jobs at once are the survivors.
38:38perspective and CEOs what they've done I think Crowd Strike and Pow were the ones where like they just if you look at Georgia Crowd Strike and the cash pow they're just able to see around corners and obviously have to continue to execute in terms like the companies where Gil would talk about like Salesforce.
In short: Named in the cyber comeback (with Fortinet, CrowdStrike) — the security names that "roared back" after the "anthropic kills cyber" scare faded. No individual call.
In short: Named in his technology 52-week-high cluster (with the semi-equipment names) as part of the tech that's working — leadership confirmed by new highs.
Palo Alto Networks is the largest cybersecurity software company. Terranova groups it with his technology 52-week-high names as part of "the tech that's working." His discipline here is simple momentum: rather than guess which corner of tech recovers, own the ones already making new highs — and Palo Alto qualifies.
In short: Owns it and prefers it over CrowdStrike. Up 78% YTD, a remarkable recovery from the Feb/March lows, firing on all cylinders — revenue +31%, subscription +31%, RPO +36%; synergies from >$30B of deals and platformization still ahead. At ~22x price-to-sales not cheap, but cheaper than CrowdStrike at 35x.
Palo Alto is a cybersecurity company, and Link owns it and CrowdStrike but clearly prefers Palo Alto. It's up 78% this year off its early-2026 lows and is "firing on all cylinders" — revenue and subscription revenue both up 31%, and RPO (remaining performance obligations — contracts already signed but not yet recognized as revenue, a sign of future growth) up 36%. It has also made more than $30 billion of acquisitions whose benefits haven't shown up yet, plus "platformization" (getting customers to buy its whole security suite rather than one product) just getting going.
Her reason to favor it over CrowdStrike is valuation: Palo Alto trades at about 22 times its sales versus CrowdStrike at 35 times. "Price-to-sales" compares the stock price to revenue — a quick yardstick for fast-growing companies that don't yet have much profit. Cheaper on that measure, and executing, so it wins.
In short: Strong quarter, messy headline: rev +31% Y/Y (14% organic) to $3.0B, record adj FCF $910M (+57%), NGS ARR $8.1B (+28% organic), RPO $18.4B (+22% organic). The $183M op loss is CyberArk/Chronosphere deal noise (~$280M intangible amort + $198M deal costs), not the business. Bought $1B of stock at ~$148 in the SaaSpocalypse dip; CyberArk → "Idira" gives agent-era identity; Cortex XSIAM >$600M ARR, Prisma AIRS >300 customers; raised guide 3rd straight quarter. App Economy built a larger PANW position. Risk: ~62x fwd EBITDA after a ~50% rally.
Palo Alto sells cybersecurity, and its big strategic idea is "platformization": instead of buying a dozen separate point products (one for firewalls, one for cloud, one for detection, one for identity…), a customer buys one integrated Palo Alto platform that does all of it. The pitch is that a single platform is stickier and easier to run — and the numbers back it: customers renew at 120% (they spend more each year than the year before), churn is in the single digits, and almost half of product revenue is now recurring software rather than one-off hardware boxes.
The headline this quarter looked ugly — a $183 million operating loss — but that's an accounting artifact, not the business. When you buy a company (here the $25B CyberArk deal and the Chronosphere deal), accounting forces you to book big one-time charges: "intangible amortization" (writing down the value assigned to the acquired company's technology/brand over time) and deal costs (lawyers, bankers, integration). Strip those out and the real engine is humming: a record $910 million of free cash flow (the actual cash left after running and investing in the business). That's why the author reads the print as strong despite the scary headline.
Why AI is the tailwind: CEO Nikesh Arora calls AI a "forcing function" — the arrival of powerful AI models forces every company to rethink its defenses, especially because AI "agents" (software that acts on its own) now get access to passwords, data, and systems, creating new ways to be attacked. But Arora's own caveat is the buy case: AI "still makes mistakes" (frontier models can be wrong ~25% of the time), and attackers only need to win once — so companies can't just trust raw AI, they need a trusted platform wrapping it. CyberArk (rebranded "Idira") plugs in the identity piece — proving who or what (human, machine, or AI agent) is allowed to do what. The risk is purely price: at ~62x forward EBITDA after a ~50% rally, the stock already assumes the CyberArk integration goes perfectly.
In short: Emerging ROS candidate: "Palo Alto looks primed" — a name he flags as close to rolling over.
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