CrowdStrike(NASDAQ: CRWD) and Palo Alto Networks(NASDAQ: PANW) are two of the world’s largest cybersecurity companies. Both stocks have generated massive multibagger gains since their public debuts as the cybersecurity market expanded.
But over the past 12 months, CrowdStrike’s stock has risen 33%, while Palo Alto’s stock has declined 4%. Let’s see why the former outperformed the latter, and if it will remain the better cybersecurity stock to buy for the rest of 2026.
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Palo Alto Networks splits its ecosystem into three main platforms: Strata, for its older on-site networking services; Prisma, for its cloud-based services; and Cortex, for its AI-powered threat detection services. Most of its recent growth has been driven by Prisma and Cortex, which it collectively refers to as its “next-gen security” services. It also recently acquired CyberArk, a leader in privileged access management (PAM) services, for $25 billion.
Palo Alto’s older services still need to be deployed on-site via expensive, maintenance-intensive appliances that are difficult to scale as a company grows. CrowdStrike addresses those issues with Falcon, its cloud-native endpoint security platform that doesn’t require on-site appliances and locks customers in with sticky recurring subscriptions. Its customers start with a handful of trial cloud modules and add more to access additional security features.
From fiscal 2020 to fiscal 2025 (which ended last July), Palo Alto’s revenue grew at a 22% CAGR. It also became profitable under generally accepted accounting principles (GAAP) in fiscal 2023 and grew its net income at a 61% CAGR over the following two years.
From fiscal 2025 to fiscal 2028, analysts expect Palo Alto’s revenue and EPS to grow at CAGRs of 19% and 22%, respectively. That growth should be driven by its NGS services, its recent acquisition of CyberArk, and its “platformization” strategy of bundling more niche services into its core platforms to pull companies away from smaller cybersecurity companies.
From fiscal 2021 to fiscal 2026 (which ended this January), CrowdStrike’s revenue grew at a 41% CAGR. However, it isn’t profitable by GAAP measures yet. It grew rapidly as its cloud-native services pulled more companies away from legacy cybersecurity providers, and it increased revenue per customer by selling more modules.
From fiscal 2026 to fiscal 2029, analysts expect CrowdStrike’s revenue to grow at a 22% CAGR. They also expect it to turn profitable in fiscal 2027, and to grow its net income at a 100% CAGR over the following two years. Its top-line growth should be driven by the expansion of its consumption-based “Falcon Flex” plans (which don’t require rigid subscriptions or module purchases) and the use of generative AI tools to simplify its threat detection services. Its profitability should also improve as it reduces its stock-based compensation expenses.
Both companies are well positioned to profit from the secular expansion of the cybersecurity market, which is generally insulated from macro headwinds because companies won’t shut off their digital defenses just to save a few dollars. According to Fortune Business Insights, the global cybersecurity market could still expand at a 13.8% CAGR from 2026 to 2034.
However, both companies could eventually face tougher competition from diversified tech giants like Microsoft(NASDAQ: MSFT), which are bundling more endpoint security services into their software, and AI-native cybersecurity companies like SentinelOne(NYSE: S).
Palo Alto trades at 45 times its forward-adjusted (non-GAAP) earnings, while CrowdStrike has a much higher forward-adjusted price-to-earnings ratio of 91. CrowdStrike is growing only slightly faster than Palo Alto, but its cloud-native approach is attracting more growth-oriented investors.
Both of these stocks are still reliable cybersecurity plays. But if I had to pick one over the other, I’d buy Palo Alto because it’s trading at a more reasonable valuation in this volatile market.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike, Microsoft, and SentinelOne. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.
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