In today’s fast-evolving cybersecurity landscape, two prominent players are making waves: Palo Alto Networks, Inc. (PANW) and Zscaler, Inc. (ZS). Both companies operate within the software infrastructure industry, focusing on innovative cybersecurity solutions. However, their approaches differ significantly, providing distinct value propositions to investors. As we delve into this comparison, I invite you to consider which of these companies presents the most compelling investment opportunity for your portfolio.
Table of contents
Company Overview
Palo Alto Networks, Inc. Overview
Palo Alto Networks, Inc. is a leading cybersecurity provider established in 2005 and headquartered in Santa Clara, California. The company aims to protect organizations from cyber threats through its comprehensive suite of security solutions, which includes advanced firewalls, cloud security, and threat intelligence services. With a market capitalization of approximately $127B, Palo Alto Networks serves a diverse clientele, including government entities and enterprises across various sectors such as healthcare, financial services, and telecommunications. The company’s innovative approach to cybersecurity integrates software and appliances, ensuring robust protection across both physical and cloud environments.
Zscaler, Inc. Overview
Founded in 2007 and based in San Jose, California, Zscaler, Inc. specializes in cloud security solutions. The company focuses on providing secure access to applications for users and devices through its Zscaler Internet Access and Zscaler Private Access products. With a market cap of around $39B, Zscaler’s mission is to enable secure digital transformation for organizations by safeguarding their cloud environments and internal applications. It caters to a variety of industries, including healthcare, financial services, and education, and emphasizes the importance of user experience and application security.
Key similarities and differences
Both Palo Alto Networks and Zscaler operate in the cybersecurity domain, focusing on protecting organizations from evolving threats. However, while Palo Alto offers a mix of hardware and software solutions, Zscaler is primarily centered around cloud-based security services. This distinction highlights their different approaches to addressing security challenges in modern IT environments.
Income Statement Comparison
The following table compares the income statements of Palo Alto Networks, Inc. (PANW) and Zscaler, Inc. (ZS) for the fiscal year ending July 31, 2025.
| Metric | Palo Alto Networks (PANW) | Zscaler (ZS) |
|---|---|---|
| Market Cap | 127.12B | 39.12B |
| Revenue | 9.22B | 2.67B |
| EBITDA | 1.94B | 0.11B |
| EBIT | 1.60B | -0.01B |
| Net Income | 1.13B | -0.04B |
| EPS | 1.71 | -0.27 |
| Fiscal Year | 2025 | 2025 |
Interpretation of Income Statement
In 2025, Palo Alto Networks (PANW) displayed robust revenue growth of 14.7% compared to the previous year, alongside a significant net income of 1.13B, indicating strong operational efficiency. Conversely, Zscaler (ZS) experienced a revenue increase of 23.4%, yet reported a small net loss of 0.04B, highlighting challenges in controlling expenses. PANW’s EBITDA margin improved, suggesting enhanced profitability, while ZS’s negative EBIT indicates ongoing investment in growth without immediate returns. Overall, PANW’s performance reflects a more stable financial position compared to ZS, which is still navigating through investment phases.
Financial Ratios Comparison
Below is a comparative analysis of key financial ratios for Palo Alto Networks, Inc. (PANW) and Zscaler, Inc. (ZS) based on the most recent fiscal year data.
| Metric | PANW | ZS |
|---|---|---|
| ROE | 14.49% | -2.30% |
| ROIC | 5.67% | -7.11% |
| P/E | 101.43 | -1063.01 |
| P/B | 14.70 | 24.51 |
| Current Ratio | 0.89 | 2.01 |
| Quick Ratio | 0.89 | 2.01 |
| D/E | 0.04 | 0.99 |
| Debt-to-Assets | 1.43% | 27.98% |
| Interest Coverage | 414.30 | -13.49 |
| Asset Turnover | 0.39 | 0.42 |
| Fixed Asset Turnover | 12.56 | 4.22 |
| Payout ratio | 0% | 0% |
| Dividend yield | 0% | 0% |
Interpretation of Financial Ratios
Palo Alto Networks demonstrates strong performance with a solid ROE of 14.49%, a favorable current ratio indicating liquidity, and efficient asset utilization. In contrast, Zscaler shows significant financial distress, with a negative ROE and debt ratios suggesting high leverage. The interest coverage ratio for Zscaler is alarming, indicating potential difficulties in meeting interest obligations. Investors should tread carefully with Zscaler while recognizing PANW’s stronger financial health.
Dividend and Shareholder Returns
Both Palo Alto Networks, Inc. (PANW) and Zscaler, Inc. (ZS) do not pay dividends. Instead, their strategies focus on reinvesting profits for growth and innovation, characteristic of companies in high-growth phases. PANW’s free cash flow supports its operations, while ZS maintains a healthy cash position. Both companies engage in share buyback programs, which can enhance shareholder value. However, the absence of dividends indicates a prioritization of capital for expansion over immediate shareholder returns, aligning with long-term value creation goals.
Strategic Positioning
Palo Alto Networks (PANW) commands a significant market share in cybersecurity solutions, with a market cap of approximately 127B. Their diverse product offerings, including advanced threat prevention and cloud security, position them strongly against competitors like Zscaler (ZS), which has a market cap of around 39B. While both companies face competitive pressure and potential technological disruptions, PANW’s broader service range provides a buffer against market fluctuations, ensuring robust positioning in an evolving landscape.
Stock Comparison
In this section, I will provide an overview of the weekly stock price movements for Palo Alto Networks, Inc. (PANW) and Zscaler, Inc. (ZS) over the past year, highlighting key price dynamics and trends.
Trend Analysis
Palo Alto Networks, Inc. (PANW) Over the past year, PANW has seen a price increase of 34.4%, indicating a bullish trend despite a recent decline of 3.14% from September 14, 2025, to November 30, 2025. The highest price reached during this period was 220.24, while the lowest was 134.51. The overall acceleration status is noted as deceleration, and the standard deviation is 20.21, suggesting some volatility in its price movements.
Zscaler, Inc. (ZS) ZS has experienced a 19.87% increase in its stock price over the past year, thus also reflecting a bullish trend. However, more recently, the stock has dropped by 11.19% from September 14, 2025, to November 30, 2025. The peak price recorded was 331.14, with a low of 156.78. Similar to PANW, ZS shows a trend of deceleration with a standard deviation of 47.31, indicating a higher level of volatility.
In summary, while both stocks have shown strong annual growth, their recent declines warrant cautious monitoring for potential adjustments in investment strategies.
Analyst Opinions
Recent analyst recommendations for Palo Alto Networks (PANW) indicate a “Buy” rating, with analysts praising its strong return on equity and assets. The overall score of 3 reflects its solid performance metrics and growth potential. Conversely, Zscaler (ZS) received a “Sell” rating, with a low overall score of 1, mainly due to concerns about its return on equity and high debt levels. The consensus for 2025 leans towards a “Buy” for PANW and a “Sell” for ZS, indicating a cautious stance on Zscaler’s prospects.
Stock Grades
In this section, I will present the latest stock ratings for Palo Alto Networks, Inc. (PANW) and Zscaler, Inc. (ZS) as provided by reputable grading companies.
Palo Alto Networks, Inc. Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Goldman Sachs | Maintain | Buy | 2025-11-21 |
| HSBC | Downgrade | Reduce | 2025-11-21 |
| BTIG | Maintain | Buy | 2025-11-20 |
| Cantor Fitzgerald | Maintain | Overweight | 2025-11-20 |
| Rosenblatt | Maintain | Buy | 2025-11-20 |
| UBS | Maintain | Neutral | 2025-11-20 |
| Needham | Maintain | Buy | 2025-11-20 |
| WestPark Capital | Maintain | Hold | 2025-11-20 |
| Oppenheimer | Maintain | Outperform | 2025-11-20 |
| Bernstein | Maintain | Outperform | 2025-11-20 |
Zscaler, Inc. Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Stifel | Maintain | Buy | 2025-11-26 |
| Rosenblatt | Maintain | Buy | 2025-11-26 |
| B of A Securities | Maintain | Buy | 2025-11-26 |
| Scotiabank | Maintain | Sector Outperform | 2025-11-26 |
| Mizuho | Maintain | Neutral | 2025-11-26 |
| UBS | Maintain | Buy | 2025-11-26 |
| Needham | Maintain | Buy | 2025-11-26 |
| Baird | Maintain | Outperform | 2025-11-26 |
| BTIG | Maintain | Buy | 2025-11-26 |
| Bernstein | Maintain | Outperform | 2025-11-26 |
Overall, both Palo Alto Networks and Zscaler have received a consistent set of ratings from various reputable firms, with the majority maintaining their previous grades. The trend suggests a solid confidence in these companies, particularly in their growth potential and market position. However, the downgrade from HSBC on PANW indicates a cautious note worth considering in your investment strategy.
Target Prices
The consensus target prices for the following companies indicate optimistic growth expectations.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Palo Alto Networks, Inc. | 250 | 157 | 228.83 |
| Zscaler, Inc. | 360 | 264 | 320.64 |
Analysts expect Palo Alto Networks to reach a consensus target price of 228.83, which suggests significant upside potential from its current price of 190.09. Similarly, Zscaler’s consensus of 320.64 implies a substantial increase from its current price of 250.92, reflecting strong market confidence in both companies’ growth trajectories.
Strengths and Weaknesses
The following table summarizes the strengths and weaknesses of Palo Alto Networks, Inc. (PANW) and Zscaler, Inc. (ZS) based on the most recent data.
| Criterion | Palo Alto Networks (PANW) | Zscaler (ZS) |
|---|---|---|
| Diversification | Strong product range in cybersecurity | Focused on cloud security solutions |
| Profitability | 12.3% net profit margin | Negative net profit margin |
| Innovation | High investment in R&D | Rapidly evolving platform |
| Global presence | Operations in multiple countries | Expanding international footprint |
| Market Share | Leading in firewall market | Growing share in cloud security |
| Debt level | Low debt-to-equity ratio (0.043) | Moderate debt levels (0.998) |
Key takeaways include Palo Alto Networks’ strong profitability and low debt, which highlight its financial stability. In contrast, Zscaler’s focus on innovation in cloud security positions it well for future growth, despite current profitability challenges.
Risk Analysis
The following table outlines the various risks associated with each company, highlighting the potential challenges they may face in the current market environment.
| Metric | Palo Alto Networks, Inc. (PANW) | Zscaler, Inc. (ZS) |
|---|---|---|
| Market Risk | Moderate | High |
| Regulatory Risk | Low | Moderate |
| Operational Risk | Moderate | High |
| Environmental Risk | Low | Low |
| Geopolitical Risk | Moderate | High |
Both companies face significant market and operational risks, particularly in a rapidly evolving technology landscape. Zscaler, for instance, has grappled with heightened competition and fluctuating demand, impacting its margins. Conversely, Palo Alto Networks benefits from strong cybersecurity demand amid rising threats.
Which one to choose?
When comparing Palo Alto Networks (PANW) and Zscaler (ZS), PANW shows stronger fundamentals, with a market cap of 115B and robust revenue growth, highlighted by a gross profit margin of 73.4% and a net income of 1.13B. In contrast, Zscaler, with a market cap of 44B, struggles with profitability, reporting a net loss of 41M. Analysts rate PANW a “B” versus ZS’s “C-“, indicating a preference for PANW. The stock trends also reflect this, with PANW’s recent bullish movement (34.4% increase) outperforming ZS’s 19.87% rise.
Investors focused on growth may prefer PANW due to its solid financial health and upward price momentum, while those prioritizing risk may lean towards ZS, given its lower market cap and higher volatility. However, both companies face industry risks such as intense competition and market dependence.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Go further
I encourage you to read the complete analyses of Palo Alto Networks, Inc. and Zscaler, Inc. to enhance your investment decisions:
