Palo Alto Networks' stock is basking in the glow of a cybersecurity revival

By Hannah Pedone

Investors are starting to see cybersecurity companies more as AI beneficiaries than as AI losers, one analyst notes

Shares of Palo Alto Networks were up 5% on Thursday.

Cybersecurity stocks were seeing an AI-driven pop on Thursday, and Palo Alto Networks' stock was among the major beneficiaries.

Shares of Palo Alto Networks (PANW) were up 6% on Thursday afternoon, after earlier flirting with their best daily gain in over a year. Meanwhile, shares of CrowdStrike Holdings (CRWD) and Zscaler (ZS) were up roughly 7% and 9%, respectively.

Two other cybersecurity companies, Datadog (DDOG) and Fortinet (FTNT), both reported upbeat earnings that were helping jolt the sector. Their shares were up were up 29% and 20%, respectively.

Software stocks in general were getting a boost Thursday, with the iShares Expanded Tech-Software Sector ETF IGV outperforming the iShares Semiconductor ETF SOXX by roughly 7 percentage points - its largest such one-day outperformance since 2002, according to Dow Jones Market DataTKKK.

Palo Alto, CrowdStrike and other cybersecurity stocks were rallying as investors reversed on the "AI-driven 'disruption' narrative" that was prominent in March, Tigress Financial Partners analyst Ivan Feinseth told MarketWatch. Now, investors are more focused on how artificial intelligence is driving demand for security platforms.

Palo Alto Networks and Fortinet both make firewall products, so if Fortinet's firewall business is "doing great," as demonstrated by its latest earnings, then that likely means Palo Alto's business is doing well too, Morningstar analyst Malik Ahmed Khan told MarketWatch.

Read more: Fortinet's stock rockets higher as earnings help dispel fears of AI disruption

Wedbush analyst Dan Ives wrote in a note that Palo Alto Networks' participation in Anthropic's Project Glasswing is a catalyst for the company. Through the project, Palo Alto is among a small cohort of companies with access to the AI startup's Mythos model, which can discover and exploit cybersecurity vulnerabilities.

Read more: Datadog's stock is soaring. Here's how the company became such a crucial AI player.

"Powerful models like Anthropic's will likely be deployed through established vendors rather than replace them," added Feinseth.

-Hannah Pedone

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05-07-26 1503ET