PANW: Key Insights from Our Extensive Research

On the 20th, the company will disclose its quarterly performance after the market closes. For companies like this, the information we can obtain about quarterly forecasts is limited. However, based on the information from sell-side and some interviews, including channel checks, especially the feedback from the company's sales indicating that performance completion rates are much higher than the set KPI targets, we believe that the pattern of the company exceeding the upper end of guidance is likely to continue.”

This article focuses on sharing our outlook for 2025

1. Appliance Part

“CY25 should enter a large firewall refresh cycle. This point was also reflected in Fortinet's recent earnings call: ‘Today, we'd like to add to this commentary by noting that in 2026, a record number of FortiGates will reach the end of their support life cycle, and we expect these customers to start to refresh their cycle for these products sometime in 2025.’ The information obtained from Palo Alto Networks is similar; in terms of units, ‘approximately 20-25% of active Palo Alto firewalls are replaced with updated versions each year. This percentage is expected to slightly increase by about 2-3% in the coming years (to 22%-28%).’ Additionally, the hardware for new firewalls is about 5% more expensive than previous versions, leading to an expected annual revenue growth of around 10% or more from existing customers' replacements.”

“From a competitive perspective, the hardware segment is currently primarily dominated by Palo Alto Networks and Fortinet as they vie for market share from Check Point and Cisco. The competition between these two companies is relatively stable, and during this major refresh cycle, the influx of new users should also support revenue growth for the company.”