PANW Outpaces CSCO: US Cybersecurity Leaders Face Different Growth Trajectories in 2025

When comparing Palo Alto Networks (PANW) and Cisco Systems (CSCO), two dominant forces in the US cybersecurity market, the narrative goes far deeper than surface-level metrics. While both companies are riding the wave of industry expansion—projected at a 12.45% compound annual growth rate through 2030—their momentum tells distinctly different stories.

The Valuation Disconnect That Matters

Here’s where investor psychology clashes with financial reality. Cisco Systems currently trades at a forward price-to-sales ratio of 4.89X, making it appear the bargain relative to Palo Alto Networks’ 12.61X multiple. Year-to-date, CSCO has surged 27.5%, outpacing PANW’s 1.7% gain. On the surface, Cisco looks like the winner.

But this narrative flips when you examine what drives these valuations. PANW’s premium reflects aggressive growth expectations, not overvaluation. The market is pricing in explosive expansion potential across multiple fronts—a bet that appears increasingly justified by operational execution.

Revenue Growth: Where PANW Pulls Ahead

The divergence becomes stark when analyzing fiscal 2026-2027 projections:

Palo Alto Networks projects revenues and earnings per share growth of 13% and 13.2% respectively for fiscal 2026, with both metrics expanding 13.5% and 13.2% in fiscal 2027. PANW’s platformization strategy—consolidating multiple security tools into unified solutions—is driving deeper customer penetration. The company added roughly 60 new platform customers in the most recent quarter alone, while the base of customers generating over $10 million in NGS (Next Gen Security) Annual Recurring Revenue doubled to 50 accounts, signaling increasingly sticky relationships and expanding deal sizes.

Cisco Systems, by contrast, faces slower growth headwinds with fiscal 2026 revenue and EPS projections of just 7.3% year-over-year growth, decelerating to 3.6% revenue expansion in fiscal 2027. This reflects structural challenges rather than cyclical weakness.

Business Mix Reveals Underlying Tension

PANW’s SASE (Secure Access Service Edge) segment expanded 34% in ARR terms during the recent quarter, representing the company’s fastest-growing initiative. A marquee example: a major US government agency signed a $33 million SASE contract covering 60,000 seats by switching from an incumbent provider. This demonstrates not just new customer acquisition but meaningful displacement of entrenched competitors.

Meanwhile, Cisco Systems security revenues contracted 2% year-over-year in its latest quarter. The culprit? A dual-track challenge: legacy product demand erosion and Splunk’s strategic shift from on-premise licenses to cloud subscriptions. While cloud is strategically sound, it front-loads customer acquisition costs and defers revenue recognition, creating near-term drag. Cisco added nearly 3,000 customers for new or refreshed security products, but this growth isn’t yet offsetting the decline in traditional offerings.

Forward Revenue Targets Signal Confidence Divergence

PANW just raised its long-term NGS ARR guidance to $20 billion by fiscal 2030, up from an earlier $15 billion target. This revision—made mid-stride rather than opportunistically—suggests internal confidence in execution and market absorption capacity. Compare this to CSCO’s more cautious posture on its security trajectory amid ongoing legacy product rationalization.

The Investment Thesis Today

For Palo Alto Networks: The higher valuation multiple reflects genuine operational momentum. Customers consolidating vendor sprawl around PANW’s platform, expanding deals with existing accounts, and government sector wins provide revenue visibility that justifies premium pricing.

For Cisco Systems: The lower multiple and recent price appreciation present a classic value trap. The 27.5% YTD gain masks slower underlying growth acceleration and product mix headwinds. Unless Splunk-powered initiatives and next-generation firewall orders accelerate meaningfully, CSCO may struggle to sustain current valuations.

In the US cybersecurity landscape where regulatory pressure and complex threat vectors continue driving spending, PANW’s demonstrated ability to capture share and expand existing relationships makes it the more compelling entry point despite its higher valuation multiple.