Palo Alto Networks (NASDAQ:PANW) experienced a decline of over 6% in its shares on Wednesday, following Microsoft’s (NASDAQ:MSFT) recent announcement of a secure service edge offering.
Is PANW Stock at Risk? Analysts’ Takes
This move signifies Microsoft’s deeper foray into the network security sector. According to Hamza Fodderwala, an analyst at Morgan Stanley, Microsoft’s entrance into the secure service edge market could potentially be the final major cybersecurity market the tech giant is yet to explore.
Fodderwala further highlighted Microsoft’s new offerings, namely Microsoft Entra Internet Access for web and SaaS apps, and Entra Private Access for private and internal apps. These developments place Microsoft in direct competition with Palo Alto Networks (NASDAQ:PANW), Zscaler (NASDAQ:ZS), and Cloudflare (NYSE:NET).
UBS analyst Roger Boyd acknowledged that Microsoft’s latest solutions pose a negative impact on the aforementioned companies, including privately-held Netskope. However, he also sees this development as a validation of the security edge market’s potential. Boyd noted that Zscaler and Palo Alto Networks have already gained significant traction in enterprise adoption, boasting a combined customer base of around 10,000 and average revenue per customer (ARPC) exceeding $100,000, with Zscaler’s ARPC surpassing $200,000.
Boyd further emphasized that Microsoft’s extensive reach, with around 1 million security customers, gives the company led by Satya Nadella a significant advantage in capturing the market leadership position in the lower-end segment where Zscaler and Palo Alto Networks currently have limited exposure.
However, Boyd cautioned that Cisco(NASDAQ:CSCO) and Cloudflare(NYSE:NET), which cater to small and medium-sized businesses, face greater near-term risks due to Microsoft’s latest move. Additionally, he speculated that Fortinet’s ambitions in the secure access service edge sector may become more complex as a result of Microsoft’s entry.
Conclusion
Overall, Palo Alto Networks stock faces a decline in value as Microsoft’s foray into network security intensifies. The market dynamics are shifting, potentially impacting various players in the cybersecurity sector, with Microsoft’s offerings gaining attention and positioning the company as a strong contender in the evolving landscape.
Featured Image: Freepik
Author Faith Yakubu 
