Morningstar | Expanding From Its Firewall Strength, Palo Alto Networks Looks to Cloud Security for Growth
Palo Alto Networks became a leading cybersecurity provider through its next-generation firewall appliance, forever altering the requirements of this essential piece of networking security. The firm's portfolio grew to include diversified security subscriptions and support that attach to firewall appliances, as well as services such as protection and automated responses for cloud-based traffic and data, software-as-a-service applications, and endpoints. Looking ahead, we think Palo Alto's nascent threat-prevention solutions will provide robust growth along with a significantly improved margin profile.The complexity of an entity's threat management increases as the quantity of data and traffic being generated off-premises grows. Network security can be attacked from various angles, and we posit that security will remain a top concern for all enterprises and governments, which bodes well for Palo Alto and its peers. Security point solutions were traditionally purchased to combat the latest threats, and IT teams had to manage various vendors' products simultaneously, which leads us to believe that IT teams are clamoring for security consolidation to manage disparate solutions. Core to Palo Alto's technology is its security operating platform, which provides centralized security management. We believe the ability to add technologies via subscriptions in the Palo Alto framework can alleviate complications by providing more holistic security, which can generate sustainable demand for Palo Alto's services.We believe that Palo Alto will continue to outpace its security peers by focusing on growing its subscription products, solutions for cloud and SaaS applications, and service provider firewalls that meet the higher demands of 5G. Palo Alto's concerted efforts into machine learning, analytics, and automated responses could make its products indispensable within customer networks. Although we expect Palo Alto to remain acquisitive and dedicated to organic innovation, we believe significant operating leverage will be gained throughout the coming decade as recurring subscription and support revenue streams flow from its expansive customer base.Palo Alto Networks provides a platform that allows enterprises, service providers, and government entities to secure their organizations. The company's platform uses a traffic classification engine that identifies network traffic by application, user, and content and provides security across the network, endpoint, and cloud. The company's product, subscription, and support offerings include: firewall appliances and software; and Panorama, which is a centralized security management solution for global control of various firewall appliances and software deployed on an end-customer's network as well as in their instances in public or private cloud environments as a virtual appliance or a physical appliance.
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