Buffett Brain · Research note
Score updated 29 Oct 2026 · analysis from 2 Jun 2026
PANW· Technology
Palo Alto Networks
Palo Alto Networks is a fine security business priced for perfection at 140 times earnings.
Buffett fit
Weak fit
Owner
46
Durability
27
Management
80
Price
0
Score updated 29 Oct 2026 · analysis from 2 Jun 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Technology stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If you buy the whole company here, you are paying about 140 times earnings for a business that returns you roughly 2% in and 0.7% in reported earnings yield.
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The durability score of 27 is the number that worries me most. Returns on capital are modest, just 5.8% on a trailing basis and 9.3% over five years, which is barely above what a passive investor earns and well below what a true franchise throws off.
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Management earns an 80 here, and they deserve it. The balance sheet carries almost no debt, with a of 0.04 and interest covered more than a thousand times over, and they have converted earnings into cash at three times net income.
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There is no here, none at all, which is why the valuation score is zero.
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
6- 1Software-class of 73.5% gives the business real operating as it scales.
- 2Revenue at roughly 21% a year shows genuine demand for the platform.
- 3 runs at three times net income, so the real cash generation is far stronger than reported earnings suggest.
- 4A fortress balance sheet with of just 0.04 and interest coverage above 1,200 times leaves no solvency risk.
Concerns
7- 1Valuation is the overriding problem: a of about 140 and an owner-earnings yield under 2% leave no , which is why the valuation score is zero.
- 2Durability scores just 27, a warning that the may not hold in a field that reinvents itself every few years.
- 3Returns on capital are weak, 5.8% trailing and 9.3% over five years, far below what a real franchise produces.
- 4 of only 14.4% shows most of that rich gross profit is consumed before it reaches the owner.
Price history
$394+364.9%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
Palo Alto Networks sells firewalls, cloud security, and AI-driven threat detection, increasingly through software subscriptions that carry a 73.5% . Revenue grew about 21% a year, but the is a thin 14.4%, so a great deal of the gross profit is still being spent on sales and research before it reaches the owner. This is a fast grower that has not yet learned to keep much of what it earns.
How this analysis has moved
The call has held across 6 reviews.
Sep 27, 2026 → Oct 29, 2026
What other investors would say
The same company, judged by three other documented playbooks.
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