Palo Alto Networks Inc (NASDAQ: PANW) drew strong customer interest in its AI security offerings at its Ignite On Tour user conference in New York City, with recent acquisitions Portkey and Koi Security attracting particular attention, according to Jefferies analysts who attended the event.
Customers and partners expressed little concern over the company's April 1 price increase of 10% on firewalls, with enterprise license agreements and cloud-based firewall and SASE availability helping to offset higher appliance costs.
Some pull-forward demand may have resulted from the February announcement, while supply chain constraints contributed to longer appliance lead times, analysts noted.
Palo Alto's software mix of approximately 45% of product revenue on a trailing twelve-month basis was cited as positioning it better than peers despite expected margin pressure in the second half of fiscal 2026 and into fiscal 2027.
AI was the dominant theme of the conference. Customers showed strong interest in Portkey, an AI gateway that authenticates and authorizes model and agent interactions and enforces security and governance policies, with the acquisition expected to close in the fourth quarter of fiscal 2026. Koi Security, acquired for $300 million and expected to close in the second half of fiscal 2026, extends security and governance to MCP servers, browser extensions and ephemeral code. Prisma AIRS, a premium offering with a seven-figure price tag, is seeing demand from enterprises with significant AI investment.
Cortex Cloud, which unifies four formerly separate cloud security interfaces, has reached feature parity with Prisma Cloud, with customer and partner feedback described as improving. Palo Alto has been offering discounts and free professional services to encourage migration from Prisma Cloud, which Jefferies viewed as a proof point of the company's ability to integrate acquisitions.
On the threat landscape, more than 500 North American customers have requested briefings on PANW's Mythos findings, with more than 170 requesting Unit 42 attack surface assessments. Palo Alto estimates enterprises have a three-to-five month window before AI-driven exploits become widespread, with its May patch advisory covering 26 CVEs, well above the typical figure of fewer than five.
Jefferies projected that a consolidated Palo Alto, CyberArk and Chronosphere entity could generate more than $16 billion in revenue in fiscal 2028, with free cash flow potentially exceeding $6 billion at a 40% margin.
Palo Alto currently trades at approximately 32 times fiscal 2028 free cash flow for the combined entity.