Advancements in AI have made investors worry about the long-term viability of software stocks in general and cybersecurity firms in particular.

This widespread anxiety led to the so-called “SaaSpocalypse” a few months ago, a trend that negatively impacted shares of software companies.

However, instead of automating software solutions away, it seems AI is creating more demand for cybersecurity services. 

Palo Alto Networks (PANW), a SaaS cybersecurity firm, saw major uplift in its revenue as it benefitted from increased cybersecurity spending in the wake of recent AI developments.

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Cyberattacks rank among the most immediate concerns of CEOs according to the Conference Board’s most recent findings 

In its survey, 56% of CEOs ranked cyberattacks as their biggest area of concern for the second quarter of 2026.

This concern among executives isn’t unfounded. Last year, it was discovered that cyberattacks grew 65% faster than in 2024, leaving companies on average less than 30 minutes to detect and respond to cybersecurity attacks before damage spread to wider systems.

As cyber breaches are becoming faster, volume is also on the rise, increasing almost 80% over the past five years according to findings from the Identity Theft Resource Center.

AI has added another layer to this story.

Just a few months ago, AI leader Anthropic rolled out Claude Mythos, an AI model that can identify cybersecurity vulnerabilities at a scale that far outpaces human capacity. 

It was reported that Claude Mythos spotted thousands of previously undiscovered zero-day vulnerabilities and a host of other flaws. In one instance, it even uncovered flaws in a popular software tool that went undetected for 16 years. 

The model’s capabilities are so potent that only a select few companies have been permitted to use it. 

That said, AI advancement cuts both ways. AI models aren’t just detection tools as they can be used to exploit vulnerabilities and improve the scale and complexity of cyberattacks. 

So instead of making cybersecurity firms obsolete, AI is accelerating demand for companies that can patch up weaknesses before they can be exploited by malicious actors. 

And that’s where Palo Alto Networks (PANW) comes in. 

Palo Alto Networks is a SaaS cybersecurity company that provides cybersecurity solutions to enterprise customers, service providers, manufacturing, healthcare, and the public sector.

The company offers a wide range of security solutions delivered through its proprietary cloud platform. Its various offerings are grouped into various categories such as Network Security, Cloud Security, Security Operations, Endpoint Security, and Identity Security. 

Aside from security solutions, the firm offers other services grouped under the Threat Intel and Incident Response Services and Global Customer Services categories. 

Palo Alto Networks has also undertaken strategic acquisitions in recent years to bolster its operations. Last year, it acquired information security firm CyberArk, AI and machine learning security platform ProtectAI, and cloud observability firm Chronosphere. 

The company’s subscription model has allowed it to generate strong returns in recent years. Since 2021, its Uniform return on assets (“ROA”) have never dipped below 30%. And last year, it posted a Uniform ROA of 47%. 

Palo Alto Networks is benefitting from escalating demand for cybersecurity solutions amid the rapid advancement of AI.

During its most recent quarter, the company posted a revenue of $3 billion, beating estimates and marking a 31% year-over-year increase. Meanwhile, remaining performance obligations grew by 36% to $18.4 billion. 

Palo Alto Network’s Subscription and Support segment delivered the bulk of quarterly revenue at $2.4 billion, with the rest coming from the Product Segment. 

As AI models evolve, demand for cybersecurity solutions will only intensify further. And as long as that trend continues, Palo Alto Networks is positioned to take advantage.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research