Geoffrey Seiler, The Motley Fool

Sat, May 24, 2025, 1:15 AM7 min read

• Palo Alto stock fell despite the company reporting solid fiscal Q3 results.

• The company's platformization continues to progress, helping drive results.

• However, the stock is not cheap, even after the recent stock sell-off.

• 10 stocks we like better than Palo Alto Networks ›

Share prices of Palo Alto Networks (NASDAQ: PANW) slipped earlier this week after the company reported its fiscal Q3 earnings results. While the results were strong and topped analyst expectations, the company failed to raise the top end of its full-year fiscal 2025 guidance for the first time this year, and a few metrics only met its guidance. The stock is now up just 1.8% in 2025 and up almost 19% over the past year, as of this writing.

Let's take a closer look at the cybersecurity company's results and guidance to see if this could be a good opportunity to buy the stock on the dip.

The big story surrounding Palo Alto over the past 15 months has been the company's decision to shift directions and begin what it called a "platformization" strategy. With its customers seeing diminishing returns on their cybersecurity spending when they added new point solutions, the company decided to stop selling new point solutions and instead embark on a plan to begin moving its customers onto one of its three cybersecurity platforms.

However, to do this, it decided to give away some of its solutions for free while its customers had contracts in place for similar services with other vendors. It said this was the equivalent of giving away free product capabilities to customers for six months, and that it would negatively impact its billings and revenue growth over the next 12 to 18 months.

Palo Alto's platformization strategy continued to gain traction in fiscal Q3, with the company delivering "over 19 net new platformization deals." Over 19 seems to indicate 20, which is a nice round number, but nobody on the company's earnings call decided to ask management what over 19 actually meant. It ended the quarter with 1,250 platformizations within its top 5,000 customers. That's an increase from the 1,150 platforms it mentioned in fiscal Q1, showing its continued progress of transitioning existing customers over to one of its platforms.

Note that the company's three platforms are its network security platform Strata, threat detection and response solution Cortex, and its cloud security solution Prisma Cloud. Strata is its most widely adopted platform and the one that is typically the starting point for customers. Cortex and Prisma, meanwhile, are more upsells.