Palo Alto's SASE ARR Tops $1.3B as Growth Deceleration and High Valuation Pose Risks

What happened

Palo Alto Networks reports accelerating secure browser adoption, with Secure Access Service Edge (SASE) annual recurring revenue exceeding $1.3 billion, bolstering its long-term platform growth story. However, the DeepValue master report highlights that consolidated revenue growth has decelerated from 25.3% in 2023 to 14.9% in 2025, signaling maturation despite strong next-generation security ARR. The company trades at elevated multiples of 112x P/E and 62x EV/EBITDA, with the report assigning a 'POTENTIAL SELL' rating and citing risks from aggressive M&A, including pending $25 billion CyberArk and $3.35 billion Chronosphere acquisitions. Market sentiment is crowded, with institutional de-risking and concerns over AI infrastructure costs eroding margins, while the base-case valuation implies limited upside at $185 per share. This SASE milestone, while positive, does not offset the overarching challenges of sustaining growth, managing integration, and justifying high valuations in a competitive landscape.

Implication

The SASE ARR reaching $1.3 billion reinforces Palo Alto's platform narrative but does not alter the fundamental risk-reward, which remains skewed due to decelerating overall growth and high multiples. With the DeepValue report's base case implying modest returns at current prices, and bear scenarios suggesting downside to $120 if growth slows or margins compress, investors face limited margin of safety. Upcoming catalysts, such as CyberArk acquisition progress and quarterly earnings showing growth stabilization, will be critical to monitor for any signs of deterioration. Given the 'POTENTIAL SELL' rating and crowded positioning, trimming positions above $215 or waiting for a pullback toward $150 is advisable until clearer evidence of sustained execution emerges. Ultimately, while SASE traction is encouraging, it must be viewed within the context of aggressive M&A integration, AI cost pressures, and a valuation that demands near-flawless performance.

Thesis delta

The SASE ARR growth reported in the article strengthens the platformization thesis but does not materially shift the investment call, as the DeepValue report already incorporates strong NGS ARR into its scenarios. The core thesis remains cautious, emphasizing that high valuation and execution risks, such as M&A integration and margin pressures, outweigh incremental positive news. Therefore, no significant delta is warranted; investors should continue to prioritize risk management over optimistic growth narratives.