Palo Alto Is Positioning for the Next Security Supercycle as AI Threats Go Vertical

There’s been a lot of excitement and awe following Anthropic’s release of Claude Mythos and its limited release to members of Project Glasswing. At the same time, though, there’s also been a bit of fear and some catastrophizing over what cyberthreats could look like as we move further into the era of agentic AI.

Undoubtedly, it’s nice that a profoundly powerful model like Claude Mythos can help tech firms uncover problems and patch them up before the wave of AI-armed bad actors looks to leverage similar technologies for their attacks. Indeed, in the wrong hands, such technology has the potential to be quite dangerous. And while time will tell when that next wave of agentic-era cyberattacks will strike and how much damage they’ll cause, I do think that the cybersecurity landscape might be entering a new kind of cycle.

Palo Alto Networks looks like a real application-layer winner from AI

Sure, call it an AI-induced supercycle, if you will, but the value of proactive security and next-level agentic systems is, in my very humble opinion, reaching new all-time highs. At the same time, shares of top cybersecurity firms have also hit new highs. And it wasn’t all too long ago that the names were in the gutter alongside much of software as innovations like Claude Mythos caused an indiscriminate round of panic-selling.

In a prior piece, I highlighted the punishment dealt to names like Palo Alto Networks (NASDAQ:PANW | PANW Price Prediction) and CrowdStrike (NASDAQ:CRWD) as one of the better buying opportunities in the slumping software scene. Indeed, these firms aren’t just software companies, but providers of critical infrastructure whose demand could stay off the charts, given the danger posed by AI-equipped cyberthreats.

In other words, I noted that frontier-level innovators like Anthropic and the cybersecurity firms were playing on the side — the side of the good guys in what was shaping up to be a pretty nasty, higher-stakes war with advanced cyberthreats, the likes of which may be difficult to fathom. Of course, the more AI innovators we have working together and collaborating to stay a step (or preferably several steps) ahead of the cyberthreats, the better it is for everyone.

The risks are higher in the agentic era. Palo Alto Networks is ready to defend

All it takes is one vulnerability exploit for a cyberattacker to do real damage. Meanwhile, firms defending against such threats need to have all bases covered. In many ways, it feels like a lopsided battle. The more profoundly powerful models, like Mythos and what succeeds it, are limited to the trusted firms, though, the greater the odds tilt toward the good guys.

In any case, I still view Project Glasswing as more than just an exclusive club of elite firms, but a strategic shift that could help augment firms like Palo Alto Networks and CrowdStrike, greatly enhancing their AI-driven defenses. There’s a lot of patching work to do following Mythos uncovering of 10,000 or so critical bugs. And the clock is ticking as the race to patch and fix before attackers have a chance to use such tools for nefarious purposes.

For Palo Alto Networks, it’s going big on platformization. The firm’s going above and beyond just selling AI tools to help firms get their guards up. At its core, a platform with an AI-driven architecture could make for something that could more easily shoot down threats as they happen. In my view, Palo Alto Networks is doing it right; it’s pivoting to become an AI-native, rather than just tacking on AI tools alongside existing offerings.

With the very impressive Prisma AIRS 3.0 AI agent gateway, it feels like Palo Alto is not only building the fortress with a wide moat to protect against attackers, but it’s also filling the fort with arguably better-equipped soldiers. In terms of application layer winners that could win big from the AI monetization wave, the rise of agents and digital labor, perhaps there is no better-positioned firm than Palo Alto Networks.

The bottom line

Looking back, it’s clear that the market was missing the point on the name and the rest of the cybersecurity industry. After a 72% gain in three months, Palo Alto Networks has enjoyed a vicious correction to the upside, and one that might not be over quite yet, as platformization and identification become new-era growth levers.