This Is What Investors Should Watch Before Buying PANW Stock. Most Will Ignore It on September 1.

Palo Alto Networks (PANW) reports earnings on Sept. 1, and Wall Street has high expectations. In the week before its quarterly release, almost every day an analyst firm raised its price target for the company. Benchmark started the rally by raising its price target on Aug. 24. J.P Morgan raised its price target on Aug. 25. Robert W. Baird raised it on Aug. 27. And Jefferies did the same on Aug. 28. All these firms kept a "Buy" rating on the stock. The optimism helped push PANW stock higher, and shares jumped roughly 13% in a single trading session.

The optimism is for a good reason. For the July quarter, management guided to revenue of around $3.35 billion, which would be an increase of approximately 32% from a year ago. Its next-generation security business, the subscription-based AI and cloud products, is expected to grow close to 60%. This will also be the first full quarter that includes CyberArk, the $25 billion identity security company Palo Alto recently bought. Its newest AI security product, Prisma AIRS, has also been the fastest-growing product in the company's history.

Here's the part I would watch closely. The headline numbers are almost certain to look strong, but a large chunk of that growth is bought rather than earned. CyberArk and other acquisitions are making the revenue and ARR figures look more flattering than they are. So the number that actually matters is the organic growth underneath. Investors should also keep an eye on whether the AI security push is turning into real, measurable recurring revenue instead of just hype.

The reason this matters is how high the stock has run. In this year alone, Palo Alto shares have more than doubled, so plenty of good news is already priced in. A simple earnings beat may not be enough. The company likely needs a blowout quarter and strong guidance for the momentum to continue. My own view is that Palo Alto beats on the headline figures, helped by CyberArk and steady demand. The bigger question is the guidance for fiscal 2027. Unless that lands strongly, even a solid quarter could see the stock sell off.