Wells Fargo: Strong Pre-Earnings Trading Momentum for Palo Alto and CrowdStrike
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Wells Fargo maintains overweight ratings on Palo Alto Networks and CrowdStrike ahead of earnings, citing accelerating AI-driven security demand — channel partners are running 31% above plan, and both companies' upcoming reports will test whether that momentum converts to results.
How strong is security spending right now?
Wells Fargo's channel survey shows partners running 31% above plan, with weighted year-over-year growth at 16% — up from 13% last quarter.
Over 50% of respondents expect growth to accelerate further in the second half.
This means → security spending is not slowing — it is picking up speed, and the outlook for H2 is more bullish than H1.
What role is AI playing in security budgets?
The top growth drivers, in order: AI, identity security, endpoint security, data and exposure management.
Roughly 40% of AI-related security spending comes from non-security budget pools — AI-specific budgets, other IT budgets, and non-software security budgets.
In plain terms = nearly half the money going into AI security is not squeezed from existing security budgets — it is pulled in from elsewhere, signaling that enterprises treat AI security as a new, standalone investment line.
Why does Palo Alto rank first?
In the survey, Palo Alto ranked #1 in both "most likely to consolidate spend" and "fastest share gains", and topped the SASE and security operations categories as well.
As the #1 "most likely AI beneficiary," its vote share surged 12 percentage points — the largest gain among all companies surveyed.
The quarter produced 29 tracked deals: 7 above $10 million, another 5 in the $8–10 million range; 15 deals came from new customers, slightly more than renewals and equipment refreshes.
This means → Palo Alto is not just upselling its installed base — new-customer acquisition has not slowed, and both engines are running.
How solid are CrowdStrike's large deals?
Wells Fargo tracked 10 deals above $10 million and multiple contracts exceeding $20 million, spanning cloud security, SIEM (security information and event management), identity security, and XDR (extended detection and response).
Of the large deals tracked, 22 were renewals and 6 were new customers — renewals dominate by a wide margin.
This reflects CrowdStrike's core strength in deepening existing relationships — once customers adopt the platform, they tend to renew and expand their purchasing scope.
When are earnings, and what does the Street expect?
CrowdStrike reports FY2027 Q2 on August 26; consensus calls for adjusted EPS of $0.29 on revenue of $1.44 billion.
Palo Alto reports FY2026 Q4 on September 1; consensus calls for adjusted EPS of $0.98 on revenue of $3.35 billion.
Wells Fargo's price targets: Palo Alto at $475, CrowdStrike at $230, both rated overweight.
In plain terms = the channel data looks strong, but the real question is whether the earnings numbers can match that momentum — these two reports are the key test of whether AI-driven security demand actually turns into profit.
Content is for reference only, not financial advice.