PANW 2Q26: Channel Checks Suggest Sustained Growth Momentum

A. Key Topics Regarding PANW: Impact of Raw Material Price Increases on Firewall Business, AI Labs and Enterprise AI Deployment Implications for Cybersecurity Vendors, and Updates on the CyberArk and Chronosphere Acquisitions

A.1 Impact of Raw Material Price Increases on the Hardware Firewall Market

Cost Pressures Are Driving Price Increases: Rising memory and semiconductor costs are pushing up hardware firewall costs, and vendors are highly likely to pass through price increases (full-year price increases of 20%+ vs. historical 7-8% annually). Even if there are phase-in delays due to inventory drawdowns, the price increases themselves are inevitable.

Higher Prices Are Shifting the Demand Mix: Higher hardware prices are suppressing incremental demand. Some customers are locking in current pricing, resulting in a short-term pull-forward of orders, while others are extending refresh cycles (from 3-5 years to 5-6 years). Approximately 15-30% of projects are shifting toward software firewalls/SASE (which offer ~30% cost advantages relative to hardware firewalls). Data center firewall demand remains hardware-centric, but software adoption at branch and edge locations is set to accelerate.

Near-Term Impact on PANW Is Largely Neutral: Price increases combined with order pull-forward provide near-term revenue support, but on a full-year basis, hardware firewalls are unlikely to deliver meaningful net incremental contribution (pull-forward and deferrals largely offset each other).