CrowdStrike and Palo Alto earnings: the next AI stress test

Key takeaways

• CrowdStrike and Palo Alto enter earnings with high expectations and strong recent share-price momentum.

• Artificial intelligence is raising both cyber risks and demand for better digital defences.

• Key areas to monitor include customer growth, contract demand, margins and how each company describes the role of artificial intelligence in cybersecurity.

Cybersecurity used to be a digital lock on the office door. Now the building has more doors, more windows, more delivery robots, and one intern using artificial intelligence (AI) to write code at midnight.

That is why this week matters. Palo Alto Networks reports fiscal third-quarter 2026 results after the US market close on 2 June 2026. CrowdStrike reports fiscal first-quarter 2027 results after the US market close on 3 June 2026.

Both companies sit at the centre of a simple but powerful investment question: does AI make cybersecurity software less valuable, or more important?

The market has recently leaned towards “more important”. Both CrowdStrike and Palo Alto Networks have seen strong investor interest ahead of results, helped by the view that AI could expand the need for better digital defences.

Two different ways to guard the same castle

CrowdStrike protects computers, cloud systems and employee identities through its Falcon platform. In plain English, it helps companies spot suspicious activity early and stop attacks before they spread. That matters in a world where one weak laptop, cloud account or password can become the front door for a much bigger problem.

For the quarter ending 30 April 2026, CrowdStrike guided for revenue of about 1.36 billion USD and annual recurring revenue of around 5.50 billion USD. Annual recurring revenue is the subscription income a company expects to repeat each year. For investors, it shows whether customers are staying, spending more and treating the product as essential digital plumbing.

The key question is whether CrowdStrike can keep turning its customer base into broader platform demand. It has largely rebuilt investor confidence after the 2024 software update incident that disrupted millions of Windows devices. Earnings will test whether customers keep expanding Falcon across more of their security budgets.

Palo Alto Networks is broader. It sells security across networks, cloud systems, security operations, identity and artificial intelligence. Its strategy is called “platformisation”, meaning customers buy more tools from one provider instead of stitching together many separate products.

Palo Alto guided for fiscal third-quarter revenue of about 2.95 billion USD, up around 29% from a year earlier, and remaining performance obligation of nearly 18 billion USD. That is contracted future revenue not yet booked. The strategic question is whether Palo Alto can become a trusted one-stop security platform without becoming too complex.

Project Glasswing changes the conversation

The bigger story is not just earnings. It is Project Glasswing.

On 8 April 2026, Anthropic announced Project Glasswing, an initiative involving major technology and cybersecurity companies, including CrowdStrike and Palo Alto Networks. The goal is to use advanced AI to find and fix weaknesses in critical software before attackers exploit them.

That matters because AI changes both sides of the cybersecurity equation. Attackers may use AI to scan code faster, find weaknesses and automate phishing messages that look more convincing. Defenders can use AI to detect strange behaviour, write safer code and respond faster.

This is why cybersecurity is different from some other software categories. In areas like traditional software as a service, AI may reduce the need for some human users and pressure seat-based pricing. In cybersecurity, AI may increase the workload. More digital activity means more places to defend. More automated code means more possible bugs. More AI agents inside companies means new security rules, new monitoring needs and new budget lines.

For investors, the question is not whether cyberattacks disappear. They will not. The question is which companies can turn a more complex threat environment into durable demand without letting costs run ahead of growth.

What the market wants to hear

The market reaction will likely depend on four signals.

First, investors will watch growth quality. Revenue growth is helpful, but subscription demand, customer retention and larger customer deals matter more for long-term confidence.

Second, margins matter. Cybersecurity companies must keep investing in AI, cloud infrastructure and sales teams. If growth stays strong but profitability weakens, investors may become less forgiving.

Third, guidance matters more than the quarter just reported. Markets care about the next hill, not only the one just climbed.

Fourth, management language around AI will be important. Investors want evidence that AI is not just a slide in a presentation, but something customers are buying, using and renewing.

Recent sector volatility adds pressure. Zscaler’s weaker outlook in late May 2026 hit sentiment across cybersecurity, even though analysts debated whether the issue was company-specific or sector-wide. That is the market’s usual subtlety: one company coughs, and the whole sector gets offered a blanket.

Risks to keep in view

The first risk is valuation. Both stocks already reflect high expectations. When shares run hard into results, even good numbers can disappoint if guidance is not strong enough.

The second risk is competition. Microsoft, cloud providers and start-ups are all pushing into security. Customers want fewer tools, but that does not guarantee the same winners forever.

The third risk is execution. CrowdStrike must keep proving reliability after the 2024 outage. Palo Alto must show that platformisation and acquisitions can improve the customer offer without creating complexity. Early warning signs include weaker customer growth, slower contract expansion, rising sales costs and softer renewal trends.

Investor playbook

• Watch guidance first. A strong past quarter matters less than confidence in the next few quarters.
• Track annual recurring revenue and remaining performance obligation as signals of future demand.
• Compare growth with margins. Fast growth is better when it does not require ever-higher spending.
• Keep position size in mind. Cybersecurity is structural, but high expectations can make stocks jumpy.

The lock is no longer enough

Cybersecurity remains one of the clearest long-term digital themes because companies cannot simply opt out of being protected. Banks, hospitals, factories, retailers and governments all run on software. That software now faces a smarter threat environment, partly because AI gives both attackers and defenders sharper tools.

CrowdStrike and Palo Alto Networks enter earnings week as two leading names in that fight, but also as stocks carrying high expectations. For investors, the lesson is balanced: cybersecurity demand looks structural, but price still matters. The door needs a lock, the windows need sensors, and the portfolio still needs discipline.

This material is marketing content and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results.