Analyst Report: Palo Alto Networks To Triple Market Share By 2024

Palo Alto Networks has been on a strong growth trajectory in the security market, but how far will it rise? A recent report by JPMorgan predicted the company would more than triple its market share by 2024.

The report, by analyst Sterling Auty, said Palo Alto Networks' current market-share standing is around 7 percent, a number it expects to rise to 24 percent in the next nine years, stepping into territory held by rival network security heavyweights, including Check Point Software Technologies, which holds around 15 percent.

The numbers for Palo Alto Networks are particularly impressive as no security vendor yet has been able to sustain more than 25 percent revenue growth for five years after hitting $100 million in revenue. However, Palo Alto Networks is on track to match Salesforce.com's incredible growth trajectory with 140 percent CAGR in its first six years and on a path to conclude its fifth year at more than 50 percent revenue growth.

[Related: Palo Alto Networks Adds Former Intel Security Exec As Head Of Global Partner Experience]

"We believe the growth potential for Palo Alto Networks is there as it continues to grow market share in firewall, increases its subscription revenue streams, and establishes itself as the first true security platform vendor," the report said.

The report came as JPMorgan initiated its coverage of the Santa Clara, Calif.-based vendor with an "overweight" rating. CRN reached out to both Auty and Palo Alto Networks for additional information but did not hear back by press time.

Technology Business Research in a June report said Palo Alto Networks would continue its growth trajectory as "one of the fastest-growing vendors in the enterprise security market."

"Continued growth in business security spending combined with strong efficacy results for Palo Alto Networks' security solutions will enable the vendor to continue to grow its enterprise security revenue year to year, although the growth will slow as competitors increase their efforts to stem Palo Alto Networks' expansion," the report continued.

Technology Business Research also predicted that Palo Alto Networks would invest in growing the company until it hits 100,000 customers, which is around the number Check Point had in the first quarter of this year.

John Riconda, CEO of Bohemia, N.Y.-based CCSI, has been a Palo Alto partner for the past two years. He said he has seen customers actively replacing competitive vendor offerings with those from Palo Alto Networks.

"It's been really gaining a lot of momentum," Riconda said. "I don’t see that slowing down."

However, Riconda did caution that the JPMorgan report predicted growth for quite an extended period given the rapidly changing security market. While Palo Alto Networks is clearly the vendor to watch in the security space, he said it is hard to predict what the security industry will look like next year, let alone nine years down the road.

"The market is going to continue to grow for security products. Whether Palo Alto will get that kind of market share, 24 percent of it, I don’t know. ... I think they're going to do very well. ... Nobody we see is [coming close]," Riconda said.

The JPMorgan report credited that growth to more companies making the move to next-generation firewalls, a trend it said wouldn’t be losing momentum anytime soon. That market will drive an overall CAGR of around 35 percent for the vendor through 2019, the report predicted. In addition to continuing its strength in the next-generation firewall market, the report said that Palo Alto Networks would be able to capitalize on an "increasingly ineffective endpoint security" market.

By bringing those pieces together, the report said JPMorgan is confident that Palo Alto Networks will be able to stay ahead of the market's transition to a platform-based approach, connecting network security, security intelligence and endpoint security.

PUBLISHED JULY 22, 2015