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There is no defensible buy winner from the available figures alone: they do not establish comparable share prices or valuation multiples for Cloudflare and Palo Alto Networks on the same date. Cloudflare’s cited quarter grew faster, but it also reported a substantial GAAP operating loss. Palo Alto Networks operates at much greater revenue scale and guided to positive FY2027 non-GAAP operating and adjusted free-cash-flow margins. Which is the better buy depends on what those businesses cost today, what growth investors expect, and how much risk an investor accepts.
The financial figures below come from Cloudflare’s August 6, 2026 results release and June 30, 2026 Form 10-Q, and Palo Alto Networks’ FY2026 results and FY2026 Form 10-K, filed September 10, 2026. They are dated company disclosures, not live market data or confirmation that no later results or guidance have been issued.
What the reported numbers say
The periods are not identical. Cloudflare’s fiscal year follows the calendar year; Palo Alto Networks’ fiscal year ends July 31. The table keeps the periods and accounting bases visible rather than treating every margin or growth rate as directly comparable.
| Measure | Cloudflare | Palo Alto Networks |
|---|---|---|
| Reported revenue growth | Q2 FY2026 revenue was $696.1 million, up 36% year over year; quarter ended June 30, 2026. Company release, August 6, 2026. | FY2026 Q4 revenue was $3.410 billion, up 34% year over year. Company FY2026 results release. |
| Profitability reported or guided | Q2 FY2026 GAAP gross margin was 71.8%; GAAP operating loss was $205.7 million, or 29.6% of revenue. Non-GAAP operating income was $96.1 million, or 13.8% of revenue. Company release, August 6, 2026. | FY2027 guidance calls for a 29.5% non-GAAP operating margin. Company FY2026 results release; guidance is forward-looking. |
| Cash generation | Q2 FY2026 free cash flow was $56.4 million, equal to 8% of revenue. Company release, August 6, 2026. | FY2026 adjusted free-cash-flow margin was 38.4%; FY2027 guidance calls for 38.0%. Company FY2026 results release. |
| Revenue outlook | FY2026 revenue guidance was $2.864–$2.870 billion. Company release, August 6, 2026. | FY2027 revenue guidance was $14.10–$14.20 billion, implying 23%–24% growth; next-generation security ARR guidance was $11.075–$11.175 billion, implying 22%–23% growth. Company FY2026 results release. |
| Non-GAAP EPS outlook | $1.25–$1.26 for FY2026. Company release, August 6, 2026. | $4.16–$4.19 for FY2027. Company FY2026 results release. |
Cloudflare’s revenue growth rate in its cited Q2 was higher than Palo Alto Networks’ FY2026 Q4 rate, but the quarters cover different periods. The growth rates show a snapshot, not a forecast. Palo Alto Networks’ FY2027 revenue guidance points to slower growth than Cloudflare’s cited quarter, while its guided revenue scale is much larger. Its FY2027 revenue range is roughly five times Cloudflare’s FY2026 range, but that comparison crosses fiscal years and is not a valuation comparison.
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How to read the profitability gap
Cloudflare: positive adjusted results do not erase the GAAP loss
In Q2 FY2026, Cloudflare reported both a $205.7 million GAAP operating loss and $96.1 million in non-GAAP operating income. These measures use different accounting treatments; non-GAAP operating income is not GAAP profitability. Its $56.4 million of free cash flow is a separate cash-flow measure, not a substitute for operating income. Consider all three together rather than relying on the adjusted figure alone.
Palo Alto Networks: guidance is adjusted and forward-looking
Palo Alto Networks guided to a 29.5% FY2027 non-GAAP operating margin and a 38.0% adjusted free-cash-flow margin. The company says its outlook reflects current market conditions and expectations. Its non-GAAP measures exclude share-based compensation and several acquisition-related and other expenses. Those adjustments mean the guided margins should not be compared as if they were GAAP margins or directly set against Cloudflare’s GAAP operating loss.
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Both companies’ guidance can change and may not be achieved. For an investment decision, check how actual results compare with guidance as new reports become available.
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What the outlooks suggest—and what they do not
Cloudflare’s FY2026 outlook was $2.864–$2.870 billion in revenue, $443–$445 million in non-GAAP operating income, and $1.25–$1.26 in non-GAAP EPS. Palo Alto Networks’ FY2027 outlook was $14.10–$14.20 billion in revenue, $4.16–$4.19 in non-GAAP EPS, and the margins shown above. These are company forecasts for different fiscal years, not guaranteed outcomes or directly comparable forecasts.
Cloudflare CEO and co-founder Matthew Prince said in the August 6, 2026 results release: “As the web shifts to AI answer engines and agent-driven commerce, we are seeing a fundamental rewrite of the Internet for machine-to-machine traffic.” This is management’s view about a potential source of demand, not independent evidence that the shift will produce a particular amount of revenue or profit.
Why price and valuation could change the answer
A company can grow quickly and still be a poor investment if its share price already assumes more growth or profitability than it can deliver. Conversely, slower growth does not by itself make a business a bad buy if its valuation and future results justify the price. The cited disclosures do not establish same-date share prices, market capitalizations or enterprise values, or comparable valuation multiples for the two stocks. Therefore, they cannot show which stock is cheaper or offer a current price-sensitive winner.
Before deciding, use market data from the same date for both companies and compare valuation against consistent periods and definitions. For example, compare enterprise value to forward revenue using the same forecast horizon, and compare price to free cash flow only when the cash-flow figures use comparable accounting definitions. Include the share count and cash or debt assumptions used in any per-share or enterprise-value calculation. A split, a different share class or later share issuance can affect share counts and per-share figures, so confirm the latest filings rather than carrying forward an older denominator.
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Cloudflare
Cloudflare’s Form 10-Q for the quarter ended June 30, 2026 identifies risks involving continued losses, customer retention and expansion, sales cycles, rapid technological change including AI, macroeconomic and geopolitical conditions, and financing, including convertible notes. These factors can affect both growth and the path to profitability.
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The same filing said directors, executive officers, holders of more than 5% and their affiliates controlled 66.0% of voting power as of June 30, 2026; founders Matthew Prince and Michelle Zatlyn together held approximately 49.3%. It also discussed proposed capitalization changes, including the possibility of a non-voting Class C share class and a two-for-one split. Those were filing-described plans and risks, not confirmation that either change had been completed. Check subsequent filings for status and any implications for voting rights or share count.
Palo Alto Networks
Palo Alto Networks’ FY2026 Form 10-K, filed September 10, 2026, is the relevant annual filing for reviewing its company-specific risk factors. Its results and guidance alone are not enough to rank it as categorically safer than Cloudflare. The filing reported 818 million common shares outstanding as of August 31, 2026; use a later share count if one is available when calculating current valuation.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Does Cloudflare’s past stock performance make it the better buy?
No. Cloudflare’s FY2025 Form 10-K reports that a hypothetical $100 invested at year-end 2020 would have been worth $259.44 at year-end 2025. The same comparison showed $182.25 for the S&P 500 and $248.07 for the S&P 500 Information Technology Index. The filing cautions that historical returns are not indicative of, or intended to forecast, future performance. The figures cover only Cloudflare and do not establish a future return or a better buy versus Palo Alto Networks.
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1Scan for outdated or missing drivers - takes under a minute2Clear out junk files and repair common Windows errors3Fix the driver behind crashes, sound loss and screen glitchesWhich stock may fit which investment thesis?
- Cloudflare may fit a growth-oriented thesis if an investor accepts its reported GAAP operating loss, believes revenue growth can translate into durable profitability, and considers the stock’s current valuation reasonable. The cited Q2 FY2026 results also show positive non-GAAP operating income and free cash flow, but those measures do not remove the GAAP loss.
- Palo Alto Networks may fit a scale-and-margin thesis if an investor prioritizes its much larger revenue base and believes it can deliver the FY2027 growth and adjusted margins it guided. The guidance is non-GAAP for those profitability measures and may not be achieved.
- Neither case settles valuation. Without date-matched prices and comparable multiples, the evidence cannot identify which stock offers more upside for the risk taken.
This is a comparison of company disclosures, not individualized investment advice. A decision also depends on an investor’s time horizon, portfolio, expectations and tolerance for loss.
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