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Shares of Palo Alto Networks (NASDAQ: PANW) climbed 15% in June, according to data provided by S&P Global Market Intelligence. After a poorly received earnings report in May, investors were excited about bullish demand indicators from other cybersecurity stocks.

Good news from cybersecurity peers

Palo Alto reported quarterly results in May. Its 15% revenue growth was in line with analyst forecasts, and it beat expectations with $1.32 earnings per share. However, the stock slid downward after the report. It's dealing with slowing growth in its core firewall products, and bookings have been somewhat weaker than analysts had expected. Palo Alto's revenue guidance was roughly aligned with consensus forecasts, but investors were still worried about the outlook overall.

That news was fully digested by the market by June, so the stock's performance last month was driven by demand indicators from some of its cybersecurity industry peers. Those data points were mostly bullish. Zscaler (NASDAQ: ZS) beat analyst estimates with 32% revenue growth, and its $0.88 quarterly earnings per share (EPS) crushed consensus expectations. Investors were pleased with the company's upbeat outlook. CrowdStrike (NASDAQ: CRWD) followed that news with impressive results of its own. CrowdStrike's sales expanded 33%, driving better-than-expected revenue and earnings. That momentum prompted the company to raise its full-year guidance.

The rising tide from a few quarterly reports seemed to lift all boats in June. Cloudflare (NYSE: NET) and SentinelOne (NYSE: S) also marched higher despite reporting quarterly results in May. The price charts point to a common momentum driver.

There have been concerns that high interest rates around the globe are hampering corporate spending, which elongates sales cycles and slows growth for cybersecurity companies. However, the latest results from major industry players suggest that demand is still strong. If the industry gets through challenging short-term conditions, then the long-term outlook is exciting. Sensitive data is part of nearly every business' operations, and it's essential to protect that data. Cybercriminals have a growing number of access points to exploit network weaknesses, so the leading vendors of cybersecurity solutions should experience robust demand growth.

Palo Alto has great long-term prospects

Palo Alto Networks is unquestionably among the cybersecurity industry leaders. The company consistently receives high marks from industry analysts. Forrester just published a glowing review on Palo Alto's product suite in June. The company is expanding beyond its traditional core firewall business, and it has promising opportunities to take market share in adjacent areas like Secure Access Service Edge (SASE). These newer product categories are generating an increasing proportion of Palo Alto's top line, which should help to accelerate growth – or at least dilute the slowdown in its firewall business.

Cybersecurity is a competitive industry, but growing demand for a range of products is sustaining impressive growth rates from multiple companies in the sector. Most of the leading cybersecurity stocks are delivering impressive growth while producing major cash flow. Despite lagging competitors' top-line growth rates, Palo Alto still expanded 15% last quarter while expanding margins to produce nearly $500 million of free cash flow. The stock's forward P/E ratio is over 50. Its gains on June's industrywide momentum following a lukewarm quarter illustrate investor bullishness about cybersecurity's long-term prospects and Palo Alto's ability to execute.

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Ryan Downie has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cloudflare, CrowdStrike, Palo Alto Networks, and Zscaler. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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