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Palo Alto Networks (NASDAQ:PANW | PANW Price Prediction) and Okta (NASDAQ:OKTA) are both selling off sharply Friday, with PANW stock sliding 6% to $146 and OKTA shares dropping 7% to $73.50 as of midday. The catalyst is a leak about Anthropic’s new cybersecurity-focused AI model, called Claude Mythos, which has rattled investors across the sector.
Both declines are running deeper than the broader market. The S&P 500 is down by around 1% today, while the technology sector has declined approximately 1.3%. This selloff is concentrated in cybersecurity, running well ahead of the tech sector’s decline overall.
The main concern is that if an AI-native model like Claude Mythos can automate threat detection and response at scale, it could commoditize the very products that established cybersecurity platforms charge premium prices to deliver. Investors are already repricing that risk ahead of any confirmation.
Palo Alto Networks: A Difficult Week Gets Worse
Today’s drop adds to an already bruising stretch for PANW stock. Palo Alto Networks shares have declined 9% over the past week and are now down 19% year to date, opening today at $156.36 before sliding further.
The selloff comes despite genuinely strong recent fundamentals. In Q2 FY2026, Palo Alto Networks reported revenue of $2.594 billion, up 14.9% year over year, with non-GAAP EPS of $1.03 beating the consensus estimate of $0.9389 by 9.7%. The company’s platformization strategy is gaining traction, with Next-Generation Security ARR reaching $6.30 billion, up 33% year over year.
Furthermore, Palo Alto Networks has been expanding its own AI-native capabilities, recently launching Prisma AIRS and updating its platform to discover and secure AI agents. CEO Nikesh Arora noted in the most recent earnings call that “customers are keen to both modernize and normalize their cybersecurity stack, aligning them to our approach.”
The question investors are asking today is whether that approach holds up against an AI model built from the ground up to compete in this space.
Okta: Growth Deceleration Makes the Selloff Hit Harder
Okta stock’s drop is particularly sharp given where the stock already stands. OKTA shares have fallen 33% over the past year and are down 14% year to date. For long-term holders, today’s move is another painful chapter in a prolonged drawdown.
The company did report solid results in its most recent quarter. Specifically, Okta’s Q4 FY2026 revenue came in at $761 million, up 11.6% year over year, with non-GAAP EPS of $0.90 beating the consensus of $0.85 by 5.88%. That is genuine progress.
Okta also crossed into full-year GAAP operating profitability, reporting $149 million in GAAP operating income versus a $74 million loss in FY2025. The vulnerability, though, is in the forward trajectory.
Okta guided for FY2027 revenue of $3.17 billion to $3.19 billion, representing approximately 9% growth. That deceleration makes the stock more sensitive to competitive fears. Okta has launched Auth0 for AI Agents and positioned its platform as the identity layer for securing AI, but today’s 6.45% decline suggests investors are not yet convinced that pivot provides sufficient insulation against the Anthropic threat.
Sector Contagion and the Broader Picture
Palo Alto Networks and Okta are not alone today. CrowdStrike Holdings (NASDAQ:CRWD) is also under pressure, with CRWD shares falling 6% to $368 on related AI competition concerns. You can read more about CrowdStrike’s session in our full coverage here. The pattern across all three names points to a sector-wide repricing of competitive risk, not stock-specific news.
Granted, the Claude Mythos leak has not been officially confirmed by Anthropic, and the actual competitive threat may prove less disruptive than today’s market reaction implies. Morningstar has previously identified both Okta and Palo Alto Networks as cybersecurity stocks well-positioned amid increased ransomware attacks, citing their innovative solutions for identity access, network security, and cloud protection. Both companies carry sticky enterprise customer bases and recurring revenue models that do not evaporate overnight.
Looking ahead, a key question heading into the close and afterwards is whether any official statement from Anthropic clarifies the scope and timeline of Claude Mythos. Confirmation or denial from the company could move these cybersecurity stocks meaningfully in either direction.
