Feb 21 (Reuters) - Palo Alto Networks sank 23% on Wednesday and sparked a selloff in cybersecurity stocks after softer client spending and steep promotions forced the company to cut its annual billings forecast.

The industry heavyweight will lose around $25 billion in market value and record its biggest decline in seven years if the premarket losses hold. Shares of rivals such as Zscaler and CrowdStrike fell more than 9% each.

Analysts pegged Tuesday's forecast cut on the company's plan to offer up to six months of free services to customers who are switching to its one-stop-shop platform for cybersecurity products.

Cybersecurity firms are combining their offerings into a unified platform to cater to customers that are tired of buying products from different vendors and still facing security breaches.

"The strategy makes sense, and it aligns with strategies we have seen other platform vendors deploying, but we expect Palo Alto Networks stock will remain under pressure for a while as the change is contributing to a cut to billings guidance," J.P. Morgan analysts said in a client note.

The results also took a hit from a slowdown in the company's business which caters to the U.S. federal government, a trend which CEO Nikesh Arora said would likely continue until mid-2024.

At least 12 brokerages lowered their price targets on the stock, pulling the median view to $345, which is still 6% higher than the stock's last close, according to LSEG data.

The stock trades at a forward price-to-earnings ratio of about 60, compared with Zscaler's 89.1 and CrowdStrike's 85.47.

(Reporting by Aditya Soni in Bengaluru; Editing by Devika Syamnath)