After $25B CyberArk deal, Palo Alto spends $3.35B on Chronosphere to boost its AI stack
The cybersecurity giant's newly raised earnings outlook underscores strong demand despite investor unease over aggressive M&A.
Palo Alto Networks said on Wednesday that it will acquire cloud management and monitoring company Chronosphere for $3.35 billion, as the cybersecurity firm moves to strengthen its AI capabilities.
The Santa Clara–based company plans to integrate Chronosphere into its Cortex AgentiX platform, enabling its AI agents to analyze Chronosphere’s data, detect performance issues, and autonomously investigate their root causes.
Palo Alto will pay the acquisition price in cash and new equity that will replace existing equity awards.
Shares of Palo Alto fell more than 3% in after-hours trading. According to analysts, Chronosphere’s price tag, and the decision to announce this deal before completing the acquisition of CyberArk, are likely weighing on the stock.
Palo Alto is paying nearly 21 times Chronosphere’s annual recurring revenue, which exceeded $160 million as of the end of September 2025.
“This large surge towards building AI compute is causing a lot of the AI players to think about newer models for software stacks and infrastructure stacks in the future,” said CEO Nikesh Arora.
The company announced the acquisition of Israeli identity security firm CyberArk for about $25 billion in July. CyberArk shareholders approved the takeover last week, and both acquisitions are expected to close in the second half of fiscal 2026.
Separately, Palo Alto raised its annual revenue and profit forecasts, citing rising demand for cybersecurity solutions amid escalating online threats.
For fiscal 2026, the company now expects revenue between $10.50 billion and $10.54 billion, compared with its previous outlook of $10.48 billion to $10.53 billion. It forecasts annual adjusted earnings per share of $3.80 to $3.90, up from the earlier range of $3.75 to $3.85.
Cybersecurity spending remains resilient, driven by nation-state attacks and increasingly sophisticated ransomware campaigns, benefiting companies including Palo Alto.
For the quarter ended October 31, Palo Alto’s revenue grew 15.6% year over year to $2.47 billion, broadly in line with analysts’ expectations, according to LSEG data.
Reuters contributed to this report.
