Palo Alto shares fall as deal costs pile up amid AI security push
Feb 18 (Reuters) - Palo Alto shares fell 8% on Wednesday after the cybersecurity firm lowered its annual profit forecast on higher integration costs related to recent acquisitions, including its $25 billion CyberArk deal.
The company has been repositioning itself as a one‑stop shop as AI‑driven threats push customers toward integrated platforms, but rising costs from recent deals, including a $2.3 billion outlay for CyberArk in the fiscal third quarter, are weighing on profit.
Palo Alto Networks has struck several major deals in recent months, including the acquisition of Israeli cybersecurity startup Koi and a $3.35 billion agreement to acquire cloud management and monitoring firm Chronosphere. It completed the CyberArk purchase earlier in February.
The company's unified network-to-browser architecture positions it strongly for AI-driven environments that demand integrated, machine-speed defenses.
Despite near-term margin pressure and profitability headwinds from the deals, analysts remain confident in Palo Alto's long-term strategy, particularly in identity security and observability.
"The profitability 'cut' is mostly due to the firm's acquisitions and we see the firm being able to leverage these acquisitions by cross-selling its existing customer base," Morningstar analyst Malik Ahmed Khan said.
The company cut its 2026 forecast for adjusted profit per share to be between $3.65 and $3.70, down from its prior forecast of $3.80 to $3.90.
TD Cowen analysts said the CyberArk and Chronosphere acquisitions reinforce Palo Alto's platform strategy by making identity a central pillar and improving real-time visibility across applications, infrastructure and AI systems.
It raised its annual revenue forecast to $11.28 billion to $11.31 billion, compared with its earlier view of $10.50 billion to $10.54 billion.
"With accelerating top-line growth and durable margin execution, we would lean in on weakness ahead of the integration narrative stabilizing and as AI-driven security tailwinds intensify through FY26 and beyond," analysts at Truist Securities said.
(Reporting by Harshita Mary Varghese in Bengaluru; Editing by Tasim Zahid)