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)

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