Palo Alto Networks shares plunged 7% in after-hours trading as investors questioned the company's aggressive AI transformation strategy and massive $25 billion acquisition of identity security firm CyberArk. The stock decline comes as CEO Nikesh Arora defended cybersecurity's position in an AI-dominated software landscape, marking the latest casualty in a broader selloff hitting enterprise software companies pivoting toward artificial intelligence. The move reflects growing market skepticism about whether traditional security vendors can successfully navigate the shift to AI-powered platforms without sacrificing margins.
Palo Alto Networks just gave investors a harsh lesson in how expensive the AI transformation can be. The cybersecurity giant's shares tumbled 7% after the company revealed its $25 billion bet on CyberArk, marking one of the industry's largest acquisitions as traditional security vendors scramble to stay relevant in an AI-first world.
CEO Nikesh Arora didn't mince words defending the strategy. Speaking to analysts, he pushed back against concerns that AI agents and automation will erode demand for traditional security tools. "Cybersecurity isn't going anywhere," Arora said, according to CNBC's coverage. "If anything, AI expands the attack surface we need to protect."
But Wall Street isn't buying it - at least not yet. The stock decline reflects a broader malaise hitting enterprise software companies caught between legacy business models and AI-driven futures. Microsoft, Salesforce, and other cloud infrastructure giants have all seen volatility as investors try to handicap which vendors will emerge as AI winners.
The CyberArk deal represents Palo Alto's most aggressive move in an acquisition spree that's reshaped the company's profile over recent months. By gobbling up the identity security specialist, Palo Alto is betting that converging network security, cloud protection, and identity management under one AI-powered platform will create a competitive moat. It's a massive gamble that the company can integrate disparate technologies faster than competitors can build their own AI capabilities organically.
