Palo Alto Networks CEO Talks CyberArk Acquisition

Summary

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Bloomberg Talks — Episode Summary

Palo Alto Networks CEO Talks CyberArk Acquisition

Date: February 18, 2026
Host: Ed (Bloomberg News)
Guest: Nikesh Arora (CEO, Palo Alto Networks)

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Episode Overview

This episode features an interview with Nikesh Arora, CEO of Palo Alto Networks, focusing on the company’s recent CyberArk acquisition, recent earnings results, and broader trends in AI-driven cybersecurity. The discussion covers Wall Street’s response to earnings guidance, the rationale and math behind high-profile acquisitions (CyberArk, Chronosphere, and Koi), and how Palo Alto Networks is positioning itself for future growth in the fast-evolving cybersecurity landscape.

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Key Discussion Points and Insights

1. Market Reaction to Earnings and the CyberArk Acquisition

• Ed opens with: Wall Street's apparent confusion over Palo Alto Networks trimming full-year EPS guidance, despite beating revenue expectations.
• Nikesh Arora responds:
  • The market isn’t properly accounting for the CyberArk acquisition and its integration into guidance.
  • Guidance figures include CyberArk’s revenue, and if consensus numbers are added together, Palo Alto Networks is outperforming expectations.
  • The misunderstanding largely results from share dilution effects, which some automated trading systems (“post market bots”) haven’t factored in.
  • Quote: "Our guides are actually above consensus across the board. These are the post market bots which haven't figured this out." (01:22)

2. The Math Behind Growth Metrics

• Analysts are questioning the "next-generation ARR growth" calculation, seeing a supposed drop in organic growth to around 20%.
• Arora clarifies:
  • CyberArk and Palo Alto networks calculate ARR differently.
  • Palo Alto’s method is more conservative, stripping out hundreds of millions from CyberArk’s figures.
  • The combined guidance is actually higher than the sum of previous individual outlooks — but the methodology confusion has muddied analyst perceptions.
  • Quote: "Our computation of ARR is different. It's more conservative than CyberArk. So Cyber Arcs is more as aggressive than ours." (02:23)

3. Chronosphere Acquisition and a Major Customer

• Ed highlights a “nine-figure” Chronosphere deal noted on the earnings call.
• Nikesh Arora (on the customer and rationale):
  • While not naming names, he refers to the client as a "popular LLM [large language model]" provider.
  • Chronosphere is praised as a net-new startup with cost-effective, scalable observability tech.
  • Their ability to "leapfrog" incumbent tools was a major acquisition driver.
  • The deal involves supplanting a legacy vendor and is indicative of Chronosphere's growing market appeal.
  • Quote: "The fact that 250 engineers can build something so amazing that provides a leapfrog opportunity against current players in observability. That's what we bought them for." (03:20)

4. Observability as a Core AI/Agentic Infrastructure Need

• Ed: Why would a cutting-edge AI company outsource security to Palo Alto Networks instead of building it in-house?
• Nikesh Arora explains:
  • Observability isn’t just about inspecting AI models; it guarantees end-to-end system reliability (latency, uptime, performance) for AI products.
  • Major AI companies are focused on their models and research, turning to specialists like Palo Alto Networks for infrastructure dependability.
  • This applies to a wide range of consumer apps, not just AI—Uber, DoorDash, YouTube, etc.—where observability underpins revenue-critical uptime.
  • Quote: "Every one of these [apps] has to have an underpinning observability platform to make sure that it's fully available 99.99% of the time..." (04:44)

5. The Koi Acquisition for Endpoint AI Security

• Ed asks about the Koi acquisition and its specific security problem area.
• Arora outlines:
  • Enterprises are broadly adopting AI coding assistants—like GitHub Copilot, Cursor, and various open-source tools.
  • The locus of coding activity has shifted to developer laptops, creating new security blind spots.
  • Koi targets this gap with specialization in endpoint security for generative AI/dev environments—distinct from traditional Endpoint Detection & Response (EDR) products.
  • Quote: "That's an uncovered area of security. You have to protect that laptop, that endpoint… This is very specific to endpoint security for agenti capability. That's what Koi does." (05:59)

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Notable Quotes & Memorable Moments

• Nikesh Arora (on market confusion):

  • "If you take the consensus of Cyber and ours, you're actually getting above the collective consensus." (01:22)
  • "If you look at the adoption of AI at the enterprise end, you are seeing tremendous amount of adoption of coding. People are using cloud code, cursor Codex and many, many open source coding platforms as they use it. All that action is happening at the endpoint at the develop laptop and that's where that's an uncovered area of security." (05:59)

• Nikesh Arora (on observability's role in AI):

  • "Observability is to look at it from an end to end perspective to see... there's nothing in the entire end to end delivery chain that is underperforming." (04:44)

• Ed (on the climate for tech M&A):

  • "You're always honest, you always very specific about M and A..."

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Timestamps for Important Segments

• 01:07 — Earnings details and guidance confusion
• 02:00 — Growth metrics, ARR debate, impact of CyberArk accounting
• 03:06 — Chronosphere "nine-figure" deal and customer characteristics
• 04:14 — Observability’s critical role in large AI/Agentic projects
• 05:48 — Koi acquisition and endpoint protection for AI developers

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Summary

Nikesh Arora asserts Palo Alto Networks is outperforming expectations, with recent acquisitions (CyberArk, Chronosphere, and Koi) strategically enhancing their cybersecurity offerings to match the accelerating pace of AI adoption and new enterprise development realities. Much of the market’s confusion, he argues, stems from technical differences in reporting and integrating acquired companies, not underlying operating weakness. The firm's strategy is “buying” future credence in observability and endpoint AI security—both fast-growing areas as software and AI capabilities move deeper into enterprise operations. The episode provides a clear, CEO-level view of how security, AI, and M&A are intersecting at the industry’s leading edge.

Transcript

[Podcast Host / Narrator]

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[Nikesh Arora]

Bloomberg Audio Studios Podcasts Radio News Nikesh I think we.

[Ed]

Get right into the numbers, right? The the situation is full year EPS guidance come down, revenue is beaten. And so I'm trying to understand like the environment that you're in, you know, what is it that that's weighing on profitability for the balance of this year.

[Nikesh Arora]

Well first of all, nice to see you Ed and thank you for having me on. I think the market is not paying attention to our numbers carefully. We just completed our largest acquisition in Cyber Arc. We had a great quarter. Our numbers are across every known consensus metric. The market is not understanding that our guidance for the next two quarters includes Cyber Arc. If you take the consensus of Cyber and ours, you're actually getting above the collective consensus. But the market hasn't understood the dilution of shares. So I think they have it wrong. Our guides are actually. Above consensus across the board. These are the post market bots which haven't figured this out.

[Ed]

I always enjoy you joining us on the network. You're always honest, you always very specific about M and A, right? The math that people are doing is the guide for next gen air growth is 53 to 54% cyber arc chronosphere. But that would suggest that organically growth is nearer to sort of 20%. Can you see the math that they're doing?

[Nikesh Arora]

Yes, I see the matt, but I think if they listen carefully, Cyberark computes error differently from us. So we've had to strip out a few hundred million dollars of Cyber rkr. Hence if you take that out and add it back, we're actually doing better collectively than we were guided. This will Clarify by tomorrow morning as the market opens. But I think the market hasn't understood the comments our CFO made around the fact that our computation of ARR is different. It's more conservative than Cyberark. So Cyber Arcs is more as aggressive than ours. If you down there are down to the way we compute it actually collectively our guidance is in excess of what we previously got it organically, individually.

[Ed]

On the call you mentioned a nine figure Chronosphere deal. You didn't name the customer. Somebody from the sell side asked you about the deal. They didn't ask you to name the customer. Who's the customer? Nakash.

[Nikesh Arora]

It's a popular LM out there. I think more importantly, what is there to understand is that Crowdosphere is a net new startup. They came up with a new way of doing observability which is much more cost effective, much more efficient and can scale to the volume that are putting out there. That's the reason we bought the company. The fact that 250 engineers can build something so amazing that provides a leapfrog opportunity against current players in observability. That's what we bought them for. They have been under test for many months with this. They have fully been accepted across the platform. They will be replacing an incumbent vendor and as that continues to grow, we expect to see continued growth of ARR for that one customer. But additionally, obviously Chronosphere is talking to a whole bunch of net new customers who are looking for either get off their do it yourself observability platforms or the place expensive observability platforms that they've subscribed to in the past.

[Ed]

Nikesh, like observability is so core to what is happening in Agentic right now. If we move on the assumption that the customer is one of the key Frontier Labs. Would you just talk a little bit about why they came to you for security rather than do security themselves? That, that. I know that might sound like a silly question, but actually you know a lot of the Frontier Labs have teams, right? They're looking at this issue themselves. They see value clearly in what Palo Alto Networks is offering.

[Nikesh Arora]

Well, remember, observability is beyond the model, right? The model people are focused on making sure their model is amazing. It does all the things that you expect it to do. But observability is to look at it from an end to end perspective to see how do they make sure that the customers of theirs who are using these things and the usage continues to double almost every quarter. How do they make sure that all their systems are low Latency are working perfectly and there's nothing in the entire end to end delivery chain that is underperforming. So that's what observability does. The reason they're coming to us is because they're busy building the best models, applying their AI research to the models. We're busy with Chronosphere making sure that the end to end proposition works. And there is very low latency by the way. This is true for not just LLM. This is true for every consumer app there is out there. Whether you take Uber or DoorDash or YouTube. Every one of these has to have an underpinning observability platform to make sure that it's fully available 99.99% of the time because every minute it is not at the capability and the latency that is required is lost revenue.

[Ed]

Nikesh, very quickly you acquired Coy. The idea is greater visibility into AI threats. But just succinctly, what problem did that solve for you on the team? What are you getting?

[Nikesh Arora]

Yeah, look, I think if you look at the adoption of AI at the, the enterprise end, you are seeing tremendous amount of adoption of coding. People are using cloud code, cursor Codex and many, many open source coding platforms as they use it. All that action is happening at the endpoint at the develop laptop and that's where that's an uncovered area of security. You have to protect that laptop, that endpoint of the developer to ensure that you can deliver code safely and securely. Koi saw the opportunity an year and a half ago. They built a capability they have hot people are adopting them across the board. Anyone who's trying to use vibe coding, anybody who's trying to get onto the coding bandwagon, find efficiencies, needs a security at the endpoint. This is different than other endpoint security, but us and other players in the industry sell called adr. This is very specific to endpoint security for agenti capability. That's what Koi does. So that's the reason we acquired Koei.

[Ed]

Nikesh Arora Palo Alto Network CEO jumping straight from the earnings call to Bloomberg Television.

[Podcast Host / Narrator]

Support for the show comes from public. Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public. You can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts. Yep. High yield cash. Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing Member FINRA SIPC Advisory Services by Public Advisors SEC Registered Advisor crypto services by ZeroHash all investing involves risk of loss. See complete [e-mail] Disclosures. With volley from iShares, you get access to both monthly income and growth potential in one simple etf. It's the best of both worlds. Discover Bali Ishares Large Cap Premium Income Active ETF iShares the market is yours. Visit www.ishares.com to view perspectives for investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Risks include principal loss and the use of derivatives, which could increase risks and volatility. Monthly income is not guaranteed. Prepared by BlackRock Investments, LLC.