Palo Alto tops earnings expectations, announces Chronosphere acquisition

Palo Alto Networks beat Wall Street’s fiscal first-quarter estimates after the bell on Wednesday and announced plans to buy cloud observability platform Chronosphere for $3.35 billion.

The stock fell about 3%.

Here’s how the company did versus LSEG estimates:

Earnings per share: 93 cents adjusted vs. 89 cents expectedRevenue: $2.47 billion vs. $2.46 billion expected

Revenues grew 16% from $2.1 billion a year ago. Net income fell to $334 million, or 47 cents per share, from $351 million, or 49 cents per share in the year-ago period.

Palo Alto’s Chronosphere deal is slated to close in the second half of its fiscal 2026. The cybersecurity provider is also in the process of buying Israeli identity security firm CyberArk for $25 billion under CEO Nikesh Arora’s acquisition spree.

He told investors in an earnings call that Palo Alto is making this simultaneous acquisition to address the fast-moving AI cycle.

“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,” he said.

Palo Alto guided for revenues between $2.57 billion and $2.59 billion in the second quarter, the midpoint of which was in line with a $2.58 billion estimate. For the full year, the company expects $10.50 billion to $10.54 billion, versus a $10.51 billion estimate.

Capital expenditures during the period were much higher than expectations at $84 million. StreetAccount expected $58.1 million. Remaining purchase obligations, which tracks backlog, grew to $15.5 billion and topped a $15.43 billion estimate.

The rise of artificial intelligence has also stirred up increasingly sophisticated cyberattacks and contributed to tools for customers. The Santa Clara, California-based company has infused AI into its tools and launched automated AI agents to help fend off attacks in October.