Cybersecurity company Palo Alto Networks (PANW) has signed an agreement to acquire Chronosphere, a next-generation observability platform, for $3.35 billion. The company expects this deal to enhance its artificial intelligence (AI) capabilities, with AI workloads requiring real-time observability. The news of the acquisition came along with Palo Alto’s better-than-expected results for the first quarter of Fiscal 2026 and mixed full-year guidance.
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The company raised its full-year revenue and profit outlook to reflect higher demand for cybersecurity solutions as online threats rise amid rapid digitization, transition to the cloud, and increased AI adoption.
Key Insights from Palo Alto’s Chronosphere Deal
Under the terms of the agreement, Palo Alto Networks will purchase Chronosphere for a total consideration of $3.35 billion, payable in cash and replacement equity awards. The acquisition is expected to be completed in PANW’s second half of Fiscal 2026, subject to closing conditions and regulatory approvals.
Palo Alto highlighted that Chronosphere’s annual recurring revenue (ARR) of more than $160 million as of the end of September 2025 reflects triple-digit year-over-year growth. The company plans to integrate its Cortex AgentiX AI agent with Chronosphere’s platform, enabling not only the detection of performance issues but also the autonomous investigation of the root cause, followed by agentic remediation.
Interestingly, Palo Alto has been on an acquisition spree. In July, the company announced the acquisition of identity security firm CyberArk Software (CYBR) for $25 billion. CyberArk’s shareholders approved the acquisition last week, and the deal is expected to close in PANW’s second half of Fiscal 2026.
PANW shares were down 3.7% in Wednesday’s extended trading session. According to Reuters, D.A. Davidson analyst Rudy Kessinger thinks that the price of the Chronosphere deal and the announcement of the acquisition before completion of the CyberArk transaction likely dragged down Palo Alto stock.
Is PANW a Good Stock to Buy Now?
Currently, Wall Street has a Strong Buy consensus rating on Palo Alto Networks stock based on 25 Buys and three Holds. The average PANW stock price target of $237.52 indicates about 19% upside potential.
These price targets/ratings are expected to be revised as more analysts react to Q1 FY26 results, outlook, and the Chronosphere acquisition. PANW stock has risen 10% year-to-date.
