Palo Alto Networks (PANW) Q2 FY26 earnings call: guidance and Q&A

How does the existential nature of the AI shift compare to the cloud transition, what areas will be obsoleted, and is M&A the primary lever again for Palo Alto Networks?

Nikesh compared the AI shift to the cloud transition, noting that while cloud adoption was slow in enterprises, AI is showing faster security adoption (e.g., Prisma AIRS). He emphasized that AI is a positive trend for security, driving consolidation and platformization due to the need for faster responses and consistent data across disparate vendors. He believes AI will require more security, especially as critical functionality moves to AI agents, and that the company's platform approach is well-suited for this.

“I think this time, I'm still confused why the market is treating AI as a threat to at least cybersecurity. I can't speak for all the software because one thing we're definitely seeing that customers have figured out that they need to drive more consistency in their security stack to be able to respond faster using AI.”

asked by Robbie Owens · answered by Nikesh Arora

How do LLMs impact SIEM tools, considering concerns that LLMs could make them obsolete, and is there a risk of new competitors for modernization opportunities?

Nikesh stated that LLMs are a net positive and additive to security capabilities, particularly for data classification and DLP. He clarified that LLMs are not a threat to comprehensive security products because they lack the 99.9% accuracy required for security, where adversaries only need to be right once. He sees LLMs as tools to summarize capabilities and assist with pre-work, but not as replacements for security products that generate proprietary domain-specific data.

“LLMs until they get to 99%, 99.9% accuracy are not a threat to delivering security. They are tools that can be used to summarize capabilities.”

asked by Brad Zelnick · answered by Nikesh Arora

How will the joint pipeline opportunity with CyberArk unfold, leveraging Palo Alto's go-to-market machine, and can Dipak provide more clarity on CyberArk's ARR contribution?

Nikesh explained that Palo Alto Networks and CyberArk teams are actively working on joint opportunities, leveraging each other's pipelines and sales incentives. He noted anecdotal evidence of cross-selling already occurring. While systems are currently different, a central acceleration team is driving collaboration, and the goal is to build next-generation products together, expecting continued momentum as teams integrate. Dipak clarified that CyberArk's NGS ARR was about $1.2 billion as of December 2025.

“We've already armed the teams with plans as to how to address the joint opportunity. But what's fascinating is just anecdotally, just as you were informing the teams, we already have had CyberArk reps coming us to have an opportunity for Palo Alto's products in an account.”

asked by Saket Kalia · answered by Nikesh Arora

What is the impact of enterprise-wide AI agent adoption on network traffic volume, and how will this affect demand for network security products like firewalls and SASE?

Nikesh stated it's too early to see a significant impact on network traffic volume from enterprise AI adoption, except for coding apps which are endpoint-intensive. He highlighted that the current challenge is consolidating AI traffic for visibility and control. He expects traffic to grow as AI adoption increases and data centers are built, but the focus remains on building the foundational security pieces for this future.

“I think the challenge right now is consolidating that traffic. How do you get all the AI traffic to be in one place. So you can understand it, provide visibility, look at the ability to control it and be able to act on it.”

asked by Joshua Tilton · answered by Nikesh Arora

If AI is positive for security, when will its impact be visible in the company's financial numbers, as it hasn't shown up significantly yet?

Nikesh compared the current AI impact to early cloud security adoption, which also took time to show up in numbers due to slower enterprise adoption compared to consumer. He noted that Prisma AIRS customer growth trajectory is similar to XSIAM's early days. He believes the current phase is about laying groundwork and building piece parts for AI security, with significant traffic growth expected as data centers are consumed.

“You didn't see cloud security numbers for a while because typically, cloud adoption in enterprises lagged the consumer. And then even then, it was literally a 2-year cycle, a 3-year cycle before enterprises fully got all their applications and workloads moved onto the cloud.”

asked by John DiFucci · answered by Nikesh Arora

What technical lift is required to make CyberArk's privileged access management more accessible for every user, and what has been learned about securing agentic identity between PAM, IGA, and IAM?

Lee Klarich discussed the transformation of Privileged Access Management (PAM) towards "modern PAM" with just-in-time controls and zero standing privileges, which improves security and user experience. He mentioned ideas for integrating CyberArk with Prisma Browser to further ease interaction. For agentic identity, he sees it as a blend of machine identity and privileged users, where CyberArk's leadership in those areas positions it well to adapt and optimize for AI agent use cases, potentially integrating with Prisma AIRS.

“The further we have ideas for how we can leverage integrations between CyberArk and, for example, Prisma Browser in terms of how do we integrate capabilities in the place where the user is already doing work in order to make it even easier for them to take advantage of these capabilities.”

asked by Gabriela Borges · answered by Lee Klarich

What key attributes enabled Chronosphere to secure a 9-figure expansion deal with a leading AI provider, and how does Palo Alto Networks manage the integration of two large acquisitions simultaneously?

Nikesh explained Chronosphere's success with a large AI provider is due to its highly scalable, net-new architecture for observability, which offers significant cost advantages and displaces existing vendors. He noted that Chronosphere passed technical hurdles and expects a full transition from the previous vendor within 6-12 months. Lee added that Chronosphere's unique capabilities for the high-end market, including scalability and AI analytics, will be expanded to replace incumbent infrastructure for large enterprises. Nikesh addressed integration by highlighting extensive pre-planning, clear communication of roles/targets, leveraging past acquisition lessons, and adding internal capacity.

“Chronosphere is a highly scalable solution and its scalability is dependent on a net new architecture design for observability, which is different from what the current incumbents in the space have. So that capability allows them to deliver those capabilities at approximately half the price, if not more, than or less than some of the other players out there.”

asked by Adam Tindle · answered by Nikesh Arora

How does the management team keep focus and avoid execution or distraction issues when closing two of Palo Alto's largest acquisitions within weeks of each other?

Nikesh addressed concerns about managing multiple large acquisitions by highlighting extensive pre-planning (7 months for CyberArk, 2-3 months for Chronosphere). He mentioned that every employee's role and targets were communicated on the close date. He emphasized leveraging lessons from 30+ prior acquisitions, adding internal capacity, and having clear governance and work streams across all functions to ensure smooth integration and maintain business momentum.

“We have had the opportunity to plan where they need to be. So where we have our eye on the ball. That's our job, right, from a CyberArk perspective.”

asked by Gregg Moskowitz · answered by Nikesh Arora