Palo Alto's $25 billion deal for CyberArk targets rising AI-driven threats

Wednesday's cash-and-stock deal, one of the largest tech takeovers this year, underscores a consolidation in the cybersecurity industry as customers streamline vendors after facing breaches while relying on a patchwork of firms.

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A surge in cyberattacks, including data breaches and ransomware, has driven demand for more comprehensive defenses. That has fueled interest in firms including CyberArk.

"The rise of AI and the explosion of machine identities have made it clear that the future of security must be built on the vision that every identity requires the right level of privilege controls," Arora said in a statement.

The Israeli company's investors will receive $45.00 in cash and 2.2005 shares of Palo Alto for each share they own.

That values CyberArk at $495 a share, representing a 29.2% premium to Monday's close, the last session before reports of deal talks, according to Reuters calculations.

Palo Alto shares fell 8%, while CyberArk slipped 2.2% to around $424 after jumping 13.5% on Tuesday.

INTEGRATION WORRIES

Analysts said the drop in Palo Alto shares reflected investor concerns about post-acquisition integration, given that it has usually targeted smaller deals of less than $1 billion.

"It's a bit of an unknown territory for Palo Alto," said Imtiaz Koujalgi, Roth Capital Partners' managing director of software research.

"Also, Palo Alto talks about integrating its acquisitions into its platform, but given the scale of CyberArk and installed base that could be a challenge."

Palo Alto has completed more than 14 acquisitions since 2019, including at least seven in the past two years, to bolster its cloud and AI security capabilities.

CyberArk reported revenue of about $1 billion for 2024, up 33% year-over-year, but its loss increased by about $27 million to $93.5 million as expenses jumped.

The latest buyout could accelerate Palo Alto's AI security push, as it can tap its large sales force to drive adoption of CyberArk's tools, seen as vital for securing AI systems.

"It helps broaden the portfolio since Palo Alto does not have any offering in the 'identity' space," said Koujalgi, adding the deal could also provide a boost to the company's slowing next‑generation security business.

Palo Alto said the buyout is expected to close in the second half of its fiscal year 2026 and would immediately add to its revenue growth and margin.

Analysts do not expect tough antitrust scrutiny for the deal, given the little overlap in the companies' services, but they said it could accelerate M&A in the sector.

Reporting by Kritika Lamba and Aditya Soni in Bengaluru; Editing by Sriraj Kalluvila

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