Palo Alto Networks saw its stock decline roughly 6% in pre-market trading on Wednesday after the cybersecurity company revised lower its annual adjusted profit outlook, attributing the change to higher costs associated with integrating recent acquisitions.
Management said that integration outlays related to a series of deals are weighing on near-term profitability. Among the transactions highlighted was the firm's acquisition of CyberArk, described by the company as a $25 billion deal, with a reported $2.3 billion cash outlay recorded in the fiscal third quarter tied to that purchase. The CyberArk transaction was completed earlier in February.
Other notable deals completed or agreed in recent months include the purchase of Israeli cybersecurity startup Koi and a $3.35 billion agreement to acquire Chronosphere, a cloud management and monitoring firm. Company executives have been repositioning Palo Alto as a consolidated platform provider as customers facing AI-driven threats look for more integrated security suites.
Despite the short-term profit headwinds driven by acquisition-related integration costs and margin compression, some analysts remain supportive of the company s long-term positioning, particularly in areas such as identity security and observability. TD Cowen analysts commented that the CyberArk and Chronosphere transactions strengthen Palo Alto Networks platform approach by making identity a core pillar and by enhancing real-time visibility across applications, infrastructure and AI systems.
Morningstar analyst Malik Ahmed Khan said, "The profitability 'cut' is mostly due to the firm s acquisitions and we see the firm being able to leverage these acquisitions by cross-selling its existing customer base."
On guidance, the company trimmed its 2026 adjusted profit-per-share forecast to a range of $3.65 to $3.70, down from a prior outlook of $3.80 to $3.90. At the same time, Palo Alto raised its full-year revenue expectation to between $11.28 billion and $11.31 billion, up from an earlier view of $10.50 billion to $10.54 billion.
Market reaction to the margin and profitability revision was evident in the pre-market decline in the stock. Observers point out the trade-off the firm is accepting: near-term earnings pressure from acquisition integration costs versus an expanded platform that could enable cross-selling and deeper visibility capabilities across customers deployments.
The company s recent buying spree and strategic emphasis on identity and observability reflect management s view of where customers are directing their security spend as AI-related threats evolve. At the same time, the immediate effect of those transactions has manifested in measurable integration expenses and a lower adjusted EPS outlook for the coming fiscal year.
Context and next steps
- Palo Alto has completed the CyberArk acquisition and announced multiple other strategic investments in cybersecurity and cloud monitoring.
- Analysts remain focused on whether cross-selling and platform benefits will offset the short-term margin impact from integration costs.
- Investors will likely watch subsequent quarterly results for signs of margin recovery and successful integration.