‘In this new era, security is no longer a bolt on,’ Palo Alto Networks CEO Nikesh Arora said.
Palo Alto Networks CEO Nikesh Arora believes the cybersecurity vendor’s “platformization” strategy of selling customers more of its product portfolio to provide a consistent security experience led to growth in its most recent fiscal quarter, with the upcoming acquisition of CyberArk taking the vendor to another level in identity and enterprise browsers positioning Palo Alto Networks for domination in AI security.
“In this new era, security is no longer a bolt on,” Arora told analysts on the Santa Clara, Calif.-based vendor’s quarterly earnings call Monday. “It is a foundational enabler of transformational success.”
Reporting results for its fourth fiscal quarter, ended July 31, Palo Alto Networks revealed that it has become the first dedicated cybersecurity company to surpass a $10 billion revenue run-rate milestone exiting the 2025 fiscal year.
[RELATED: Palo Alto Networks-CyberArk Combination Would Be ‘Watershed Deal:’ Analyst]
Palo Alto Networks 4Q
The vendor’s top channel goals for 2025 include increasing the overall percentage of company revenue that comes through the channel and improving partner profitability, according to CRN’s 2025 Channel Chiefs.
CyberArk has about 3,000 channel partners worldwide, according to CRN’s 2025 Channel Chiefs. That’s about a fifth the size of Palo Alto Networks’ ecosystem.
Palo Alto Networks and its ecosystem of partners are not only selling customers on a security platform approach for cost savings, but because the shared data under one vendor better prepares customers for cyberattacks, especially in an AI-dominated world. AI has taken attack times down to 25 minutes, Arora said on the call.
“AI is going to act as an accelerant towards the desire to consolidate,” he said. “Customers are beginning to feel the value of consolidated data–not just in security, in other areas, as you can see.”
A study of Palo Alto Networks customers showed generative AI traffic up more than ninefold in 2024, Arora told analysts Monday. Data security incidents related to generative AI (GenAI) have more than doubled since last year.
Betting on one security vendor also makes customers more prepared as Palo Alto Networks leads competitors on product innovation, he said.
“Two years ago, we didn’t have a browser,” he said. “A year ago, we didn’t have an AI firewall. Our customers see that and said, ‘Look, I know that if I commit to your platform, I will see a path to the next technology out there.’
On the subject of whether global economics will hurt Palo Alto Networks, Arora said that he doesn’t “see anything different in the market going forward.”
Company CFO Dipak Golechha told analysts on the call that Palo Alto Networks has been moving its primary manufacturing and fulfillment center to a contract manufacturing facility in Texas to take advantage of a foreign trade zone that can mitigate the impact of potential tariffs on products shipped to international customers.
Palo Alto Networks is the only pure-play cybersecurity firm to assemble all of hardware in the U.S. at scale, he said, calling tariff impacts “immaterial.”
CyberArk, Protect AI Opportunities
The value CyberArk brings to Palo Alto Networks and its network is in the identity space, Arora said on the call. He sees the identity market hitting an inflection point in the next 12 to 24 months as agentic AI grows.
More than 90 percent of breaches involve stolen or mismanaged credentials, meaning that every user machine and AI agent should be considered privileged users rather than just a small set of IT administrators, he said. CyberArk reaches about 8 million privileged end users and more than 50 percent of the Fortune 500.
“We believe the future in this category is going to belong to somebody who’s already established a strong reputation and is a leader in identity security,” Arora said.
As a part of Palo Alto Networks, CyberArk will deepen privileged access management (PAM) penetration and attract a larger base of global identity and access management (IAM) users and machine identities, the CEO said. Palo Alto Networks has nearly 10 times the number of core sellers as CyberArks and a much larger, 75,000 customer base. Palo Alto Networks aims to double the value of the joint businesses over the next five years.
Palo Alto Networks closed on its acquisition of Protect AI during the quarter, in July. The new purchase has helped fuel AI security conversations, Arora said.
“We will be able to offer the most complete, integrated security solution of the market,” Arora said. “We’re building an evergreen security company that will define the industry for decades to come.”
Browsers Will Replace OSes
Arora called enterprise browsers a “new operating system for the enterprise” and “the primary interface for AI and cloud applications,” boding well for Palo Alto Networks’ Prisma Access Browser.
Palo Alto Networks sold more than 3 million licenses in the fourth quarter, with its cumulative seat count more than doubling on a sequential basis to more than 6 million, according to the vendor.
“It will become impossible to allow employees access to non-secure browsers in the future,” Arora said. “As more and more critical applications and data reside within the browser, it naturally becomes a target for cyberattacks.”
Prisma Access Browser “is strategically positioned to be the future OS in enabling secure and productive work in an AI-driven world,” Arora added.
Although Palo Alto Networks started investing in enterprise browser sales to reach virtual desktop infrastructure, mobile devices and other use cases not covered by secure access service edge (SASE), in the past six to eight months, the vendor has seen browsers leveraged for successful consumer AI agent deployment, Arora said on the call.
AI vendors relying more on consumer browsers for AI agents will increase enterprises’ desire to put employees on secure browsers, the CEO said.
“If you believe that agentic’s true future is coming through browsers in the future for the desktop, then you have to believe that the case for secure browser just became a mainstream case in the enterprise use case,” he said. “It’s going to become a critical part of your SASE stack.”
Founder, CTO Retirement
On Monday, Palo Alto Networks also revealed that Nir Zuk, its founder and chief technology officer, has retired. Lee Klarich succeeds Zuk as CTO and has joined the board of directors. Klarich will also retain the role of chief product officer.
Zuk founded Palo Alto Networks in 2005 as a next-generation firewall provider. He will “turn his attention to a new set of challenges and untapped ideas he is passionate about pursuing,” according to a company statement Monday.
“I started Palo Alto Networks with a radical idea and the conviction to challenge a stagnant industry with a cybersecurity platform,” Zuk said in a statement. “Our vision has always been to lead from the front, and our recent intent to acquire CyberArk is a testament to that enduring ambition. With the most comprehensive security portfolio today, I am confident in Nikesh’s leadership and thrilled to pass the torch to Lee Klarich.”
Klarich joined Palo Alto Networks in 2006 and “will be responsible for driving the company’s technology vision and leading the product and engineering organizations to deliver the industry’s most comprehensive, integrated, and AI-powered cybersecurity platforms,” according to Palo Alto Networks.
On Monday’s earnings call, Arora said “when you think of Palo Alto Networks, you think of Nir.”
“He didn’t just start a company,” Arora said. “He started a revolution with the next-generation firewall, forever changing the security landscape. Personally, it has been a privilege to call him a partner and a friend. The relentless competitive fire that defines our culture, that is his legacy.”
Q4, FY25 In Detail
Palo Alto Networks saw $2.5 billion in revenue during the fourth fiscal quarter, up 16 percent year over year. The vendor’s net income using Generally Accepted Accounting Principles (GAAP) was $253.8 million, down about 30 percent year over year.
For the fiscal year, Palo Alto Networks saw $9.2 billion in revenue, up 15 percent year on year. GAAP net income was $1.1 billion, down about 60 percent year on year, according to the vendor.
Next-generation security annual revenue rate (ARR) was $5.6 billion at the end of the quarter, up 32 percent year over year. The company added $490 million in net new NGS ARR in the fourth quarter, up 12 percent from a year ago.
AI ARR was about $545 million in the quarter, up almost threefold year over year. Remaining performance obligation (RPO) was $15.8 billion, up 24 percent year over year. Arora called fourth quarter bookings growth “the highest we’ve seen in two-and-a-half years.”
The vendor ended the fiscal year with $2.3 billion in cash and cash equivalents, perhaps signaling more acquisitions on the horizon.
Customers spending $5 million to $10 million in ARR were up about 50 percent year over year, according to the vendor. Customers spending $20 million-plus ARR customers were up nearly 80 percent year over year.
The software firewall business saw ARR in the fourth quarter up nearly 20 percent year on year and almost double the total contract value. Product revenue grew 19 percent year over year. The software firewall market share is nearly 50 percent, according to the vendor.
Services revenue grew 15 percent year over year. Subscription revenue grew 17 percent. Support revenue grew 11 percent.
Network security continues to account for over 75 percent of the vendor’s bookings, but more than 60 percent of network security bookings are driven by software form factors across SASE and virtual firewalls.
For the last year, Palo Alto Networks displaced incumbent SASE vendors in more 70 accounts exceeding $200 million in total contract value (TCV), Arora said. SASE ARR grew 35 percent year over year, more than twice as fast as the overall market. Palo Alto Networks has more than 6,300 SASE customers.
Cortex and cloud saw a combined ARR up nearly 25 percent year over year in the fourth quarter. Palo Alto Networks now has about 400 XSIAM customers, with an average ARR per customer of more than $1 million.
Extended detection and response (XDR) saw deals of more than $1 million grow 30 percent year on year.
FY26 Forecasts
Palo Alto Networks said to expect ARR of its next-generation security portfolio between $5.82 billion and $5.84 billion in the first quarter of its 2026 fiscal year, which would be 29 percent growth year over year.
The vendor expects remaining performance obligation (RPO) of $15.4 billion to $15.5 billion, representing year-over-year growth of 23 percent. Total revenue should come in at $2.45 billion to $2.47 billion, which would mean 15 percent growth year on year.
Palo Alto Networks continues to see hardware as a mid single digit grower in the 2026 fiscal year.
For the 2026 fiscal year, Palo Alto Networks said to expect $7 billion to $7.1 billion in next-generation security ARR, up 26 percent to 27 percent year on year. The vendor did not include any impacts on revenue from CyberArk.
Palo Alto Networks predicts closing the deal in the second half of its fiscal year. The vendor predicts adjusted free cash flow of 40-plus percent for the combined company by fiscal year 2028.
RPO should come in between $18.6 billion and $18.7 billion, growth of 17 percent to 18 percent year on year.
Total revenue should come in at about $10.5 billion, growth year on year of 14 percent.
First fiscal quarter product revenue growth should be about 20 percent. That growth should come in at the low teens for the fiscal year.
Palo Alto Networks’ stock grew about 5 percent after market close Monday, trading at about $185 a share.
