The company is a provider of ‘next-generation observability’ with a platform that is ‘always-on’ to meet the obligations of the AI era, Palo Alto Networks CEO Nikesh Arora says.
Palo Alto Networks announced Wednesday it has reached a deal to acquire observability platform provider Chronosphere for $3.35 billion, with an eye toward addressing major challenges in the category due to the growth of AI adoption.
The deal is targeted at helping customers and partners to meet observability needs in the era of AI, Palo Alto Networks CEO Nikesh Arora said during the vendor’s quarterly call with analysts Wednesday.
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“The 17-year-old observability industry was not designed for the AI era,” Arora said.
Chronosphere is a provider of “next-generation observability” with a platform that is “always-on,” he said.
It’s the second multi-billion-dollar acquisition deal announced by Palo Alto Networks in 2025, following the cybersecurity giant’s $25 billion deal to acquire identity security vendor CyberArk, announced in July.
With the planned acquisition of Chronosphere — which is expected to close during the second half of Palo Alto Networks’ fiscal 2026, which ends July 31 — Chronosphere will be combined with the vendor’s AgentiX platform, which enables building and governing of AI agents.
“The AI cycle is moving fast. There’s never a day that goes by without significant announcements on investments in AI data centers AI infrastructure,” Arora said. “This large surge towards building AI compute is causing a lot of the AI players to think about newer models for software stacks and infrastructure stacks in the future.”
Ultimately, “AI requires always-on, comprehensive observability at gigawatt-scale. The challenge so far has been that full observability is cost prohibitive for the customer,” Arora said. “The observability solution for Chronosphere has already been deployed and has demonstrated scale at a large frontier model, where they continue to move workloads across.”
Founded in 2019, Chronosphere is “one of the fastest-growing software companies in history,” he added. The company is generating annual recurring revenue (ARR) of more than $160 million as of the end of September, with triple-digit ARR growth year-over-year, according to Palo Alto Networks.
Chronosphere will continue to be run independently following the closing of the acquisition, Arora said.
“We’re just going to provide the rocket fuel” for Chronosphere to continue its rapid growth, he said.
