Palo Alto Networks Stock Drops 5% Amid Concerns Over $25 Billion Acquisition

Palo Alto Networks' stock plummeted by over 5% after the company announced a $25 billion acquisition of cybersecurity firm CyberArk Software. Analysts expressed concern about the cost and potential synergies, with some downgrading their recommendations. The deal is expected to close in the second half of Palo Alto's fiscal 2026.

Palo Alto Networks (PANW) saw its stock fall by more than 5% on Wednesday following the announcement of a $25 billion acquisition of CyberArk Software (CYBR). The deal, which includes a mix of cash and stock components, has raised questions and concerns among analysts.

Under the terms of the agreement, CyberArk stockholders will receive $45 in cash and 2.2 shares of Palo Alto Networks common stock for each CyberArk share. This represents a 26% premium over the 10-day average of CyberArk as of July 25 [1].

The acquisition marks Palo Alto Networks' largest since CEO Nikesh Arora took over in June 2018. Palo Alto Networks has spent nearly $5 billion on acquisitions since then, including the recent purchase of Protect AI, an AI security specialist [1].

Analysts have mixed reactions to the deal. Keith Bachman of BMO Capital Markets expressed concern that the acquisition suggests Palo Alto Networks is focusing on defensive strategies rather than organic growth [1]. Matthew Hedberg of RBC Capital Markets also noted that the deal's size is unusual for Palo Alto Networks, which typically prefers smaller acquisitions [1]. Eric Heath of KeyBanc, however, sees the deal as a strategic move to strengthen Palo Alto Networks' end-to-end security portfolio [1].

The acquisition is expected to close in the second half of Palo Alto Networks' fiscal 2026, subject to regulatory clearances and shareholder approvals [1]. CyberArk's second-quarter revenue rose 46% to $328 million, with subscription revenue up 66% year-over-year [1].

Palo Alto Networks' stock, which fell to $183.40 in midday trading, has been impacted by the news. Meanwhile, CyberArk's stock, which dipped to $431.50, has seen a 29% increase since the announcement [1].

The acquisition is part of a busy month for cybersecurity M&A, with several other notable deals announced, including Darktrace's acquisition of Mira Security and Orange Cyberdefense's acquisition of ensec [2].

References:
[1] https://www.investors.com/news/technology/palo-alto-stock-falls-amid-cyberark-acquisition/
[2] https://www.infosecurity-magazine.com/news-features/ma-roundup-palo-alto-acquire/