Palo Alto shares sink 7%, CEO defends cybersecurity's position as AI hits software stocks - CNBC

Skip Navigation Palo Alto shares sink 7%, CEO defends cybersecurity’s position as AI hits software stocks SHARE Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via Email Markets Business Investing Tech Politics Video Watchlist Investing Club PRO Livestream Menu Key Points Palo Alto Networks CEO Nikesh Arora defended the company’s strategy and tried to differentiate itself from the AI threat facing software stocks. The cybersecurity company topped Wall Street’s fiscal second-quarter estimates but issued lackluster earnings guidance for the current period. Software stocks have sold off in recent weeks on fears that AI will render their business models obsolete. In this article PANW+0.56 (+0.34%) Follow your favorite stocksCREATE FREE ACCOUNT Chief executive officer at Palo Alto Networks Inc., Nikesh Arora attends the 9th edition of the VivaTech trade show at the Parc des Expositions de la Porte de Versailles on June 11, 2025, in Paris. Chesnot | Getty Images Palo Alto Networks CEO Nikesh Arora addressed the recent downdraft in software stocks, telling analysts in an earnings call that artificial intelligence won’t replace cybersecurity “anytime soon.” “I’m still confused why the market is treating AI as a threat to at least cybersecurity,” he said Tuesday. “I can’t speak for all of software, but one thing we’re definitely seeing is that customers have figured out that they need to drive more consistency in their security stack to be able to respond faster using AI.” Shares sank 7% Wednesday following the cybersecurity company’s fiscal second-quarter results, which topped Wall Street estimates. However, third-quarter earnings guidance fell short of expectations. The rise of new AI tools creating enterprise workflows or websites in a matter of seconds has intensified a selloff in software stocks in recent weeks. These new tools, from the likes of Anthropic and OpenAI, have left investors fretting over whether AI will permanently disrupt their business models. Read more CNBC tech news Micron revenue almost triples, tops estimates as demand for memory soars Uber to invest up to $1.25 billion in EV maker Rivian in deal to launch 50,000 robotaxis Meta is shutting down VR social platform Horizon Worlds in further pivot away from the metaverse Meta’s Manus launches desktop app to bring its AI agent onto personal devices amid OpenClaw craze So far this year, the iShares Expanded Tech-Software Sector ETF has slumped more than 23%. Palo Alto Networks has dropped 11% year to date and 21% over the last year. But Arora believes AI is far from displacing the security products. “It’s not a secret,” he said. “Every one of us is working hard. Almost every AI, every security product has some version of a copilot that now runs in tandem with the product.” Palo Alto has been betting big on AI in recent months and launched a suite of new agentic tools in the fourth quarter. The company has also invested heavily in new acquisitions to scale cybersecurity capabilities for customers in the age of sophisticated AI. Earlier this month, the company closed its massive $25 billion acquisition of identity security company CyberArk and completed its purchase of AI observability platform Chronosphere in January. Palo Alto announced on Tuesday that it’s buying Israeli cybersecurity startup Koi. “These investments are a direct response to the inflections we see taking shape in the market,” Arora told analysts. “While it’s still early, the initial feedback from our customers has been very encouraging. We believe we’re now entering the next phase of AI adoption.” watch now VIDEO1:0001:00 Palo Alto shares slide despite beat on revenue and earnings Closing Bell: Overtime Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news. RELATED Figma’s stock drops 12% in two days after Google releases ‘vibe design’ product OpenAI’s first crack at online shopping stumbled. It’s preparing for the next wave How China is getting everyone on OpenClaw, from gearheads to grandmas Column: Jensen Huang doesn’t need a new chip. He needs a new moat. 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