Palo Alto CEO Defends Cybersecurity's Position as AI Hits Software Stocks

Palo Alto Networks shares sink 8% despite topping earnings estimates as the company addresses AI's impact on the software industry.

Published on Feb. 21, 2026

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Palo Alto Networks CEO Nikesh Arora addressed the recent downturn in software stocks, telling analysts that artificial intelligence won't replace cybersecurity "anytime soon." Palo Alto's fiscal second-quarter results topped Wall Street estimates, but its third-quarter earnings guidance fell short of expectations. The rise of new AI tools has intensified a selloff in software stocks, as investors worry about the potential disruption to business models. Palo Alto has been betting big on AI, launching new tools and making acquisitions to scale its cybersecurity capabilities for customers.

Why it matters

The software industry is facing significant uncertainty as AI technologies rapidly advance, raising concerns about the potential disruption to traditional business models. Palo Alto's response highlights the challenges and opportunities for cybersecurity firms as they navigate this shifting landscape.

The details

Palo Alto Networks has been aggressively investing in AI, launching a suite of new agentic tools in the fourth quarter and completing major acquisitions like the $25 billion purchase of identity security company CyberArk and the acquisition of AI observability platform Chronosphere. The company believes these investments are a direct response to the changes taking shape in the market, with Arora telling analysts that the initial feedback from customers has been "very encouraging" as Palo Alto enters the "next phase of AI adoption."

  • Palo Alto Networks reported its fiscal second-quarter results on February 18, 2026.
  • The company's third-quarter earnings guidance fell short of expectations.

The players

Nikesh Arora

The CEO of Palo Alto Networks who addressed the impact of AI on the software industry during the company's earnings call.

Palo Alto Networks

A leading cybersecurity company that has been investing heavily in AI and making acquisitions to scale its capabilities for customers.

CyberArk

An identity security company that Palo Alto Networks acquired for $25 billion earlier this month.

Chronosphere

An AI observability platform that Palo Alto Networks acquired in January.

Koi

An Israeli cybersecurity startup that Palo Alto Networks announced it is acquiring on Tuesday.

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What they’re saying

“I'm still confused why the market is treating AI as a threat to at least cybersecurity. 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.”

— Nikesh Arora, CEO, Palo Alto Networks (CNBC)

“These investments are a direct response to the inflections we see taking shape in the market. 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.”

— Nikesh Arora, CEO, Palo Alto Networks (CNBC)

What’s next

The judge in the case will decide on Tuesday whether or not to allow Walker Reed Quinn out on bail.

The takeaway

This case highlights growing concerns in the community about repeat offenders released on bail, raising questions about bail reform, public safety on SF streets, and if any special laws to govern autonomous vehicles in residential and commercial areas.