Bloomberg Audio Studios, podcasts, radio news. Let's stick into earnings a little bit more now, but this time is Palo Alto Networks, a cybersecurity firm reporting sixteen percent increase in revenue. That was yesterday, but it also announced a three point four billion dollar plan to acquire a Chronosphere. It's a boost to its AI enabled cybersecurity offerings. Paral Alto Network
CEO Nikesha Urora joins us for more now. And look, your stock is lower because many are saying it's an M and a well digestion risk that maybe is being faced here. You put twenty five billion dollar offer into cyber Arc now another M and a piece. Why does it work for you?
Well, Carol, I'm nice to see you.
This is our twenty eighth acquisition in about seven and a half years, and we've demonstrated to the market that we have been able to establish our business and adjacent markets for the last seven years by being attention to the market, looking at where the puck is going, understanding what is important for our customers. And I think Coronasphare, which is our latest acquisition, fits right.
Banks make in the middle where the market's going.
If you look at what you guys were talking about before this, You're talking about.
In Vidia AMD.
Eventually, all this compute power is going to result in people building faster and more and more relevant applications the end consumer or enterprises. All those applications have to be observed and make sure they don't have problems or go down.
And that's what Coronos Fair does.
It observes applications and infrastructure, make sure you have nine nine point nine percent uptime, and then we are going to combine that with our agentic capabilities to make sure agents will go fix that if they go down. So I think it's a phenomenal opportunity going forward. That's fine, the stock will recover. I think investors are beginning to understand the story, all right.
I mean, obviously has an outperformed price target two fifty, well above where you are, and they're saying, look, you're a top TIS software vendor seeing AI tailwinds as it grows ahead of industry pairs. But how does observability take you into a whole new ecosystem. We are now fighting data job dina trace, Why is that the right total addressable market for you? As well as security?
Look observability is a space.
As I said, as we get more and more AI deployed, we're going to need more and more real time capability, real time capability and actions, real time capability and applications. Real time capabilities required ninety nine point nine nine percent availability, which means you have to make sure your infrastructure is always up and running. If it has a problem, you should be able to fix it right away, sort of
similar to security. We also have to watch security on a constant basis, make sure something happens, we fix it right away. So actually, over the last ten to fifteen years, if we look, there are companies who tried to play in both spaces, and.
Typically that ended up really well in one side not the other. We've not made a foray into.
Observability because we never thought we could build it organically. We don't have the skill set. But we went out looking for data pipelining. We found Cronospare. Curnis Fair has some of the best engineers in the space. Observably suffers from two problems. One is too expensive and two it doesn't scale well well. Curnis Fair solve that problem. It is two and a half times cheaper than anybody else on the market. And two it gets scale to giggle what size in terms of what.
Is needed from an AI perspective.
So we think the time is right, the asset is right, and the opportunity is right.
Taken in aggregate, that is an astonishing amount of M and A. Is there any reason why you can't just keep going and keep using M and A as the tool to position the platform where you want it in.
Akesh look, in the last seven and a half years, i'd say thirty percent of our opportunity has been created by strategic and timely M and A. Seventy percent of our opportunity has been on organic innovation as a company.
Now, that's worked out really well for us.
Even now we've announced two big deals, cyber Arc and Chronosware. Collectively, we're going to spend slightly hundred and thirty billion dollars. But that gave us the confidence to increase our targets for ARR in five thirty five billion dollars. If I can go spend thirty billion dollars and buy five billion dollars of AR five years, so now I do that every day.
Let's go back to the fund mentals where you are already RPO, in particular remaining performance obligation growth. It was strong in the court to just announce. But when you're pushing out to fiscal twenty twenty six, our own intelligence, ANEL is just a little bit worried about the slowdown in growth.
Are you worried about it?
You know, when I started seven and a half, he's go a two billion dollar company. RPR nows fifteen and a half billion dollars, set a target of twenty billion dollars in ARR. Those are big numbers. So I think part of what people fail to understand is absolute numbers get bigger and bigger on the margin growth rates change. But I think from a pero capability perspective, if we start doing twenty billion dollars in ARR, we'll be generating ten or fifteen billion dollars a free.
Cast flow year.
That's a far cry from where we started at a few hundred dollars seven years ago. So I think you have to look at it from a slightly multi year perspective.
From that perspective, we think we're well positioned.
We think this is going to be the largest cybersecurity company in the world, and we have aspirations to take it and double the triple for where we.
Are right now.
Any given technology company might use a dozen several dozen different tools across cyber and AI, right and your pitch is you just put everything in one place, you know, offer a suite of things in one place. Is that strategy working to convince software companies in particular that it's better it's come to paramount to networks then do business with a handful of different players.
Yes, of course it is working. We call that platformization at Power. So we continue to at fifty to seventy five customers every quarter and sometimes more in about the fourth quarter. But I think more importantly look at the evolution of technology. Almost every industry, vertical and technology has started that way. From the application perspective, people had fifteen or twenty different vendors that you did the entire solutioning for CRM. Today we see single vendors platforms in CRM,
same thing in HR. When I used to work in programming twenty five years ago, we used to have multiple applications that solved the problem. Today there's one platform, same thing in ITSM.
I do.
The same thing is coming to cyber security. Cybersecurity is a twenty year old industry. It usually it takes thirty thirty five years to build that platform capability in industries and make them become ubiculous. So I think we're the right place right time. We are seeing that move towards platformization. If you look at what happened most recently a few weeks ago, there was an attack using an AILLLM.
That means the I was used.
By bad actors to go and attack customers, and they were able to do it in real time. You have to have real time capability on your side to defend yourself. The only way deliver real time capability in your side is to not have a mess of forty or fifty products. The idea is to have them all be consolidated, running on a singular data layer, and building agents that go and defend you, just the way bad actors are using agents can attack you.
In case, we just very briefly dropped into negative territory on the Nasdaq one hundred, having been up at one point two point four percent, And the story this morning when I woke up was that in Vidia's forecast, it's print with soothing fears that we have about an AI mark hit bubble. This might be the last chance I get for a while, So I'm going to do it. Give me the nikeshur nikesh Aurora.
Cool. Are we or are we not?
In an AI bubble?
Look, we are in an exuberant phase of AI.
I think it is the fastest technology evolution we've seen in our lifetimes, and I don't think it's about to stop. You can see huge bets being made by almost everybody. I think there's a lot of promise you are seeing the consumer case. I think we underestimate how much the entire consumer landscape is changing, and it's going to change.
In the next twenty four months.
The idea of having applications where we have to go to all the work ourselves is going to become our gane. You know, you'll have agents that will go book your Uber, We'll go get your food from door dash, we'll book your airline ticket.
We can only imagine a future like that. We all want a future like that.
That's going to require significant amounts of compute at the end. So I think, from an infrastructure perspective in history, if you've never had a situation where we built infrastructure get consumed if we want it more so, I don't think the infrastructure problem is a real problem. Whether the demand comes right away or it comes an ear or two later. I think that time will tell. But from a demand
from a technology fit, we're there. From an AI perspective, enterprises are slightly lagging that consumer adoption, but I think they're actually working hard to get there. You know, every time we do some AI experimentation internally, we come back and say, Wow, that is cool. I wish we could deploy that faster across the entire enterprise. So I think the demand's going to come. The timing is to you guys. You guys follow that on a daily basis.
We don't.
We put our heads down and see where am I going to be three to five years from now? How do I position power out a network in that context? And are we going to plot our way there? And if we think that AI opportunity is going to create explosive opportunity for almost every technology subsector and even cybersecurity.
Palo Alto Network CEO Nikesha Rora, it's great to have you back on Bloomberg Tech