Palo Alto Networks CEO defends cybersecurity against AI threat fears

Investing.com -- Palo Alto Networks CEO Nikesh Arora defended the company's cybersecurity business against fears that artificial intelligence could make such software obsolete.

"I'm still confused why the market is treating AI as a threat to at least cybersecurity," Arora said during an earnings call on 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."

The cybersecurity firm reported fiscal second-quarter earnings per share of $1.03, exceeding analyst estimates of $0.94. Revenue reached $2.6 billion, slightly above the consensus estimate of $2.58 billion.

Despite beating quarterly expectations, Palo Alto Networks issued lower-than-expected guidance. The company forecasts third-quarter EPS of $0.78-$0.80, below analyst expectations of $0.92.

For fiscal year 2026, Palo Alto Networks projects EPS of $3.65-$3.70, below the $3.87 consensus.

The company's shares dropped roughly 10% when markets opened Wednesday before recovering somewhat to trade down about 5%.

Software stocks have faced selling pressure in recent weeks amid concerns that new AI tools from companies like Anthropic and OpenAI, which can create enterprise workflows or websites in seconds, might disrupt traditional business models.

Arora emphasized that AI won't replace cybersecurity "anytime soon" and noted that Palo Alto Networks has been investing heavily in AI, launching new agentic tools in the fourth quarter.

"Every security product has some version of a copilot that now runs in tandem with the product," Arora explained. "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."

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