Q2 2026 Palo Alto Networks Inc Earnings Call

February 17, 2026

Investor relations and strategic Finance.

Speaker #1: This brings our total count to approximately 1,450, up 35%. The success of this strategy is also reflected in our best-in-class net retention rate.

Please note that this call is being recorded today. Tuesday, February 17th 2026 at 1:30 p.m. Pacific time.

Speaker #1: Amongst platform customers , which stands at 119% with low single digit turn churn . This proves that once customers adopt our platform , they not only stay but continue to invest more with us over time This momentum isn't accidental , as a result of a deliberate flywheel motion , we built when we committed to our platform strategy years ago .

With me on today's call to discuss our fiscal second quarter results.

Our net cash Aurora.

Our chairman and chief executive officer.

And Deepak Electra our Chief Financial Officer following our prepared. Remarks Lee clarage, our chief product, and Technology officer and board member

Will join us for the question and answer portion.

Speaker #1: We're betting on a shift that has now become an industry standard. This approach allows us to not only solve today's problems, but also provides the foundation to address new ones as they emerge.

You can find the press release and other information to supplement today's discussion.

Speaker #1: It starts by providing multiple clear landing paths in network security. Customers can begin with SASE hardware or software firewalls, and now AI security with Prisma AI is in the SOC.

On our website at investors.pershing.com.

Speaker #1: They can land on our platform via XDR cloud security , or directly onto Xim from any starting point . Customer experience to superior outcomes of an integrated platform , which leads them to adopt more deeply across our ecosystem .

During the course of today's call, we'll be making forward-looking statements and projections, regarding the company's business operations and financial performance, as well as the company's recent acquisitions.

Speaker #1: In a market changing this quickly, we believe our responsibility is to anticipate the next inflection and ensure our platform is ready. That philosophy guides our strategic investments and results.

These statements May today are subject to a number of risks and uncertainties that could cause our actual results to differ from these forward-looking statements.

Speaker #1: Give us the confidence to continue our secure browser. For example, it was one such early investment that is now accelerating our SASE business.

Please review, our press release and recent SEC filings for a description of these risks and uncertainties. We assume no obligation to update any forward-looking statements made in the presentation today.

Speaker #1: With over 9 million licenses sold to date Similarly , in AI security , Prisma Air's launched just a few quarters ago and has already rapidly scaling with over 100 customers , ending in Q2 This is the discipline we now plan to apply to two large established markets poised for inflection , identity and observability If AI becomes a new interface for how work gets done , identity security will be required to create the permissions and boundaries that teams can trust and as AI introduces unprecedented scale , observability is essential for building resilient systems that can operate reliably By bringing our platform discipline to these new pillars , we believe we can deliver even greater value to our customers and solidify our role as a trusted partner to navigate the complex security and data challenges of the AI era .

This presentation contains non-gaap Financial measures and key metrics relating to the company's past and expected future performance.

Non-gaap Financial measures should not be considered a substitute for financial measures prepared in accordance with gaap.

The most directly comparable, gaap, Financial, measures and reconciliations are in the press release, and the appendix of our investor presentation.

Unless specifically noted, otherwise all results in comparisons are on a fiscal year-over-year basis, I will now turn the call over to Nash.

Thank you, hanza. Good afternoon, thank you, everyone, for joining us today for our earnings call.

is either with a strong Q2 field by robust demand for cyber security and continue execution against our conversation strategy,

Speaker #1: Let me share a few examples of how this strategy is translating into deeper, more strategic customer relationships. First, a global automotive leader selected us for a major security transformation.

This led a strong organic results in Q2, but then the S of 28% and have any growth of 15%, excluding the impact of recently closed products.

Speaker #1: Their goal was to modernize their security architecture and dramatically improve efficacy. This resulted in an over $50 million deal, including $30 million for SASE and $20 million for Exim to run their global SOC. Similarly, a global technology supplier selected us for a transformation initiative for over $40 million.

We saw a broad based Trends across our products from sassy software firewalls and xim, who are emerging leadership in AI security with Prisma Aires.

He bares his growth, with improving profitability, achieving a 30% plus operating margin for the third consecutive quarter.

Speaker #1: Choosing Exim to modernize their security operations globally while expanding their investment in SASE. Finally, a transaction with a leading IT service provider perfectly illustrates the flywheel—building on existing investments. They committed to a $20 million expansion centered on Exim and have now maximized across network security operations.

We're excited to head into the second half of the Year having closed, both the Cyber Arc and conos for Acquisitions. And I want to extend a warm. Welcome to both teams

Both companies continue to deliver record numbers and their most recent quarters, and we look forward to building on the momentum as we hit the ground running on our integration plans.

These Investments are a direct response to the inflections, we see taking shape in the market.

Speaker #1: These aren't just transactions , they're architectural decisions . When the stakes are highest . These wins validate that industry leaders are choosing the superior outcomes delivered By Palo Alto Networks With that , let's dive deeper into the individual performance of our platforms , starting with our largest segment , our network security business delivered a standout quarter , demonstrating the power of a platform designed to be customers wherever they are in their hybrid journey .

And while it's still early, the initial feedback from our customers has been very encouraging.

We believe we're not entering the next phase of AI adoption.

Our Enterprises are moving beyond experimentation and beginning to integrate foundational models into real workflows.

As AI becomes embedded in day-to-day work. The central question that organizations face in shifting from capability to control,

That shift has meaningful implications for security.

As AI becomes more pervasive across the Enterprise is expands the attack surface area.

Speaker #1: In Q2 , our SaaS business continued to go from strength to strength , surpassing the 1.5 billion IR milestone while growing approximately 40% year on year , solidifying our position as the fastest growing SaaS provider at scale What's particularly telling in this shift , we are seeing in the market many early adopters of sassy who made choices 4 or 5 years ago .

More agents, more infrastructure, more machine to machine activity and new classes of risks, that simply did not exist before and that environment security cannot sit on the sidelines.

Despite the current sentiment about Ai and software. We firmly believe that security is enabling layer that allows Innovation to move forward safely and at scale

Speaker #1: During the pandemic , are now finding that those early solutions are not comprehensive enough for today's threats and complexity . As a result , they're reconsidering their first generation point products in favor of a platform approach that provides a single , unified architecture to secure the entire hybrid environment from the data center to the cloud and the remote workforce .

And as the agents become autonomous employees, the old security Playbook is not just slow its obsolete.

Speaker #1: A key driver of these wins is also our secure browser, which stems from a strategic bet we made over two years ago with the acquisition of talent. Our thesis was that the browser is the most critical, unmanaged edge where users’ data and now AI agents intersect. The results show our customers agree.

Security must operate in real time at the critical control points, where decisions are made across Network endpoint Cloud browser and identity. This is where Palo Alto networks operates. And as B, AI becomes more embedded across the Enterprise, those control points are converging

A fragmented, defense of disparate products is no longer, a viable strategy. The risk is simply too high when adversaries are moving at machine speed.

Speaker #1: As of Q2, Prisma browser has been adopted by over 1,500 organizations, 10% of which are in the Global 2000, with an additional 2 million licenses.

Our latest unit 42 research, confirms this end-to-end attacks are now 4 times faster than a year ago.

Speaker #1: Seats sold in Q2 . This success has clearly not gone unnoticed . It's encouraging to see others in the industry waking up to the idea that they must secure the browser layer , validating the importance of this increasingly critical control point While many of these approaches simply extend existing architectures into the browser , we continue to believe the browser itself should function as a native security platform architected for real time control rather than retrofitted through extensions We also continue to see strong momentum in our software firewall business .

And in nearly a quarter of the cases, attackers were able to break in and exfiltrate data in under an hour.

Nikesh Arora: The old security playbook is not just slow; it's obsolete. Security must operate in real time at the critical control points where decisions are made, across network, endpoint, cloud, browser, and identity. This is where Palo Alto Networks operates. And as AI becomes more embedded across the enterprise, those control points are converging. A fragmented defense of disparate products is no longer a viable strategy. The risk is simply too high when adversaries are moving at machine speed. Our latest Unit 42 research confirms this. End-to-end attacks are now four times faster than a year ago, and in nearly a quarter of the cases, attackers were able to break in and exfiltrate data in under an hour. The good news is that 90% of those breaches were preventable, caused by basic gaps in visibility and controls across multiple attack vectors.

The good news is that 90% of those breaches were preventable caused by basic gaps in visibility and controls across multiple attack vectors.

This is why we committed to our platformization strategy, a few years ago.

Is the only way to secure the modern Enterprise and our results continue to prove that out.

Speaker #1: Last quarter , we called our hidden gem that was validated once again in Q2 . Our IRR growth was approximately 25% , driven by the need to secure increasingly dynamic multi-cloud environments , a need that grows as AI workloads scale .

In Q2, we delivered approximately, 110 net, new platforms, a quarterly record outside of our seasonally strong Q4.

this brings our total platformization counter approximately 1550 up 35%

Speaker #1: This is complemented by our strongest hardware performance in several quarters, with revenue up nearly 10%, driven in part by early adoption of our latest Gen Five firewalls.

The success of this strategy is also reflected in our best-in-class. Net retention rate amongst platform customers, which stands at 119% with low single digit turns turn.

This proves that once customers, adopt our platform, they not only stay, but continue to invest more with us over time.

Speaker #1: Finally, we remain focused on where the market is going. That includes preparing our customers for the post-quantum era. The threat is already here.

Nikesh Arora: This is why we committed to our platformization strategy a few years ago. A platformized approach built on a real-time, data-driven model that gets smarter with scale, is the only way to secure the modern enterprise, and our results continue to prove that out. In Q2, we delivered approximately 110 net new platformizations, a quarterly record outside of our seasonally strong Q4. This brings our total platformization count to approximately 1,550, up 35%. The success of this strategy is also reflected in our best-in-class net retention rate among platformized customers, which stands at 190% with low single-digit churn. This proves that once customers adopt our platform, they not only stay, but continue to invest more with us over time. This momentum isn't accidental. It's a result of a deliberate five-year motion we've built.

Speaker #1: Adversaries are using a harvest now to later strategy , stealing encrypted data today to break in the future We're seeing this become a sea priority in our early customer conversations , and the broad interest in this topic was confirmed by nearly 5000 attendees at our Quantum Summit last month .

This momentum is an accidental, is a result of a deliberate 5 year old motion. We built when we committed to our platformization straight years ago, we're betting on a shift that has now become an industry standard.

This approach allows us to not only solve today's problems but also provides the foundation to address new ones as they emerge.

Speaker #1: This is a critical part of our customers' long-term roadmap, and we believe we are uniquely positioned to guide them through this coming architectural uplift and shift.

Speaker #1: Now moving to Cortex. Customers continue to partner with us on their AI SoC modernization. In Q2, Shyam surpassed the half-billion-dollar IRR milestone.

It starts by providing multiple clear Landing paths in network security customers can begin with sassy Hardware or software firewalls and now, ai security with Prisma aires in the sock. They can land or our cortex platform via xDrive Cloud, security, or directly onto XM from any starting point. Customer experience. The superior outcomes of an integrated platform which leads them to adopt more deeply across our ecosystem.

Speaker #1: We welcomed almost 150 new customers, bringing our total base to over 600, paying an average of nearly $1 million in IRR.

Speaker #1: But the key story here remains not just the growth. It's the outcomes. Over 60% of our deployed customers are now achieving mean time to remediation of less than ten minutes.

Nikesh Arora: When we committed to our platformization strategy years ago, we were betting on a shift that has now become an industry standard. This approach allows us to not only solve today's problems, but also provides the foundation to address new ones as they emerge. It starts by providing multiple clear landing paths. In network security, customers can begin with SASE, hardware or software firewalls, and now AI security with Prisma AIRS. In the SOC, they can learn on our Cortex platform via XDR, cloud security, or directly onto XIM. From any starting point, customers experience the superior outcomes of an integrated platform, which leads them to adopt more deeply across our ecosystem. In a market changing this quickly, we believe our responsibility is to anticipate the next inflection and ensure our platform is ready. That philosophy guides our strategic investments, and the results give us the confidence to continue.

In a market changing this quickly, we believe our responsibility is to anticipate. The next inflection and ensure our platform is ready that philosophy guides, our strategic Investments and this is us give us the confidence to continue.

Speaker #1: The profound shift from the days or weeks they measured before the success of XII is a great example of our ability to identify a market inflection early, invest aggressively, and execute to scale.

Our secure browser, for example was 1, such early investment that is now accelerating our sassy business with over 9 million licenses sold to date.

Speaker #1: You may have made a bet on the AI driven SoC well before it became an industry wide theme . The results are showing at scale in just three and a half years after GA , the same focus on what's next led us to develop a genetics .

Similarly, in AI security, Prisma, errors. Lost just a few quarters ago and already rapidly scaling with over 100, customers ending in Q2.

This is the discipline. We now plan to apply to 2 large established markets poised for inflection identity and observability.

Speaker #1: The simplest way to think about it is we're enabling our customers to build a workforce of autonomous AI agents . But the key differentiator and what makes this real breakthrough is where these agents can operate Unlike traditional security tools confined to their own ecosystem , our agents can securely extend into first and third party infrastructure .

If AI becomes a new interface for how work gets done, identity security will be required to create the permissions and boundaries that teams can trust and as they are introduced is unprecedented scale.

Observability is essential for building resilient systems that can operate reliably.

Nikesh Arora: Our secure browser, for example, was one such early investment that is now accelerating our SASE business, with over 9 million licenses sold to date. Similarly, in AI security, Prisma AIRS launched just a few quarters ago and is already rapidly scaling with over 100 customers ending in Q2. This is a discipline we now plan to apply to two large established markets poised for inflection, identity and observability. If AI becomes the new interface for how work gets done, identity security will be required to create the permissions and boundaries that teams can trust. And as AI introduces unprecedented scale, observability is essential for building resilient systems that can operate reliably.

Speaker #1: This means an agent can not only detect an issue . Nexium , but then can go out and ought to remediate it directly in a cloud console and identity provider , or a firewall machine .

By bringing our platformization discipline, to these new pillars, we believe we can deliver even greater value to our customers and solidify, our role as a trusted partner to navigate the complex, security, and data challenges of the AI era.

Speaker #1: Speed This capability , already enabled by 200 customers , is a key to delivering true enterprise wide automation This is a powerful example of how we use AI to create better security outcomes , but that's only one part of our AI security strategy .

Let me share a few examples of how this strategy is translating into deeper more strategic customer relationships.

Speaker #1: Over the last couple of years, we have expanded our AI security capabilities, aligned to what our customers need as they deploy AI at scale.

First, a Global Automotive leader, selected us for a major security transformation. The goal was to modernize their security architecture and dramatically improve efficacy. This is resulted in an over 50 million deal including 30 million for sassy and 20 million for XI to run their Global saw. Similarly,

Speaker #1: We're bringing those capabilities together as part of a universal AI security platform . When designed to protect AI deployments across models , agents , and the environments in which they operate , it starts with Prisma to secure AI models and AI powered applications across their life cycle .

Nikesh Arora: By bringing our platformization discipline to these new pillars, we believe we can deliver even greater value to our customers and solidify our role as a trusted partner to navigate the complex security and data challenges of the AI era. Let me share a few examples of how this strategy is translating into deeper, more strategic customer relationships. First, a global automotive leader selected us for a major security transformation. Their goal was to modernize their security architecture and dramatically improve efficacy. This resulted in an over $50 million dollar deal, including $30 million for SASE and $20 million for XIM to run their global SOC. Similarly, a global technology supplier selected us for a transformation initiative for over $40 million dollars, choosing XIM to modernize their security operations globally while expanding their investment in SASE. Finally, a transaction with a leading IT service provider perfectly illustrates our flywheel.

Speaker #1: For model signing and red teaming , runtime defense . We launched this platform just a few quarters ago , and its adoption has been remarkably strong .

A global technology supplier selected us for a transformation Initiative for over 40 million to modernize their security operations globally, while expanding their investment in sassy finally a transaction with leading it service. Provider perfectly illustrates a fly fly flywheel building on existing Investments, they committed for million dollar expansion sent over the next IM and have now platforms, network security, and security operations.

Speaker #1: From Q1 to Q2, we more than tripled our customer count to over 100, while bookings also doubled during the same period.

Speaker #1: With a nine figure pipeline already materializing . Is clear . The market has been waiting for a comprehensive platform to secure AI at the same point , we're also seeing a new class of autonomous agents emerge software that can perform tasks and interact with local systems on its own This naturally extends security requirements to the endpoint .

These aren't just transactions. They're architectural decisions when the stakes are highest. These winds validate, that industry leaders are choosing the superior. Outcomes. Delivered.

By power Auto Networks.

With that.

Let's dive deeper into the individual performance of our platforms, starting with our largest segment.

Speaker #1: This is why I'm excited to announce our intent to acquire COI, a pioneer in securing the next major inflection point in security.

Speaker #1: The endpoint will enhance our endpoint capabilities within XDR 2.0, while also becoming an integrated part of our universal AI security platform, extending security and governance to autonomous agents at the device layer. We are witnessing a dramatic shift in how software lives on the endpoint.

Nikesh Arora: Building on existing investments, they committed for a $20 million expansion centered on XIM, and have now platformized across network security and security operations. These aren't just transactions, they're architectural decisions. When the stakes are highest, these wins validate that industry leaders are choosing the superior outcomes delivered by Palo Alto Networks. With that, let's dive deeper into the individual performance of our platforms, starting with our largest segment. Our network security business delivered a standout quarter, demonstrating the power of a platform designed to meet customers wherever they are in their hybrid journey. In Q2, our SASE business continued to go from strength to strength, surpassing the $1.5 billion ARR milestone while growing approximately 40% year-over-year, solidifying our position as the fastest growing SASE provider at scale.

Our network security business delivered, a standout quarter demonstrating the power of a platform designed to be customers, wherever they are in their hybrid journey. In Q2 our sassy business continued to go from standard to 10th surpassing the 1.5 billion, our Milestone while growing approximately 40% year, on year,

Solidifying our position as the fastest growing sassy provider at scale.

Speaker #1: Traditional security tools are often blind to the new AI layer software. The massive rise of MCP servers, browser extensions, plugins, and ephemeral code that bypasses standard security controls.

Speaker #1: This represents a significant unmanaged attack surface. We identified this new threat vector early, and Palo Alto Networks has been a customer of Koye since the summer of 2025.

What's particularly telling you? The shift we are seeing in the market. Many earlier, doctors of sassy who made choices 4 to 5 years ago during the pandemic are now finding that those early Solutions not comprehensive enough for today's threats and complexity as a result, they're reconsidering their first generation Point products in favor of a platform approach that provides a single unified architecture to secure the entire hybrid environment from the data center to the cloud and the remote Workforce.

A key driver of these winds is also our secure browser.

Speaker #1: On my recent trip to Israel in December, Lea and I met with the core team and were immediately impressed by their foresight into the next generation of endpoint threats. Since then, we've seen this risk pattern intensify, including security concerns that have been recently popularized by the widespread adoption of open core.

It stems from a strategic bet we made over 2 years ago with the acquisition of talent.

Our thesis was that the browser is the most critical unmanaged Edge where users data and now ai agents intersect

Nikesh Arora: What's particularly telling in the shift we are seeing in the market, many early adopters of SASE, who made choices 4 to 5 years ago during the pandemic, are now finding that those early solutions are not comprehensive enough for today's threats and complexity. As a result, they're reconsidering their first-generation point products in favor of a platform approach that provides a single unified architecture to secure their entire hybrid environment, from the data center to the cloud, and the remote workforce. A key driver of these wins is also our secure browser, which stems from a strategic bet we made over 2 years ago with the acquisition of Talon. Our thesis was that the browser is the most critical, unmanaged edge, where users, data, and now AI agents intersect. The results show our customers agree.

Speaker #1: We believe this is the latest example of what the future of an AI attack surface will look like, and that will help our XDR platform remain well positioned to provide the most innovative security solutions to our customers. After closing, Core will also be able to provide unique extensions to Prisma and Prisma Browser to ensure that our customers have visibility into any software and browser that are only present on the endpoint, resulting in the most comprehensive visibility to the AI attack surface over time.

The results show. Our customers agree. As of Q2 Prisma browser has been adopted by our 1500 customers 10% of which are in the global 2000.

With an additional 2 million licenses seats sold in Q2.

Waking up to the idea that there must secure the browser layer validating, the importance of this increasingly critical control point.

Speaker #1: This will help ensure that the endpoint becomes more authentic. Our customers will remain fully protected. Now, this focus on visibility is critical, but to act with precision, you first need to see with clarity.

While many of these approaches simply extend existing architectures into the browser. We continue to believe the browser itself should function as a native security platform. Architecture for real-time control rather than retrofitted through extensions.

We also continue to see strong momentum in our software firewall business. Last quarter, we called our Hidden Gem.

That was validated once again in Q2.

Nikesh Arora: As of Q2, Prisma Browser has been adopted by over 1,500 customers, 10% of which are in the Global 2,000, with an additional 2 million license seats sold in Q2. This success has clearly not gone unnoticed. It's encouraging to see others in the industry waking up to the idea that they must secure the browser layer, validating the importance of this increasingly critical control point. While many of these approaches simply extend existing architectures into the browser, we continue to believe the browser itself should function as a native security platform, architected for real-time control rather than retrofitted through extensions. We also continue to see strong momentum in our software firewall business. Last quarter, we called it our hidden gem. That was validated once again in Q2.

Speaker #1: This is why a new level of observability is so essential . Which brings me to Chronosphere . In the age of AI , Chronosphere offers a unique value proposition Deliver observability as a massive scale proven in production today by many of the world's leading born in the cloud and AI native companies .

Our error growth was approximately 25% driven by the need to secure increasingly Dynamic multicloud environments. And need that grows as AI workloads scale.

This is complemented by our strongest Hardware performance. In several quarters, the revenue up nearly 10% driven by early adoption of our latest Gen 5. Firewalls

Speaker #1: During Q2 and after we closed the Chronosphere acquisition , we signed a multi-year , nine figure expansion deal with a leading AI model provider , a testament to Chronosphere ability to scale the largest and most complex environments The momentum is clear in the numbers , where the company generating approximately 200 million in IRR as of Q2 , well above our expectations .

finally, we remain focused on where the market is going and that includes preparing our customers for the Post Quantum error.

The tech is already. Here adversaries are using a harvest now to equip later strategy stealing encrypted data today to break in the future.

Speaker #1: The end to end observability platform is also gaining traction , with over 80% of new logos in the last year landing with multiple products such as metrics , logs and traces .

Nikesh Arora: Our ARR growth was approximately 25%, driven by the need to secure increasingly dynamic multi-cloud environments, a need that grows as AI workloads scale. This is complemented by our strongest hardware performance in several quarters, with revenue up nearly 10%, driven in part by early adoption of our latest Gen5 firewalls. Finally, we remain focused on where the market is going. That includes preparing our customers for the post-quantum era. The threat is already here. Adversaries are using a harvest now, decrypt later strategy, stealing encrypted data today to break in the future. We're seeing this become a C-level priority in our early customer conversations, and the broad interest in this topic was confirmed by nearly 5,000 attendees at our Quantum Summit last month.

Speaker #1: By combining Chronosphere deep visibility with the automated action of agents, we are enabling our customers to build self-healing, autonomous enterprises of the future.

We're seeing this become a sea level priority and our early customer conversations, the broad interests of this topic was confirmed by nearly 5,000 attendees that our Quantum Summit last month. This is a critical part of our customer at the long term road map and we believe we are uniquely positioned to guide them through this coming architectural, uplift and shift.

Now, moving to Cortex.

Customers continue to partner with us on their AI sock modernization.

Speaker #1: So we have prevention . We have visibility , and we have automation . But every action , whether by a human or an agent , is governed by an identity Which brings me to our next newest major pillar .

In Q2 xim surpassed the half billion dollar our Milestone. We welcome almost 150 new customers, bringing our total base to over 600 paying an average of nearly 1 million in ARR.

Speaker #1: We're delighted to have closed the acquisition of CyberArk early in Q3, and are ready to execute on what I believe is a massive opportunity in identity security.

But the key story here, Remains Not Just a growth, it's the outcomes.

Speaker #1: As many of you noticed earlier this month, CyberArk is coming off an exceptional December quarter. The record net new RR and 30% subscription growth at scale. We've been rigorously building and refining our integration plans and moving fast to put these plans into execution.

Over 60% of our deployed customers. Now achieving meantime, remediation of less than 10 minutes, the profound shift from the days or weeks to the measured before.

Nikesh Arora: This is a critical part of our customer's long-term roadmap, and we believe we are uniquely positioned to guide them through this coming architectural uplift and shift. Now moving to Cortex. Customers continue to partner with us on their AI SOC modernization. In Q2, XSIAM surpassed the $500 million ARR milestone. We welcomed almost 150 new customers, bringing our total base to over 600, paying an average of nearly $1 million in ARR. But the key story here remains not just the growth, it's the outcomes. Over 60% of our deployed customers are now achieving mean time to remediation of less than 10 minutes, a profound shift from the days or weeks they measured before. The success of XSIAM is a great example of our ability to identify a market inflection early, invest aggressively, and execute to scale.

Speaker #1: This includes aligning our go-to-market engines. We're already well underway on detailed account planning and aligned sales incentives to ensure our teams are collaborating from day one. From a product perspective, the innovation roadmap here is massive.

The success of XI is a great example, of our ability to identify a market inflection. Early, invest aggressively, and execute to scale. You know, we made a bet on the AI driven sock. Well, before it became an industry-wide team, and there is also showing at scale in just 3 and a half years after ga

Speaker #1: We aren't just looking at legacy . Im , which in our view is basic hygiene . We're building a next generation identity security platform that protects across humans , machines and AI agents .

Speaker #1: We also look forward to delivering machine identity and certificate lifecycle management to our 65,000-plus firewall customers. Longer term, we're pretty excited about the opportunity to address the growing needs of identity to secure AI agents.

The same focus on what's next. Led us to develop a genetics. The simplest way to think about it is we're enabling our customers to build a Workforce of autonomous AI agents but the key differentiator and what makes this real breakthrough is where these agents can operate unlike traditional security tools, confined to their own ecosystem. Our agents can securely extend into first and third party infrastructure. This means an agent can normally detect an issue with an exam but then can go out and order to remediate it directly in a cloud console and identity provider or a firewall that machine speed.

Speaker #1: We bought CyberArk because when AI agents start logging in, and machine-speed logging in becomes the primary attack vector, we believe we are now the only company that can verify the who and secure the what simultaneously.

Nikesh Arora: We made a bet on the AI-driven SOC well before it became an industry-wide theme, and the results are showing at scale in just 3.5 years after GA. The same focus on what's next led us to develop Agentics. The simplest way to think about it is we're enabling our customers to build a workforce of autonomous AI agents, but the key differentiator, and what makes this a real breakthrough, is where these agents can operate. Unlike traditional security tools confined to their own ecosystem, our agents can securely extend into first- and third-party infrastructure. This means an agent can not only detect an issue in XSIAM, but then can go out and auto-remediate it directly in a cloud console, an identity provider, or a firewall with machine speed. This capability, already enabled by 200 XSIAM customers, is the key to delivering true enterprise-wide automation.

This capability already enabled by 200x. Time customers is the key to delivering true enterprise-wide automation.

This is a powerful example of how we use AI to create better security outcomes.

Speaker #1: Given the momentum in the business currently and our innovation roadmap, we believe we are well positioned to become the largest identity security player over time. In summary, we continue to execute against our platform strategy in Q2, with momentum building across multiple areas of business. Our core innovation engine remains strong, with great traction in new products like Eres, and we are ready to put our integration plans into action with CyberArk and Chronosphere. Before I hand over to Dipak, I want to take a few minutes to reflect on the recent advancements in AI.

But that's only 1 part of our AI security strategy.

Over the last couple of years, we have expanded, our AI security capabilities aligned to what our customers need, as the deploy AI at scale, we're bringing those capabilities together as part of a universal AI security platform, 1 design to protect AI, deployments of cost models agents and the environments in which they operate.

it starts with my errors to secure AI models and AI powered applications across our life cycle, from modeling and red, teaming to runtime defense,

Speaker #1: We're seeing significant innovation in new platforms targeting the enterprise, and while it's still early, it is causing some companies to reassess how their applications are built.

We launched this platform just a few quarters ago and as adoption has been remarkably strong.

From q1 to Q2, we more than tripled our customer account to over 100.

Speaker #1: Our workflows are automated and decisions are made . Long standing assumptions about systems of record are being revisited , and perhaps even more so , the analytics layer built on top of that in many enterprise applications , data reflects structured business processes within defined workflows Security data is different in our case , it is real time threat activity generated at the control point where our platforms operate in continuously refined through more than 30 billion attacks blocked daily and 15PB of telemetry processed in our AI saw .

Nikesh Arora: This is a powerful example of how we use AI to create better security outcomes. But that's only one part of our AI security strategy. Over the last couple of years, we have expanded our AI security capabilities aligned to what our customers need as they deploy AI at scale. We're bringing those capabilities together as part of a universal AI security platform, one designed to protect AI deployments across models, agents, and the environments in which they operate. It starts with Prisma AI to secure AI models and AI-powered applications across their lifecycle, from model scanning and red teaming to runtime defense. We launched this platform just a few quarters ago, and its adoption has been remarkably strong. From Q1 to Q2, we more than tripled our customer count to over 100.

But bookings also doubled during the same period with the 9-figure pipeline already. Materializing is clear. The market has been waiting for a comprehensive platform to secure a app.

The same point.

We're ALS seeing a new class of autonomous, AI agents emerge software that can perform tasks and interact with local systems on its own.

This naturally extends security requirements to the endpoint. This is why I'm excited to announce our intent to acquire koi. A Pioneer in securing the next, major inflection, point of security, the agentic endpoint.

Speaker #1: That distinction matters when we say AI. It's not AI layered onto a feature set. It is AI trained on our proprietary data set and embedded directly at those critical control points as they are.

Google enhance, our endpoint capabilities within XTR 2.0, while also becoming an integrated part of our Universal AI security platform, extending security and governance to autonomous agents at the device layer.

Speaker #1: Begins interacting autonomously across application infrastructure . Fragmented security introduces delay at precisely the wrong moment Security must operate as a coordinated system , unified , consistent , and real time .

Nikesh Arora: While bookings also doubled during the same period, with a nine-figure pipeline already materializing, it's clear the market has been waiting for a comprehensive platform to secure AI. At the same point, we're also seeing a new class of autonomous AI agents emerge, software that can perform tasks and interact with local systems on its own. This naturally extends security requirements to the endpoint. This is why I'm excited to announce our intent to acquire Koi, a pioneer in securing the next major inflection point in security, the agentic endpoint. Koi will enhance our endpoint capabilities in XDR 2.0, while also becoming an integrated part of our universal AI security platform, extending security and governance to autonomous agents at the device layer. We are witnessing a dramatic shift. Now software lives on the endpoint, traditional security tools are often blind to the new AI layer of software.

We are witnessing a dramatic shift in our software lives in the endpoint, traditional security tools. Are often blind to the new AI layer of software. The massive rise of mCP, servers browser, extensions plugins and fmr code, that bypasses Standard Security controls.

Speaker #1: Because our platform sits at these control points . With these shifts , we see these shifts as they happen . The data generated across network , cloud , identity , endpoint and browser continually informs our models , creating a feedback loop that compounds the scale .

This is represents a significant unmanaged attack service.

We identified this new tech Vector, early and power out. The networks has been a customer, of course, since summer of 2025

Speaker #1: But scale is not enough. Sustaining leadership requires a willingness to adapt and challenge our own assumptions. Technology cycles change, architectures evolve. For the past seven and a half years, they've consistently aimed to invest ahead of inflection points in technology.

Speaker #1: Even when the path is not fully defined, maintaining this discipline is vital to ensuring that we remain the digital guardian for our consumers.

Of open call. We leave the latest example of what the future of an AI attack. Surface will look like

Speaker #1: However, the technology stack could evolve. With that, I will hand over the call to Dipak to review the results in detail.

Nikesh Arora: The massive rise of MCP servers, browser extensions, plugins, and ephemeral code that bypasses standard security controls. This represents a significant unmanaged attack surface. We identified this new threat vector early, and Palo Alto Networks has been a customer of Koi since summer of 2025. On my recent trip to Israel in December, Lee Klarich and I met with the Koi team and were immediately impressed by their foresight into the next generation of endpoint threats. Since then, we've seen this risk pattern intensify, including security concerns that have been recently popularized by the widespread adoption of OpenClaw. We believe this is the latest example of what the future of an AI attack surface will look like, and that Koi will help our XDR platform remain well-positioned to provide the most innovative security solutions to our customers.

And that code will help our xdr platform remain, well, positioned to provide the most Innovative Security Solutions to our customers.

Speaker #2: Thank you, Nikesh, and good afternoon, everyone. As Nikesh noted, our strong Q2 results reflect the consistent execution of our platform strategy, coupled with a robust demand environment.

After closing call will also be able to provide unique extensions to Prisma areas and Prisma browser to ensure that our customers have visibility to any are software and browser that are only present on the endpoint. Resulting, the most comprehensive visibility to the AI attack surface.

Speaker #2: The increasing adoption of our platforms is most evident in our next generation security RR, which grew 33% to $6.33 billion. This includes a $200 million contribution from our recent acquisition of Chronosphere.

Over time, this will help ensure that the endpoint becomes more agentic. Our customers will remain fully protected.

Speaker #2: On an organic basis, NGS RR was up 28% year over year, and net new RR was up 11% year over year. This performance was driven by an acceleration in SASE and software firewall.

Now, this focus on visibility is critical, but the actual Precision you first need to see with flattery this is why a new level of observability is so essential which brings me to chronosphere.

And the H of AI chronosphere offers a unique value proposition deliver observability as a massive scale, proven in production today by many of the world's leading born in the cloud knee and Native companies.

Nikesh Arora: After closing, Koi will also be able to provide unique extensions to Prisma AIRS and Prisma Access Browser to ensure that our customers have visibility to any AI software and browser that are only present on the endpoint, resulting in the most comprehensive visibility to the AI attack surface. Over time, this will help ensure that the endpoint becomes more agentic. Our customers will remain fully protected. Now, this focus on visibility is critical, but to act with precision, you first need to see with clarity. This is why a new level of observability is so essential, which brings me to Chronosphere. In the age of AI, Chronosphere offers a unique value proposition: deliver observability at a massive scale, proven in production today by many of the world's leading born-in-the-cloud and AI-native companies.

Speaker #2: RR , alongside continue momentum in Xi'an , a key contributor to our software firewall growth in recent quarters is Prisma Air's . As customers increase their AI deployments , they're looking for a trusted partner to secure this critical transformation .

During Q2. And after we closed the process for acquisition, we signed a multi-year 9-figure expansion deal with a leading AI model provider, a testament to cross visibility to scale with the largest and most complex environments.

Speaker #2: Prisma Air's directly addresses this need . And as Nikesh mentioned , it is scaling rapidly with over 100 customers . And in Q2 , our remaining performance obligation , or RPO , grew 23% to $16.0 billion .

Momentum is clear on the numbers where the company generating approximately 200 million in our as of Q2 well above our expectations.

Speaker #2: This includes approximately $150 million of RPO from our Chronosphere acquisition. It's important to note that RPO balances for Chronosphere can fluctuate from period to period.

The intern. Observability platform is also getting to action with over 80% of new logos last year Landing with multiple products such as metrics, logs and Traces by combining chronosphere deep visibility to the automated action of Agents. We are enabling our customers to build a self-healing autonomous Enterprises of the future.

Speaker #2: Given usage based pricing , with IRR and revenue being more representative of business performance Our current RPO , which represents the near-term revenue realization , was $7.1 billion , representing 18% growth .

Nikesh Arora: During Q2, and after we closed the Chronosphere acquisition, we signed a multi-year, nine-figure expansion deal with a leading AI model provider, a testament to Chronosphere's ability to scale in the largest and most complex environments... The momentum is clear in the numbers, with the company generating approximately $200 million in ARR as of Q2, well above our expectations. The end-to-end observability platform is also getting traction, with over 80% of new logos last year, landing with multiple products such as metrics, logs, and traces. By combining Chronosphere's deep visibility with the automated action of Agentics, we are enabling our customers to build the self-healing, autonomous enterprises of the future. So we have prevention, we have visibility, and we have automation. But every action, whether by a human or an AI agent, is governed by an identity. Which brings me to our next newest major pillar.

So we have prevention, we have visibility and we have automation but every action whether by a human or an AI agent is governed by an identity, which brings me to our next newest. Major pillar

Speaker #2: Total revenue was $2.59 billion and grew 15%. Given the close of our Chronosphere acquisition came near the end of fiscal Q2, the revenue contribution was immaterial.

We delighted to have closed the acquisition of cyber art early in Q3 and are ready to execute on what I believe is a massive opportunity in identity security.

As many of you noticed earlier this month, cyber Arc is coming off. An exceptional December quarter, the record net new are and 30% of subscription are goes at scale.

Speaker #2: During the quarter, product revenue was up 22%, with 45% of the product revenue coming from software form factors over the trailing 12 months, which was up from 38% in the trailing 12 months ending Q2 '25.

We've been rigorously building and defining our integration plans and removing fast to put these plans into execution. This includes aligning, our go to market engines, we're already well underway on detailed account planning and aligned sales incentives to ensure our teams are collaborating from day 1.

Speaker #2: This was driven in part by strong demand for software firewalls. As noted earlier, our software growth was complemented by improving hardware demand led by the adoption of our latest Gen Five firewall appliances and SD-WAN. Total services revenue grew slightly above 13%.

Nikesh Arora: We're delighted to have closed the acquisition of CyberArk early in Q3, and are ready to execute on what I believe is a massive opportunity in identity security. As many of you noticed earlier this month, CyberArk is coming off an exceptional December quarter with record net new ARR, and 30% of subscription ARR growth at scale. We've been rigorously building and refining our integration plans and moving fast to put these plans into execution. This includes aligning our go-to-market engines. We're already well underway on detailed account planning and aligned sales incentives to ensure our teams are collaborating from day one. From a product perspective, the innovation roadmap here is massive. We aren't just looking at legacy IM, which in our view, is basic hygiene. We're building a next-generational identity security platform that protects across humans, machines, and AI agents.

Phone product, perspective, Innovation, roadmap. Here is massive. We aren't just looking at Legacy IM, which in our view is basic hygiene for building a Next Generation identity security platform that protects across humans machines and AI agents.

Speaker #2: Within this , subscription revenue was up 14% , while support revenue grew 12% . From a geographical perspective , we saw broad based strength across all of our major theatres with the Americas growing 14% , EMEA growing 17% and Jpac growing 17% .

We also look forward to delivering machine identity and certificate life cycle management to our 65,000 plus firewall customers longer term, premium excited about the opportunity, to address. The growing needs of identity to secure AI agents. We brought cyber Arc because when AI doesn't start logging in and machine speed,

Logging in becomes a primary attack Factory. We believe we are now the only company that can verify the who has secure the what simultaneously

Speaker #2: Moving further down the income statement, our disciplined focus on profitability and operational leverage continued to deliver strong results in Q2. Given the timing of the Chronosphere acquisition, the impact of this transaction to our P&L financials was immaterial. Our total gross margin for the quarter was 76.1%.

given the momentum in the business currently and our Innovation road map, we believe we are well positioned to become the largest identity security player of all time.

In summary, we continue to executing Sr platformization strategy in Q2 with momentum building across multiple areas of business.

Nikesh Arora: We also look forward to delivering machine identity and certificate lifecycle management to our 65,000+ firewall customers. Longer term, we remain excited about the opportunity to address the growing needs of identity to secure AI agents. We bought CyberArk because when AI agents start logging in at machine speed, logging in becomes a primary attack vector. We believe we are now the only company that can verify the who and secure the what simultaneously. Given the momentum in the business currently and our innovation roadmap, we believe we are well positioned to become the largest identity security player over time. In summary, we continued executing against our Platformization strategy in Q2, with momentum building across multiple areas of the business.

Speaker #2: Within this product , gross margin was 78.2% , an increase of 150 basis points year over year , driven by a higher software mix compared to last year As noted earlier , we did see improvement in our hardware business during Q2 Therefore , on a sequential basis , the higher mix of hardware and product revenue resulted in 180 basis point decrease to product gross margin versus Q1 The services segment delivered gross margin of 75.6% , down 100 basis points year over year .

Our core Innovation engine remains strong with great traction and new products, like, heirs and agents are ready to put our integration plans into action, with cyber Rock and Co.

Before I hand over to debuck, I want to take a few minutes to reflect on the recent advancements in AI.

We're seeing significant innovation in new, agentic platforms targeting the Enterprise. And while it's still early, it is causing some companies to reassess how the applications are built. Our workflows are automated, and we decisions are made long-standing assumptions about systems of record are being Revisited, and perhaps even more. So the analytics layer built on top of that.

Speaker #2: The year over year change in services gross margin reflects a positive mix shift towards a high growth SaaS offerings , which remain in the earlier part of their scaling curve .

In many Enterprise applications data, reflects structured business processes within defined workflows.

Security data is different in our case.

Nikesh Arora: Our core innovation engine remains strong, with great traction in new products like Airs and Agentics, and are ready to put our integration plans into action with CyberArk and Chronosphere. Before I hand over to Dipak, I want to take a few minutes to reflect on the recent advancements in AI. We're seeing significant innovation in new agentic platforms targeting the enterprise, and while it's still early, it is causing some companies to reassess how their applications are built, how workflows are automated, and how decisions are made. Long-standing assumptions about systems of record are being revisited, and perhaps even more so, the analytics layer built on top of them. In many enterprise applications, data reflects structured business processes within defined workflows. Security data is different.

Speaker #2: We continue to be pleased by the growth of our SaaS offerings and remain focused on driving efficiencies here. Now, turning to the supply chain.

it is real-time threat activity generated at the control point where our platforms operate in continuously, refined through more than 30 billion attacks blocked daily and 15 pabt of telemetry processed in our AI saw

Speaker #2: We observed a marginal impact on product hogs this quarter from higher memory and storage pricing , but we believe we are well positioned to manage through these dynamics First , our high and growing software mix provides a natural hedge Second , we will leverage our scale deep supply chain expertise , and lessons learned through Covid and prior supply chain constraints .

that distinction matters. When we say Precision, AI is not AI, layered onto a feature set. It is AI trained in our proprietary data set and embedded directly at those critical control points.

ASI begins interacting autonomously across applications infrastructure.

Fragmented, security, introduces a delay at precisely the wrong moment, security must operate as according to the system unified consistent and real time.

Speaker #2: And third, pricing actions taking effect later this fiscal year will help offset corresponding cost increases. We are proactively factoring these considerations into our Q3 and full-year outlook.

This is our platform sits at these control points with these shifts. We see these shifts as they happen.

Nikesh Arora: In our case, it is real-time threat activity generated at the control point, where our platforms operate and continuously refine to more than 30 billion attacks blocked daily, and 15 petabytes of telemetry processed in our AI SOC. That distinction matters. When we say Precision AI, it is not AI layered onto a feature set; it is AI trained on a proprietary dataset and embedded directly at those critical control points. As AI begins interacting autonomously across applications and infrastructure, fragmented security introduces delay at precisely the wrong moment. Security must operate as a coordinated system, unified, consistent, and real-time. Because our platform sits at these control points, we see these shifts as they happen. The data generated across network, cloud, identity, endpoint, and browser continually informs our models, creating a feedback loop that compounds with scale. But scale is not enough.

Is they generate a cross Network Cloud, identity, endpoint and browser, continually informs our models, creating a feedback loop that compounds the scale.

Speaker #2: We delivered our third consecutive quarter of 30% plus operating margins, with Q2 operating margin of 30.3%, a 190 basis point expansion versus Q2 of last year.

Speaker #2: The strong expansion reflects our ability to drive consistent scale and efficiency across all OpEx line items. Our diluted non-GAAP EPS reached $1.10 and $0.03, which once again came in above the high end of our guidance. Q2 adjusted free cash flow was $502 million on a trailing 12-month basis.

To adapt and challenge our own assumptions. Technology Cycles. Change architectures evolved for the past 7 and a half years. They've consistently aimed to invest ahead of inspection points in technology even when the path is not fully defined.

Maintaining this discipline is vital to ensuring that we Remain the digital Guardian for our customers consumers. However, the technology stack could evolve

with that, I will hand over the calls, Deepak to the quarter results in detail.

Thank you, cash and good afternoon, everyone.

Speaker #2: We generated $3.75 billion in adjusted non-GAAP free cash flow, representing a margin of 37.9%. Our cash and cash equivalents for the period were $7.9 billion, reflecting a $2.6 billion cash consideration for the Chronosphere acquisition.

As in the cash noted, our strong Q2 results reflect the consistent execution of our platformization strategy coupled with a robust amount of environments.

Nikesh Arora: Sustained leadership requires a willingness to adapt and challenge our own assumptions. Technology cycles change, architectures evolve. For the past 7.5 years, we've consistently aimed to invest ahead of inflection points in technology, even when the path is not fully defined. Maintaining this discipline is vital to ensuring that we remain the digital guardian for our customers. However, the technology stack could evolve. With that, I will hand over the call to Dipak to review the quarter results in detail.

The increasing adoption of our platforms is most evident in our next generation of security are which grew 33% to 6.33 billion dollars?

Speaker #2: Given the recent close of our CyberArk acquisition, we expect the $2.3 billion cash outlay in Q3. This results in a total combined cash outlay of $4.9 billion in connection with our acquisition of CyberArk.

This includes a hundred million dollar contribution from our recent acquisition of chronosphere.

On an organic basis. NGS are was up 28% year-over-year and net. New are was up 11% year-over-year.

Speaker #2: We guaranteed the payment obligations under Cyber Arcs convertible senior notes due 2030 . The acquisition resulted in a make whole fundamental change under the notes , and we will be making an offer to repurchase the notes in the coming days We also issued 112 million shares in consideration for the cyber Ark acquisition Before I turn to guidance , I also want to extend a warm welcome to the over 4000 talented individuals from Cyberark and Chronosphere .

Dipak Golechha: Thank you, Nikesh, and good afternoon, everyone. As Nikesh noted, our strong Q2 results reflect the consistent execution of our Platformization strategy, coupled with a robust demand environment. The increasing adoption of our platforms is most evident in our Next-Generation Security ARR, which grew 33% to $6.33 billion. This includes a $200 million contribution from our recent acquisition of Chronosphere. On an organic basis, NGS ARR was up 28% year-over-year, and net new ARR was up 11% year-over-year. This performance was driven by an acceleration in SASE and software firewall ARR, alongside continued momentum in XIM. A key contributor to our software firewall growth in recent quarters is Prisma AIRS. As customers increase their AI deployments, they're looking for a trusted partner to secure this critical transformation.

Performance was driven by an acceleration in sassy and software firewall ARR alongside Continuum momentum and exam.

A key contributor to our software. Firewall growth in recent quarters is Prisma as

Customers increase their AI, deployments they're looking for a trusted partner to secure this critical transformation.

Prisma Air's directly addresses this need. And as nikesh mentioned, it is scaling rapidly with over a 100 customers ending Q2.

Speaker #2: We're thrilled to have them on board and excited to execute on our integration plans to unlock the full value of these acquisitions. Our focus is on a frictionless onboarding experience for our new colleagues, and within just the first few days, we provided access to collaboration tools for every individual to work as one cohesive team.

Our remaining performance obligation or RPO to 23% to 16.0 billion dollars. This includes approximately 150 million dollars of RPO from our chronosphere acquisition.

Speaker #2: We remain confident in our ability to deliver significant scale and leverage across every line of each of our financial statements. From an operational standpoint, integration is being executed with the same rigor that we apply to running our core business. We've established clear governance and defined workstreams across all functions, including IT and finance.

It's important to note that RPO balances are chronosphere can fluctuate from period to period, given usage based pricing with ARR and revenue being more representative of business performance.

our current RPO which represents the near-term revenue realization was 7.1 billion representing 18% across

Dipak Golechha: Prisma AIRS directly addresses this need, and as Nikesh mentioned, it is scaling rapidly with over 100 customers ending Q2. Our remaining performance obligation, or RPO, grew 23% to $16.0 billion. This includes approximately $150 million of RPO from our Chronosphere acquisition. It's important to note that RPO balances for Chronosphere can fluctuate from period to period, given usage-based pricing, with ARR and revenue being more representative of business performance. Our current RPO, which represents the near-term revenue realization, was $7.1 billion, representing 18% growth. Total revenue was $2.59 billion and grew 15%.

Total revenue was 2.59 billion and grew 15%.

Speaker #2: IT , HR , products and go to market and implemented measures to ensure continuity for customers , partners and employees . Our priority is maintaining business momentum while methodically bringing platforms , reporting structures and operating rhythms together .

Given the close of our chronosphere, acquisition came near the end of fiscal. Q2 the revenue contribution was immaterial during the quarter.

Speaker #2: Taken together, we believe this disciplined approach to integration reinforces our confidence in delivering sustained growth and operating leverage, enabling us to achieve our target of a 40% free cash flow margin by fiscal 2028.

product Revenue was up 22% with 45% of the product Revenue coming from software form factors over the trailing 12 months, which was up from 38% in the trailing 12 months and in Q2 255,

This was driven in part by strong demand for software firewalls as noted earlier.

Speaker #2: And our longer term goal of $20 billion in earnings by fiscal 2030 . Now , let me take you through the guidance Please note that our Q3 and full year 2026 guidance is inclusive of both the Cyberark and Chronosphere acquisitions , which have been aligned to our fiscal year and our definitions of certain non-GAAP metrics .

Our software growth was complemented by improving Hardware demand led by the adoption of our latest Gen 5 firewall appliances and ST1.

Dipak Golechha: Given the close of our Chronosphere acquisition came near the end of fiscal Q2, the revenue contribution was immaterial during the quarter. Product revenue was up 22%, with 45% of the product revenue coming from software form factors over the trailing twelve months, which was up from 38% in the trailing twelve months ending Q2 2025. This was driven in part by strong demand for software firewalls, as noted earlier. Our software growth was complemented by improving hardware demand, led by the adoption of our latest Gen5 firewall appliances and SD-WAN. Total services revenue grew slightly above 13%. Within this, subscription revenue was up 14%, while support revenue grew 12%. From a geographical perspective, we saw broad-based strength across all of our major theaters, with the Americas growing 14%, EMEA growing 17%, and JAPAC growing 17%.

Total Services Revenue, grew slightly above 13%. Within this subscription Revenue was up 14% while support Revenue grew, 12%.

Speaker #2: This includes Nsaa , which reflects only the subscription portion of Cyberark RR and has been conformed to our standard revenue base definition . Our Q3 and full year 2026 guidance assumes reported earnings IRR for Cyberark will be approximately 2 to 3% lower than the equivalent on Cyberark previous bookings based based RR definition Please see the appendix of our earnings presentation for more detail on the comparison of the two RR definitions for the fiscal third quarter 2026 .

From a geographical perspective, we saw broadberry strength across all of our major theaters with the Americas. Growing 14% emia growing 17% and jpack growing 17%.

Moving further down the income statement, our discipline focus on profitability and operational, leverage continue to deliver strong results in Q2.

Given the timing of the chronosphere acquisition the impact of this transaction to our p&l financials was immaterial.

Our total gross margin for the quarter was 76.1% within this product gross margin was 78.2% and increase of 150 basis points to year-over-year driven by a higher software mix compared to last year.

Speaker #2: We expect NGS ARR to be in the range of $7.94 to $7.96 billion, an increase of 56%. This includes a $1.47 billion contribution from M&A. Remaining performance obligation is expected to be $17.85 to $17.95 billion, an increase of 32 to 33%.

As noted earlier, we did see Improvement in a hardware business during Q2 therefore on a sequential basis. The higher mix of hardware and product, Revenue resulted in the 180 basis, point decreased to product gross margin versus q1

Dipak Golechha: Moving further down the income statement, our disciplined focus on profitability and operational leverage continued to deliver strong results in Q2. Given the timing of the Chronosphere acquisition, the impact of this transaction to our P&L financials was immaterial. Our total gross margin for the quarter was 76.1%. Within this, product gross margin was 78.2%, an increase of 150 basis points year-over-year, driven by a higher software mix compared to last year. As noted earlier, we did see improvement in our hardware business during Q2. Therefore, on a sequential basis, the higher mix of hardware and product revenue resulted in a 180 basis point decrease to product gross margin versus Q1. The services segment delivered gross margin of 75.6%, down 100 basis points year-over-year.

Speaker #2: This includes a $1.6 billion contribution from M&A revenue, with total revenue expected to be in the range of $2.941 to $2.945 billion, an increase of 28 to 29%.

Speaker #2: This includes a $340 million contribution from M&A. Our fully diluted share count is 812 to 817 million shares, which accounts for the close of the cyber acquisition on February 11th.

The services. Segment delivered gross margin of 75.6% down 100 basis, points year-over-year, the year-over-year change in services, gross margin, reflects a positive, mix shift, towards a high growth, SAS offerings, which remain in the earlier. Part of their scaling curve. We continue to be pleased by the growth of our SAS offerings and remain focused on driving efficiencies here.

Now, turning to the supply chain, we observed a marginal impact on product hubs this quarter, and higher memory and storage pricing, but we believe we are well positioned to manage through these Dynamics.

Speaker #2: Diluted non-GAAP EPS to be in the range of $0.78 to $0.80 for the fiscal year 2026. We expect things to be in the range of $8.52 to $8.62 billion, an increase of 53 to 54%.

First, our high and growing software. Mix provides a natural Hedge.

second, we will leverage our scale deep supply chain, expertise and Lessons Learned through coid and prior supply chain constraints,

Dipak Golechha: The year-over-year change in services gross margin reflects a positive mix shift towards our high-growth SaaS offerings, which remain in the earlier part of their scaling curve. We continue to be pleased by the growth of our SaaS offerings and remain focused on driving efficiencies here. Now, turning to the supply chain, we observed a marginal impact on product COGS this quarter from higher memory and storage pricing, but we believe we are well positioned to manage through these dynamics. First, our high and growing software mix provides a natural hedge. Second, we will leverage our scale, deep supply chain expertise, and lessons learned through COVID and prior supply chain constraints. And third, pricing actions taking effect later this fiscal year will help offset corresponding cost increases. We have proactively factored these considerations into our Q3 and full year outlook.

Speaker #2: This includes a $1.52 billion contribution from M&A , remaining performance obligation of 20.2 to $20.3 billion , an increase of 28% , which includes a $1.6 billion contribution from M&A revenue to be in the range of 11.28 to $11.31 billion , an increase of 22 to 23% .

Corresponding cost increases. We are proactively factor these considerations into our Q3 in full year outlook.

We delivered our third consecutive quarter of 30% plus operating margins with Q2 operating margin of 30.3%. 190 basis point expansion versus Q2 of last year.

Speaker #2: This includes a $760 million contribution from M&A. Operating margins to be in the range of 28.5% to 29%. Diluted non-GAAP EPS to be in the range of $3.65 to $3.70 per share, fully diluted.

The strong expansion, reflects our ability to drive consistent scale and efficiency across all Opex line items.

Our diluted non-gaap EPS we reach 1 Point, 1 and 3 cents, which once again came in above the high end of our guidance.

Speaker #2: Share count is 768 to 773 million shares , which accounts for the close of the Cyberark acquisition and adjusted free cash flow margin of 37% .

222 adjusted free cash flow was 502 million on a trailing 12-month basis. We generated 3.75 billion dollars in adjusted non-gaap free. Cash flow representing a margin of 37.9%.

Dipak Golechha: We delivered our third consecutive quarter of 30%+ operating margins, with Q2 operating margin of 30.3%, 190 basis point expansion versus Q2 of last year. The strong expansion reflects our ability to drive consistent scale and efficiency across all OpEx line items. Our diluted non-GAAP EPS reached $1.03, which once again came in above the high end of our guidance. Q2 adjusted free cash flow was $502 million. On a trailing twelve-month basis, we generated $3.75 billion in adjusted non-GAAP free cash flow, representing a margin of 37.9%. Our cash and cash equivalents for the period was $7.9 billion, reflecting a $2.6 billion cash consideration for the Chronosphere acquisition.

Speaker #2: We have included our typical typical modeling points in the presentation for your review , but I would like to highlight a few now First , note that under our accounting policy , the upfront portion of term licenses and any perpetual license revenue from Cyberark will be recognized as product revenue .

Our cash and cash equivalents for the period was 7.9 billion reflecting A 2.6 billion, cash consideration for the chronosphere acquisition.

Given the recent close of our cyber Ark acquisition. We expect the 2.3 billion cash outlay in Q3

This results in total combined cash outlay of 4.9 billion.

Speaker #2: All of our Chronosphere revenue will be included in services . The Q3 we expect product revenue growth of 25% . And for the year , we expect product revenue growth in the low 20s .

Speaker #2: With that , I will turn it back to Hamza for Q&A

In connection with our acquisition of cyber art, we guarantee the payment obligations under cyber Arts convertible senior notes, due 2030. The acquisition. Resulted in a make hole fundamental change under the notes and we will be making an offer to repurchase the notes in the coming days.

Speaker #3: Okay . Thank you . Deepak . Brian , please limit yourself to one question to allow for maximum time for Q&A First , we've got Rob Owens from Piper Sandler , followed by Brad Zelnick from Deutsche Bank .

We also issued 112 million shares in consideration for the Cyber architect position.

Dipak Golechha: Given the recent close of our CyberArk acquisition, we expect a $2.3 billion cash outlay in Q3. This results in total combined cash outlay of $4.9 billion. In connection with our acquisition of CyberArk, we guaranteed the payment obligations under CyberArk's convertible senior notes due 2030. The acquisition resulted in a make-whole fundamental change under the notes, and we will be making an offer to repurchase the notes in the coming days. We also issued 112 million shares in consideration for the CyberArk acquisition. Before I turn to guidance, I also want to extend a warm welcome to the over 4,000 talented individuals from CyberArk and Chronosphere. We're thrilled to have them on board and excited to execute on our integration plans to unlock the full value of these acquisitions.

Speaker #4: Great . Thank you Hamza , and good afternoon , everyone . Nikesh , looking back at 2018 , 2019 , there was a prevailing fear that cloud computing would render parts of the the cybersecurity stack obsolete .

Before I turn to guidance, I also want to extend the warm, welcome to the over 4,000, talented individuals from cyber, are and thrilled to have them on board and excited to execute and not integration plans to unlock the full value of these acquisitions.

Speaker #4: And at that time , you leaned in via M&A and reposition the portfolio . You know , obviously , the business has tripled since that today .

Our focus is on a frictionless onboarding experience for our new colleagues. And within just the first few days we've provided access to collaboration tools for every individual to work as 1 Cohen.

Speaker #4: Now we enter this AI era, and the narrative feels oddly similar. Could you compare the existential nature of this AI shift to what we saw in cloud, and maybe what areas you think will be obsolete?

We remain confident in our ability to deliver significant scale. And leverage across every line of each of our financial things.

Speaker #4: And then specifically, is M&A the primary lever again this time around, or does your starting position differ at Palo Alto from where you were, let's say, at the start of the cloud cycle?

Speaker #4: Thanks

Speaker #1: That's a long one question , Rob , nice to see you again . So that's a good question . Rob . Look , I think when we looked at in 20 1819 , you were you were trying to manage two challenges .

From an operational standpoint Integrations being executed with the same rigor that we apply to running our Core Business. We've established clear governance defined work streams across all functions, including it financed. It HR products and go to market and implemented measures to ensure continuity for customers partners and employees.

Dipak Golechha: Our focus is on a frictionless onboarding experience for our new colleagues, and within just the first few days, we've provided access to collaboration tools for every individual to work as one cohesive team. We remain confident in our ability to deliver significant scale and leverage across every line of each of our financial statements. From an operational standpoint, integration is being executed with the same rigor that we apply to running our core business. We've established clear governance, defined work streams across all functions, including IT, finance, IT, HR, products, and go-to-market, and implemented measures to ensure continuity for customers, partners, and employees. Our priority is maintaining business momentum while methodically bringing platforms, reporting structures, and operating rhythms together.

Speaker #1: One challenge was how do we get customers to get off on prem to cloud and then deliver them cloud security . And the other challenge was , you know , how do we deliver services off the cloud ?

our priority is maintaining business momentum, while methodically bringing platforms reporting structures and operating rhythms together,

Speaker #1: The customers would accept because they were being delivered from the cloud . And that's kind of where , you know , us . We to refactor our entire security services in the firewall , delivered them from the cloud , which was a huge opportunity .

Taken together we believe this discipline approached integration reinforces our confidence in delivering sustained growth and operating leverage enabling us to achieve our Target of 40%, be cash flow, margin by fiscal 2028 and a longer term goal of 20 billion dollars in NGS ARR by fiscal 2030.

Speaker #1: We made a lot of acquisitions to deliver cloud security . We fundamentally architected Xim at that point in time as a cloud delivered SoC , which is generally not the prevailing trend .

Now, let me take you through the guidance.

Speaker #1: I think this time I'm still, you know, confused why the market is treating AI as a threat to, at least, cyber.

Please note that our Q3 and full year. 2026 guidance is inclusive of. Both the Cyber art and chronosphere Acquisitions, which have been aligned to our fiscal year and our definitions of certain non-gaap metrics.

Speaker #1: And I can't speak for all the software, because 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.

Dipak Golechha: Taken together, we believe this disciplined approach to integration reinforces our confidence in delivering sustained growth and operating leverage, enabling us to achieve our target of 40% free cash flow margin by fiscal 2028, and our longer-term goal of $20 billion in NGS ARR by fiscal 2030. Now, let me take you through the guidance. Please note that our Q3 and full year 2026 guidance is inclusive of both the CyberArk and Chronosphere acquisitions, which have been aligned to our fiscal year and our definitions of certain non-GAAP metrics. This includes NGS ARR, which reflects only the subscription portion of CyberArk's ARR and has been conformed to our standard revenue-based definition. Our Q3 and full year 2026 guidance assumes reported NGS ARR for CyberArk will be approximately 2 to 3% lower than the equivalent under CyberArk's previous bookings-based ARR definition.

This includes NGS ARR, which reflects only the subscription portion of cyber ARS are and has been conformed to our standard Revenue based definition.

Speaker #1: Using AI , you cannot respond fast if you've got 70 different vendors who have different data , different logs , different API's running .

Speaker #1: So we are seeing a trend towards more consolidation , more platforms , and that's evident in what we said we did our best number of platforms this quarter than we've ever done .

Our Q3 and full year 2026. Guidance assumes reported NGS are the Cyber Arc will be approximately 2 to 3% lower than the equivalent on the Cyber OS, previous bookings. They they um, our definition

Speaker #1: Barring a Q4 , which is seasonally strong . So I think that's one trend we're seeing . And the other trend we are seeing is a slow adoption on the enterprise side , slower than the consumer side of AI .

Please see the appendix of our earnings presentation for more detail. On the comparison of the 2 are definitions.

so, the fiscal third quarter 2026, we expect

Speaker #1: But as the adoption is beginning to happen , we're beginning to hear conversations around security , which as you see with my eyes , we delivered 100 plus customers .

NGS are to be in the range of 7.94 to 7.96 billion and increase of 56%. This includes a 1.47 billion contribution from m&a.

Speaker #1: This is much faster than we did in cloud security . So people are adopting it faster . So from my perspective , AI is inevitable .

Speaker #1: It is going to be used by enterprises as enterprises start putting more critical functionality in the hands of AI , they will want control of AI agents or of their AI infrastructure .

Remaining performance. Obligation of 17.85 to 17.95 billion and increase of 32 to 33% this includes a 1.6 billion contribution from m&a.

Speaker #1: And that requires more security . So I think generally it's a positive trend towards more security , adoption . I particularly believe it's a bigger trend towards platforms and consistency of data and harmonization of data on the enterprise .

Dipak Golechha: Please see the appendix of our earnings presentation for more detail on the comparison of the two ARR definitions. For the fiscal Q3 2026, we expect NGS ARR to be in the range of $7.94 to 7.96 billion, an increase of 56%. This includes a $1.47 billion contribution from M&A. Remaining performance obligation of $17.85 to 17.95 billion, an increase of 32% to 33%. This includes a $1.6 billion contribution from M&A. Revenue to be in the range of $2.941 to 2.945 billion, an increase of 28% to 29%. This includes a $340 million contribution from M&A.

Revenue to be in the range of 2.941 to 2.945 billion and increase of 28 to 29% this includes a 340 million contribution from m&a.

Speaker #1: We're not collecting enough data right now to get security , good security outcomes .

Our fully diluted share count of 812 to 817 million shares which accounts for the close of the Cyber acquisition on February 11th.

Speaker #4: All right . Thank you .

Speaker #3: Okay . Thank you . Rob . Next we have Brad Zelnick from Deutsche Bank followed by Sakala from Barclays .

For the fiscal year 2026.

Speaker #5: Great . Thanks so much . Nice to see everybody . Nikesh I play I pay close attention to the acquisitions . You make and the things that you tell us because you've proven very astute at identifying future opportunities as we think about Shyam and the AI driven SOC , I've heard investors concerned lately that Llms are going to kill SIM tools .

We expect NGS are to be in the range of 8.52 to 8.62 billion dollars an increase of 53 to 54%. This includes a 1.52 billion dollar contribution from m&a.

Speaker #5: How do we think about the balance of opportunity and threat of LLMs doing a lot of the things that we relied upon SIMs for?

Remaining performance. Obligation of 20.2 to 20.3 billion and increase of 28% which includes a 1.6 billion contribution from m&a.

Dipak Golechha: Our fully diluted share count of 812 to 817 million shares, which accounts for the close of the CyberArk acquisition on February 11. Diluted non-GAAP EPS to be in the range of $0.78 to $0.80. For the fiscal year 2026, we expect NGS ARR to be in the range of $8.52 to $8.62 billion, an increase of 53% to 54%. This includes a $1.52 billion contribution from M&A. Remaining performance obligation of $20.2 to $20.3 billion, an increase of 28%, which includes a $1.6 billion contribution from M&A. Revenue to be in the range of $11.28 to $11.31 billion, an increase of 22% to 23%.

Speaker #5: And even if you're competitive from a product standpoint , is there a risk that you now face a new , strong competitor for these modernization opportunities ?

Revenue to be in the range of 11.28 to 11.31 billion and increase of 22 to 23%. This includes a 760 million contribution from m&a.

Speaker #1: I think, Brad, the LLMs are a net positive and additive to our capability to deliver security. Like, LLMs are very useful for data classification.

Operating margins to be in the range of 28.5 to 29%.

Speaker #1: We're doing DLP because we've relied on very traditional approaches towards matching, exact matching data, and DLP and LLMs are much more able to understand context and say, no, this definitely looks like something that is data that is restricted or PII.

Diluted non-gaap EPS to be in the range of 3.65 to 3.70.

Per share, our fully diluted share count of 768 to 7773 million shares which accounts for the close of the Cyber art acquisition.

Speaker #1: So I think there are certain examples where generative AI and Llms are extremely useful . All the examples you see , they're really good at looking at patterns and finding gaps .

and adjust, if we cash flow margins of 37%,

Speaker #1: And you'll see in offensive security or red teaming Llms are being helpful . I think the challenge that Llms will face or do face in providing comprehensive security is it's not the 95% of time they're right .

We have included our tipping typical modeling points in the presentation for your review, but I would like to highlight a few now.

Dipak Golechha: This includes a $760 million contribution from M&A. Operating margins to be in the range of 28.5% to 29%. Diluted non-GAAP EPS to be in the range of $3.65 to $3.70 per share. Our fully diluted share count is 768 to 773 million shares, which accounts for the close of the CyberArk acquisition, an adjusted free cash flow margin of 37%. We've included our typical modeling points in the presentation for your review, but I would like to highlight a few now. First, note that under our accounting policy, the upfront portion of term licenses and any perpetual license revenue from CyberArk will be recognized as product revenue. All of our Chronosphere revenue will be included in services.

Speaker #1: It's the 5% of the time . They're not right . You need to be right , right . This is like we're fighting bad guys who have to be right .

First note that under our accounting policy, The Upfront portion of term licenses. And any Perpetual license revenue from cyber art will be recognized as product. Revenue, all of our chronosphere Revenue will be included in services.

Speaker #1: Once we have to be right 100 times , 100% of the time . So llms until they get to 99 , 99.9% accuracy are not a threat to delivering security .

The Q3 we expect product Revenue growth of 25%. And for the year, we expect product Revenue growth in the low 20s.

Speaker #1: They are tools that can be used to summarize capabilities . There will be a genetic actions that can be used to get a lot of the pre-work done from a precision AI perspective , and data together .

With that, I will turn it back to Hamza for Q&A.

Speaker #1: So I think AI helps the cause . Every security company is going to have to use AI to deliver the capabilities that they deliver today .

Okay, thank you Deepak. Um, Brian. Let's please limit your yourself to 1 question to allow for maximum time for Q&A. Uh, first, we've got Rob Owens from Piper, Sandler, followed by Brad dunnick from Deutsche Bank.

Speaker #1: So I think it's not a secret . 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 .

Speaker #1: This helps you understand the patterns , understand the capabilities , and be able to answer questions faster . I don't think it's going to replace the security product anytime soon .

Dipak Golechha: For Q3, we expect product revenue growth of 25%, and for the year, we expect product revenue growth in the low 20s. With that, I will turn it back to Hamza for Q&A.

Speaker #1: And don't forget , Brad , one more thing is , in most cases , our security products sit at edges and create new data and logs that didn't exist from everything that's around them .

Speaker #1: So, to the extent we are creating proprietary data and security, that is not going to be replaced by—we’re not a system of record.

Hamza Fodderwala: Okay. Thank you, Dipak. For our analysts, please limit yourself to one question to allow for maximum time for Q&A. First, we've got Rob Owens from Piper Sandler, followed by Brad Zelnick from Deutsche Bank.

Speaker #1: We're not a system of work. We are generating specific, domain-specific data based on threats we see out in the environment, and then using that analytically to figure out how the customer should protect themselves.

Great. Uh, thank you, Hamza and good afternoon everyone. Uh, nikesh looking back at 2018209. There was a prevailing fear that cloud computing would render parts of the, uh, the cyber security stack obsolete. At that time. You leaned in Via m&a and repositioned the portfolio. And, you know, obviously the business is tripled, uh, since that today. Now we enter this AI era and the narrative feels oddly similar. Uh, could you compare that existential nature of this AI shift to to what we saw in cloud and maybe what areas you think will be Obsolete? And then specifically is emanated primary lever again this time around or does your starting position differ at Palo Alto from where you were? Let's say at the start of the cloud cycle? Thanks.

Rob Owens: Great. Thank you, Hamza, and good afternoon, everyone. Nikesh, looking back at 2018, 2019, there was a prevailing fear that cloud computing would render parts of the cybersecurity stack obsolete. At that time, you leaned in via M&A and repositioned the portfolio. You know, obviously, the business has tripled since that today. Now we enter this AI era, and the narrative feels oddly similar. Could you compare the existential nature of this AI shift to what we saw in cloud, and maybe what areas you think will be obsolesced? And then specifically, is M&A the primary lever again this time around, or does your starting position differ at Palo Alto from where you were, let's say, at the start of the cloud cycle? Thanks.

Speaker #5: Awesome. Super clear, super helpful. Thank you.

Speaker #3: Thank you Brad . Next we have Sakalia from Barclays followed by meta marshall from Morgan Stanley

That's the long 1 question are up. Nice to see you again. So that's, that's a good question. Rob, look, I think when we looked at in 2018, 1907,

Speaker #6: Okay , great . Hey , thanks for taking my question here . Congrats on closing Chronosphere and Cyberark Nikesh . Maybe , maybe on that point I'd love to dig into the the Joint Pipeline opportunity with Cyberark a little bit .

How do we get customers to get off on Prem to Cloud?

and then deliver them Cloud security, and the other challenge was

Speaker #6: You know , you have a big go to market machine that we can leverage here . So I'm just kind of curious how you think that opportunity unfolds and maybe relatedly , Deepak , for you , you gave some breadcrumbs earlier on cyber , but or on , on , on inorganic but wondered if you could help us bridge maybe how much IRR we can include for cyberark this year as we kind of think about that build up of organic versus inorganic .

You know, how do we deliver services off the cloud? The customers would accept because they're being delivered from the cloud.

And that's kind of where, you know, us we had to refactor our entire Security Services in the firewall, delivered them from the cloud which was a huge opportunity. We made a lot of Acquisitions to deliver Cloud security and we fundamentally architected xim at that point in time as a cloud delivered sock, which was generally not the prevailing trend.

Nikesh Arora: That's a long one question, Rob. Nice to see you again. So that's a, that's a good question, Rob. Look, I think when we looked at in 2018, 2019, we were- you were trying to manage two challenges. One challenge was: How do we get customers to get off on-prem to cloud, and then deliver them cloud security? And the other challenge was, you know, how do we deliver services off the cloud the customers would accept because they're being delivered from the cloud? And that's kind of where, you know, us, we had to refactor our entire security service in the firewall, delivered them from the cloud, which was a huge opportunity. We made a lot of acquisitions to deliver cloud security. We finally architected XSIAM at that point in time as a cloud-delivered SOC, which was generally not the prevailing trend.

I think this time, I'm still

You know.

Speaker #1: So so , you know , the good news is that Cyberark has a phenomenal team out there in the field . So does Palo Alto networks .

Speaker #1: We have very carefully, sort of, been working with them after the close. Both teams have been made aware of how to pursue joint opportunities together.

Speaker #1: We understand our pipeline. We understand their pipeline. We built a roadmap for overlapping pipeline, where both customers have opportunities in the fray.

Speaker #1: In the next 3 to 6 months , and we've already armed the teams with plans as to how to address the joint opportunity .

Speaker #1: But what's fascinating is just anecdotally , just as you were informing the teams , we already have had Cyberark reps come tell us they have an opportunity for Palo Alto products in an account , particularly strong at .

Speaker #1: And I know that Peter Jenkins, our president, was on a call over the weekend trying to help close the customer for CyberArk reps with Palo Alto capability.

Confused. Why the market is treating AI as a threat to at least cyber security and I can't speak for all the software. Because 1 thing, we're definitely seeing that customers have figured out that they need to drive more consistency in their security stack to be able to respond faster. Using AI, you cannot respond fast. If you got 70 different vendors, who have different data, different logs, different, apis running. So we are seeing a trend towards more consolidation, more platformization. And that's evident in what we said. We did our best number of platformization of this quarter, then we've ever done barring a Q4 which is seasonally strong. So I think that's 1 Trend, we're seeing and the other Trend we are seeing is, you know, slow adoption.

Nikesh Arora: I think this time, I'm still, you know, confused why the market is treating AI as a threat to at least cybersecurity, and I can't speak for all the software. Because one thing we're definitely seeing that customers have figured out that they need to drive more consistency in their security stack to be able to respond faster using AI. You cannot respond fast if you've got 70 different vendors who have different data, different logs, different APIs running. So we are seeing a trend towards more consolidation, more platformization, and that's evident in what we said. We did our best number of platformization this quarter than we've ever done, barring a Q4, which is seasonally strong. So I think that's one trend we're seeing. And the other trend we are seeing is, you know, slow adoption on the enterprise side, slower than the consumer side of AI.

Speaker #1: So and it's happening in both directions . But I think it's early days . But I think the opportunity is real . And as the teams get to know each other , as they get to know each other's processes , I think we're going to see more and more momentum with both the teams .

Speaker #1: It is going to be a bit of a crawl , walk , run because right now both our systems are different , so we have to do this stuff manually and we have people helping us build sort of a central acceleration team , which drives both .

The Enterprise side slower than the Consumer side of AI, but as the adoption is beginning to happen, we're beginning to hear conversations around security which as you see with Prisma airs, we delivered 100 plus customers. This is much faster than we did in Cloud security. The people are adopting it fast. So from my perspective,

Speaker #1: But as CyberArk teams understand more and more, the biological products and the capabilities and platforms, and as Palo Alto teams understand the cyber capabilities, and also as we work with the CyberArk team to build the next generation of products that we've been ideating with them recently, I think we're going to see continued momentum in both those pursuits.

And consistency of data and harmonization of data, on the Enterprise.

Speaker #7: Yeah. And then if I can just take the breakout.

Nikesh Arora: But as the adoption is beginning to happen, we're beginning to hear conversations around security, which, as you see with Prisma AI, as we delivered 100+ customers, this is much faster than we did in cloud security. So people are adopting it faster. So from my perspective, AI is inevitable. It is gonna be used by enterprises. As enterprises start putting more critical functionality in the hands of AI, they will want control of AI agents or of their AI infrastructure, and that requires more security. So I think generally it's a positive trend towards more security adoption. I particularly believe it's a bigger trend towards platformization, consistency of data, and harmonization of data in the enterprise. We're not collecting enough data right now to get security, good security outcomes.

We're not collecting enough data right now to get security, good security outcomes.

All right. Thank you.

Speaker #2: So look , we're not breaking out every M&A deal that we do separately all the time . However , just as a baseline , circuit , we did say that Cyberark Nzara was about 1.2 billion .

Okay, thank you rob. Next we have Brad zelnick from Deutsche Bank followed by Sokka Kalia from barklay.

Speaker #2: The as of December 2025 . And I just said that in my prepared remarks that 200 million of RR came from Chronosphere . And then I've also guided what the total M&A contribution is .

Speaker #2: So I think it's hopefully you'll agree , it's a lot more than breadcrumbs to be able to allow you to to do the math here .

Speaker #1: Full English breakfast .

Speaker #6: We'll take it. Thank you.

Speaker #3: All right. Thank you. Next, we have Meta Marshall from Morgan Stanley, followed by Josh Chilton from Wolfe Research.

Speaker #8: Great thanks and congrats on the quarter . Maybe just a question for me on the sassy business . We saw a nice re-acceleration in that business in fiscal Q2 .

Great. Thanks so much. Nice to see everybody nikesh. I play, I pay close attention to the Acquisitions you make. And the things that you tell us because you've proven very astute and identifying future opportunities as we think of about exam and the AI driven sock. I've heard investors concerned lately that LMS are going to kill Sim tools. How do we think about the balance of opportunity and threat of llms doing a lot of the things that we relied upon Sims for and and even if your competitive from a product standpoint, is there a risk that you now face a new strong competitor for these modernization opportunities?

Dipak Golechha: All right, thank you.

Rob Owens: All right, thank you.

Hamza Fodderwala: Okay. Thank you, Rob. Next, we have Brad Zelnick from Deutsche Bank, followed by Saket Kalia from Barclays.

Speaker #8: Just any commentary about what you're kind of seeing driving some of that strength ?

Brad Zelnick: Great. Thanks so much. Nice to see everybody. Nikesh, I pay close attention to the acquisitions you make and the things that you tell us, because you've proven very astute at identifying future opportunities. As we think about XSIAM and the AI-driven SOC, I've heard investors concerned lately that LLMs are gonna kill SIM tools. How do we think about the balance of opportunity and threat of LLMs doing a lot of the things that we relied upon SIMs for? And even if you're competitive from a product standpoint, is there a risk that you now face a new strong competitor for these modernization opportunities?

Speaker #9: Yeah . Good question . We're we're obviously very excited by seeing that business accelerate at scale . The I think Nikesh said it fairly well when he talked about sort of this notion of a first gen adoption of customers .

Speaker #9: That was tended to be more sort of point , product type adoption . They're trying to solve a particular problem . And the , you know , the existing solution at the time , we're pretty good at solving that one problem .

I think about the elements are a net positive and additive to our capability to deliver security, like LMS are very useful for data classification, we're doing DLP because we've relied on very traditional approaches towards matching, exact matching data and trying to do DLP and LMS are much able to understand context. And say, you know, this definitely looks like something that is, uh, data that is restricted or pii. So I think there are certain examples where generative Ai and LMS are extremely useful. Uh, all the examples. You see, they're really good at looking at patterns and finding gaps, and you'll see an offensive security, or redeeming LMS are being helpful.

Speaker #9: And now we're seeing both new customers, as well as many of those customers come back and look for a more comprehensive solve. Their employees might, all in one day, show up to an office and work, work from home, and work while traveling.

Nikesh Arora: So I think, Brad, the LLMs are a net positive and additive to our capability to deliver security. Like, LLMs are very useful for data classification when we're doing DLP, because we've relied on very traditional approaches towards matching, exact matching data and trying to do DLP. And LLMs are much easier able to understand context and say, "No, this definitely looks like something that is data that is restricted or PII." So I think there are certain examples where generative AI and LLMs are extremely useful. All the examples you see, they're really good at looking at patterns and finding gaps, and you'll see in offensive security or red teaming, LLMs are being helpful.

Speaker #9: And if they get three completely different experiences and application access and everything else , it doesn't work for them . From a productivity perspective .

Speaker #9: And so, what we're able to do by delivering this as a platform is, we can bridge how we apply network security from a hardware perspective.

Speaker #9: Software perspective , SaaS perspective , and even all the way down into the browser with Prisma browser , all in a very consistent way , both for security outcomes as well as the end user experience and the productivity they achieve .

Nikesh Arora: I think the challenge that LLMs will face or do face in providing comprehensive security is, it's not the 95% of the time they're right, it's the 5% of the time they're not right, you need to be right, right? This is like we're fighting bad guys who have to be right once, we have to be right 100 times, 100% of the time. So LLMs, until they get to 99, 99.9% accuracy, are not a threat to delivering security. They are tools that can be used to summarize capabilities. There will be agentic actions that can be used to get a lot of the pre-work done from a Precision AI perspective and get a data together. So I think AI helps the cause. Every security company is going to have to use AI to deliver the capabilities that they deliver today. So...

Speaker #9: Like that is the overarching trend that that I see . And what's driving the the business right now in sassy and the customer excitement about what we do .

I think the challenge that LMS will face or do face in providing comprehensive security is it's not the 95% of the time, they're right? Is a 5% of the time. They're not right. You need to be right, right? This is like, we're fighting. Bad guys who have to be right. Once we have to be write, 100 times 100% of the time, so LMS, until they get to 99. 90 9.9%, accuracy are not a threat to delivering security. They are tools that can be used to summarize capabilities, there will be a genetic actions that can be used to get a lot of the pre-work done from a Precision AI perspective and get data together. So I think AI helps the cause every security company is going to have to use AI to deliver the capabilities that they deliver today. So and I think it's not a secret. Every 1 of us is working hard almost every AI, every security product has some version of a co-pilot that now runs in tandem, with a product that helps you understand the patterns understand the capabilities and be able to answer questions faster. I don't think it's it's going to replace the security product anytime soon.

Speaker #8: Great . Thanks

Speaker #3: All right . Thank you . Meta . Next we have Josh Tilson from Wolfe Research , followed by John from Guggenheim

And don't forget Brad 1. More thing is in most cases our security products, sit at edges and create new data and logs that didn't exist for everything that's around them.

Speaker #10: Thank you, guys. Maybe just a high-level one for me. What are you guys seeing in regards to the volume of network traffic from your customers as they move more out of the experimentation phase and actually start to really adopt agents enterprise-wide?

Nikesh Arora: I think it's not a secret; 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. This helps you understand the patterns, understand the capabilities, and be able to answer questions faster. I don't think it's, it's gonna replace the security product anytime soon. And don't forget, Brad, one more thing is, in most cases, our security products sit at edges and create new data and logs that didn't exist from everything that's around them. So to the extent we are creating proprietary data and security, that is not going to be replaced by an LLM. We're not a system of record; we're not a system of work.

So to the extent, we are creating proprietary data and security that is not going to be replaced by. We're not a system of record, we're not a system of work. We have a generating specific domain specific data based on threats, we see out in the environment and then using that analytically to figure out how the customers should protect themselves.

Speaker #10: And how , if at all , will that impact the demand for the broader network security suite , whether that's firewall or Sassy ?

Awesome. Super clear. Super helpful. Thank you.

Great, thank you, Brad. Next we have socket. Kalia from Barclays.

Speaker #1: It's too early to tell. I think if you look at AI adoption in the enterprise, there is a surge of AI adoption in the coding space.

Followed by media Marshall from Morgan Stanley.

Speaker #1: So people using Codex Cursor cloud code and equivalent , you're seeing a lot of that . Those are very application specific . And actually that fits exactly where COI operates .

Speaker #1: Because when you start doing coding, and vibe coding of your desktop, you'll see server MCP servers and clients spun up on edge edges.

Speaker #1: You'll see a whole bunch of code that is sitting at the edge , which is not visible to traditional XDR capability . And that's why that was a solution we were using .

Nikesh Arora: We are generating specific domain-specific data based on threats we see out in the environment, and then using that analytically to figure out how the customer should protect themselves.

Speaker #1: And that's where we saw the traction. They had 4,050 customers and we were a customer there. And so this is a UN problem in security.

Brad Zelnick: Awesome. Super clear, super helpful. Thank you.

Okay, great. Hey, thanks for taking my question here. Congrats on closing Corona sphere and cyber Arc, um, nikash, maybe maybe on that point, I'd love to dig into the The Joint pipeline opportunity, with cyber Arc a little bit, you know, you have a big go to market machine that we can leverage here. So I'm just kind of curious how you think that opportunity unfolds and maybe relatedly debuck for you. You gave some breadcrumbs earlier on on cyborg but or on on, on, on inorganic, but wondered, if you could help us Bridge, maybe how much are we can include for cyborg this year, as we kind of, think about that build up of organic versus inorganic.

Hamza Fodderwala: Okay, thank you, Brad. Next, we have Saket Kalia from Barclays, followed by Meta Marshall from Morgan Stanley.

Speaker #1: And this is kind of where all the action is from an enterprise adoption perspective . Outside of that , there is now enterprise adoption that we're beginning to see where customers are running .

Saket Kalia: Okay, great. Hey, thanks for taking my question here. Congrats on closing Chronosphere and CyberArk. Nikesh, maybe on that point, I'd love to dig into the joint pipeline opportunity with CyberArk a little bit. You know, you have a big go-to-market machine that we can leverage here, so I'm just kind of curious how you think that opportunity unfolds. And maybe relatedly, Dipak, for you, you gave some breadcrumbs earlier on CyberArk, but or on inorganic, but wondered if you could help us bridge maybe how much ARR we can include for CyberArk this year, as we kind of think about that buildup of organic versus inorganic.

Speaker #1: Perhaps millions of tokens in one or two particular applications. They're working with some of the providers on that, and that's where we see the traffic.

Speaker #1: That traffic is again , more within the network . I don't think it's traffic . The networks cannot handle . I think the challenge right now is consolidating that traffic .

So, so I can, you know, the good news is, is that cyborg has a phenomenal team out there in the field. So does, but all the networks? Uh, we have very carefully sort of been working with them. After the close, both teams have been made aware of how to, pursue a joint opportunities together. We understand our pipeline. We understand their pipeline. We built a road map for overlapping pipeline where both customer has opportunities in the free in the next 3 to 6 months. And we've already armed the teams with plans.

Speaker #1: How do you get all the AI traffic to be in one place so you can understand it , provide visibility , look at the ability to control it and be able to act on it .

Speaker #1: So I think that's going to be the next battle as to how do we figure out the solution for all this traffic that is beginning to have a different nature in enterprise ?

Nikesh Arora: So, Saket, you know, the good news is that CyberArk has a phenomenal team out there in the field, so does Palo Alto Networks. We have very carefully sort of been working with them after the close. Both teams have been made aware of how to pursue joint opportunities together. We understand our pipeline, we understand their pipeline. We've built a roadmap for overlapping pipeline, where both customer have opportunities in the frame in the next three to six months, and we've already armed the teams with plans as to how to address the joint opportunity. But what's fascinating is, you know, just anecdotally, just as we were informing the teams, we already have had CyberArk reps come tell us they have an opportunity for Palo Alto's products in an account they're particularly strong at.

Speaker #1: And it needs a different set of controls and tools . But it's not really impacting the network level traffic yet . And I say yet because as adoption grows , I fully expect I mean , you can't build $600 billion worth of data centers and not expect traffic to grow .

Speaker #1: And kind of kind of expect that that not to happen . So I think that's going to happen . The the data center is being built .

Speaker #1: It's early days, and consumer actually is far outstripping enterprise for the moment. But we expect enterprise will surely and slowly get on that bandwagon.

Speaker #10: Super helpful . Thank you .

Speaker #3: Thank you Josh . Next we have John from Guggenheim , followed by Gabriela Borges from Goldman Sachs . Thank , thank you for taking my question .

Nikesh Arora: And I know that Peter Jenkins, their president, was in a call over the weekend trying to help close a customer for CyberArk reps with Palo Alto capability. So, and it's happening in both directions. But I think it's early days, but I think the opportunity is real. And as the teams get to know each other, as they get to know each other's processes, I think we're gonna see more and more momentum with both the teams. It is gonna be a bit of a crawl, walk, run, because right now, both our systems are different, so we have to do this stuff manually, and we have people helping us build sort of a central acceleration team, which drives both.

Products and the capabilities of the platforms. And as topology teams, understand the Cyber our capabilities. And also, you know, as we work with uh cyber Arc team, to build the next generation of products that we've been sort of ideating with them recently, I think we're going to see continued momentum in both both those Pursuits.

and then, if I

Speaker #3: Nikesh, I agree with you. Everything you said. Thank you, John.

Speaker #1: I'm going to sleep better tonight.

Speaker #3: Next question .

Speaker #1: You can stop now . It's good . Great question .

Speaker #11: I don't always agree with you , but I really do on this . I really do . I agree with you on everything you're saying about AI .

Speaker #11: It's positive effects on security . I actually really like the acquisitions you've done here . But but if AI is going to be good for security , and I think it will in both cases , both you need to secure AI .

Nikesh Arora: But as CyberArk teams understand more and more the Palo Alto products and the capability of the platform, and as Palo Alto teams understand the CyberArk capabilities, and also, you know, as we work with CyberArk team to build the next generation of products that we've been sort of ideating with them recently, I think we're gonna see continued momentum in both, both those pursuits.

Speaker #11: Also , AI is going to I could be a hacker if I wanted to be , but but if that's the case , when are we going to see it ?

Speaker #11: Because it doesn't show up in the numbers . It doesn't show up . I mean , not that it doesn't show up in your numbers yet .

Speaker #11: It doesn't show up in anybody's numbers yet . Really . Maybe a couple , but not really . I , I mean , when it is this .

Dipak Golechha: Yeah. And then if I can just take the breakout. So look, we're not breaking out every M&A deal that we do separately all the time. However, just as a baseline, Saket, we did say that CyberArk NGS ARR was about $1.2 billion as of December 2025. And I just said that in my prepared remarks, that $200 million of ARR came from Chronosphere. And then I've also guided what the total M&A contribution is. So I think it's hopefully, you'll agree that it's a lot more than breadcrumbs to be able to allow you to do the math there.

Speaker #11: No .

Speaker #3: I .

Speaker #1: Think that's it . Look , I think , John , if you , I think the best analogy I can give you is we look at cloud security .

Speaker #1: You didn't see cloud security numbers for a while because typically cloud adoption in enterprise is lagged . The consumer . And then even then it was literally a two year cycle or three year cycle before enterprises fully got all their applications and workloads moved onto the cloud .

Break out. So look, we're not breaking out every m&a, deal that we do separately all the time. However, just as a baseline second, we did say that cyborg, ngsa was about 1.2 billion. Um, the as of December 2025 and I just said that in my prepared, remarks at 200 million of ARR came from chronosphere. Um, and then I've also guided what the total m&a contribution is. So I think it's hopefully you'll agree, it's a lot more than breadcrumbs to be able to allow you to to do the math there, full English breakfast, we'll take it. Thank you. All right. Thank you, socket. Next, we have Mita Marshall from Morgan Stanley. Followed by Josh. Tilton from Wolfe research. Great thanks. And congrats on the quarter. Um, maybe if the question for me on, uh, The Sassy business we saw a nice re acceleration in that business uh in physical Q2, just any commentary about what you're kind of seeing uh driving some of that strength. Yeah um

Speaker #1: So I expect there right now , if you look at it , you tell me how many enterprise AI apps are you using ?

Nikesh Arora: Full English breakfast.

Speaker #1: Which are which are driving tremendous amounts of throughput ? And I can't think of anything but coding apps now . Coding apps are not resource intensive on your infrastructure .

Saket Kalia: We'll take it. Thank you.

Hamza Fodderwala: All right. Thank you, Saket. Next, we have Meta Marshall from Morgan Stanley, followed by Josh Tilton from Wolfe Research.

[Analyst] (Morgan Stanley): ... Great, thanks, and congrats on the quarter. Maybe just a question for me on SASE business. We saw a nice re-acceleration in that business in fiscal Q2. Just any commentary about what you're kind of seeing, driving some of that strength?

Meta Marshall: ... Great, thanks, and congrats on the quarter. Maybe just a question for me on SASE business. We saw a nice re-acceleration in that business in fiscal Q2. Just any commentary about what you're kind of seeing, driving some of that strength?

Speaker #1: They're resource intensive on your endpoint . So like endpoint capability and llms are where all the action is . So I think it's early days What I'm heartened by , the fact is that our number of customers of Prisma ER's is kind of following the same trajectory as Exim .

Your question. We're we're obviously very excited by seeing that business accelerate at scale. The I think the cash said it fairly well when he talked about um, sort of this notion of a first gen adoption of customers that was tended to be more sort of Point product type adoption, they're trying to solve a particular problem and the, you know, the existing Solutions at the time were were pretty good at solving that 1 problem and now we're seeing both new customers as well as many of those customers. Come back and look for a more comprehensive solve.

Speaker #1: The volume isn't there because the throughput is not coming through Llms right now . So I think it's early days . Look , you have to have one of two beliefs , John .

Nikesh Arora: Yeah. Good question. We're obviously very excited by seeing that business accelerate at scale. I think Nikesh said it fairly well when he talked about sort of this notion of a first-gen adoption of customers. It tended to be more sort of point product type adoption. They're trying to solve a particular problem, and the, you know, the existing solutions at the time were pretty good at solving that one problem. And now we're seeing both new customers as well as many of those customers come back and look for a more comprehensive solve. Their employees might all in one day show up to an office and work from home and work while traveling, and if they get three completely different experiences, application access, and everything else, it doesn't work for them from a productivity perspective.

Speaker #1: You have to be in one camp or the other. Either you have to believe that the $600 billion of data centers being built are going to be consumed.

Speaker #1: And if you believe that which most people seem to do , then that consumption is going to be 80 , 20 , 80% consumer , 20% enterprise .

Their employees might All In 1 Day, show up to an office and work work from home and work while traveling. And if they get 3, completely different experiences and application access and everything else, it doesn't work for them from a productivity perspective. And so what we're able to do by delivering this as a platform is, we can Bridge how we apply network security from a hardware perspective. Software perspective sassy perspective and even all the way down into the browser with Prisma browser.

Speaker #1: But those data centers are yet to be built . I think what is happening is we're all laying the groundwork right now is a bit of a sort of an arms race to try and see who can get the AI security sort of platform up and running as quickly as we can .

Speaker #1: And you can see innovations happening in every direction . That's why you see us by AI , which is now well integrated . We took the firewall , made an AI firewall .

All in a very consistent way, both for security outcomes, as well as the end user experience in the productivity, they achieve like that is the overarching trends that, that I see and, and what's driving? Um, the uh, the business right now in sassy in the, in the customer excitement about what we do,

Great, thanks.

Speaker #1: Now we're taking COI . We see that the that's where the action is . The next is going to be . Do you consolidate all AI traffic in one place .

All right. Thank you ma. Uh next we have Josh Tilton from Wolfe research.

Speaker #1: So, I think we're seeing the piece parts being built mid-flight. I think you have to be a bit patient.

Followed by John duchi from Guggenheim.

Nikesh Arora: And so what we're able to do by delivering this as a platform is we can bridge how we apply network security from a hardware perspective, software perspective, SASE perspective, and even all the way down into the browser with Prisma browser, all in a very consistent way, both for security outcomes as well as the end user experience and the productivity they achieve. Like, that is the overarching trend that I see in what's driving the business right now in SASE and the customer excitement about what we do.

Speaker #11: Okay . I'm not always patient , but I going to try .

Speaker #3: Thank you .

Speaker #1: Thank you John .

Speaker #3: All right John , thank you for the question . Next we have Gabrielle Borges from Goldman Sachs , followed by Adam Tyndall from Raymond James .

Speaker #12: Hey , good afternoon . This one is for Lee . It's a cyberark question , but it's a product based cyberark question . If we think about cyber as being strong for privileged users at the high end , what is the technical lift that has to be done to make that technology more accessible for every user ?

Thank you guys. Uh, maybe just a high level 1 for me. Um, what are you guys seeing in regards to the volume of network traffic from your customers as they move more out of the experimentation phase? And actually start to really adopt agents enterprise-wide uh and how if at all will that impact the demand for, you know, the broader Network, Security Suite, where the firewall or sassy.

Speaker #12: And I'm curious what you've learned in the last six months or so from your customer base on the method to securing a genetic identity between Pam , IGA and IAM .

[Analyst] (Morgan Stanley): Great, thanks.

Meta Marshall: Great, thanks.

Hamza Fodderwala: All right. Thank you, Mita. Next, we have Josh Tilton from Wolfe Research, followed by John DiFucci from Guggenheim.

Speaker #12: Any learnings from the last six months ? I'd be curious to hear . Thanks so much !

Josh Tilton: Thank you, guys. Maybe just a high-level one for me. What are you guys seeing in regards to the volume of network traffic from your customers, as they move more out of the experimentation phase and actually start to really adopt agents enterprise-wide? And how, if at all, will that impact the demand for, you know, the broader network security suite, whether that's firewall or SASE?

Speaker #9: Yeah , thanks , Gabriel . Good question . First , let me start with your first question . The I think the just the general space of privileged access management has largely been a more sophisticated category .

Speaker #9: And as such , it's been the more sort of security conscious enterprises have been the biggest adopters . And the there's already sort of a transformation underfoot of sort of this notion of modern Pam and moving to just in time controls and zero standing privileges and things like that .

Nikesh Arora: It's too early to tell. I think if you look at the AI adoption in the enterprise, there is a surge of AI adoption in the coding space, so people using Codex, Cursor, Cloud Code, and equivalent. You're seeing a lot of that. Those are very application specific, and actually, that fits exactly where Koi operates because when you start doing coding and Vibe Coding off your desktop, you'll see servers, MCP servers and clients spun up on edges. You'll see a whole bunch of code that is sitting at the edge, which is not visible to traditional XDR capability. That's why, you know, that was a solution we were using, Koi, and that's where, you know, we saw they had traction.

Speaker #9: And part of that is actually improving security. But part of it actually is also about making it easier for the end user to actually interact with these systems.

It's too early to tell, I think, if you look at the AI adoption of the Enterprise, there is a surge of adoption in the coding space. So people using codecs cursor, Cloud code, and equivalent. You're seeing a lot of that. Uh, those are very applications specific, uh, and actually, that fits exactly where koi operates because when you start doing coding and Vibe coding off your desktop, you'll see Server. MCP servers and clients spun up on edge edges. You'll see a whole bunch of code. That is sitting at the edge, which is not visible as a traditional xDrive capability. Uh, that's why, you know, that was a solution we were using koi and that's where, you know, we saw, they had traction, they had 40 50 customers and we were a customer over there. And so, all this is an unsolved problem and security. And this is kind of where all the action is from an Enterprise adoption perspective, outside of that, there is now Enterprise adoption that we're beginning to

Speaker #9: We so that's already happening . The further we have ideas for how we can leverage integrations between Cyberark and for example , Prisma browser in terms of how do we integrate capabilities in the place where the user is already doing work in order to make it even easier for them to take advantage of these capabilities ?

See where customers are running. Perhaps millions of tokens in 1 or 2 particular applications. They're working with some of the LM providers on and that's where we see the traffic that traffic is again.

Speaker #9: So we there's already a lot of progress and we have more ideas for how we're going to continue to make that easier so we can drive broader adoption across the existing customers , but also make it easier for Non-customers to adopt .

Nikesh Arora: They had 40, 50 customers, and we were a customer of theirs, and so this is an unsolved problem in security, and this is kind of where all the action is from an enterprise adoption perspective. Outside of that, there is now enterprise adoption that we're beginning to see where customers are running perhaps millions of tokens in 1 or 2 particular applications they're working with some of the LLM providers on, and that's where we see the traffic. That traffic is, again, more within the network. I don't think it's traffic that networks cannot handle. I think the challenge right now is consolidating that traffic. How do you get all the AI traffic to be in one place so you can understand it, provide visibility, look at the ability to control it, and be able to act on it?

Speaker #9: Then ultimately , we think that leads to the broader sort of full human identity solution that that we're excited about . Now , as that is happening .

More within the network. I don't think it's traffic that networks cannot handle. I think the challenge right now is consolidating that traffic. How do you get all the AI traffic to be in 1 place. So you can understand it provide visibility look at the ability to control it and be able to act on it. So I think that's going to be the next Bastion as to. How do we figure out the solution for all the traffic that is beginning to have a different nature in Enterprise and it needs different set of controls and tools but it's not really impacting the network

Speaker #9: Yes there is the Agentic identity sort of market that is is rapidly forming and look , the my view on on Agentic identity is it's going to have sort of aspects of machine identity and privileged of wrapped into one .

Expect. I mean, you can't build 600 billion dollars worth of data centers and not expect traffic to grow and kind of, you know, kind of expect that that not to happen. So I think that's going to happen. The the data center is being built, uh, it's 30 days and consumer actually is far outstripping, Enterprise for the moment but we expect Enterprise will surely and slowly get on that bandwagon.

Speaker #9: And this is partly why we , I think Cyberark is well suited for being able to go after this because of their leadership in both of those foundational spaces .

Super helpful. Thank you.

Nikesh Arora: So I think that's going to be the next bastion as to how do we figure out the solution for all this traffic that is beginning to have a different nature in enterprise, and it needs different set of controls and tools. But it's not really impacting the network-level traffic yet, and I say yet, because as adoption grows, I fully expect... I mean, you can't build $600 billion worth of data centers and not expect traffic to grow, and can't, you know, can't expect that, that not to happen. So I think that's going to happen. The data center is being built. It's early days, and consumer actually is far outstripping enterprise for the moment, but we expect enterprise will surely and slowly get on that bandwagon.

Thank you. Josh. Next, we have John duchi from Guggenheim followed by Gabriela Borges from Goldman Sachs.

Thanks. Thank you for taking my question. Um,

Speaker #9: And then it's, how do we adapt AD to, and then optimize for, agentic use cases? And again, some of that will be sort of, I'll call it, standalone CyberArk from an identity platform perspective.

Nikesh. I I agree with you everything. You said. Thank you, John. I'm gonna sleep better tonight. Next question you can stop now. It's good. Great question.

Speaker #9: And some of it will be how we think about that in concert with Prisma ER's , where we already have hooks into the AI infrastructure , and we'll we'll have again , integration opportunities to be able to bring solutions to our customers .

Speaker #12: That makes sense. Thank you.

Speaker #3: All right . Thank you , Gabriella . Next we have Adam Tindle from Raymond James , followed by Xiao Yao from Cowan .

Speaker #13: Okay . Thanks , Hamzah . Nikesh , in your comments , you talked about it with Chronosphere , a nine figure expansion deal with the leading AI provider .

Josh Tilton: Super helpful. Thank you.

Hamza Fodderwala: Thank you, Josh. Next, we have John DiFucci from Guggenheim, followed by Gabriela Borges from Goldman Sachs.

Speaker #13: I just want to pick on that and just ask about the key attributes that help Chronosphere get that level of commitment, where you're displacing existing vendors, the timing for that, the rationale for it, and maybe even the pipeline beyond that.

[Analyst] (Morgan Stanley): Thank you for taking my question. Nikesh, I agree with you, everything you said.

John DiFucci: Thank you for taking my question. Nikesh, I agree with you, everything you said.

About AI. Um, it's positive effects on security. I actually really like the Acquisitions, you've done here, but but if AI is going to be good for security and I think it will in both cases, both you need to secure Ai and also AI is going to. I can be a hacker if I want to be but but if that's the case, when are we going to see it? Because it doesn't show up in the number it doesn't show up. I mean, not that it doesn't show up in your numbers yet, it doesn't show up in anybody's numbers yet. Really maybe a couple but not really. And I mean when it

Is this?

Nikesh Arora: Thank you, John. I'm going to sleep better tonight.

[Analyst] (Morgan Stanley): Next question.

John DiFucci: Next question.

Speaker #13: And just a quick clarification, Deepak, just because I know this is coming up in after hours after you talked about IRR in total, I think investors are stripping out the $1.47 billion from Q3 NSAA and looking at it like organic net new NGS.

Nikesh Arora: You can stop now. It's good. Great question.

[Analyst] (Morgan Stanley): I don't always agree with you, but I really do on this.

John DiFucci: I don't always agree with you, but I really do on this.

Nikesh Arora: Okay, good.

[Analyst] (Morgan Stanley): I agree with you on everything you're saying about AI. It's positive effects on security. I actually really like the acquisitions you've done here. But if AI is going to be good for security, and I think it will in both cases, both you need to secure-

John DiFucci: I agree with you on everything you're saying about AI. It's positive effects on security. I actually really like the acquisitions you've done here. But if AI is going to be good for security, and I think it will in both cases, both you need to secure-

Speaker #13: IRR is down a lot . I think there's probably some flaws to that , but just want to toss that out there to have you clear the air .

Speaker #13: Thanks .

Speaker #1: All right . Adam , first things first . Look , fair is a highly scalable solution and it's is dependent on a net new architecture .

Nikesh Arora: Yep

[Analyst] (Morgan Stanley): ... AI. Also, AI is gonna... I could be a hacker if I want to be. But, but if that's the case, when are we going to see it? Because it doesn't show up in the numbers. It doesn't show up. I mean, not that it doesn't show up in your numbers yet. It doesn't show up in anybody's numbers yet, really. Maybe a couple, but not really. And I mean, when it. Is this-

John DiFucci: ... AI. Also, AI is gonna... I could be a hacker if I want to be. But, but if that's the case, when are we going to see it? Because it doesn't show up in the numbers. It doesn't show up. I mean, not that it doesn't show up in your numbers yet. It doesn't show up in anybody's numbers yet, really. Maybe a couple, but not really. And I mean, when it. Is this-

Speaker #1: The design for observability , which is different from what the current incumbents in the space have . So that's capability allows them to deliver those capabilities at approximately half the price , if not more than or less than than some of the other players out there .

Nikesh Arora: No, I think that's. Look, I think, John, if you—I think the best analogy I can give you is if you look at cloud security, you didn't see cloud security numbers for a while. Because typically, cloud adoption in enterprises lagged the consumer, and then even then, it was literally a two-year cycle, a three-year cycle before enterprises fully got all their application and workloads moved onto the cloud. So I expect. Right now, if you look at it, you tell me, how many enterprise AI apps are you using which, which are driving tremendous amounts of throughput? And I can't think of anything but coding apps. Now, coding apps are not resource intensive on your infrastructure, they're resource intensive on the endpoint. So, like, endpoint capability and LLMs are where all the action is. So I think it's early days.

Speaker #1: So they are displacing another vendor in that space . They have been partnering with the large language model over the last six months or so , and they have passed every technical hurdle , which allowed them to make a commitment to Chronosphere .

No, I think that's a look. I think John if you I think the best analogy I can give you is we look at Cloud security. You didn't see Cloud Security numbers for a while because typically Cloud adoption in Enterprise is lagged to Consumer. And then even then it was literally a 2 year cycle, or 3 year cycle before Enterprise is fully got all their application and workloads moved onto the cloud. So I expect there right now, if you look at it, you tell me how many Enterprise AI apps are you using? Which I have which are driving to Mazda throughput and I can't think of anything but coding apps. Now. Coding apps are not resource intensive on your infrastructure, their resource intensity endpoint. So like endpoint capability and llms are where all the action is. So I think it's early days. Uh what I'm heartened by the fact is that you know, our number of customers with Prisma. Errors is kind of following the same trajectory as xim. The volume is on there because the throughput is not coming through LMS right now. So I think it's early days. Look you have to have 1 of 2 release John. You have to be in

Believe that the 600 billion dollars of data centers are being built are going to be consumed.

Speaker #1: We expect the full transformation over the next 6 to 12 months, or a full transition from the other vendor. Part of the $200 million ARR is from one of those large LM vendors.

And if you believe that which most people seem to do, then that consumption is going to be 80/20 80% consumer or 20% Enterprise.

Speaker #1: We expect that to continue to grow . In addition to that , they have other customers are significant customers , and they are going to pursue significant customers over the next three , six months in partnership with us .

Nikesh Arora: What I'm heartened by the fact is that, you know, our number of customers of Prisma AIRS is kind of following the same trajectory as XSIAM. The volume isn't there because the true power's not coming through LLMs right now. So I think some of it is. Look, you have to have one of two beliefs, John. You have to be in one camp or the other. Either you have to believe that the $600 billion of data centers being built are gonna be consumed. And if you believe that, which most people seem to do, then that consumption is gonna be 80/20, 80% consumer, 20% enterprise. But those data centers are yet to be built.

Speaker #1: But that's why we bought the company . Because because of scalability , because of the capability from a technical as well as a commercial perspective .

Speaker #1: And we're going to talk more about product capabilities that we're going to give it . But we hope that that will allow it to be a full , sort of full scale replacement option for both DIY , many , many customers do DIY in that situation , as well as being able to compete effectively with some of the big observability players out there .

But those data centers yet to be built, I think what is happening, is we're all laying the groundwork right now is a bit of a sort of an arms race to try and see who can get the AI security sort of platform up and running as quickly as we can and you can see Innovation is happening in every direction. That's why you see us Pi. Protect AI which is now, well integrated, we took the firewall made an AI firewall. Now we're taking koi. We see that the fee of the action is. The next question is going to be how do you consolidate all AI traffic in 1 place? So, I think you're seeing the piece Parts being built mid-flight. Uh, I think this had to be a bit patient.

Okay. I I'm not always patient but I I'm going to try. Thank you. All right. Thank you John. All right John uh thank you for the question. Next we have Gabriel of or just from Goldman Sachs followed by Adam Tindle from Raymond James.

Nikesh Arora: I think what is happening is we're all laying the groundwork right now, is a bit of a sort of an arms race to try and see who can get the AI security sort of platform up and running as quickly as we can. And you can see innovation is happening in every direction. That's why you see us buy Protect AI, which is now well integrated. We took the firewall, made an AI firewall. Now we're taking Koi. We see that, that's where the action is. The next question is gonna be, how do you consolidate all the AI traffic in one place? So I think you're seeing the piece parts being built mid-flight. I think you just have to be a bit patient.

Speaker #9: Yeah , look , I'll just give you a high level . There's as they they've built something very unique for that very high end of the market scalability and the economic aspects .

Speaker #9: Even the start of some of the AI analytics . And that will complement with XD . The next phase is going to be how do we build out a lot of sort of enterprise , sort of off the shelf kind of features that make it just really easy to do integrations to basically replace existing incumbent infrastructure , whether that's commercial products or open source .

[Analyst] (Morgan Stanley): Okay. I'm not always patient, but I'm gonna try. Thank you.

John DiFucci: Okay. I'm not always patient, but I'm gonna try. Thank you.

I brought a question if we think about cyber Rock, historically being strong for privileged uses of the high end. What if the technical lift that has to be done to make that technology more accessible for every user? And I'm curious what you've learned in the last 6 months. Let's hear from your customer base on the method to securing, agentic identity, between Pam, IG and IM any learning from the last 6 months would be curious here. Thanks so much. Yeah, thanks, Gabriel. Good question. Um,

Speaker #9: We think, in both cases, the Chronosphere will scale down into that large enterprise segment very nicely.

Nikesh Arora: All right. Thank you, John.

Hamza Fodderwala: All right, John, thank you for the question. Next, we have Gabriela Borges from Goldman Sachs, followed by Adam Tindale from Raymond James.

Speaker #2: Then .

Gabriela Borges: Hey, good afternoon. This one is for Lee. It's a CyberArk question, but it's a product-based CyberArk question. If we think about CyberArk historically being strong for privileged users at the high end, what is the technical lift that has to be done to make that technology more accessible for every user? And I'm, I'm curious what you've learned in the last six months or so from your customer base on the method to securing agentic identity between PAM, JIT, and IAM. Any learnings from the last six months will be curious to hear. Thanks so much.

Speaker #7: .

Speaker #2: Adam , just on your question on on Ng4 , just just to be clear , organic NGS RR is roughly in line with consensus for , you know , Q3 and we've reiterated the full year .

First, let me, let me start with the first question. The I think the, the just, the general space of privilege access management has largely been a more sort of sophisticated category um and as such has been, the more sort of security conscious Enterprises have been the biggest adopters.

Speaker #2: So maybe folks just haven't fully appreciated that Chronosphere has closed before Q2 , but we make sure that that's all cleared up . Thank you

Speaker #3: Okay, looks like Charles is not here. So next, we'll go with Adam Borg at Stifel, followed by Gregg Moskowitz from Mizuho.

Lee Klarich: Yeah. Thanks, Gabriela. Good question. First, let me start with the first question. I think just the general space of Privileged Access Management has largely been a more sort of sophisticated category. And as such, has been the more sort of security-conscious enterprises have been the biggest adopters. And there's already sort of a transformation underfoot of sort of this notion of modern PAM and moving to just-in-time controls and Zero Standing Privileges and things like that. And part of that is actually improving security, but part of it actually is also about making it easier for the end user to actually interact with these systems. So that's already happening.

Speaker #14: Great . Thanks so much for taking the question . Maybe two , you talked about a little bit in prepared remarks about the quantum opportunity .

Speaker #14: We talked about a little bit last quarter . Love to hear more about kind of the early learnings from kind of the the discussions with with the customers from from the panel a few weeks back and ultimately how your thinking about the opportunity in coming years .

Speaker #14: Thanks so much, Rick.

Speaker #1: As part of the cyber ordeal, we've acquired Venafi, and we have Lee talking about a new capability we're building called the Next Generation Trust Subscription, plus our quantum capability.

Can drive broader adoption across the existing customers but also make it easier for non-customers to adopt. And then ultimately we think that leads to the broader sort of full human identity uh solution that uh that we're excited about. Now as that is happening. Yes, there is the agentic identity. Uh,

Um, sort of Market that is is rapidly forming. And

Speaker #1: We have been in discussion with 100 customers who are experimenting or are beta customers of our product. We have tremendous feedback from them. Our quantum capability is not just for Palo Alto firewalls.

Lee Klarich: The further we have ideas for how we can leverage integrations between CyberArk and, for example, Prisma browser, in terms of how do we integrate capabilities in a place where the user is already doing work in order to make it even easier for them to take advantage of these capabilities. There's already a lot of progress, and we have more ideas for how we're gonna continue to make that easier, so we can drive broader adoption across the existing customers, but also make it easier for non-customers to adopt. And then ultimately, we think that leads to the broader sort of full human identity solution that that we're excited about. Now, as that is happening, yes, there is the agentic identity sort of market that is rapidly forming.

Speaker #1: It actually looks at the enterprise capability . So we have actually integrated ten other vendors worth of quantum data into our quantum sub .

Speaker #1: But I'm going to let Lee talk about the the sub .

Speaker #9: I think the the yeah , the in both of these cases , whether it's , you know , cryptography and pqc or certificates and managing the the alternative is largely a very manual sort of human centric repetitive kind of task approach .

Look, the my view on, on agentic identity is it's going to have, um, sort of aspects of machine identity and privileged users sort of wrapped into 1. And, and this is partly why we I think cyborg is, is, is well suited, uh, for being able to go after this because of their leadership in both of those foundational spaces.

Speaker #9: It's either some poor person or people that have to constantly, sort of manually, go look at certificates, look at their renewal dates, and ages, and other things like that.

Lee Klarich: And look, my view on agentic identity is, it's going to have sort of aspects of machine identity and privileged users sort of wrapped into one. And this is partly why we I think CyberArk is well suited for being able to go after this because of their leadership in both of those foundational spaces. And then it's how do we adapt, add to, and then optimize for agentic use cases? And again, some of that will be sort of, I'll call it standalone CyberArk from a identity platform perspective, and some of it will be how we think about that in concert with Prisma AIRS, where we already have hooks into the AI infrastructure, and we'll have, again, integration opportunities to be able to bring solutions to our customers.

And then it's how do we adapt add to? And then optimize for agentic use cases. And again, some of that will be sort of I'll call it a standalone, cyber Ark from a identity platform perspective. And some of it will be how we think about that in concert with Prisma errors, where we already have hooks into the AI infrastructure. And we'll, we'll, we'll have again integration opportunities to be able to bring solutions to our customers.

Does that make sense? Thank you.

Speaker #9: And then redo them manually . Or we can do it through technology . The same is true with quantum cryptography . It's either a lot of manual consultation going through and trying to figure out what exists , or we can use technology .

Speaker #9: And so in both cases , we figured out obviously in one case that will be joining the team is and then the Netsec team is , how do we use technology largely our next gen firewalls , but not only our next gen firewalls , other data sources as well .

Speaker #9: To do that discovery, to be able to technologically discover everything that is needed, and then through automation, to then also be able to automate the process of remediation.

Gabriela Borges: That makes sense. Thank you.

Speaker #9: And so this has obviously security benefits , but it also has reliability and uptime benefits as well , because you have to remember in both of these cases these these are fundamental to how production systems operate

All right. Thank you Gabriella. Next, we have Adam Tindle from Raymond James, followed by Shia from Catan. Okay, thanks Hamza nikash in your comments. You talked about it with Kronos expansion deal with the leading AI provider. I just want to pick on that and just ask about the key attributes, that help chronosphere get that level of commitment were you, displacing is an existing vendor the timing for that the rationale for it and maybe even the pipeline beyond that. Um, and just a quick clarification deepo just because I know this is coming up in, in after hours, after you talked about, uh, are in total. Think investors are stripping out the 1.47 billion from Q3 NGS. ARR and looking like organic. Net new NGS are is down a lot. I think there's probably some flaws to that, but just want to talk toss that out there to have. You clear the air? Thanks.

Hamza Fodderwala: All right. Thank you, Gabriela. Next, we have Adam Tindale from Raymond James, followed by Shaul Eyal from Cowen.

All right. Adam, uh, first thing first look Jonas Fair.

Nikesh Arora: Okay, thanks, Hamza. And Nikesh, in your comments, you talked about it with Chronosphere, a nine-figure expansion deal with a leading AI provider. I just want to pick on that and just ask about the key attributes that help Chronosphere get that level of commitment. Were you displacing a, a, an existing vendor, the timing for that, the rationale for it, and maybe even the pipeline beyond that? And just a quick clarification, Dipak, just because I know this is coming up in, in after hours, after you talked about ARR in total. I think investors are stripping out the $1.47 billion from Q3 NGS ARR and looking like organic net new NGS ARR is down a lot. I think there's probably some flaws to that, but just want to toss that out there and have you clear the air. Thanks.

Adam Tindle: Okay, thanks, Hamza. And Nikesh, in your comments, you talked about it with Chronosphere, a nine-figure expansion deal with a leading AI provider. I just want to pick on that and just ask about the key attributes that help Chronosphere get that level of commitment. Were you displacing a, a, an existing vendor, the timing for that, the rationale for it, and maybe even the pipeline beyond that? And just a quick clarification, Dipak, just because I know this is coming up in, in after hours, after you talked about ARR in total. I think investors are stripping out the $1.47 billion from Q3 NGS ARR and looking like organic net new NGS ARR is down a lot. I think there's probably some flaws to that, but just want to toss that out there and have you clear the air. Thanks.

Is a highly scalable solution?

And its scalability.

Speaker #3: Okay. Thank you. We'll end it here with Greg Moskowitz from Mizuho.

Speaker #2: All right . Last question . Thank you Hamzah . So you know , closing Palo Alto's two largest ever acquisitions within a couple of weeks of each other .

Speaker #2: It's exciting . The potential is tremendous . But it could also add an unprecedented amount of stress on the management team . Engineering go to market teams , etc.

Speaker #2: . How do you keep everyone's eye on the ball yourself included , and not be subject to execution or distraction issues ? Thanks .

Is dependent on a net. New architecture of the design for observability, which is different from what the current incumbents in the space have. So that's capability allows them to deliver those capabilities at approximately half the price. If not more than or less than than some of the other players out there. So they are displacing another vendor in that space. Uh they have been partnering with the large language model over the last, uh, 6 months or so. And they have fast every technical hurdle which allowed

Speaker #1: Well , Greg , these acquisitions , at least in the case of Chronosphere , has been the work for the last 2 or 3 months , and Cyberark has been in the works the last seven months .

Nikesh Arora: All right, Adam. First things first, look, Chronosphere is a highly scalable solution, and its scalability is dependent on a net new architecture design for observability, which is different from what the current incumbents in the space have. So that scalability allows them to deliver those capabilities at approximately half the price, if not more than, or less than, than some of the other players out there. So they are displacing another vendor in that space. They have been partnering with the large language model over the last 6 months or so, and they have passed every technical hurdle, which allowed them to make a commitment to Chronosphere. We expect the full transformation over the next 6 to 12 months, or the full transition from the other vendor. Part of the $200 million ARR is from one of those large LLM vendors.

Speaker #1: I've visited their Boston facility, spent days there with them. Lee and I were in Israel with the team and spent time with them.

Speaker #1: So Cyberark just didn't come upon us this week . It has been in in the works the last 6 or 7 months . As you might have read , we had worked with the management team to fully understand what role every employee at Cyberark was going to have , so we were able to , on the date of close , inform every employee with their role in the future .

Speaker #1: Joint organization was going to be what their plans . Give OKRs , give targets to every one of them so they all have that within the first 48 hours .

Speaker #1: So it's not like we've been waiting . There are some system transitions that we need to do . In the case of Cyberark , which the teams are working in hard , fast and furious on , we have had we've had the opportunity to plan what they need to be .

Speaker #1: So we have our eye on the ball . That's our job , right from a Cyberark perspective and chromosphere is honestly , I didn't .

Them to make a commitment to chronosphere. We expect the full transformation over the next 6 to 12 months, or to the full transition from the other vendor. Uh, part of the 200 million R is from 1 of those large LM vendors. We expect that to continue to grow in addition to that. They have other customers who are significant customers and they are going to pursue significant customers over the next 3 to 6 months in partnership with us. Uh, but you know, that's why we bought the company because because of its scalability because of the capability from a technical as well as a commercial perspective. And we are at least going to, we can talk more about product capabilities that we're going to give it, but we hope that that will allow it to be a full sort of full scale replacement. Option for both DIY. Okay, many many customers do DIY in that situation as well as being able to compete effectively with some of the big Reserve that he plays out there.

Yeah, um, but I'll just give you a high level. There's

Nikesh Arora: We expect that to continue to grow. In addition to that, there are other customers who are significant customers, and they are going to pursue significant customers over the next 3, 6 months in partnership with us. But, you know, that's why we bought the company, because of its scalability, because of the capability from a technical as well as a commercial perspective. And we're, Lee can talk more about the product capabilities that we're gonna give it, but we hope that that will allow it to be a full, sort of, full-scale replacement option for both DIY. Many customers do DIY in that situation, as well as being able to compete effectively with some of the big observability players out there.

Speaker #1: The fact that the price tag was big , that it's still at 250 people . Engineering team that does observability , which is different from anything we've done .

Speaker #1: The only point of product interaction is they're working hard with the cortex team to figure out how to incorporate the genetics into their platform so they can have agents solve the observability problem , just not just sort of be an observability company and separate that because they are so they're whale hunters .

Speaker #1: They go after big observability clients . We are able to selectively and surgically help them on a client by client basis to help them drive what they need to do .

um, as they, they've built something very unique for that very high, end of the market scalability and the economic aspects, even the start of some of the AI analytics and, and that will complement with agent XB the, the the next phase is going to be, how do we build out? A lot of sort of Enterprise sort of off-the-shelf kind of features that make it just really easy to do Integrations to basically replace existing incumbent infrastructure, whether that's commercial products or open source. We think in both cases,

Speaker #1: So this is our 32nd or 33rd acquisition between two of them . You know , we have a lot of lessons from prior , prior acquisitions , which we have brought to bear our teams have been working really hard over the last many months , and we have been actually adding capacity at our end to make sure we can handle some of these transitions that are required

Uh, the caresphere will scale down into that large Enterprise segment very nicely.

Lee Klarich: Yeah, look, I'll just give you a high level. There's, look, they've built something very unique for that very high end of the market, scalability and the economic aspects, even the start of some of the AI analytics and, and that will complement with Agentics. The next phase is going to be how do we build out a lot of sort of enterprise, sort of, off-the-shelf kind of features that make it just really easy to do integrations, to basically replace existing incumbent infrastructure, whether that's commercial products or open source. We think in both cases, the Chronosphere will scale down into that large enterprise segment very nicely.

Speaker #2: Terrific . Thank you .

Speaker #1: Thanks, Greg. Thanks.

Speaker #3: Thanks , Greg . That concludes the Q&A portion of this call . I'll pass it back to Nikesh Arora . Any closing remarks ?

Just on your question on on NGS are just just to be clear our organic NDS are is roughly in line with consensus um for you know Q3 and we've re re reiterated the full year so maybe folks just haven't fully appreciated that. Chronosphere is closed before Q2 but we all make sure that's all cleared up.

Thank you.

Okay um looks like shallows now here's the next we'll go with Adam Borg. That's default. Followed by Greg moscowitz uh from Missoula.

Dipak Golechha: Then, Adam, just on your question on NGS ARR, just to be clear, our organic NGS ARR is roughly in line with consensus, for, you know, Q3, and we've reiterated the full year. So maybe folks just haven't fully appreciated that Chronosphere is closed before Q2, but we'll make sure that's all cleared up. Thank you.

And thank you so much for taking the question. Uh, maybe to catch you talked about a little bit in the prepared marks about the quantum opportunity. We talked about a little bit last quarter. Love to hear more about kind of the early learnings from kind of the, the, the, the, the discussions with, with with, uh,

The customers from from the panel a few weeks back and ultimately how you're thinking about the opportunity in coming years, thanks so much.

Hamza Fodderwala: Okay, looks like Charles is not here. So next we'll go with Adam Borg at Stifel, followed by Greg Moskowitz from Mizuho.

Adam Borg: Great, and thanks so much for taking the question. Maybe, Nikesh, you talked about a little bit in the prepared remarks about the quantum opportunity. You talked about a little bit last quarter. Love to hear more about kind of the early learnings from kind of the discussions with the customers from the panel a few weeks back, and ultimately how you're thinking about the opportunity in coming years. Thanks so much.

Look uh, you know, as part of the Cyber or deal. We've acquired venofye. I don't have Lee, talk about a new capability. We're building called the Next Generation trust, uh, subscription plus our Quantum capability. We have been in discussion with 100 customers who are experimenting or beta customers of product. We have tremendous feedback for them. Our Quantum, uh, capability is not just for power out of s firewalls. It actually looks at the Enterprise capability. So we have actually integrated 10 other vendors. What the quantum data into our Quantum sub, but I'm going to let me talk about the, the sub, I think the

The.

yeah, the

Nikesh Arora: Look, you know, as part of the CyberArk deal, we've acquired Venafi. I'm going to have Lee talk about a new capability we're building called the Next Generation Trust subscription, plus our quantum capability. We have been in discussion with 100 customers who are experimenting our beta customers of product. We have tremendous feedback for them. Our quantum capability is not just for Palo Alto fire- for firewalls, it actually looks at the enterprise capability. So we have actually integrated 10 other vendors worth of quantum data into our quantum sub, and I'm going to let Lee talk about the, the sub.

In both these cases whether it's you know cryptography and and pqc or certificates and and managing the the alternative is largely a very manual uh sort of human Centric. Repetitive kind of task approach, it's either.

Lee Klarich: I think the in both of these cases, whether it's, you know, cryptography and PQC or certificates and managing them, the alternative is largely a very manual, sort of human-centric, repetitive kind of task approach. It's either some poor person or people that have to constantly sort of manually go look at certificates, look at their renewal dates and ages and other things like that, and then redo them manually, or we can do it through technology. The same is true with quantum cryptography. It's either a lot of manual, you know, consultation going through and trying to figure out what exists or we can use technology.

Some some poor person or people that have to constantly sort of manually. Go look at certificates. Look at their the uh um renewal dates and ages and other things like that and and then redo the manually or we can do it through technology. The same is true with with Quantum cryptography. It's it's either a lot of manual, you know, consultation, going through and and trying to figure out what exists or we can use technology. And so what in both cases we figured out obviously venofye in 1 case that will be joining a team is and then the net suck. Uh team is how do we use technology? Largely our nextg files but not only our NextGen variables other data sources. Well,

To do that Discovery to be able to Tech logically, discover everything that is needed. And then through automation to then also be able to automate the process of remediation. Um, and so this has obviously Security benefits but it also has, um, reliability and uptime benefits as well because you have to remember in both of these cases. These These are fundamental to how production systems operate

Lee Klarich: In both cases, we figured out, obviously, Venafi in one case, that we'll be joining the team is, and then the NetSec team, is how do we use technology, largely our next-gen firewalls, but not only our next-gen firewalls, other data sources as well, to do that discovery, to be able to technologically discover everything that is needed, and then through automation, to then also be able to automate the process of remediation. So this has obviously security benefits, but it also has reliability and uptime benefits as well, because you have to remember, in both of these cases, these are fundamental to how production systems operate.

Okay, thank you. Uh we'll end it here with Greg Moscow with from muo.

All right. Uh last question. Thank you, Hamza. So, you know closing in Palo alto's. Uh, 2 largest ever Acquisitions within a couple of weeks of each other. It's exciting. The potential is tremendous, but it could also add an unprecedented amount of stress on the management. Team engineering, go to market teams, Etc. Nikesh, how do you keep everyone's eye on the ball? Yourself included. And not be subject to execution or a distraction issues? Thanks.

Hamza Fodderwala: Okay, thank you. We'll end it here with Greg Moskowitz from Mizuho.

Gregg Moskowitz: All right, last question. Thank you, Hamza. So, you know, closing Palo Alto's two largest-ever acquisitions within a couple of weeks of each other, it's exciting, the potential is tremendous, but it could also add an unprecedented amount of stress on the management team, engineering, go-to-market teams, et cetera. Nikesh, how do you keep everyone's eye on the ball, yourself included, and not be subject to execution or distraction issues? Thanks.

Nikesh Arora: Well, Greg, these acquisitions, at least in the case of Chronosphere, have been in the works the last two or three months, and CyberArk has been in the works the last seven months. And I've visited their Boston facility, spent days there with them. Lee and I were in Israel with the team and spent time with them. So CyberArk just didn't come upon us this week. It has been in the works for the last many six or seven months. As you might have read, we had worked with the management team to fully understand what role every employee at CyberArk was going to have. So we were able to, on the date of close, inform every employee what their role in the future joint organization was gonna be, what their plans are, give OKRs, give targets to every one of them.

All right, these Acquisitions uh at least in the case of Kronos Fair has been The Works last 2 or 3 months and cyborg has been the works for the last 7 months. You know, I've visited their Boston facilities spend days there with them Lee and I were in Israel with a team and spent time with them. So cyber just didn't come upon us this week. It has been in in the works for the last many 6, or 7 months, as you might have read. Uh, we had worked with the management team to fully understand what role every employee at Cyber work was going to have. So we were able to on the date of close in for every employee with their role in the future, joint organization was going to be what their plans are. Give okrs give targets every 1 of them. So they all have that within the first 48 hours. So it's not like we've been waiting. Uh, there are some system transitions that we need to do in the case of cyber Arc, which the teams are working in a hard fast and furious song, We have had we've had the opportunity to plan or they need to be so where we have our eye on the ball. That's our job, right? Um, from a cyber Ark perspective and kilos, there is

Nikesh Arora: So they all have that within the first 48 hours. So it's not like we've been waiting. There are some system transitions that we need to do in the case of CyberArk, which the teams are working in a hard, fast, and furious on. We've had the opportunity to plan, well, they need to be so... Well, we have our eye on the ball, that's our job, right? From a CyberArk perspective. And Chronosphere is honestly, other than the fact that the price tag was big, that it's still a 250 people engineering team that does observability, which is fundamentally different from anything we've done.

Because honestly other than the fact that the price tag was big but it's still a 250 people engineering team that does observability which is not only different from anything. We've done. The only point of product that our actions, they're working hard with the cortex team to figure out how to incorporate the genetics into their platform. So they can have agents solve the observability problem. Just not just sort of being observability company and set of that, you know, because they are. So they're rail Hunters. They go after big observability clients. We are able to selectively and surgically help them on a client by client basis to help them Drive within you to do. So uh, this is our 302 or 333 acquisition, we do of them. You know, we have a lot of lessons from prior uh,

Prior Acquisitions which we have brought to bear. Our teams have been working really hard over the last many months and we have been actually adding capacity at our end to make sure we can handle some of these transitions that are required.

Nikesh Arora: The only point of product interaction is they're working hard with the Cortex team to figure out how to incorporate Agentics into their platform, so they can have agents solve the observability problem, just not just sort of be an observability company. Except for that, you know, because they are. So they're whale hunters, they go after big observability clients, we are able to selectively and surgically help them on a client-by-client basis and help them drive what they need to do. So, this is our 32nd or 33rd acquisition, these two of them. You know, we have a lot of lessons from prior, prior acquisitions, which we have brought to bear. Our teams have been working really hard over the last many months, and we have been actually adding capacity at our end to make sure we can handle some of these transitions that are required.

All of our customers to all of our employees around the world and thank you to all of you for joining us on our conference call. Uh, we will see you guys next quarter.

Gregg Moskowitz: Terrific. Thank you.

Nikesh Arora: Thanks, Greg.

Hamza Fodderwala: Thanks, Greg. All right, that concludes the Q&A portion of this call. I'll pass it back to Nikesh for any closing remarks.

Nikesh Arora: Well, I just wanna say thank you to all of our customers, to all of our employees around the world, and thank you to all of you for joining us on our conference call. We will see you guys next quarter.

Q2 2026 Palo Alto Networks Inc Earnings Call

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