Palo Alto stock falls 8% as CEO defends cybersecurity from AI threats

palo alto networks CEO Nikesh Arora, citing the recent downward trend in software stocks, told analysts that artificial intelligence will not replace cybersecurity “any time soon.”

“I’m still confused as to why the market treats AI at least as a threat to cybersecurity,” he said on Tuesday. “I can’t speak for all software, but what we’re definitely seeing is that customers are realizing that they need to be more consistent in their security stack to be able to respond faster using AI.”

Shares fell 8% Wednesday after the company’s second-quarter results beat Wall Street expectations. However, the profit outlook for the third quarter was lower than expected.

The rise of new AI tools to create enterprise workflows and websites in seconds has intensified the decline in software stocks in recent weeks.

These new tools, like Anthropic and OpenAI, have investors worried that AI will permanently disrupt business models.

This year so far, iShares Enhanced Technology Software Sector ETF It fell more than 23%. Palo Alto Networks is down 11% since the beginning of the year and 21% over the last year.

Palo Alto has been betting big on AI in recent months, launching a series of new agent tools in the fourth quarter.

The company has also invested heavily in new acquisitions to expand its cybersecurity capabilities for customers in the era of sophisticated AI.

Earlier this month, the company completed its blockbuster $25 billion acquisition of identity security company CyberArk, and in January it completed its acquisition of AI observability platform Chronosphere. Palo Alto announced Tuesday that it will acquire Israeli cybersecurity startup Koi.

“These investments are in direct response to changes that are taking shape in the market,” Arora told analysts. “Although it is still early days, the initial feedback from our customers is very encouraging. We believe we are now entering the next phase of AI adoption.”