Palo Alto Networks has announced its acquisition of Chronosphere, a cloud observability platform, for $3.35 billion. The deal, which involves a combination of cash and equity, is expected to close in the second half of Palo Alto Networks' fiscal year 2026, pending regulatory approvals. This strategic move aims to bolster Palo Alto Networks' AI-driven security capabilities and address the escalating demands of modern AI workloads.
Chronosphere, founded in 2019, specializes in observability software that helps engineering teams swiftly identify and resolve issues to maintain the smooth operation of cloud applications. According to Palo Alto Networks, Chronosphere's technology can deliver observability at a third of the cost compared to other leading solutions. CEO of Palo Alto Networks, Nikesh Arora, has lauded Chronosphere as "one of the fastest-growing software companies in history". As of September 2025, Chronosphere reported annual recurring revenue exceeding $160 million, demonstrating triple-digit year-over-year growth.
The acquisition is a strategic step to integrate security, reliability, and AI operations into a unified framework. Palo Alto Networks intends to integrate Chronosphere into its Cortex AgentiX platform. This integration will enable AI agents to analyze Chronosphere's data, detect performance bottlenecks, and autonomously investigate root causes. The goal is to transform observability from basic monitoring to autonomous remediation, enabling AI agents to detect performance issues, investigate root causes, and implement fixes automatically.
Palo Alto Networks has also raised its annual revenue and profit forecasts, citing increased demand for cybersecurity solutions amidst rising online threats. The company now anticipates revenue between $10.50 billion and $10.54 billion for fiscal year 2026, up from its previous projection of $10.48 billion to $10.53 billion. Furthermore, it forecasts annual adjusted earnings per share of $3.80 to $3.90, an increase from the earlier range of $3.75 to $3.85.
This acquisition marks another significant move in Palo Alto Networks' expansion strategy. In July 2025, the company announced the acquisition of CyberArk for approximately $25 billion. Additionally, Palo Alto Networks acquired Protect AI in April 2025 to secure AI/ML models and pipelines.
The Chronosphere team, including CEO Martin Mao and CTO Rob Skillington, will join Palo Alto Networks upon the deal's completion. Chronosphere has over 250 employees.
Analysts suggest that the price tag for Chronosphere, along with the timing of the announcement before the CyberArk acquisition is finalized, has impacted Palo Alto Networks' stock. Shares of Palo Alto fell more than 3% in after-hours trading.
