Palo Alto Networks cuts annual profit forecast as deal costs bite, shares fall

Feb 17 (Reuters) - Palo Alto Networks trimmed its annual profit forecast on Tuesday, signaling rising costs from recent acquisitions to ‌enhance AI capabilities, sending the cybersecurity company's shares down around 7% ‌in extended trading.

The company announced on Tuesday the acquisition of Israeli cybersecurity startup Koi, ​following last July's purchase of CyberArk Software in its largest deal to date and the buyout of Chronosphere in November, as it steps up efforts to counter AI-driven cyber threats.

Palo Alto said acquisition-related costs jumped to $24 million ‌in the second quarter, ⁠from $10 million a year earlier.

While acquisitions expand the total addressable market, the company has acknowledged the challenge of effectively ⁠integrating larger acquired companies, such as CyberArk, which require more reengineering and restructuring.

The company now expects adjusted profit per share of $3.65 to $3.70 for its ​fiscal 2026, ​down from its prior forecast of $3.80 ​to $3.90.

However, Palo Alto raised its ‌annual revenue forecast to between $11.28 billion and $11.31 billion, compared with its earlier expectations of $10.50 billion to $10.54 billion.

Clients are stepping up investments in modernizing their security operations amid a wave of high-profile cyberattacks that have hit global companies, including F5 and UnitedHealth Group.

The company said its quarterly and annual ‌forecasts are inclusive of both CyberArk ​and Chronosphere acquisitions.

Palo Alto forecast third-quarter revenue ​of about $2.94 billion to $2.95 billion, ​above analysts' average estimate of $2.60 billion, according to data ‌compiled by LSEG.

Its quarterly adjusted profit ​per share forecast ​of 78 cents to 80 cents was below estimates of 92 cents.

Revenue for the second quarter rose 15% to $2.59 billion, in line ​with estimates.

Adjusted profit per ‌share of $1.03 beat estimates of 94 cents for the three ​months ended January 31.

(Reporting by Jaspreet Singh in Bengaluru; Editing ​by Alan Barona and Sriraj Kalluvila)