Analysis: Why Palo Alto Networks Is The Apple Of The Cybersecurity Industry

CEO Nikesh Arora has proven a number of times at this point that unorthodox strategic moves are the way to bigger opportunities in the longer term.

From the very start, Nikesh Arora encountered, in his own words, a “fair share of naysayers” after arriving as CEO at Palo Alto Networks in 2018.

An outsider to cybersecurity, Arora was by no means the obvious choice for the role. The former high-level Google executive also quickly set the vendor on a new course with an aggressive acquisition strategy meant to turn Palo Alto Networks into much more than a firewall vendor.

Most, I think, would agree that it has worked. And so has Arora’s major “platformization” strategy shift initiated in early 2024, judging from the results so far.

Arora and Co. have a pattern of making big moves that no one sees coming and initially rattle the market. And yet, each time, the longer-term results practically speak for themselves.

It’s not clear why acquiring CyberArk would be any different.

The $25 billion price tag for the identity security vendor came as a shock to some because, throughout its acquisition spree, Palo Alto Networks has always focused on buying startups in the past and had never reached a deal above $800 million.

Identity, however, is a different animal, and not something you can acquire your way into through buying a startup, according to Arora.

Customers are “petrified” about making big changes to their identity infrastructure, he said during a call with analysts Wednesday.

“They don’t know what’s connected to what,” Arora said. “They don’t know what’s going to stop working.”

As a result, when it comes to identity security, acquiring an emerging vendor is simply not the way in. And yet to truly have a complete platform as Palo Alto Networks has been aspiring to do for years now, identity is the final frontier.

Acquiring CyberArk very plainly “allows us to cover the majority of the [total addressable market] in cybersecurity,” Arora said.

When it comes to a pattern of flouting expectations in ways that pay off in the longer term, an analogy to Steve Jobs-era Apple would seem to be not too far off the mark.

Arora, like Jobs at his best, is inclined to bet on a vision rather than making the moves the market is expecting. Short-term market pressure is clearly not the main consideration for Arora-era Palo Alto Networks, just as it wasn’t for Jobs-era Apple.

The “think different” approach embraced by Jobs, and now Arora, is much easier said than done, of course. It’s why Palo Alto Networks has been one of the very few vendors among the thousands in cybersecurity to excel at it—and arguably, it’s exactly why the company has gotten where it is today.

Put another way, Arora has proven a number of times at this point that unorthodox strategic moves are the way to bigger opportunities in the longer term for Palo Alto Networks. Seeking to acquire CyberArk is undoubtedly a major shift from past strategy for the company—and that’s exactly the point.