Palo Alto Networks CEO: We’re ‘Best Positioned’ To Deliver AI-Powered Security

As the cybersecurity giant announced quarterly earnings that crushed expectations, CEO Nikesh Arora said that AI is making a difference for customers with offerings including its recently launched ‘autonomous’ security operations platform.


Palo Alto Networks CEO Nikesh Arora

As the popularity of ChatGPT brings AI technology into greater prominence, Palo Alto Networks is positioned better than its competitors to deliver significantly improved cybersecurity outcomes to customers using AI, CEO Nikesh Arora said Tuesday.

Just one piece of evidence is the strong start that the vendor has had with its “autonomous” security operations platform, which is powered by AI and is on track to have “the fastest ramp of any security product” for the company, Arora said during the company’s quarterly call with analysts.

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With the AI investments that Palo Alto Networks has made in recent years — coupled with the massive quantities of data flowing through its network, cloud and endpoint security products — “we are best positioned to deliver security outcomes using AI and machine learning,” Arora said.

Arora made the comments as Palo Alto Networks disclosed quarterly earnings results Tuesday that blew past analyst expectations. The results were driven in part by numerous large deals for its secure access service edge (SASE) and cloud security offerings — as well as the rapid start for its AI-driven security operations platform, Cortex XSIAM (extended security intelligence and automation management).

XSIAM has only been generally available since October, and the company has already closed $30 million in business for it, Arora said. Cortex XSIAM aims to rapidly detect and respond to a larger number of threats than was previously possible, while bringing greater automation to the security operations center (SOC).

Ultimately, Arora said, “I think XSIAM is going to pave the way for us to drive AI-driven security transformation outcomes.”

On the whole, Palo Alto Networks reported $1.66 billion in revenue for its fiscal second quarter of 2023, ended Jan. 31, up 26 percent year-over-year. That came in slightly above the Wall Street analyst consensus estimate for the quarter.

On earnings, the company reported non-GAAP net income of $1.05 per diluted share for its fiscal Q2, well above the 78 cents per share that had been expected by analysts. Palo Alto Networks’ stock price rose 7.5 percent in after-hours trading Tuesday, to $179.48 a share. The company also raised its forward-looking guidance for revenue and profits.

On Tuesday, Arora said the company’s expansion in recent years to build out a broad security platform — covering key emerging areas such as SASE, cloud security and security operations — is paying off as customers look to consolidate their security vendors during the current challenging economic conditions.

“This environment drives the need for consolidation — not just to generate clear security outcomes, but also to reduce the security vendor sprawl that has been prevalent in our customers’ infrastructure,” he said. “We feel fortunate that with our portfolio, we are best positioned to deliver this to our customers.”

Cleveland-based Advizex, No. 104 on the 2022 CRN Solution Provider 500, is expecting strong revenue growth from its Palo Alto Networks business this year, CTO Chris Miller said. That’s thanks both to the company’s flagship next-generation firewalls and the vendor’s newer solutions, such as zero trust network access (ZTNA), according to Miller.

ZTNA is considered a more-secure remote access solution compared to VPNs, and for Palo Alto Networks it’s available as part of the company’s Prisma SASE and Prisma Access offerings. The company offers endpoint detection and response (EDR), along with extended detection and response (XDR) and XSIAM, through its Cortex platform.

Arora pointed to the growth in Prisma SASE as a major recent highlight for the company. Palo Alto Networks closed its first $40 million SASE deal during its fiscal Q2, and over the past six quarters, the company has generated about $1 billion in bookings for its SASE business, he said. The vendor now has 4,000 SASE customers and saw its annual recurring revenue for SASE grow by 50 percent during its latest quarter, Arora said.

When asked by analyst about competition in the SASE space, Arora suggested the company is pulling out ahead. “I want to see how many vendors can claim that in the last six quarters, they’ve sold a billion dollars of SASE, and who just did a $40 million deal on SASE last quarter,” he said.

Likewise, for Prisma Cloud, Arora said that “our largest cloud security deal was $40 million this past quarter. I don’t know any other vendor in the cloud security space who’s doing half of that in a quarter in one deal.”

When it comes to XDR — a tool that correlates data from across an organization and then prioritizes the most serious threats — the deal sizes are not in the same ballpark as in SASE and cloud security, Arora acknowledged. However, the strong demand for Cortex XSIAM is helping to pull along the vendor’s Cortex XDR offering, he said.

“We’re seeing customers saying, ‘I’d like XSIAM’ — and we’re saying, ‘Listen, you can only get XSIAM if you’re going to buy XDR,’” he said. To get the improved security outcome from XSIAM, customers have to realize they need “good data” — and that “the only way” to get that data is by also using Cortex XDR, Arora said.

In short, XDR “allows us to go create the security outcomes in XSIAM,” he said.

It’s still early for XSIAM, as the company has landed 15 customers on XSIAM so far, Arora noted. Still, every XSIAM deal has been north of $1 million in size, and the company has a strong pipeline of customers for the offering, he said.

Arora said he now believes it’s possible that Cortex XSIAM will reach its first big financial milestone — $100 million in bookings — faster than past products from the company including Prisma SASE, Prisma Cloud and prior Cortex offerings.

Crucially, with the demand for XSIAM, customers are proving they are looking for “AI-based SOC transformation,” he said.

Prior to OpenAI’s launch of ChatGPT in late November, the majority of customers “weren’t asking us about AI,” Arora said. But with the success of ChatGPT — which is estimated by some to be the fastest-growing app ever — “now they all want to know, ‘Are you deploying AI in your security products?’” he said.