Palo Alto Networks’ bombastic $25 billion offer for identity and privileged access management (IAM/PAM) vendor CyberArk continues CEO Nikesh Arora’s vision of building a cybersecurity and networking empire that can rival market heavyweights. But as in most mega-deals, analysts note that integration will be key to monetizing this financial bet.

The deal itself is Palo Alto Network’s largest financial bet to date, which is saying something considering the vendor’s long history of acquisitions since Arora joined the firm in mid-2018. Those deals built Palo Alto Networks into a market powerhouse, with the firm’s cybersecurity prowess in the network space highlighted by with repeated top rankings by analyst firms.

Analysts note that the CyberArk deal expands on that approach by adding a significant piece that was missing. CyberArk was highly touted in Gartner’s most recent ranking of access management platforms, sitting proudly within the “challengers.” That position was ever-so-close to the ranking’s “leaders” category, which included Microsoft, Okta, Ping Identity, and IBM.

“This is the next step for Nikesh in this platformization vision,” Mauricio Sanchez, director of enterprise security and networking at Dell’Oro Group, told SDxCentral in an interview. “Palo Alto was missing an identity piece. They had bits and pieces of it, but now they're front and center. They're ready to take on Microsoft, Okta, and the other identity providers in a direct fashion.”

Sanchez explained that identity is becoming increasingly important in the cybersecurity and networking space.

“Identity has been around forever,” Sanchez said. “It went through a period of being on the cooler side, but of late, it's warm. It's warming up as identity is being injected into every last piece of the security stack and so it makes perfect sense that rather than trying to build it, and ultimately fail to be able to match the likes of who they would compete against, which is folks like Microsoft or even CyberArk as an independent company, it accelerates them to the to the front of the pack, in many respects.”

Roy Chua, founder and principal at AvidThink, said that he views the deal as better positioning Palo Alto Networks in the minds of enterprise customers as opposed to directly targeting rivals.

“I think the competitiveness is not necessarily against specific products, point product, or even collection of products,” Chua said. “I think the specific offering is that if they can pull this off and it becomes integrated, then Palo Alto becomes the strategic security partner for a CIO or CISO.”

Palo Alto Networks noted during a briefing on the deal that CyberArk’s IAM/PAM platform is the key to unlocking up to $29 billion in “identity” total addressable market (TAM) opportunities. One slide noted that “significant revenue potential” exists in cross-selling into Palo Alto Networks’ more than 70,000 current customers.

Integration toward the market

However, Chua added that this move is not a slam dunk toward that financial goal.

“When you go in and sell PAM products, the fact that you have integrated SASE [secure access service edge] doesn't necessarily make it better,” Chua said. “But, if you have identity security, identity visibility, it could make SASE better. You'll make your [user and entity behavior] offerings better. You make your endpoint stuff better. I think that's the way to look at it.”

Sanchez agreed, noting that the packaging will be important.

“Being able to offer one of the widest portfolios of any cybersecurity company, that's the strategy,” Sanchez said. “But just because it’s a suite doesn't necessarily mean best of breed in all instances.”

Instead, Chua thinks Palo Alto Networks will have to find a different way to hook new business.

“The buyers for PAM products are very different from Palo Alto traditional buyers, which are more the network centric, or to a certain extent, cloud centric,” Chua said. “Trying to figure out how to come in with a unified platform solution, which is what his view is – this is the dream, the mission to platform – and I think that's going to take a lot of effort, and have a lot of stepping-stone milestones along the way because it's not clear that the market is ready to consume all that at once.”

Is the AI opportunity real?

Market adoption could be spurred by the growing push toward AI. This is tied to the growing need for cybersecurity platforms to identify AI-based agents that are being used to generate relevant content.

Palo Alto Networks pointed to CyberArk research that showed machine identities outnumber humans 80-to-one, a ratio that is expected to only increase as agentic AI use grows.

ABI Research recently pointed to transparency as a key hurdle for scaling agentic AI use.

“As AI agents take more autonomous actions, organizations must be able to track decisions, audit behavior, and explain outcomes,” Reece Hayden, principal analyst at ABI Research, wrote. “Concerns around bias and misuse must be addressed before full-scale rollouts. Transparency into how Agentic AI models work is especially prevalent in highly regulated industries like health care and banking.”

Chua noted that Palo Alto Networks’ focus on an AI future is an “accurate statement,” however the degree of that opportunity remains in questions.

“AI agents are coming,” Chua said. “Across the board we are seeing one-way AI agents, and the ability to secure those agents, to ascertain the identity of those agents, to have audit trails around those agents, and then basically risk-analyze those agents based on what they've done and the trail that they leave, I think that's valid. And to the extent that you have an asset in the PAM space does help for sure, so that that is an accurate statement. How it applies exactly and how it evolves is still unclear.”

Regardless of that outcome, Sanchez did note that Arora’s approach follows a path paved by some of the market’s most successful players.

“It reminds me, for us networking folks, when John Chambers was running Cisco and Cisco's growth back in the 2000s,” Sanchez said. “It was based on a very strong acquisition playbook. Cisco perfected that for many years.”