Palo Alto Networks revealed the price tags of its most recent two acquisitions — about $232 million in cash for Dig Security Solutions and about $435 million for Talon Cyber Security. CEO Nikesh Arora said the security giant sustains close to $1 billion in mergers and acquisitions (M&A) as an important part of its strategy.

“We have always maintained that we're going to sustain M&A at a level close to a billion here. So we haven't done one for a while,” Arora said during the vendor’s earnings call for Q1 2024. “We did a cloud security one, and we've been pretty consistent in that rough range in the $150 million to $250 million range in terms of adding cloud capability as we see the market evolves.”

On October 31, Palo Alto Networks announced its intent to acquire Dig Security, an Israeli cloud security startup specializing in data security posture management (DSPM). The emerging space addresses deep data-related risks in the cloud. Arora noted the move is to double down on data security for generative artificial intelligence (genAI) and Prisma Cloud.

CFO Dipak Golechha said this deal is valued at about $232 million in cash, excluding the value of replacement equity awards.

A week later, the vendor made another announcement regarding its Talon Cyber Security acquisition. Palo Alto Networks plans to integrate the enterprise browser technology provider into its secure access service edge (SASE) solution for securing both managed and unmanaged devices. “We see an opportunity to expand the addressable market for SASE and solve an important customer problem,” Arora said.

Golechha noted the purchase price is at $435 million, excluding the value of replacement equity awards and an inclusive of cash on Talon's balance sheet at closing.

The company expects both deals to close in the second quarter of fiscal year 2024.

Echoing the sentiments of its security peers, Arora saw a "normalization" in the security industry on the hardware and product front.

“It's something we've been indicating for a while,” he said. “Backlogs are being shipped, supply chain issues are behind us and product growth is normalizing in the industry, we continue to seize normal strength.”

“In Q1, the cost of money remained a constant discussion and customers' significant focus on this topic is becoming the new normal. The way it manifests itself in our business is that there's always a payment in duration discussions in final negotiations,” he added.

Golechha noted the rising cost of money had an important and incremental impact on customer behavior in the first fiscal quarter, which harmed the vendor’s billings.

Palo Alto Networks uses “a mix of strategies” to navigate these challenges by offering a variety of financing options including annual billing plans, financing through Palo Alto Networks Financial Services (PANFS), and partner financing, according to Arora and Golechha.

Arora reiterates that he is not concerned about the cybersecurity demand for this and upcoming quarters, but about the company’s ability to execute.

“We continue to see strong interest across our next-generation security portfolio, and we're making progress on our platformization journey,” he said, highlighting the 60% growth in SASE for this quarter.