Cybersecurity CEO to AI Skeptics: 'Not Replacing Us Anytime Soon

While software stocks crater 23% this year, one CEO isn't backing down. "I'm still confused why the market is treating AI as a threat to cybersecurity," Palo Alto Networks' Nikesh Arora told analysts Tuesday.

His defiance comes as OpenAI and Anthropic unleash tools that can build websites and workflows in seconds, sending investors into panic mode. The fear? AI will make entire software categories obsolete overnight.

The Numbers Tell a Brutal Story

Market sentiment has been merciless. The software sector ETF has plummeted 23% year-to-date, while Palo Alto Networks shares dropped 11% despite beating Wall Street's second-quarter estimates. Even Tuesday's earnings beat couldn't save the stock from another 7% decline—lackluster third-quarter guidance spooked investors.

But Arora sees opportunity where others see existential threat. "Customers have figured out that they need to drive more consistency in their security stack to be able to respond faster using AI," he argued. His thesis: as AI gets smarter, so do the bad guys, creating more demand for sophisticated security solutions.

Going All-In While Others Retreat

Palo Alto Networks isn't just talking—it's betting big. The company closed its massive $25 billion acquisition of CyberArk earlier this month and snapped up AI observability platform Chronosphere in January. Tuesday brought news of another purchase: Israeli cybersecurity startup Koi.

"These investments are a direct response to the inflections we see taking shape in the market," Arora explained. The company launched a suite of AI agent tools in Q4, joining the industry-wide rush to embed AI copilots into security products.

The Contrarian Bet

Arora's strategy runs counter to the prevailing market narrative. While investors flee software stocks on fears of AI displacement, he's arguing that cybersecurity becomes more valuable in an AI-driven world. Every security product now needs an AI copilot, he claims—not to replace human analysts, but to help them work faster.

The early customer feedback has been "very encouraging," according to Arora, though he admits it's still early days. The company believes it's "entering the next phase of AI adoption"—one where security and AI evolve together rather than compete.

What Wall Street Misses

The disconnect between Arora's confidence and market skepticism highlights a broader question: which software categories will thrive alongside AI versus those that get displaced? While AI can automate code generation and workflow creation, cybersecurity requires constant adaptation to new threats—many of which AI itself might create.

Consider the irony: as AI tools proliferate across enterprises, they expand the attack surface that cybersecurity companies must defend. More AI agents mean more potential entry points for sophisticated attacks.