Palo Alto Networks to Buy Chronosphere in $3.35B AI Push

Palo Alto Networks is making another major move in the artificial intelligence space with plans to acquire observability software company Chronosphere in a deal worth $3.35 billion. The acquisition, announced on Wednesday, highlights the growing demand for tools that help businesses manage increasingly complex AI-powered applications and cloud infrastructure.

Founded in 2019, Chronosphere has built a platform that enables engineering teams to monitor cloud-native applications, detect issues faster, and maintain system performance. As organizations deploy larger AI models and process more data than ever before, Palo Alto Networks believes Chronosphere’s technology will play an important role in meeting these new infrastructure demands.

Chronosphere has strong ties to Seattle through its leadership team. CEO Martin Mao and CTO Rob Skillington first met while working at Microsoft, where they helped transition Microsoft Office to the cloud-based Office 365 platform. After Microsoft, both engineers joined Uber before launching Chronosphere together.

Although the company operates as a distributed organization, it maintains major hubs in New York City, Seattle, and Vilnius. Mao continues to work from the Seattle area, alongside several members of the company’s workforce. Chronosphere currently employs more than 250 people, and the entire team, including Mao and Skillington, is expected to join Palo Alto Networks once the transaction is completed.

Speaking during the company’s earnings call, Palo Alto Networks CEO Nikesh Arora praised Chronosphere’s rapid growth, describing it as one of the fastest-growing software companies ever built. He also revealed that the startup already serves two leading large language model (LLM) providers as customers.

Arora explained that many traditional observability platforms were designed before the rapid rise of AI and are no longer suited for modern workloads. He said organizations often struggle with the high cost of monitoring AI systems, while Chronosphere offers similar capabilities at roughly one-third the cost of many competing solutions.

According to Arora, the startup has redefined the observability market by combining open-source technologies with innovative architectural approaches. During Palo Alto Networks’ evaluation of observability and data pipeline companies, he said the engineering team’s feedback stood out.

“Generally, engineers have too much pride to tell you that somebody else is good,” Arora said during the earnings call. “But our team came back and said, ‘these guys are the best engineers we’ve run into.'”

Palo Alto Networks also disclosed that Chronosphere has surpassed $160 million in annual recurring revenue (ARR) and continues to grow at a triple-digit rate, making it one of the fastest-expanding companies in the software industry.

Despite becoming part of Palo Alto Networks, Chronosphere will continue to operate largely as a standalone business after the acquisition closes next year. Arora said the company will retain its engineering-focused culture while receiving additional support from Palo Alto Networks, particularly through introductions to carefully selected enterprise customers.

Since its launch, Chronosphere has attracted backing from several well-known venture capital firms, including General Atlantic, Greylock Partners, Lux Capital, Addition, Founders Fund, Spark Capital, and Glynn Capital.

Reflecting on the company’s journey, Martin Mao shared a message on LinkedIn, saying that he and Rob Skillington founded Chronosphere six years ago with the goal of building a next-generation observability platform capable of supporting the world’s most demanding cloud-native workloads. He added that the company has since become a trusted observability provider for many of the world’s leading AI and digital-first businesses.

The acquisition also continues Palo Alto Networks’ broader AI expansion strategy. Earlier this year, the cybersecurity company acquired Protect AI, a Seattle-based startup that develops technology for monitoring and securing machine learning systems.

As AI adoption accelerates across industries, Palo Alto Networks is positioning itself to provide businesses with the security, visibility, and operational tools needed to manage increasingly data-intensive AI environments. The addition of Chronosphere strengthens the company’s portfolio while expanding its capabilities in cloud observability and AI infrastructure.

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