Palo Alto Networks Inc (NYSE:PANW) announced Tuesday it is enhancing its cloud capabilities by acquiring Tel Aviv, Israel-based start-up Dig Security, a provider of Data Security Posture Management (DSPM).
The company said that Dig’s DSPM solution allows organizations to discover, classify, monitor, and protect sensitive data across all cloud data stores, giving Palo Alto’s customers visibility and control of the multi-cloud data estates.
Dig’s capabilities will be integrated into Palo Alto Networks’ Prisma Cloud platform, it added.
Financial terms of the transaction were not disclosed but regardless, analysts at Jefferies analysts viewed the announcement as positive for Palo Alto Networks.
“We believe this is a strategic and complementary acquisition that should bolster PANW’s $500M million Prisma Cloud business (growing at a 29% 2-year compound annual growth rate) and could also help PANW become a governance tool for artificial intelligence (AI) data sets further broadening its total addressable market,” they wrote in a note to clients.
“This deal represents PANW's continued strategy of buying best-of-breed technology over the past few years. This is the first major deal since Cider Security in December 2022, off the back of over $3 billion in M&A over the last five years.”
On Palo Alto Network’s strategic rationale behind the acquisition, the Jefferies analysts wrote that a common theme of recent investor and industry conversations has been the eventual location of data given the prevalence and adoption of AI.
“We have long favored PANWs ability to defend data no matter where it resides (on-premise/cloud) and this acquisition will further allow PANW to differentiate itself and be a data protection vendor of choice for large enterprises seeking to utilize AI (both on-premise or in cloud),” they wrote.
“We also believe it further solidifies a moat on PANWs posture management cloud business, which we believe has the lowest barriers to entry and remains hyper-competitive.”
They expect Palo Alto Networks will continue to opportunistically build out its cloud portfolio given the large total addressable market.
The analysts reiterated their ‘Buy’ rating on the stock and price target of US$285.
Palo Alto Networks shares traded 1.6% higher at US$242.25 in the early afternoon on Tuesday.
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