Palo Alto Networks Inc. announced Wednesday it will acquire Chronosphere, a next-generation observability platform designed for artificial intelligence (AI) workloads, in a $3.35 billion deal combining cash and replacement equity awards.
The acquisition, pending regulatory approval, is expected to close in the second half of Palo Alto Networks’ fiscal 2026. The move represents the cybersecurity giant’s strategic push into the observability market at a time when AI applications are creating unprecedented demand for system monitoring and performance management.
Chronosphere addresses a crucial need in modern data centers: Maintaining constant uptime and resilience for AI workloads that generate massive data volumes. The platform has already proven its capabilities with several industry-leading companies, including two premier large language model (LLM) providers. Earlier this week, Chronosphere previewed AI capabilities embedded in its observability platform that help identify the root cause of an issue and provide remediation suggestions. It also made available a Model Context Protocol (MCP) Server that lets AI coding tools and agents query observability data.
“The foundational requirement for every modern AI data center is constant uptime and resilience, which demands real-time, always-on observability delivered at the right cost,” Palo Alto Networks CEO Nikesh Arora said in a statement announcing the deal. He said Chronosphere was “built to scale for the data demands of the AI era from day one.”
The acquisition aims to transform observability from passive monitoring into autonomous remediation, Palo Alto Networks said. By combining Chronosphere’s architecture with Palo Alto Networks’ AgentiX technology, the companies plan to deploy AI agents that can detect performance issues, investigate root causes, and implement fixes automatically moving beyond traditional dashboard-based monitoring.
The integration promises customers deeper visibility across security and observability data at petabyte scale while reducing costs through Chronosphere’s optimized data ingestion architecture. The combined solution will handle some of the largest and most complex digital environments currently operating.
Martin Mao, co-founder and CEO of Chronosphere, called Palo Alto Networks “the perfect strategic partner,” noting the combination would accelerate momentum in solving complex data and resiliency challenges for cloud- and AI-native customers worldwide.
Chronosphere was recognized as a Leader in the 2025 Gartner Magic Quadrant for Observability Platforms and reported annual recurring revenue exceeding $160 million as of September 2025, with triple-digit year-over-year growth.
The acquisition also adds innovative telemetry pipeline capabilities to Palo Alto Networks’ portfolio, enabling powerful data transformation and routing that makes massive-scale data ingestion economically viable — a crucial capability as organizations navigate increasingly data-intensive AI workloads.
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