Palo Alto Networks CEO Nikesh Arora said Tuesday that AI is forcing companies to overhaul roughly $1 trillion of aging cybersecurity infrastructure built for a pre-AI world.
"Nothing that was deployed seven or 10 years ago is prepared or ready to handle AI at machine speed," Arora told CNBC's Jim Cramer on "Mad Money." "You have to rethink your cyber architecture."
Palo Alto's earnings report on Tuesday suggests that urgency is already translating into business. The company beat fiscal fourth quarter estimates and issued a strong outlook for its new fiscal year. Cramer's Charitable Trust, the portfolio run by the CNBC Investing Club, owns Palo Alto and cyber peer CrowdStrike .
Arora expects the opportunity to grow as AI allows attackers to find and exploit vulnerabilities faster than ever before, forcing companies to modernize security defenses that weren't designed for automated threats. "You cannot deploy AI successfully if you don't get cybersecurity right," he said.
"There's approximately $1 trillion of global cybersecurity debt that must be modernized to defend against automated threats because they operate instantaneously," Arora said on Palo Alto's earnings call.
That opportunity marks a dramatic reversal from how investors viewed AI's impact on cybersecurity earlier this year. Palo Alto and other cybersecurity stocks came under pressure on fears that increasingly capable AI models could disrupt traditional security software. Eventually, the market began to view AI as a growth driver as investors recognized that attackers can weaponize the same technology.
"Nine months ago, ... we were guilty and convicted of near death because AI was going to eat our lunch, breakfast, and dinner," Arora told Cramer. "It seems like that's not the case. It seems like we're going to have to have the feast with them."
Arora pointed to the emergence of Anthropic's Mythos model earlier this year as a turning point. Mythos prompted companies to take cybersecurity more seriously because the model could be easily used to exploit software vulnerabilities. Shares of Palo Alto have surged 113% since April 7. Prior to that point, the stock was in the red for 2026.
"I've been trying for eight years to tell customers they're not ready, and [Anthropic CEO Dario Amodei] did it in one event, just by launching Mythos," Arora said on CNBC.
Arora said Palo Alto has held conversations with roughly 2,000 companies about its Frontier AI Critical Defense Program, which uses advanced AI models to test customers' defenses, identify vulnerabilities, and help them modernize their security infrastructure. The company formally introduced the initiative in August.
While Arora cautioned that the spending won't materialize all at once, he said AI has fundamentally expanded the size and duration of the opportunity for the cybersecurity industry.
"Not everything's going to happen next quarter," Arora told Cramer. "But all I say is this changes the long-term growth rate and duration of cybersecurity, not just for Palo Alto, but as an industry."
