Fengye Bank: Palo Alto (PANW.US) Acquires SentinelOne (S.US) or Subverts Its Own "Small M&A" Strategy

According to analysts at Bank of Nova Scotia, the potential acquisition of SentinelOne (S.US) by Palo Alto Networks (PANW.US) could signify a "significant strategic transformation" for the cybersecurity giant, making it the largest acquisition in the company's history. "This deal, which could reach up to $10 billion, will completely change Palo Alto Networks' previous focus on small, easily integrated 'bolt-on acquisitions'," wrote bank analyst Patrick Colville in a research report on Tuesday. "According to our calculations, if the company's free cash flow profit margin decreases by approximately 2 percentage points as a result, it is unclear how investors will react." This analysis comes following reports on Monday speculating that Palo Alto may be in talks to acquire SentinelOne. Both companies have declined to comment citing "not commenting on market rumors". Following this news, SentinelOne's stock surged by 9.83% on Monday but fell by 2.68% on Tuesday; while Palo Alto Networks dropped by 1.58% on Tuesday. Colville from Bank of Nova Scotia pointed out that from 2018 to 2025, Palo Alto Networks has completed 16 strategic acquisitions totaling over $4.2 billion, making it one of the most aggressive acquisition strategies in the cybersecurity field, all of which were previously bolt-on acquisitions. The analyst added that acquiring SentinelOne (NYSE:S) makes strategic sense for Palo Alto, especially considering the potential reshaping of the SIEM market share, which would greatly enhance the competitiveness of its XSIAM platform.