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Palo Alto Networks paying $3.3B to acquire observability startup Chronosphere, which has roots in Seattle
Cybersecurity giant Palo Alto Networks announced Wednesday it will acquire Chronosphere in a deal valued at $3.35 billion.
Founded in 2019, Chronosphere sells observability software that helps engineering teams spot problems quickly and keep cloud applications running. Palo Alto Networks said the acquisition will help it meet the massive data demands created by modern AI workloads.
Chronosphere CEO Martin Mao and CTO Rob Skillington first met in the Seattle area at Microsoft, where they worked on migrating Office to the cloud-based Office 365 format. They both later joined Uber’s engineering teams.
The company describes itself as a “distributed team” with major hubs in New York City, Seattle, and Vilnius. Mao is based in the Seattle region, along with several Chronosphere employees. The team, including Mao and Skillington, will join Palo Alto once the acquisition closes. Chronosphere has more than 250 employees.
On the company’s earnings call with analysts Wednesday, Palo Alto Networks CEO Nikesh Arora described Chronosphere as “one of the fastest-growing software companies in history.” It counts two of the “premier LLMs” as customers.
Arora said existing observability tools were not built for the AI era and that full observability has become cost prohibitive for many organizations. Chronosphere, he said, can deliver observability at one-third the cost of other leading solutions.
He added that Chronosphere has “changed the observability model” with its combination of open source and architectural techniques.
When Palo Alto evaluated observability and data-pipeline vendors, Arora said the team was struck by Chronosphere’s engineering chops. “Generally, engineers have too much pride to tell you that somebody else is good,” he said. “But our team came back and said, ‘these guys are the best engineers we’ve run into.'”
Chronosphere reports more than $160 million in annual recurring revenue, growing at triple-digit rates, according to Palo Alto.
Chronosphere will remain “largely standalone” after the deal closes next year. “They are basically a bunch of really smart engineers and forward-deployed engineers, as well as a few salespeople,” Arora said. “So, we’re going to give them some support by introducing the right customers in very targeted fashion.”
The company’s investors include General Atlantic; Greylock Partners; Lux Capital; Addition; Founders Fund; Spark Capital; and Glynn Capital.
“When Rob Skillington and I started Chronosphere six years ago, we set out to build a next-generation observability platform capable of handling the most complex cloud native workloads,” Mao wrote on LinkedIn. “Today, we are the observability leader trusted by the world’s top AI and digital-native innovators.”
Earlier this year Palo Alto Networks also acquired Protect AI, a Seattle startup that helps companies monitor machine learning systems.
