Palo Alto Networks in Talks to Pay $500 Million for AI Security Startup

Palo Alto Networks is in talks to buy three-year-old Israeli security startup Clutch Security for around $500 million, according to people familiar with the matter.

If finalized, the acquisition would be the fifth Palo Alto Networks has announced this year, as CEO Nikesh Arora seeks to bolster the company’s products that counter new AI threats. Clutch develops software that helps companies track passwords and authentication codes used by AI agents.

Discussions are ongoing and may not lead to a deal. A Palo Alto Networks spokesperson said the company doesn’t comment about “rumors or speculation.” A spokesperson for Clutch Security didn’t immediately respond to a request for comment.

The startup has raised more than $20 million from investors including Lightspeed Venture Partners and SignalFire. Its current valuation couldn’t be learned.

The acquisition could further deepen Palo Alto Networks’ offerings in identity security—the software that helps businesses manage logins and other permissions to make sure their users only access the data they’re supposed to. Earlier this year, Palo Alto, which has a market cap of $287 billion, completed its $25 billion acquisition for CyberArk, the market leader in identity security. While CyberArk had historically focused on managing human users’ logins, Clutch tries to corral AI agents’ use of passwords and data.

The cybersecurity sector has found its services in high demand from rising AI-related threats, as new AI models have shown they can find serious flaws in widely used software that attackers can exploit. Meanwhile, a string of high-profile incidents involving AI agents that have breached other companies’ systems has highlighted the need for security that labels, tracks and controls customers’ AI agents.

These risks have spurred a string of acquisitions for startups that provide safeguards against AI agent blunders. Last month, HR and finance company Workday acquired startup C1.ai to manage AI agent identities alongside human identities. In August, identity security company Okta acquired Permiso Security and rival Sailpoint acquired Entro Security in June, both due to the targets’ specialization in managing AI agent identities.