⚠ Datadog, Dynatrace and Elastic Were There FirstModerate threat

Palo Alto Networks (PANW) — threat to the moat

Palo Alto's observability business competes with Datadog, Dynatrace and Elastic, and depends heavily on usage that can move.

Palo Alto entered observability as a newcomer. Its 10-K names DataDog, Dynatrace and Elasticsearch among its competitors in the category1, companies built for the market over many years.

Observability competitors named by Palo AltoDataDognamed in the 10-KDynatracenamed in the 10-KElasticsearchnamed in the 10-KPalo Alto observability ARRabove 500 million dollarsPalo Alto Form 10-K FY2026; Q4 FY2026 call via Yahoo Finance
Three incumbents, one newcomer.

The newcomer's pitch is the combination of security and monitoring on one data platform. The incumbents' reply is depth: their products have had years to add the features that operations teams depend on.

Observability is also billed on consumption, which Palo Alto flags as a source of "revenue volatility from consumption- or usage-based offerings"2. The one large AI customer that moved to Chronosphere in the fourth quarter3 could, in principle, move again.

Palo Alto's own risk factors frame the entry as a change in its business: the CyberArk acquisition, it says, substantially changed the scope and size of the company and brought increased competition4. Observability is the second new market entered in the same year, which stretches management attention across two sets of incumbents at once.

The test is whether Chronosphere keeps winning customers from incumbents after the first large migration. Observability ARR growth in fiscal 2027 will show it; a figure that stays close to the $500 million reached at year end5 would mean the incumbents have held their ground.

References
  1. ReportedIts 10-K names DataDog, Dynatrace and Elasticsearch among its competitors in the category, companies built for the market over many years.
    Palo Alto Networks Form 10-K for fiscal 2026 (year ended 31 July 2026) - Item 1 business and Item 7 MD&A: platforms, customers, channels, employees, revenue by type and geography. — FY2026 · publ. 10 September 2026 · source ↗
  2. ReportedObservability is also billed on consumption, which Palo Alto flags as a source of "revenue volatility from consumption- or usage-based offerings".
    Palo Alto Networks fourth-quarter and fiscal 2026 results release, Form 8-K exhibit 99.1 - income statement, non-GAAP reconciliation, balance sheet, cash flow, Next-Generation Security ARR, remaining performance obligations and fiscal 2027 guidance - fourth-quarter and full-year results, balance sheet and cash flow. — Q4 FY2026 · publ. 1 September 2026 · source ↗
  3. ReportedThe one large AI customer that moved to Chronosphere in the fourth quarter could, in principle, move again.
    Palo Alto Networks fourth-quarter fiscal 2026 earnings call transcript (Motley Fool) - platform revenue, platformized cohort retention, large deals and fiscal 2027 modelling points. — Q4 FY2026 · publ. 1 September 2026 · source ↗
  4. ReportedPalo Alto's own risk factors frame the entry as a change in its business: the CyberArk acquisition, it says, substantially changed the scope and size of the company and brought increased competition.
    Palo Alto Networks Form 10-K for fiscal 2026 (year ended 31 July 2026) - Item 1A risk factors, Israel, supply and legal proceedings. — FY2026 · publ. 10 September 2026 · source ↗
  5. ReportedObservability ARR growth in fiscal 2027 will show it; a figure that stays close to the $500 million reached at year end would mean the incumbents have held their ground.
    Yahoo Finance summary of the Palo Alto Networks fourth-quarter fiscal 2026 call - XSIAM, Prisma AIRS and observability ARR, platformizations, Idira deals and hardware share of revenue. — Q4 FY2026 · publ. September 2026 · source ↗
Sources
Generated September 26, 2026