Palo Alto Networks PANW recently announced its agreement to acquire cloud threat defence company RedLock Inc. for $173 million.

Palo Alto Networks, which offers network security solutions to enterprises, service providers and government entities worldwide, aims at bolstering its cloud security offerings with the acquisition, which is expected to be completed during the company’s fiscal first quarter.

Integration of RedLock’s technology will enable the company to better cater to multi-cloud environments including Amazon’s AMZN Amazon Web Services, Alphabet’s GOOGL Google Cloud Platform and Microsoft MSFT Azure.

Higher Demand for Security Boosts Growth

Rising demand for cyber security owing to the long list of data breaches is a positive for Palo Alto Networks. The advent of cloud computing and the idea of resource sharing to lower cost have further increased demand for adequate security policies, protocols and products. So, companies are allotting increasing portions of IT budgets to security solutions.

Per Grand View Research, the global threat intelligence market will reach $12.6 billion by 2025, witnessing a CAGR of 17.4% from 2017 to 2025. Moreover, according to a research by Gartner, worldwide enterprise security spending is projected to total $96.3 billion in 2018, representing an 8% increase from 2017 tally.

Management is optimistic about the continuous spending on security, which is backed by large-scale upgrade in IT infrastructure and transition to cloud. A healthy demand environment, product launches and an increasing adoption of next-generation security platforms is boosting the company’s top line.

Acquisitions Augur Well for Palo Alto

Palo Alto Networks’ strategy of making acquisitions to boost growth is long documented. The company completed the buyout of LightCyber last year, expanding its Next-Generation Security Platform.

Over the past few years, the company also closed three important consolidations to broaden its portfolio and global reach. The transactions including purchases of Morta Security and Israel-based Cyvera in turn expanded the company’s product portfolio as well as customer base.

Additionally, the company’s integration of CirroSecure helped it expand the functionality of its enterprise security platform and better guard the SaaS collaboration products of, Google Drive, Box and Dropbox.

Moreover, the company expects to expand its endpoint detection and response (EDR) capabilities with its latest buyout of Secdo.

Notably, the acquisition of in March this year, strengthened Palo Alto Networks’ security offerings for multi-cloud environments with inline, host-based and API-based security.

Clubbing the technologies of Evident and RedLock will allow the company to provide a unified offering of cloud security analytics, advanced threat detection, steady security and compliance monitoring, which is expected to be launched early next year.

Palo Alto Networks currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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