According to an informed source, Palo Alto Networks is in talks to acquire Clutch Security for $500 million in cash plus additional payments linked to milestones. Clutch is a startup that provides security protection for AI's company systems on their behalf.

According to this source, Clutch, which was established three years ago, had a valuation of $85 million when it completed a $20 million Series A financing round led by Lightspeed and SignalFire in January 2025. The startup's current annual recurring revenue (ARR) is close to $10 million. This means that if the transaction is completed, the valuation of Clutch will be approximately 50 times its ARR; this is also a common valuation method for software companies.

Neither Palo Alto Networks nor Clutch Security has responded to requests for comments. The Information was the first to report on these acquisition negotiations.

This high valuation is not uncommon in the current market. As the market pays more and more attention to how to protect software from attacks by malicious actors who find it easier to invade systems using AI, related transactions are also on the rise. TechCrunch reported last week that Upwind, a startup that uses AI to protect cloud infrastructure, recently rejected a takeover bid from DataDog; the offer valued Upwind at approximately 40 times its ARR.

If the deal is completed, this will be Palo Alto Networks's seventh acquisition this year, according to PitchBook data. As a giant in network security, the company has traditionally preferred to acquire companies rather than engage in internal research and development to drive innovation, and it has accelerated its acquisition pace this year due to the increase in cyberattacks driven by AI.

In September, Palo Alto Networks acquired Console, a two-year-old startup that uses AI to automate routine IT help desk tasks. TechCrunch reported that the transaction valued Console at $500 million and was paid for in stock and cash. Other companies acquired by Palo Alto Networks this year that are supported by venture capital include NEA-funded Embrace for $325 million; the observability platform Chronosphere supported by Greylock and Lux Capital for $2.95 billion; and the cybersecurity startup Koi funded by Battery and Team8 for $231 million. The relevant data comes from regulatory documents.

Some competitors of Clutch have also been acquired. Cyera, a cybersecurity startup that was valued at $12 billion at one point this year, acquired Oasis Security, which, like Clutch, focuses on managing access to AI proxy systems. The transaction amount was $1 billion. Meanwhile, Cisco acquired Astrix, which is supported by Menlo Ventures, for approximately $400 million, according to Calcalist.