Palo Alto Networks reported strong third-quarter earnings results on Tuesday afternoon, beating estimates for every major metric. Its stock drpped 2.75% in after-hours trading.

Amid skepticism about artificial-intelligence disruption of software companies, the results reinforce the argument Palo Alto and its peers have made: AI creates more work for cybersecurity firms, not less.

Adjusted earnings per share were 85 cents, ahead of Wall Street’s consensus estimate of 80 cents, and up from 80 cents last year. Revenue for the quarter reached $3 billion, edging expectations of $2.94 billion, and up 31% on the year.

The company’s backlog grew to $18.4 billion, up 36% and besting the analyst consensus.

Palo Alto also provided strong fourth-quarter guidance and nudged its annual outlook higher.

The strong sales growth coupled with the moderate rise in earnings is a function of several acquisitions being integrated at once. Excluding those deals, sales were up 14% organically.

“Our results surpassed every guided metric, fueled by an acceleration in organic bookings momentum, the sustained tailwinds from our platformization strategy, and surging cybersecurity needs as AI transitions from experimental stages to enterprise-wide production,” said CEO Nikesh Arora on the earnings call.

Key among the company’s five AI-related acquisitions from the past year is identity-security company CyberArk, which Palo Alto agreed to acquire in a cash-and-stock deal announced last year that valued CyberArk at about $25 billion. The merger closed in February.

AI brings a host of new security issues to enterprise networks. AI enables traditional cyberattacks to be carried out at greater scale and speed, and networks need to be hardened to address the threat. But the bigger issue may be AI agents, software that can use AI models to accomplish a complex series of tasks from simple conversational commands.

To be useful, agents must be granted access to private data, web browsers, email, and other external communications. That also turns them into a new attack surface, with emerging classes of exploits such as prompt injection.

One of the primary ways experts hope to lock down agents is through identity security. People on an enterprise network have their identities managed so that they have the privileges they need, and are blocked from everything else. If predictions are correct, agents will soon outnumber people on enterprise networks, and they will need strict identity governance.

Agent-identity security came into even sharper focus after last week’s earnings report from Okta, one of the leaders in identity security. Sales upside potential from its agent-identity software drove the stock up 30% the next day. CyberArk has similar software, announced late last year. CyberArk’s software will be integrated into Palo Alto’s broad platform of security services.