PANWPalo Alto Networks

We note that as of January 31, 2024, your analysis of all positive and negative evidence resulted in a conclusion that it is more likely than not that deferred tax assets will be realizable based on recent profitability and continued forecasted income.

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This conclusion resulted in recording a deferred tax benefit of $3.2 billion, deferred tax expense of $1.7 billion and a net tax benefit of $1.5 billion in the three month period ended January 31, 2024. Please expand the discussion of income tax to include a detailed discussion of the reason for the amount and timing of the change in valuation allowance in the three month period ended January 31, 2024. Describe the facts and circumstances surrounding the recognition of the "deferred tax expense of $1.7 billion for the U.S. federal indirect tax effect of foreign deferred taxes." In this regard, please supplementally tell us and expand the discussion to explain the timing of your recognition of the expense and the nature and timing of the foreign deferred taxes. Also, describe in detail any related trends in profitability underlying your analysis pursuant to Item 303(b)(2)(ii) of Regulation S-K.

to the staff’s comments, we will enhance our disclosure regarding the nature, amount, and timing of our valuation allowance in our Form 10-Q for the period ending April 30, 2024. Specifically, we expect to revise our Income Tax footnote as follows (presented as tracked changes with additions underlined and deletions struck from our footnote 12. Income Tax included on our Form 10-Q for the period ended January 31, 2024):

We regularly assess the need for a valuation allowance on our deferred tax assets.

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In making this assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all the deferred tax assets will not be realized. As of January 31, 2024, basedBased on our analysis of all positive and negative evidence during the fiscal quarter ended January 31, 2024, we concluded it is more likely than not that our U.S. federal, U.S. states other than California, and United Kingdom deferred tax assets will be realizable based on our recent

1 As described in footnote 1. Description of Business and Summary of Significant Accounting Policies on page 67 of our Form 10-K filed on September 1, 2023 and consistent with the guidance included in the FASB Staff Q&A Topic 740, No. 5-Accounting for Global Intangible Low-Taxed Income.

profitability and continued forecasted income. In making these judgments, we considered our recent and expected ongoing profitability, which supports our conclusion of the realization of the deferred tax assets. We continue to maintain a valuation allowance for our California deferred tax assets due to the uncertainty regarding realizability of these deferred tax assets as they have not met the “more likely than not” realization criterion. We expect future research and development tax credit generation in California to exceed our ability to use the existing tax credits.

As a result of the valuation allowance release, we recognized a deferred tax benefit of $3.2 billion for the U.S. federal, U.S. states other than California, and United Kingdom deferred tax assets. Our U.S. federal and state deferred tax assets largely consist of capitalized research expenditures and accelerated recognition of deferred revenue for tax purposes. U.S. tax carryforwards (including net operating losses and tax credits) are expected to be fully utilized to the extent allowable by law. Our United Kingdom deferred tax assets largely consist of basis differences in intangible assets and related net operating losses expected to be utilized in the future.

In addition, we recognized a deferred tax expense of $1.7 billion for the U.S. federal indirect tax effect of foreign deferred taxes consistent with our policy to record deferred tax assets for basis differences relating to our global intangible low-taxed income. Accordingly, during the three and six months ended January 31, 2024, we recognized a net tax benefit of $1.5 billion relating to our valuation allowance release. We will continue to monitor the need for a valuation allowance on our deferred tax assets.

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We note that you provided more expansive disclosure in your CSR report than you provided in your SEC filings. Please advise us what consideration you gave to providing the same type of climate-related disclosure in your SEC filings as you provided in your CSR report.

Securities and Exchange Commission

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Please be advised that the Company has not published or posted a Corporate Social

Responsibility report on its website. The Company’s website does provide an overview of the Company’s Corporate Responsibility vision, as the Company believes that corporations should be good stewards of the environment even if the impact of climate change and environmental matters has not had a material impact on the corporation.

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In addition, the Company’s website contains a link to a document titled “Our Approach to Environmental, Social & Governance (ESG)

Practices” which references the Company’s participation in CDP Climate Change 2020 and CDP Climate Change 2021, including links to its submissions in respect thereto.

For purposes of the Company’s Annual Report on Form 10-K for the fiscal year ended July 31,

2021 (the “Annual Report”), the Company provided the environmental disclosure referenced by the Staff in its comment letter, which provided the Company’s stockholders with awareness of the Company’s overall commitment to environmental matters in the broader context of environmental, social and governance (“ESG”) matters. The Company’s Annual Report also contains risk factor disclosures regarding the potential impact of environmental laws and regulations on its operations, which are also disclosed in our 2021 CDP Climate Change submission (posted on our website). Although the future impact is currently uncertain (see pages 33 and 34 of the Annual Report), this risk factor disclosure sets forth the Company’s current assessment of the material risks to the Company arising from climate and environmental matters. Accordingly, the Company believes that the disclosure contained in the Annual Report satisfies the requirements of

Regulation S-K, and the Company also believes that additional disclosure in the Annual Report was not necessary in order to make other statements made by a Company materially accurate or not misleading.

The Company is aware of the Commission’s recent statements that climate change disclosure is a priority and stockholders may have an interest in learning more about the Company’s commitments related to climate change and the environment. The Company considered and assessed whether to include additional disclosures in the Annual Report, and determined that the Annual Report should contain a general description of the Company’s commitments to climate change and the risks to the Company presented by environmental matters because such items could be viewed as material to the Company. However, given that climate change and the environment have not had a material impact on the Company’s business, financial condition or results of operations, the Company determined that additional detail was not required for the Annual Report. Although the Company believes that it has met its disclosure obligations in the Annual Report, the Company intends to provide further disclosures relating to climate and environmental matters in the Company’s proxy statement for its 2021 annual meeting of stockholders, which will be held in December 2021. The Company also intends to post a CSR report to its website during the fourth calendar quarter of 2021. The Company believes this additional proxy disclosure and the CSR report will provide its stockholders with a deeper understanding of the Company’s commitment to climate and the environment, as well as contain additional discussion of the Company’s undertakings in respect thereto. The Company is providing this additional information not because it believes that such information is material; it is providing this additional information because it believes that corporations should be good stewards of the environment, even though climate change and environmental matters have not had a material impact on the Company’s business, financial condition or results of operations.

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You generally refer to environmental laws and regulations concerning the hazardous material content of your products and the collection of and recycling of electrical and electronic equipment and disclose on page 13 of your Form 10-K that you aligned your carbon neutral goal to the Paris Agreement.

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Please tailor your disclosure to identify any other material existing climate change-related legislation, regulations, and international accords and describe any material effect on your business, financial condition, and results of operations.

On page 13 of the Annual Report, the Company disclosed that, on its own initiative, it has aligned with the

Paris Agreement and sets forth three strategies to reach the Company’s goal of being carbon neutral by 2030. The Company does not currently believe that any climate change related legislation, regulations or international accords have or are expected to have a material impact on the Company’s business, financial condition or results of operations.

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The Annual Report also contains risk factor disclosures regarding the potential current and future impact of environmental laws and regulations on its operations, although the future impact is currently uncertain (see pages 33 and 34 of the Annual Report). If, in the future, any such laws or regulations materially affect or are expected to affect the Company’s business, financial condition or results of operations, the Company will include appropriate disclosures in future filings with the SEC.

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Disclose the material effects of transition risks related to climate change that may affect your business, financial condition, and results of operations, such as policy and regulatory changes that could impose operational and compliance burdens, market trends that may alter business opportunities, credit risks, or technological changes.

The Company does not currently believe that it is subject to material transition risks related to climate change. These transition risks are most relevant to the Company’s supply chain for components needed to create its firewall hardware products, which are manufactured by a third party. To date, while the Company has experienced events that could be labeled as risks related to climate change, none of these events have been material to the Company’s business, financial condition or results of operations.

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On page 34 of the Annual Report, the Company discloses that it “expect[s] that

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our products will be affected by new environmental laws and regulations on an ongoing basis.” This disclosure historically relates primarily to the Company’s firewall hardware products, which are manufactured by a third party. This disclosure also applies to the Company’s broad range of software-based cybersecurity products that are dependent upon the operation of computing and storage services provided by cloud service providers, and the Company’s recently introduced

(September 2021) consumer product offering, which is also manufactured by a third party. While the Company’s product offerings have not been materially impacted by climate change and the Company has not otherwise experienced the material effects of transition risks related to climate change, the Company is mindful that the consequences of climate change are evolving and will continue to monitor such consequences on the Company’s business, financial condition and result of operations. If, in the future, the Company determines that there are direct consequences or such indirect consequences are material to the Company, the Company will include appropriate disclosures in future filings.

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We note the disclosure in your annual report and proxy statement about enhancements you made during 2020 and 2021 to your environmental initiatives. Please quantify any material capital expenditures or compliance costs related to these initiatives.

The Company did not incur material capital expenditures or compliance costs during fiscal 2020 or fiscal 2021 related to the environmental initiatives referenced in our annual report or proxy statement, and currently does not expect to incur such material expenditures or costs. In addition, on page 34 of the Annual Report, the Company discloses that “[t]o date, our expenditures for environmental compliance have not had a material impact on our operating results or cash flows.” If, in the future, the Company incurs or anticipates material capital expenditures or compliance costs, the Company

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will include appropriate disclosures in future annual reports.

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To the extent material, discuss the indirect consequences of climate-related regulation or business trends, such as the following: • decreased demand for goods and services that produce significant greenhouse gas emissions or are related to carbon-based energy sources; • increased demand for goods and services that result in lower emissions than competing products; • increased competition to develop innovative new

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products and services that result in lower emissions; and • any anticipated reputational risks resulting from operations or products that produce material greenhouse gas emissions.

The Company does not currently believe that it is subject to material indirect consequences of climate-related regulations or business trends. For example, the Company does not believe that it has experienced any material decreased demand for goods and services, material increased demand for its goods and services, material increased competition to develop innovative new products and services, or any reputational risks resulting from its operations or products as result of climate-related regulation or business trends.

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While the Company’s product and service offerings have not been materially impacted by climate-related regulation or business trends, the Company is mindful that the consequences of climate change are evolving for the Company and its business partners, and will continue to monitor such consequences on the Company and its operations. If, in the future, the Company determines that such indirect consequences are material to the Company, the Company will include appropriate disclosures in future annual reports.

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If material, discuss the significant physical effects of climate change on your operations and results. This disclosure may include quantification of material weather-related damages to your property or operations and any weather-related impacts on the cost or availability of insurance.

The Company has not experienced any material physical effects of climate changes on its operation or results, including weather-related damages to property or operations or any weather-related impacts on the cost or availability of insurance. The Company is mindful that the consequences of climate change are evolving and will continue to monitor such consequences on the Company and its operations.

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If, in the future, the Company experiences significant physical effects attributable to client change on its operations or results of operations, the Company will include appropriate disclosures in future annual reports.

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As noted by the Staff, the Company acknowledges that the Company and its management are responsible for the accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or absence of action by the Staff.

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We note your response to prior comment 2. Tell us how you considered providing disclosure regarding the difficulties involved in assessing the timing and effect of pending climate-related laws or regulations.

to the Staff’s comment, we respectfully advise the Staff that, in our response to prior comment 2, we did not refer to difficulties in assessing the timing and effect of pending climate-related laws or regulations on us and our business. Generally, we have not experienced such difficulties, as climate-related laws or regulations have not had a material impact on our business, financial condition or results of operations, as described in our prior response.

We have a process to evaluate and assess pending or expected climate-related laws and regulations.

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We have an internal cross-functional policy working committee (the “Climate Committee”) focussed on climate, clean energy and sustainability policy issues, that meets regularly to monitor and analyze potential and pending climate-related laws and regulations and their impact on us. The Climate Committee regularly reports to our Senior Director of Global Corporate Responsibility and to senior management, which reports to the Board of Directors of the Company, regarding enacted or pending climate-change related laws and regulations. Our Senior Director of Global Corporate Responsibility also reports to our Disclosure Committee. In addition, we partner with external, reputable, non-governmental organizations

(“NGOs”), including the Information Technology Industry Council (“ITI”), and the non-profit organization Ceres and the Renewable Energy Buyers Alliance

(“REBA”), to keep abreast of current governmental policies and their potential outcomes, and to advocate for impactful climate and clean energy legislation. Our Climate Committee works together with our government policy team and enterprise risk management function to consider holistically the impact of pending or expected laws and regulations on us.

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Your response to prior comment 3 references transition risks in your supply chain for your firewall hardware products, software-based cybersecurity products and consumer product offering. Please describe the relevant transition risks in your supply chain for each of these product types and explain how you analyzed the materiality of these risks.

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Also, please describe the events you reference in your response "that could be labeled as risks related to climate change" and any other transition risks related to climate change for which you performed a materiality assessment.

to the Staff’s comment, we respectfully advise the Staff that we consider transition risks as those specific, potential climate-related risks that could have a substantive impact on our business, such as power outages, disruption of our supply chain (either in the case of our hardware products, with respect to the manufacturing or delivery of those products, or in the case of our cloud-delivered services, data center operations), employee health impacts, or reputational damage from negative media or legal actions.

Bruce R.

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Byrd, EVP

& General Counsel | 202.286.2676 | bbyrd@paloaltonetworks.com | 3000 Tannery Way, Santa Clara, CA 95054 |

Our firewall hardware products consist of computer hardware appliances with a range of cybersecurity capabilities, from those designed for small organizations and remote or branch offices, to those designed for large-scale data centers and service provider use. Our consumer product offering, launched recently after the end of the fiscal year that is covered by the Company’s Annual Report on Form 10K for the fiscal year ended July 31, 2021 (the “Annual Report”), is a hardware product and is subject to the same risks as our other hardware products.

We actively monitor for climate-change and non-climate change related supply chain events and all events are managed through our and our partners’ supply chain risk mitigation processes. We did not experience any disruptions in our hardware supply chain due to climate-change related weather events in fiscal 2021.

Our software-based

(digital) cybersecurity products include our firewall cybersecurity products, delivered through virtual and containerized form factors, as well as our Prisma Cloud, Prisma Access and Cortex cloud security offerings. All of these products are digitally delivered to customers, meaning transition risks (such as drought, flooding, freezing, etc.) are very low due to the ability to instantaneously move computing, storage, and networking to other regions that are not experiencing any climate impact. We contract with multiple cloud service providers and maintain resiliency in our networks that provide these digital cybersecurity products and services to customers. We did not experience any disruptions in the delivery of our software-based (digital) cybersecurity products due to climate-change related weather events in fiscal 2021.

With respect to our prior response, we respectfully advise the Staff that we were referring to normal supply chain issues that are a normal part of the business. In fiscal 2021, we managed our supply chain so that we were able to deliver our products and services in a timely manner to customers. For further information regarding the transition risks applicable to us, we direct the Staff to our Response #4 below.

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Your response to prior comment 4 states that you did not incur material capital expenditures or compliance costs during fiscal 2020 or fiscal 2021. In order to better understand your response, please tell us about your capital expenditures and compliance costs related to environmental initiatives (including quantification of amounts incurred) and explain how you assessed the materiality of these expenditures and

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costs. In addition, please tell us more about how you considered providing disclosure quantifying the estimated costs of achieving your carbon neutral goal and explain how you analyzed the materiality of these costs.

to the Staff’s comment, we respectfully advise the

Staff that we did not incur material capital expenditures or compliance costs during fiscal 2021 related to our environmental initiatives and we do not currently expect to incur such material expenditures or costs.

To provide further detail, we supplementally advise the Staff that our capital expenditures and compliance costs in fiscal 2021 related to environmental initiatives totaled approximately $0.4 million, consisting of:

1.

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Partnering with our local utility to procure renewable energy certificates (RECs) to run our headquarters office in Santa Clara, California (our largest operational footprint, representing over 60% of our total global square footage of office space) with renewable energy.

Procuring (a) US wind energy RECs to offset the rest of our US footprint (representing 12% of our total global square footage of office space) and (b) carbon offsets to cover the rest of our global footprint and all of our business travel.

Other costs included hiring an external sustainability advisory resource, subscribing to a digital platform for warehousing sustainability data, and engaging a third party consulting firm to support our ESG reporting.

Our revenues for fiscal 2021 were approximately $4.3 billion. In fiscal 2021, our GAAP operating loss was $304.1 million. In the context of our total revenues and operating loss, we determined that the total cost of our environmental initiatives, as described above, of approximately $0.4 million in fiscal 2021, was not material to our business, financial conditions or results of operations. We declared and committed to our environmental sustainability programs in fiscal 2021. Prior to that time, in fiscal 2020 and in prior years, we did not specifically track costs related to environmental initiatives. We believe our environmental efforts in fiscal 2020 were less than what we undertook in fiscal 2021.

In our proxy statement, we have disclosed our goal to be carbon neutral by 2030 and in fiscal

2021, we took the steps outlined above toward this goal. To reach our goal by 2030, we anticipate incurring similar types of costs and expenses each year. While we expect to budget for similar and increasing expenditures annually, we believe that these costs will not be material to our business, financial conditions or results of operations in the next 24 months. Our budget for environmental initiatives in fiscal 2022 is approximately $0.5 million.

As described above, we assessed the materiality of these expenditures and determined that they were not material to our business, financial conditions or results of operations. Under Rule 12b-20 of the Securities and Exchange Act of 1934, as amended, as the disclosures in our Annual Report should include material information, we decided the disclosure of these amounts was not required in our Annual Report.

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Your response to prior comment 5, which states that you do not currently believe that you are subject to material indirect consequences of climate-related regulations or business trends, appears to be conclusory in nature and does not provide an analysis of the factors listed in our comment. Please describe the indirect consequences you considered in your analysis and explain how you concluded they were not material.

With respect to material indirect consequences of climate-related regulations or business trends, the factors listed in the prior Staff comment letter were:

decreased demand for goods and services that produce significant greenhouse gas emissions or are related to carbon-based energy sources;

increased demand for goods and services that result in lower emissions than competing products;

increased competition to develop innovative new products and services that result in lower emissions; and any anticipated reputational risks resulting from operations or products that produce material

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greenhouse gas emissions.

As a business, our products and services indirectly produce greenhouse gas emissions due to the energy used to (a) manufacture our products, (b) power data centers to deliver our software products and services and (c) power offices for our staff. With respect to our level of greenhouse gas emissions, we have a clear understanding of our emissions and we measure, report and set goals to reduce and eliminate them. However, we believe our products and services do not produce significant greenhouse gas emissions. Accordingly, regarding factors #1 and #2, we respectfully advise the Staff that we believe our goods and services, consisting of (a) computer hardware appliances, (b) digitally delivered software services and (c) cybersecurity consulting, technical advisory and support services, do not produce significant greenhouse gas emissions.

Regarding factor #3, we are subject to competition to develop innovative, energy efficient products that effectively address cyber threats. While lower emissions are not a key differentiating factor for products in our field, one way that we have developed energy-efficient products and services is by providing our products and services through a cloud-delivered software as a service. We remain committed to providing our hardware products and in addition, we have embraced the digitally delivered cloud services part of our business. Our digitally delivered cloud software services eliminate the need for heavy, material intensive, physical processes and contribute to proliferating a digital, clean energy, low-carbon economy. We believe these digitally delivered, cloud software services are a competitive advantage for us and are leading to increased, incremental sales opportunities for our business, due to all of the factors above, when compared to competitors that have not set ambitious sustainability goals.

Regarding factor #4, “any anticipated reputational risks resulting from operations or products that produce material greenhouse gas emissions,” as described above, we track, report on, and work to mitigate, our greenhouse gas emissions. However, unlike a manufacturer of products, such as automobiles, whose products emit greenhouse gases, our products and services do not emit greenhouse gases. Our business operations, consisting of engineering product development of our software and hardware products and general and administrative staff, and our products and services do not produce material greenhouse gas emissions.

Accordingly, we do not anticipate incurring reputational risks from our operations or products.

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Your response to prior comment 6 states that you have not experienced any material physical effects of climate changes on your operations or results. Please explain whether you have experienced physical effects of climate change on your operations or results and, if so, how you concluded that such effects have been, and are expected to continue to be, immaterial to your operations and results.

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As noted in our prior comment, quantify weather-related damages to your property or operations and discuss any weather-related impacts on the cost or availability of insurance.

to the Staff’s comment, we respectfully advise the Staff that we have not experienced any material physical effects of climate change on our operations or results.

In February 2021, we experienced unusual freezing temperatures at our Texas leased office facility which might be attributable to climate-change. The freezing temperatures caused damage to an automatic transfer switch at the office, which resulted in the office being on generator power for seven days and also caused landscaping damage.

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Due to this incident, we incurred approximately $0.1 million in costs for the oil to run the generator, for repairs, and miscellaneous other expenses. In the context of our total revenues and operating loss as set forth in response #3 above, we determined that these costs and expenditures were not material to our business, financial conditions or results of operations. We may experience similar events in the future with respect to our offices, but expect those events similarly to be immaterial to our operations and results.

In order to mitigate the risks of climate change, we deploy measures in our offices such as back-up power, onsite drought-resistant flora, and low flow water faucets and encourage sustainable, resilient practices for employees through our Green Teams and education programs.

We respectfully advise the Staff that weather-related impacts have not affected the cost or availability of insurance to us.

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As noted by the Staff, the Company acknowledges that the Company and its management are responsible for the accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or absence of action by the Staff.

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