Palo Alto Networks Reports Fiscal Fourth Quarter and Fiscal Year 2026 Financial
Palo Alto Networks Reports Fiscal Fourth Quarter and Fiscal Year 2026 Financial Results
— Palo Alto Networks ® (NASDAQ: PANW), the global AI cybersecurity leader, announced today financial results for its fiscal fourth quarter and fiscal year, ended July 31, 2026.
"We delivered a strong Q4 to close out the year, adding nearly $1 billion of Net New NGS ARR in a single quarter," said Nikesh Arora, chairman and chief executive officer of Palo Alto Networks. "The latest advancements in AI are elevating cybersecurity to the top of the CIO priority list, and will serve as durable tailwinds as we progress towards our $20 billion FY30 NGS ARR target."
"We delivered a strong finish to a record year and exceeded our guidance across the board, fueled by strength across our Network & AI Security, Cortex, and Idira platforms," said Dipak Golechha, chief financial officer of Palo Alto Networks. "Our profitable growth framework continues to scale effectively, reinforcing our confidence in achieving 40% adjusted free cash flow margin in FY28."
• Total revenue for the fiscal fourth quarter 2026 grew 34% year over year to $3.41 billion.
• Next-Generation Security ARR for the fiscal fourth quarter 2026 grew 63% year over year to $9.10 billion.
• GAAP operating income for the fiscal fourth quarter 2026 was $172 million, compared with GAAP operating income of $497 million for the fiscal fourth quarter 2025. Non-GAAP operating income for the fiscal fourth quarter 2026 was $1.0 billion, compared with non-GAAP operating income of $768 million for the fiscal fourth quarter 2025. A reconciliation between GAAP and non-GAAP information is contained in the tables below.
• GAAP net loss for the fiscal fourth quarter 2026 was $282 million, or ($0.35) per diluted share, compared with GAAP net income of $254 million, or $0.36 per diluted share, for the fiscal fourth quarter 2025. Non-GAAP net income for the fiscal fourth quarter 2026 was $853 million, or $1.02 per diluted share, compared with non-GAAP net income of $673 million, or $0.95 per diluted share, for the fiscal fourth quarter 2025. A reconciliation between GAAP and non-GAAP information is contained in the tables below.
• Net cash provided by operating activities for the fiscal fourth quarter 2026 was $1.4 billion, compared with net cash provided by operating activities of $1.0 billion for the fiscal fourth quarter 2025. Adjusted free cash flow for fiscal fourth quarter 2026 was $1.3 billion, compared with adjusted free cash flow of $954 million for the fiscal fourth quarter 2025. Fiscal year 2026 adjusted free cash flow margin was 38.4%. A reconciliation between GAAP and non- GAAP information is contained in the tables below.
Palo Alto Networks has acquired Console, an AI-native platform that enables agentic workflows across enterprise operations. Console will expand the role of our Cortex platform across the broader enterprise agentic transformation.
Palo Alto Networks provides guidance based on current market conditions and expectations.
• Next-Generation Security ARR of $9.54 billion to $9.56 billion, representing year-over-year growth of 63%.
• Remaining performance obligations of $20.8 billion to $20.9 billion, representing year-over-year growth of 34% to 35%.
• Total revenue in the range of $3.300 billion to $3.310 billion, representing year-over-year growth of 33% to 34%.
• Diluted non-GAAP net income per share in the range of $0.96 to $0.98, using 837 million to 844 million shares outstanding.
• Next-Generation Security ARR of $11.075 billion to $11.175 billion, representing year-over-year growth of 22% to 23%.
• Remaining performance obligations of $25.2 billion to $25.4 billion, representing year-over-year growth of 19% to 20%.
• Total revenue in the range of $14.10 billion to $14.20 billion, representing year-over-year growth of 23% to 24%.
• Diluted non-GAAP net income per share in the range of $4.16 to $4.19, using 844 million to 847 million shares outstanding.
Guidance for non-GAAP financial measures excludes share-based compensation- related charges, including share-based payroll tax expense, acquisition-related costs, including change in fair value of contingent consideration liability, amortization expense of acquired intangible assets, litigation-related charges, non-cash charges related to convertible notes, change in fair value of convertible senior notes and capped calls, and income tax and other tax adjustments related to our long-term non-GAAP effective tax rate, along with certain non-recurring expenses and certain non-recurring cash flows. We have not reconciled non-GAAP operating margin guidance to GAAP operating margin, diluted non-GAAP net income per share guidance to GAAP net income (loss) per diluted share, or adjusted free cash flow margin guidance to GAAP net cash provided by operating activities because we do not provide guidance on GAAP operating margin, GAAP net income (loss) or net cash provided by operating activities and would not be able to present the various reconciling cash and non-cash items between GAAP and non-GAAP financial measures because certain items that impact these measures are uncertain or out of our control, or cannot be reasonably predicted, including share-based compensation expense, without unreasonable effort. The actual amounts of such reconciling items will have a significant impact on the company’s GAAP net income (loss) per diluted share, GAAP operating margin and GAAP net cash provided by operating activities.
Palo Alto Networks will host a video webcast for analysts and investors to discuss the company’s fiscal fourth quarter and fiscal year 2026 results as well as the outlook for its fiscal first quarter and fiscal year 2027 today at 4:30 p.m. Eastern time/1:30 p.m. Pacific time. Open to the public, investors may access the webcast, supplemental financial information and earnings slides from the "Investors" section of the company’s website at investors.paloaltonetworks.com. A replay will be available three hours after the conclusion of the webcast and archived for one year.
This press release contains forward-looking statements that involve risks, uncertainties and assumptions including statements regarding our financial and operating results and financial outlook for the fiscal first quarter 2027 and fiscal year 2027. There are a significant number of factors that could cause actual results to differ materially from forward-looking statements made or implied in this press release, including: unfavorable economic and market conditions and the uncertain geopolitical environment; our ability to effectively manage future growth and improve our systems, processes, and controls; our ability to maintain our revenue growth rate or profitability; variability and seasonality in our operating results; our ability to sell new and additional products, subscriptions, and support offerings to existing and new customers; the delayed recognition of revenue from subscription and support offerings; revenue volatility from consumption- or usage-based offerings and customer usage optimization behavior; potential decreases in the sales prices of our products, subscriptions, and support offerings; our reliance on channel partners; credit and liquidity risk exposure; challenges associated with sales to government entities; intense competition in our markets; risks associated with the evolving definition of the identity security market; customer trends toward vendor consolidation in cybersecurity; competition from cloud infrastructure providers offering native security capabilities; risks related to past and future acquisitions; our ability to predict, prepare for, and respond to rapidly evolving technological and
market developments; the need to maintain a broad ecosystem of third-party technology integrations; risks related to the development, deployment, or use of AI, including AI agents as a new class of identity; the impact of network or data security incidents; defects, errors, or vulnerabilities in our products and subscriptions; reliance on customers to configure and use our products securely; the quality of our technical support services; our ability to meet service-level commitments; our reliance on data center facilities operated by third-party cloud service providers; intellectual property claims and our ability to protect proprietary rights; risks associated with open source software; our reliance on third-party technology licenses; dependence on manufacturing partners and limited sources of supply; our ability to attract, retain, and motivate key personnel; risks associated with international sales and operations, including export and import controls; fluctuations in foreign currency exchange rates; risks associated with operations and employees located in Israel; costs and risks related to compliance with privacy and data protection laws; potential tax liabilities; risks related to estimates, judgments, and critical accounting policies; our ability to maintain proper and effective internal control over financial reporting; risks related to corporate responsibility matters; dilution from issuance of additional common stock; risks related to our convertible senior notes, including our ability to settle conversions, repurchase, or repay such notes and the potential effect of capped call transactions.
Additional risks and uncertainties on these and other factors that could affect our financial results and cause actual results to differ materially from those described in the forward-looking statements we make in this press release are included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our annual reports on Form 10-K and quarterly reports on Form 10-Q, which are available on our website at investors.paloaltonetworks.com and on the SEC's website at www.sec.gov. Additional information and risks and uncertainties will also be set forth in other documents that we file with or furnish to the SEC from time to time. All forward-looking statements in this press release are based on our current beliefs and information available to management as of the date hereof and are inherently uncertain, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.
Palo Alto Networks has provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). The company uses these non-GAAP financial measures and other key metrics internally in analyzing its financial results and believes that the use of these non-GAAP financial measures and key metrics are helpful to investors as an additional tool to evaluate ongoing operating results and trends, and in comparing the company’s financial results with other companies in its industry, many of which present similar non-GAAP financial measures or key metrics.
The presentation of these non-GAAP financial measures and key metrics are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with the company’s consolidated financial statements prepared in accordance with GAAP. A reconciliation of the company’s historical non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review these reconciliations.
Non-GAAP operating income. Palo Alto Networks defines non-GAAP operating income as operating income plus share-based compensation-related charges, including share-based payroll tax expense, acquisition-related costs, including change in fair value of contingent consideration liability, amortization expense of acquired intangible assets, and litigation-related charges. The company believes that non-GAAP operating income provides management and investors with greater visibility into the underlying performance of the company’s core business operating results.
Non-GAAP net income and net income per share, diluted. Palo Alto Networks defines non-GAAP net income as net income (loss) plus share-based compensation- related charges, including share-based payroll tax expense, acquisition-related costs, including change in fair value of contingent consideration liability, amortization expense of acquired intangible assets, litigation-related charges, non-cash charges related to convertible notes, and change in fair value of convertible senior notes and capped calls. The company also excludes from non- GAAP income tax and other tax adjustments related to our long-term non-GAAP effective tax rate in order to provide a complete picture of the company’s recurring core business operating results. The company defines non-GAAP net income per share, diluted, as non-GAAP net income divided by the weighted- average diluted shares outstanding, which includes the potentially dilutive effect of the company’s employee equity incentive plan awards and the company’s convertible senior notes and related warrants, after giving effect to the anti- dilutive impact of the company’s note hedge agreements and capped call transactions, which reduced the potential economic dilution that otherwise would have occurred in connection with the conversion and settlement of the company’s convertible senior notes. Under GAAP, the anti-dilutive impact of the note hedge or capped calls is not reflected in diluted shares outstanding. The company considers these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that it uses non-GAAP operating income.
Adjusted free cash flow margin, adjusted free cash flow, and free cash flow. Palo Alto Networks defines adjusted free cash flow margin, a non-GAAP measure, as adjusted free cash flow divided by total revenue. The company defines adjusted free cash flow, a non-GAAP measure, as free cash flow, plus certain capital expenditures for our headquarters and certain corporate assets, plus payments of acquisition-related costs, plus litigation-related payments. The company defines free cash flow, a non-GAAP measure, as net cash provided by operating activities less purchases of property, equipment, and other assets. We consider free cash flow, adjusted free cash flow, and adjusted free cash flow margin to be operating metrics as well as liquidity measures that provide useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures and before the impact of certain qualifying non-recurring cash payments from operating activities, as applicable. A limitation of the utility of free cash flow or adjusted free cash flow as a measure of our liquidity is that it does not represent the total increase or decrease in our cash balance for the period. In addition, it is important to note that other companies, including companies in our industry, may not use free cash flow or adjusted free cash flow, may calculate free cash flow or adjusted free cash flow in a different manner than we do, or may use other financial measures to evaluate their liquidity, all of which could reduce the usefulness of free cash flow or adjusted free cash flow as a comparative measure.
Next-Generation Security ARR. Palo Alto Networks defines Next-Generation Security ARR as the annualized allocated revenue of all active contracts as of the final day of the reporting period related to all product, subscription and support offerings, excluding revenue from hardware products, and legacy attached subscriptions, support offerings and professional services. The company considers Next-Generation Security ARR to be a useful operating metric for management and investors to assess the performance of the company because Next- Generation Security is where the company has focused its innovation and the company expects its overall revenue to be disproportionately driven by this Next-Generation Security portfolio. Because Next-Generation Security ARR does not have the effect of providing a numerical measure that is different from any comparable GAAP measure, the company does not consider it a non-GAAP measure.
Investors are cautioned that there are a number of limitations associated with the use of non-GAAP financial measures and key metrics as analytical tools. Many of the adjustments to the company’s GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in the company’s financial results for the foreseeable future, such as share-based compensation, which is an important part of Palo Alto Networks employees’ compensation and impacts their performance. Furthermore, these non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP, and the components that Palo Alto Networks excludes in its calculation of non-GAAP financial measures may differ from the components that its peer companies exclude when they report their non-GAAP results of operations. As a result, these non-GAAP financial measures may not be directly comparable to similar non-GAAP financial measures used by other companies. Palo Alto Networks compensates for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures. In the future, the company may also exclude non-recurring expenses and other expenses that do not reflect the company’s core business operating results.
Palo Alto Networks® (NASDAQ: PANW), the global AI cybersecurity leader, protects our digital way of life with a comprehensive portfolio of cybersecurity solutions and platforms across Network, Cloud, Security Operations, AI and Identity. Trusted by 70,000+ customers and powered by Unit 42 ® threat intelligence, our AI-driven platforms eliminate complexity, empowering enterprises to modernize with confidence and securing the speed of innovation. Explore the future of security at www.paloaltonetworks.com.
Palo Alto Networks and the Palo Alto Networks logo are trademarks of Palo Alto Networks, Inc. in the United States or in certain jurisdictions throughout the world. All other trademarks, trade names, or service marks used or mentioned herein belong to their respective owners. Any unreleased services or features (and any services or features not generally available to customers) referenced in this or other press releases or public statements are not currently available (or are not yet generally available to customers) and may not be delivered when expected or at all. Customers who purchase Palo Alto Networks applications should make their purchase decisions based on services and features currently generally available.
Palo Alto Networ… Inc. Reconc… of GAAP to Non-GA… Financ… Measur… (In millio… except per share amount… (Unaud… Three Year Months Ended Ended July 31, July 31, 2026 2025 2026 2025 GAAP operat… $ 172 $ 497 $ 695 $ 1,243 income Share-… compen… 487 372 1,712 1,386 charges Acquis… 68 -142 295 -110 costs(… Amorti… expense of 281 37 638 164 acquir… intang… assets Litiga… 3 4 16 -31 charge… Non-GA… operat… $ 1,011 $ 768 $ 3,356 $ 2,652 income GAAP net $ -282 $ 254 $ 307 $ 1,134 income (loss) Share-… compen… 487 372 1,712 1,386 charges Acquis… 68 -142 295 -110 costs(… Amorti… expense of 281 37 638 164 acquir… intang… assets Litiga… 3 4 16 -31 charge… Change in fair value of conver… 524 — 562 1 senior notes and capped calls(… Income tax and other -228 148 -599 -199 tax adjust… Non-GA… net $ 853 $ 673 $ 2,931 $ 2,345 income GAAP net income (loss) $ -0.35 $ 0.36 $ 0.40 $ 1.60 per share, diluted Share-… compen… 0.59 0.53 2.23 1.98 charges Acquis… 0.08 -0.20 0.39 -0.15 costs(… Amorti… expense of 0.34 0.05 0.84 0.23 acquir… intang… assets Litiga… 0.00 0.00 0.02 -0.04 charge… Change in fair value of conver… 0.64 0.00 0.74 0.00 senior notes and capped calls(… Income tax and other -0.28 0.21 -0.78 -0.28 tax adjust… Non-GA… net income $ 1.02 $ 0.95 $ 3.84 $ 3.34 per share, diluted GAAP weight… shares used to compute net 817 709 764 709 income (loss) per share, diluted Weight… diluti… effect of 16 — — — potent… diluti… securi… Weight… anti-d… impact of note hedge -1 -2 — -7 agreem… and capped call transa… Non-GA… weight… shares used to compute 832 707 764 702 net income per share, diluted
(1) Consists of acquisition transaction costs, share-based compensation related to the cash settlement of certain equity awards, change in fair value of contingent consideration liability, and costs to terminate certain employment, operating lease, and other contracts of the acquired companies. During the three months and fiscal year ended July 31, 2026, it also includes integration costs related to our acquisition of CyberArk Software Ltd.
(2) Consists of the amortization of intellectual property licenses and covenant not to sue, and legal contingency charges (credit). During the fiscal year ended July 31, 2026, it also includes a litigation settlement charge.
(3) Consists of changes in fair value of convertible senior notes acquired from CyberArk Software Ltd. that are included in earnings and changes in fair value of the related capped calls. During the fiscal year ended July 31, 2025, it also includes non-cash interest expense for amortization of debt issuance costs related to our convertible senior notes.
(4) Consists of income tax adjustments related to our long-term non-GAAP effective tax rate. During the three months and fiscal year ended July 31, 2025, it included a one-time deferred tax provision adjustment relating to the enactment of One Big Beautiful Bill.
(5) Consists of potentially dilutive effect of employee equity incentive plan awards in periods with GAAP net loss position as they are excluded from GAAP weighted-average shares. 3
(2) Consists of a one-time purchase of a corporate asset which was paid through July 2026.
(3) Consists of payments of acquisition-related costs in connection with our acquisitions of CyberArk Software Ltd. and Koi Security Ltd.
(4) Consists of a non-recurring litigation settlement payment during the three months ended January 31, 2026. 4
Palo Alto Networks, Inc. Preliminary Condensed Consolidated Balance Sheets (In millions) Assets July 31, 2026 Current assets: (unaudited) July 31, 2025 ────────────────────────────────────────────────────────────────────────────── Cash and cash equivalents $ 2,514 $ 2,269 Short-term investments 557 635 Accounts receivable, net 3,629 2,965 Short-term financing 592 715 receivables, net Short-term deferred 544 419 contract costs Prepaid expenses and other current 807 520 assets Total current assets 8,643 7,523 Property and equipment, 523 387 net Operating lease 700 347 right-of-use assets Long-term investments 4,835 5,555 Long-term financing 944 1,002 receivables, net Long-term deferred 667 586 contract costs Goodwill 22,010 4,567 Intangible assets, net 7,017 763 Deferred tax assets 2,443 2,424 Other assets 678 422 Total assets $ 48,460 $ 23,576 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 290 $ 232 Accrued compensation 1,048 608 Accrued and other 838 846 liabilities Deferred revenue 7,747 6,302 Total current liabilities 9,923 7,988 Long-term convertible 1,774 — senior notes Long-term deferred revenue 7,009 6,450 Deferred tax liabilities 251 89 Long-term operating lease 726 338 liabilities Other long-term 1,285 887 liabilities Total liabilities 20,968 15,752 Stockholders’ equity: Preferred stock — — Common stock and additional paid-in 24,772 5,292 capital Accumulated other comprehensive income -71 48 (loss) Retained earnings 2,791 2,484 Total stockholders’ equity 27,492 7,824 Total liabilities and stockholders’ $ 48,460 $ 23,576 equity
Full text with the tables
Exhibit 99.1
Palo Alto Networks Reports Fiscal Fourth Quarter and Fiscal Year 2026 Financial
Results
SANTA CLARA, Calif., Sept. 1, 2026
— Palo Alto Networks ® (NASDAQ: PANW), the global AI cybersecurity leader,
announced today financial results for its fiscal fourth quarter and fiscal year,
ended July 31, 2026.
"We delivered a strong Q4 to close out the year, adding nearly $1 billion of Net
New NGS ARR in a single quarter," said Nikesh Arora, chairman and chief
executive officer of Palo Alto Networks. "The latest advancements in AI are
elevating cybersecurity to the top of the CIO priority list, and will serve as
durable tailwinds as we progress towards our $20 billion FY30 NGS ARR target."
"We delivered a strong finish to a record year and exceeded our guidance across
the board, fueled by strength across our Network & AI Security, Cortex, and
Idira platforms," said Dipak Golechha, chief financial officer of Palo Alto
Networks. "Our profitable growth framework continues to scale effectively,
reinforcing our confidence in achieving 40% adjusted free cash flow margin in
FY28."
Fourth Quarter Fiscal 2026 Financial Highlights
• Total revenue for the fiscal fourth quarter 2026 grew 34% year over year to
$3.41 billion.
• Next-Generation Security ARR for the fiscal fourth quarter 2026 grew 63% year
over year to $9.10 billion.
• Remaining performance obligations grew 34% year over year to $21.2 billion.
• GAAP operating income for the fiscal fourth quarter 2026 was $172 million,
compared with GAAP operating income of $497 million for the fiscal fourth
quarter 2025. Non-GAAP operating income for the fiscal fourth quarter 2026 was
$1.0 billion, compared with non-GAAP operating income of $768 million for the
fiscal fourth quarter 2025. A reconciliation between GAAP and non-GAAP
information is contained in the tables below.
• GAAP net loss for the fiscal fourth quarter 2026 was $282 million, or ($0.35)
per diluted share, compared with GAAP net income of $254 million, or $0.36 per
diluted share, for the fiscal fourth quarter 2025. Non-GAAP net income for the
fiscal fourth quarter 2026 was $853 million, or $1.02 per diluted share,
compared with non-GAAP net income of $673 million, or $0.95 per diluted share,
for the fiscal fourth quarter 2025. A reconciliation between GAAP and non-GAAP
information is contained in the tables below.
• Net cash provided by operating activities for the fiscal fourth quarter 2026
was $1.4 billion, compared with net cash provided by operating activities of
$1.0 billion for the fiscal fourth quarter 2025. Adjusted free cash flow for
fiscal fourth quarter 2026 was $1.3 billion, compared with adjusted free cash
flow of $954 million for the fiscal fourth quarter 2025. Fiscal year 2026
adjusted free cash flow margin was 38.4%. A reconciliation between GAAP and non-
GAAP information is contained in the tables below.
Acquisition of Console
Palo Alto Networks has acquired Console, an AI-native platform that enables
agentic workflows across enterprise operations. Console will expand the role of
our Cortex platform across the broader enterprise agentic transformation.
Financial Outlook
Palo Alto Networks provides guidance based on current market conditions and
expectations.
For the fiscal first quarter 2027, we expect:
• Next-Generation Security ARR of $9.54 billion to $9.56 billion, representing
year-over-year growth of 63%.
• Remaining performance obligations of $20.8 billion to $20.9 billion,
representing year-over-year growth of 34% to 35%.
• Total revenue in the range of $3.300 billion to $3.310 billion, representing
year-over-year growth of 33% to 34%.
• Diluted non-GAAP net income per share in the range of $0.96 to $0.98, using
837 million to 844 million shares outstanding.
For the fiscal year 2027, we expect:
• Next-Generation Security ARR of $11.075 billion to $11.175 billion,
representing year-over-year growth of 22% to 23%.
• Remaining performance obligations of $25.2 billion to $25.4 billion,
representing year-over-year growth of 19% to 20%.
• Total revenue in the range of $14.10 billion to $14.20 billion, representing
year-over-year growth of 23% to 24%.
• Non-GAAP operating margin of 29.5%.
• Diluted non-GAAP net income per share in the range of $4.16 to $4.19, using
844 million to 847 million shares outstanding.
• Adjusted free cash flow margin to be 38.0%.
Guidance for non-GAAP financial measures excludes share-based compensation-
related charges, including share-based payroll tax expense, acquisition-related
costs, including change in fair value of contingent consideration liability,
amortization expense of acquired intangible assets, litigation-related charges,
non-cash charges related to convertible notes, change in fair value of
convertible senior notes and capped calls, and income tax and other tax
adjustments related to our long-term non-GAAP effective tax rate, along with
certain non-recurring expenses and certain non-recurring cash flows. We have not
reconciled non-GAAP operating margin guidance to GAAP operating margin, diluted
non-GAAP net income per share guidance to GAAP net income (loss) per diluted
share, or adjusted free cash flow margin guidance to GAAP net cash provided by
operating activities because we do not provide guidance on GAAP operating
margin, GAAP net income (loss) or net cash provided by operating activities and
would not be able to present the various reconciling cash and non-cash items
between GAAP and non-GAAP financial measures because certain items that impact
these measures are uncertain or out of our control, or cannot be reasonably
predicted, including share-based compensation expense, without unreasonable
effort. The actual amounts of such reconciling items will have a significant
impact on the company’s GAAP net income (loss) per diluted share, GAAP operating
margin and GAAP net cash provided by operating activities.
Earnings Call Information
Palo Alto Networks will host a video webcast for analysts and investors to
discuss the company’s fiscal fourth quarter and fiscal year 2026 results as well
as the outlook for its fiscal first quarter and fiscal year 2027 today at 4:30
p.m. Eastern time/1:30 p.m. Pacific time. Open to the public, investors may
access the webcast, supplemental financial information and earnings slides from
the "Investors" section of the company’s website at
investors.paloaltonetworks.com. A replay will be available three hours after the
conclusion of the webcast and archived for one year.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks,
uncertainties and assumptions including statements regarding our financial and
operating results and financial outlook for the fiscal first quarter 2027 and
fiscal year 2027. There are a significant number of factors that could cause
actual results to differ materially from forward-looking statements made or
implied in this press release, including: unfavorable economic and market
conditions and the uncertain geopolitical environment; our ability to
effectively manage future growth and improve our systems, processes, and
controls; our ability to maintain our revenue growth rate or profitability;
variability and seasonality in our operating results; our ability to sell new
and additional products, subscriptions, and support offerings to existing and
new customers; the delayed recognition of revenue from subscription and support
offerings; revenue volatility from consumption- or usage-based offerings and
customer usage optimization behavior; potential decreases in the sales prices of
our products, subscriptions, and support offerings; our reliance on channel
partners; credit and liquidity risk exposure; challenges associated with sales
to government entities; intense competition in our markets; risks associated
with the evolving definition of the identity security market; customer trends
toward vendor consolidation in cybersecurity; competition from cloud
infrastructure providers offering native security capabilities; risks related to
past and future acquisitions; our ability to predict, prepare for, and respond
to rapidly evolving technological and
market developments; the need to maintain a broad ecosystem of third-party
technology integrations; risks related to the development, deployment, or use of
AI, including AI agents as a new class of identity; the impact of network or
data security incidents; defects, errors, or vulnerabilities in our products and
subscriptions; reliance on customers to configure and use our products securely;
the quality of our technical support services; our ability to meet service-level
commitments; our reliance on data center facilities operated by third-party
cloud service providers; intellectual property claims and our ability to protect
proprietary rights; risks associated with open source software; our reliance on
third-party technology licenses; dependence on manufacturing partners and
limited sources of supply; our ability to attract, retain, and motivate key
personnel; risks associated with international sales and operations, including
export and import controls; fluctuations in foreign currency exchange rates;
risks associated with operations and employees located in Israel; costs and
risks related to compliance with privacy and data protection laws; potential tax
liabilities; risks related to estimates, judgments, and critical accounting
policies; our ability to maintain proper and effective internal control over
financial reporting; risks related to corporate responsibility matters; dilution
from issuance of additional common stock; risks related to our convertible
senior notes, including our ability to settle conversions, repurchase, or repay
such notes and the potential effect of capped call transactions.
Additional risks and uncertainties on these and other factors that could affect
our financial results and cause actual results to differ materially from those
described in the forward-looking statements we make in this press release are
included under the captions "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our annual reports
on Form 10-K and quarterly reports on Form 10-Q, which are available on our
website at investors.paloaltonetworks.com and on the SEC's website at
www.sec.gov. Additional information and risks and uncertainties will also be set
forth in other documents that we file with or furnish to the SEC from time to
time. All forward-looking statements in this press release are based on our
current beliefs and information available to management as of the date hereof
and are inherently uncertain, and we do not assume any obligation to update the
forward-looking statements provided to reflect events that occur or
circumstances that exist after the date on which they were made, except as
required by law.
Non-GAAP Financial Measures and Other Key Metrics
Palo Alto Networks has provided in this press release financial information that
has not been prepared in accordance with generally accepted accounting
principles in the United States (GAAP). The company uses these non-GAAP
financial measures and other key metrics internally in analyzing its financial
results and believes that the use of these non-GAAP financial measures and key
metrics are helpful to investors as an additional tool to evaluate ongoing
operating results and trends, and in comparing the company’s financial results
with other companies in its industry, many of which present similar non-GAAP
financial measures or key metrics.
The presentation of these non-GAAP financial measures and key metrics are not
meant to be considered in isolation or as a substitute for comparable GAAP
financial measures and should be read only in conjunction with the company’s
consolidated financial statements prepared in accordance with GAAP. A
reconciliation of the company’s historical non-GAAP financial measures to their
most directly comparable GAAP measures has been provided in the financial
statement tables included in this press release, and investors are encouraged to
review these reconciliations.
Non-GAAP operating income. Palo Alto Networks defines non-GAAP operating income
as operating income plus share-based compensation-related charges, including
share-based payroll tax expense, acquisition-related costs, including change in
fair value of contingent consideration liability, amortization expense of
acquired intangible assets, and litigation-related charges. The company believes
that non-GAAP operating income provides management and investors with greater
visibility into the underlying performance of the company’s core business
operating results.
Non-GAAP net income and net income per share, diluted. Palo Alto Networks
defines non-GAAP net income as net income (loss) plus share-based compensation-
related charges, including share-based payroll tax expense, acquisition-related
costs, including change in fair value of contingent consideration liability,
amortization expense of acquired intangible assets, litigation-related charges,
non-cash charges related to convertible notes, and change in fair value of
convertible senior notes and capped calls. The company also excludes from non-
GAAP income tax and other tax adjustments related to our long-term non-GAAP
effective tax rate in order to provide a complete picture of the company’s
recurring core business operating results. The company defines non-GAAP net
income per share, diluted, as non-GAAP net income divided by the weighted-
average diluted shares outstanding, which includes the potentially dilutive
effect of the company’s employee equity incentive plan awards and the company’s
convertible senior notes and related warrants, after giving effect to the anti-
dilutive impact of the company’s note hedge agreements and capped call
transactions, which reduced the potential economic dilution that otherwise would
have occurred in connection with the conversion and settlement of the company’s
convertible senior notes. Under GAAP, the anti-dilutive impact of the note hedge
or capped calls is not reflected in diluted shares outstanding. The company
considers these non-GAAP financial measures to be useful metrics for management
and investors for the same reasons that it uses non-GAAP operating income.
Adjusted free cash flow margin, adjusted free cash flow, and free cash flow.
Palo Alto Networks defines adjusted free cash flow margin, a non-GAAP measure,
as adjusted free cash flow divided by total revenue. The company defines
adjusted free cash flow, a non-GAAP measure, as free cash flow, plus certain
capital expenditures for our headquarters and certain corporate assets, plus
payments of acquisition-related costs, plus litigation-related payments. The
company defines free cash flow, a non-GAAP measure, as net cash provided by
operating activities less purchases of property, equipment, and other assets. We
consider free cash flow, adjusted free cash flow, and adjusted free cash flow
margin to be operating metrics as well as liquidity measures that provide useful
information to management and investors about the amount of cash generated by
the business after necessary capital expenditures and before the impact of
certain qualifying non-recurring cash payments from operating activities, as
applicable. A limitation of the utility of free cash flow or adjusted free cash
flow as a measure of our liquidity is that it does not represent the total
increase or decrease in our cash balance for the period. In addition, it is
important to note that other companies, including companies in our industry, may
not use free cash flow or adjusted free cash flow, may calculate free cash flow
or adjusted free cash flow in a different manner than we do, or may use other
financial measures to evaluate their liquidity, all of which could reduce the
usefulness of free cash flow or adjusted free cash flow as a comparative
measure.
Next-Generation Security ARR. Palo Alto Networks defines Next-Generation
Security ARR as the annualized allocated revenue of all active contracts as of
the final day of the reporting period related to all product, subscription and
support offerings, excluding revenue from hardware products, and legacy attached
subscriptions, support offerings and professional services. The company
considers Next-Generation Security ARR to be a useful operating metric for
management and investors to assess the performance of the company because Next-
Generation Security is where the company has focused its innovation and the
company expects its overall revenue to be disproportionately driven by this
Next-Generation Security portfolio. Because Next-Generation Security ARR does
not have the effect of providing a numerical measure that is different from any
comparable GAAP measure, the company does not consider it a non-GAAP measure.
Investors are cautioned that there are a number of limitations associated with
the use of non-GAAP financial measures and key metrics as analytical tools. Many
of the adjustments to the company’s GAAP financial measures reflect the
exclusion of items that are recurring and will be reflected in the company’s
financial results for the foreseeable future, such as share-based compensation,
which is an important part of Palo Alto Networks employees’ compensation and
impacts their performance. Furthermore, these non-GAAP financial measures are
not based on any standardized methodology prescribed by GAAP, and the components
that Palo Alto Networks excludes in its calculation of non-GAAP financial
measures may differ from the components that its peer companies exclude when
they report their non-GAAP results of operations. As a result, these non-GAAP
financial measures may not be directly comparable to similar non-GAAP financial
measures used by other companies. Palo Alto Networks compensates for these
limitations by providing specific information regarding the GAAP amounts
excluded from these non-GAAP financial measures. In the future, the company may
also exclude non-recurring expenses and other expenses that do not reflect the
company’s core business operating results.
About Palo Alto Networks
Palo Alto Networks® (NASDAQ: PANW), the global AI cybersecurity leader, protects
our digital way of life with a comprehensive portfolio of cybersecurity
solutions and platforms across Network, Cloud, Security Operations, AI and
Identity. Trusted by 70,000+ customers and powered by Unit 42 ® threat
intelligence, our AI-driven platforms eliminate complexity, empowering
enterprises to modernize with confidence and securing the speed of innovation.
Explore the future of security at www.paloaltonetworks.com.
Palo Alto Networks and the Palo Alto Networks logo are trademarks of Palo Alto
Networks, Inc. in the United States or in certain jurisdictions throughout the
world. All other trademarks, trade names, or service marks used or mentioned
herein belong to their respective owners. Any unreleased services or features
(and any services or features not generally available to customers) referenced
in this or other press releases or public statements are not currently available
(or are not yet generally available to customers) and may not be delivered when
expected or at all. Customers who purchase Palo Alto Networks applications
should make their purchase decisions based on services and features currently
generally available.
Media Contact:
Allie Cefalo Morales
VP, Global Communications, Palo Alto Networks
press@paloaltonetworks.com
Investor Relations Contact:
Ryan Fenwick
Director, Investor Relations & Strategic Finance, Palo Alto Networks
ir@paloaltonetworks.com
1
Palo
Alto
Networ…
Inc.
Prelim…
Conden…
Consol…
Statem…
of
Operat…
(In
millio…
except
per Three
share Months Year
data) Ended Ended
(Unaud… July 31, July 31,
Revenu… 2026 2025 2026 2025
──────────────────────────────────────────────────────────────────────────────
Product $ 738 $ 574 $ 2,280 $ 1,802
Subscr…
and 2,672 1,962 9,200 7,419
support
Total 3,410 2,536 11,480 9,221
revenue
Cost of
revenu…
Product 197 136 568 413
Subscr…
and 909 543 2,835 2,038
support
Total
cost of 1,106 679 3,403 2,451
revenue
Total
gross 2,304 1,857 8,077 6,770
profit
Operat…
expens…
Resear…
and 779 504 2,552 1,984
develo…
Sales
and 1,127 829 3,931 3,100
market…
General
and 226 27 899 443
admini…
Total
operat… 2,132 1,360 7,382 5,527
expens…
Operat… 172 497 695 1,243
income
Other
income -441 95 -159 353
(expen…
net
Income
(loss)
before -269 592 536 1,596
income
taxes
Provis…
for 13 338 229 462
income
taxes
Net
income $ -282 $ 254 $ 307 $ 1,134
(loss)
Net
income
(loss) $ -0.35 $ 0.38 $ 0.41 $ 1.71
per
share,
basic
Net
income
(loss) $ -0.35 $ 0.36 $ 0.40 $ 1.60
per
share,
diluted
Weight…
shares
used to
compute
net 817 669 749 663
income
(loss)
per
share,
basic
Weight…
shares
used to
compute
net 817 709 764 709
income
(loss)
per
share,
diluted
2
Palo
Alto
Networ…
Inc.
Reconc…
of GAAP
to
Non-GA…
Financ…
Measur…
(In
millio…
except
per
share
amount…
(Unaud…
Three Year
Months Ended
Ended
July 31, July 31,
2026 2025 2026 2025
GAAP
operat… $ 172 $ 497 $ 695 $ 1,243
income
Share-…
compen… 487 372 1,712 1,386
charges
Acquis… 68 -142 295 -110
costs(…
Amorti…
expense
of 281 37 638 164
acquir…
intang…
assets
Litiga… 3 4 16 -31
charge…
Non-GA…
operat… $ 1,011 $ 768 $ 3,356 $ 2,652
income
GAAP
net $ -282 $ 254 $ 307 $ 1,134
income
(loss)
Share-…
compen… 487 372 1,712 1,386
charges
Acquis… 68 -142 295 -110
costs(…
Amorti…
expense
of 281 37 638 164
acquir…
intang…
assets
Litiga… 3 4 16 -31
charge…
Change
in fair
value
of
conver… 524 — 562 1
senior
notes
and
capped
calls(…
Income
tax and
other -228 148 -599 -199
tax
adjust…
Non-GA…
net $ 853 $ 673 $ 2,931 $ 2,345
income
GAAP
net
income
(loss) $ -0.35 $ 0.36 $ 0.40 $ 1.60
per
share,
diluted
Share-…
compen… 0.59 0.53 2.23 1.98
charges
Acquis… 0.08 -0.20 0.39 -0.15
costs(…
Amorti…
expense
of 0.34 0.05 0.84 0.23
acquir…
intang…
assets
Litiga… 0.00 0.00 0.02 -0.04
charge…
Change
in fair
value
of
conver… 0.64 0.00 0.74 0.00
senior
notes
and
capped
calls(…
Income
tax and
other -0.28 0.21 -0.78 -0.28
tax
adjust…
Non-GA…
net
income $ 1.02 $ 0.95 $ 3.84 $ 3.34
per
share,
diluted
GAAP
weight…
shares
used to
compute
net 817 709 764 709
income
(loss)
per
share,
diluted
Weight…
diluti…
effect
of 16 — — —
potent…
diluti…
securi…
Weight…
anti-d…
impact
of
note
hedge -1 -2 — -7
agreem…
and
capped
call
transa…
Non-GA…
weight…
shares
used to
compute 832 707 764 702
net
income
per
share,
diluted
(1) Consists of acquisition transaction costs, share-based compensation related
to the cash settlement of certain equity awards, change in fair value of
contingent consideration liability, and costs to terminate certain employment,
operating lease, and other contracts of the acquired companies. During the three
months and fiscal year ended July 31, 2026, it also includes integration costs
related to our acquisition of CyberArk Software Ltd.
(2) Consists of the amortization of intellectual property licenses and covenant
not to sue, and legal contingency charges (credit). During the fiscal year ended
July 31, 2026, it also includes a litigation settlement charge.
(3) Consists of changes in fair value of convertible senior notes acquired from
CyberArk Software Ltd. that are included in earnings and changes in fair value
of the related capped calls. During the fiscal year ended July 31, 2025, it also
includes non-cash interest expense for amortization of debt issuance costs
related to our convertible senior notes.
(4) Consists of income tax adjustments related to our long-term non-GAAP
effective tax rate. During the three months and fiscal year ended July 31, 2025,
it included a one-time deferred tax provision adjustment relating to the
enactment of One Big Beautiful Bill.
(5) Consists of potentially dilutive effect of employee equity incentive plan
awards in periods with GAAP net loss position as they are excluded from GAAP
weighted-average shares.
3
Palo
Alto
Net…
Inc.
Rec…
of
GAAP
to
Non…
Fin…
Mea…
(Co…
(In
mil…
(Un…
Three Year
Mont… End…
Ended
July July
31, 31,
2026 2025 2026 2025
Net
cash
pro… $ 1,357 $ 1,021 $ 4,553 $ 3,7…
by
ope…
act…
Les…
pur…
of
pro… 103 87 440 247
equ…
and
oth…
ass…
Free
cash $ 1,254 $ 934 $ 4,113 $ 3,4…
flow
(no…
Add:
cap…
exp… — — 91 —
for
hea…
Add:
cap…
exp…
for 7 20 42 38
cer…
cor…
ass…
Add:
pay…
of 28 — 164 —
acq…
cos…
Add:
lit… — — 4 —
pay…
Adj…
free
cash $ 1,289 $ 954 $ 4,414 $ 3,5…
flow
(no…
Adj…
free
cash 37.8 % 37.6 % 38.4 % 38.0 %
flow
mar…
(no…
(1) Consists of a land purchase of $91 million.
(2) Consists of a one-time purchase of a corporate asset which was paid through
July 2026.
(3) Consists of payments of acquisition-related costs in connection with our
acquisitions of CyberArk Software Ltd. and Koi Security Ltd.
(4) Consists of a non-recurring litigation settlement payment during the three
months ended January 31, 2026.
4
Palo Alto Networks, Inc.
Preliminary Condensed
Consolidated Balance
Sheets
(In millions)
Assets July 31, 2026
Current assets: (unaudited) July 31, 2025
──────────────────────────────────────────────────────────────────────────────
Cash and cash equivalents $ 2,514 $ 2,269
Short-term investments 557 635
Accounts receivable, net 3,629 2,965
Short-term financing 592 715
receivables, net
Short-term deferred 544 419
contract costs
Prepaid expenses and other
current 807 520
assets
Total current assets 8,643 7,523
Property and equipment, 523 387
net
Operating lease 700 347
right-of-use assets
Long-term investments 4,835 5,555
Long-term financing 944 1,002
receivables, net
Long-term deferred 667 586
contract costs
Goodwill 22,010 4,567
Intangible assets, net 7,017 763
Deferred tax assets 2,443 2,424
Other assets 678 422
Total assets $ 48,460 $ 23,576
Liabilities and
stockholders’ equity
Current liabilities:
Accounts payable $ 290 $ 232
Accrued compensation 1,048 608
Accrued and other 838 846
liabilities
Deferred revenue 7,747 6,302
Total current liabilities 9,923 7,988
Long-term convertible 1,774 —
senior notes
Long-term deferred revenue 7,009 6,450
Deferred tax liabilities 251 89
Long-term operating lease 726 338
liabilities
Other long-term 1,285 887
liabilities
Total liabilities 20,968 15,752
Stockholders’ equity:
Preferred stock — —
Common stock and
additional paid-in 24,772 5,292
capital
Accumulated other
comprehensive income -71 48
(loss)
Retained earnings 2,791 2,484
Total stockholders’ equity 27,492 7,824
Total liabilities and
stockholders’ $ 48,460 $ 23,576
equity
5