Palo Alto Networks, Inc. is a cybersecurity company that empowers enterprises, organizations, service providers, and government entities to secure their users, networks, clouds, and endpoints through comprehensive cybersecurity solutions enabled by artificial intelligence and automation **[0001327567-24-000005_panw-20240131.htm:6]** **[0001327567-24-000040_panw-20241031.htm:4]** **[0001327567-24-000029_panw-20240731.htm:106]**. The company offers a range of products, including appliances, software licenses, and subscription services, to provide real-time access to security capabilities across various environments **[0001327567-24-000040_panw-20241031.htm:27]** **[0001327567-24-000029_panw-20240731.htm:78]** **[0001327567-24-000017_panw-20240430.htm:31]**. Palo Alto Networks also provides professional services such as incident response and risk management, and operates a two-tiered, indirect fulfillment model for sales through distributors and resellers **[0001327567-24-000029_panw-20240731.htm:78]** **[0001327567-24-000005_panw-20240131.htm:27]**.

1. **Subscription and Support Services** - Provide real-time access to security capabilities across networks, endpoints, and the cloud, often purchased alongside firewall appliances.
2. **Appliances** - Include the ML-Powered Next-Generation Firewall, which secures networks with advanced machine learning capabilities.
3. **Software Licenses** - Cover Panorama, SD-WAN, and the VM-Series, offering comprehensive management and security for various network environments.
4. **CN-Series Container Firewalls** - Secure containerized computing environments, ensuring protection across cloud-native applications.
5. **Professional Services** - Offer incident response and risk management to help organizations manage and mitigate cybersecurity threats.

a34f0f6a45c68f0fd3829ea8496910023f9bd4f443e0d381718c0e950c613cf9

Adjustments for Non-Cash Items [USD, Thousands]

Stock-Based Compensation [USD, Thousands]

Changes in Working Capital [USD, Thousands]

Capital Expenditures (CapEx) [USD, Thousands]

Proceeds from / Repayments of Debt [USD, Thousands]

Share Repurchases [USD, Thousands]

Dividend Payments [USD, Thousands]

Net Change in Cash [USD, Thousands]

55f70b70f546a20cb93cdd493587aed711d65100c4d4927542a6f10565598145

b7cb415cfe3ac0f8b1be12536d2d9a247ab6010f68690c1a92b781f5da0b7710

| Geographical Segment | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 |
|----------------------|---------|---------|---------|---------|---------|---------|---------|---------|
| **Americas (USD Million)** | **1,442.1**  **[0001327567-24-000040_panw-20241031.htm:6]**  | N/A | **1,359.6**  **[0001327567-24-000017_panw-20240430.htm:38]**  | **1,334.2**  **[0001327567-24-000005_panw-20240131.htm:34]**  | **1,286.6**  **[0001327567-23-000032_panw-20231031.htm:5]**  | N/A | **1,179.2**  **[0001327567-23-000014_panw-20230430.htm:32]**  | **1,117.0**  **[0001327567-23-000006_panw-20230131.htm:32]**  |
| **EMEA (USD Million)** | **441.4**  **[0001327567-24-000040_panw-20241031.htm:6]**  | N/A | **399.2**  **[0001327567-24-000017_panw-20240430.htm:38]**  | **406.8**  **[0001327567-24-000005_panw-20240131.htm:34]**  | **364.9**  **[0001327567-23-000032_panw-20231031.htm:5]**  | N/A | **332.1**  **[0001327567-23-000014_panw-20230430.htm:32]**  | **341.5**  **[0001327567-23-000006_panw-20230131.htm:32]**  |
| **APAC (USD Million)** | **255.3**  **[0001327567-24-000040_panw-20241031.htm:6]**  | N/A | **226.0**  **[0001327567-24-000017_panw-20240430.htm:38]**  | **234.1**  **[0001327567-24-000005_panw-20240131.htm:34]**  | **226.6**  **[0001327567-23-000032_panw-20231031.htm:5]**  | N/A | **209.6**  **[0001327567-23-000014_panw-20230430.htm:32]**  | **196.6**  **[0001327567-23-000006_panw-20230131.htm:32]**  |

e15ab543567b5c8732af2c6844b0a29f7c8ddd5ccacf8fb5f24da45d22f63153

| Metric (Unit) | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 |
|---------------|---------|---------|---------|---------|---------|---------|---------|---------|
| Percentage of Gross Accounts Receivable (%) | **52.2** **[0001327567-23-000006_panw-20230131.htm:78]** | **37.6** **[0001327567-23-000014_panw-20230430.htm:72]** | **31.5** **[0001327567-23-000032_panw-20231031.htm:51]** | **31.5** **[0001327567-23-000032_panw-20231031.htm:51]** | **46.6** **[0001327567-24-000005_panw-20240131.htm:58]** | **37.1** **[0001327567-24-000017_panw-20240430.htm:62]** | **31.5** **[0001327567-24-000029_panw-20240731.htm:107]** | **37.8** **[0001327567-24-000040_panw-20241031.htm:57]** |

1777058e1eb552d084f359b29ab613ec949cd02dcff6034530bdd5e17f5ff034

| Metric [USD Million] | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 |
|----------------------|---------|---------|---------|---------|---------|---------|---------|---------|
| Product Revenue      | **353.8**  **[0001327567-24-000040_panw-20241031.htm:27]**  | **480.5**  **[0001327567-24-000023_ex991q424earningsrelease.htm:6]**  | **391.0**  **[0001327567-24-000017_panw-20240430.htm:31]**  | **390.7**  **[0001327567-24-000005_panw-20240131.htm:27]**  | **341.1**  **[0001327567-23-000032_panw-20231031.htm:22]**  | N/A | **388.1**  **[PANW_3252755_7]**  | **352.9**  **[0001327567-23-000006_panw-20230131.htm:26]**  |
| Subscription & Support Revenue | **1,800.0**  **[0001327567-24-000040_panw-20241031.htm:28]**  | **1,709.0**  **[0001327567-24-000023_ex991q424earningsrelease.htm:6]**  | **1,593.8**  **[0001327567-24-000017_panw-20240430.htm:31]**  | **1,584.4**  **[0001327567-24-000005_panw-20240131.htm:27]**  | **1,537.0**  **[0001327567-23-000032_panw-20231031.htm:22]**  | N/A | **1,332.8**  **[PANW_3252755_7]**  | **1,300.0**  **[0001327567-23-000006_panw-20230131.htm:26]**  |
| Total Revenue        | **2,153.8**  **[0001327567-24-000040_panw-20241031.htm:27]**  | **2,189.5**  **[0001327567-24-000023_ex991q424earningsrelease.htm:6]**  | **1,984.8**  **[0001327567-24-000017_panw-20240430.htm:31]**  | **1,975.0**  **[0001327567-24-000005_panw-20240131.htm:27]**  | **1,878.0**  **[0001327567-23-000032_panw-20231031.htm:22]**  | N/A | **1,720.0**  **[PANW_3252755_7]**  | **1,660.0**  **[0001327567-23-000006_panw-20230131.htm:26]**  |

29eeb851d0a38b9a12154611d54605ab1bd02562715eebb82fbf21fbe07c7cfe

0fb89890cf16191cfbc17dd5bc0e88685fc056f00ee1f9eb8130f80d5b5d8bad

1. With your contract lengths remaining roughly consistent at three years, what implications do you see on free cash flow generation in both the short term and long term, and how might this affect your free cash flow margins?  **[PANW_3399478_17]** 

2. Given the shift towards RPO and ARR guidance and your expectation of a mix more towards annualized billings and away from financing, how do you anticipate this will impact your financial metrics, especially regarding operating margins and cash flow?  **[PANW_3399478_19]** 

3. Considering the potential uncertainties with the upcoming U.S. elections and their impact on federal budgets, how are you adjusting your expectations and strategies for your U.S. federal business in the coming quarters?  **[PANW_3399478_20]** 

4. Despite the acceleration in XSIAM bookings and the growth of your Cortex business to over $900 million in ARR, what challenges do you foresee in maintaining this growth trajectory, and how do you plan to address competition in the security operations platform market?  **[PANW_3399478_5]** 

5. As you implement AI to drive operating efficiencies within your own operations, what specific obstacles have you encountered, and how do you plan to overcome them to fully realize the potential cost savings and productivity gains?  **[PANW_3399478_15]** 

ab3647fea80a78a195f9ce521816c292d2476aaf817a920680665533b4ab0594

510685d69a3433b2c5b51b0a2ce89f13a357b4d64fcc43b29e12fb0af184de90

- Cisco Systems, Inc. ("Cisco") - Large company incorporating security features in their products  **[0001327567-24-000029_panw-20240731.htm:16]** .
- Microsoft - Large company incorporating security features in their products  **[0001327567-24-000029_panw-20240731.htm:16]** .
- Alphabet - Large company incorporating security features in their products  **[0001327567-24-000029_panw-20240731.htm:16]** .
- Check Point Software Technologies Ltd. ("Check Point") - Independent security vendor offering a mix of security products  **[0001327567-24-000029_panw-20240731.htm:16]** .
- Fortinet, Inc. ("Fortinet") - Independent security vendor offering a mix of security products  **[0001327567-24-000029_panw-20240731.htm:16]** .
- CrowdStrike Holdings, Inc. ("CrowdStrike") - Independent security vendor offering a mix of security products  **[0001327567-24-000029_panw-20240731.htm:16]** .
- Zscaler, Inc. ("Zscaler") - Independent security vendor offering a mix of security products  **[0001327567-24-000029_panw-20240731.htm:16]** .
- Wiz, Inc. ("Wiz") - Independent security vendor offering a mix of security products  **[0001327567-24-000029_panw-20240731.htm:16]** .

5c9a64668bd6be1afa0bb81f14364e76f56adfa5c57e53a4dba2b746c2c88a77

Americas

- United States

- Other Americas

EMEA

APAC

Total Revenue

842a0fbd47b699459cadb7ccf8df8881ad03a478a6e6ec2b616843102f9bb08c

**Quarterly guidance for Q1 2025:**
- **NGS ARR**: $4.33B to $4.38B  **[PANW_3399478_10]**  (no change from prior guidance   )  
- **RPO**: $12.4B to $12.5B  **[PANW_3399478_10]**  (no change from prior guidance   )  
- **Revenue**: $2.10B to $2.13B  **[PANW_3399478_10]**  (no change from prior guidance   )  
- **Non-GAAP EPS**: $1.47 to $1.49  **[PANW_3399478_10]**  (no change from prior guidance   )

7cab4e1012227ebb40692cd73304032114ae23143ed7c3d5a5ccaaef0dc81700

### Q1 2025 Earnings Call
- **Issued Period**: Q1 2025
- **Guided Period**: FY 2025 and Q1 2025
- **Guidance**:
  - **NGS ARR**: $4.33 billion to $4.38 billion, increase of 34% to 36%  **[PANW_3399478_10]** .
  - **Remaining Performance Obligation (RPO)**: $12.4 billion to $12.5 billion, increase of 19% to 20%  **[PANW_3399478_10]** .
  - **Revenue**: $2.10 billion to $2.13 billion, increase of 12% to 13%  **[PANW_3399478_10]** .
  - **Non-GAAP EPS**: $1.47 to $1.49, increase of 7% to 8%  **[PANW_3399478_10]** .

### Q4 2024 Earnings Call
- **Issued Period**: Q4 2024
- **Guided Period**: FY 2025 and Q1 2025
- **Guidance**:
  - **Fiscal Year 2025**:
    - **NGS ARR**: $5.42 billion to $5.47 billion, increase of 28% to 30%  **[PANW_3399478_10]** .
    - **RPO**: $15.2 billion to $15.3 billion, increase of 19% to 20%  **[PANW_3399478_10]** .
    - **Revenue**: $9.10 billion to $9.15 billion, increase of 13% to 14%  **[PANW_3399478_10]** .
    - **Operating Margins**: 27.5% to 28%  **[PANW_3399478_10]** .
    - **Non-GAAP EPS**: $6.18 to $6.31, increase of 9% to 11%  **[PANW_3399478_10]** .
    - **Adjusted Free Cash Flow Margin**: 37% to 38%  **[PANW_3399478_10]** .
  - **First Fiscal Quarter of 2025**:
    - **NGS ARR**: $4.33 billion to $4.38 billion, increase of 34% to 36%  **[PANW_3399478_10]** .
    - **RPO**: $12.4 billion to $12.5 billion, increase of 19% to 20%  **[PANW_3399478_10]** .
    - **Revenue**: $2.10 billion to $2.13 billion, increase of 12% to 13%  **[PANW_3399478_10]** .
    - **Non-GAAP EPS**: $1.47 to $1.49, increase of 7% to 8%  **[PANW_3399478_10]** .

### Q3 2024 Earnings Call
- **Issued Period**: Q3 2024
- **Guided Period**: Q4 2024 and FY 2024
- **Guidance**:
  - **Q4 2024**:
    - **Billings**: $3.43 billion to $3.48 billion, increase of 9% to 10%  **[PANW_3390029_8]** .
    - **Revenue**: $2.15 billion to $2.17 billion, increase of 10% to 11%  **[PANW_3390029_8]** .
    - **Non-GAAP EPS**: $1.40 to $1.42, decrease of 1% to 3%  **[PANW_3390029_8]** .
  - **Fiscal Year 2024**:
    - **Billings**: $10.3 billion to $10.18 billion, increase of 10% to 11%  **[PANW_3390029_8]** .
    - **NGS ARR**: $4.05 billion to $4.10 billion, increase of 37% to 39%  **[PANW_3390029_8]** .
    - **Revenue**: $7.99 billion to $8.1 billion, increase of 16%  **[PANW_3390029_8]** .
    - **Operating Margins**: 26.8% to 27.0%, increase of 270 to 290 basis points year-over-year  **[PANW_3390029_8]** .
    - **Non-GAAP EPS**: $5.56 to $5.58, increase of 25% to 26%  **[PANW_3390029_9]** .
    - **Adjusted Free Cash Flow Margin**: 38.5% to 39%  **[PANW_3390029_9]** .

### Q2 2024 Earnings Call
- **Issued Period**: Q2 2024
- **Guided Period**: Q3 2024 and FY 2024
- **Guidance**:
  - **Fiscal Year 2024**:
    - **Billings**: $10.10 billion to $10.20 billion, increase of 10% to 11%  **[PANW_3374053_11]** .
    - **NGS ARR**: $3.95 billion to $4 billion, increase of 34% to 35%  **[PANW_3374053_11]** .
    - **Revenue**: $7.95 billion to $8 billion, increase of 15% to 16%  **[PANW_3374053_11]** .
    - **Operating Margins**: 26.5% to 27%, increase of 240 to 290 basis points year-over-year  **[PANW_3374053_11]** .
    - **Non-GAAP EPS**: $5.45 to $5.55, increase of 23% to 25%  **[PANW_3374053_11]** .
    - **Adjusted Free Cash Flow Margin**: 38% to 39%  **[PANW_3374053_11]** .
  - **Q3 2024**:
    - **Billings**: $2.30 billion to $2.35 billion, increase of 2% to 4%  **[PANW_3374053_10]** .
    - **Revenue**: $1.95 billion to $1.98 billion, increase of 13% to 15%  **[PANW_3374053_10]** .
    - **Non-GAAP EPS**: $1.24 to $1.26, increase of 13% to 15%  **[PANW_3374053_10]** .

e323d2efdeea956e2c901a505dafaf172bd79809adc9f81211d0008d0a1a5cf2

Percentage of Gross Accounts Receivable (%)

885279c8782d0587e3e25482f10621881170f438fb263c2ee7e9d326a50e0b13

Product

Subscription and Support

Services

- Subscription

- Support

- Support and Maintenance

20d391654698c24d4c4a00f9fa7f869f1d56fd7e02ebf4b83d2fbeea3b6e9a99

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

| Name            | Position                          | Start Date | Short Bio                                                                                                                                                                                                                                                                                                                                 |
|-----------------|-----------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Nikesh Arora    | Chief Executive Officer and Chairman | June 2018  | Nikesh Arora has been the CEO and Chairman of Palo Alto Networks since June 2018. Previously, he was an angel investor and advisor to SoftBank Group Corp. He held leadership roles at SoftBank and Google, Inc. He holds degrees in Business Administration, Finance, and Electrical Engineering  **[0001308179-24-000770_panw4345341-def14a.htm:72]** **[0001308179-24-000770_panw4345341-def14a.htm:181]** **[0001308179-23-001049_panw4225281-def14a.htm:45]** .                                    |
| Dipak Golechha  | Chief Financial Officer            | March 2021 | Dipak Golechha became the CFO of Palo Alto Networks in March 2021. He joined the company in December 2020 as Senior Vice President, Finance. His past roles include senior advisor at Boston Consulting Group and President and CEO of Excelligence Learning Corporation. He holds degrees in Economics from Cambridge University  **[0001308179-24-000770_panw4345341-def14a.htm:181]** **[0001308179-23-001049_panw4225281-def14a.htm:122]** **[0001206774-22-002637_panw4099631-def14a.htm:118]** . |
| William "BJ" Jenkins | President                        | August 2021 | William "BJ" Jenkins has been the President of Palo Alto Networks since August 2021. Before this, he was the President and CEO of Barracuda Networks, Inc. He also held leadership roles at EMC Corporation. He holds an engineering degree from the University of Illinois and an M.B.A. from Harvard Business School  **[0001308179-23-001049_panw4225281-def14a.htm:122]** **[0001308179-24-000770_panw4345341-def14a.htm:181]** .                  |
| Lee Klarich     | Chief Product Officer              | August 2017 | Lee Klarich has served as the Chief Product Officer since August 2017. He previously held various product management roles at Palo Alto Networks and worked at NetScreen Technologies, Juniper Networks, Excite@Home, and Packard Bell-NEC. He holds a Bachelor of Science degree in Engineering from Cornell University  **[0001308179-24-000770_panw4345341-def14a.htm:181]** **[0001308179-23-001049_panw4225281-def14a.htm:122]** .               |
| Nir Zuk         | Chief Technology Officer and Director | March 2005 | Nir Zuk is a co-founder of Palo Alto Networks and has been the CTO and a Director since March 2005. He was previously the Chief Security Technologist at Juniper Networks and CTO at NetScreen Technologies. He co-founded OneSecure, Inc. and worked at Check Point Software Technologies Ltd. He studied Mathematics at Tel Aviv University  **[0001308179-24-000770_panw4345341-def14a.htm:69]** **[0001308179-24-000770_panw4345341-def14a.htm:181]** **[0001308179-23-001049_panw4225281-def14a.htm:53]** . |

05ec94af5693f660b7d064f03ee593263a4b1f091a9d5d188b21f41e3bc74153

| Program Details            | Program 1       | Program 2       | Program 3       | Program 4       | Program 5       |
|----------------------------|-----------------|-----------------|-----------------|-----------------|-----------------|
| Approval Date              | February 2019   | December 2020   | August 2021     | August 2022     | November 2023   |
| End Date/Duration          | December 31, 2025 | N/A             | N/A             | N/A             | N/A             |
| Total Additional Amount ($) | **1.0 billion**  **[0001327567-24-000040_panw-20241031.htm:18]** **[0001327567-24-000040_panw-20241031.htm:39]** **[0001327567-24-000040_panw-20241031.htm:89]** **[0001327567-24-000040_panw-20241031.htm:86]**  | **700.0 million**  **[0001327567-24-000040_panw-20241031.htm:18]** **[0001327567-24-000040_panw-20241031.htm:39]** **[0001327567-24-000040_panw-20241031.htm:89]** **[0001327567-24-000040_panw-20241031.htm:86]**  | **676.1 million**  **[0001327567-24-000040_panw-20241031.htm:18]** **[0001327567-24-000040_panw-20241031.htm:39]** **[0001327567-24-000040_panw-20241031.htm:89]** **[0001327567-24-000040_panw-20241031.htm:86]**  | **915.0 million**  **[0001327567-24-000040_panw-20241031.htm:18]** **[0001327567-24-000040_panw-20241031.htm:39]** **[0001327567-24-000040_panw-20241031.htm:89]** **[0001327567-24-000040_panw-20241031.htm:86]**  | **316.7 million**  **[0001327567-24-000040_panw-20241031.htm:18]** **[0001327567-24-000040_panw-20241031.htm:39]** **[0001327567-24-000040_panw-20241031.htm:89]** **[0001327567-24-000040_panw-20241031.htm:86]**  |
| Remaining Authorization ($) | **0.0**  **[0001327567-24-000040_panw-20241031.htm:18]** **[0001327567-24-000040_panw-20241031.htm:39]** **[0001327567-24-000040_panw-20241031.htm:89]** **[0001327567-24-000040_panw-20241031.htm:86]**  | **0.0**  **[0001327567-24-000040_panw-20241031.htm:18]** **[0001327567-24-000040_panw-20241031.htm:39]** **[0001327567-24-000040_panw-20241031.htm:89]** **[0001327567-24-000040_panw-20241031.htm:86]**  | **0.0**  **[0001327567-24-000040_panw-20241031.htm:18]** **[0001327567-24-000040_panw-20241031.htm:39]** **[0001327567-24-000040_panw-20241031.htm:89]** **[0001327567-24-000040_panw-20241031.htm:86]**  | **0.0**  **[0001327567-24-000040_panw-20241031.htm:18]** **[0001327567-24-000040_panw-20241031.htm:39]** **[0001327567-24-000040_panw-20241031.htm:89]** **[0001327567-24-000040_panw-20241031.htm:86]**  | **1.0 billion**  **[0001327567-24-000040_panw-20241031.htm:18]** **[0001327567-24-000040_panw-20241031.htm:39]** **[0001327567-24-000040_panw-20241031.htm:89]** **[0001327567-24-000040_panw-20241031.htm:86]**  |
| Details                    | May be suspended or discontinued at any time without prior notice  **[0001327567-24-000040_panw-20241031.htm:18]** **[0001327567-24-000040_panw-20241031.htm:39]** **[0001327567-24-000040_panw-20241031.htm:89]** **[0001327567-24-000040_panw-20241031.htm:86]**  | N/A | N/A | N/A | N/A |

b41920756735df5c393474105c1662b8229dd6fb959966ff104ad223a56b1555

| Name               | Start Date | End Date | Reason for Change |
|--------------------|------------|----------|-------------------|
| Ernst & Young LLP | 2009       | Present  | Current auditor   |
```
Start Date: Ernst & Young LLP has served as the auditor of Palo Alto Networks, Inc. since 2009.  **[0001327567-24-000029_panw-20240731.htm:100]**

df14707abb235ccfa1f616f5e62014bd3ec97bd14785f8d1191d32107a7a2b38

3cb9132ab8b011afcd70a3e88f5f1089e87800326de8dcfa9292a72a236d9b47

- Total Revenue: $2,138.8 million (+14% YoY)  **[0001327567-24-000040_panw-20241031.htm:6]** **[0001327567-23-000032_panw-20231031.htm:5]**   
- Subscription & Support Revenue: $1,785.0 million (+16% YoY)  **[0001327567-24-000040_panw-20241031.htm:28]** **[0001327567-24-000040_panw-20241031.htm:32]** **[0001327567-23-000032_panw-20231031.htm:27]**   
- EMEA Revenue: $441.4 million (**+21%** YoY)  **[0001327567-24-000040_panw-20241031.htm:6]** **[0001327567-23-000032_panw-20231031.htm:5]**   
- Net Income: $350.7 million (**+80%** YoY)  **[0001327567-24-000040_panw-20241031.htm:2]** **[0001327567-23-000032_panw-20231031.htm:2]**   
- Net Change in Cash: $746.1 million (−45% YoY)  **[0001327567-24-000040_panw-20241031.htm:4]** **[0001327567-24-000040_panw-20241031.htm:3]** **[0001327567-24-000040_panw-20241031.htm:2]** **[0001327567-23-000032_panw-20231031.htm:4]**   

4786bfdb55e36caa107219b084b1cf0363b5f5a646bfcf23f5dfa3351003d962

Next-Generation Security Annualized Recurring Revenue (USD billions)

30eb38a6befccacc7a93028a561179350c232ec4c0e5c1206b69bb2bec34b11a

4dd1dc117db9a46ca6c37dc008b73ca2504f6c997256c0cb6bdb2ea75a4cbbf9

1. **Billings Guidance and Platformization Impact**  
   **Q:** Why was there a cut in billings guidance?  
   **A:** Management explained that the billings guidance was impacted by their new platformization initiatives, which include offering up to **six months of free product capabilities** to customers as they adopt Palo Alto's comprehensive platform. This strategy aims to accelerate customer consolidation but results in short-term billings deferrals. They expect growth rates to return in about **12 months** as these offers start to lap, and they suggest focusing on **RPO (Remaining Performance Obligations)** as a more accurate metric.  **[PANW_3374053_12]** **[PANW_3374053_13]** **[PANW_3374053_15]** **[PANW_3374053_20]** 

2. **Federal Spending Softness**  
   **Q:** Why is U.S. federal spending soft?  
   **A:** A specific large federal program did not materialize as expected, impacting revenue and billings. Management is cautious about federal spending in the next six months, noting that the federal sector is generally slower to adopt next-generation security solutions and pays on an annualized basis, affecting revenue recognition.  **[PANW_3374053_14]** 

3. **Platformization Strategy and Revenue Growth**  
   **Q:** How will the platformization strategy affect future growth?  
   **A:** The platformization approach aims to drive customer consolidation onto Palo Alto's platform, improving win rates and deal sizes. While this strategy results in short-term billing impacts due to free initial periods, management expects it to double the business over the next **3–5 years** and return to mid- to high double-digit billings growth in the second half of FY25.  **[PANW_3374053_16]** **[PANW_3374053_17]** **[PANW_3374053_18]** **[PANW_3374053_19]** **[PANW_3374053_21]** **[PANW_3374053_23]** 

4. **Maintaining Free Cash Flow Margins**  
   **Q:** Can free cash flow margins be maintained despite the strategy change?  
   **A:** Management is confident in maintaining free cash flow margins due to increasing operating margins and optimization of factors like vendor payment terms. They have maintained their absolute free cash flow guidance for the year and expect margins to hold into next year.  **[PANW_3374053_20]** **[PANW_3374053_24]** 

5. **Competitive Environment and Discounting**  
   **Q:** Is the competitive environment affecting pricing or win rates?  
   **A:** Management does not view their strategy as initiating a price war but rather avoiding one by offering a compelling platform that provides better ROI for customers. They emphasize that the exit ARR remains consistent, and they are confident in their competitive position, seeing the platformization as a strategic move, not a short-term hiccup.  **[PANW_3374053_22]** **[PANW_3374053_25]** 

6. **Channel and SI Alignment**  
   **Q:** How are partners incentivized under the new strategy?  
   **A:** Channel partners are compensated based on TCV, benefiting from larger deal sizes associated with platform deals. Systems Integrators (SIs) are key to the platform approach, preferring to partner with larger players and generating more services revenue through platform offerings.  **[PANW_3374053_23]** 

7. **XSIAM Adoption and Displacement**  
   **Q:** What progress is there with XSIAM adoption?  
   **A:** XSIAM has displaced **19** unique SIEM vendors and gained over **65** customers in nine months. The company is launching offers to replace legacy endpoints, aiming to become the SOC of choice by providing a superior, AI-driven solution.  **[PANW_3374053_21]** 

d413a37ca601e6c12e4b5b269936b98f8c708f1ba9bf02c4d9f6bf33c92686b6

- The company's new bundling strategy could **cannibalize existing customers who are willing to pay full price today**, potentially reducing overall revenue from these customers.  **[PANW_3374053_16]**
- Their increased aggressiveness on discounting to drive platform adoption may lead to **revenue and margin pressures**, as analysts express concerns about the impact of discounting on profitability.  **[PANW_3374053_19]** ,  **[PANW_3374053_23]**
- The company is **not providing guidance for the next fiscal year**, creating uncertainty about maintaining margin targets and future financial performance.  **[PANW_3374053_25]**

7b9b06b42e2f51c7b698bc4eb3d1cab5e769119269e846143a40abf62fd3273b

- The company's aggressive **platformization strategy** is expected to result in **lower billings and, to a lesser degree, revenue** over the next **12 to 18 months**, impacting financial performance **through fiscal year 2025**.  **[PANW_3390029_8]** ,  **[PANW_3390029_10]**
- Increasing **deferred payment terms**, with customers opting for **annual billings instead of upfront payments**, could affect **free cash flow margins** and add uncertainty to short-term cash flows. The company acknowledges this shift may continue and needs careful management to maintain margins.  **[PANW_3390029_15]** ,  **[PANW_3390029_22]**
- The **pressure on financial metrics** due to platformization efforts is anticipated to persist until at least the **end of Q2 next year**, indicating a prolonged period of adjustment that could impact **visibility and predictability** of financial results in the near term.  **[PANW_3390029_10]**

e72e904683bc41b1a94e8ab99e33c3149546a22fd230e83decf40261e9f7ca39

- **Strong growth and customer interest in AI-driven security products:** Palo Alto Networks' XSIAM product achieved approximately **$500 million in bookings in FY '24**, more than doubling from the previous year. Additionally, over **1,000 customers** have shown interest in their new AI Access offering, signaling significant potential for future growth in AI security.  **[PANW_3399478_12]**
- **Successful platformization strategy leading to increased ARR:** The company added over **90 new platformizations** in Q4, bringing the total to well over **1,000 platformized customers** among its largest 5,000 customers. The average ARR per platformized customer is up over **10%** since Q1, demonstrating the effectiveness of this strategy in driving growth.  **[PANW_3399478_11]**
- **Effective internal use of AI driving operational efficiencies:** By implementing AI internally, Palo Alto Networks has reduced headcount in certain operations by **50%**, and some of its best developers are now **40% more productive**. This enhances operational efficiency and competitiveness.  **[PANW_3399478_15]**

2cdf6dbb7e0519da47dfe73e7dfef726107edecdf202b7e4207c80e940de1b3a

- **Strong Customer Interest and Monetization of AI Capabilities**: PANW is seeing significant customer adoption of their AI-enabled services, with the **majority of customers opting into capabilities that increase prices from 20% to 30% of firewall cost**, indicating potential for increased revenue per customer.  **[PANW_3390029_24]**
- **Competitive Advantage through Native Cloud Integrations**: PANW is **likely the only security vendor with native integration with AWS, Azure, GCP, and Oracle in their public clouds**, positioning them uniquely to capture market share in securing AI applications across multi-cloud environments.  **[PANW_3390029_25]**
- **Robust Pipeline and Expected Growth in Q4**: PANW has a **strong pipeline heading into their largest quarter**, with management expressing **conviction in converting this pipeline into business**, indicating expectations for continued growth.  **[PANW_3390029_12]**

8719ead55629975ab127f995857885e99464cf7c030721bf74404cbc8f2511ab

- **Intense competition is causing pricing pressure**, as competitors are willing to "do whatever it takes" to dislodge Palo Alto Networks' platforms, which can negatively impact margins.  **[PANW_3367186_16]**
- **Some product pillars are reaching maturity**, suggesting that future growth may be limited in these more penetrated areas, and the company relies on newer products like SASE and XSIAM for upside.  **[PANW_3367186_14]**
- **Pressure on billings growth due to customer payment terms**, with customers requesting deferred payments and financing options because of the higher cost of money, which could impact future billings forecasts.  **[PANW_3367186_9]**

907acac70fa4e13fc4d12fd2621e861fcb83774cdcefd00ccbaa0bdf4343dc30

| Year  | Amount Due (Millions) | Debt Type                  | Interest Rate (%) | % of Total Debt                     |
|-------|------------------------|---------------------------|-------------------|--------------------------------------|
| 2025  | 646.6                 | Convertible Senior Notes  | 0.375             | 100% = (646.6 / 646.6) * 100 **[0001327567-24-000040_panw-20241031.htm:39]** **[0001327567-24-000040_panw-20241031.htm:13]** |

17698e753e96d350a1145b927e82ac3fd12ee7b74119e99ace4852fdf62259ea

1. **Strong Guidance Amid Industry Tepidness**  
   **Q:** How is PANW defying tepid industry guidance?  
   **A:** Despite broader industry caution, PANW guides for accelerations in RPO and strong ARR, attributing this to their **unique platformization strategy** and robust product portfolio. They cite a strong pipeline bolstered by recent acquisitions and a proven forecasting process, implying their strategy is enabling them to outperform peers.  **[PANW_3409588_14]** 

2. **NGS ARR Growth and QRadar Impact**  
   **Q:** What's driving changes in NGS ARR growth?  
   **A:** NGS ARR growth was above guidance but showed a year-over-year decline due to lapping advanced cloud subscriptions from last year. The peak inorganic NGS ARR this quarter was **$74 million** from the IBM QRadar acquisition, with expectations to migrate about **half** to PANW by year-end. The remaining half will stay on QRadar through the fiscal year.  **[PANW_3409588_18]** **[PANW_3409588_18]** **[PANW_3409588_18]** **[PANW_3409588_18]** **[PANW_3409588_18]** **[PANW_3409588_19]** 

3. **SIM Replacement Opportunity**  
   **Q:** How will PANW capitalize on SIM market upheaval?  
   **A:** PANW sees the SIM market, worth **$20 billion**, entering a replacement cycle due to outdated technologies. They believe their XSIAM platform is positioned to capture significant market share, expecting to become a top 3 SIM player in the next two years by offering better security outcomes and cost savings.  **[PANW_3409588_15]** 

4. **Platformization's Impact on Margins**  
   **Q:** How does platformization affect margins long-term?  
   **A:** Platformization improves margins through lower cost of sales, as larger deals reduce sales efforts. Additionally, margins benefit from steady COGS due to favorable cloud provider deals and reduced customer support costs via automation, enhancing overall profitability.  **[PANW_3409588_9]** 

5. **Competitors' Hardware Refresh Cycles**  
   **Q:** How do competitors' refreshes impact PANW's opportunity?  
   **A:** Competitors' hardware refresh cycles present an opportunity for PANW to displace them. PANW expects steady hardware growth and increasing market share, as customers prefer their integrated management interface, aiding in gradually capturing more hardware firewall market share.  **[PANW_3409588_11]** **[PANW_3409588_11]** **[PANW_3409588_11]** 

6. **Data Security and Secure Browser Strategy**  
   **Q:** What's PANW's approach to data security evolution?  
   **A:** PANW enhances data classification across all data locations, integrating with their Prisma Access browser to secure user interactions with data. Early adopters find it effective as a next-gen data security component, and PANW sees this expanding to all users and devices for comprehensive data protection.  **[PANW_3409588_17]** 

7. **Platformization Go-to-Market Success Factors**  
   **Q:** What's resonating most in platformization strategy?  
   **A:** Eliminating execution risk is key; customers appreciate phased deployments where they can start using PANW's solutions now and pay after phasing out the previous vendor. This approach reduces risk and aligns with customers' transformation goals, facilitating broader adoption of PANW's platform.  **[PANW_3409588_16]** 

8. **Early View into 2025 and Macro Factors**  
   **Q:** How are macro factors influencing the 2025 outlook?  
   **A:** PANW sees AI as the biggest driver in the next 12–48 months, with increasing cyber threats leading to higher security spending. While consolidation remains a trend, they're finding success with top-down motions and partnerships. Potential regulatory changes from a new administration are acknowledged but seen as increasing risk and, consequently, security needs.  **[PANW_3409588_12]** 

9. **Cortex and Cloud Integration**  
   **Q:** How does integrating Cortex and cloud improve positioning?  
   **A:** By connecting Prisma Cloud with Cortex, PANW offers end-to-end cloud security, leveraging data from posture management and real-time security for better protection and remediation. This integrated approach differentiates them across all segments and enhances competitive positioning.  **[PANW_3409588_13]** **[PANW_3409588_13]** **[PANW_3409588_13]** 

10. **Prisma SASE Growth and Competition**  
    **Q:** Is Prisma SASE growth coming at competitors' expense?  
    **A:** Yes, new Prisma SASE customers include those replacing competitors' solutions and those transforming their networks. **40%** are net new logos to PANW, indicating significant competitive wins and expansion in the SASE market, solidifying PANW's position among the top three players.  **[PANW_3409588_19]** 

11. **Contract Duration and Renewals**  
    **Q:** Are contract lengths increasing with platform adoption?  
    **A:** While some customers opt for longer durations when adopting platforms like XSIAM, others prefer shorter terms to stay agile for future innovations. Overall, contract durations have trended slightly upward but without significant change.  **[PANW_3409588_21]** 

12. **Migrating QRadar On-Prem Customers**  
    **Q:** What's the strategy for on-prem QRadar customers?  
    **A:** PANW is proactively reaching out to the top 500 QRadar customers, including on-prem users, aiming to migrate them to XSIAM. Collaborating with IBM, they're supporting customers through migration, expecting this effort to position PANW among the top SIM providers within two years.  **[PANW_3409588_20]** 

db616d056b5f4181524f17e14189385c58fb3ec4771b38e4296a6a5cf063080f

1. **RPO Growth Outlook**  
   **Q:** What gives confidence in RPO growth guidance?  
   **A:** Nikesh Arora explained that the company expects RPO to grow by **19.5%** in fiscal '25 due to a combination of factors, including a strong pipeline, acceleration in the second half, the IBM business acquisition, strength in XSIAM, and platformization efforts.  **[PANW_3399478_18]** 

2. **AI Security Revenue**  
   **Q:** How fast can AI security products grow?  
   **A:** Nikesh Arora noted that while it's early days, there is significant interest in their AI security suite, with about **1,000 customers** interested in AI Access. He expressed confidence that these products will grow rapidly, highlighting that XSIAM achieved **$500 million** in bookings, showcasing potential for swift adoption.  **[PANW_3399478_12]** 

3. **Free Cash Flow Margins**  
   **Q:** Implications of contract durations on free cash flow?  
   **A:** Dipak Golechha stated that contract lengths remain consistent at **three years**, and operating margins have improved by **800 basis points** since fiscal year '21. This improvement supports strong free cash flow generation despite deferred payments increasing from **6% to 30%**.  **[PANW_3399478_17]** 

4. **XSIAM Growth and IBM Acquisition**  
   **Q:** Where are XSIAM customers coming from?  
   **A:** Nikesh Arora explained that almost every XSIAM sale replaces existing SIEMs, sometimes multiple ones. With the IBM QRadar acquisition, although some contracts won't be immediately recognized due to accounting treatments, the focus is on converting these customers to XSIAM, driving ratable revenue growth.  **[PANW_3399478_21]** 

5. **Prisma Cloud Acceleration**  
   **Q:** What's driving Prisma Cloud's acceleration?  
   **A:** Nikesh Arora mentioned that aggressive pricing from new players last year has stabilized. They've made product improvements and shifted to an ACV business model, resulting in customers adopting more modules. Platformization also helps drive growth in the cloud security business.  **[PANW_3399478_16]** 

6. **Billing Mix Changes**  
   **Q:** Will billing mix shift toward annualized billings?  
   **A:** Dipak Golechha indicated they expect a shift more toward annualized billings and away from financing, reducing friction in sales processes. Nikesh Arora added that they may do fewer PANFS deals, which will alter billing metrics but won't impact RPO or cash flow.  **[PANW_3399478_19]** 

7. **Competitor's Outage Impact**  
   **Q:** How did the July outage affect demand?  
   **A:** Nikesh Arora noted that the competitor's outage impacted tens of millions of users, prompting customers to consider Palo Alto's solutions. This event opened opportunities as customers reevaluated XDR options, benefiting their Cortex business.  **[PANW_3399478_13]** 

8. **U.S. Federal Outlook**  
   **Q:** Outlook for federal business amid elections?  
   **A:** Nikesh Arora stated they are approaching the federal market with muted expectations due to uncertainties around elections and budgets. They will continue pursuing renewals and new projects without trying to predict government actions.  **[PANW_3399478_20]** 

9. **Platformization Growth**  
   **Q:** Source of growth in platformization strategy?  
   **A:** Nikesh Arora highlighted that platformization is resonating with customers, with **one-third** of SASE customers being new to the company. Both new and existing customers are adopting the larger platform, helping drive toward their **$15 billion** revenue target faster.  **[PANW_3399478_11]** 

10. **Internal AI Efficiencies**  
    **Q:** How is AI improving internal operations?  
    **A:** Nikesh Arora explained they've reduced employee support headcount by **50%** using AI automation, with potential to reach an **80%** reduction. Their best developers are **40%** more productive using internal AI coding copilots, leading to significant operational efficiencies.  **[PANW_3399478_15]** 

4e2dd395054461d7ce8155e3aa113d1c0a84d2196b6e377d1e5528f63a32a328

- **Palo Alto Networks is guiding for approximately 17% billings growth**, significantly outpacing competitors who are guiding for negative growth, demonstrating strong demand across multiple business segments.  **[PANW_3367186_17]**
- **Strong pipeline for new products like XSIAM, with over $1 billion in pipeline**, including $500 million generated in the past quarter, indicating robust future growth opportunities in security operations transformation.  **[PANW_3367186_12]**
- **Increasing ransomware attacks and new SEC disclosure requirements are driving greater demand for cybersecurity solutions**, positioning Palo Alto Networks favorably to capitalize on this heightened need for advanced security offerings.  **[PANW_3367186_15]**

4612e8ef469dd67eef98f89e1789f20e549e6b2bc497b276b5ecf67bd4a9aa2f

1. **Billings Growth Recovery**  
   **Q:** What's the path to recovery for billings growth?  
   **A:** Nikesh explained that billing is now an artificial metric due to changes in payment terms and interest rates. Instead, the company focuses on implied bookings and RPO, where they saw a **double-digit increase** this quarter.  **[PANW_3390029_14]**  They believe they saw a recovery faster than expected, driven by strong deal activity, even though some deals had deferred billing.  **[PANW_3390029_14]** 

2. **Free Cash Flow Margin Visibility**  
   **Q:** How durable is the free cash flow margin given current impacts?  
   **A:** Nikesh stated that they aim to balance growth in annual billings with maintaining free cash flow margins, targeting **37% plus** margin for fiscal '25.  **[PANW_3390029_22]**  Dipak added that deferred payments actually provide more certainty in future cash flows as long as the shift is gradual.  **[PANW_3390029_22]**  They believe they can manage margins without creating a kink in their financials.  **[PANW_3390029_22]** 

3. **Duration of Platformization Efforts**  
   **Q:** Will platformization efforts continue beyond this fiscal year?  
   **A:** Dipak affirmed that platformization is now their ongoing strategy and will continue for a while.  **[PANW_3390029_10]**  Nikesh added that they previously indicated this focus would persist until the end of **Q2 next year**, having started in Q2 this year.  **[PANW_3390029_10]** 

4. **Platformization Deal Targets**  
   **Q:** Shouldn't new platformization customers be higher over time?  
   **A:** Nikesh mentioned that they completed **60-plus** platformization deals this quarter.  **[PANW_3390029_18]**  While they are just starting this journey, they see this as a robust goal and are open to updating targets if prospects improve.  **[PANW_3390029_18]**  Achieving these numbers would make them the first in cybersecurity to reach such ambitious goals.  **[PANW_3390029_18]** 

5. **IBM Deal Rationale**  
   **Q:** What was the impetus for acquiring IBM's assets?  
   **A:** Nikesh highlighted that the deal allows them to transition IBM's existing customers without waiting for contract expirations.  **[PANW_3390029_21]**  It gives them access to IBM's **1,000 cybersecurity sellers** who will now promote their XSIAM platform.  **[PANW_3390029_21]**  For a minimal cost of **$5 million**, this accelerates their position in the SIEM/SOAR market without significant expenditure.  **[PANW_3390029_21]** 

6. **AI Monetization Opportunities**  
   **Q:** How will you monetize new AI capabilities?  
   **A:** Nikesh explained that advanced AI services on firewalls have already led to an **uptick from 20% to 30%** of the cost of firewalls.  **[PANW_3390029_24]**  AI-powered subscriptions like AI Access Security will be sold as incremental capabilities.  **[PANW_3390029_24]**  Co-pilots may require customers to upgrade underlying capabilities, leading to additional revenue.  **[PANW_3390029_24]** 

7. **Increase in Finance Receivables**  
   **Q:** Will finance receivables continue to expand?  
   **A:** Dipak acknowledged that as the business grows, tools like deferred payment plans help meet customer needs.  **[PANW_3390029_20]**  He doesn't mind if finance receivables increase because they provide more certainty in future cash flows.  **[PANW_3390029_20]**  The rise is more related to the current high-interest-rate environment.  **[PANW_3390029_20]** 

8. **SASE Market Growth**  
   **Q:** What is the growth outlook for Secure Service Edge?  
   **A:** Lee Klarich noted that SASE saw **50% growth** over the last several quarters.  **[PANW_3390029_17]**  While the market will remain hybrid, customers are increasingly choosing platform-based approaches.  **[PANW_3390029_17]**  They expect the SASE portion to grow faster for some time before integrating into the total platform growth.  **[PANW_3390029_17]** 

9. **Pipeline and Q4 Expectations**  
   **Q:** Can you provide color on the Q4 pipeline?  
   **A:** Nikesh stated they have a robust pipeline across most platforms.  **[PANW_3390029_12]**  They have reviewed **500 customers**, identifying opportunities for platform delivery and consolidation.  **[PANW_3390029_12]**  The pipeline gives them hope and conviction for converting business, limited only by customer speed and resources.  **[PANW_3390029_12]** 

10. **Use Periods in Platformization Deals**  
    **Q:** How do free use periods affect revenue recognition?  
    **A:** Nikesh explained that in some cases, they may wait **6 months** before charging for services during migrations.  **[PANW_3390029_23]**  Deals with free periods often have longer durations (over **3 years**) to compensate.  **[PANW_3390029_23]**  They prioritize ensuring the exit ARR meets expectations, and the impact is more from deferred billing than free periods.  **[PANW_3390029_23]** 

99781a5b876f747c5551957f3eeb398b947445fda18e65b532cae3ba685a7444

- **Confidence in Free Cash Flow and Operating Margins**: Despite strategic changes, Palo Alto Networks is confident in maintaining its free cash flow margins and expects operating margins to continue increasing, supporting long-term profitability.  **[PANW_3374053_25]**
- **Longer Contract Durations through Platformization**: By focusing on platformization and consolidation, the company anticipates longer contract durations with customers, securing 3- to 5-year commitments and strengthening customer relationships.  **[PANW_3374053_19]**
- **Sustained ARR through Bundling Strategy**: The bundling of multiple products into a single platform provides customers with better ROI without reducing the company's exit Annual Recurring Revenue (ARR), ensuring consistent long-term revenue.  **[PANW_3374053_23]**

f65866e1293d33da51bc563ad3453bdd2743ce67e037eabe00b4db06fe326d55

Palo Alto Networks Inc (PANW)

Financials