8ee0f2efe45d0f999f6d2a7adf93d75ef3d360f2852e153039fe357f1af84e4e

f1319c4e5f7e3fea7dd47e6a6af86ef95622b3205f820ee62387bb5d6e5031f0

Next-Generation Security Annualized Recurring Revenue (USD billions)

30eb38a6befccacc7a93028a561179350c232ec4c0e5c1206b69bb2bec34b11a

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]

44a97d009b8674f59d774561fdcfb5dce0ef1e8e06f01d20c94ab7f09372bd46

The **high Operating Cash Flow in Q1 2024** was primarily driven by **strong collections** (partially stemming from the solid bookings in Q4 2023), overall **business growth**, and favorable **changes in operating assets and liabilities**. Specifically, the company saw a significant improvement in accounts receivable collections and adjustments in deferred revenue, which directly contributed to the increased net cash provided by operating activities.  **[PANW_3367186_6]** **[0001327567-23-000032_panw-20231031.htm:26]** **[0001327567-23-000032_panw-20231031.htm:4]** 

Why was Operating Cash Flow so high in Q1 2024?

The surge in Q2 2024 Net Income was primarily driven by a **$1.5 billion tax benefit** due to the release of the valuation allowance on deferred tax assets, a **one-time item** that significantly boosted net income. In addition, **19% revenue growth**, improved operating margins, and adjustments related to **litigation charges** also contributed to the overall increase in net income.  **[0001327567-24-000003_ex991q224earningsrelease.htm:0]** **[PANW_3374053_9]** **[0001327567-24-000003_ex991q224earningsrelease.htm:7]** 

What drove the surge in Net Income in Q2 2024?

The emergence of this fair value adjustment in **Q1 2025** is primarily explained by **acquisition-related costs**. Specifically, Palo Alto Networks experienced a **$6.3 million** increase in the fair value of its contingent consideration liability due to adjustments in the underlying assumptions used for its valuation. Initially set at **$648.9 million** on the acquisition date, the liability increased to **$655.2 million** by the end of the period, reflecting these assumption changes that have a material impact on operating results.  **[0001327567-24-000040_panw-20241031.htm:8]** **[0001327567-24-000040_panw-20241031.htm:36]** **[0001327567-24-000040_panw-20241031.htm:61]** 

What explains the emergence of a fair value adjustment in Q1 2025?

In Q1 2025, the deferred income tax benefit significantly increased because the company released its valuation allowance on U.S. federal, U.S. non-California state, and United Kingdom deferred tax assets. This release unlocked a benefit of **$137.4 million** compared to a minimal benefit of only **$0.3 million** in Q1 2024, leading to the sharp drop in the deferred income tax liability.  **[0001327567-24-000040_panw-20241031.htm:4]** **[0001327567-24-000029_panw-20240731.htm:137]** **[0001327567-24-000040_panw-20241031.htm:37]** 

Why did Deferred Income Taxes drop so sharply in Q1 2025?

The dramatic reversal in Accounts Receivable in Q4 2024 reflects an increase of **$155.4 million**. Although the documents do not explicitly confirm the definitive reasons, **potential contributing factors** include **strong revenue growth**—with fiscal year revenue rising by **16% year-over-year** and fiscal Q4 revenue by **12% year-over-year**—which naturally boosts customer billings. Additionally, **rising interest rates** have led customers to request extended, multi-year payment terms, and the company’s **platformization strategy** offering more flexible payment options may have further contributed to the higher receivables balance.  **[20240819SF86593:0]** **[0001327567-24-000023_ex991q424earningsrelease.htm:8]** **[PANW_3399478_8]** **[0001327567-24-000023_ex991q424earningsrelease.htm:0]** **[0001327567-24-000029_panw-20240731.htm:102]** 

What caused the dramatic reversal in Accounts Receivable in Q4 2024?

a03e7f5466fbfb9f7fabe1527bc82dde49d2ba6e85aa712591069421fbc51e67

The **Provision for (Benefit from) Income Taxes** was so negative in Q2 2024 because the company released its valuation allowance on deferred tax assets. This release applied to **U.S. federal**, **U.S. states other than California**, and the **United Kingdom**, which resulted in a one-time, significant tax benefit. Specifically, a deferred tax benefit of **$3.2 billion** was recognized, partially offset by a **$1.7 billion** deferred tax expense related to the U.S. federal indirect tax effect of foreign deferred taxes, leading to a net tax benefit for the quarter.  **[0001327567-24-000005_panw-20240131.htm:39]** **[0001327567-24-000005_panw-20240131.htm:22]** **[PANW_3374053_9]** **[0001327567-24-000003_ex991q224earningsrelease.htm:0]** 

Why was Provision for (Benefit from) Income Taxes so negative in Q2 2024?

What drove the unusually high Net Income in Q2 2024?

Palo Alto Networks achieved its significant increase in total revenue in FY 2024 due to several key factors. **Subscription and support revenue** rose by **20.9%** to **$6,424.2 million**, largely driving overall growth. Additionally, **geographic expansion** across the Americas, EMEA, and APAC helped boost revenues, while **product revenue** saw a modest increase of **1.6%**, supported by a shift towards next-generation software and hardware offerings. Strategic investments in the global sales force and a remarkable **43% growth** in Next-Generation Security ARR further contributed to the revenue jump from **$6,892.7 million** in FY 2023 to **$8,027.5 million** in FY 2024.  **[0001327567-24-000029_panw-20240731.htm:85]** **[0001327567-24-000029_panw-20240731.htm:83]** 

What factors contributed to the significant increase in Total Revenue in FY 2024?

In **Q4 2024**, the drastic drop in **interest expense** was primarily driven by two key factors: **the maturity of the 2023 notes**, which eliminated associated interest expense, and **the early conversion of the 2025 notes**, further reducing the expense.  **[0001327567-24-000029_panw-20240731.htm:89]** 

Why did Interest Expense drop so drastically in Q4 2024?

95e2489083abb5424a4338eb0230db0bbdc5f1e0360194c8bebce2c4187c4a3d

Americas

- United States

- Other Americas

EMEA

APAC

Total Revenue

79c55546e3e155464bc56d469014a6457adb21ddbf59cb4e0c730e72f29542e2

Product

Subscription and Support

Services

- Subscription

- Support

- Support and Maintenance

44f707395070f1ff9d5e1dcd960421c64de3880aa0c1cb332404713003c7b2ce

Product Revenue (USD, millions)

Subscription and Support Revenue (USD, millions)

Total Revenue (USD, millions)

Product Cost of Revenue (USD, millions)

Subscription and Support Cost of Revenue (USD, millions)

Total Cost of Revenue (USD, millions)

Total Gross Profit (USD, millions)

Research and Development Expenses (USD, millions)

Sales and Marketing Expenses (USD, millions)

General and Administrative Expenses (USD, millions)

Total Operating Expenses (USD, millions)

Operating Income (USD, millions)

Interest Expense (USD, millions)

Other Income, Net (USD, millions)

Income Before Income Taxes (USD, millions)

Provision for (Benefit from) Income Taxes (USD, millions)

Net Income (USD, millions)

f7256338b6616f12b2e7c8830910e8798acb79eb15b58dabfa1e0bc639010b6e

Share-based Compensation for Equity-based Awards (USD, millions)

Depreciation and Amortization (USD, millions)

Amortization of Deferred Contract Costs (USD, millions)

Amortization of Debt Issuance Costs (USD, millions)

Change in Fair Value of Contingent Consideration Liability (USD, millions)

Reduction of Operating Lease Right-of-Use Assets (USD, millions)

Amortization of Investment Premiums, Net of Accretion of Purchase Discounts (USD, millions)

Net Cash Provided by Operating Activities (USD, millions)

Purchases of Investments (USD, millions)

Proceeds from Sales of Investments (USD, millions)

Proceeds from Maturities of Investments (USD, millions)

Business Acquisitions, Net of Cash and Restricted Cash Acquired (USD, millions)

Purchases of Property, Equipment, and Other Assets (USD, millions)

Net Cash Used in Investing Activities (USD, millions)

Repayments of Convertible Senior Notes (USD, millions)

Repurchases of Common Stock (USD, millions)

Proceeds from Sales of Shares Through Employee Equity Incentive Plans (USD, millions)

Payments for Taxes Related to Net Share Settlement of Equity Awards (USD, millions)

Net Cash Used in Financing Activities (USD, millions)

Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash (USD, millions)

Deferred Income Taxes (USD, millions)

Cash, Cash Equivalents, and Restricted Cash - Beginning of Period (USD, millions)

Cash, Cash Equivalents, and Restricted Cash - End of Period (USD, millions)

98bd1f430b696d5bad49fa717e55cf0dffd8d20c0fd6408dfad8ac614a27f03d

Cash and cash equivalents (USD, millions)

Short-term investments (USD, millions)

Accounts receivable, net (USD, millions)

Short-term financing receivables, net (USD, millions)

Short-term deferred contract costs (USD, millions)

Prepaid expenses and other current assets (USD, millions)

Total current assets (USD, millions)

Property and equipment, net (USD, millions)

Operating lease right-of-use assets (USD, millions)

Long-term investments (USD, millions)

Long-term financing receivables, net (USD, millions)

Long-term deferred contract costs (USD, millions)

Goodwill (USD, millions)

Intangible assets, net (USD, millions)

Deferred tax assets (USD, millions)

Other assets (USD, millions)

Total assets (USD, millions)

Accounts payable (USD, millions)

Accrued compensation (USD, millions)

Accrued and other liabilities (USD, millions)

Deferred revenue (USD, millions)

Convertible senior notes, net (USD, millions)

Total current liabilities (USD, millions)

Long-term deferred revenue (USD, millions)

Deferred tax liabilities (USD, millions)

Long-term operating lease liabilities (USD, millions)

Other long-term liabilities (USD, millions)

Total liabilities (USD, millions)

Preferred stock (USD, millions)

Common stock and additional paid-in capital (USD, millions)

Accumulated other comprehensive loss (USD, millions)

Retained earnings (USD, millions)

Total stockholders’ equity (USD, millions)

Total liabilities and stockholders’ equity (USD, millions)

598386b2d21c3ec3aff096cf4f67fe3bec7d8da7eac82226b4d0f92053eb8eea

Palo Alto Networks Inc (PANW)

Financials