AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 2/6 · 29/10/2026
Moat—
Insufficient evidence for every rubric criterion; no category score is inferred.
structural advantage · 2/4 · Common PAN-OS functionality, enterprise-policy integration and centralized configuration provide a concrete basis for switching friction. However, migration effort and comparative customer outcomes are unmeasured, while Microsoft offers overlapping integrated security capabilities. The mechanism is credible but its economic strength remains mixed.
durability · — · The 2024 and 2026 descriptions show continuity of integrated management capabilities. They do not establish how long economically significant customer dependency persists, how difficult competing replication is, or whether customers retain the platform through replacement cycles. A durable advantage cannot be graded from these descriptions alone.
customer dependency · 2/4 · Embedding applications, users and devices in security policies, then centrally managing configurations, supports moderate workflow dependency by inference from disclosed functionality. The passages do not quantify adoption, migration costs or operational disruption on replacement, so strong demonstrated customer lock-in is not established.
erosion resilience · 2/4 · Fiscal fourth-quarter 2026 revenue and remaining performance obligations each grew 34%, supporting continued commercial demand despite competitive risks. Acquisitions contribute to growth, and Microsoft offers overlapping capabilities. These results support mixed resilience; they do not isolate organic share gains or demonstrate successful defense of installed customers.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · — · The catalog supplies revenue growth and possible selling-price pressure, but no observed Palo Alto Networks selling-price changes or price-volume-mix bridge. Neither aggregate growth nor remaining performance obligations isolates realized pricing. The previous analysis's price-increase claim has no supporting passage in this catalog.
retention · — · Integrated policies suggest switching friction, and growing contracted demand supports commercial traction. However, the supplied passages do not demonstrate renewals, repeat purchases or engagement by existing customers. Acquired revenue further complicates inference, so retention cannot be graded from total growth alone.
margin resilience · 1/4 · The fiscal 2026 fourth-quarter supply disruption and higher memory and component costs actually reduced gross margin, demonstrating fragile cost absorption in that episode. Fourth-quarter GAAP operating income also declined. These outcomes do not isolate selling prices or establish a permanent inability to recover costs.
contractual freedom · — · No supplied passage establishes Palo Alto Networks' ability to reset customer prices, alter contract terms or terminate customer and distributor arrangements. Non-cancelable supplier commitments concern procurement obligations, not customer repricing authority. Generic potential price declines cannot establish commercial contractual freedom.
Predictability100
5 consecutive published annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 4.65
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 2.21
- observedAnnualPeriods
- 5.00
Financial strength—
Missing required inputs: debtFcfGrade, netDebtEbitGrade. Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 9.68
- Current ratio (x)
- 0.87
Capital allocation—
Missing required inputs: operatingReturn. Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or EBIT calculated from reported pretax profit plus reported gross interest expense; the issuer-reported EBIT is distinct from GAAP operating income and gross interest; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. ROIC remains undefined for nonpositive invested capital; the explicit asset-return alternative does not change the ROIC chart. Missing financial inputs alone never trigger an alternative. Does not establish acquisition quality or buyback timing.
- 3-year average dilution (%)
- 7.37
- 3-year average SBC / revenue (%)
- 14.30
- cashConversionGrade
- 100.00
Management44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Trailing-12-month operating cash flow through April 30, 2026 was $4.217 billion against $424 million of capital purchases, and completed repurchases totaled $1 billion. Rising outstanding shares, acquisition-related balance-sheet expansion and substantial non-cancelable commitments offset cash generation. Acquisition returns and repurchase value creation remain unestablished.
incentive alignment · 2/4 · Actual fiscal 2025 executive equity awards were performance-based; ownership guidelines excluded unvested awards and were met as of September 15, 2025. A holding policy adds alignment, subject to exceptions. Recurring compensation exclusions and approved severance acceleration temper these safeguards; actual ownership amounts and incentive outcomes remain unavailable.
execution · 2/4 · Revenue, remaining performance obligations and operating cash generation demonstrate commercial execution indirectly. However, fiscal third-quarter revenue included $388 million from CyberArk and Chronosphere, and fourth-quarter GAAP operating income declined materially. Results support mixed execution without demonstrating acquisition returns or sustained competitive outperformance.
governance · 1/4 · Independent oversight committees provide safeguards. Nevertheless, the December 2025 compensation vote drew more votes against than for, and directors were elected for terms through 2028. Shareholders approved an annual-election proposal, but implementation is unestablished. These disclosures support weak accountability, without proving broader oversight failure.
Evidence
All of our hardware and software firewalls incorporate our PAN-OS® operating system and come with the same rich set of features, ensuring consistent operation across our entire product line.
2024 Form 10-K, filed 2024-09-06, Business: common PAN-OS operating system · Filed 06/09/2024
The content, applications, users, and devices—the elements that run a business—become integral components of an enterprise’s security policy via our Content-ID™, App-ID™, User-ID™, and Device-ID technologies.
2024 Form 10-K, filed 2024-09-06, Business: enterprise security-policy components · Filed 06/09/2024
It enables customers to manage and monitor their NGFW and SASE environments through a single, streamlined interface.
2026 Form 10-K, filed 2026-09-10, Business: unified NGFW and SASE management · Filed 10/09/2026
SCM helps customers centrally manage configurations and security policies, assess security posture and network health, and streamline troubleshooting and remediation.
2026 Form 10-K, filed 2026-09-10, Business: centralized configurations and policies · Filed 10/09/2026
We prioritize security above all else and we offer our customers integrated AI-driven products addressing security, compliance, identity, management, and privacy across customers’ multi-cloud, application, and device assets.
Microsoft 2026 Form 10-K, filed 2026-07-29, Business: Microsoft's integrated security offerings; competitor comparison only · Filed 29/07/2026
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
Fiscal 2026 fourth-quarter release, filed 2026-09-01, forward-looking risk discussion: competition and native cloud security · Filed 01/09/2026
For example, we experienced supply chain disruption and inflationary pressures during our fourth quarter of fiscal 2026, resulting in increased costs for memory and other components, which have negatively affected our gross margin and could continue to affect our gross margin.
2026 Form 10-K, filed 2026-09-10, Risk Factors: realized fourth-quarter component-cost and gross-margin pressure · Filed 10/09/2026
•Total revenue for the fiscal fourth quarter 2026 grew 34% year over year to $3.41 billion.
Fiscal 2026 fourth-quarter release, filed 2026-09-01, financial highlights: revenue growth · Filed 01/09/2026
•Remaining performance obligations grew 34% year over year to $21.2 billion.
Fiscal 2026 fourth-quarter release, filed 2026-09-01, financial highlights: remaining performance obligations · Filed 01/09/2026
•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.
Fiscal 2026 fourth-quarter release, filed 2026-09-01, financial highlights: comparative GAAP operating income · Filed 01/09/2026
•Total revenue for the fiscal third quarter 2026 grew 31% year over year to $3.0 billion.
Fiscal 2026 third-quarter release, filed 2026-06-02, financial highlights: total revenue · Filed 02/06/2026
This includes $388 million from CyberArk and Chronosphere.
Fiscal 2026 third-quarter release, filed 2026-06-02, financial highlights: acquired-company revenue contribution · Filed 02/06/2026
3
Palo Alto Networks, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures (Continued)
(In millions)
(Unaudited)
Three Months Ended
Trailing 12-Month Ended
April 30,
April 30,
2026
2025
2026
2025
Net cash provided by operating activities
$
871
$
628
$
4,217
$
3,208
Less: purchases of property, equipment, and other assets
83
68
424
208
Free cash flow (non-GAAP)
Fiscal 2026 third-quarter release, filed 2026-06-02, cash-flow reconciliation: periods, units, operating cash and capital purchases · Filed 02/06/2026
During the three and nine months ended April 30, 2026, we repurchased and retired 7 million shares of our common stock under our current repurchase authorization for an aggregate purchase price of $1.0 billion, including transaction costs, at an average price of $147.70 per share.
April 2026 Form 10-Q, filed 2026-06-03, Stockholders’ Equity: completed repurchases · Filed 03/06/2026
The following table presents details of the aggregate future non-cancelable purchase commitments under these agreements as of July 31, 2026 (in millions):
Fiscal years ending July 31,
Total
2027
2028
2029
2030
2031
2032 and Thereafter
Cloud
$
7,686
$
143
$
1,218
$
1,329
$
1,398
$
1,725
$
1,873
Manufacturing
370
370
—
—
—
—
—
Other
186
129
34
13
10
—
—
Total
$
8,242
$
642
$
1,252
$
1,342
$
1,408
$
1,725
$
1,873
Additionally, we have a $81 million minimum purchase commitment with a cloud hosting service provider through September 2027 with no specified annual commitments.
2026 Form 10-K, filed 2026-09-10, Commitments: future non-cancelable purchases as of July 31, 2026 · Filed 10/09/2026
586
Goodwill
21,902
4,567
Intangible assets, net
7,283
763
Deferred tax assets
2,380
2,424
Other assets
593
422
Total assets
$
46,266
$
23,576
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
293
$
232
Accrued compensation
680
608
Accrued and other liabilities
760
846
Deferred revenue
7,113
6,302
Short-term convertible senior notes
160
—
Total current liabilities
9,006
7,988
Long-term convertible senior notes
1,192
—
Long-term deferred revenue
6,492
6,450
Deferred tax liabilities
259
89
Long-term operating lease liabilities
719
338
Other long-term liabilities
930
887
Total liabilities
18,598
15,752
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock; $0.0001 par value; 100 shares authorized; none issued and outstanding as of April 30, 2026 and July 31, 2025
—
—
Common stock and additional paid-in capital; $0.0001 par value; 2,000 shares authorized; 813 and 668 shares issued and outstanding as of April 30, 2026 and July 31, 2025, respectively
24,608
5,292
Accumulated other comprehensive income (loss)
(13)
48
Retained earnings
3,073
2,484
Total stockholders’ equity
27,668
7,824
Total liabilities and stockholders’ equity
$
46,266
$
23,576
See notes to condensed consolidated financial statements.
April 2026 Form 10-Q, filed 2026-06-03, balance sheet: shares outstanding and acquisition-related balance-sheet expansion · Filed 03/06/2026
For fiscal 2025, 100% of our named executive officers’ equity compensation awards were performance-based, with different performance targets than the cash incentive plan awards.
2025 proxy, filed 2025-11-07, Executive Compensation: actual fiscal 2025 performance-based equity awards · Filed 07/11/2025
Ownership Definition. Unvested PSUs, RSUs, and unexercised stock options do not count toward satisfying these ownership guidelines.
2025 proxy, filed 2025-11-07, ownership guidelines: excluded unvested awards and options · Filed 07/11/2025
Status. As of September 15, 2025, our CEO and each of our other executive officers have each met their respective stock ownership guideline.
2025 proxy, filed 2025-11-07, ownership-guideline compliance as of September 15, 2025 · Filed 07/11/2025
Under the policy all NEOs are required to hold, for one full calendar year from the date of vesting or acquisition any shares of our common stock acquired by such NEO upon the vesting of an equity award granted by the Company.
2025 proxy, filed 2025-11-07, compensation: one-year post-vesting holding requirement · Filed 07/11/2025
There are limited exceptions to the holding requirement for shares withheld or sold for tax purposes and for equity awards granted upon the initial hiring or appointment of an NEO as an executive officer.
2025 proxy, filed 2025-11-07, compensation: holding-policy exceptions · Filed 07/11/2025
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.
Fiscal 2026 fourth-quarter release, filed 2026-09-01, non-GAAP limitations: recurring share-based compensation · Filed 01/09/2026
•Fully independent Audit Committee, Compensation and People Committee, and Governance and Sustainability Committee, with frequent and robust executive sessions
2025 proxy, filed 2025-11-07, Governance: independent oversight committees · Filed 07/11/2025
The shareholders cast their votes with respect to an advisory resolution on named executive officer compensation as follows:
Votes For
Votes Against
Abstentions
Broker Non-Votes
221,211,579
253,792,757
4,432,315
99,483,700
4.
Annual-meeting results, filed 2025-12-11, advisory executive-compensation voting results · Filed 11/12/2025
1. The following individuals were elected at the Annual Meeting to serve as Class II directors of the Company until the Company’s 2028 Annual Meeting of Shareholders or until their respective successors are duly elected and qualified:
Nominee
Votes For
Votes Against
Abstentions
Broker Non-Votes
John M.
Annual-meeting results, filed 2025-12-11, election of Class II directors for terms through the 2028 meeting · Filed 11/12/2025
A shareholder proposal regarding electing each of our directors annually was approved.
Annual-meeting results, filed 2025-12-11, approval of shareholder proposal for annual director elections · Filed 11/12/2025
If an executive’s employment is terminated by the Company other than for Cause, death or Disability, or by the executive for “Good Reason” (as defined in the Policy) during the CIC Period, then subject to the executive’s timely execution and non-revocation of a separation agreement and release of claims with the Company, the executive will receive: (i) Salary Severance (based on the percentage described in the table below); (ii) cash incentive severance equal to a percentage (as described in the table below) of the executive’s annual target cash incentive compensation opportunity (“Cash Incentive Severance”); (iii) Health Benefit Severance (based on a number of months described in the table below); and (iv) vesting acceleration as to 100% of any equity awards that are outstanding and unvested, provided that the treatment of the performance conditions of awards that are subject to performance-based vesting conditions will be as set forth in the individual award agreement.
Form 8-K, filed 2026-08-21, approved severance policy: qualifying change-in-control termination benefits and equity acceleration · Filed 21/08/2026
