22 unchanged sentences
• If we do not accurately predict, prepare for, and respond promptly to rapidly evolving technological and market developments and successfully manage product and subscription introductions and transitions to meet changing end-customer needs in the enterprise security industry, our competitive position and prospects will be harmed.
−Removed: T able of Contents
• Issues in the development and deployment of AI may result in reputational harm and legal liability and could adversely affect our results of operations.
26 unchanged sentences
• The convertible note hedge and warrant transactions may affect the value of our common stock.
−Removed: T able of Contents
Risks Related to Global Economic and Geopolitical Conditions
11 unchanged sentences
As a result, our employee headcount has increased, and we expect it to continue to grow over the next year.
−Removed: For example, from the end of fiscal 2023 to the end of the second quarter of fiscal 2024, our headcount increased from 13,948 to 14,789 employees.
+Added: For example, from the end of fiscal 2023 to the end of the third quarter of fiscal 2024, our headcount increased from 13,948 to 15,166 employees.
In addition, as we have grown, the number of end-customers has also increased, and we have managed more complex deployments of our products and subscriptions with larger end-customers.
7 unchanged sentences
Our revenue growth rate in recent periods may not be indicative of our future performance, and we may not be able to maintain profitability, which could cause our business, financial condition, and operating results to suffer.
−Removed: We have experienced revenue growth rates of 19.7% and 25.5% for the six months ended January 31, 2024 and 2023, respectively.
+Added: We have experienced revenue growth rates of 18.2% and 25.0% for the nine months ended April 30, 2024 and 2023, respectively.
Our revenue for any quarterly or annual period should not be relied upon as an indication of our future revenue or revenue growth for any future period.
7 unchanged sentences
If we are unable to navigate these challenges as we encounter them, our business, financial condition, and operating results may suffer.
−Removed: T able of Contents
Our operating results may vary significantly from period to period, which makes our results difficult to predict and could cause our results to fall short of expectations, and such results may not be indicative of future performance.
14 unchanged sentences
If we are unable to sell new and additional product, subscription, and support offerings to our end-customers, especially to large enterprise customers, our future revenue and operating results will be harmed.
−Removed: Our future success depends, in part, on our ability to expand the deployment of our portfolio with existing end-customers, especially large enterprise customers, and create demand for our new offerings, The rate at which our end-customers purchase additional products, subscriptions, and support depends on a number of factors, including the perceived need for additional security products, including subscription and support offerings, as well as general economic conditions.
+Added: Our future success depends, in part, on our ability to expand the deployment of our portfolio with existing end-customers, especially large enterprise customers, including through our platformization strategy, and create demand for our new offerings, The rate at which our end-customers purchase additional products, subscriptions, and support depends on a number of factors, including the perceived need for additional security products, including subscription and support offerings, as well as general economic conditions.
If our efforts to sell additional products and subscriptions to our end-customers are not successful, our revenues may grow more slowly than expected or decline.
3 unchanged sentences
Failure to realize sales from large enterprise end-customers could materially and adversely affect our business, operating results, and financial condition.
−Removed: T able of Contents
If we are unable to attract new customers, our future results of operations could be harmed.
9 unchanged sentences
We rely on revenue from subscription and support offerings, and because we recognize revenue from subscription and support over the term of the relevant service period, downturns or upturns in sales or renewals of these subscription and support offerings are not immediately reflected in full in our operating results.
−Removed: Subscription and support revenue accounts for a significant portion of our revenue, comprising 81.0% of total revenue in the six months ended January 31, 2024 and 78.8% of total revenue in the six months ended January 31, 2023.
+Added: Subscription and support revenue accounts for a significant portion of our revenue, comprising 80.8% of total revenue in the nine months ended April 30, 2024 and 78.3% of total revenue in the nine months ended April 30, 2023.
Sales and renewals of subscription and support contracts may decline and fluctuate as a result of a number of factors, including end-customers’ level of satisfaction with our products and subscriptions, the frequency and severity of subscription outages, our product uptime or latency, the prices of our products and subscriptions, and reductions in our end-customers’ spending levels.
9 unchanged sentences
Substantially all of our revenue is generated by sales through our channel partners, including distributors and resellers.
−Removed: For the six months ended January 31, 2024, three distributors individually represented 10% or more of our total revenue and in the aggregate represented 46.4% of our total revenue.
−Removed: As of January 31, 2024, three distributors individually represented 10% or more of our gross accounts receivable and in the aggregate represented 46.6% of our gross accounts receivable.
+Added: For the nine months ended April 30, 2024, three distributors individually represented 10% or more of our total revenue and in the aggregate represented 46.1% of our total revenue.
+Added: As of April 30, 2024, two distributors individually represented 10% or more of our gross accounts receivable and in the aggregate represented 37.1% of our gross accounts receivable.
We provide our channel partners with specific training and programs to assist them in selling our products, including subscriptions and support offerings, but there can be no assurance that these steps will be utilized or effective.
7 unchanged sentences
If we fail to effectively manage our sales channels or channel partners, our ability to sell our products and subscriptions and operating results will be harmed.
−Removed: T able of Contents
We are exposed to the credit and liquidity risk of our customers, and to credit exposure in weakened markets, which could result in material losses.
28 unchanged sentences
• public cloud vendors and startups that offer solutions for cloud security (private, public, and hybrid cloud).
−Removed: T able of Contents
Many of our competitors have greater financial, technical, marketing, sales, and other resources, greater name recognition, longer operating histories, and a larger base of customers than we do.
32 unchanged sentences
The occurrence of any of these risks could harm our business, operating results, and financial condition.
−Removed: T able of Contents
If we do not accurately predict, prepare for, and respond promptly to rapidly evolving technological and market developments and successfully manage product and subscription introductions and transitions to meet changing end-customer needs in the enterprise security industry, our competitive position and prospects will be harmed.
26 unchanged sentences
These efforts could subject us to regulatory risk, legal liability, including under new proposed legislation regulating AI in jurisdictions such as the EU and regulations being considered in other jurisdictions, or brand or reputational harm.
−Removed: T able of Contents
The rapid evolution of AI, including potential government regulation of AI, requires us to invest significant resources to develop, test, and maintain AI in our products and services in a manner that meets evolving requirements and expectations.
18 unchanged sentences
Any of these negative outcomes could adversely impact the market perception of our products and subscriptions and end-customer and investor confidence in our company and could seriously harm our business or operating results.
−Removed: T able of Contents
Defects, errors, or vulnerabilities in our products, subscriptions, or support offerings, the failure of our products or subscriptions to block a virus or prevent a security breach or incident, misuse of our products, or risks of product liability claims could harm our reputation and adversely impact our operating results.
1 unchanged sentence
For example, from time to time, certain of our end-customers have reported defects in our products related to performance, scalability, and compatibility.
−Removed: Additionally, defects may cause our products or subscriptions to be vulnerable to security attacks, cause them to fail to help secure networks, or temporarily interrupt end-customers’ networking traffic.
+Added: Additionally, defects or vulnerabilities may cause our products or subscriptions to be vulnerable to security attacks, cause them to fail to help secure networks, or temporarily interrupt end-customers’ networking traffic.
+Added: For example, in April 2024, we became aware of a command injection vulnerability in the GlobalProtect feature of certain versions of our PAN-OS software.
+Added: To remediate the matter, we published a security advisory to advise customers, provided software updates for affected PAN-OS versions, and are actively engaged in customer outreach, support and remediation efforts for potentially impacted customers.
Because the techniques used by computer hackers to access or sabotage networks change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques and provide a solution in time to protect our end-customers’ networks.
22 unchanged sentences
These false positives may impair the perceived reliability of our products and subscriptions and may therefore adversely impact market acceptance of our products and subscriptions and could result in damage to our reputation, negative publicity, loss of channel partners, end-customers and sales, increased costs to remedy any problem, and costly litigation.
−Removed: T able of Contents
Our ability to sell our products and subscriptions is dependent on the quality of our technical support services and those of our channel partners, and the failure to offer high-quality technical support services could have a material adverse effect on our end-customers’ satisfaction with our products and subscriptions, our sales, and our operating results.
11 unchanged sentences
For example, on January 31, 2024, in the Centripetal Networks, Inc.
−Removed: lawsuit against us, a jury returned a verdict of non-willful infringement with a lump sum amount of $151.5 million, plus statutory interest, for which we have accrued $176.8 million for the verdict amount and estimated interest.
+Added: lawsuit against us, a jury returned a verdict of non-willful infringement with a lump sum amount of $151.5 million, plus statutory interest, for which we have accrued $180.5 million for the verdict amount and estimated interest as of April 30, 2024.
In addition, we have been sued for patent infringement by Finjan, Inc.
−Removed: and Lionra Technologies, which are both scheduled for trial in 2024.
+Added: and Lionra Technologies, with trial dates not currently set.
Third parties may also assert such claims against our end-customers or channel partners, whom our standard license and other agreements obligate us to indemnify against claims that our products and subscriptions infringe the intellectual property rights of third parties.
9 unchanged sentences
Any of these events could seriously harm our business, financial condition, and operating results.
−Removed: T able of Contents
Our proprietary rights may be difficult to enforce or protect, which could enable others to copy or use aspects of our products or subscriptions without compensating us.
27 unchanged sentences
If we are held to have breached the terms of an open source software license, we could be required to seek licenses from third parties to continue offering our products and subscriptions on terms that are not economically feasible, to reengineer our products and subscriptions, to discontinue the sale of our products and subscriptions if reengineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, operating results, and financial condition.
−Removed: T able of Contents
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or assurance of title or controls on origin of the software.
28 unchanged sentences
Any production interruptions for any reason, such as a natural disaster, epidemic or pandemic, capacity shortages, or quality problems at one of our manufacturing partners would negatively affect sales of our product lines manufactured by that manufacturing partner and adversely affect our business and operating results.
−Removed: T able of Contents
Managing the supply of our hardware products and product components is complex.
28 unchanged sentences
If we are unable to hire, integrate, train, or retain the qualified and highly skilled personnel required to fulfill our current or future needs, our business, financial condition, and operating results could be harmed.
−Removed: T able of Contents
Further, we believe that a critical contributor to our success and our ability to retain highly skilled personnel has been our corporate culture, which we believe fosters innovation, inclusion, teamwork, passion for end-customers, focus on execution, and the facilitation of critical knowledge transfer and knowledge sharing.
9 unchanged sentences
Additionally, our international sales and operations are subject to a number of risks, including the following:
−Removed: • political, economic, and social uncertainty around the world, health risks such as epidemics and pandemics like COVID-19, macroeconomic challenges in Europe, terrorist activities, Russia’s invasion of Ukraine, tensions between China and Taiwan, the hostilities in Israel and the surrounding region, and continued hostilities in the Middle East;
+Added: • political, economic, and social uncertainty around the world, health risks such as epidemics and pandemics like COVID-19, macroeconomic challenges, terrorist activities, Russia’s invasion of Ukraine, tensions between China and Taiwan, the hostilities in Israel and the surrounding region, and continued hostilities in the Middle East;
• unexpected changes in, or the application of, foreign and domestic laws and regulations (including intellectual property rights protections), regulatory practices, trade restrictions, and foreign legal requirements, including those applicable to the importation, certification, and localization of our products, tariffs, and tax laws and treaties, including regulatory and trade policy changes adopted by the current administration, such as the Sanctions on Russia, or foreign countries in response to regulatory changes adopted by the current administration;
16 unchanged sentences
We have entered into forward contracts in an effort to reduce our foreign currency exchange exposure related to our foreign currency denominated expenditures.
−Removed: As of January 31, 2024, the total notional amount of our outstanding foreign currency forward contracts was $1.2 billion.
+Added: As of April 30, 2024, the total notional amount of our outstanding foreign currency forward contracts was $1.3 billion.
For more information on our hedging transactions, refer to Note 6.
7 unchanged sentences
Current or future tensions and conflicts in the Middle East could adversely affect our business, operating results, financial condition, and cash flows.
−Removed: T able of Contents
In addition, many of our employees in Israel are obligated to perform annual reserve duty in the Israeli military and are subject to being called for active duty under emergency circumstances, which has occurred as a result of hostilities in Israel and the surrounding region.
34 unchanged sentences
In practice, we rely on standard contractual clauses approved under the GDPR to carry out such transfers and to receive personal data subject to the GDPR (directly or indirectly) in the United States.
−Removed: In the future, we may self-certify to the EU-U.S.
+Added: In addition, we self-certified to the EU-U.S.
Data Privacy Framework (“EU-U.S.
−Removed: DPF”), which has been approved for transfers of personal data subject to the GDPR to the United States and requires public disclosures of adherence to data protection principles and the submission of jurisdiction to European regulatory authorities.
−Removed: Following the “Schrems II” decision by the Court of Justice of the European Union, transfers of personal data to recipients in third countries are also subject to additional assessments and safeguards beyond the implementation of approved transfer mechanisms.
−Removed: The decision imposed a requirement for companies to carry out an assessment of the laws and practices governing access to personal data in the third country to ensure an essentially equivalent level of data protection to that afforded in the E.U.
−Removed: T able of Contents
+Added: DPF”), which has been approved for transfers of personal data subject to the GDPR to the United States.
+Added: DPF has been recognized as adequate under EU law to allow transfers of personal data from the EU to companies in the U.S.
+Added: that have self-certified to the framework.
+Added: However, the EU-U.S.
+Added: DPF may be subject to legal challenge, which could cause the legal requirements for data transfers from the EU to be uncertain.
Among other effects, we may experience additional costs associated with increased compliance burdens, reduced demand for our offerings from current or prospective customers in the European Economic Area (“EEA”), Switzerland, and the U.K.
(collectively, “Europe”) to use our products, on account of the risks identified in the Schrems II decision, and we may find it necessary or desirable to make further changes to our processing of personal data of European residents.
−Removed: The regulatory environment applicable to the handling of European residents’ personal data, and our actions taken in response, may cause us to assume additional liabilities or incur additional costs, including in the event we self-certify to the EU-U.S.
+Added: The regulatory environment applicable to the handling of European residents’ personal data, and our actions taken in response, may cause us to assume additional liabilities or incur additional costs.
Moreover, much like with Schrems II, we anticipate future legal challenges to the approved data transfer mechanisms between Europe and the United States, including a challenge to the EU-U.S.
4 unchanged sentences
Moreover, additional state privacy laws have been passed and will require potentially substantial efforts to obtain compliance.
−Removed: These include laws enacted in at least fourteen states, which all go into effect by January 1, 2026.
+Added: These include laws enacted in at least sixteen states, which all go into effect by January 1, 2026.
We may also from time to time be subject to obligations relating to personal data by contract, or face assertions that we are subject to self-regulatory obligations or industry standards.
17 unchanged sentences
Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded on our consolidated financial statements and may materially affect our financial results in the period or periods for which such determination is made.
−Removed: T able of Contents
In addition, our future income tax obligations could be adversely affected by changes in, or interpretations of, tax laws, regulations, policies, or decisions in the United States or in the other jurisdictions in which we operate.
27 unchanged sentences
Enforcement actions, litigation, and sanctions could harm our business, operating results, and financial condition.
−Removed: T able of Contents
Risks Related to Our Notes and Common Stock
2 unchanged sentences
We will need to make cash payments (a) if holders of our 2025 Notes require us to repurchase all, or a portion of, their 2025 Notes upon the occurrence of a fundamental change (e.g., a change of control of Palo Alto Networks, Inc.) before the maturity date, (b) upon conversion of our 2025 Notes, or (c) to repay our 2025 Notes in cash at their maturity unless earlier converted or repurchased.
−Removed: Effective February 1, 2024 through April 30, 2024, all of the 2025 Notes are convertible.
+Added: Effective May 1, 2024 through July 31, 2024, all of the 2025 Notes are convertible.
If all of the note holders decided to convert their 2025 Notes, we would be obligated to pay the $1.2 billion principal amount of the 2025 Notes in cash.
26 unchanged sentences
• departures of key personnel;
−Removed: T able of Contents
• geopolitical or economic uncertainty around the world.
15 unchanged sentences
We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance shareholder value, and share repurchases could affect the price of our common stock.
−Removed: As of January 31, 2024, we had $1.0 billion available under our share repurchase program which will expire on December 31, 2024 and may be suspended or discontinued at any time without prior notice.
+Added: As of April 30, 2024, we had $500.0 million available under our share repurchase program which will expire on December 31, 2024 and may be suspended or discontinued at any time without prior notice.
Such share repurchase program may be suspended or discontinued by the Company at any time without prior notice.
10 unchanged sentences
• establish that our board of directors is divided into three classes, Class I, Class II, and Class III, with three-year staggered terms;
−Removed: T able of Contents
• authorize our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval;
24 unchanged sentences
If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely affected.
−Removed: T able of Contents
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.