What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-09-06 compared with 2023-09-01 · 94 added, 75 removed, 369 unchanged (31% of the section changed)

16 unchanged sentences

A discussion of our accounting policies that require critical estimates, assumptions, and judgments.

• Recent Accounting Pronouncements.

A discussion of expected impacts of impending accounting changes on financial information to be reported in the future.

We empower enterprises, organizations, service providers, and government entities to protect themselves against today’s most sophisticated cyber threats.

Our cybersecurity platforms and services help secure enterprise users, networks, clouds, and endpoints by delivering comprehensive cybersecurity backed by industry-leading artificial intelligence and automation.

We are a leading provider of zero trust solutions, starting with next-generation zero trust network access to secure today’s remote hybrid workforces and extending to securing all users, applications, and infrastructure with zero trust principles.

Our security solutions are designed to reduce customers’ total cost of ownership by improving operational efficiency and eliminating the need for siloed point products.

Our company focuses on delivering value in four fundamental areas:

Our cybersecurity platforms and services help secure enterprise users, networks, clouds, and endpoints by delivering comprehensive cybersecurity backed by AI and automation.

A key element of our strategy is to help our customers simplify their security architectures through consolidating disparate point products.

We execute on this strategy by developing our capabilities and packaging our offerings into platforms which are able to cover many of our customers’ needs in the markets in which we operate.

Our platformization strategy combines various products and services into a tightly integrated architecture and makes security faster, less complex, and more cost-effective.

We focus on delivering value in four sectors of the cybersecurity industry:

Network Security:

• Our network security platform, designed to deliver complete zero trust solutions to our customers, includes our hardware and software ML-Powered Next-Generation Firewalls, as well as a cloud-delivered Secure Access Service Edge (“SASE”).

Prisma ® Access, our Security Services Edge (“SSE”) solution, when combined with Prisma SD-WAN, provides a comprehensive single-vendor SASE offering that is used to secure remote workforces and enable the cloud-delivered branch.

We have been recognized as a leader in network firewalls, SSE, and SD-WAN.

Our network security platform also includes our cloud-delivered security services, such as Advanced Threat Prevention, Advanced WildFire ® , Advanced URL Filtering, DNS Security, IoT/OT Security, GlobalProtect ® , Enterprise Data Loss Prevention (“Enterprise DLP”), Artificial Intelligence for Operations (“AIOps”), SaaS Security API, and SaaS Security Inline.

• Our network security platform, designed to deliver complete zero trust solutions to our customers, includes our hardware and software ML-Powered Next-Generation Firewalls, AI Runtime Security, as well as a cloud-delivered SASE.

Prisma ® Access, our SSE solution, when combined with Prisma SD-WAN, provides a comprehensive single-vendor SASE offering that is used to secure remote workforces and securely enable the cloud-delivered branch.

Our network security platform also includes our cloud-delivered security services, such as Advanced Threat Prevention, Advanced WildFire ® , Advanced URL Filtering, Advanced DNS Security, IoT/OT Security, GlobalProtect ® , Enterprise DLP, AIOps, SaaS Security, and AI Access Security.

Through these add-on security services, our customers are able to secure their content, applications, users, and devices across their entire organization.

Panorama ® , our network security management solution, can centrally manage our network security platform irrespective of form factor, location, or scale.

Strata Cloud Manager, our network security management solution, can centrally manage our network security platform irrespective of form factor, location, or scale.

Strata Cloud Manager includes the Strata Copilot which provides a natural language interface to simplify and accelerate platform management.

Cloud Security:

• We enable cloud-native security through our Prisma Cloud platform.

As a comprehensive Cloud Native Application Protection Platform (“CNAPP”), Prisma Cloud secures multi- and hybrid-cloud environments for applications, data, and the entire cloud native technology stack across the full development lifecycle;

from code to runtime.

For inline network security on multi- and hybrid-cloud environments, we also offer our VM-Series and CN-Series Firewall offerings.

• We deliver scalable and comprehensive security across the cloud application development lifecycle through our Code to Cloud TM platform, Prisma Cloud.

As a comprehensive CNAPP, Prisma Cloud secures multi- and hybrid-cloud environments for applications, data, GenAI ecosystem, and the entire cloud native technology stack across the full development lifecycle, from code to cloud.

We also offer our VM-Series and CN-Series virtual firewalls for inline network security on multi- and hybrid-cloud environments.

Security Operations:

• We deliver the next generation of security automation, security analytics, endpoint security, and attack surface management solutions through our Cortex portfolio.

These include Cortex XSIAM, our AI security automation platform, Cortex XDR ® for the prevention, detection, and response to complex cybersecurity attacks on the endpoint, Cortex XSOAR ® for security orchestration, automation, and response (“SOAR”), and Cortex Xpanse TM for attack surface management (“ASM”).

• We deliver the next generation of security operations capabilities that combine security analytics, endpoint security, automation, and ASM solutions through our Cortex platform.

These include Cortex XSIAM, our AI-driven security operations platform, Cortex XDR ® for the prevention, detection, and response to complex cybersecurity attacks, Cortex XSOAR ® for SOAR, and Cortex Xpanse TM for ASM.

These products are delivered as SaaS or software subscriptions.

Threat Intelligence and Security Consulting (Unit 42):

• Unit 42 brings together world-renowned threat researchers with an elite team of incident responders and security consultants to create an intelligence-driven, response-ready organization to help customers proactively manage cyber risk.

Threat Intelligence and Advisory Services (Unit 42):

Our consultants serve as trusted advisors to our customers by assessing and testing their security controls against the right threats, transforming their security strategy with a threat-informed approach, and responding to security incidents on behalf of our clients.

Additionally, Unit 42 offers managed detection and response and managed threat hunting services.

For fiscal 2024 and 2023, total revenue was $8.0 billion and $6.9 billion, respectively, representing year-over-year growth of 16.5%.

13 unchanged sentences

Our subscription and support revenue grew to $6.4 billion or 80.0% of total revenue for fiscal 2024, representing year-over-year growth of 20.9%.

Our subscriptions provide our end-customers with near real-time access to the latest antivirus, intrusion prevention, web filtering, modern malware prevention, data loss prevention, and cloud access security broker capabilities across the network, endpoints, and the cloud.

When end-customers purchase our physical, virtual, or container firewall appliances, or certain cloud offerings, they typically purchase support in order to receive ongoing security updates, upgrades, bug fixes, and repairs.

In addition to the subscriptions purchased with these appliances, end-customers may also purchase other subscriptions on a per-user, per-endpoint, or capacity-based basis.

Our subscriptions provide our end-customers with near real-time access to the latest antivirus, intrusion prevention, web filtering, modern malware prevention, data loss prevention, CASB and AI security capabilities across the network, endpoints, and the cloud.

When customers purchase our physical, virtual, or container firewall appliances, or certain cloud offerings, they typically purchase support in order to receive ongoing security updates, upgrades, bug fixes, and repairs.

In addition to the subscriptions purchased with these appliances, customers may also purchase other subscriptions on a per-user, per-endpoint, or capacity-based basis.

We also offer professional services, including incident response, risk management, and digital forensic services.

1 unchanged sentence

During fiscal 2024, we introduced several new offerings, including:

Cortex XSIAM 1.0, major updates to Prisma Cloud (including three new security modules), Prisma Access 4.0, PAN-OS 11.0, Cloud NGFW for AWS, and Cloud NGFW for Azure.

Prisma Cloud Darwin release with newly integrated Code to Cloud intelligence capabilities, PAN-OS 11.2 Quasar, Cortex XSIAM 2.0, new Cortex XSIAM features, Prisma SASE 3.0, and Precision AI TM .

Additionally, we acquired productive investments that fit well within our long-term strategy.

For example, in December 2022, we acquired Cider, which we expect will support our Prisma Cloud’s platform approach to securing the entire application security lifecycle from code to cloud.

We believe that the growth of our business and our short-term and long-term success are dependent upon many factors, including our ability to extend our technology leadership, grow our base of end-customers, expand deployment of our portfolio and support offerings within existing end-customers, and focus on end-customer satisfaction.

For example, in December 2023, we acquired Dig, which we expect will enhance our Prisma Cloud capabilities with a DSPM solution that is intended to provide customers with visibility into, and secure data stored across, their multi-cloud environments;

and we acquired Talon, which will support Prisma SASE’s approach to provide secure access to business applications for unmanaged and personal devices with an enterprise browser.

In May 2024, we announced an expanded partnership with International Business Machines Corporation (“IBM”) to deliver AI-powered security outcomes for customers, as part of which we agreed to acquire IBM's QRadar SaaS assets, including QRadar intellectual property rights, customer relationships and customer contracts.

On August 31, 2024, we completed the acquisition of IBM’s QRadar SaaS assets and we expect the acquisition will help accelerate the growth of our Cortex XSIAM business.

To manage any future growth effectively, we must continue to improve and expand our information technology and financial infrastructure, our operating and administrative systems and controls, and our ability to manage headcount, capital, and processes in an efficient manner.

3 unchanged sentences

Our overall performance depends in part on worldwide economic and geopolitical conditions and their impact on customer behavior.

Worsening economic conditions, including inflation, higher interest rates, slower growth, fluctuations in foreign exchange rates, and other conditions, may adversely affect our results of operations and financial performance.

We continue to experience supply chain disruption and incur increased costs resulting from inflationary pressures.

We are monitoring the tensions between China and Taiwan, and between the U.S.

Worsening economic conditions, including inflation, higher interest rates, slower growth, fluctuations in foreign exchange rates, supply chain disruptions, and other conditions, may adversely affect our results of operations and financial performance.

The hostilities in Israel and the surrounding region have increased the levels of economic and political uncertainty.

While we have business operations in Israel, and intend to continue growing our presence in Israel, we currently do not expect significant business disruption.

We are actively monitoring, evaluating, and responding to the developing situation.

We are also monitoring the impact of inflationary pressures and the tensions between China and Taiwan, and between the U.S.

and China, which could have an adverse impact on our business or results of operations in future periods.

22 unchanged sentences

We define billings as total revenue plus the change in total deferred revenue, net of acquired deferred revenue, during the period.

We consider billings to be a key metric used by management to manage our business.

We believe billings provides investors with an important indicator of the health and visibility of our business because it includes subscription and support revenue, which is recognized ratably over the contractual service period, and product revenue, which is recognized at the time of hardware shipment or delivery of software license, provided that all other conditions for revenue recognition have been met.

We consider billings to be a useful metric for management and investors, particularly if we continue to experience increased sales of subscriptions and strong renewal rates for subscription and support offerings, and as we monitor our near-term cash flows.

While we believe that billings provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management, it is important to note that other companies, including companies in our industry, may not use billings, may calculate billings differently, may have different billing frequencies, or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of billings as a comparative measure.

We have considered billings to be a key metric used by management to manage our business.

There are inherent limitations in using billings to evaluate our operating results as the variability in payment terms may cause fluctuation in billings.

Beginning in the first fiscal quarter of 2025, billings will no longer be a key financial metric and will no longer be reported.

We calculate billings in the following manner:

52 unchanged sentences

Income (loss) before income taxes 988.3 12.3 % 566.3 8.2 % (207.2) (3.8) %

Provision for income taxes 126.6 1.8 % 59.8 1.1 % 33.9 0.8 %

Provision for (benefit from) income taxes

(1,589.3) (19.8) % 126.6 1.8 % 59.8 1.1 %

Net income (loss) $ 2,577.6 32.1 % $ 439.7 6.4 % $ (267.0) (4.9) %

22 unchanged sentences

Product $ 1,603.3 $ 1,578.4 $ 24.9 1.6 % $ 1,578.4 $ 1,363.1 $ 215.3 15.8 %

Product revenue increased for fiscal 2023 compared to fiscal 2022 driven by increased demand for our new generation of hardware products, increased software revenue primarily due to a new go-to-market strategy for certain Network Security offerings and an increased demand for our VM-Series virtual firewalls, partially offset by decreased revenue from our prior generation of hardware products.

Product revenue increased for fiscal 2024 compared to fiscal 2023 driven by increased software revenue primarily due to our go-to-market strategy for certain Network Security offerings, and a change in mix shift within our new generation of hardware products, partially offset by decreased demand for our prior generation of hardware products.

SUBSCRIPTION AND SUPPORT REVENUE

19 unchanged sentences

Americas $ 5,482.9 $ 4,719.9 $ 763.0 16.2 % $ 4,719.9 $ 3,802.6 $ 917.3 24.1 %

EMEA 1,359.6 1,055.8 303.8 28.8 % 1,055.8 817.3 238.5 29.2 %

APAC 813.2 643.1 170.1 26.5 % 643.1 501.3 141.8 28.3 %

Europe, the Middle East, and Africa (“EMEA”) 1,602.0 1,359.6 242.4 17.8 % 1,359.6 1,055.8 303.8 28.8 %

Asia Pacific and Japan (“APAC”) 942.6 813.2 129.4 15.9 % 813.2 643.1 170.1 26.5 %

Total revenue $ 8,027.5 $ 6,892.7 $ 1,134.8 16.5 % $ 6,892.7 $ 5,501.5 $ 1,391.2 25.3 %

Revenue from the Americas, Europe, the Middle East, and Africa (“EMEA”) and Asia Pacific and Japan (“APAC”) increased year-over-year for fiscal 2023 as we continued to increase investment in our global sales force in order to support our growth and innovation.

Revenue from the Americas, EMEA and APAC increased year-over-year for fiscal 2024 as we continued to increase investment in our global sales force in order to support our growth and innovation.

Our three geographic theaters had similar year-over-year revenue growth rates for fiscal 2024, with the Americas contributing the highest increase in revenue due to its larger scale.

11 unchanged sentences

Cost of product revenue $ 348.2 $ 418.3 $ (70.1) (16.8) % $ 418.3 $ 455.5 $ (37.2) (8.2) %

Cost of product revenue decreased for fiscal 2023 compared to fiscal 2022 due to a favorable hardware product mix.

Cost of product revenue decreased for fiscal 2024 compared to fiscal 2023 primarily due to decreased demand for our prior generation of hardware products and lower costs largely driven by an easing of supply chain challenges, partially offset by a change in mix shift within our new generation hardware products.

COST OF SUBSCRIPTION AND SUPPORT REVENUE

Cost of subscription and support revenue includes personnel costs for our global customer support and technical operations organizations, customer support and repair costs, third-party professional services costs, data center and cloud hosting service costs, amortization of acquired intangible assets and capitalized software development costs, and shared costs.

Cost of subscription and support revenue includes personnel costs for our global customer support and technical operations organizations, data center and cloud hosting service costs, third-party professional services costs, amortization of acquired intangible assets and capitalized software development costs, customer support and repair costs, and shared costs.

We expect our cost of subscription and support revenue to increase as our installed end-customer base grows and adoption of our cloud-based subscription offerings increases.

18 unchanged sentences

Total gross profit $ 5,968.3 74.3 % $ 4,983.0 72.3 % $ 3,782.8 68.8 %

Product gross margin increased for fiscal 2023 compared to fiscal 2022 primarily due to increased software revenue and a favorable hardware product mix.

Product gross margin increased for fiscal 2024 compared to fiscal 2023 primarily due to increased software revenue and lower costs largely driven by an easing of supply chain challenges.

Subscription and support gross margin increased for fiscal 2024 compared to fiscal 2023 primarily due to our growth in subscription and support revenue, which outpaced the subscription and support costs.

3 unchanged sentences

Our operating expenses also include shared costs, which consist of certain facilities, depreciation, benefits, recruiting, and information technology costs that we allocate based on headcount to each department.

We expect operating expenses generally to increase in absolute dollars and decrease over the long term as a percentage of revenue as we continue to scale our business.

We expect operating expenses generally to increase in absolute dollars and to decrease over the long term as a percentage of revenue as we continue to scale our business.

As of July 31, 2024, we expect to recognize approximately $2.0 billion of share-based compensation expense over a weighted-average period of approximately 2.6 years, excluding additional share-based compensation expense related to any future grants of share-based awards.

10 unchanged sentences

Research and development expense increased for fiscal 2024 compared to fiscal 2023 primarily due to increased personnel costs, which grew $143.4 million, largely due to headcount growth.

The remaining increase in research and development expense was further driven by increased shared costs.

SALES AND MARKETING

8 unchanged sentences

Sales and marketing $ 2,794.5 $ 2,544.0 $ 250.5 9.8 % $ 2,544.0 $ 2,148.9 $ 395.1 18.4 %

Sales and marketing expense increased for fiscal 2023 compared to fiscal 2022 primarily due to increased personnel costs, which grew $290.7 million, largely due to headcount growth and increased travel and entertainment expenses.

Sales and marketing expense increased for fiscal 2024 compared to fiscal 2023 primarily due to increased personnel costs, which grew $117.3 million, largely due to headcount growth.

The increase in sales and marketing expense was further driven by increased costs associated with sales and marketing events and go-to-market initiatives.

7 unchanged sentences

General and administrative $ 680.5 $ 447.7 $ 232.8 52.0 % $ 447.7 $ 405.0 $ 42.7 10.5 %

General and administrative expenses increased for fiscal 2023 compared to fiscal 2022 primarily due to increased personnel costs, which grew $23.2 million, largely due to share-based compensation related to our recent acquisitions and headcount growth.

The increase in general and administrative expense was further driven by slightly higher reserves due to increased receivables as a result of our business growth.

General and administrative expenses increased for fiscal 2024 compared to fiscal 2023 primarily due to litigation-related charges of $204.4 million in fiscal 2024.

Refer to Note 12.

Commitments and Contingencies in Part II, Item 8 of this Annual Report on Form 10-K for more information.

INTEREST EXPENSE

Interest expense primarily consists of interest expense related to our 0.75% Convertible Senior Notes due 2023 (the “2023 Notes”) and the 0.375% Convertible Senior Notes due 2025 (the “2025 Notes,” and together with “2023 Notes,” the “Notes”).

Interest expense primarily consists of interest expense related to our 0.75% Convertible Senior Notes due 2023 (the “2023 Notes”) and our 0.375% Convertible Senior Notes due 2025 (the “2025 Notes,” and together with “2023 Notes,” the “Notes”).

Year Ended July 31, Year Ended July 31,

3 unchanged sentences

Interest expense $ 8.3 $ 27.2 $ (18.9) (69.5) % $ 27.2 $ 27.4 $ (0.2) (0.7) %

Interest expense remained relatively flat for fiscal 2023 compared to fiscal 2022.

Interest expense decreased for fiscal 2024 compared to fiscal 2023 primarily due to maturity of our 2023 Notes in July 2023 and early conversion of our 2025 Notes in fiscal 2024.

Refer to Note 10.

Debt in Part II, Item 8 of this Annual Report on Form 10-K for more information on the Notes.

OTHER INCOME, NET

5 unchanged sentences

Other income, net $ 312.7 $ 206.2 $ 106.5 51.6 % $ 206.2 $ 9.0 $ 197.2 *

Other income, net increased for fiscal 2023 compared to fiscal 2022 primarily due to higher interest income as a result of higher interest rates and higher average cash, cash equivalent, and investments balances for fiscal 2023 compared to fiscal 2022.

PROVISION FOR INCOME TAXES

Provision for income taxes consists primarily of U.S.

taxes driven by capitalization of research and development expenditures, foreign income taxes, and withholding taxes.

We maintain a full valuation allowance for domestic and certain foreign deferred tax assets, including net operating loss carryforwards and certain domestic tax credits.

Our valuation allowance has caused, and may continue to cause, disproportionate relationships between our overall effective tax rate and other jurisdictional measures.

We regularly evaluate the need for a valuation allowance.

Due to recent profitability, a reversal of our valuation allowance in certain jurisdictions in the foreseeable future is reasonably possible.

* Not meaningful

Other income, net increased for fiscal 2024 compared to fiscal 2023 primarily due to higher interest income as a result of higher interest rates and higher average cash, cash equivalents, and investments balance for fiscal 2024 compared to fiscal 2023.

PROVISION FOR (BENEFIT FROM) INCOME TAXES

Provision for (benefit from) income taxes consists primarily of U.S.

taxes, foreign income taxes, and withholding taxes.

We had a benefit from income taxes during fiscal 2024 primarily due to the release of our valuation allowance on U.S.

federal, U.S.

states other than California, and U.K.

deferred tax assets.

We continue to maintain a valuation allowance for California and certain deferred tax assets, including net operating loss carryforwards and certain domestic tax credits.

Year Ended July 31, Year Ended July 31,

2 unchanged sentences

(dollars in millions)

Provision for income taxes $ 126.6 $ 59.8 $ 66.8 111.7 % $ 59.8 $ 33.9 $ 25.9 76.4 %

Provision for (benefit from) income taxes

$ (1,589.3) $ 126.6 $ (1,715.9) * $ 126.6 $ 59.8 $ 66.8 111.7 %

Effective tax rate (160.8) % 22.4 % 22.4 % (28.9) %

Our provision for income taxes for fiscal 2023 was primarily due to U.S.

federal and state income taxes, withholding taxes, and foreign income taxes.

Our effective tax rate varied for fiscal 2023 compared to fiscal 2022, primarily due to our profitability in fiscal 2023 and an increase in U.S.

taxes driven by capitalization of research and development expenditures with no offsetting deferred benefit due to our valuation allowance.

This increase was offset by releases of uncertain tax positions during fiscal 2023 resulting from tax settlements.

* Not meaningful

Our benefit from income taxes in fiscal 2024 was $1.6 billion, a net change of $1.7 billion compared to a provision for income taxes of $126.6 million in fiscal 2023, primarily due to the release of our valuation allowance in fiscal 2024.

This is also the primary driver of the change in our effective tax rate for fiscal 2024 compared to fiscal 2023.

Refer to Note 15.

15 unchanged sentences

However, there could be local withholding taxes due to various foreign countries if certain lower tier earnings are distributed.

Withholding taxes that would be payable upon remittance of these lower tier earnings are not expected to be material.

In July 2018, we issued the 2023 Notes with an aggregate principal amount of $1.7 billion.

The 2023 Notes were converted prior to or settled on the maturity date of July 1, 2023.

During fiscal 2023, we repaid in cash $1.7 billion in aggregate principal amount of the 2023 Notes and issued 11.4 million shares of common stock to the holders for the conversion value in excess of the principal amount of the 2023 Notes converted, which were fully offset by shares we received from our exercise of the associated note hedges.

Withholding taxes that would be payable upon remittance of these lower tier earnings are not material.

Beginning in fiscal 2023, we were required to capitalize and amortize research and development expenses as required by the Tax Cuts and Jobs Act.

As a result of this change and our increased profitability, we have paid significantly more U.S.

cash taxes during fiscal 2024 and we expect our cash tax payments to increase in future periods.

In June 2020, we issued the 2025 Notes with an aggregate principal amount of $2.0 billion.

The 2025 Notes mature on June 1, 2025;

however, under certain circumstances, holders may surrender their 2025 Notes for conversion prior to the applicable maturity date.

Upon conversion of the 2025 Notes, we will pay cash equal to the aggregate principal amount of the 2025 Notes to be converted, and, at our election, will pay or deliver cash and/or shares of our common stock for the amount of our conversion obligation in excess of the aggregate principal amount of the 2025 Notes being converted.

however, under certain circumstances, holders may surrender their 2025 Notes for conversion prior to the maturity date.

Upon conversion of the 2025 Notes, we will pay cash equal to the aggregate principal amount of the 2025 Notes to be converted, and, at our election, we will pay or deliver cash and/or shares of our common stock for the amount of our conversion obligation in excess of the aggregate principal amount of the 2025 Notes being converted.

During fiscal 2024, we repaid in cash $1.0 billion in aggregate principal amount of the 2025 Notes and issued 7.0 million shares of common stock to the holders for the conversion value in excess of the principal amount of the 2025 Notes converted, which were fully offset by shares we received from our exercise of the associated note hedges.

Subsequent to July 31, 2024, through the filing date of this Annual Report on Form 10-K, $285.8 million in aggregate principal amount of the 2025 Notes was converted or had been submitted by the holders for conversion and will settle during the fiscal quarter ending October 31, 2024.

The sale price condition for the 2025 Notes was met during the fiscal quarter ended July 31, 2024, and as a result, holders may convert their 2025 Notes during the fiscal quarter ending October 31, 2024.

1 unchanged sentence

We believe that our cash provided by operating activities, our existing cash, cash equivalents and investments, and existing sources of and access to financing will be sufficient to meet our anticipated cash needs should the holders choose to convert their 2025 Notes during the fiscal quarter ending October 31, 2024 or hold the 2025 Notes until maturity on June 1, 2025.

As of July 31, 2023, substantially all of our 2025 Notes remained outstanding.

As of July 31, 2024, $1.0 billion of our 2025 Notes remained outstanding.

Refer to Note 10.

Debt in Part II, Item 8 of this Annual Report on Form 10-K for more information on the Notes.

In April 2023, we entered into a new credit agreement (the “2023 Credit Agreement”) that provides for a $400.0 million unsecured revolving credit facility (the “2023 Credit Facility”), with an option to increase the amount of the 2023 Credit Facility by up to an additional $350.0 million, subject to certain conditions.

In April 2023, we entered into a credit agreement (the “Credit Agreement”) that provides for a $400.0 million unsecured revolving credit facility (the “Credit Facility”), with an option to increase the amount of the Credit Facility by up to an additional $350.0 million, subject to certain conditions.

The interest rates and commitment fees are also subject to upward and downward adjustments based on our progress towards the achievement of certain sustainability goals related to greenhouse gas emissions.

4 unchanged sentences

In February 2019, our board of directors authorized a $1.0 billion share repurchase program.

In December 2020, August 2021, and August 2022, our board of directors authorized additional $700.0 million, $676.1 million, and $915.0 million increases to this share repurchase program, respectively, bringing the total authorization under this share repurchase program to $3.3 billion.

In December 2020, August 2021, August 2022, and November 2023, our board of directors authorized additional $700.0 million, $676.1 million, $915.0 million, and $316.7 million increases to this share repurchase program, respectively, bringing the total authorization under this share repurchase program to $3.6 billion.

Repurchases will be funded from available working capital and may be made at management’s discretion from time to time.

The expiration date of this repurchase authorization was extended to December 31, 2023, and our repurchase program may be suspended or discontinued at any time.

As of July 31, 2024, $500.0 million remained available for future share repurchases under this repurchase program.

On August 15, 2024, our board of directors authorized a $500.0 million increase to our share repurchase program, bringing the total remaining authorization for future share repurchases to $1.0 billion.

The repurchase authorization will expire on December 31, 2025, and may be suspended or discontinued at any time without prior notice.

Refer to Note 13.

Stockholders’ Equity in Part II, Item 8 of this Annual Report on Form 10-K for information on these repurchase programs.

Stockholders’ Equity in Part II, Item 8 of this Annual Report on Form 10-K for more information on this repurchase program.

LEASES AND OTHER MATERIAL CASH REQUIREMENTS

We have entered into various non-cancelable operating leases primarily for our facilities with original lease periods expiring through the year ending July 31, 2033, with the most significant leases relating to our corporate headquarters in Santa Clara, California.

We have entered into various non-cancelable operating leases, primarily for our offices and data centers, with lease terms expiring through fiscal 2036.

As of July 31, 2024, we have total operating lease obligations of $446.4 million recorded on our consolidated balance sheet.

25 unchanged sentences

We expect to continue such activities as our business grows.

Cash used in investing activities during fiscal 2023 was $2.0 billion, an increase of $1.1 billion compared to fiscal 2022.

The increase was primarily due to an increase in purchases of investments and an increase in net cash payments for business acquisitions, partially offset by an increase in proceeds from sales and maturities of investments during fiscal 2023.

Cash used in investing activities during fiscal 2024 was $1.5 billion, a decrease of $523.9 million compared to fiscal 2023.

The decrease was primarily due to a decrease in purchases of investments, partially offset by a decrease in proceeds from sales and maturities of investments and an increase in net cash payments for business acquisitions during fiscal 2024.

FINANCING ACTIVITIES

Our financing activities have consisted of cash used to repurchase shares of our common stock, proceeds from sales of shares through employee equity incentive plans, and payments for tax withholding obligations of certain employees related to the net share settlement of equity awards.

Cash used in financing activities during fiscal 2023 was $1.7 billion, an increase of $919.7 million compared to fiscal 2022.

The increase was primarily due to repayments of our 2023 Notes upon maturity, partially offset by a decrease in repurchases of our common stock during fiscal 2023.

Our financing activities have consisted of repayments of our convertible senior notes, cash used to repurchase shares of our common stock, proceeds from sales of shares through employee equity incentive plans, and payments for tax withholding obligations of certain employees related to the net share settlement of equity awards.

Cash used in financing activities during fiscal 2024 was $1.3 billion, a decrease of $383.2 million compared to fiscal 2023.

The decrease was primarily due to a decrease in repayments of our Notes, partially offset by an increase in cash used to repurchases of our common stock during fiscal 2024.

Critical Accounting Estimates

45 unchanged sentences

Commitments and Contingencies in Part II, Item 8 of this Annual Report on Form 10-K for more information regarding our litigation.

Recent Accounting Pronouncements

Refer to “Recently Issued Accounting Pronouncements” in Note 1.

Description of Business and Summary of Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K for a description of recent accounting pronouncements and our expectation of their impact, if any, on our results of operations and financial condition.

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.

What changed 10-K

Item 7. Management’s Discussion and Analysis