What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-08-29 compared with 2024-09-06 · 152 added, 137 removed, 326 unchanged (47% of the section changed)

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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 AI and automation.

Our mission is to be the cybersecurity partner of choice for enterprises, organizations, service providers, and government entities to protect our digital way of life.

Our cybersecurity platforms and services help secure enterprise users, networks, clouds, and endpoints by delivering comprehensive cybersecurity backed by artificial intelligence (“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:

Our platformization strategy combines various products and services into a tightly integrated architecture for more secure, faster, and cost-effective outcomes.

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, 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.

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.

Our network security platform is designed to deliver complete zero trust solutions to our customers.

The platform includes:

• Secure Access Service Edge (“SASE”).

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

Prisma Access Browser further extends SASE security and data protection to the end user device, providing workers with freedom to access business applications securely using our secure browser from any device.

• Next-Generation Firewalls.

Our hardware ML-Powered Next-Generation Firewalls (“NGFWs”) secure on-premises environments including campus locations and data centers.

Our software NGFWs secure cloud networks.

• Cloud-Delivered Security Services (“CDSS”).

Our network security platform integrates a suite of CDSS that complements our SASE and Firewall solutions.

These include Advanced Threat Prevention, Advanced WildFire ® , Advanced URL Filtering, Advanced DNS Security, IoT/OT Security, GlobalProtect ® , Prisma Access Agent, Enterprise Data Loss Prevention (“Enterprise DLP”), AI for IT Operations (“AIOps”), Software as a Service (“SaaS”) Security, and AI Access Security.

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

• Prisma AIRS.

Prisma AIRS is a comprehensive AI security platform that has been designed to protect customers’ entire AI ecosystem by providing AI model scanning, posture management, red teaming, run-time security, and AI agent security.

• Strata Cloud Manager (“SCM”).

SCM, our network security management solution, centrally manages network security across all remote workers, branches, headquarters, campuses, and cloud.

SCM leverages AI to simplify and strengthen network security by enabling customers to proactively pinpoint vulnerabilities, gain real-time remediation recommendations, and enhance overall digital experiences, thereby reducing operational burden.

This comprehensive solution includes Strata Copilot, which offers a natural language interface for enhanced insights and guided remediation, and integrates Autonomous Digital Experience Monitoring (“ADEM”) to proactively maintain infrastructure health, facilitate AI-driven one-click troubleshooting, and ensure seamless end-user performance across the enterprise.

Security Operations

Our AI-powered Cortex platform transforms end-to-end security operations with unified data, AI, and automation for more secure, faster, and cost effective outcomes.

We have consolidated our industry-leading Security Operations and Cloud Security capabilities on a single comprehensive platform to provide centralized visibility, proactive protection, real-time prevention, AI-driven insights, and automated remediation across enterprise and cloud.

• Security Operations.

We deliver the next generation of security operations capabilities that unifies standalone Security Information and Event Management (“SIEM”) tools, endpoint security, security automation, cloud detection and response (“CDR”), as well as attack surface management (“ASM”) capabilities on our Cortex ® platform.

These include Cortex XSIAM ® , for AI-powered security operations replacing traditional SIEM tools, Cortex XDR ® , for the prevention, detection, and response to complex cybersecurity attacks, Cortex XSOAR ® , for security orchestration, automation, and response (“SOAR”), and Cortex Xpanse ® , for ASM.

• Cloud Security.

• 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 deliver comprehensive security across the cloud application development lifecycle through Cortex Cloud, delivered as a scalable SaaS offering.

As a comprehensive Cloud Native Application Protection Platform (“CNAPP”) combined with CDR, Cortex Cloud secures multi- and hybrid-cloud environments for applications, data, generative AI (“GenAI”) ecosystem, and the cloud native technology stack across the full development lifecycle, from code to cloud to security operations.

As part of the Cortex Cloud platform, customers can expand from Cortex Cloud to our security operations offerings available on a single user experience and unified agent.

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 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 Advisory Services (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 manage cyber risk.

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.

Threat Intelligence and Advisory Services

• Unit 42 brings together world-renowned expertise across threat research, incident response, and security consulting to deliver intelligence-driven, response-ready outcomes that help customers reduce cyber risk.

Our elite consultants serve as trusted advisors to our customers by assessing and testing their security controls against sophisticated 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 (“MDR”) and managed threat hunting services.

For fiscal 2025 and 2024, total revenue was $9.2 billion and $8.0 billion, respectively, representing year-over-year growth of 14.9%.

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Our product revenue grew to $1.8 billion or 19.5% of total revenue for fiscal 2025, representing year-over-year growth of 12.4%.

Product revenue is derived from sales of our appliances, primarily our ML-Powered Next-Generation Firewall.

Product revenue also includes revenue derived from software licenses of Panorama ® , SD-WAN, and the VM-Series.

Product revenue is derived from sales of hardware products, primarily our ML-Powered Next-Generation Firewall, and software licenses, including SD-WAN, the VM-Series, and Panorama ® .

Our ML-Powered Next-Generation Firewall incorporates our PAN-OS operating system, which provides a consistent set of capabilities across our entire network security product line.

Our appliances and software licenses include a broad set of built-in networking and security features and functionalities.

Our hardware products and software licenses include a broad set of built-in networking and security features and functionalities.

Our products are designed for different performance requirements throughout an organization, ranging from our PA-400, which is designed for small organizations and remote or branch offices, to our top-of-the-line PA-7500, which is designed for large-scale data centers and service provider use.

The same firewall functionality that is delivered in our physical appliances is also available in our VM-Series virtual firewalls, which secure virtualized and cloud-based computing environments, and in our CN-Series container firewalls, which secure container environments and traffic.

The same firewall functionality that is delivered in our hardware products is also available in our VM-Series virtual firewalls, which secure virtualized and cloud-based computing environments, and in our CN-Series container firewalls, which secure container environments and traffic.

Our subscription and support revenue grew to $7.4 billion or 80.5% of total revenue for fiscal 2025, representing year-over-year growth of 15.5%.

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.

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

Our subscriptions also include security operations, which enable customers to leverage the AI-powered Cortex platform for advanced capabilities such as security information and event management, next-generation antivirus, endpoint detection and response, extended detection and response, identity threat detection and response, cloud detection and response, SOAR, ASM, and CNAPP for comprehensive cloud security.

Additionally, we offer MDR for Cortex subscriptions, powered by Unit 42’s elite expertise.

When customers purchase our physical, virtual, or container firewalls, 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 firewalls, 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.

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During fiscal 2025, we introduced several new offerings, including:

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 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.

Prisma Access Browser, new capabilities in our OT Security solution, Cortex Cloud, Prisma AIRS, and Cortex XSIAM 3.0.

Additionally, in August 2024, we completed the acquisition of certain IBM QRadar assets, which we expect will help accelerate the growth of our Cortex business.

Additionally, in July 2025, we completed the acquisition of Protect AI, which we expect will enhance the capabilities of our AI security platform.

In July 2025, we also entered into a definitive agreement to acquire Software Ltd.

(“CyberArk”), an identity security company, which acquisition is expected to close during the second half of our fiscal 2026.

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, focus on end-customer satisfaction, and address any product vulnerabilities.

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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, 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.

Changes in legislation or regulations and actions by regulators, including changes in enforcement and administration policies, may have an impact on our results of operations and financial condition.

Significant changes in U.S.

or global trade policy, including further expansion of U.S.

export/imports controls and tariffs, as well as retaliatory actions by other countries, may materially and adversely affect our business.

Further, economic conditions, including inflation, high interest rates, slow growth, fluctuations in foreign exchange rates, supply chain disruptions, impacts of trade regulations or international trade disputes, and other conditions, may adversely affect our results of operations and financial performance.

The hostilities in Israel and the surrounding region have continued to result in 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 actively monitoring, evaluating, and responding to the situation.

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

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We monitor the key financial metrics set forth in the tables below to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies.

We discuss revenue, gross margin, and the components of operating income (loss) and margin below under “Results of Operations.”

(in millions)

Total deferred revenue $ 11,480.5 $ 9,296.4

Cash, cash equivalents, and investments $ 6,752.0 $ 5,437.9

We discuss revenue, gross margin, and the components of operating income and margin below under “Results of Operations.”

(in billions)

Next-Generation Security Annualized Recurring Revenue

Remaining performance obligations

$ 15.8 $ 12.7

Year Ended July 31,

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Gross margin 73.4 % 74.3 % 72.3 %

Operating income (loss) $ 683.9 $ 387.3 $ (188.8)

Operating income

$ 1,242.9 $ 683.9 $ 387.3

Operating margin 13.5 % 8.5 % 5.6 %

Billings $ 10,208.1 $ 9,194.4 $ 7,471.5

Billings year-over-year percentage increase 11.0 % 23.1 % 37.0 %

Cash flow provided by operating activities $ 3,716.0 $ 3,257.6 $ 2,777.5

Free cash flow (non-GAAP) $ 3,469.8 $ 3,100.8 $ 2,631.2

• Deferred Revenue.

Our deferred revenue primarily consists of amounts that have been invoiced but have not been recognized as revenue as of the period end.

The majority of our deferred revenue balance consists of subscription and support revenue that is recognized ratably over the contractual service period.

We monitor our deferred revenue balance because it represents a significant portion of revenue to be recognized in future periods.

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

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:

Year Ended July 31,

2024 2023 2022

(in millions)

Total revenue $ 8,027.5 $ 6,892.7 $ 5,501.5

change in total deferred revenue, net of acquired deferred revenue

2,180.6 2,301.7 1,970.0

Billings $ 10,208.1 $ 9,194.4 $ 7,471.5

• Next-Generation Security Annualized Recurring Revenue (“NGS ARR”).

Our NGS ARR represents the annualized allocated revenue of all active contracts as of the final day of the reporting period related to all product, subscription and support offerings, excluding revenue from hardware products, and legacy attached subscriptions, support offerings and professional services.

NGS ARR is an operating metric that we use to assess the strength and trajectory of our business.

NGS ARR should be viewed independently of revenue, deferred revenue and remaining performance obligations and does not represent our revenue under U.S.

GAAP on an annualized basis, as it is an operating metric that can be impacted by contract start and end dates and renewal rates.

NGS ARR is not intended to be a replacement for forecasts of revenue.

The scope of products, subscriptions, and support offerings that contribute to NGS ARR will generally increase over time as we introduce or acquire new next-generation products, subscriptions, and support offerings.

• Cash Flow Provided by Operating Activities.

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5,527.0 59.9 % 5,284.4 65.8 % 4,595.7 66.7 %

Operating income (loss) 683.9 8.5 % 387.3 5.6 % (188.8) (3.4) %

Operating income

1,242.9 13.5 % 683.9 8.5 % 387.3 5.6 %

Interest expense (3.0) — % (8.3) (0.1) % (27.2) (0.4) %

Other income, net 355.8 3.8 % 312.7 3.9 % 206.2 3.0 %

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

Income before income taxes

1,595.7 17.3 % 988.3 12.3 % 566.3 8.2 %

Provision for (benefit from) income taxes

461.8 5.0 % (1,589.3) (19.8) % 126.6 1.8 %

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

$ 1,133.9 12.3 % $ 2,577.6 32.1 % $ 439.7 6.4 %

(1) Includes share-based compensation as follows:

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PRODUCT REVENUE

Product revenue is derived from sales of our appliances, primarily our ML-Powered Next-Generation Firewall.

Product revenue also includes revenue derived from software licenses of Panorama, SD-WAN, and the VM-Series.

Our appliances and software licenses include a broad set of built-in networking and security features and functionalities.

Product revenue is derived from sales of hardware products, primarily our ML-Powered Next-Generation Firewall, and software licenses, including SD-WAN, the VM-Series, and Panorama.

Our hardware products and software licenses include a broad set of built-in networking and security features and functionalities.

We recognize product revenue at the time of hardware shipment or delivery of software license.

As a percentage of product revenue, we expect our revenue from software licenses to vary from quarter to quarter and increase over the long term as we improve features and capabilities of our on-premise software, renew our software license contracts, and expand our installed end-customer base.

Year Ended July 31, Year Ended July 31,

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Product $ 1,801.9 $ 1,603.3 $ 198.6 12.4 % $ 1,603.3 $ 1,578.4 $ 24.9 1.6 %

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.

Product revenue increased for fiscal 2025 compared to fiscal 2024 driven by an increase in price of, and allocation to, on-premise software licenses due to enhanced features and capabilities beginning in the second quarter of fiscal 2025, and an increased demand for our new generation of hardware products and accessories, partially offset by decreased demand for our prior generation of hardware products.

SUBSCRIPTION AND SUPPORT REVENUE

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Total revenue $ 9,221.5 $ 8,027.5 $ 1,194.0 14.9 % $ 8,027.5 $ 6,892.7 $ 1,134.8 16.5 %

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.

Revenue from the Americas, EMEA and APAC increased year-over-year for fiscal 2025 as we continued to increase investment in our global sales force in order to support our growth and innovation, with the Americas contributing the highest increase in revenue due to its larger scale.

COST OF REVENUE

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Cost of product revenue primarily includes costs paid to our manufacturing partners for procuring components and manufacturing our products.

Our cost of product revenue also includes personnel costs, which consist of salaries, benefits, bonuses, share-based compensation, and travel associated with our operations organization, amortization of intellectual property licenses, product testing costs, shipping and tariff costs, and shared costs.

Our cost of product revenue also includes personnel costs, which consist of salaries, benefits, bonuses, share-based compensation, and travel associated with our operations organization, inventory excess and obsolete charges, shipping and tariff costs, amortization of intellectual property licenses, product testing costs, and shared costs.

Shared costs consist of certain facilities, depreciation, benefits, recruiting, and information technology costs that we allocate based on headcount.

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Cost of product revenue $ 413.2 $ 348.2 $ 65.0 18.7 % $ 348.2 $ 418.3 $ (70.1) (16.8) %

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 product revenue increased for fiscal 2025 compared to fiscal 2024 primarily due to an increase in inventory excess and obsolete charges and an increased demand for our new generation hardware products and accessories, partially offset by a decreased demand for our prior generation of hardware products.

COST OF SUBSCRIPTION AND SUPPORT REVENUE

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Personnel costs grew $52.9 million for fiscal 2025 compared to fiscal 2024, primarily due to headcount growth.

The increase in cost of subscription and support revenue was further driven by increased professional services expense.

Gross margin has been and will continue to be affected by a variety of factors, including the introduction of new products, manufacturing costs, the average sales price of our products, cloud hosting service costs, personnel costs, the mix of products sold, and the mix of revenue between product and subscription and support offerings.

Our virtual and higher-end firewall products generally have higher gross margins than our lower-end firewall products within each product series.

Our higher-end firewall products generally have higher gross margins than our lower-end firewall products within each product series.

We expect our gross margins to vary over time depending on the factors described above.

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2025 2024 2023

Margin Amount Gross

Amount Gross Margin

(dollars in millions)

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Total gross profit $ 6,769.9 73.4 % $ 5,968.3 74.3 % $ 4,983.0 72.3 %

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.

Product gross margin decreased for fiscal 2025 compared to fiscal 2024 primarily due to unfavorable hardware product mix and an increase in inventory excess and obsolete charges, partially offset by increased software revenue.

Subscription and support gross margin decreased for fiscal 2025 compared to fiscal 2024 primarily due to an increase in costs related to our cloud-based offerings, partially offset by increased leverage of our global customer service organization.

OPERATING EXPENSES

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Research and development $ 1,984.1 $ 1,809.4 $ 174.7 9.7 % $ 1,809.4 $ 1,604.0 $ 205.4 12.8 %

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.

Research and development expense increased for fiscal 2025 compared to fiscal 2024 primarily due to increased personnel costs, which grew $123.4 million for fiscal 2025 compared to fiscal 2024, largely due to headcount growth.

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

SALES AND MARKETING

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Sales and marketing $ 3,100.2 $ 2,794.5 $ 305.7 10.9 % $ 2,794.5 $ 2,544.0 $ 250.5 9.8 %

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.

Sales and marketing expense increased for fiscal 2025 compared to fiscal 2024 primarily due to increased personnel costs, which grew $263.6 million for fiscal 2025 compared to fiscal 2024, largely due to headcount growth.

GENERAL AND ADMINISTRATIVE

General and administrative expense consists primarily of personnel costs and shared costs for our executive, finance, human resources, information technology, and legal organizations, and professional services costs, which consist primarily of legal, auditing, accounting, and other consulting costs.

General and administrative expense also includes change in fair value of contingent consideration liability.

We expect general and administrative expense to increase in absolute dollars over time as we increase the size of our general and administrative organizations and incur additional costs to support our business growth, although our general and administrative expense may fluctuate as a percentage of total revenue.

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General and administrative $ 442.7 $ 680.5 $ (237.8) (34.9) % $ 680.5 $ 447.7 $ 232.8 52.0 %

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.

General and administrative expenses decreased for fiscal 2025 compared to fiscal 2024 primarily due to litigation-related charges of $204.4 million in fiscal 2024 and a partial release of litigation-related accrual of $38.8 million in fiscal 2025.

We also recorded a gain of $135.3 million in fiscal 2025 for the change in fair value of the contingent consideration liability from our acquisition of certain IBM QRadar assets.

The decrease in general and administrative expense was partially offset by increased personnel costs, which grew $153.2 million, largely due to increased share-based compensation.

INTEREST EXPENSE

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Interest expense $ 3.0 $ 8.3 $ (5.3) (63.9) % $ 8.3 $ 27.2 $ (18.9) (69.5) %

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.

Interest expense decreased for fiscal 2025 compared to fiscal 2024 primarily due to conversions of the 2025 Notes prior to or upon maturity in June 2025.

Refer to Note 11.

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Other income, net $ 355.8 $ 312.7 $ 43.1 13.8 % $ 312.7 $ 206.2 $ 106.5 51.6 %

* 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.

Other income, net increased for fiscal 2025 compared to fiscal 2024 primarily due to higher interest income as a result of higher average cash, cash equivalents, and investments balance for fiscal 2025 compared to fiscal 2024.

The increase was further driven by increased gains from our non-designated derivative instruments and investments, partially offset by increased foreign currency exchange losses for fiscal 2025 compared to fiscal 2024.

PROVISION FOR (BENEFIT FROM) INCOME TAXES

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

taxes, foreign income taxes, and withholding taxes.

Provision for income taxes consists primarily of U.S.

and foreign income taxes.

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

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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.

We continue to maintain a valuation allowance for California and certain deferred tax assets.

Year Ended July 31, Year Ended July 31,

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* 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.

Our provision for income taxes in fiscal 2025 was $461.8 million, a net change of $2.1 billion compared to a benefit from income taxes of $1.6 billion in fiscal 2024, 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 2025 compared to fiscal 2024.

During the year ended July 31, 2025, we recorded a deferred tax provision of $218.5 million arising from the remeasurement of our basis differences associated with the U.S.

tax effects of foreign deferred tax assets.

Our remeasurement is a result of the One Big Beautiful Bill Act ("OBBB") enacted on July 4, 2025 which provides for significant tax law changes and modifications including changes to the U.S.

effective tax rates on certain foreign earnings.

Refer to Note 16.

Income Taxes in Part II, Item 8 of this Annual Report on Form 10-K for more information.

Income Taxes in Part II, Item 8 of this Annual Report on Form 10-K for more information on OBBB.

Liquidity and Capital Resources

(in millions)

Working capital (1)

Working capital (deficit) (1)

$ (465.2) $ (833.0)

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Total cash, cash equivalents, and investments $ 8,458.8 $ 6,752.0

(1) Current liabilities included net carrying amounts of convertible senior notes of $1.0 billion and $2.0 billion as of July 31, 2024 and 2023, respectively.

(1) Current liabilities included net carrying amounts of convertible senior notes of $1.0 billion as of July 31, 2024.

Refer to Note 11.

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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 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.

If all of the holders convert their 2025 Notes during this period, we would be obligated to settle the $1.0 billion principal amount of the 2025 Notes in cash.

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, 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.

The 2025 Notes were converted prior to or settled on the maturity date of June 1, 2025.

During fiscal 2025, we repaid in cash $965.6 million in aggregate principal amount of the 2025 Notes and issued 14.0 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.

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.

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.

As of July 31, 2025, there were no amounts outstanding, and we were in compliance with all covenants under the Credit Agreement.

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

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.

Our board of directors subsequently authorized additional increases to this share repurchase program, bringing the total authorization to $4.1 billion.

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

As of July 31, 2025, $1.0 billion remained available for future share repurchases under this repurchase program.

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

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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

CONTRACTUAL OBLIGATIONS AND OTHER MATERIAL CASH REQUIREMENTS

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, 2025, we have total operating lease obligations of $417.4 million recorded on our consolidated balance sheet.

As of July 31, 2024, our commitments to purchase products, components, cloud and other services totaled $4.8 billion.

As of July 31, 2025, our commitments to purchase products, components, cloud hosting and other services totaled $7.1 billion.

Refer to Note 13.

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

Our acquisition of certain IBM QRadar assets on August 31, 2024 included contingent consideration that requires potential future payments through the fiscal quarter ending October 2028.

As of July 31, 2025, we have total contingent consideration obligation of $513.6 million recorded on our consolidated balance sheet.

Refer to Note 3.

Fair Value Measurements and Note 8.

Acquisitions in Part II, Item 8 of this Annual Report on Form 10-K for more information on our contingent consideration obligation.

On July 30, 2025, we entered into a definitive agreement to acquire CyberArk.

The acquisition is expected to close during the second half of our fiscal 2026, subject to the satisfaction of customary closing conditions.

Under the terms of the definitive agreement, CyberArk shareholders will receive $45.00 in cash and 2.2005 shares of our common stock for each CyberArk share.

This represents an equity value for CyberArk of approximately $25 billion based on the unaffected 10-day average daily volume-weighted average trading prices of our common stock as of July 25, 2025.

We expect to fund the cash portion of the consideration with our cash on hand.

Refer to Part I, Item 1A “Risk Factors” in this Form 10-K and Note 8.

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

The following table summarizes our cash flows for the years ended July 31, 2025, 2024, and 2023:

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Net increase (decrease) in cash, cash equivalents, and restricted cash

$ 732.4 $ 404.6 $ (982.6)

Cash from operations could be affected by various risks and uncertainties detailed in Part I, Item 1A “Risk Factors” in this Form 10-K.

We believe that our cash flow from operations with existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next 12 months and thereafter for the foreseeable future.

Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products and subscription and support offerings, the costs to acquire or invest in complementary businesses and technologies, the costs to ensure access to adequate manufacturing capacity, the investments in our infrastructure to support the adoption of our cloud-based subscription offerings, the repayment obligations associated with our 2025 Notes, the continuing market acceptance of our products and subscription and support offerings and macroeconomic events.

Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products and subscription and support offerings, the costs to acquire or invest in complementary businesses and technologies, the costs to ensure access to adequate manufacturing capacity, the investments in our infrastructure to support the adoption of our cloud-based subscription offerings, the continuing market acceptance of our products and subscription and support offerings and macroeconomic events.

In addition, from time to time, we may incur additional tax liability in connection with certain corporate structuring decisions.

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OPERATING ACTIVITIES

Our operating activities have consisted of net income (losses) adjusted for certain non-cash items and changes in assets and liabilities.

Our largest source of cash provided by our operations is receipts from our billings.

Our operating activities have consisted of net income adjusted for certain non-cash items and changes in assets and liabilities.

Our largest source of cash provided by our operations is receipts from our customers.

Net cash provided by operating activities can be impacted by factors such as timing of payments and collections, vendor payment terms, and timing and amount of tax payments.

Cash provided by operating activities during fiscal 2025 was $3.7 billion, an increase of $458.4 million compared to fiscal 2024.

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We expect to continue such activities as our business grows.

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.

Cash used in investing activities during fiscal 2025 was $2.2 billion, an increase of $694.8 million compared to fiscal 2024.

The increase was primarily due to an increase in net cash payments for business acquisitions and higher purchases of investments during fiscal 2025.

FINANCING ACTIVITIES

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.

Cash used in financing activities during fiscal 2025 was $778.9 million, a decrease of $564.2 million compared to fiscal 2024.

The decrease was primarily due to a decrease in cash used to repurchase our common stock which did not recur during fiscal 2025.

Critical Accounting Estimates

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The majority of our contracts with our customers include various combinations of our products and subscriptions and support.

Our appliances and software licenses have significant standalone functionalities and capabilities.

Accordingly, these appliances and software licenses are distinct from our subscriptions and support services as the customer can benefit from the product without these services and such services are separately identifiable within the contract.

Our hardware products and software licenses are distinct from our subscriptions and support services as the customer can benefit from the product without these services and such services are separately identifiable within the contract.

We account for multiple agreements with a single customer as a single contract if the contractual terms and/or substance of those agreements indicate that they may be so closely related that they are, in effect, parts of a single contract.

The amount of consideration we expect to receive in exchange for delivering on the contract is allocated to each performance obligation based on its relative standalone selling price.

We establish standalone selling price using the prices charged for a deliverable when sold separately.

If the standalone selling price is not observable through past transactions, we estimate the standalone selling price based on our pricing model and our go-to-market strategy, which include factors such as type of sales channel (channel partner or end-customer), the geographies in which our offerings were sold (domestic or international), and offering type (products, subscriptions, or support).

When estimating standalone selling price, we first consider the prices charged for a deliverable when sold separately.

If the standalone selling price is not observable through past transactions, we estimate it based on our pricing model and our go-to-market strategy, which include factors such as type of sales channel (channel partner or end-customer), the geographies in which our offerings were sold (domestic or international), and offering type (products, subscriptions, or support).

As our business offerings evolve over time, we may be required to modify our estimated standalone selling prices, and as a result the timing and classification of our revenue could be affected.

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In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

We recognize liabilities for uncertain tax positions based on a two-step process.

The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.

The second step requires us to estimate and measure the tax benefit as the largest amount that is more likely than not to be realized upon ultimate settlement.

Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.

Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals.

We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate.

To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences may impact the provision for income taxes in the period in which such determination is made.

MANUFACTURING PARTNER AND SUPPLIER LIABILITIES

We outsource most of our manufacturing, repair, and supply chain management operations to our EMS provider, which procures components and assembles our products based on our demand forecasts.

These forecasts of future demand are based upon historical trends and analysis from our sales and product management functions as adjusted for overall market conditions.

We accrue costs for manufacturing purchase commitments in excess of our forecasted demand, including costs for excess components or for carrying costs incurred by our manufacturing partners and component suppliers.

Actual component usage and product demand may be materially different from our forecast and could be caused by factors outside of our control, which could have an adverse impact on our results of operations.

Through July 31, 2024, we have not accrued significant costs associated with this exposure.

We recognize liabilities for uncertain tax positions based on a two-step process which includes evaluating if a tax position is more likely than not to be sustained on audit and then measuring the tax benefit as the largest amount that is more likely than not to be realized upon ultimate settlement.

Assumptions, judgment, and the use of estimates are required in determining if the more-likely-than-not standard has been met and in determining the expected benefit when developing the provision for income taxes.

Our evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law or guidance, correspondence with tax authorities during the course of audits, and effective settlement of audit issues.

Changes in these or other factors could result in material increases or decreases in our provision for (benefit from) income taxes in the period in which we make the change.

LOSS CONTINGENCIES

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

BUSINESS COMBINATIONS

We make significant estimates, assumptions, and judgments when valuing assets acquired and liabilities assumed, especially with respect to purchased intangible assets, in connection with the initial purchase price allocation of an acquired business.

Critical estimates in valuing certain purchased intangible assets include, but are not limited to, cash flows that an asset is expected to generate in the future, discount rates, the time and expense that would be necessary to recreate the assets, and the profit margin a market participant would receive on such recreated assets.

The amounts and useful lives assigned to identified intangible assets impact the amount and timing of future amortization expense.

One of our business combinations has included post-closing payments contingent upon the occurrence of future events and/or certain conditions being met.

Critical estimates used in valuing our contingent consideration obligation include, but are not limited to, estimated future cash payments related to customers entering into qualified new transactions and risk-adjusted discount rates used to present value the expected cash flows.

These estimates and assumptions are updated to revalue our contingent consideration liability at the end of each reporting period.

Accordingly, subsequent changes in underlying facts and circumstances could result in changes in these estimates and assumptions, which could have a material impact on the estimated future fair values of these obligations.

Recent Accounting Pronouncements

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

Refer to “Recently Adopted Accounting Pronouncement” and “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