What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-20 compared with 2025-05-21 · 158 added, 176 removed, 282 unchanged (54% of the section changed)

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the sufficiency of our cash flow from operations with existing cash, cash equivalents, and investments to meet our cash needs for the foreseeable future;

our ability to successfully acquire and integrate companies and assets and expectations and intentions with respect to the assets, products and technologies that we acquire;

our ability to successfully acquire and integrate companies and assets and expectations and intentions with respect to the assets, products and technologies that we acquire, including with respect to our proposed acquisition of CyberArk Software Ltd.

and our expectations regarding the benefits and synergies of the proposed acquisition;

expectations regarding contingent consideration obligations;

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• Results of Operations.

A discussion of the nature and trends in our financial results and an analysis of our financial results comparing the three and nine months ended April 30, 2025 to the three and nine months ended April 30, 2024.

A discussion of the nature and trends in our financial results and an analysis of our financial results comparing the three months ended October 31, 2025 to the three months ended October 31, 2024.

• Liquidity and Capital Resources.

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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 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.

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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, Prisma AIRS TM , 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 securely enable the cloud-delivered branch.

Prisma Access Browser extends SASE security and data protection to the end user device, giving workers complete device freedom to access business applications securely using a secure browser.

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 Data Loss Prevention (“Enterprise DLP”), AI for IT Operations (“AIOps”), software as a service (“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.

Prisma AIRS is a comprehensive AI security platform that protects customers’ AI ecosystem—AI apps, agents, models, and data—and aims to make it secure at every step.

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

Strata Cloud Manager includes Strata Copilot, which offers a natural language interface to simplify and strengthen network security, and Autonomous Digital Experience Monitoring.

Security Operations and Cloud Security:

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

We have merged 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.

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 SASE offering that secures users working from anywhere and pioneers the modernization of branch offices.

Prisma Browser further extends zero-trust security and data protection to the browser, where the majority of work is done today, providing users with the freedom to work 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, Device 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 Security, AI Posture Management, AI Red Teaming, AI Runtime 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.

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-driven 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.

These products are delivered as SaaS or software subscriptions.

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 comprehensive security across the cloud application development lifecycle through Cortex Cloud, the next generation of Prisma Cloud, delivered as a scalable SaaS offering.

As a comprehensive Cloud Native Application Protection Platform (“CNAPP”) merged 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 platform, customers can expand from Cortex Cloud to our security operations offerings available on a single user experience and unified agent.

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.

Threat Intelligence and Advisory Services (Unit 42):

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.

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Additionally, Unit 42 offers managed detection and response (“MDR”) and managed threat hunting services.

For the third quarter of fiscal 2025 and 2024, total revenue was $2.3 billion and $2.0 billion, respectively, representing year-over-year growth of 15.3%.

For the first quarter of fiscal 2026 and 2025, total revenue was $2.5 billion and $2.1 billion, respectively, representing year-over-year growth of 16%.

Our growth reflects the increased adoption of our portfolio, which consists of product, subscriptions, and support.

We believe our portfolio will enable us to benefit from recurring revenues and new revenues as we continue to grow our end-customer base.

As of April 30, 2025, we had end-customers in over 180 countries.

As of October 31, 2025, we had end-customers in over 180 countries.

Our end-customers represent a broad range of industries, including education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications, and include almost all of the Fortune 100 companies and a majority of the Global 2000 companies.

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We primarily use a two-tiered, indirect fulfillment model whereby we sell our products, subscriptions, and support to our distributors, which, in turn, sell to our resellers, which then sell to our end-customers.

Our product revenue grew to $452.7 million, or 19.8% of total revenue, for the third quarter of fiscal 2025, representing year-over-year growth of 15.8%.

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 product revenue grew to $434 million, or 17.5% of total revenue, for the first quarter of fiscal 2026, representing year-over-year growth of 23%.

Product revenue is derived from sales of hardware products, primarily our ML-Powered Next-Generation Firewall and software licenses, including SD-WAN, 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 products are designed for different performance requirements throughout an organization, ranging from our PA-400 Series, 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.

Our subscription and support revenue grew to $1.8 billion, or 80.2% of total revenue, for the third quarter of fiscal 2025, representing year-over-year growth of 15.2%.

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

Our subscriptions also include security operations, which enable customers to leverage the AI-driven 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.

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 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 $2.0 billion, or 82.5% of total revenue, for the first quarter of fiscal 2026, representing year-over-year growth of 14%.

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 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.

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.

We continue to invest in innovation as we evolve and further extend the capabilities of our portfolio, as we believe that innovation and timely development of new features and products are essential to meeting the needs of our end-customers and improving our competitive position.

For example, in April 2025, we introduced several new offerings, including:

Prisma AIRS, new SASE innovations such as Prisma Access Browser 2.0, and Cortex XSIAM 3.0.

Additionally, we continue to make strategic investments that fit within our long-term strategy.

For example, in April 2025, we entered into a definitive agreement to acquire Protect AI, Inc., a privately-held cyber security company (“Protect AI”), and we expect the acquisition will enhance the capabilities of our AI security platform.

The acquisition of Protect AI is expected to close by the first quarter of fiscal 2026, subject to the satisfaction of closing conditions, including regulatory clearance.

We continue to invest in innovation as we evolve and further extend the capabilities of our portfolio, as we believe that innovation and timely development of and investment in new features and products are essential to meeting the needs of our end-customers and improving our competitive position.

For example, in August 2025, we introduced innovations through a software upgrade to PAN-OS 12.1 Orion to provide enterprise wide quantum security readiness for our customers.

In October 2025, we launched Prisma AIRS 2.0, a major platform upgrade that completes the native integration of the recently acquired Protect AI, Inc.

to provide customers with end-to-end protection across AI application lifecycle.

Additionally, in July 2025, we entered into a definitive agreement to acquire CyberArk Software Ltd.

(“CyberArk”), an identity security company, which acquisition is expected to close during the third quarter of our fiscal 2026, subject to the satisfaction of customary closing conditions.

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

Further, worsening 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.

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.

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

April 30, 2025 July 31, 2024

October 31, 2025 July 31, 2025

(in billions)

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$ 15.5 $ 15.8

Three Months Ended April 30, Nine Months Ended April 30,

2025 2024 2025 2024

Three Months Ended October 31,

(dollars in millions)

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• 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 for Prisma and Cortex offerings inclusive of the VM-Series and related services, and certain cloud-delivered security services.

Beginning in the first quarter of fiscal 2025, NGS ARR includes revenue attributable to QRadar SaaS contracts.

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.

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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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GAAP, is provided below:

Nine Months Ended April 30,

Three Months Ended October 31,

(in millions)

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Net cash used in investing activities $ (983) $ (544)

Net cash used in financing activities $ (404.8) $ (1,163.8)

Net cash provided by (used in) financing activities $ 8 $ (220)

Results of Operations

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The period-to-period comparison of results is not necessarily indicative of results for future periods.

Three Months Ended April 30, Nine Months Ended April 30,

2025 2024 2025 2024

Amount % of Revenue Amount % of Revenue Amount % of Revenue Amount % of Revenue

Three Months Ended October 31,

Amount % of Revenue Amount % of Revenue

(dollars in millions)

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Income before income taxes 412 16.7 % 368 17.2 %

Provision for (benefit from) income taxes 48.4 2.1 % (27.6) (1.3) % 123.8 1.8 % (1,550.6) (26.5) %

Provision for income taxes 78 3.2 % 17 0.8 %

Net income $ 334 13.5 % $ 351 16.4 %

(1) Includes share-based compensation as follows:

Three Months Ended April 30, Nine Months Ended April 30,

2025 2024 2025 2024

Three Months Ended October 31,

(in millions)

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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, 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.

Three Months Ended April 30, Nine Months Ended April 30,

2025 2024 Change 2025 2024 Change

Amount Amount Amount % Amount Amount Amount %

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.

Three Months Ended October 31,

2025 2024 Change

Amount Amount Amount %

(dollars in millions)

Product $ 434 $ 354 $ 80 23 %

Product revenue increased for the three and nine months ended April 30, 2025 compared to the same periods in 2024 driven by increased demand for our new generation of hardware products and accessories, and 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, partially offset by decreased demand for our prior generation of hardware products.

Product revenue increased for the three months ended October 31, 2025 compared to the same period in 2024 driven by an increased product demand and 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.

SUBSCRIPTION AND SUPPORT REVENUE

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As a percentage of total revenue, we expect our subscription and support revenue to vary from quarter to quarter and increase over the long term as we introduce new subscriptions, renew existing subscription and support contracts, and expand our installed end-customer base.

Three Months Ended April 30, Nine Months Ended April 30,

2025 2024 Change 2025 2024 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2025 2024 Change

Amount Amount Amount %

(dollars in millions)

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Total subscription and support $ 2,040 $ 1,785 $ 255 14 %

Subscription and support revenue increased for the three and nine months ended April 30, 2025 compared to the same periods in 2024 primarily due to increased demand for our subscription and support offerings from our end-customers.

Subscription and support revenue increased for the three months ended October 31, 2025 compared to the same period in 2024 due to increased demand for our subscription and support offerings from our end-customers.

The mix between subscription revenue and support revenue will fluctuate over time, depending on the introduction of new subscription offerings, renewals of support services, and our ability to increase sales to new and existing end-customers.

REVENUE BY GEOGRAPHIC THEATER

Three Months Ended April 30, Nine Months Ended April 30,

2025 2024 Change 2025 2024 Change

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Three Months Ended October 31,

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(dollars in millions)

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Total revenue $ 2,474 $ 2,139 $ 335 16 %

Revenue from the Americas, EMEA, and APAC increased for the three and nine months ended April 30, 2025 compared to the same periods in 2024 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.

Revenue from the Americas, EMEA, and APAC increased for the three months ended October 31, 2025 compared to the same period in 2024 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.

We expect our cost of product revenue to fluctuate with our revenue from hardware products.

Three Months Ended April 30, Nine Months Ended April 30,

2025 2024 Change 2025 2024 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2025 2024 Change

Amount Amount Amount %

(dollars in millions)

Cost of product revenue $ 89 $ 75 $ 14 19 %

Cost of product revenue increased for the three and nine months ended April 30, 2025 compared to the same periods in 2024 primarily due to increased demand for our new generation hardware products and an increase in inventory reserves.

The increase in cost of product revenue for the nine months ended April 30, 2025 was partially offset by increasing benefits from manufacturing in a foreign trade zone established in July 2024.

Cost of product revenue increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to increased product volume and other product costs.

The remaining increase was primarily driven by higher tariff costs.

COST OF SUBSCRIPTION AND SUPPORT REVENUE

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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.

Three Months Ended April 30, Nine Months Ended April 30,

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Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2025 2024 Change

Amount Amount Amount %

(dollars in millions)

Cost of subscription and support revenue $ 549 $ 479 $ 70 15 %

Cost of subscription and support revenue increased for the three and nine months ended April 30, 2025 compared to the same periods in 2024 primarily due to increased costs to support the growth of our subscription and support offerings.

Cloud hosting service costs, which support our cloud-based subscription offerings, increased $55.7 million and $141.4 million for the three and nine months ended April 30, 2025, respectively, compared to the same periods in 2024.

Personnel costs grew $14.0 million and $39.8 million for the three and nine months ended April 30, 2025, respectively, compared to the same periods in 2024, primarily due to headcount growth.

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

Cost of subscription and support revenue increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to increased costs to support the growth of our subscription and support offerings.

Cloud hosting service costs, which support our cloud-based subscription offerings, increased $48 million for the three months ended October 31, 2025 compared to the same period in 2024.

Personnel costs grew $14 million for the three months ended October 31, 2025 compared to the same period in 2024, primarily due to headcount growth.

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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Amount Gross Margin Amount Gross Margin Amount Gross Margin Amount Gross Margin

Three Months Ended October 31,

Amount Gross Margin Amount Gross Margin

(dollars in millions)

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Total gross profit $ 1,836 74.2 % $ 1,585 74.1 %

Product gross margin decreased for the three and nine months ended April 30, 2025 compared to the same periods in 2024 primarily due to an increase in inventory reserves.

The decrease in product gross margin for the nine months ended April 30, 2025 was partially offset by increasing benefits from manufacturing in a foreign trade zone established in July 2024.

Subscription and support gross margin decreased for the three and nine months ended April 30, 2025 compared to the same periods in 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.

Product gross margin increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to continued shift in our product revenue mix toward software, partially offset by a decrease in gross margin on our hardware products.

Subscription and support gross margin was flat for the three months ended October 31, 2025 compared to the same period in 2024.

OPERATING EXPENSES

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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 April 30, 2025, we expect to recognize approximately $2.4 billion of share-based compensation expense over a weighted-average period of approximately 2.5 years, excluding additional share-based compensation expense related to any future grants of share-based awards.

As of October 31, 2025, we expect to recognize approximately $2.2 billion of share-based compensation expense over a weighted-average period of approximately 2.4 years, excluding additional share-based compensation expense related to any future grants of share-based awards.

Share-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards.

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We expect research and development expense to increase in absolute dollars as we continue to invest in our future products and services, although our research and development expense may fluctuate as a percentage of total revenue.

Three Months Ended April 30, Nine Months Ended April 30,

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Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2025 2024 Change

Amount Amount Amount %

(dollars in millions)

Research and development $ 528 $ 481 $ 47 10 %

Research and development expense increased for the three and nine months ended April 30, 2025 compared to the same periods in 2024 primarily due to increased personnel costs, which grew $22.1 million and $109.2 million for the three and nine months ended April 30, 2025, respectively, compared to the same periods in 2024, largely due to headcount growth.

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

Research and development expense increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to increased personnel costs, which grew $45 million for the three months ended October 31, 2025 compared to the same period in 2024, largely due to headcount growth.

SALES AND MARKETING

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We expect sales and marketing expense to continue to increase in absolute dollars as we increase the size of our sales and marketing organizations to grow our customer base, increase touch points with end-customers, and expand our global presence, although our sales and marketing expense may fluctuate as a percentage of total revenue.

Three Months Ended April 30, Nine Months Ended April 30,

2025 2024 Change 2025 2024 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2025 2024 Change

Amount Amount Amount %

(dollars in millions)

Sales and marketing $ 820 $ 720 $ 100 14 %

Sales and marketing expense increased for the three and nine months ended April 30, 2025 compared to the same periods in 2024 primarily due to increased personnel costs, which grew $60.6 million and $183.3 million for the three and nine months ended April 30, 2025, respectively, compared to the same periods in 2024, largely due to headcount growth.

Sales and marketing expense increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to increased personnel costs, which grew $86 million for the three months ended October 31, 2025 compared to the same period in 2024, largely due to headcount growth.

GENERAL AND ADMINISTRATIVE

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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.

Three Months Ended April 30, Nine Months Ended April 30,

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Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2025 2024 Change

Amount Amount Amount %

(dollars in millions)

General and administrative $ 179 $ 98 $ 81 83 %

General and administrative expense increased for the three months ended April 30, 2025 compared to the same period in 2024 primarily due to increased personnel costs, which grew $44.8 million, largely due to increased share-based compensation.

General and administrative expense decreased for the nine months ended April 30, 2025 compared to the same period in 2024 primarily due to a litigation-related accrual of $176.8 million during the three months ended January 31, 2024 and a partial release of $43.0 million during the three months ended October 31, 2024.

The decrease in general and administrative expense for the nine months ended April 30, 2025 was partially offset by increased personnel costs, which grew $92.6 million, largely due to increased share-based compensation.

General and administrative expense increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to a partial release of litigation-related accrual of $43 million during the three months ended October 31, 2024.

The increase in general and administrative expense was further driven by increased personnel costs, which grew $37 million, largely due to increased share-based compensation and headcount growth.

INTEREST EXPENSE

Interest expense primarily consists of interest expense related to our 0.375% Convertible Senior Notes due 2025 (the “2025 Notes”).

Three Months Ended April 30, Nine Months Ended April 30,

2025 2024 Change 2025 2024 Change

Amount Amount Amount % Amount Amount Amount %

Interest expense consists of interest expense related to our 0.375% Convertible Senior Notes due 2025 (the “2025 Notes”).

Three Months Ended October 31,

2025 2024 Change

Amount Amount Amount %

(dollars in millions)

Interest expense $ — $ 1 $ (1) (100) %

Interest expense decreased for the three and nine months ended April 30, 2025 compared to the same periods in 2024 primarily due to early conversions of our 2025 Notes.

Interest expense decreased for the three months ended October 31, 2025 compared to the same period in 2024 due to the maturity of our 2025 Notes in June 2025.

Refer to Note 9.

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Other income, net includes interest income earned on our cash, cash equivalents, and investments, and gains and losses from foreign currency remeasurement and foreign currency transactions.

Three Months Ended April 30, Nine Months Ended April 30,

2025 2024 Change 2025 2024 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2025 2024 Change

Amount Amount Amount %

(dollars in millions)

Other income, net $ 103 $ 83 $ 20 24 %

Other income, net increased for the three and nine months ended April 30, 2025 compared to the same periods in 2024 primarily due to higher interest income as a result of higher average cash, cash equivalent, and investment balances for the three and nine months ended April 30, 2025 compared to the same periods in 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 the three and nine months ended April 30, 2025 compared to the same periods in 2024.

PROVISION FOR (BENEFIT FROM) INCOME TAXES

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

Other income, net increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to higher interest income as a result of higher average cash, cash equivalents, and investment balance, partially offset by lower interest rates for the three months ended October 31, 2025 compared to the same period in 2024.

PROVISION FOR INCOME TAXES

Provision for income taxes consists primarily of U.S.

and foreign income taxes.

Our effective tax rates during the three and nine months ended April 30, 2025 were lower than our statutory tax rate primarily due to excess tax benefits from share-based compensation.

We regularly assess the need for a valuation allowance on our deferred tax assets.

In making this assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all the deferred tax assets will not be realized.

The assessment requires significant judgment and is performed for each of the applicable jurisdictions.

Based on our analysis of all positive and negative evidence during the fiscal quarter ended April 30, 2025, we continue to maintain a valuation allowance for our California deferred tax assets due to the uncertainty regarding realizability of these deferred tax assets as they have not met the “more likely than not” realization criterion.

Our effective tax rate during the three months ended October 31, 2025 was lower than our statutory tax rate primarily due to excess tax benefits from share-based compensation.

We continue to maintain a valuation allowance for our California deferred tax assets due to the uncertainty regarding realizability of these deferred tax assets as they have not met the “more likely than not” realization criterion.

We expect future research and development tax credit generation in California to exceed our ability to use the existing tax credits.

Three Months Ended April 30, Nine Months Ended April 30,

2025 2024 Change 2025 2024 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2025 2024 Change

Amount Amount Amount %

(dollars in millions)

Provision for (benefit from) income taxes $ 48.4 $ (27.6) $ 76.0 (275.4) % $ 123.8 $ (1,550.6) $ 1,674.4 (108.0) %

Provision for income taxes $ 78 $ 17 $ 61 359 %

Effective tax rate 18.9 % 4.9 %

Our provision for income taxes for the three and nine months ended April 30, 2025 was primarily due to U.S.

Our provision for income taxes for the three months ended October 31, 2025 was primarily due to U.S.

and foreign income taxes.

Our effective tax rate increased for the three and nine months ended April 30, 2025 compared to the same periods in 2024 primarily due to the release of our valuation allowance on U.S.

federal, U.S.

states other than California, and United Kingdom deferred tax assets in the second quarter of fiscal 2024.

Our effective tax rate increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to increased earnings before income taxes and decreased excess tax benefits from share-based compensation.

Refer to Note 13.

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Liquidity and Capital Resources

April 30, 2025 July 31, 2024

October 31, 2025 July 31, 2025

(in millions)

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Total cash, cash equivalents, and investments $ 10,192 $ 8,459

As of April 30, 2025, our total cash, cash equivalents, and investments of $8.5 billion were held for general corporate purposes.

As of April 30, 2025, we had no unremitted earnings when evaluating our outside basis difference relating to our U.S.

As of October 31, 2025, our total cash, cash equivalents, and investments of $10.2 billion were held for general corporate purposes.

As of October 31, 2025, we had no unremitted earnings when evaluating our outside basis difference relating to our U.S.

investment in foreign subsidiaries.

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

Our cash tax payments have increased and we expect this trend to continue as a result of our increased profitability and utilization of our net operating loss carryforwards and credits.

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 the three and nine months ended April 30, 2025, we repaid in cash $150.9 million and $582.3 million, respectively, in aggregate principal amount of the 2025 Notes and issued 2.2 million and 8.4 million shares of common stock to the holders, respectively, 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.

All of the outstanding 2025 Notes will mature on June 1, 2025 and, at that time, we will become obligated to pay the remaining principal amount of the 2025 Notes of $383.3 million in cash, and deliver 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.

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 in connection with maturity of the 2025 Notes.

As of April 30, 2025, $383.3 million of our 2025 Notes remained outstanding.

Refer to Note 9.

Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on the 2025 Notes.

In April 2023, we entered into a credit agreement (the “Credit Agreement”) that provides for a $400 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 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.

As of April 30, 2025, there were no amounts outstanding, and we were in compliance with all covenants under the Credit Agreement.

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

Refer to Note 9.

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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, November 2023, and August 2024, our board of directors authorized additional $700.0 million, $676.1 million, $915.0 million, $316.7 million and $500.0 million increases to this share repurchase program, respectively, bringing the total authorization under this share repurchase program to $4.1 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 April 30, 2025, $1.0 billion remained available for future share repurchases under this repurchase program.

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

The repurchase authorization will expire on December 31, 2026, and may be suspended or discontinued at any time without prior notice.

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Stockholders’ Equity in Part I, Item 1 of this Quarterly Report on Form 10-Q 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 April 30, 2025, we have total operating lease obligations of $422.8 million recorded on our condensed consolidated balance sheet.

As of April 30, 2025, our commitments to purchase products, components, cloud and other services totaled $4.3 billion.

As of October 31, 2025, we have total operating lease obligations of $429 million recorded on our condensed consolidated balance sheet.

As of October 31, 2025, our commitments to purchase products, components, cloud hosting and other services totaled $6.8 billion.

Refer to Note 10.

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Our acquisition of certain QRadar assets from International Business Machines Corporation (“IBM”) on August 31, 2024 included contingent consideration that requires potential future payments through the fiscal quarter ending October 2028.

As of April 30, 2025, we have total contingent consideration obligations of $669.2 million recorded on our condensed consolidated balance sheet.

As of October 31, 2025, we have total contingent consideration obligation of $380 million recorded on our condensed consolidated balance sheet.

Refer to Note 3.

Fair Value Measurements and Note 7.

Acquisition in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on these contingent consideration obligations.

The following table summarizes our cash flows for the nine months ended April 30, 2025 and 2024:

Nine Months Ended April 30,

Acquisition in Part I, Item 1 of this Quarterly Report on Form 10-Q 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 third quarter 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 II, Item 1A “Risk Factors” and Note 7.

Acquisitions in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on the acquisition.

The following table summarizes our cash flows for the three months ended October 31, 2025 and 2024:

Three Months Ended October 31,

(in millions)

1 unchanged sentence

Net cash used in investing activities (983) (544)

Net cash used in financing activities (404.8) (1,163.8)

Net cash provided by (used in) financing activities 8 (220)

Net increase in cash, cash equivalents, and restricted cash $ 796 $ 746

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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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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 the nine months ended April 30, 2025 was $2.7 billion, a slight decrease of $49.7 million compared to the same period in 2024.

The decrease was primarily due to higher payments of cash expenditure to support our business growth, partially offset by an increase in receipts from our customers during the nine months ended April 30, 2025.

Cash provided by operating activities during the nine months ended April 30, 2025 also includes proceeds from the sale of $30.4 million of our financing receivables based upon our financing credit risk management policy.

Cash provided by operating activities during the three months ended October 31, 2025 was $1.8 billion, an increase of $261 million compared to the same period in 2024.

The increase was primarily due to growth of our business as reflected by increases in collections during the three months ended October 31, 2025, partially offset by higher cash expenditure to support our business growth.

INVESTING ACTIVITIES

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We expect to continue such activities as our business grows.

Cash used in investing activities during the nine months ended April 30, 2025 was $1.4 billion, an increase of $100.8 million compared to the same period in 2024.

The increase was primarily due to higher purchases of investments, partially offset by higher proceeds from sales and maturities of investments and a decrease in net cash payments for business acquisitions during the nine months ended April 30, 2025.

Cash used in investing activities during the three months ended October 31, 2025 was $1.0 billion, an increase of $439 million compared to the same period in 2024.

The increase was primarily due to higher purchases of investments and lower proceeds from sales and maturities of investments, partially offset by a decrease in net cash payments for business acquisitions during the three months ended October 31, 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 the nine months ended April 30, 2025 was $404.8 million, a decrease of $759.0 million compared to the same period in 2024.

The decrease was primarily due to a decrease in cash used to repurchase our common stock which did not recur during the nine months ended April 30, 2025 and a decrease in cash used for repayments of the early conversion of our 2025 Notes during the period.

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

Cash provided by financing activities during the three months ended October 31, 2025 was $8 million, a change of $228 million compared to cash used in financing activities of $220 million during the same period in 2024.

The change was primarily due to a decrease in cash used for repayments of our 2025 Notes which did not recur during the three months ended October 31, 2025 as a result of its maturity, partially offset by payments of our contingent consideration liability during the three months ended October 31, 2025.

Critical Accounting Estimates

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We believe the critical accounting estimates discussed under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended July 31, 2025 reflect our more significant estimates, assumptions, and judgments that have the most significant impact on our condensed consolidated financial statements.

There have been no significant changes to our critical accounting estimates as filed in such report, except for the update as described below resulting from our acquisition of certain IBM QRadar assets.

BUSINESS COMBINATIONS

We make significant estimates, assumptions, and judgments when valuing goodwill and other purchased intangible assets in connection with the initial purchase price allocation of an acquired business.

These estimates are based upon a number of factors, including historical experience, market conditions, and information obtained from the management of the acquired business.

Critical estimates in valuing certain 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.

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

Our business combination may also involve post-closing payments contingent upon the occurrence of future events and/or certain conditions being met.

Critical estimates used in valuing contingent consideration obligations 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 required to be updated in order 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.

There have been no significant changes to our critical accounting estimates as filed in such report.

Recent Accounting Pronouncements

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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-Q

Item 2. Management’s Discussion and Analysis