What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-09-10 compared with 2025-08-29 · 436 added, 236 removed, 1090 unchanged (38% of the section changed)

15 unchanged sentences

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of July 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated August 29, 2025 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of July 31, 2026, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated September 10, 2026 expressed an unqualified opinion thereon.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

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We evaluated the accuracy of the Company’s contract summary documentation, specifically related to the identification and determination of distinct performance obligations and the timing of revenue recognition.

VALUATION OF CONTINGENT CONSIDERATION LIABILITY IN CONNECTION WITH THE ACQUISITION OF IBM QRADAR ASSETS

ACQUISITION OF CYBERARK SOFTWARE LTD.

(“CYBERARK”) - VALUATION OF PLATFORM RENEWALS

of the Matter

As described in Note 8 to the consolidated financial statements, the Company completed the acquisition of certain IBM QRadar assets on August 31, 2024, for which the purchase consideration included contingent consideration.

The Company has determined the fair value of contingent consideration liability to be $513.6 million as of July 31, 2025, using a discounted cash flow valuation technique including an estimate of future cash payments related to customers entering into qualified new transactions with the Company as well as a risk-adjusted discount rate used to present value the expected cash flows.

Auditing the Company’s accounting for contingent consideration liability was complex due to estimation uncertainty in the Company’s determination of the fair value due to the significant assumption about customer transactions that will qualify for cash payments under the arrangement.

The significant assumption is forward-looking, dependent upon customer behavior, and could be affected by various factors including future economic and market conditions.

As disclosed in Notes 1 and 8 to the consolidated financial statements, on February 11, 2026, the Company completed the acquisition of CyberArk for total purchase consideration of $21.1 billion.

The Company accounted for the acquisition as a business combination.

In connection with this acquisition, the Company recognized platform renewals intangible assets of $3.5 billion.

Auditing the Company’s valuation of the acquired platform renewals intangible assets was complex due to the significant judgment and estimation in determining the fair value of the platform renewals.

Specifically, the fair value estimate for the acquired platform renewals intangible assets is sensitive to changes in the Company’s assumption related to forecasted revenue attributable to platform renewals.

This significant assumption is forward-looking and could be affected by future economic and market conditions.

How We Addressed

the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s process and controls to estimate fair value of the contingent consideration liability.

We also tested controls regarding management’s review of assumptions used in the valuation model.

To test the estimated fair value of this contingent consideration liability, our audit procedures included, among others, assessing the valuation methodology with the assistance of a valuation specialist, and testing the significant assumption about customer transactions that will qualify for cash payments under the arrangement and the completeness and accuracy of the underlying data used by the Company.

We also performed a sensitivity analysis to evaluate the changes in the fair value of this contingent consideration liability that would result from changes in the significant assumption.

We also considered whether the assumption was consistent with evidence obtained in other areas of the audit.

We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s process and controls for the valuation of acquired intangible assets, including controls over the significant assumption described above.

To test the estimated fair value of the platform renewals intangible assets, we performed audit procedures that included, among others, assessing the valuation methodology, and testing the significant assumption discussed above and the completeness and accuracy of the underlying data used by the Company.

We compared the significant assumption used by the Company to current and historical industry, market and economic information and trends where relevant.

We assessed sensitivity analyses of the significant assumption to evaluate the changes in the fair value of the platform renewals intangible assets resulting from changes in the assumption.

We involved our valuation professionals to assist in evaluating the valuation methodology used in the determination of the fair value estimate.

/s/ Ernst & Young LLP

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San Mateo, California

August 29, 2025

September 10, 2026

Report of Independent Registered Public Accounting Firm

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of July 31, 2026, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of July 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended July 31, 2025, and the related notes and our report dated August 29, 2025 expressed an unqualified opinion thereon.

As indicated in the accompanying Management's Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of CyberArk, which is included in the 2026 consolidated financial statements of the Company and constituted 2% and less than 1% of total consolidated assets and total consolidated net assets, respectively, as of July 31, 2026 and 6% of total consolidated revenue, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of CyberArk.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of July 31, 2026 and 2025, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended July 31, 2026, and the related notes and our report dated September 10, 2026 expressed an unqualified opinion thereon.

Basis for Opinion

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San Mateo, California

August 29, 2025

September 10, 2026

PALO ALTO NETWORKS, INC.

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Accounts receivable, net of allowance for credit losses of $ 4 and $ 10 as of July 31, 2026 and July 31, 2025, respectively

2,965.0 2,618.6

Short-term financing receivables, net 592 715

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Deferred tax assets

2,424.2 2,399.0

Other assets 678 422

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Deferred revenue 7,747 6,302

Convertible senior notes, net — 963.9

Total current liabilities 9,923 7,988

Long-term convertible senior notes 1,774 —

Long-term deferred revenue 7,009 6,450

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815 and 668 shares issued and outstanding as of July 31, 2026 and July 31, 2025, respectively

5,291.9 3,821.1

Accumulated other comprehensive income (loss)

Retained earnings

2,484.1 1,350.2

Total stockholders’ equity 27,492 7,824

21 unchanged sentences

695 1,243 684

Interest expense ( 3.0 ) ( 8.3 ) ( 27.2 )

Other income, net 355.8 312.7 206.2

Other income (expense), net ( 159 ) 353 304

Income before income taxes

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Weighted-average shares used to compute net income per share, basic

662.5 638.5 606.4

Weighted-average shares used to compute net income per share, diluted

709.3 707.9 684.5

See notes to consolidated financial statements.

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$ 307 $ 1,134 $ 2,578

Other comprehensive income, net of tax:

Other comprehensive income (loss), net of tax:

Change in unrealized gains (losses) on investments ( 62 ) 19 48

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Net change on cash flow hedges ( 46 ) 31 ( 7 )

Other comprehensive income

50.0 41.6 12.4

Change in fair value of convertible senior notes attributable to instrument-specific credit risk ( 11 ) — —

Other comprehensive income (loss) ( 119 ) 50 41

Comprehensive income

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Other comprehensive income

— — 12.4 — 12.4

Issuance of common stock in connection with employee equity incentive plans 18 297 — — 297

1 unchanged sentence

Share-based compensation for equity-based awards — 1,079 — — 1,079

Reclassification of deferred compensation liability to (from) equity — ( 5 ) — — ( 5 )

Repurchase and retirement of common stock ( 4 ) ( 567 ) — — ( 567 )

Replacement awards related to business acquisitions 1 27 — — 27

Settlement of convertible notes 14 ( 3 ) — — ( 3 )

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( 14 ) — — — —

Settlement of warrants 18 — — — —

Balance as of July 31, 2024 650 3,821 ( 2 ) 1,350 5,169

1 unchanged sentence

Other comprehensive income

— — 41.6 — 41.6

Issuance of common stock in connection with employee equity incentive plans 18 370 — — 370

1 unchanged sentence

Share-based compensation for equity-based awards — 1,314 — — 1,314

Reclassification of deferred compensation liability to (from) equity — ( 32 ) — — ( 32 )

Repurchase and retirement of common stock — — — — —

Replacement awards related to business acquisitions — 3 — — 3

Settlement of convertible notes 14 — — — —

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( 14 ) — — — —

Settlement of warrants 18.0 — — — —

Balance as of July 31, 2025 668 5,292 48 2,484 7,824

Net income — — — 307 307

Other comprehensive income — — 50.0 — 50.0

Other comprehensive loss — — ( 119 ) — ( 119 )

Issuance of common stock in connection with employee equity incentive plans 13 292 — — 292

1 unchanged sentence

Share-based compensation for equity-based awards — 1,787 — — 1,787

Settlement of convertible notes 14.0 — — — —

Settlement of note hedges ( 14.0 ) — — — —

Reclassification of deferred compensation liability to (from) equity — ( 335 ) — — ( 335 )

Repurchase and retirement of common stock ( 7 ) ( 1,000 ) — — ( 1,000 )

Issuance of common stock in connection with business acquisition 112 18,488 — — 18,488

Replacement awards related to business acquisitions 2 374 — — 374

Settlement of warrants 27 — — — —

Balance as of July 31, 2026 815 $ 24,772 $ ( 71 ) $ 2,791 $ 27,492

13 unchanged sentences

Amortization of debt issuance costs

Change in fair value of convertible senior notes and capped calls 562 — —

Change in fair value of contingent consideration liability

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Amortization of investment premiums, net of accretion of purchase discounts ( 54 ) ( 41 ) ( 60 )

Unrealized foreign currency exchange (gains) losses, net 1 — —

Changes in operating assets and liabilities, net of effects of acquisitions:

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Cash flows from financing activities

Repayments of convertible senior notes ( 965.6 ) ( 1,033.7 ) ( 1,692.0 )

Repayments and settlement of conversions of convertible senior notes ( 160 ) ( 966 ) ( 1,033 )

Proceeds from capped calls related to convertible senior notes 10 — —

Repurchases of common stock ( 1,000 ) — ( 567 )

1 unchanged sentence

Payments for taxes related to net share settlement of equity awards ( 126 ) ( 184 ) ( 26 )

Payments of contingent consideration liability ( 191 ) — —

Net cash used in financing activities ( 1,202 ) ( 779 ) ( 1,343 )

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

732.4 404.6 ( 982.6 )

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 3 ) — —

Net increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash—beginning of period 2,279 1,547 1,142

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Restricted cash included in prepaid expenses and other current assets 5 10 12

Restricted cash included in other assets 4 — —

Total cash, cash equivalents, and restricted cash $ 2,523 $ 2,279 $ 1,547

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(the “Company,” “we,” “us,” or “our”), headquartered in Santa Clara, California, was incorporated in March 2005 under the laws of the State of Delaware and commenced operations in April 2005.

Our cybersecurity platforms and services help enterprises, organizations, service providers, and government entities to secure their users, networks, clouds, and endpoints by delivering comprehensive cybersecurity backed by artificial intelligence and automation.

Our cybersecurity platforms and services help secure enterprise users, networks, clouds, endpoints, artificial intelligence (“AI”) apps and agents, and identities by delivering comprehensive cybersecurity backed by AI and automation.

On January 29, 2026, we acquired Chronosphere, Inc.

(“Chronosphere”), a privately-held observability technology company, forming our next-generation observability platform.

On February 11, 2026, we acquired CyberArk Software Ltd.

(“CyberArk”), an identity security company, forming our next-generation identity security platform.

The consolidated financial statements include the financial results of Chronosphere and CyberArk prospectively from the respective dates of acquisitions.

Refer to Note 8.

Acquisitions for more information regarding our acquisitions of Chronosphere and CyberArk.

Basis of Presentation

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All significant intercompany balances and transactions have been eliminated in consolidation.

Reclassification

Certain prior period amounts in the consolidated financial statements and accompanying notes have been reclassified to conform to the current presentation.

Use of Estimates

2 unchanged sentences

We evaluate our estimates on an ongoing basis.

Management estimates include, but are not limited to, the standalone selling price for our products and services, share-based compensation, fair value of assets acquired and liabilities assumed in business combinations, fair value of our contingent consideration liability, the assessment of recoverability of our intangibles and goodwill, valuation allowance against deferred tax assets, valuation of inventory and manufacturing partner and supplier liabilities, deferred contract costs benefit period, and loss contingencies.

Management estimates include, but are not limited to, the standalone selling price for our products and services, share-based compensation, fair value of assets acquired and liabilities assumed in business combinations, fair value of our contingent consideration liability, fair value of our capped call transactions (“Capped Calls”), the assessment of recoverability of our intangibles and goodwill, valuation allowance against deferred tax assets, and loss contingencies.

We base our estimates on assumptions, both historical and forward looking, that we believe are reasonable.

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We perform ongoing credit evaluations and generally do not require collateral on accounts receivable or financing receivables.

As of July 31, 2025, three distributors individually represented 10% or more of our gross accounts receivable, and in the aggregate represented 44.8 % of our gross accounts receivable.

As of July 31, 2026, one distributor individually represented 19 % of our gross accounts receivable.

As of July 31, 2026, no end-customers or channel partners represented 10% or more of our gross financing receivables.

For fiscal 2025, three distributors represented 10% or more of our total revenue, representing 18.8 %, 14.4 %, and 11.0 % respectively.

For fiscal 2026, two distributors represented 10% or more of our total revenue, representing 15 % and 15 %, respectively.

No single end-customer accounted for more than 10% of our total revenue in fiscal 2026, 2025, or 2024.

2 unchanged sentences

Comprehensive income is comprised of net income and other comprehensive income.

Our other comprehensive income includes unrealized gains and losses on available-for-sale investments and unrealized gains and losses on cash flow hedges, net of tax effects.

Our other comprehensive income includes unrealized gains and losses on available-for-sale investments, unrealized gains and losses on cash flow hedges, and change in fair value of convertible senior notes attributable to instrument-specific credit risk, net of tax effects.

Foreign Currency Transactions

11 unchanged sentences

The inputs require significant management judgment or estimation.

Our financial assets and liabilities that are measured at fair value on a recurring basis include marketable securities, derivative financial instruments, and contingent consideration liability.

Our financial assets and liabilities that are measured at fair value on a recurring basis include marketable securities, derivative financial instruments, Capped Calls related to convertible senior notes, deferred compensation liability, contingent consideration liability, and convertible senior notes.

Goodwill, intangible assets, and other long-lived assets are measured at fair value on a nonrecurring basis, only if impairment is indicated.

7 unchanged sentences

Our marketable debt securities are classified as available-for-sale.

Debt securities in an unrealized loss position are written down to its fair value with the corresponding charge recorded in other income, net on our consolidated statements of operations, if it is more likely than not that we will be required to sell the impaired security before recovery of its amortized cost basis, or we have the intention to sell the security.

Debt securities in an unrealized loss position are written down to its fair value with the corresponding charge recorded in other income (expense), net on our consolidated statements of operations, if it is more likely than not that we will be required to sell the impaired security before recovery of its amortized cost basis, or we have the intention to sell the security.

If neither of these conditions are met, we determine whether a credit loss exists by comparing the present value of the expected cash flows of the security with its amortized cost basis.

An allowance for credit losses is recorded in other income, net on our consolidated statements of operations for an amount not to exceed the unrealized loss.

Unrealized losses that are not credit-related are included in accumulated other comprehensive income (loss) (“AOCI”) in stockholders’ equity.

An allowance for credit losses is recorded in other income (expense), net on our consolidated statements of operations for an amount not to exceed the unrealized loss.

Unrealized losses that are not credit-related are included in AOCI in stockholders’ equity.

Accounts Receivable

8 unchanged sentences

Financing receivables are recorded at amortized cost, which approximates fair value.

As part of our financing credit risk management policy, we may sell financing receivables with an internal risk rating of 5 or greater on a non-recourse basis to third-party financial institutions when the outstanding balance of our financing receivables exceeds preestablished thresholds.

The financing receivables are derecognized upon sale as these transactions qualify as true sales.

9 unchanged sentences

Gains and losses related to the effective portion of our cash flow hedges are recorded as a component of AOCI on our consolidated balance sheets and are reclassified into the financial statement line item associated with the underlying hedged transaction on our consolidated statements of operations when the underlying hedged transaction is recognized in earnings.

In the event the underlying hedged transaction does not occur, or it becomes probable that it will not occur within the defined hedge period, the gains or losses on the related cash flow hedges are recognized in other income, net on our consolidated statements of operations.

In the event the underlying hedged transaction does not occur, or it becomes probable that it will not occur within the defined hedge period, the gains or losses on the related cash flow hedges are recognized in other income (expense), net on our consolidated statements of operations.

Cash flows from foreign currency derivative contracts designated as cash flow hedges are classified on our consolidated statements of cash flows in the same manner as the underlying hedged transaction, primarily within cash flows from operating activities.

We also enter into foreign currency derivative contracts to hedge a portion of our outstanding monetary assets and liabilities denominated in foreign currencies.

These derivatives are not designated as hedging instruments for accounting purposes, and the related gains and losses are recorded in other income, net on our consolidated statements of operations.

These derivatives are not designated as hedging instruments for accounting purposes, and the related gains and losses are recorded in other income (expense), net on our consolidated statements of operations.

Inventory and Manufacturing Partner and Supplier Liabilities

27 unchanged sentences

Additional information existing as of the acquisition date but unknown to us may become known during the remainder of the measurement period, not to exceed 12 months from the acquisition date, which may result in changes to the amounts and allocations recorded.

Contingent consideration obligation incurred in connection with a business combination is recorded at fair value on the acquisition date and remeasured at each subsequent reporting period until the related contingencies have been resolved, with the change in fair value recognized in general and administrative expense on our consolidated statements of operations.

A contingent consideration obligation incurred in connection with a business combination is recorded at fair value on the acquisition date and remeasured at each subsequent reporting period until the related contingencies have been resolved, with the change in fair value recognized in general and administrative expense on our consolidated statements of operations.

Payments not made soon after the acquisition date to settle a contingent consideration liability are classified as cash flows from financing activities up to the amount of the contingent consideration liability recognized at the acquisition date.

11 unchanged sentences

We did not recognize any impairment losses on our goodwill, intangible assets, or other long-lived assets during the years ended July 31, 2026, 2025, and 2024.

Convertible Senior Notes

Our convertible senior notes were fully settled upon maturity as of July 31, 2025.

Prior to settlement, our convertible senior notes were accounted for as a liability and measured at their amortized cost.

Transaction costs related to the issuance of the notes were netted with the liability and were amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the term of the notes.

Convertible Senior Notes and Capped Calls

Our convertible senior notes issued in June 2020 were fully settled upon maturity as of July 31, 2025.

Prior to settlement, these convertible senior notes were accounted for as a liability and measured at their amortized cost.

In connection with the CyberArk acquisition, we acquired CyberArk’s convertible senior notes and assumed certain Capped Calls that CyberArk had previously entered into relating to the issuance of these convertible senior notes.

The Capped Calls are expected to reduce the potential dilution to our common stock upon conversion of the convertible senior notes and/or offset our cash payments in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap.

For the convertible senior notes acquired from CyberArk, we have elected the fair value option to simplify the accounting for embedded features that would otherwise require bifurcation from the debt-host and recognition as a separate derivative liability.

These convertible senior notes are measured at fair value on a recurring basis through maturity or settlement.

Changes in fair value included in earnings are recorded in other income (expense), net on our consolidated statements of operations, and changes in fair value attributable to instrument-specific credit risk are included in AOCI in our consolidated statements of stockholders’ equity.

We account for Capped Calls as derivative assets, measured at fair value on a recurring basis through maturity or settlement.

Capped Calls are recorded in other assets on our consolidated balance sheets.

Changes in fair value are recorded in other income (expense), net on our consolidated statements of operations.

Revenue Recognition

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Contract costs, which primarily consist of sales commissions, are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.

Certain sales commissions for initial contracts are not commensurate with the commissions for renewal contracts, given the substantive difference in commission rates in proportion to their respective contract values.

We determine whether sales commissions for initial contracts are commensurate with the commissions for renewal contracts based on whether there is a substantive difference in commission rates in proportion to their respective contract values.

Sales commissions for initial contracts that are commensurate and sales commissions for renewal contracts are amortized over the related contractual period.

Sales commissions for initial contracts that are not commensurate are amortized over a benefit period of five years .

The benefit period is determined by taking into consideration contract length, expected renewals, technology life, and other quantitative and qualitative factors.

Sales commissions for initial contracts that are commensurate and sales commissions for renewal contracts are amortized over the related contractual period.

We classify deferred contract costs as short-term or long-term based on when we expect to recognize the expense.

15 unchanged sentences

We account for forfeitures of all share-based payment awards when they occur.

Deferred Compensation Plan

We maintain an unfunded nonqualified deferred compensation plan that allows eligible employees to defer a portion of their base salary, bonus, commissions, and vested equity awards which are settled in shares of our common stock.

Participants may elect to diversify a portion of their deferred compensation into certain investment funds.

Amounts diversified are accounted for as liability-classified awards and are recorded in accrued compensation and other long-term liabilities on our consolidated balance sheets based on the timing of expected distributions.

Liability-classified awards are measured at fair value on a recurring basis through distribution with changes in fair value recorded as share-based compensation.

We determine if an arrangement is a lease at inception.

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We regularly evaluate current information available to us to determine whether an accrual is required, an accrual should be adjusted, or a range of possible loss should be disclosed.

Recently Adopted Accounting Pronouncement

Segment Reporting

In November 2023, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

We adopted the standard in our fourth quarter of fiscal 2025.

Recently Adopted Accounting Pronouncements

Income Tax Disclosures

In December 2023, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that requires consistent categories and greater disaggregation of information in the effective tax rate reconciliation and additional disclosures of income taxes paid by jurisdiction.

We adopted this standard for the year ended July 31, 2026 on a prospective basis.

The adoption of this standard results in disclosure of additional jurisdictional level tax information in our consolidated financial statements.

Refer to Note 16.

Segment Information for more details.

Income Taxes for more details.

Government Grants Received by Business Entities

In December 2025, the FASB issued authoritative guidance that establishes the accounting for government grants received by business entities.

We early adopted this standard in our fiscal 2026 on a modified prospective basis.

The adoption of this standard did not have a material impact on our consolidated financial statements for the year ended July 31, 2026.

Recently Issued Accounting Pronouncements

Income Tax Disclosures

In December 2023, the FASB issued authoritative guidance that requires consistent categories and greater disaggregation of information in the effective tax rate reconciliation and additional disclosures of income taxes paid by jurisdiction.

The standard is effective for our fiscal 2026 and could be applied either prospectively or retrospectively.

We are currently evaluating the impact of this standard on our disclosures in the consolidated financial statements.

Expense Disaggregation Disclosures

In November 2024, the FASB issued authoritative guidance that expands annual and interim disclosure of specified information about certain costs and expenses in the notes to financial statements.

The standard is effective for our annual period in fiscal 2028 and interim period in our first quarter of fiscal 2029, and could be applied either prospectively or retrospectively.

The standard is effective for our annual periods beginning in fiscal 2028 and interim periods beginning in our first quarter of fiscal 2029, and can be applied either prospectively or retrospectively.

Early adoption is permitted.

2 unchanged sentences

In July 2025, the FASB issued authoritative guidance that provides a practical expedient for estimating expected credit losses on accounts receivable and contract assets.

The standard is effective for us in our first quarter of fiscal 2027 and will be applied on a prospective basis.

We plan to adopt this standard beginning in our first quarter of fiscal 2027 and do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

Accounting for Internal-Use Software

In September 2025, the FASB issued authoritative guidance that modernizes the accounting for internal-use software by eliminating project stage-based capitalization and clarifying the requirements, including probable-to-complete threshold, to commence the capitalization of software development costs.

The standard is effective for our annual and interim periods beginning in the first quarter of fiscal 2029 and can be applied either prospectively or retrospectively.

Early adoption is permitted.

We are currently evaluating the impact of this standard on our consolidated financial statements.

Hedge Accounting Improvements

In November 2025, the FASB issued authoritative guidance that clarifies and improves the existing hedge accounting guidance to better reflect the economics of an entity’s risk management activities.

The standard is effective for our annual and interim periods beginning in the first quarter of fiscal 2028 and will be applied on a prospective basis.

Early adoption is permitted.

We are currently evaluating the impact of this standard on our consolidated financial statements.

Disaggregation of Revenue

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Commercial paper — 123 — 123 — 169 — 169

Corporate debt securities — — — — — 18.2 — 18.2

government and agency securities — — — — — 149.6 — 149.6

Total cash equivalents 1,514 123 — 1,637 1,206 169 — 1,375

Short-term investments:

Certificates of deposit — — — — — 20.6 — 20.6

Commercial paper — 10 — 10 — 15 — 15

10 unchanged sentences

Total long-term investments — 4,835 — 4,835 — 5,555 — 5,555

July 31, 2025 July 31, 2024

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Prepaid expenses and other current assets:

3 unchanged sentences

Foreign currency forward contracts — — — — — 3 — 3

Capped calls related to convertible senior notes — 153 — 153 — — — —

Total other assets — 153 — 153 — 3 — 3

Total assets measured at fair value $ 1,514 $ 5,521 $ — $ 7,035 $ 1,206 $ 6,415 $ — $ 7,621

July 31, 2026 July 31, 2025

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Accrued and other liabilities:

Foreign currency forward contracts $ — $ 24 $ — $ 24 $ — $ 4 $ — $ 4

Deferred compensation liability

5 — — 5 2 — — 2

Contingent consideration

1 unchanged sentence

Total accrued and other liabilities 5 24 116 145 2 4 276 282

Long-term convertible senior notes — 1,774 — 1,774 — — — —

Other long-term liabilities:

Foreign currency forward contracts — 0.1 — 0.1 — 0.9 — 0.9

Deferred compensation liability

400 — — 400 57 — — 57

Contingent consideration

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In June 2025, we amended the terms of our contingent consideration arrangement with International Business Machines Corporation (“IBM”).

During the three months ended July 31, 2025, we reduced our estimate of future cash payments based on the amended terms and our quarterly assessment of assumptions, including the magnitude and likelihood of customers entering into qualified new transactions, the competitive industry environment, and current market conditions.

During the three months ended July 31, 2025, we reduced our estimate of future cash payments based on the amended terms and our quarterly assessment of assumptions.

During the year ended July 31, 2026, we reduced our estimate of future cash payments based on our quarterly assessment of assumptions.

Assumptions considered during our quarterly assessment include the magnitude and likelihood of customers entering into qualified new transactions, the competitive industry environment, and current market conditions.

The following table presents a reconciliation of our contingent consideration liability (in millions):

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Change in fair value

( 117 ) ( 135 )

Payments ( 191 ) —

Contingent consideration liability at the end of the period

1 unchanged sentence

We consider the fair value of our financing receivables to be a Level 3 measurement as we use unobservable inputs in determining discounted cash flows to estimate the fair value.

Refer to Note 11.

Debt, for the carrying amount and estimated fair value of our convertible senior notes as of July 31, 2024.

Cash Equivalents and Investments

16 unchanged sentences

Commercial paper $ 169 $ — $ — $ 169

Corporate debt securities 18.2 — — 18.2

government and agency securities 149.6 — — 149.6

Total available-for-sale cash equivalents $ 169 $ — $ — $ 169

Certificates of deposit $ 20.6 $ — $ — $ 20.6

Commercial paper $ 15 $ — $ — $ 15

17 unchanged sentences

Marketable equity securities consist of money market funds and are included in cash and cash equivalents on our consolidated balance sheets.

As of July 31, 2025 and 2024, the carrying values of our marketable equity securities were $ 1.2 billion and $ 494.0 million, respectively.

As of July 31, 2026 and 2025, the carrying values of our marketable equity securities were $ 1.5 billion and $ 1.2 billion, respectively.

There were no unrealized gains or losses recognized for these securities during the years ended July 31, 2026, 2025, and 2024.

2 unchanged sentences

Short-term financing receivables, gross

$ 806.1 $ 830.2

Unearned income

1 unchanged sentence

Allowance for credit losses

( 5.7 ) ( 8.6 )

Short-term financing receivables, net

$ 714.6 $ 725.9

Long-term financing receivables, gross

3 unchanged sentences

Allowance for credit losses

( 8.0 ) ( 9.7 )

Long-term financing receivables, net

10 unchanged sentences

(1) Internal risk ratings are categorized as 1 through 10, with the lowest rating representing the highest quality.

We sold $ 37.8 million of our financing receivables during the year ended July 31, 2025.

During the years ended July 31, 2026 and 2025, we sold $ 54 million and $ 38 million, respectively, of our financing receivables.

The associated gains and losses were not material.

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Derivative Instruments

As of July 31, 2025 and 2024, the notional amount of our outstanding foreign currency forward contracts designated as cash flow hedges was $ 964.3 million and $ 804.8 million, respectively.

As of July 31, 2026 and 2025, the notional amount of our outstanding foreign currency forward contracts designated as cash flow hedges was $ 1.7 billion and $ 964 million, respectively.

Refer to Note 3.

Fair Value Measurements for the fair value of our derivative instruments as reported on our consolidated balance sheets as of July 31, 2026 and 2025.

As of July 31, 2025, unrealized gains and losses in AOCI related to our cash flow hedges were a $ 39.8 million net gain, of which $ 38.4 million in gains are expected to be recognized into earnings within the next 12 months.

As of July 31, 2024, unrealized gains and losses in AOCI related to our cash flow hedges were a $ 10.6 million net loss.

As of July 31, 2026, unrealized gains and losses in AOCI related to our cash flow hedges were a net loss of $ 15 million, substantially all of which is expected to be recognized into earnings within the next 12 months.

As of July 31, 2025, unrealized gains and losses in AOCI related to our cash flow hedges were a net gain of $ 40 million.

As of July 31, 2026 and 2025, the notional amount of our outstanding foreign currency forward contracts not designated as hedging instruments was $ 522 million and $ 504 million, respectively.

As of July 31, 2026 and 2025, our inventory balance was $ 117 million and $ 113 million, respectively.

For the years ended July 31, 2025 and 2024, inventory write-downs and excess manufacturing purchase commitment charges were $ 71.2 million and $ 24.9 million, respectively.

For the year ended July 31, 2023, inventory write-downs and excess manufacturing purchase commitment charges was not significant.

For the years ended July 31, 2026, 2025, and 2024, inventory write-downs and excess manufacturing purchase commitment charges were $ 4 million, $ 71 million, and $ 25 million, respectively.

Chronosphere, Inc.

On January 29, 2026, we completed our acquisition of Chronosphere, a privately-held observability technology company.

The acquisition resulted in forming our next-generation observability platform.

The total purchase consideration for the acquisition of Chronosphere was $ 3.0 billion, which consisted of the following (in millions):

Fair value of replacement awards 109

Total $ 2,951

As part of the acquisition, we issued $ 525 million of replacement equity awards, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration.

The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

The replacement equity awards included 2 million shares of our restricted common stock.

These shares of restricted common stock vest over a period of two to three years from the date of issuance.

We have accounted for this transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on preliminary estimated fair values, as presented in the following table (in millions):

Goodwill $ 2,364

Identified intangible assets 565

Net liabilities assumed ( 35 )

Total $ 2,951

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating the Chronosphere observability platform into our business.

The goodwill is not deductible for U.S.

income tax purposes.

The following table presents details of the identified intangible assets acquired (in millions, except years):

Fair Value Estimated Useful Life

Developed technology $ 300 5 years

Customer relationships 255 6 years - 10 years

Trade name and trademarks 10 1 year

CyberArk Software Ltd.

On February 11, 2026, we completed our acquisition of CyberArk, an identity security company, forming our next-generation identity security platform.

CyberArk shareholders received $ 45.00 in cash and 2.2005 shares of our common stock for each CyberArk share.

The total purchase consideration for the acquisition of CyberArk was $ 21.1 billion, which consisted of the following (in millions):

Common stock ( 112 million shares)

Fair value of replacement awards 265

Total $ 21,061

As part of the acquisition, we issued $ 945 million of replacement equity awards, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration.

The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

Goodwill $ 14,800

Identified intangible assets 6,279

Cash and cash equivalents 743

Accounts receivable, net of allowance for credit losses 312

Short-term and long-term investments 1,217

Net assets acquired 60

Convertible senior notes ( 1,303 )

Deferred revenue ( 776 )

Deferred tax liabilities ( 271 )

Total $ 21,061

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from incorporating the CyberArk next-generation identity security platform into our business.

Substantially all of the goodwill is deductible for U.S.

income tax purposes.

The following table presents details of the identified intangible assets acquired (in millions, except years):

Fair Value Estimated Useful Life

Developed technology $ 2,537 5 years - 7 years

Platform renewals 3,500 12 years - 14 years

Customer contracts 219 2 years

Trade name 23 1 year

Total $ 6,279

For the year ended July 31, 2026, transaction costs related to CyberArk acquisition were $ 56 million, which were primarily included in general and administrative expense on our consolidated statements of operations.

In connection with our acquisition integration strategy, we initiated a plan to optimize the combined entity’s workforce for a total estimated cost of $ 60 million.

The activities associated with this plan are expected to be substantially completed by the end of fiscal 2027.

Employee severance costs are recognized upon notification.

If service is required beyond the minimum retention period, expense is recognized ratably over the future service period.

During the year ended July 31, 2026, we made cash payments of $ 18 million under the plan.

As of July 31, 2026, a liability of $ 14 million related to employee severance was included in accrued compensation on our consolidated balance sheets.

The following table summarizes employee severance charges related to the CyberArk acquisition (in millions):

Year Ended July 31, 2026

Cash Compensation Share-based Compensation

Cost of subscription and support revenue $ 2 $ — $ 2

Research and development 1 — 1

Sales and marketing 16 16 32

General and administrative 13 1 14

Total $ 32 $ 17 $ 49

Koi Security Ltd.

On April 14, 2026, we completed our acquisition of Koi Security Ltd.

(“Koi”), a privately-held endpoint posture management company.

The acquisition adds agentic endpoint security capabilities to our security operations platform and enhances Prisma AIRS™.

The total purchase consideration for the acquisition of Koi was $ 231 million, substantially all of which is comprised of cash.

As part of the acquisition, we issued $ 61 million of replacement equity awards, which were allocated to future services and will be expensed over the remaining service periods as share-based compensation.

The replacement equity awards included 0.3 million shares of our restricted common stock.

These shares of restricted common stock vest over a period of three years from the date of issuance.

Identified intangible asset 35

Cash and restricted cash

Net assets acquired

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Koi’s technology into our platforms.

The goodwill is deductible for U.S.

income tax purposes.

The following table presents details of the identified intangible asset acquired (in millions, except years):

Fair Value Estimated Useful Life

Developed technology $ 35 5 years

Portkey, Inc.

On May 29, 2026, we completed our acquisition of Portkey, Inc.

(“Portkey”), a privately-held AI Gateway company.

The acquisition enhances the capabilities of Prisma AIRS™.

The total purchase consideration for the acquisition of Portkey was $ 117 million, substantially all of which is comprised of cash.

As part of the acquisition, we issued $ 2 million of replacement equity awards, which were allocated to future services and will be expensed over the remaining service periods as share-based compensation.

Identified intangible assets 15

Cash and cash equivalents 17

Net liabilities assumed ( 25 )

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Portkey ’s technology into our platforms.

The goodwill is not deductible for U.S.

income tax purposes.

The following table presents details of the identified intangible asset acquired (in millions, except years):

Fair Value Estimated Useful Life

Developed technology $ 15 5 years

Embrace Mobile, Inc.

On July 20, 2026, we entered into a definitive agreement to acquire Embrace Mobile, Inc.

(“Embrace”), a privately-held user-focused observability company, in exchange for total consideration of $ 325 million in cash, subject to adjustments.

We expect the acquisition to add high-fidelity Real User Monitoring (“RUM”) capabilities to our next-generation observability platform.

Refer to Note 20.

Subsequent Events for additional information.

Console Systems, Inc.

On July 29, 2026, we entered into a definitive agreement to acquire Console Systems, Inc.

(“Console”), a privately-held company providing an AI-native platform that enables agentic workflows across enterprise operations, in exchange for total consideration of $ 500 million in cash, subject to adjustments.

We expect the acquisition to deepen our agentic capabilities in Cortex.

Refer to Note 20.

Subsequent Events for additional information.

Additional Acquisition-Related Information

Since the date of acquisitions, the combined net impact of the Chronosphere and CyberArk acquisitions on our consolidated statements of operations was revenue of $ 930 million and operating loss of $ 797 million for the year ended July 31, 2026.

The following unaudited pro forma financial information summarizes the combined results of operations for Palo Alto Networks, Chronosphere, and CyberArk, as though the companies were combined as of the beginning of our fiscal 2025 (in millions):

Year Ended July 31,

Total revenue

$ 12,312 $ 10,486

Net loss $ ( 114 ) $ ( 37 )

The unaudited pro forma financial information for the years ended July 31, 2026 and 2025 combines the historical results of Palo Alto Networks and Chronosphere for these periods with the historical results of CyberArk for the years ended June 30, 2026 and 2025, respectively.

The unaudited pro forma financial information include adjustments attributable to our acquisition of Chronosphere and CyberArk, including amortization of acquired intangible assets, share-based compensation expense from assumed replacement equity awards, acquisition-related transaction costs, employee severance costs under the workforce optimization plan, and income tax impact.

We elected the fair value option to account for the convertible senior notes acquired from CyberArk.

During the post-acquisition period presented, we recognized approximately $ 562 million of net losses related to changes in fair value of the convertible senior notes and Capped Calls.

Such amounts are reflected in our historical post-acquisition results but are not included as adjustments to the historical periods presented in the unaudited pro forma financial information.

The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of our fiscal 2025 or of the results of our future operations of the combined business.

Additional information related to our fiscal 2026 acquisitions, such as that related to income tax and other contingencies existing as of the acquisition date, may become known during the remainder of the measurement period, not to exceed 12 months from the acquisition date, which may result in changes to the amounts and allocations recorded.

IBM QRadar Assets

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As part of the acquisition, we agreed to make post-closing payments to IBM contingent upon customers entering into qualified new transactions through June 30, 2028.

We also expect to receive a return of purchase consideration of $ 6.3 million due to timing of transition of certain underlying customer contracts, of which $ 2.9 million was received during the year ended July 31, 2025.

We also expect to receive a return of purchase consideration of $ 6 million due to timing of transition of certain underlying customer contracts, of which $ 2 million and $ 3 million were received during the years ended July 31, 2026 and 2025, respectively.

In addition, we have entered into a transition services arrangement with IBM, under which IBM will perform certain services supporting the acquired assets and customers for a period of time that ends in the fiscal quarter ending October 31, 2026.

Payments related to the contingent consideration liability are expected to begin in the fiscal quarter ending October 2025 and continue through the fiscal quarter ending October 2028.

Payments related to the contingent consideration liability commenced in the fiscal quarter ended October 31, 2025 and are expected to continue through the fiscal quarter ending October 31, 2028.

The estimated range of undiscounted contingent consideration is between $ 0.3 billion and $ 0.5 billion.

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Developed technology 12 2 years

Total $ 476.0

Protect AI, Inc.

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Fair value of replacement awards 27

Total $ 634.5

As part of the acquisition, we issued $ 106.5 million of replacement awards, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration.

As part of the acquisition, we issued $ 107 million of replacement equity awards, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration.

The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

We have accounted for this transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on estimated fair values, as presented in the following table (in millions):

Goodwill $ 516

Identified intangible assets

Net liabilities assumed ( 2 )

Total $ 634.5

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Protect AI technology into our platforms.

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Developed technology $ 70 5 years

CyberArk Software Ltd.

On July 30, 2025, we entered into a definitive agreement to acquire CyberArk Software Ltd., an identity security company (“CyberArk”).

The acquisition is expected to close during the second half of our fiscal 2026, subject to the satisfaction of customary closing conditions, including the receipt of CyberArk shareholder approval, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and receipt of other approvals under specified antitrust and foreign investment laws.

Under the terms of the 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 of approximately $ 25 billion for CyberArk 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.

The agreement also provides that we will assume certain unvested outstanding equity awards held by CyberArk employees.

We and CyberArk each have certain termination rights under the definitive acquisition agreement.

A termination fee of $ 1.0 billion may be payable by us to CyberArk, or a fee of $ 750.0 million may be payable by CyberArk to us, upon termination of the definitive acquisition agreement under specified circumstances.

Dig Security Solutions Ltd.

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Fair value of replacement awards 7

Total $ 255.4

As part of the acquisition, we issued replacement equity awards, which included 0.4 million shares of our restricted common stock.

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Goodwill $ 186

Identified intangible assets

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Fair value of replacement awards 20

Total $ 458.6

As part of the acquisition, we issued replacement equity awards, which included 0.6 million shares of our restricted common stock.

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Net assets acquired 36

Total $ 458.6

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Talon technology into our platforms.

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Developed technology $ 132 5 years

Cider Security Ltd.

On December 20, 2022, we completed our acquisition of Cider Security Ltd.

(“Cider”), a privately-held cloud security company.

The total purchase consideration for the acquisition of Cider was $ 198.3 million, which consisted of the following (in millions):

Fair value of replacement awards 0.3

Total $ 198.3

As part of the acquisition, we issued replacement equity awards, which included 0.4 million shares of our restricted common stock.

The total fair value of the replacement equity awards was $ 48.6 million, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration.

The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

Goodwill $ 164.6

Identified intangible assets 27.8

Net liabilities assumed ( 6.5 )

Total $ 198.3

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Cider technology into our platforms.

The goodwill is deductible for U.S.

income tax purposes.

The following table presents the identified intangible asset acquired (in millions, except years):

Fair Value Estimated Useful Life

Developed technology

$ 27.8 5 years

Other acquisition

In April 2023, we completed an acquisition for total purchase consideration of $ 18.9 million in cash.

We have accounted for this transaction as a business combination and recorded goodwill of $ 14.5 million.

The goodwill is not deductible for income tax purposes.

Additional Acquisition-Related Information

Pro forma results of operations have not been presented because the effects of the acquisitions were not material to our consolidated statements of operations.

Additional information related to our Protect AI acquisition, such as that related to income tax and other contingencies, existing as of the acquisition date may become known during the remainder of the measurement period, not to exceed 12 months from the acquisition date, which may result in changes to the amounts and allocations recorded.

Goodwill and Intangible Assets

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Developed technology $ 3,402 $ ( 614 ) $ 2,788 $ 536 $ ( 274 ) $ 262

Customer relationships 609.0 ( 123.2 ) 485.8 172.7 ( 96.1 ) 76.6

Customer relationships and platform renewals 4,356 ( 320 ) 4,036 609 ( 123 ) 486

Customer contracts 219 ( 55 ) 164 — — —

Acquired intellectual property 24 ( 12 ) 12 24 ( 9 ) 15

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Total purchased intangible assets $ 8,034 $ ( 1,017 ) $ 7,017 $ 1,170 $ ( 407 ) $ 763

We recognized amortization expense of $ 166.3 million, $ 120.9 million, and $ 104.9 million for the years ended July 31, 2025, 2024, and 2023, respectively.

The following table summarizes amortization expense of our intangible assets (in millions):

Year Ended July 31,

2026 2025 2024

Cost of product revenue $ 75 $ — $ —

Cost of subscription and support revenue 343 111 98

Sales and marketing 222 55 22

General and administrative — — 1

Total intangible assets amortization $ 640 $ 166 $ 121

The following table summarizes estimated future amortization expense of our intangible assets subject to amortization as of July 31, 2026 (in millions):

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Leasehold improvements 366 325

Land 87.2 87.2

Demonstration units 49 47

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We recognized depreciation expense of $ 111 million, $ 94 million, and $ 85 million related to property and equipment during the years ended July 31, 2026, 2025, and 2024, respectively.

During the year ended July 31, 2026, we purchased 14.5 acres of land adjacent to our headquarters in Santa Clara, California for $ 91 million to accommodate future expansion of our headquarters.

Convertible Senior Notes, Note Hedges, and Warrants

2025 Convertible Senior Notes

In July 2018, we issued $ 1.7 billion aggregate principal amount of 0.75 % Convertible Senior Notes due 2023 (the “2023 Notes”) and in June 2020, we issued $ 2.0 billion aggregate principal amount of 0.375 % Convertible Senior Notes due 2025 (the “2025 Notes,” and together with the 2023 Notes, the “Notes”).

The 2023 Notes bear interest at a fixed rate of 0.75 % per year, payable semi-annually in arrears on January 1 and July 1 of each year, beginning on January 1, 2019.

The 2023 Notes were converted prior to or settled on the maturity date of July 1, 2023 in accordance with their terms.

In June 2020, we issued $ 2.0 billion aggregate principal amount of 0.375 % Convertible Senior Notes due 2025 (the “2025 Notes”).

The 2025 Notes bear interest at a fixed rate of 0.375 % per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020.

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Conversion Rate per $1,000 Principal Initial Conversion Price Convertible Date Initial Number of Shares

22.5270 $ 44.39 April 1, 2023 38.1

2025 Notes 20.1612 $ 49.60 March 1, 2025 40

Holders of the 2023 Notes were able to early convert their 2023 Notes in fiscal 2023 up to April 1, 2023 and conversion requests received on or after April 1, 2023 were settled upon maturity of the 2023 Notes.

Holders of the 2025 Notes were able to early convert their 2025 Notes in fiscal 2023, fiscal 2024, and fiscal 2025 up to March 1, 2025 and conversion requests received on or after March 1, 2025 were settled upon maturity of the 2025 Notes.

During the years ended July 31, 2025, 2024, and 2023, we repaid in cash $ 965.6 million, $ 1.0 billion, and $ 1.7 billion, respectively, in aggregate principal amount of the Notes.

We also issued 14.0 million, 14.0 million, and 22.9 million shares of our common stock to the holders of the Notes during the years ended July 31, 2025, 2024, and 2023, respectively, for the conversion value in excess of the principal amount.

Holders of the 2025 Notes were able to early convert their 2025 Notes in fiscal 2024 and fiscal 2025 up to March 1, 2025, and conversion requests received on or after March 1, 2025 were settled upon maturity of the 2025 Notes.

During the years ended July 31, 2025 and 2024, we repaid in cash $ 966 million and $ 1.0 billion, respectively, in aggregate principal amount of the 2025 Notes.

We also issued 14 million shares of our common stock to the holders of the 2025 Notes during each of the years ended July 31, 2025 and 2024, for the conversion value in excess of the principal amount.

These shares were fully offset by shares we received from the corresponding exercise of the associated note hedges.

The following table sets forth the net carrying amount of our 2025 Notes (in millions):

July 31, 2025 July 31, 2024

Principal $ — $ 965.6

debt issuance costs, net of amortization — ( 1.7 )

Net carrying amount $ — $ 963.9

The total estimated fair value of the 2025 Notes was $ 3.2 billion as of July 31, 2024.

The fair value was determined based on the closing trading price per $100 of the 2025 Notes as of the last day of trading for the period.

We consider the fair value of the 2025 Notes at July 31, 2024 to be a Level 2 measurement.

The fair value of the 2025 Notes is primarily affected by the trading price of our common stock and market interest rates.

The following table sets forth interest expense recognized related to the Notes (dollars in millions):

Year Ended July 31, 2025 Year Ended July 31, 2024 Year Ended July 31, 2023

2023 Notes 2025 Notes Total 2023 Notes 2025 Notes Total 2023 Notes 2025 Notes Total

The following table sets forth interest expense recognized related to our 2025 Notes (dollars in millions):

Year Ended July 31,

Contractual interest expense $ 2 $ 5

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Effective interest rate of the liability component 0.6 % 0.6 %

To minimize the impact of potential economic dilution upon conversion of our convertible senior notes, we entered into separate convertible note hedge transactions (the “2023 Note Hedges,” with respect to the 2023 Notes, the “2025 Note Hedges,” with respect to the 2025 Notes, and the 2023 Note Hedges together with 2025 Note Hedges, the “Note Hedges”) with respect to our common stock concurrent with the issuance of each series of the Notes.

2025 Note Hedges

To minimize the impact of potential economic dilution upon conversion of our 2025 Notes, we entered into separate convertible note hedge transactions (the “2025 Note Hedges”) with respect to our common stock concurrent with the issuance of the 2025 Notes.

The following table presents details of our Note Hedges (in millions):

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2025 Note Hedges 40 $ 371

2025 Note Hedges 40.3 $ 370.8

The Note Hedges covered shares of our common stock at a strike price per share that corresponded to the initial applicable conversion price of the applicable series of the Notes and were exercisable upon conversion of the applicable series of the Notes.

The Note Hedges expired upon maturity of the applicable series of the Notes.

The Note Hedges are separate transactions and are not part of the terms of the applicable series of the Notes.

Holders of the Notes of either series do not have any rights with respect to the Note Hedges.

Any shares of our common stock receivable by us under the Note Hedges are excluded from the calculation of diluted earnings per share as they are antidilutive.

As a result of the conversions of the Notes during the years ended July 31, 2025, 2024, and 2023, we exercised the corresponding portion of our Note Hedges and received 14.0 million, 14.0 million, and 22.9 million shares of our common stock during the respective periods.

Separately, but concurrently with the issuance of each series of our convertible senior notes, we entered into transactions whereby we sold warrants (the “2023 Warrants,” with respect to the 2023 Notes, the “2025 Warrants,” with respect to the 2025 Notes, and the 2023 Warrants together with the 2025 Warrants, the “Warrants”) to acquire shares of our common stock, subject to anti-dilution adjustments.

The 2023 Warrants were, and the 2025 Warrants are, exercisable over 60 scheduled trading days beginning October 2023 and September 2025, respectively.

The 2025 Note Hedges covered shares of our common stock at a strike price per share that corresponded to the initial conversion price of the 2025 Notes and were exercisable upon conversion of the 2025 Notes.

The 2025 Note Hedges expired upon maturity of the 2025 Notes.

The 2025 Note Hedges were separate transactions and were not part of the terms of the 2025 Notes.

Holders of the 2025 Notes did not have any rights with respect to the 2025 Note Hedges.

Any shares of our common stock that were receivable by us under the 2025 Note Hedges were excluded from the calculation of diluted earnings per share as they were antidilutive.

As a result of the conversions of the 2025 Notes during the years ended July 31, 2025 and 2024, we exercised the corresponding portion of our 2025 Note Hedges and received 14 million shares of our common stock during each of the respective periods.

2025 Warrants

Separately, but concurrently with the issuance of our 2025 Notes, we entered into transactions whereby we sold warrants (the “2025 Warrants”) to acquire shares of our common stock, subject to anti-dilution adjustments.

The 2025 Warrants were exercisable over 60 scheduled trading days beginning September 2025.

The following table presents details of our 2025 Warrants (in millions, except per share data):

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2025 Warrants 40 $ 68.08 $ 203

2025 Warrants 40.3 $ 68.08 $ 202.8

The shares issuable under the Warrants are included in the calculation of diluted earnings per share when the average market value per share of our common stock for the reporting period exceeds the applicable strike price for such series of Warrants.

The Warrants are separate transactions and are not part of either series of Notes or Note Hedges and are not remeasured through earnings each reporting period.

Holders of the Notes of either series do not have any rights with respect to the Warrants.

During the year ended July 31, 2024, we net settled all of the 2023 Warrants with 18.0 million shares of our common stock with a fair value of $ 2.4 billion.

The shares that were issuable under the 2025 Warrants were included in the calculation of diluted earnings per share when the average market value per share of our common stock for the reporting period exceeded the strike price of the 2025 Warrants.

During the year ended July 31, 2026, we net settled all of the 2025 Warrants with the issuance of 27 million shares of our common stock with a fair value of $ 5.6 billion.

The number of net shares issued was determined based on the number of 2025 Warrants exercised multiplied by the difference between the strike price of the 2025 Warrants and their daily volume-weighted-average stock price.

2030 Convertible Senior Notes and Capped Calls

2030 Convertible Senior Notes

In February 2026, in connection with the acquisition of CyberArk, we entered into a supplemental indenture (the “Supplemental Indenture”) to the Indenture, dated as of June 10, 2025 (together with the Supplemental Indenture, the “Indenture”), between CyberArk, as issuer, and U.S.

Bank Trust Company, National Association, as trustee, governing CyberArk’s $ 1.25 billion aggregate principal amount of 0.0% Convertible Senior Notes due 2030 (the “2030 Notes”).

As a result of our acquisition of CyberArk and pursuant to the Supplemental Indenture, the 2030 Notes are no longer convertible into ordinary shares of CyberArk.

The conversion feature has been modified such that each $1,000 principal amount of the 2030 Notes are exchangeable for a combination of (i) approximately 4.3161 shares of our common stock, which is the effective initial conversion rate, and (ii) cash of $ 88.2630 , subject to adjustment under the Indenture.

These modifications result in the 2030 Notes being exchangeable initially for 5.4 million shares of our common stock with an effective initial conversion price of approximately $ 211.24 per share of common stock, subject to adjustments, and an initial cash amount of $ 110 million.

The 2030 Notes are unsecured, unsubordinated obligations, and the Indenture does not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness, or the issuance or repurchase of securities by us or any of our subsidiaries.

The 2030 Notes mature on June 15, 2030.

We may redeem for cash all or, subject to certain limitations, any portion of the 2030 Notes, at our option, on or after June 20, 2028 and on or prior to the 31st scheduled trading day immediately preceding the maturity date if the last reported sale price of our common stock has been at least $ 280.75 per share for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on and including the trading day preceding the date on which we provide notice of redemption.

Any redemption of the 2030 Notes will be at a price equal to 100 % of the principal amount of the 2030 Notes, plus accrued and unpaid special interest, if any, up to, but excluding, the redemption date.

If we call any or all of the 2030 Notes for redemption, holders may convert such 2030 Notes called for redemption at an increased conversion rate at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date.

Holders of the 2030 Notes may surrender their 2030 Notes for conversion at their option at any time prior to the close of business on the business day immediately preceding February 15, 2030 under the following circumstances:

• during any calendar quarter commencing after the calendar quarter ended on September 30, 2025 (and only during such calendar quarter), if the last reported sale price of our common stock is greater than or equal to $ 280.75 per share of our common stock on each applicable trading day for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter (the “sale price condition”);

• during the five business day period immediately after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the 2030 Notes for each trading day of the measurement period was less than 98 % of the aggregate of (i) the product of the last reported sale price of our common stock on each such trading day and the conversion rate for the 2030 Notes on each such trading day and (ii) $ 88.2630 ;

• upon the occurrence of specified corporate events as described in the Indenture.

On or after February 15, 2030, holders may surrender all or, subject to certain limitations, any portion of their 2030 Notes for conversion at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, and such conversions will be settled upon the maturity date.

Upon any conversion of the 2030 Notes, holders of the 2030 Notes will receive cash equal to the aggregate principal amount of the 2030 Notes to be converted, and, at our election, cash or a combination of cash and shares of our common stock for any amounts in excess of the aggregate principal amount of the 2030 Notes converted.

The conversion rate will be subject to adjustment in connection with certain events.

Holders of the 2030 Notes who convert their 2030 Notes in connection with certain corporate events that constitute a “make-whole fundamental change” under the Indenture are, under certain circumstances, entitled to an increase in the conversion rate for a certain period of time.

Additionally, following the occurrence of a corporate event that constitutes a “fundamental change” under the Indenture, holders of the 2030 Notes may require us to repurchase for cash all or a portion of the 2030 Notes at a repurchase price equal to 100 % of the principal amount of the 2030 Notes plus accrued and unpaid special interest, if any, up to, but excluding, the fundamental change repurchase date.

Our acquisition of CyberArk constituted both a “make-whole fundamental change” and a “fundamental change” under the Indenture.

In connection with the make-whole fundamental change, holders had the option to convert all or a portion of their 2030 Notes at an increased conversion rate equal to a combination of approximately 5.5690 shares of our common stock and $ 113.8860 in cash per $1,000 principal amount (the “make-whole conversion right”).

We elected cash settlement as the settlement method for any 2030 Notes surrendered during the make-whole fundamental change period.

Certain holders of the 2030 Notes surrendered $ 153 million in aggregate principal amount of the 2030 Notes during the make-whole fundamental change period for conversion, which were settled for $ 160 million in cash on May 7, 2026.

In connection with the fundamental change, holders had the right to tender all or a portion of their 2030 Notes for cash (the “repurchase right”) pursuant to our offer to purchase in accordance with the obligations under the 2030 Notes.

No holders exercised the repurchase right to tender their 2030 Notes.

The make-whole conversion right and repurchase right resulting from our acquisition of CyberArk expired on March 20, 2026.

As of July 31, 2026, after giving effect to the 2030 Notes surrendered for conversion during the make-whole conversion period, the remaining outstanding principal balance of the 2030 Notes was $ 1.1 billion.

As of July 31, 2026, the 2030 Notes were classified as a long-term liability on our consolidated balance sheets since the sale price condition was not met during the calendar quarter ended June 30, 2026.

The related fair value of $ 1.8 billion was determined based on the closing trading price per $100 of the 2030 Notes as of the last day of trading for the period.

The fair value of the 2030 Notes is primarily affected by the trading price of our common stock and market interest rates.

For the year ended July 31, 2026, changes in fair value of 2030 Notes included in earnings were a loss of $ 620 million, and changes in fair value attributable to instrument-specific credit risk included in AOCI were a loss of $ 11 million.

In connection with our acquisition of CyberArk, on February 11, 2026, we entered into amendments to the Capped Calls that CyberArk purchased from certain financial institutions in connection with the issuance of the 2030 Notes.

Under the amendments, we assumed the rights and obligations of CyberArk with respect to the Capped Calls and modified the Capped Calls to require the delivery of shares of our common stock in lieu of ordinary shares of CyberArk.

The Capped Calls have a strike price of approximately $ 211.24 per share, subject to certain adjustments, which corresponds to the effective initial conversion price of our 2030 Notes.

The Capped Calls have cap prices ranging from approximately $ 287.21 to $ 291.44 per share, subject to certain adjustments.

In connection with exercising the Capped Calls, we may elect that the Capped Calls be settled either entirely in cash or a combination of our common stock and cash.

The Capped Calls are separate transactions from the 2030 Notes, and holders of the 2030 Notes do not have any rights with respect to the Capped Calls.

The Capped Calls cover shares of our common stock underlying the 2030 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2030 Notes.

In April 2026, we elected to terminate portions of the Capped Calls in exchange for $ 10 million in cash in connection with the $ 153 million in aggregate principal amount of the 2030 Notes surrendered by certain holders during the make-whole conversion period.

As of July 31, 2026, the fair value of the outstanding Capped Calls was $ 153 million, determined using the Black-Scholes option pricing model and observable inputs, including the price of our common stock, volatility, remaining contractual term, and risk-free interest rate.

For the year ended July 31, 2026, the change in fair value of Capped Calls was a gain of $ 58 million.

Revolving Credit Facility

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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.

We have entered into various non-cancelable operating leases, primarily for our offices and data centers, with lease terms expiring through the year ending July 31, 2036.

Some of our leases contain rent holiday periods, scheduled rent increases, lease incentives, early termination rights, and/or renewal options.

As of July 31, 2026, there were no amounts outstanding and no default or event of default has occurred under the Credit Agreement.

We have entered into various non-cancelable operating leases, primarily for our offices, with lease terms expiring through the year ending July 31, 2040.

The most significant leases relate to our corporate headquarters in Santa Clara.

In April 2026, we entered into three lease amendments to extend the lease terms of our current corporate headquarters in Santa Clara, California for a period of twelve years through July 2040.

The leases contain rent holiday periods, scheduled rent increases, lease incentives, and renewal options which allow the lease terms to be extended through July 2052.

Lease payments under the three lease amendments, net of lease incentives such as rent holidays and tenant improvement allowances, are approximately $ 469 million over the extended lease term through July 2040.

During the years ended July 31, 2026, 2025, and 2024, our net cost for operating leases was $ 146 million, $ 122 million, and $ 105 million, respectively, primarily consisting of operating lease costs of $ 104 million, $ 88 million, and $ 76 million, respectively.

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Right-of-use assets obtained in exchange for new operating lease liabilities (1)

$ 442 $ 27 $ 178

(1) Includes $ 262 million in fiscal 2026 relating to the lease amendments of our corporate headquarters in Santa Clara.

July 31, 2026 July 31, 2025

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As of July 31, 2026, we had additional non-cancelable operating leases for office space that had been signed but had not yet commenced with total future minimum lease payments of $ 15 million.

These leases are expected to commence on or after fiscal 2026, with lease terms ranging from four to seven years .

These leases are expected to commence in or after fiscal 2028, with lease terms ranging from four to five years .

Commitments and Contingencies

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As the primary benefit of the arrangement was attributable to future use, the amount was recorded in other assets on our consolidated balance sheets and is amortized to cost of product revenue on our consolidated statements of operations over the estimated period of benefit of seven years .

In October 2023, we established a multi-currency notional cash pool for a certain number of our entities with a third-party bank.

As of July 31, 2026, we have multi-currency notional cash pool for a certain number of our entities with third-party banks.

As part of the notional cash pool agreement, the bank extends overdraft credit to our participating entities as needed, provided that the overall notionally pooled balance of all accounts in the pool at the end of each day is positive.

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Palo Alto Networks

On March 12, 2021, Centripetal Networks, Inc., filed a lawsuit against us in the United States District Court for the Eastern District of Virginia.

On March 12, 2021, Centripetal Networks, Inc.

(“Centripetal”) filed a lawsuit against us in the United States District Court for the Eastern District of Virginia.

The lawsuit alleges that our products infringe multiple Centripetal patents.

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Those matters are still pending.

As of July 31, 2024, we accrued $ 184.4 million for the verdict amount and estimated interest.

As of July 31, 2025, we accrued $ 145.6 million based on the judgment and estimated interest, which is recorded in other long-term liabilities on our consolidated balance sheets.

As of July 31, 2026 and 2025, we accrued $ 151 million and $ 146 million, respectively, based on the judgment and estimated interest, which is recorded in other long-term liabilities on our consolidated balance sheets.

The corresponding amount was a charge of $ 5 million for the year ended July 31, 2026 and a release of $ 39 million for the year ended July 31, 2025, which is included in general and administrative expense on our consolidated statements of operations.

Palo Alto Networks

On November 4, 2014, Finjan, Inc., filed a lawsuit against us in the United States District Court for the Northern District of California.

On November 4, 2014, Finjan, Inc.

(“Finjan”) filed a lawsuit against us in the United States District Court for the Northern District of California.

The lawsuit alleges that our products infringe multiple Finjan patents.

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On March 21, 2025, the judge issued an order granting summary judgment of non-infringement on all remaining patents at issue.

Plaintiff filed a Notice of Appeal on April 21, 2025.

The matter is currently pending appeal.

We are unable, at this time, to reasonably estimate a possible loss or potential range of loss, if any.

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On April 3, 2024, Eire OG Innovations filed a lawsuit against us in the United States District Court for the Eastern District of Texas asserting infringement of multiple patents, certain of which were subsequently dismissed.

The complaint requests monetary damages and attorneys’ fees.

Trial is set for February 17, 2026.

We are unable, at this time, to reasonably estimate a possible loss or potential range of loss, if any.

The parties have resolved all pending matters between them as of December 2025.

The amount paid by us to resolve these matters was not material.

Indemnification

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In February 2019, our board of directors authorized a $ 1.0 billion share repurchase program, which is funded from available working capital.

Our board of directors subsequently authorized additional increases to this share repurchase program, including $ 915.0 million in August 2022, $ 316.7 million in November 2023, and $ 500.0 million in August 2024, bringing the total authorization under this share repurchase program to $ 4.1 billion (our “current authorization”).

Our board of directors subsequently authorized additional increases to this share repurchase program, bringing the total authorization under this share repurchase program to $ 5.1 billion (our “current authorization”).

The expiration date of our current authorization was extended to December 31, 2026, and our repurchase program may be suspended or discontinued at any time.

Repurchases may be made at management’s discretion from time to time on the open market, through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing.

Repurchases are to be made at management’s discretion from time to time on the open market, through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing.

The following table summarizes the share repurchase activity under our share repurchase program (in millions, except per share amounts):

Year Ended July 31,

2026 2025 2024

Number of shares repurchased 7 — 4

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(1) Includes transaction costs

We did no t repurchase shares of our common stock during the year ended July 31, 2025.

During the year ended July 31, 2023, we paid $ 22.7 million related to share repurchases of our common stock that were not settled as of July 31, 2022.

As of July 31, 2026, $ 1.0 billion remained available for future share repurchases under our current repurchase authorization.

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The service conditions are satisfied over a period of one to three years .

For PSUs granted during the year ended July 31, 2025, the performance conditions are based on an average of next-generation security annualized recurring revenue and non-GAAP net income per diluted share.

For PSUs granted during the years ended July 31, 2024 and 2023, the performance conditions are based on revenue growth or billing growth.

For PSUs granted during the years ended July 31, 2026 and 2025, the performance conditions are based on an average of next-generation security annualized recurring revenue and non-GAAP net income per diluted share.

For PSUs granted during the year ended July 31, 2024, the performance conditions are based on revenue growth or billing growth.

The market condition is measured based on our TSR relative to the TSR of the companies listed in the Standard & Poor’s 500 index.

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We have also granted PSOs with both service and market conditions.

The market condition for PSOs granted in the fiscal years 2018 and 2019 requires the price of our common stock to equal or exceed $ 49.63 , $ 66.17 , $ 82.71 , and $ 99.25 based on the average closing price for 30 consecutive trading days during the four -, five -, six -, and seven-and-a-half-year periods following the date of grant in fiscal year 2018 and 2019, respectively.

The market condition for PSOs granted in fiscal 2018 and 2019 requires the price of our common stock to equal or exceed $ 49.63 , $ 66.17 , $ 82.71 , and $ 99.25 based on the average closing price for 30 consecutive trading days during the four -, five -, six -, and seven-and-a-half-year periods following the date of grant in fiscal 2018 and 2019, respectively.

Once a market condition is met, its corresponding one-fourth of the PSOs vest on each anniversary date of the grant date, subject to continued service.

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We net-share settle equity awards held by certain employees by withholding shares upon vesting to satisfy tax withholding obligations.

The shares withheld to satisfy employee tax withholding obligations are returned to our 2021 Plan and will be available for future issuance.

Effective August 14, 2025, our 2021 Plan was amended to provide that the shares withheld by us to satisfy employee tax withholding obligations are retired and are not returned to our 2021 Plan.

Prior to the amendment, the shares withheld by us to satisfy employee tax withholding obligations were returned to the 2021 Plan and were available for future issuance.

Payments for employees’ tax obligations to the tax authorities are recognized as a reduction to additional paid-in capital and reflected as financing activities on our consolidated statements of cash flows.

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Acquisitions for more information on our acquisitions and the related equity awards assumed.

Stock Option Activities

The following table summarizes the stock option and PSO activity under our stock plans during the years ended July 31, 2025, 2024, and 2023 (in millions, except per share amounts):

Stock Options Outstanding PSOs Outstanding

PSO Activities

The following table summarizes the PSO activity under our stock plans during the years ended July 31, 2026, 2025, and 2024 (in millions, except per share amounts):

PSOs Outstanding

Number of Shares Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Term

(Years) Aggregate Intrinsic Value Number of Shares Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Term

(Years) Aggregate Intrinsic Value

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Exercised ( 1 ) 32.76

— — ( 8.2 ) 32.65

Balance—July 31, 2026 — $ — 0.0 $ —

Exercisable—July 31, 2026 — $ — 0.0 $ —

(1) Includes 1.3 million shares withheld by us to satisfy the exercise price and tax withholding requirements.

The intrinsic value of options exercised during the years ended July 31, 2025, 2024, and 2023 was $ 1.2 billion, $ 358.5 million, and $ 237.7 million, respectively.

(1) Includes 1 million shares withheld by us to satisfy exercise price and tax withholding requirements.

The intrinsic value of options exercised during the years ended July 31, 2026, 2025, and 2024 was $ 235 million, $ 1.2 billion, and $ 359 million, respectively.

RSU and PSU Activities

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Balance—July 31, 2025 13 $ 143.33 $ 2,285 9 $ 140.92 $ 1,635

Granted (1)(3)

15 184.48 4 186.49

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(2) Includes time-based vesting for PSUs.

(3) Includes 7 million RSUs assumed in connection with the acquisitions of Chronosphere, CyberArk, Koi, and Portkey with weighted-average grant-date fair value of $ 176.20 , $ 165.30 , $ 161.59 , and $ 281.69 per share, respectively, for the year ended July 31, 2026.

The aggregate fair value, as of the respective vesting dates, of RSUs vested during the years ended July 31, 2026, 2025, and 2024 was $ 1.8 billion, $ 1.6 billion, and $ 1.6 billion, respectively.

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Treasury zero-coupon issues with maturities that approximate the expected term.

The following table summarizes share-based compensation by award types (in millions):

Year Ended July 31,

2026 2025 2024

RSU and RSA $ 1,319 $ 878 $ 866

PSU 344 331 124

Others 152 91 89

Total share-based compensation $ 1,815 $ 1,300 $ 1,079

The following table summarizes share-based compensation included in costs and expenses (in millions):

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Total share-based compensation $ 1,815 $ 1,300 $ 1,079

During the year ended July 31, 2026, the vesting of certain equity awards was accelerated in connection with our acquisitions of CyberArk and Koi;

as a result, we recorded share-based compensation of $ 177 million, including $ 1 million in cost of subscription and support revenue, $ 36 million in sales and marketing expense, and $ 140 million in general and administrative expense on our consolidated statements of operations.

As of July 31, 2026, total compensation cost related to unvested share-based awards not yet recognized was $ 3.3 billion.

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Total $ 229 $ 462 $ ( 1,590 )

For the year ended July 31, 2025, our provision for income taxes was $ 461.8 million, which included a deferred tax provision of $ 218.5 million arising from the remeasurement of our basis difference associated with the U.S.

For the year ended July 31, 2026, our provision for income taxes was $ 229 million, which represented a $ 233 million decrease from prior year, primarily due to a one-time deferred tax provision of $ 219 million recorded during during the year ended July 31, 2025 arising from the remeasurement of our basis difference 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.

Although these specific provisions are not effective until our fiscal 2027, our policy to account for basis differences relating to our global intangible low-taxed income requires us to account for these changes in the period of enactment.

For the year ended July 31, 2024, our benefit from income taxes was $ 1.6 billion, primarily due to the release of our valuation allowance on U.S.

federal, U.S.

states other than California, and United Kingdom (“U.K.”) deferred tax assets, partially offset by the deferred tax provision in our U.S.

federal tax provision to recognize the indirect effect on basis differences relating to our global intangible low-taxed income in connection with the release of our valuation allowance in the U.K.

The following table presents the items accounting for the difference between income taxes computed at the federal statutory income tax rate and our provision for (benefit from) income taxes:

We adopted the new income tax disclosures guidance effective in our year ended July 31, 2026 on a prospective basis.

The following table presents a reconciliation from the federal statutory tax amount and rate to our provision for incomes taxes and effective tax rate under the requirements of the newly adopted income tax disclosures guidance (dollars in millions):

Year Ended July 31, 2026

Federal statutory tax $ 113 21.0 %

State taxes (1)(2)

Foreign tax effects:

Statutory rate differential ( 10 ) ( 1.9 )

Reduced statutory rate on qualifying income 93 17.3

Nondeductible expenses 22 4.1

Intercompany legal entity restructuring (2)

United Kingdom:

Statutory rate differential 20 3.7

Other jurisdictions 54 10.2

Effect of cross-border tax laws:

Global intangible low-taxed income (2)

( 195 ) ( 36.4 )

Subpart F income 22 4.1

branch income (loss) (2)

( 117 ) ( 21.9 )

Other ( 23 ) ( 4.1 )

Research and development tax credits ( 58 ) ( 10.8 )

Changes in valuation allowance ( 2 ) ( 0.4 )

Nontaxable or nondeductible items:

Shared-based compensation 49 9.1

Change in fair value of convertible senior notes and Capped Calls 118 22.0

Changes in unrecognized tax benefits 86 16.0

Intercompany legal entity restructuring (2)

( 39 ) ( 7.3 )

Total $ 229 42.7 %

(1) The state and local jurisdictions that contribute to the majority of the tax effect in this category include California, District of Columbia, Maryland, the state and city of New York, and Pennsylvania.

(2) These categories include impacts of an intercompany legal entity restructuring completed Q4 fiscal 2026 with a total impact of $ 45 million income tax benefit.

Prior to the adoption of the new income tax disclosure guidance, the following table presents a reconciliation from the federal statutory income tax rate to our effective tax rate:

Year Ended July 31,

Federal statutory rate 21.0 % 21.0 %

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Total deferred tax liabilities ( 2,291 ) ( 2,316 )

Net deferred tax assets (liabilities) $ 2,334.9 $ 2,011.3

Net deferred tax assets $ 2,192 $ 2,335

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

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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 year ended July 31, 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.

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

federal and state deferred tax assets largely consist of capitalized research expenditures and accelerated recognition of deferred revenue for tax purposes.

tax carryforwards (including net operating losses and tax credits) are expected to be fully utilized to the extent allowable by law.

deferred tax assets largely consist of basis differences in intangible assets and related net operating losses expected to be utilized in the future.

Due to a law change during the year ended July 31, 2026, we released a portion of the valuation allowance for our California deferred tax assets due to these assets becoming “more likely than not” to be realized in the future;

however, we still expect future research and development tax credit generation in California to exceed our ability to use the existing tax credits.

As of July 31, 2026, we had federal, state, and foreign net operating loss carryforwards of approximately $ 474 million, $ 746 million, and $ 3.0 billion, respectively, as reported on our tax returns, available to reduce future taxable income, if any.

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If not utilized, the foreign tax credit carryforwards will expire in various amounts at various dates beginning in the year ending July 31, 2029.

Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions.

The annual limitation may result in the expiration of net operating losses and credits before utilization.

As of July 31, 2025, we had $ 572.2 million of unrecognized tax benefits, $ 274.8 million of which would affect income tax expense if recognized, after consideration of our valuation allowance in California and other assets.

As of July 31, 2024, we had $ 454.4 million of unrecognized tax benefits, $ 200.1 million of which would affect income tax expense if recognized, after consideration of our valuation allowance in the United States and other assets.

We do not expect the amount of unrecognized tax benefits as of July 31, 2025 to materially change over the next 12 months.

As of July 31, 2026, we had $ 719 million of unrecognized tax benefits, $ 393 million of which would affect income tax expense if recognized.

As of July 31, 2025, we had $ 572 million of unrecognized tax benefits, $ 275 million of which would affect income tax expense if recognized.

We file federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitations.

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We recognize both interest and penalties associated with uncertain tax positions as a component of income tax expense.

During the years ended July 31, 2025, 2024, and 2023, we recognized an income tax expense of $ 42.4 million, an income tax expense of $ 5.8 million, and a net income tax benefit of $ 4.8 million related to interest and penalties, respectively.

During the years ended July 31, 2026, 2025, and 2024, we recognized income tax expense of $ 59 million, $ 42 million, and $ 6 million related to interest and penalties, respectively.

We had accrued interest and penalties on our consolidated balance sheets related to unrecognized tax benefits of $ 113 million and $ 53 million as of July 31, 2026 and 2025, respectively.

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Unrecognized tax benefits at the end of the period $ 719 $ 572 $ 454

During the years ended July 31, 2025 and 2024, increases in uncertain tax positions were primarily due to our credits and incentives and intercompany transactions.

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

investment in foreign subsidiaries.

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

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

As part of the acquisition of CyberArk, we executed an intercompany transaction to repatriate $ 3.5 billion of foreign earnings, resulting in immaterial income tax expense related to state and other taxes.

Our remaining unremitted earnings are indefinitely reinvested.

Pursuant to adoption of the new income tax disclosures guidance, the following table presents the income taxes paid, net of refunds (in millions):

Year Ended July 31, 2026

California 18

All Others 51

Netherlands 13

All Others 37

Net Income Per Share

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Weighted-average shares used to compute net income per share, basic

662.5 638.5 606.4

Weighted-average effect of potentially dilutive securities:

3 unchanged sentences

Weighted-average shares used to compute net income per share, diluted

709.3 707.9 684.5

Net income per share, basic

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Employee equity incentive plans 5 3 5

Other Income, Net

The following table sets forth the components of other income, net (in millions):

Other Income (Expense), Net

The following table sets forth the components of other income (expense), net (in millions):

Year Ended July 31,

1 unchanged sentence

Interest income $ 374 $ 364 $ 318

Interest expense — ( 3 ) ( 8 )

Foreign currency exchange gains (losses), net ( 35 ) ( 33 ) —

Change in fair value of convertible senior notes ( 620 ) — —

Change in fair value of Capped Calls 58 — —

Other, net 64 25 ( 6 )

Total other income, net $ 355.8 $ 312.7 $ 206.2

Total other income (expense), net $ ( 159 ) $ 353 $ 304

Segment Information

1 unchanged sentence

We conduct business globally and sales are primarily managed on a geographic theater basis.

Our chief operating decision maker (“CODM”) is our Chairman and Chief Executive Officer who reviews financial information presented on a consolidated basis accompanied by revenue information for purposes of allocating resources and evaluating financial performance.

Our CODM uses consolidated net income as our measure of segment profit or loss.

The consolidated financial information by function as reflected on our consolidated statements of operations is used in our annual budget and forecasting process to establish goals and monitor budget versus actual results.

Our chief operating decision maker (“CODM”) is our Chairman and Chief Executive Officer who reviewed financial information presented on a consolidated basis accompanied by revenue information for purposes of allocating resources and evaluating financial performance.

Our CODM used consolidated net income as our measure of segment profit or loss.

The consolidated financial information by function as reflected on our consolidated statements of operations was used in our annual budget and forecasting process to establish goals and monitor budget versus actual results.

The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets.

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Revenue for revenue by geographic theater and revenue for groups of similar products and services for the years ended July 31, 2026, 2025, and 2024.

Subsequent Events

Embrace Mobile, Inc.

On August 27, 2026, we completed the acquisition of Embrace.

This acquisition will be accounted for as a business combination in the first quarter of fiscal 2027.

Console Systems, Inc.

On September 1, 2026, we completed the acquisition of Console.

This acquisition will be accounted for as a business combination in the first quarter of fiscal 2027.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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 8. Financial Statements and Supplementary Data