Palo Alto Networks, Inc. (פאלו אלטו נטוורקס)

Palo Alto Networks (PANW) develops and sells cybersecurity products to enterprises, service providers and government entities. It organizes its offering in four platforms: Network & AI Security (firewalls, cloud-delivered secure access, and security for AI agents), security operations and cloud under the Cortex name, identity security under the Idira name, and threat intelligence and incident response through Unit 42. The company is headquartered in Santa Clara, California, and had 21,921 employees on July 31, 2026, compared with 16,068 a year earlier.

Fiscal 2026 was a year of acquisitions. In January 2026 the company completed the acquisition of Chronosphere, a cloud observability company, for about $3.0 billion. In February 2026 it completed the acquisition of Israel-based CyberArk, an identity security company, for $21.1 billion, mostly in stock. Four smaller companies were acquired later in the year and after it. About 80% of revenue comes from subscriptions and support, the rest from hardware and software licenses.

Sales go mainly through distributors and resellers: two distributors accounted for 30% of revenue in fiscal 2026. No single end-customer accounted for more than 10% of revenue. Nikesh Arora serves as Chairman and CEO. The company has no controlling shareholder and pays no dividend.

Revenue: what grew in the existing business and what was added by acquisition

Fiscal 2026 revenue rose 24.5% to $11.48 billion. According to the annual report, CyberArk and Chronosphere contributed $930 million from their acquisition dates. Without them revenue grew 14.4%, similar to the 14.9% of fiscal 2025. In the third quarter, when the company disclosed the acquired portion separately ($388 million), revenue without it grew 14.2%. There is no separate disclosure for the fourth quarter; by our calculation ($930 million for the year less $391 million for nine months), the acquired portion was about $539 million, and growth without it about 13.2%.

The report also includes pro forma figures, as if the three companies had been combined from the start of fiscal 2025: revenue of $12.31 billion in 2026 against $10.49 billion in the prior year, an increase of 17.4%, and a net loss in both years.

Profitability: two bottom lines

Reported operating income fell from $1,243 million to $695 million (a 6.1% margin), and net income from $1,134 million to $307 million. The fourth quarter showed a net loss of $282 million. Management's measure — excluding stock-based compensation, amortization of acquired intangibles and acquisition costs — showed operating income of $3,356 million (29.2% of revenue) and net income of $2,931 million. The gap between the two bottom lines is 9.5x.

The middle line — $2,047 million — treats stock-based compensation as an expense. At the tax rate implied by management's measure (about 22%), it equals net income of about $1.6 billion, about $1.89 per share on 843 million fully diluted shares. Stock-based compensation was $1,815 million, 15.8% of revenue (14.1% in the prior year).

* Includes a one-time tax benefit of $1.59 billion from the release of a deferred tax valuation allowance.

On July 31, 2026 the company held $7.9 billion in cash and investments. Its only financial debt is CyberArk's zero-coupon convertible notes, which the company guaranteed after the merger: $1.1 billion principal, carried at $1.8 billion, maturing June 2030. A $400 million credit facility was undrawn.

The acquisitions reshaped the balance sheet: goodwill rose from $4.6 to $22.0 billion, 45% of total assets, and intangible assets from $0.8 to $7.0 billion. Equity rose from $7.8 to $27.5 billion, mainly because of the shares issued to CyberArk shareholders. Under the amortization schedule in the report, amortization of intangibles will be $1,081 million in fiscal 2027 and will decline gradually in the following years.

Convertible notes: holders may convert if the share price was at least $280.75 on 20 of the last 30 trading days of a calendar quarter. According to the report, the condition was not met in the quarter ended June 2026. The closing price was above that level on every trading day from late July to late September 2026. On conversion, the company pays principal in cash and any excess in cash or shares at its election. According to the report, management considers existing resources sufficient for this.

Shares and capital return: year-end shares outstanding rose from 668 to 815 million (+22%): 112 million were issued to CyberArk shareholders and 27 million on settlement of old warrants. The company repurchased stock once during the year, in February 2026: 6.8 million shares for $1.0 billion, at an average price of $147.70. An authorization of $1.0 billion remains through the end of 2026.

Other commitments: purchase commitments of $8.2 billion, of which $7.7 billion to cloud providers through 2032 and beyond; contingent consideration to IBM for the QRadar acquisition ($206 million on the balance sheet); and a $151 million accrual in a patent case under appeal. After year-end, $825 million in cash was paid for two further acquisitions.

The company reports a single operating segment. It does not publish revenue or profitability by platform. The available split is by revenue type and by region.

Gross margin: fell from 73.4% to 70.4%. In product — from 77.1% to 75.1%, according to the report because of supply chain challenges and amortization. In subscription and support — from 72.5% to 69.2%, because of amortization from the acquisitions and cloud costs.

Management metrics: Next-Generation Security ARR (NGS ARR) — a metric the company defines itself, not part of the financial statements — reached $9.10 billion (+63%). In the third quarter, the only quarter in which the acquired portion was published ($1.6 billion), growth without it was about 28%. Remaining performance obligations were $21.2 billion (+34%), of which about $9.3 billion is to be recognized over the next 12 months. Deferred revenue on the balance sheet rose 15.7%; excluding $776 million added with CyberArk, the increase is 9.6%.

The strategy the company presents is called "platformization": consolidating separate security products into one integrated platform, so a customer replaces several vendors with one. According to the report, customers include almost all of the Fortune 100 and a majority of the Global 2000, in more than 180 countries. The CyberArk acquisition added a fourth platform — identity, including machine identities and identities of AI agents.

Competitors named in the report: large companies that build security into their products (Microsoft, Cisco, Alphabet); independent security vendors (Check Point, CrowdStrike, Fortinet, Zscaler, Okta, SailPoint, Delinea); observability vendors (Datadog, Dynatrace, Elastic); and startups. The report contains no market-share data. In its risk factors the company notes that the "identity security" market lacks a universally accepted definition, and that customers of its observability services pay by usage, which may create revenue volatility.

This review does not include competitor data from a primary source.

Risks that emerge from the filings

• Integration: six deals in about a year, including the largest in the company's history. Internal control over CyberArk was not yet assessed in the annual report (permitted in the first year).
• Competition: large competitors that build security into existing products, and cloud providers offering native security.
• Convertible notes: on conversion, principal ($1.1 billion) is paid in cash; any excess in cash or shares. The capped calls are capped at about $287–291.
• Dilution: according to management's guidance, fiscal 2027 EPS is calculated on 844–847 million shares, against an average of 764 million in 2026. $3.3 billion of unrecognized stock-based compensation remains.
• Israel: operations and employees in Israel, which grew with CyberArk. According to management, there is no significant business disruption.
• Supply chain and tariffs: shortages and rising prices in memory and storage components, and U.S.–China tariffs.
• Sales channel: 30% of revenue through two distributors.

Items to monitor in the Q1 fiscal 2027 report (late November 2026)