Palo Alto(PANW) - 2025 Q3 - Quarterly Report

Financial Performance - Total revenue for Q3 fiscal 2025 was $2.3 billion, a year-over-year growth of 15.3$2.0 billion in Q3 fiscal 2024[113] - Product revenue reached $452.7 million, accounting for 19.8$1.8 billion, representing 80.2% of total revenue, with a year-over-year growth of 15.2%[114] - Total revenue for the three months ended April 30, 2025, was $2,289.0 million, representing a year-over-year increase of 15.3$1,836.3 million, a 15.2% increase from $1,593.8 million in the same period last year[130] - Product revenue for the three months ended April 30, 2025, was$452.7 million, reflecting a 15.8% increase from $391.0 million in the prior year[128] - Net income for the three months ended April 30, 2025, was$262.1 million, which is 11.5% of total revenue[125] - Total gross profit for the three months ended April 30, 2025, was $1,669.7 million, with a gross margin of 72.9$218.8 million, with an operating margin of 9.6%[124] - Total operating expenses for the three months ended April 30, 2025, were $1,450.9 million, representing 63.3$494.5 million, an increase of $37.3 million or 8.2$718.7 million, a decrease of $73.8 million or 10.3$118.6 million, a decrease of $45.3 million or 38.2$2,535.3 million, compared to $2,635.5 million in the prior year[122] - Cash flow provided by operating activities for the nine months ended April 30, 2025, was$2,695.2 million, slightly down from $2,744.9 million in the previous year[122] - Cash provided by operating activities was$2.7 billion for the nine months ended April 30, 2025, a slight decrease of $49.7 million compared to the same period in 2024[167] - Cash used in investing activities increased by$100.8 million to $1.4 billion for the nine months ended April 30, 2025, primarily due to higher purchases of investments[169] - Cash used in financing activities decreased by$759.0 million to $404.8 million for the nine months ended April 30, 2025, mainly due to reduced cash used for share repurchases[171] - Total cash, cash equivalents, and investments reached$8.5 billion as of April 30, 2025, up from $6.8 billion as of July 31, 2024[154] Strategic Initiatives - In April 2025, the company introduced new offerings such as Prisma AIRS and Cortex XSIAM 3.0, and announced the acquisition of Protect AI, expected to close by Q1 fiscal 2026[115] - The company focuses on a platformization strategy to simplify security architectures and consolidate various products and services[108] - The AI-driven Cortex platform enhances security operations with unified data and automation, providing real-time prevention and automated remediation[110] - The company emphasizes the importance of innovation and timely development of new features to meet end-customer needs and improve competitive positioning[115] Market and Economic Conditions - The company continues to monitor macroeconomic conditions, including inflation and geopolitical tensions, which may impact business performance[117] - The company maintains a two-tiered indirect fulfillment model for sales, working closely with channel partners[113] - Revenue from the Americas increased by$169.6 million or 12.5% for the three months ended April 30, 2025, contributing the highest increase in revenue due to its larger scale[131] Accounting and Financial Estimates - The company has made significant estimates and assumptions regarding goodwill and intangible assets in business combinations, impacting future amortization expenses[174] - A hypothetical 100 basis point increase in interest rates would result in a $124.7 million decline in the fair market value of the investment portfolio[178] - The company maintains a diversified portfolio of cash, cash equivalents, and investment-grade securities to minimize interest rate risk[178] - There have been no significant changes to critical accounting estimates since the last report, except for updates related to the acquisition of certain IBM QRadar assets[173] - The company evaluates its estimates and assumptions on an ongoing basis, acknowledging that actual results could differ materially due to economic uncertainties[172] - Contingent consideration obligations in business combinations are subject to revaluation at the end of each reporting period, which may materially impact future fair values[175] - The company aims to preserve principal, provide liquidity, and maximize income without significantly increasing risk in its investment activities[178] - Recent accounting pronouncements have been reviewed, with expectations of their impact on results of operations and financial condition noted[176] - The company assesses its exposures to market risk, with no material changes reported since the last annual report[177] - Critical estimates in valuing intangible assets include expected future cash flows, discount rates, and profit margins[174]