Palo Alto(US:PANW)2025-11-20 00:19Financial Performance - Total revenue for the first quarter of fiscal 2026 was $2.5 billion, representing a year-over-year growth of 16% compared to $2.1 billion in the same period of fiscal 2025[92]. - Product revenue reached $434 million, accounting for 17.5% of total revenue, with a year-over-year growth of 23%[93]. - Subscription and support revenue grew to $2.0 billion, representing 82.5% of total revenue, with a year-over-year growth of 14%[93]. - Total revenue for the three months ended October 31, 2025, was $2,474 million, a 16% increase from $2,139 million in 2024[103]. - Product revenue increased by 23% to $434 million for the three months ended October 31, 2025, compared to $354 million in 2024[106]. - Subscription and support revenue rose by 14% to $2,040 million for the three months ended October 31, 2025, from $1,785 million in 2024[108]. - Gross profit for the three months ended October 31, 2025, was $1,836 million, with a gross margin of 74.2%, slightly up from 74.1% in 2024[116]. - Operating income for the three months ended October 31, 2025, was $309 million, representing 12.5% of total revenue, compared to 13.4% in 2024[103]. - Cash flow from operating activities was $1.771 billion, up from $1.510 billion year-over-year[99]. - Free cash flow (non-GAAP) for the quarter was $1.687 billion, compared to $1.466 billion in the same period last year[99]. Expenses and Costs - Cost of subscription and support revenue increased by 15% to $549 million for the three months ended October 31, 2025, from $479 million in 2024[114]. - Research and development expense increased to $528 million for the three months ended October 31, 2025, up 10% from $481 million in the same period in 2024, primarily due to increased personnel costs[120]. - Sales and marketing expense rose to $820 million for the three months ended October 31, 2025, a 14% increase from $720 million in the same period in 2024, driven by higher personnel costs[122]. - General and administrative expense surged to $179 million for the three months ended October 31, 2025, an 83% increase from $98 million in the same period in 2024, largely due to increased personnel costs and a partial release of litigation-related accrual[124]. - Interest expense decreased to $0 million for the three months ended October 31, 2025, down 100% from $1 million in the same period in 2024, due to the maturity of the 2025 Notes[126]. - Provision for income taxes rose to $78 million for the three months ended October 31, 2025, a 359% increase from $17 million in the same period in 2024, with an effective tax rate of 18.9%[130]. Cash and Investments - Total cash, cash equivalents, and investments reached $10.2 billion as of October 31, 2025, up from $8.5 billion on July 31, 2025[131]. - Cash provided by operating activities was $1.8 billion for the three months ended October 31, 2025, an increase of $261 million compared to the same period in 2024[141]. - The company has commitments to purchase products and services totaling $6.8 billion as of October 31, 2025[135]. Acquisitions and Future Plans - The company plans to acquire CyberArk Software Ltd., expected to close in the third quarter of fiscal 2026, enhancing its identity security capabilities[94]. - The acquisition of CyberArk is expected to close in the third quarter of fiscal 2026, with an equity value of approximately $25 billion[137]. Market and Economic Sensitivity - A hypothetical 100 basis point increase in interest rates would result in a $139 million decline in the fair market value of the investment portfolio[150]. - Conversely, a hypothetical 100 basis point decrease in interest rates would lead to a $142 million increase in the fair market value of the portfolio[150]. Other Financial Metrics - Next-Generation Security Annualized Recurring Revenue increased to $5.9 billion from $5.6 billion[99]. - Remaining performance obligations were reported at $15.5 billion, slightly down from $15.8 billion[99]. - Share-based compensation expense for the company is expected to be approximately $2.2 billion over a weighted-average period of 2.4 years[118]. - Other income, net increased to $103 million for the three months ended October 31, 2025, a 24% increase from $83 million in the same period in 2024, primarily due to higher interest income[128]. - The company has not made significant changes to its critical accounting estimates since the last report[147].