Palo Alto(US:PANW)2023-02-21 16:00Revenue Performance - Total revenue for Q2 fiscal 2023 was $1.7 billion, a year-over-year increase of 25.7% compared to $1.3 billion in Q2 fiscal 2022[79] - Total revenue for the three months ended January 31, 2023, was $1,655.1 million, representing a year-over-year increase of 25.7%[85] - The year-over-year percentage increase in total revenue for the six months ended January 31, 2023, was 25.5%[85] - Total deferred revenue increased to $7,554.0 million as of January 31, 2023, compared to $6,994.0 million a year earlier[85] Product and Subscription Revenue - Product revenue reached $352.9 million, accounting for 21.3% of total revenue, with a year-over-year growth of 14.6%[81] - Subscription and support revenue grew to $1.3 billion, representing 78.7% of total revenue, with a year-over-year increase of 29.1%[82] - Product revenue increased to $352.9 million for the three months ended January 31, 2023, up 14.6% from $308.0 million in the same period of 2022[95] - Subscription and support revenue reached $1,302.2 million for the three months ended January 31, 2023, a 29.1% increase from $1,008.9 million in the same period of 2022[96] Profitability and Margins - Gross margin improved to 71.8% for the three months ended January 31, 2023, up from 69.2% in the same period last year[85] - Gross profit for the three months ended January 31, 2023, was $1,188.9 million, which is 71.8% of total revenue, compared to $911.6 million or 69.2% of total revenue in the same period of 2022[92] - Operating income for the three months ended January 31, 2023, was $39.9 million, a significant recovery from an operating loss of $(73.9) million in the prior year[85] - Net income for the three months ended January 31, 2023, was $84.2 million, compared to a loss of $(93.5) million in the same period of 2022[92] Expenses and Cost Management - Total operating expenses for the three months ended January 31, 2023, were $1,149.0 million, which is 69.4% of total revenue, compared to $985.5 million or 74.8% of total revenue in the same period of 2022[92] - Research and development expenses increased to $404.1 million for the three months ended January 31, 2023, a 12.6% rise from $359.0 million in the same period of 2022[105] - Sales and marketing expenses grew to $625.5 million for the three months ended January 31, 2023, an increase of 18.3% from $528.8 million in the same period of 2022[108] - General and administrative expenses increased to $119.4 million for the three months ended January 31, 2023, up 22.2% from $97.7 million in the same period of 2022[109] Cash Flow and Investments - Free cash flow (non-GAAP) for the six months ended January 31, 2023, was $1,853.4 million, compared to $956.2 million in the same period last year[90] - Cash flow provided by operating activities for the six months ended January 31, 2023, was $1,931.3 million, up from $1,071.5 million in the prior year[90] - The company reported a total cash, cash equivalents, and investments balance of $6,167.5 million as of January 31, 2023, compared to $4,686.4 million a year earlier[85] - Cash used in investing activities rose to $2.5 billion for the six months ended January 31, 2023, an increase of $2.0 billion (396.3%) compared to $504.2 million in the same period in 2022[121] Market Presence and Strategy - The company had end-customers in over 180 countries, including almost all Fortune 100 companies and a majority of Global 2000 companies[79] - The company’s growth strategy includes expanding its customer base and enhancing technology leadership to drive recurring revenues[82] - The company operates a two-tiered, indirect fulfillment model, selling products through distributors to resellers and then to end-customers[79] - The company emphasizes the importance of innovation and timely development of new features to meet customer needs and improve competitive position[82] Challenges and Risks - The company continues to face supply chain challenges, including chip and component shortages, impacting costs and delivery times[83] - A hypothetical 100 basis point increase in interest rates would result in a $46.8 million decline in the fair market value of the investment portfolio as of January 31, 2023[128] - The company maintains a full valuation allowance for certain deferred tax assets, which has caused a disproportionate relationship between the effective tax rate and other jurisdictional measures[114]