Summary
Palo Alto Networks reported fiscal first quarter 2025 results for the period ended October 31, 2024. Revenue rose 13.9% to $2.14 billion. Gross profit rose 12.8% to $1.58 billion, while gross margin fell 0.7 percentage points to 74.1%. Operating income rose 33.1% to $286.5 million, and operating margin rose 1.9 percentage points to 13.4%. Net income rose 80.6% to $350.7 million. Diluted EPS rose 76.8% to $0.99. Operating cash flow slipped 1.1% to $1.51 billion. Capital expenditures rose 19.8% to $44.1 million. Deferred revenue, current portion, rose 16.4% to $5.51 billion. Remaining performance obligations rose 21.2% to $12.60 billion.
The non-GAAP picture showed similar momentum. Non-GAAP net income was $544.9 million, or $1.56 per diluted share, compared with $466.3 million, or $1.38 per diluted share, a year earlier. Non-GAAP operating margin was 28.8%, compared with 28.2%. Next-Generation Security ARR grew 40% year over year to $4.5 billion. Management tied the quarter to platformization, saying the strategy is driving strong financial results. The company completed its acquisition of certain IBM QRadar assets on August 31, 2024, and starting in fiscal first quarter 2025 NGS ARR includes revenue attributable to QRadar software as a service contracts. Palo Alto Networks also launched Prisma Access Browser in August 2024 and introduced new operational technology security capabilities in October 2024. Its end-customers are in over 180 countries, including almost all of the Fortune 100 and a majority of the Global 2000.
Guidance points to continued growth. For fiscal second quarter 2025, the company expects NGS ARR of $4.70 billion to $4.75 billion, representing year-over-year growth of between 35% and 36%. It expects RPO of $12.9 billion to $13.0 billion, representing year-over-year growth of between 20% and 21%. Total revenue is guided to $2.22 billion to $2.25 billion, representing year-over-year growth of between 12% and 14%. Diluted non-GAAP net income per share is guided to $1.54 to $1.56, using 350 million to 352 million shares outstanding. For fiscal year 2025, the company expects NGS ARR of $5.52 billion to $5.57 billion, representing year-over-year growth of between 31% and 32%. It expects RPO of $15.2 billion to $15.3 billion, representing year-over-year growth of between 19% and 20%. Total revenue is guided to $9.12 billion to $9.17 billion, representing year-over-year growth of 14%. Non-GAAP operating margin is guided to 27.5% to 28.0%. Diluted non-GAAP net income per share is guided to $6.26 to $6.39, using 350 million to 354 million shares outstanding. Adjusted free cash flow margin is guided to 37% to 38%.
Capital actions and risks round out the quarter. The board approved a two-for-one forward stock split. Stockholders of record on December 12, 2024 will receive one additional share for every share held, and trading is expected to begin on a split-adjusted basis on December 16, 2024. The split also increases authorized shares from 1.0 billion to 2.0 billion. The 2025 Notes remain a near-term item. As of October 31, 2024, $646.6 million of principal remained outstanding, and holders may convert during the fiscal quarter ending January 31, 2025. During the first quarter, the company repaid $319.0 million in aggregate principal and issued 2.3 million shares for conversion value above principal, offset by note hedges. Subsequent to quarter end, $106.0 million in aggregate principal was converted or submitted for conversion. The IBM QRadar acquisition added contingent consideration obligations of $655.2 million as of October 31, 2024, with potential payments through the fiscal quarter ending October 2028. Purchase commitments for products, components, cloud and other services totaled $4.6 billion. The company had $1.0 billion remaining under its share repurchase authorization, which expires December 31, 2025. Risks include execution of the platformization strategy, failure of platformization product offerings, strategic partnerships and acquisitions, changes in the fair value of contingent consideration, managing growth, new AI-related offerings, delays in new products, defects or vulnerabilities, customer purchasing decisions and sales cycles, competition, customer retention, integration of acquired companies, debt repayment, and the share repurchase program. Macroeconomic and geopolitical risks include hostilities in Israel and the surrounding region, inflation, interest rates, foreign exchange fluctuations, supply chain disruptions, trade regulations, and tensions between China and Taiwan and between the U.S. and China.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2025 | Q4 FY2024 | QoQ | Q1 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $2.14B | $2.19B | -2.3% | $1.88B | +13.9% |
| Gross profit | $1.58B | $1.62B | -1.9% | $1.41B | +12.8% |
| Gross margin | 74.1% | 73.8% | +0.3 pp | 74.8% | -0.7 pp |
| Research & development | $480.4M | $494.8M | -2.9% | $409.5M | +17.3% |
| Sales & marketing | $720.1M | $742.3M | -3.0% | $660.5M | +9.0% |
| General & administrative | $97.7M | $140.3M | -30.4% | $120.1M | -18.7% |
| Total operating expenses | $1.30B | $1.38B | -5.7% | $1.19B | +9.1% |
| Operating income (loss) | $286.5M | $238.4M | +20.2% | $215.2M | +33.1% |
| Operating margin | 13.4% | 10.9% | +2.5 pp | 11.5% | +1.9 pp |
| Net income (loss) | $350.7M | $357.7M | -2.0% | $194.2M | +80.6% |
| Net margin | 16.4% | 16.3% | +0.1 pp | 10.3% | +6.1 pp |
| Diluted EPS | $0.99 | $1.01 | -$0.02 | $0.56 | +$0.43 |
Risks
Global economic and geopolitical uncertainty, including hostilities in Israel and the surrounding region, sanctions on Russia, inflation, interest rates, and trade disputes, could reduce sales, lengthen sales cycles, and increase component costs. Management said it is monitoring these conditions and their impact on customer behavior.
PANW faces intense competition from large platform vendors, independent security vendors, and cloud startups, with AI and machine learning increasing competitive pressure and potential pricing and gross margin pressure. MD&A emphasizes platformization and new AI-enabled offerings such as Prisma Access Browser and OT Security.
Sales to large enterprise customers involve longer sales cycles, complex deployments, and quarter-end order concentration, and revenue growth was 13.9% in the quarter ended October 31, 2024 versus the 20.1% growth cited for the prior-year quarter. If anticipated large orders slip, quarterly revenue could fall short of expectations.
Three distributors individually represented 10% or more of total revenue in the quarter ended October 31, 2024 and 45.0% in aggregate, while two distributors were 37.8% of gross accounts receivable as of October 31, 2024. Dependence on channel partners that can terminate agreements or promote competitors could disrupt sales.
Subscription and support revenue was 83.5% of total revenue in the quarter ended October 31, 2024, up from 81.8% in the prior-year quarter, and revenue is recognized over one to five years. Renewal declines or shorter contract lengths may not be fully reflected in current revenue but will affect future periods.
On October 3, 2024, a judgment assessed $113.6 million in lump sum damages in the Centripetal Networks litigation, and other patent infringement cases are disclosed. IP claims could require damages, licenses, injunctions, or indemnification of customers and channel partners.
In April 2024, PANW became aware of a command injection vulnerability in the GlobalProtect feature of certain PAN-OS versions, requiring a security advisory, software updates, and customer remediation. Defects or vulnerabilities could harm reputation, delay revenue, increase warranty costs, and hurt gross margins.
Total gross margin decreased to 74.1% in the quarter ended October 31, 2024 from 74.8% in the prior-year quarter, and subscription and support gross margin decreased to 73.2% from 74.3% due to increased cloud-based offering costs. Rising cloud hosting and support costs could pressure profitability.
Hardware relies on manufacturing partners, primarily Flex, with limited sources for key components and exposure to import tariffs. The risk factors say tariffs have increased costs and led to hardware price increases, and any production interruption could cause lost sales or delayed revenue.
The 2025 Notes are convertible effective November 1, 2024 through January 31, 2025, and if all holders convert, PANW would be obligated to settle $646.6 million principal amount in cash. Although management believes liquidity is sufficient, conversion or repurchase obligations could require third-party financing.
PANW depends on attracting, retaining, and motivating key technical, sales, and management personnel, and headcount increased from 15,289 at fiscal 2024 end to 15,514 at first quarter fiscal 2025. Failure to retain key talent could impair product innovation and sales execution.
Expanding privacy and data protection laws, including GDPR penalties of up to the greater of EUR 20 million or 4% of annual worldwide turnover and CCPA obligations, plus new AI and data localization rules, increase compliance costs and enforcement risk. Noncompliance could lead to government actions, private litigation, and reputational harm.
PANW believes its second and fourth fiscal quarters may record greater revenue sequentially than its first and third fiscal quarters due to customer budget cycles and sales compensation plans. This seasonality may cause revenue fluctuations and make results difficult to predict.
SaaS KPIs
All quarters →Free cash flow (non-GAAP)
Non-GAAP Operating Margin
Remaining Performance Obligations (RPO)
Summary, forecast, risks and KPIs are extracted from Palo Alto Networks Inc's SEC filings for Q1 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.