Summary
Palo Alto Networks closed fiscal 2021 with fourth-quarter revenue of $1,219.3 million, up 28.3% from $950.4 million in the prior-year quarter. Full-year revenue reached $4,256.1 million, up 24.9% from $3,408.4 million. Demand signals outside the income statement were stronger still. Billings grew 34% year over year to $1.9 billion, and full-year billings rose 27% to $5.5 billion. Remaining performance obligations climbed 37.2% to $5.9 billion from $4.3 billion. Current deferred revenue increased 33.8% to $2,741.9 million from $2,049.1 million. Management credited the quarter to large customer transactions and strategic commitments across the Strata, Prisma, and Cortex platforms.
Profitability stayed under pressure. Gross profit rose 30.4% to $860.4 million, and gross margin improved to 70.6% from 69.4%, a gain of 1.1 percentage points. Below that line, spending overwhelmed the top line. The operating loss widened to $60.4 million from $17.8 million, and operating margin fell to -5.0% from -1.9%, down 3.1 percentage points. The net loss widened to $119.3 million from $58.9 million. For fiscal 2021, the operating loss was $304.1 million, wider than the prior year's $179.0 million, and the net loss was $498.9 million, wider than $267.0 million. Diluted loss per share for the fiscal year widened to -$5.18 from -$2.76. Non-GAAP figures were positive. Fourth-quarter non-GAAP net income was $161.9 million, or $1.60 per diluted share, against $144.9 million, or $1.48 per diluted share. Full-year non-GAAP net income was $613.7 million, or $6.14 per diluted share.
Cash generation split by period. Fourth-quarter operating cash flow was $325.8 million, down 2.4% from $333.7 million, while full-year operating cash flow was $1,503.0 million, up 45.1% from $1,035.7 million. Capital expenditures were $27.4 million in the quarter, down 13.8%, and $116.0 million for the year, down 45.9%. The MD&A separately reports non-GAAP free cash flow of $1,387.0 million for fiscal 2021 against $821.3 million for fiscal 2020. After the quarter closed, the board authorized an additional $676.1 million for share repurchase, lifting the remaining authorization to $1.0 billion through December 31, 2022. The 2023 Notes met a sale price condition, so holders may convert them during the quarter ending October 31, 2021, and management says existing cash plus operating cash flow can cover that.
Guidance covers both the next quarter and the full fiscal year. For the fiscal first quarter 2022, the company targets billings of $1.29 billion to $1.31 billion, growth of 19% to 21%, and non-GAAP diluted net income per share of $1.55 to $1.58 on 101 million to 103 million shares. The top-line outlook for that quarter points to growth of 26% to 28%. For fiscal year 2022, guidance calls for billings of $6.60 billion to $6.65 billion, growth of 21% to 22%, and non-GAAP diluted net income per share of $7.15 to $7.25 on 104 million to 106 million shares. Full-year revenue growth is guided to 24% to 25%, and adjusted free cash flow margin to 30%. The non-GAAP outlook excludes share-based compensation and other items, so GAAP results will differ materially.
Risks are the familiar ones for this business plus a few specific to the moment. COVID-19 and its variants could keep disrupting customer purchasing, delay deals, and lengthen sales cycles and payment terms. Some customers or partners may be credit or cash constrained, which threatens collections. The company depends on third-party manufacturing partners and component suppliers, so supply constraints could bite. Competitive pressure in cloud and network security remains intense, and the company has absorbed several acquisitions, including Crypsis, Sinefa, Expanse, and Bridgecrew, which carry integration risk. Litigation and tax matters add further uncertainty. The growth and billings momentum are real, but the widening GAAP losses show how much the company is spending to get there.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.22B | $1.07B | +13.5% | $950.4M | +28.3% |
| Gross profit | $860.4M | $743.3M | +15.8% | $660.0M | +30.4% |
| Gross margin | 70.6% | 69.2% | +1.3 pp | 69.4% | +1.1 pp |
| Research & development | $325.3M | $311.0M | +4.6% | $215.9M | +50.7% |
| Sales & marketing | $489.8M | $448.0M | +9.3% | $391.2M | +25.2% |
| General & administrative | $105.7M | $94.7M | +11.6% | $70.7M | +49.5% |
| Total operating expenses | $920.8M | $853.7M | +7.9% | $677.8M | +35.9% |
| Operating income (loss) | -$60.4M | -$110.4M | +45.3% | -$17.8M | -239.3% |
| Operating margin | -5.0% | -10.3% | +5.3 pp | -1.9% | -3.1 pp |
| Net income (loss) | -$119.3M | -$145.1M | +17.8% | -$58.9M | -102.5% |
| Net margin | -9.8% | -13.5% | +3.7 pp | -6.2% | -3.6 pp |
| Diluted EPS | -$1.24 | — | — | — | — |
Risks
The ongoing global COVID-19 outbreak and related economic uncertainty could harm the business and results, with MD&A noting it may curtail end-customer spending and lead to delayed or deferred purchasing decisions and lengthened sales cycles and payment terms. The filing says the full impact cannot be reasonably estimated at this time.
The company depends on sole-source manufacturing partner Flex and external component suppliers, and the filing states COVID-19 and the global semiconductor shortage have caused delays in obtaining components and inventory and increases to freight and shipping costs. Tariffs on components imported for U.S. final manufacturing have also increased costs and led to price increases on hardware products.
The enterprise security market is intensely competitive, with Cisco, Check Point, Fortinet, Zscaler, Crowdstrike and others cited; larger competitors have broader product suites and greater resources and may use bundling, concessions, or zero or negative margin pricing, which could reduce revenue, gross margins, and market share.
The company reported an operating loss of $304.1 million for fiscal 2021 year to date, with the operating loss widened versus the prior-year period, and a net loss of $498.9 million for fiscal 2021 year to date, also widened. Operating margin was -7.1% for fiscal 2021 year to date, down versus the prior-year period.
The sale price condition for the 2023 Notes was met during the quarter ended July 31, 2021, so holders may convert their notes at any time during the quarter ending October 31, 2021. The company may not have enough available cash or be able to obtain financing to settle conversions, repurchase notes upon a fundamental change, or repay notes at maturity.
The company must hire, integrate, train, and retain qualified personnel, particularly engineering talent, in competitive markets including the San Francisco Bay Area. Headcount grew from 8,014 at the end of fiscal 2020 to 10,473 at the end of fiscal 2021, intensifying management and retention demands.
Growth strategy depends on sales to new and existing medium and large enterprise end-customers, which involve longer sales cycles that in some cases exceed 12 months, budget constraints, multiple approvals, and acceptance provisions that can delay revenue recognition. MD&A notes COVID-19 could further lengthen sales cycles and payment terms.
Substantially all revenue is generated through channel partners, including distributors and resellers, and agreements generally may be terminated by either party with advance notice before each annual renewal date. Failure of channel partners to perform, a shift in their focus to competitors' products, or disruption from consolidation among distributors and resellers could limit sales and harm operating results.
Revenue grew 24.9% in fiscal 2021 year to date, but the filing states prior-period revenue growth rates may not be indicative of future performance. If the company cannot maintain consistent or increasing revenue or revenue growth, the stock price could be volatile and profitability harder to achieve.
The company has made recent acquisitions including Crypsis, Sinefa, Expanse, and Bridgecrew, and may pursue more; integration may require significant management attention, disrupt the business, fail to realize expected synergies, subject it to assumed liabilities, and dilute stockholder value.
SaaS KPIs
All quarters →Billings
Remaining performance obligation
Summary, forecast, risks and KPIs are extracted from Palo Alto Networks Inc's SEC filings for Q4 FY2021 (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.