Summary
Palo Alto Networks closed fiscal 2022 with a quarter that swung to GAAP profitability. Fourth quarter revenue was $1.55 billion, up 27.2% from a year earlier. Gross profit was $1.06 billion, up 23.0%. Gross margin slipped to 68.2%, down 2.3 percentage points. Operating income was $15.40 million, a swing to profit from an operating loss in the prior-year quarter, and operating margin improved to 1.0%, up 5.9 percentage points. Net income was $3.30 million, also a swing to profit. Management called it GAAP profitability for the first time in four years.
Full fiscal 2022 told a similar story of scaling into profitability. Revenue was $5.50 billion, up 29.3%. Gross profit was $3.78 billion, up 26.9%. The operating loss was $188.80 million, a narrowed loss. The net loss was $267.00 million, a narrowed loss. Diluted loss per share was $2.71, a narrowed loss per share. Gross margin for the year was 68.8%, down 1.3 percentage points, and operating margin was negative 3.4%, up 3.7 percentage points. The swing to a quarterly profit came even as gross margin compressed, which points to cost control in operating expenses rather than pricing power.
Operational metrics stayed strong. Fourth quarter billings grew 44% to $2.7 billion, and full year billings grew 37% to $7.5 billion. Remaining performance obligation was $8.20 billion, up 39.0%. Current deferred revenue was $3.64 billion, up 32.8%. Operating cash flow was $523.70 million in the quarter, up 60.7%, and $1.98 billion for the year, up 32.0%. Capital expenditures were $39.20 million in the quarter, up 43.1%, and $192.80 million for the year, up 66.2%. Non-GAAP free cash flow for the full year was $1.7919 billion. Non-GAAP net income was $254.1 million, or $2.39 per diluted share, in the quarter, and $823.7 million, or $7.56 per diluted share, for the full year.
Guidance points to another year of growth. For the fiscal first quarter 2023, the company guided billings of $1.68 billion to $1.70 billion, with revenue growth of 23% to 25%, and diluted non-GAAP net income per share of $2.03 to $2.06 using 108 million to 110 million shares. For the full fiscal year 2023, guidance is billings of $8.95 billion to $9.05 billion, revenue growth of 25%, diluted non-GAAP net income per share of $9.40 to $9.50 using 111 million to 113 million shares, adjusted free cash flow margin of 33.5% to 34.5%, and positive GAAP net income. The board approved a three-for-one stock split, with a record date of September 6, 2022, and split-adjusted trading beginning September 14, 2022. The board also authorized an additional $915 million for share repurchase, bringing remaining authorization to $1 billion through December 31, 2023.
Risks cluster around supply chain and macro conditions. The company cited chip and component shortages, COVID-19, inflation, higher interest rates, foreign exchange fluctuations, competition, customer purchasing decisions, sales cycle length, acquisition integration, debt repayment obligations, and its share repurchase program. The filing noted that the sale price condition for its convertible notes was met during the quarter ended July 31, 2022, so holders may convert their notes during the quarter ending October 31, 2022. The company believes its cash flow from operations, existing cash and investments, and access to financing are sufficient if holders choose to convert or hold the notes.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.55B | $1.39B | +11.8% | $1.22B | +27.2% |
| Gross profit | $1.06B | $946.2M | +11.8% | $860.4M | +23.0% |
| Gross margin | 68.3% | 68.2% | +0.0 pp | 70.6% | -2.3 pp |
| Research & development | $363.8M | $355.4M | +2.4% | $325.3M | +11.8% |
| Sales & marketing | $570.6M | $543.6M | +5.0% | $489.8M | +16.5% |
| General & administrative | $108.4M | $94.8M | +14.3% | $105.7M | +2.6% |
| Total operating expenses | $1.04B | $993.8M | +4.9% | $920.8M | +13.2% |
| Operating income (loss) | $15.4M | -$47.6M | +132.4% | -$60.4M | +125.5% |
| Operating margin | 1.0% | -3.4% | +4.4 pp | -5.0% | +5.9 pp |
| Net income (loss) | $3.3M | -$73.2M | +104.5% | -$119.3M | +102.8% |
| Net margin | 0.2% | -5.3% | +5.5 pp | -9.8% | +10.0 pp |
| Diluted EPS | $0.03 | -$0.74 | +$0.77 | -$1.24 | +$1.27 |
Risks
MD&A cites significant supply chain challenges, including chip and component shortages, increased costs and lead times, and product delivery delays. Total gross margin for fiscal 2022 was 68.8%, down 1.3 pp from 70.0% in fiscal 2021, and the company depends on limited-source components and manufacturing partner Flex under a contract terminable for convenience.
Effective August 1, 2022 through October 31, 2022, all 2023 Notes and 2025 Notes are convertible; if all holders convert, the company would be obligated to pay the $3.7 billion principal amount in cash. Working capital was negative $1.89 billion as of July 31, 2022, with current liabilities including $3.7 billion net carrying amount of convertible notes.
MD&A states worsening economic conditions, including inflation, higher interest rates, and foreign exchange fluctuations, may adversely affect financial performance. Risk factors also cite global economic uncertainty and slowing technology spending that could reduce sales and alter customer spending.
Russia's invasion of Ukraine and related sanctions/export controls create compliance risk and may increase cyberattacks; risk factors state the U.S. government has warned companies to prepare for a significant increase in Russian cyberattacks in response to Sanctions on Russia. The conflict may also worsen economic and market conditions and increase costs.
Headcount increased from 10,473 to 12,561 from end fiscal 2021 to end fiscal 2022, increasing management strain. Risk factors cite high employee attrition and intense competition for engineering talent, particularly in the San Francisco Bay Area, and warn loss of key personnel or ineffective sales leadership transitions could harm growth and operating margins.
Risk factors state the enterprise security market is intensely competitive, naming Cisco, Check Point, Fortinet, Zscaler, and Crowdstrike, and warn that larger competitors can bundle products or sell at zero or negative margins. MD&A highlights continued investment in new offerings such as Prisma Cloud 3.0 and Prisma Access 3.0 to address competition.
Risk factors note large enterprise sales cycles can exceed 12 months, particularly during the current economic slowdown, and reliance on shipments at the end of the quarter could cause revenue to fall below expected levels. MD&A states COVID-19 could lead end-customers to delay purchasing decisions and lengthen sales cycles and payment terms.
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 FY2022 (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.