Summary
Palo Alto Networks closed fiscal 2025 with fourth-quarter revenue of $2.54 billion, up 15.8% from the prior-year quarter. Full-year revenue was $9.22 billion, up 14.9% from fiscal 2024. The top line kept growing at a double-digit pace, but profitability was mixed. Fourth-quarter operating income rose 108.6% to $497.2 million, while net income fell 29.0% to $253.8 million. For the full year, operating income increased 81.7% to $1.24 billion, but net income dropped 56.0% to $1.13 billion. Diluted EPS for fiscal 2025 was $1.60, down $2.04 from fiscal 2024.
Gross profit rose 14.9% to $1.86 billion in the quarter and 13.4% to $6.77 billion for the year. Gross margin slipped 0.6 percentage points to 73.2% in the quarter and 0.9 points to 73.4% for the full year. The filing points to higher cloud hosting costs and unfavorable hardware mix. Operating leverage improved sharply. Fourth-quarter operating margin reached 19.6%, up 8.7 percentage points from the prior-year quarter. Full-year operating margin was 13.5%, up 5.0 percentage points. The gap between operating income growth and net income reflects items below the operating line and a tax benefit in the prior year. Palo Alto Networks recorded a benefit from income taxes in fiscal 2024 from releasing a valuation allowance on U.S. federal, state, and U.K. deferred tax assets.
Cash generation was a bright spot. Fourth-quarter operating cash flow was $1.02 billion, up 99.1% from the prior-year quarter. Full-year operating cash flow was $3.72 billion, up 14.1%. Capital expenditures rose 82.1% to $86.3 million in the quarter and 57.0% to $246.2 million for the year. Deferred revenue was $6.30 billion at July 31, 2025, up 13.7% from a year earlier. Remaining performance obligations were $15.80 billion, up 24.4%. NGS ARR stood at $5.6 billion at July 31, 2025. The prior-year figure was $4.2 billion. The filing says NGS ARR excludes hardware products, legacy attached subscriptions, support offerings and professional services, so it is not a GAAP revenue measure.
Management continues to push platformization and consolidation. The filing highlights Prisma Access Browser, Cortex Cloud, Prisma AIRS, Cortex XSIAM 3.0 and new OT Security capabilities. Palo Alto Networks completed its acquisition of Protect AI in July 2025 and expects the purchase of CyberArk to close in the second half of fiscal 2026. CyberArk shareholders would receive $45.00 in cash and 2.2005 shares of Palo Alto Networks common stock for each CyberArk share, an equity value of approximately $25 billion. That is a large bet on identity security and a major integration task.
The risk list is familiar but heavy. The filing flags macroeconomic conditions, inflation, interest rates, foreign exchange, supply chain disruptions, tariffs, export controls, and trade disputes. It also calls out hostilities in Israel, tensions between China and Taiwan, and between the U.S. and China. Cybersecurity threats, product vulnerabilities, litigation, and the ability to manage growth are other stated risks. The CyberArk deal adds execution and financing risk, though the company expects to fund the cash portion with cash on hand. The filing says existing cash and cash equivalents should be enough to meet anticipated cash needs for at least the next 12 months. It gives only broad expense expectations, with operating expenses seen generally increasing in absolute dollars and declining over the long term as a percentage of revenue.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2025 | Q3 FY2025 | QoQ | Q4 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $2.54B | $2.29B | +10.8% | $2.19B | +15.8% |
| Gross profit | $1.86B | $1.67B | +11.2% | $1.62B | +14.9% |
| Gross margin | 73.2% | 72.9% | +0.3 pp | 73.8% | -0.6 pp |
| Research & development | $503.5M | $494.5M | +1.8% | $494.8M | +1.8% |
| Sales & marketing | $829.3M | $792.5M | +4.6% | $742.3M | +11.7% |
| General & administrative | $27.3M | $163.9M | -83.3% | $140.3M | -80.5% |
| Total operating expenses | $1.36B | $1.45B | -6.3% | $1.38B | -1.3% |
| Operating income (loss) | $497.2M | $218.8M | +127.2% | $238.4M | +108.6% |
| Operating margin | 19.6% | 9.6% | +10.0 pp | 10.9% | +8.7 pp |
| Net income (loss) | $253.8M | $262.1M | -3.2% | $357.7M | -29.0% |
| Net margin | 10.0% | 11.4% | -1.4 pp | 16.3% | -6.3 pp |
| Diluted EPS | $0.36 | $0.37 | -$0.01 | $1.01 | -$0.65 |
Risks
PANW entered a definitive agreement on July 30, 2025 to acquire CyberArk for $45.00 in cash and 2.2005 shares per CyberArk share, an equity value of about $25 billion, with closing expected in the second half of fiscal 2026. Delay or failure could trigger a $1.0 billion termination fee, distract management, dilute stockholders, and increase competition in identity security.
The filing expands AI risk as PANW embeds AI in products such as Prisma AIRS and Cortex and faces competitors using AI and machine learning. It warns AI algorithms may have flaws or biased training data, and evolving EU and other AI rules plus uncertain IP rights could raise costs, create liability, and harm reputation.
Substantially all revenue is generated through channel partners. For fiscal 2025, three distributors each represented 10% or more of total revenue and in aggregate 44.2% of total revenue; as of July 31, 2025, three distributors represented 44.8% of gross accounts receivable. Partner failure or termination would limit sales.
Growth depends on platformization and expanding deployments with large enterprise end-customers, which involve longer sales cycles, greater product functionality and scalability requirements, and increased customer leverage. Failure to sell additional offerings to these customers would harm future revenue.
The One Big Beautiful Bill Act enacted July 4, 2025 led to a $218.5 million deferred tax provision from remeasurement of U.S. tax effects of foreign deferred tax assets, and fiscal 2025 effective tax rate was 28.9%. Changes in tax law or adverse audits could increase tax liabilities and reduce cash flow.
In November 2024, PANW identified an authentication bypass vulnerability in the management web interface of certain PAN-OS versions and issued a security advisory and software updates. As a security vendor, it may be a more attractive target, and any actual or perceived breach could damage reputation, cause regulatory action, and harm results.
Gross margin declined to 73.4% for fiscal 2025 from 74.3% for fiscal 2024, and fourth quarter gross margin declined to 73.2% from 73.8% in the prior year quarter. MD&A attributes subscription and support margin pressure to higher cloud hosting costs and product margin pressure to unfavorable hardware mix and inventory excess and obsolete charges.
The enterprise security market remains intensely competitive, with rivals including Cisco, Microsoft, Alphabet, Check Point, Fortinet, CrowdStrike, Zscaler, and Wiz able to bundle offerings or price aggressively. The CyberArk acquisition adds identity security competition and could pressure sales, prices, and margins.
Revenue grew 14.9% in fiscal 2025, down from 16.5% in fiscal 2024 and 25.3% in fiscal 2023. The filing states recent growth rates may not be indicative of future performance and failure to maintain revenue growth could prevent profitability or consistent cash flow.
Hardware products depend on manufacturing partners and key components from limited sources, including outside the United States. Supply shortages, logistics delays, tariffs, and trade regulations have disrupted or delayed scheduled product deliveries and increased costs, and could cause lost sales.
In the Centripetal Networks patent lawsuit, a judgment issued October 3, 2024 assessed $113.6 million in lump sum damages plus statutory interest, and the matter is on appeal. IP claims and indemnification obligations to customers or channel partners could cause substantial costs and distraction.
SaaS KPIs
All quarters →Summary, forecast, risks and KPIs are extracted from Palo Alto Networks Inc's SEC filings for Q4 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.