$PANW · Palo Alto Networks Inc
Palo Alto Networks filed its FY2026 10-K for the year ended July 31, 2026. Total revenue grew 24.5% to $11.48B, with subscription and support revenue of $9.2B representing 80.1% of the total. However, net income plunged 73% to $307M from $1.134B, as share-based compensation surged 40% to $1.815B and operating margin compressed to 6.1% from 13.5%. Free cash flow remained robust at $4.113B.
- Revenue grew 24.5% YoY to $11.48B, with subscription and support contributing 80.1% of total revenue.
- Net income collapsed 73% to $307M from $1.134B, driven by a 40% surge in share-based compensation to $1.815B.
- Operating margin compressed to 6.1% from 13.5% as total operating expenses jumped to 64.3% of revenue.
- Free cash flow rose 18.6% to $4.113B, up from $3.469B in FY2025.
- Diluted EPS fell to $0.40 from $1.60, while diluted share count increased 7.8% to 764M shares.
Stock is down 0.86% since filing at $338.49 in after-hours trading. The steep net income decline and SBC dilution likely weigh on sentiment despite strong top-line growth and healthy free cash flow.
PANW's top-line growth story remains intact but the 73% net income collapse and surging dilution raise serious questions about the cost of its platformization strategy.
PANW's platformization strategy is driving strong subscription revenue growth (80.1% of total), consistent with the cybersecurity sector's shift toward consolidated platforms over point solutions. However, the margin compression contrasts with peers maintaining higher operating leverage at similar $
Share-based compensation surged to $1.815B (15.8% of revenue), heavily diluting shareholders. Operating margin halved to 6.1%, signaling deteriorating profitability despite revenue growth. The CyberArk acquisition integration risk is flagged as a forward-looking uncertainty.
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