Palo Alto Networks, Inc. Common Stock

Capital structure and performance · Financial performance volatility

Our operating results may vary significantly from period to period, including due to seasonality, which makes our results difficult to predict and could cause our results to fall short of expectations...This variability and unpredictability could also result in our failure to meet our revenue, margin, or other operating result expectations.

Industry regulation · Licensing and permits

Our products and subscriptions are subject to certification, testing, and regulatory approval requirements in foreign jurisdictions, and our failure to obtain or maintain such approvals could limit our ability to sell in those markets...If we are unable to obtain or maintain required certifications, approvals, or authorizations in a timely manner.

Industry regulation · Safety and environmental regulations

We are subject to regulation by various federal, state, local, and foreign governmental agencies, including agencies responsible for employment and labor laws, workplace safety, product safety, environmental laws, consumer protection laws.

Legal and litigation · Litigation and legal proceedings

Claims by others that we infringe their intellectual property rights could harm our business...For example, on January 31, 2024, in the Centripetal Networks, Inc. lawsuit against us, the jury returned a verdict of non-willful infringement, and a judgment was issued on October 3, 2024 assessing damages of $114 million, plus statutory interest, which is currently on appeal.

Legal and litigation · Product liability and warranty claims

The sale and support of our products and subscriptions also entails the risk of product liability claims...Indemnification by third-party manufacturers may not cover claims arising from design or manufacturing defects...our insurance coverage may not adequately cover claims asserted against us.

Tax and financial reporting · Tax compliance and changes in tax law

We may have exposure to tax liabilities that are greater than anticipated...The tax laws applicable to our business, including the laws of the United States and various other jurisdictions, are subject to interpretation and certain jurisdictions may aggressively interpret their laws, regulations, and policies.

Tax and financial reporting · Audit and regulatory examinations

It is possible that domestic or international tax authorities may subject us to tax examinations or audits, and such tax authorities may disagree with certain positions we have taken, and any adverse outcome of such an examination, review, or audit could result in additional tax liabilities and penalties.

Customer and revenue · Customer concentration and key customer dependence

For fiscal 2026, two distributors individually represented 10% or more of our total revenue and in the aggregate represented 30% of our total revenue. As of July 31, 2026, one distributor individually represented 19% of our gross accounts receivable.

Customer and revenue · Revenue concentration in specific products or segments

Subscription and support revenue accounts for a significant portion of our revenue, comprising 80% of total revenue in fiscal 2026, 81% in fiscal 2025, and 80% in fiscal 2024...If our sales of new or renewal subscription and support contracts decline, our total revenue and revenue growth rate may decline.

Customer and revenue · Customer retention and subscription renewal

We rely on revenue from subscription and support offerings...Existing end-customers have no contractual obligation to renew their subscription and support contracts after their initial contract period and may renew for shorter contract terms or terms that are less economically beneficial to us, or not at all.

Customer and revenue · Changing customer preferences and behavior

Our consumption- or usage-based offerings may expose us to customer usage optimization behavior that could create revenue volatility...customers who have rapidly increased usage subsequently seek to reduce, optimize, or reconfigure their consumption or usage to lower costs.

Innovation and product development · Time to market and commercialization risks

The success of new products depends on several factors, including appropriate product definition, differentiation from competitors, market acceptance, management of production ramp-up issues...If we fail to identify opportunities for new products and subscriptions, experience unanticipated delays in the availability of new products and subscriptions.

Innovation and product development · Intellectual property protection and infringement

Our proprietary rights may be difficult to enforce or protect, which could enable others to copy or use aspects of our products or subscriptions without compensating us...We rely and expect to continue to rely on a combination of confidentiality and license agreements with our employees, consultants, and third parties.

Market position and competition · Competitive pressure and market share loss

We face intense competition and we may lack sufficient financial or other resources to maintain or improve our competitive position...The industry for enterprise security products and the other spaces in which we have offerings is intensely competitive, and we expect competition to increase in the future.

Market position and competition · Disruptive competitors and new market entrants

Cloud infrastructure providers and advanced AI companies increasingly offer native security and observability capabilities that compete directly with our offerings...These providers have significant resources and may bundle native capabilities with their cloud infrastructure services at low or no incremental cost to customers.

Market position and competition · Industry consolidation and market concentration

Customer trends toward vendor consolidation in cybersecurity may favor competitors offering broader platforms...Enterprise cybersecurity buyers are increasingly seeking to consolidate their vendors to reduce costs, complexity, and integration challenges.

Market position and competition · Pricing pressure and margin compression

The sales prices of our products, subscriptions, and support offerings may decrease, which may reduce our revenue and gross profits and adversely impact our financial results...Declining sales prices could reduce our revenue, gross profits, and profitability and adversely impact our financial and operational results.

Market position and competition · Market cyclicality and demand volatility

Our operating results may vary significantly from period to period, including due to seasonality, which makes our results difficult to predict and could cause our results to fall short of expectations...seasonal factors may cause our second and fourth fiscal quarters to record greater revenue sequentially than our first and third fiscal quarters.

Strategic execution · Merger acquisition and divestiture risks

As a result of the CyberArk acquisition, the scope and size of our business have substantially changed...The integration process for CyberArk could create uncertainty for our and CyberArk's employees, partners, and customers, divert senior management's attention, and result in disruption to existing business relationships.

Strategic execution · Geographic expansion and market entry

Our products and subscriptions are subject to certification, testing, and regulatory approval requirements in foreign jurisdictions, and our failure to obtain or maintain such approvals could limit our ability to sell in those markets.