Palo Alto Networks Inc

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q, including, without limitation, the following discussion and analysis, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally can be identified by words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “projects,” “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions that convey uncertainty of future events or outcomes. These forward-looking statements include, but are not limited to, statements concerning the following: expectations regarding the cybersecurity landscape; expectations regarding our platformization strategy and related progress and opportunities; expectations regarding annual recurring revenue, remaining performance obligations, and product development strategy; expectations regarding artificial intelligence; expectations regarding our strategic partnerships; expectations regarding drivers of and factors affecting growth in our business; statements regarding expected profitability, trends in annual recurring revenue, trends in remaining performance obligations, our mix of product and subscription and support revenue, cost of revenue, gross margin, cash flows, operating expenses, including future share-based compensation expense, income taxes, investment plans, and liquidity; expected recurring revenues resulting from growth in our end-customers and increased adoption of our products and cloud-delivered security solutions; the performance advantages of our products and subscription and support offerings and the potential benefits to our customers; expectations regarding future investments in research and development and product development, customer support, in our employees and in our sales force, including expectations regarding growth in our sales headcount; expectations that we will continue to expand our global presence; expectations regarding our revenues, including the seasonality and cyclicality from quarter to quarter; expectations relating to our customer financing activities; the sufficiency of our cash flow from operations with existing cash, cash equivalents, and investments to meet our cash needs for the foreseeable future; our ability to successfully acquire and integrate companies and assets and expectations and intentions with respect to the assets, products and technologies that we acquire, including with respect to our proposed acquisition of CyberArk Software Ltd. and our expectations regarding the benefits and synergies of the proposed acquisition; expectations regarding contingent consideratio…

Excerpt shortened here; the source contains the full paragraph.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q, including, without limitation, the following discussion and analysis, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally can be identified by words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “projects,” “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions that convey uncertainty of future events or outcomes. These forward-looking statements include, but are not limited to, statements concerning the following: expectations regarding the cybersecurity landscape; expectations regarding our platformization strategy and related progress and opportunities; expectations regarding annual recurring revenue, remaining performance obligations, and product development strategy; expectations regarding artificial intelligence; expectations regarding our strategic partnerships; expectations regarding drivers of and factors affecting growth in our business; statements regarding expected profitability, trends in annual recurring revenue, trends in remaining performance obligations, our mix of product and subscription and support revenue, cost of revenue, gross margin, cash flows, operating expenses, including future share-based compensation expense, income taxes, investment plans, and liquidity; expected recurring revenues resulting from growth in our end-customers and increased adoption of our products and cloud-delivered security solutions; the performance advantages of our products and subscription and support offerings and the potential benefits to our customers; expectations regarding future investments in research and development and product development, customer support, in our employees and in our sales force, including expectations regarding growth in our sales headcount; expectations that we will continue to expand our global presence; expectations regarding our revenues, including the seasonality and cyclicality from quarter to quarter; expectations relating to our customer financing activities; the sufficiency of our cash flow from operations with existing cash, cash equivalents, and investments to meet our cash needs for the foreseeable future; our ability to successfully acquire and integrate companies and assets and expectations and intentions with respect to the assets, products and technologies that we acquire, including with respect to our acquisition of CyberArk Software Ltd. and our expectations regarding the benefits and synergies of the acquisition; expectations regarding contingent consideration obligations; sta…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

•Results of Operations. A discussion of the nature and trends in our financial results and an analysis of our financial results comparing the three months ended October 31, 2025 to the three months ended October 31, 2024.

Current wording

•Results of Operations. A discussion of the nature and trends in our financial results and an analysis of our financial results comparing the three and six months ended January 31, 2026 to the three and six months ended January 31, 2025.

Previous wording

•Security Operations. We deliver the next generation of security operations capabilities that unifies standalone Security Information and Event Management (“SIEM”) tools, endpoint security, security automation, cloud detection and response (“CDR”), as well as attack surface management (“ASM”) capabilities on our Cortex® platform. These include Cortex XSIAM®, for AI-powered security operations replacing traditional SIEM tools; Cortex XDR®, for the prevention, detection, and response to complex cybersecurity attacks; Cortex XSOAR®, for security orchestration, automation, and response (“SOAR”); and Cortex Xpanse®, for ASM.

Current wording

•Security Operations. We deliver the next generation of security operations capabilities that unifies standalone Security Information and Event Management (“SIEM”) tools, endpoint security, security automation, cloud detection and response (“CDR”), as well as attack surface management (“ASM”) capabilities on our Cortex® platform. These include Cortex XSIAM®, for AI-powered security operations replacing traditional SIEM tools; Cortex XDR®, for the prevention, detection, and response to complex cybersecurity attacks; Cortex XSOAR®, for security orchestration, automation, and response (“SOAR”); and Cortex Xpanse®, for ASM. Additionally, Cortex XSIAM integrates with the Chronosphere Telemetry Pipeline to ingest and optimize massive data volumes, promoting cost-effective scaling of autonomous operations.

Previous wording

For the first quarter of fiscal 2026 and 2025, total revenue was $2.5 billion and $2.1 billion, respectively, representing year-over-year growth of 16%. Our growth reflects the increased adoption of our portfolio, which consists of product, subscriptions, and support. We believe our portfolio will enable us to benefit from recurring revenues and new revenues as we continue to grow our end-customer base. As of October 31, 2025, we had end-customers in over 180 countries. Our end-customers represent a broad range of industries, including education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications, and include almost all of the Fortune 100 companies and a majority of the Global 2000 companies. We maintain a field sales force that works closely with our channel partners in developing sales opportunities. We primarily use a two-tiered, indirect fulfillment model whereby we sell our products, subscriptions, and support to our distributors, which, in turn, sell to our resellers, which then sell to our end-customers.

Current wording

For the second quarter of fiscal 2026 and 2025, total revenue was $2.6 billion and $2.3 billion, respectively, representing year-over-year growth of 15%. Our growth reflects the increased adoption of our portfolio, which consists of product, subscriptions, and support. We believe our portfolio will enable us to benefit from recurring revenues and new revenues as we continue to grow our end-customer base. As of January 31, 2026, we had end-customers in over 180 countries. Our end-customers represent a broad range of industries, including education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications, and include almost all of the Fortune 100 companies and a majority of the Global 2000 companies. We maintain a field sales force that works closely with our channel partners in developing sales opportunities. We primarily use a two-tiered, indirect fulfillment model whereby we sell our products, subscriptions, and support to our distributors, which, in turn, sell to our resellers, which then sell to our end-customers.

Previous wording

Our product revenue grew to $434 million, or 17.5% of total revenue, for the first quarter of fiscal 2026, representing year-over-year growth of 23%. Product revenue is derived from sales of hardware products, primarily our ML-Powered Next-Generation Firewall and software licenses, including SD-WAN, VM-Series, and Panorama®. Our ML-Powered Next-Generation Firewall incorporates our PAN-OS operating system, which provides a consistent set of capabilities across our entire network security product line. Our hardware products and software licenses include a broad set of built-in networking and security features and functionalities. Our products are designed for different performance requirements throughout an organization, ranging from our PA-400, which is designed for small organizations and remote or branch offices, to our top-of-the-line PA-7500, which is designed for large-scale data centers and service provider use. The same firewall functionality that is delivered in our hardware products is also available in our VM-Series virtual firewalls, which secure virtualized and cloud-based computing environments, and in our CN-Series container firewalls, which secure container environments and traffic.

Current wording

Our product revenue grew to $514 million, or 19.8% of total revenue, for the second quarter of fiscal 2026, representing year-over-year growth of 22%. Product revenue is derived from sales of hardware products, primarily our ML-Powered Next-Generation Firewall and software licenses, including SD-WAN, VM-Series, and Panorama®. Our ML-Powered Next-Generation Firewall incorporates our PAN-OS operating system, which provides a consistent set of capabilities across our entire network security product line. Our hardware products and software licenses include a broad set of built-in networking and security features and functionalities. Our products are designed for different performance requirements throughout an organization, ranging from our PA-400, which is designed for small organizations and remote or branch offices, to our top-of-the-line PA-7500, which is designed for large-scale data centers and service provider use. The same firewall functionality that is delivered in our hardware products is also available in our VM-Series virtual firewalls, which secure virtualized and cloud-based computing environments, and in our CN-Series container firewalls, which secure container environments and traffic.

Previous wording

Our subscription and support revenue grew to $2.0 billion, or 82.5% of total revenue, for the first quarter of fiscal 2026, representing year-over-year growth of 14%. Our subscriptions provide our end-customers with near real-time access to the latest intrusion prevention, web security, modern malware prevention, data loss prevention, CASB and AI security capabilities across the network, endpoints, and the cloud. Our subscriptions also include security operations, which enable customers to leverage the AI-powered Cortex platform for advanced capabilities such as security information and event management, next-generation antivirus, endpoint detection and response, extended detection and response, identity threat detection and response, cloud detection and response, SOAR, ASM, and CNAPP for comprehensive cloud security. Additionally, we offer MDR for Cortex subscriptions, powered by Unit 42’s elite expertise. When customers purchase our physical, virtual, or container firewalls, or certain cloud offerings, they typically purchase support in order to receive ongoing security updates, upgrades, bug fixes, and repairs. In addition to the subscriptions purchased with these firewalls, customers may also purchase other subscriptions on a per-user, per-endpoint, or capacity-based basis. We also offer professional services, including incident response, risk management, and digital forensic services.

Current wording

Our subscription and support revenue grew to $2.1 billion, or 80.2% of total revenue, for the second quarter of fiscal 2026, representing year-over-year growth of 13%. Our subscriptions provide our end-customers with near real-time access to the latest intrusion prevention, web security, modern malware prevention, data loss prevention, cloud security access broker and AI security capabilities across the network, endpoints, and the cloud. Our subscriptions also include security operations, which enable customers to leverage the AI-powered Cortex platform for advanced capabilities such as security information and event management, next-generation antivirus, endpoint detection and response, extended detection and response, identity threat detection and response, cloud detection and response, SOAR, ASM, and CNAPP for comprehensive cloud security. In connection with our acquisition of Chronosphere, Inc. (“Chronosphere”) in January 2026, our subscriptions also include a next-generation observability platform for cloud-native infrastructure and applications as well as telemetry pipeline management that is designed to handle vast cloud data volumes with cost-efficiency and reliability. Additionally, we offer MDR for Cortex subscriptions, powered by Unit 42’s elite expertise. When customers purchase our physical, virtual, or container firewalls, or certain cloud offerings, they typically purchase support in order to receive ongoing security updates, upgrades, bug fixes, and repairs. In addition to the subscriptions purchased with these firewalls, customers may also purchase other subscriptions on a per-user, per-endpoint, or capacity-based basis. We also offer professional services, including incident response, risk management, and digital forensic services.

Previous wording

We continue to invest in innovation as we evolve and further extend the capabilities of our portfolio, as we believe that innovation and timely development of and investment in new features and products are essential to meeting the needs of our end-customers and improving our competitive position. For example, in August 2025, we introduced innovations through a software upgrade to PAN-OS 12.1 Orion to provide enterprise wide quantum security readiness for our customers. In October 2025, we launched Prisma AIRS 2.0, a major platform upgrade that completes the native integration of the recently acquired Protect AI, Inc. to provide customers with end-to-end protection across AI application lifecycle. Additionally, in July 2025, we entered into a definitive agreement to acquire CyberArk Software Ltd. (“CyberArk”), an identity security company, which acquisition is expected to close during the third quarter of our fiscal 2026, subject to the satisfaction of customary closing conditions.

Current wording

We continue to invest in innovation as we evolve and further extend the capabilities of our portfolio, as we believe that innovation and timely development of and investment in new features and products are essential to meeting the needs of our end-customers and improving our competitive position. On February 11, 2026, we completed the acquisition of CyberArk Software Ltd. (“CyberArk”), forming our next-generation identity security platform. Additionally, on January 29, 2026, we completed the acquisition of Chronosphere, forming our next-generation observability platform.

Previous wording

Our overall performance depends in part on worldwide economic and geopolitical conditions and their impact on customer behavior. Changes in legislation or regulations and actions by regulators, including changes in enforcement and administration policies, may have an impact on our results of operations and financial condition. Significant changes in U.S. or global trade policy, including further expansion of U.S. export/imports controls and tariffs, as well as retaliatory actions by other countries, may materially and adversely affect our business. Further, economic conditions, including inflation, high interest rates, slow growth, fluctuations in foreign exchange rates, supply chain disruptions, impacts of trade regulations or international trade disputes, and other conditions, may adversely affect our results of operations and financial performance.

Current wording

Our overall performance depends in part on worldwide economic and geopolitical conditions and their impact on customer behavior. Changes in legislation or regulations and actions by regulators, including changes in enforcement and administration policies, may have an impact on our results of operations and financial condition. Significant changes in U.S. or global trade policy, including further expansion of U.S. export/imports controls and tariffs, as well as retaliatory actions by other countries, may materially and adversely affect our business. Further, economic conditions, including inflation, high interest rates, slow growth, fluctuations in foreign exchange rates, supply chain disruptions, such as a memory or other component shortage, impacts of trade regulations or international trade disputes, and other conditions, may adversely affect our results of operations and financial performance.

Previous wording

•Free Cash Flow (non-GAAP). We define free cash flow, a non-GAAP financial measure, as cash provided by operating activities less purchases of property, equipment, and other assets. We consider free cash flow to be a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures. A limitation of the utility of free cash flow as a measure of our financial performance and liquidity is that it does not represent the total increase or decrease in our cash balance for the period. In addition, it is important to note that other companies, including companies in our industry, may not use free cash flow, may calculate free cash flow in a different manner than we do, or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a comparative measure. A reconciliation of free cash flow to cash flow provided by operating activities, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, is provided below:

Current wording

•Free Cash Flow (non-GAAP). We define free cash flow, a non-GAAP financial measure, as cash provided by operating activities less purchases of property, equipment, and other assets. We consider free cash flow to be an operating metric as well as a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures. A limitation of the utility of free cash flow as a measure of our financial performance and liquidity is that it does not represent the total increase or decrease in our cash balance for the period. In addition, it is important to note that other companies, including companies in our industry, may not use free cash flow, may calculate free cash flow in a different manner than we do, or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a comparative measure. A reconciliation of free cash flow to cash flow provided by operating activities, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, is provided below:

Previous wording

Subscription and support revenue increased for the three months ended October 31, 2025 compared to the same period in 2024 due to increased demand for our subscription and support offerings from our end-customers. The mix between subscription revenue and support revenue will fluctuate over time, depending on the introduction of new subscription offerings, renewals of support services, and our ability to increase sales to new and existing end-customers.

Current wording

Subscription and support revenue increased for the three and six months ended January 31, 2026 compared to the same periods in 2025 due to increased demand for our subscription and support offerings from our end-customers. The mix between subscription revenue and support revenue will fluctuate over time, depending on the introduction of new subscription offerings, renewals of support services, and our ability to increase sales to new and existing end-customers.

Previous wording

Revenue from the Americas, EMEA, and APAC increased for the three months ended October 31, 2025 compared to the same period in 2024 as we continued to increase investment in our global sales force in order to support our growth and innovation, with the Americas contributing the highest increase in revenue due to its larger scale.

Current wording

Revenue from the Americas, EMEA, and APAC increased for the three and six months ended January 31, 2026 compared to the same periods in 2025 as we continued to increase investment in our global sales force in order to support our growth and innovation, with the Americas contributing the highest increase in revenue due to its larger scale.

Previous wording

Cost of product revenue increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to increased product volume and other product costs. The remaining increase was primarily driven by higher tariff costs.

Current wording

Cost of product revenue increased for the three and six months ended January 31, 2026 compared to the same periods in 2025 primarily due to increased demand for our hardware products and higher tariff costs, partially offset by a decrease in inventory excess and obsolete charges.

Previous wording

Cost of subscription and support revenue increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to increased costs to support the growth of our subscription and support offerings. Cloud hosting service costs, which support our cloud-based subscription offerings, increased $48 million for the three months ended October 31, 2025 compared to the same period in 2024. Personnel costs grew $14 million for the three months ended October 31, 2025 compared to the same period in 2024, primarily due to headcount growth.

Current wording

Cost of subscription and support revenue increased for the three and six months ended January 31, 2026 compared to the same periods in 2025 primarily due to increased costs to support the growth of our subscription and support offerings. Cloud hosting service costs, which support our cloud-based subscription offerings, increased $48 million and $97 million for the three and six months ended January 31, 2026, respectively, compared to the same periods in 2025. Personnel costs grew $11 million and $25 million for the three and six months ended January 31, 2026, respectively, compared to the same periods in 2025, primarily due to headcount growth.

Previous wording

Product gross margin increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to continued shift in our product revenue mix toward software, partially offset by a decrease in gross margin on our hardware products.

Current wording

Product gross margin increased for the three and six months ended January 31, 2026 compared to the same periods in 2025 primarily due to continued shift in our product revenue mix toward software, and a decrease in inventory excess and obsolete charges, partially offset by a decrease in gross margin on our hardware products.

Previous wording

Subscription and support gross margin was flat for the three months ended October 31, 2025 compared to the same period in 2024.

Current wording

Subscription and support gross margin were flat for the three and six months ended January 31, 2026 compared to the same periods in 2025.

Previous wording

Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, share-based compensation, travel and entertainment, and with regard to sales and marketing expense, sales commissions. Our operating expenses also include shared costs, which consist of certain facilities, depreciation, benefits, recruiting, and information technology costs that we allocate based on headcount to each department. We expect operating expenses generally to increase in absolute dollars and to decrease over the long term as a percentage of revenue as we continue to scale our business. As of October 31, 2025, we expect to recognize approximately $2.2 billion of share-based compensation expense over a weighted-average period of approximately 2.4 years, excluding additional share-based compensation expense related to any future grants of share-based awards. Share-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards.

Current wording

Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, share-based compensation, travel and entertainment, and with regard to sales and marketing expense, sales commissions. Our operating expenses also include shared costs, which consist of certain facilities, depreciation, benefits, recruiting, and information technology costs that we allocate based on headcount to each department. We expect operating expenses generally to increase in absolute dollars and to decrease over the long term as a percentage of revenue as we continue to scale our business. As of January 31, 2026, we expect to recognize approximately $2.9 billion of share-based compensation expense over a weighted-average period of approximately 2.6 years, excluding additional share-based compensation expense related to any future grants of share-based awards. Share-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards.

Previous wording

Research and development expense increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to increased personnel costs, which grew $45 million for the three months ended October 31, 2025 compared to the same period in 2024, largely due to headcount growth.

Current wording

Research and development expense was relatively flat for the three months ended January 31, 2026 compared to the same period in 2025. Research and development expense increased for the six months ended January 31, 2026 compared to the same period in 2025 primarily due to increased personnel costs, which grew $41 million for the six months ended January 31, 2026 compared to the same period in 2025, largely due to headcount growth.

Previous wording

Sales and marketing expense increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to increased personnel costs, which grew $86 million for the three months ended October 31, 2025 compared to the same period in 2024, largely due to headcount growth.

Current wording

Sales and marketing expense increased for the three and six months ended January 31, 2026 compared to the same periods in 2025 primarily due to increased personnel costs, which grew $69 million and $154 million for the three and six months ended January 31, 2026, respectively, compared to the same periods in 2025, largely due to headcount growth.

Previous wording

General and administrative expense increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to a partial release of litigation-related accrual of $43 million during the three months ended October 31, 2024. The increase in general and administrative expense was further driven by increased personnel costs, which grew $37 million, largely due to increased share-based compensation and headcount growth.

Current wording

General and administrative expense increased for the three months ended January 31, 2026 compared to the same period in 2025 primarily due to an increase in acquisition-related costs. General and administrative expense increased for the six months ended January 31, 2026 compared to the same period in 2025 primarily due to the partial release of litigation-related accrual of $42 million during the six months ended January 31, 2025. The increase in general and administrative expense for the six months ended January 31, 2026 was further driven by increased personnel costs, which grew $43 million, largely due to increased share-based compensation and headcount growth.

Previous wording

Interest expense decreased for the three months ended October 31, 2025 compared to the same period in 2024 due to the maturity of our 2025 Notes in June 2025. Refer to Note 9. Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on the Notes.

Current wording

Interest expense decreased for the three and six months ended January 31, 2026 compared to the same periods in 2025 due to the maturity of our 2025 Notes in June 2025. Refer to Note 9. Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on the Notes.

Previous wording

Other income, net increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to higher interest income as a result of higher average cash, cash equivalents, and investment balance, partially offset by lower interest rates for the three months ended October 31, 2025 compared to the same period in 2024.

Current wording

Other income, net increased for the three and six months ended January 31, 2026 compared to the same periods in 2025 primarily due to higher interest income as a result of higher average cash, cash equivalents, and investment balances for the three and six months ended January 31, 2026 compared to the same periods in 2025. The increase was further driven by increased gains on sales of our investments to fund recent acquisitions.

Previous wording

Provision for income taxes consists primarily of U.S. and foreign income taxes. Our effective tax rate during the three months ended October 31, 2025 was lower than our statutory tax rate primarily due to excess tax benefits from share-based compensation. We continue to maintain a valuation allowance for our California deferred tax assets due to the uncertainty regarding realizability of these deferred tax assets as they have not met the “more likely than not” realization criterion. We expect future research and development tax credit generation in California to exceed our ability to use the existing tax credits.

Current wording

Provision for income taxes consists primarily of U.S. and foreign income taxes. Our effective tax rate during the three and six months ended January 31, 2026 was lower than our statutory tax rate primarily due to excess tax benefits from share-based compensation. We continue to maintain a valuation allowance for our California deferred tax assets due to the uncertainty regarding realizability of these deferred tax assets as they have not met the “more likely than not” realization criterion. We expect future research and development tax credit generation in California to exceed our ability to use the existing tax credits.

Previous wording

Our provision for income taxes for the three months ended October 31, 2025 was primarily due to U.S. and foreign income taxes. Our effective tax rate increased for the three months ended October 31, 2025 compared to the same period in 2024 primarily due to increased earnings before income taxes and decreased excess tax benefits from share-based compensation. Refer to Note 13. Income Taxes in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.

Current wording

Our provision for income taxes for the three and six months ended January 31, 2026 was primarily due to U.S. and foreign income taxes. Our effective tax rate increased for the three and six months ended January 31, 2026 compared to the same periods in 2025 primarily due to decreased excess tax benefits from share-based compensation relative to our increased business profits. Refer to Note 13. Income Taxes in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.

Previous wording

As of October 31, 2025, our total cash, cash equivalents, and investments of $10.2 billion were held for general corporate purposes. As of October 31, 2025, we had no unremitted earnings when evaluating our outside basis difference relating to our U.S. investment in foreign subsidiaries. However, there could be local withholding taxes due to various foreign countries if certain lower tier earnings are distributed. Withholding taxes that would be payable upon remittance of these lower tier earnings are not material.

Current wording

As of January 31, 2026, our total cash, cash equivalents, and investments of $7.9 billion were held for general corporate purposes. As of January 31, 2026, we had no unremitted earnings when evaluating our outside basis difference relating to our U.S. investment in foreign subsidiaries. However, there could be local withholding taxes due to various foreign countries if certain lower tier earnings are distributed. Withholding taxes that would be payable upon remittance of these lower tier earnings are not material.

Previous wording

We have entered into various non-cancelable operating leases, primarily for our offices and data centers, with lease terms expiring through fiscal 2036. As of October 31, 2025, we have total operating lease obligations of $429 million recorded on our condensed consolidated balance sheet.

Current wording

We have entered into various non-cancelable operating leases, primarily for our offices and data centers, with lease terms expiring through fiscal 2036. As of January 31, 2026, we have total operating lease obligations of $459 million recorded on our condensed consolidated balance sheet.

Previous wording

As of October 31, 2025, our commitments to purchase products, components, cloud hosting and other services totaled $6.8 billion. Refer to Note 10. Commitments and Contingencies in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on these commitments.

Current wording

As of January 31, 2026, our commitments to purchase products, components, cloud hosting and other services totaled $6.9 billion. Refer to Note 10. Commitments and Contingencies in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on these commitments.

Previous wording

Our acquisition of certain QRadar assets from International Business Machines Corporation (“IBM”) on August 31, 2024 included contingent consideration that requires potential future payments through the fiscal quarter ending October 2028. As of October 31, 2025, we have total contingent consideration obligation of $380 million recorded on our condensed consolidated balance sheet. Refer to Note 3. Fair Value Measurements and Note 7. Acquisition in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on our contingent consideration obligation.

Current wording

Our acquisition of certain QRadar assets from International Business Machines Corporation (“IBM”) on August 31, 2024 included contingent consideration that requires potential future payments through the fiscal quarter ending October 2028. As of January 31, 2026, we have total contingent consideration obligation of $369 million recorded on our condensed consolidated balance sheet. Refer to Note 3. Fair Value Measurements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on our contingent consideration obligation.

Previous wording

On July 30, 2025, we entered into a definitive agreement to acquire CyberArk. The acquisition is expected to close during the third quarter of our fiscal 2026, subject to the satisfaction of customary closing conditions. Under the terms of the definitive agreement, CyberArk shareholders will receive $45.00 in cash and 2.2005 shares of our common stock for each CyberArk share. This represents an equity value for CyberArk of approximately $25 billion based on the unaffected 10-day average daily volume-weighted average trading prices of our common stock as of July 25, 2025. We expect to fund the cash portion of the consideration with our cash on hand. Refer to Part II, Item 1A “Risk Factors” and Note 7. Acquisitions in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on the acquisition.

Current wording

On July 30, 2025, we entered into a definitive agreement to acquire CyberArk. Under the terms of the definitive agreement, CyberArk shareholders were entitled to receive $45.00 in cash and 2.2005 shares of our common stock for each CyberArk share. On February 11, 2026, we completed the acquisition of CyberArk for $2.3 billion in cash and 112 million shares of our common stock. The cash portion of the consideration was funded with our cash on hand. Refer to Part II, Item 1A “Risk Factors” and Note 7. Acquisitions in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on the acquisition.

Previous wording

The following table summarizes our cash flows for the three months ended October 31, 2025 and 2024:

Current wording

The following table summarizes our cash flows for the six months ended January 31, 2026 and 2025:

Previous wording

Cash provided by operating activities during the three months ended October 31, 2025 was $1.8 billion, an increase of $261 million compared to the same period in 2024. The increase was primarily due to growth of our business as reflected by increases in collections during the three months ended October 31, 2025, partially offset by higher cash expenditure to support our business growth.

Current wording

Cash provided by operating activities during the six months ended January 31, 2026 was $2.3 billion, an increase of $258 million compared to the same period in 2025. The increase was primarily due to growth of our business as reflected by increases in collections during the six months ended January 31, 2026, partially offset by higher cash expenditure to support our business growth.

Previous wording

Cash used in investing activities during the three months ended October 31, 2025 was $1.0 billion, an increase of $439 million compared to the same period in 2024. The increase was primarily due to higher purchases of investments and lower proceeds from sales and maturities of investments, partially offset by a decrease in net cash payments for business acquisitions during the three months ended October 31, 2025.

Current wording

Cash used in investing activities during the six months ended January 31, 2026 was $332 million, a decrease of $593 million compared to the same period in 2025. The decrease was primarily due to higher proceeds from sales and maturities of investments, partially offset by an increase in net cash payments for business acquisitions during the six months ended January 31, 2026.

Previous wording

Cash provided by financing activities during the three months ended October 31, 2025 was $8 million, a change of $228 million compared to cash used in financing activities of $220 million during the same period in 2024. The change was primarily due to a decrease in cash used for repayments of our 2025 Notes which did not recur during the three months ended October 31, 2025 as a result of its maturity, partially offset by payments of our contingent consideration liability during the three months ended October 31, 2025.

Current wording

Cash used in financing activities during the six months ended January 31, 2026 was $106 million, a decrease of $346 million compared to the same period in 2025. The decrease was primarily due to a decrease in cash used for repayments of our 2025 Notes which did not recur during the six months ended January 31, 2026 as a result of its maturity, partially offset by payments of our contingent consideration liability during the six months ended January 31, 2026.