Stock Analysis on Net

Palo Alto Networks Inc. (NASDAQ:PANW)

Analysis of Income Taxes

Microsoft Excel

Income Tax Expense (Benefit)

Palo Alto Networks Inc., income tax expense (benefit), continuing operations

US$ in thousands

Microsoft Excel
12 months ended: Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
Federal 213,400 26,100 2,600 3,300 3,800 (1,300)
State 101,500 44,000 1,500 1,700 1,300 (900)
Foreign 129,600 44,000 58,800 41,300 39,200 27,500
Current 444,500 114,100 62,900 46,300 44,300 25,300
Federal 311,700 19,300 (300) (5,900) (1,300) (11,300)
State (172,800) 400 100 100 100 (3,000)
Foreign (2,172,700) (7,200) (2,900) (6,600) (7,900) (3,700)
Deferred (2,033,800) 12,500 (3,100) (12,400) (9,100) (18,000)
Provision for (benefit from) income taxes (1,589,300) 126,600 59,800 33,900 35,200 7,300

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Palo Alto Networks Inc. current increased from 2022 to 2023 and from 2023 to 2024.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Palo Alto Networks Inc. deferred increased from 2022 to 2023 but then decreased significantly from 2023 to 2024.
Provision for (benefit from) income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Palo Alto Networks Inc. provision for (benefit from) income taxes increased from 2022 to 2023 but then decreased significantly from 2023 to 2024.

Effective Income Tax Rate (EITR)

Palo Alto Networks Inc., effective income tax rate (EITR) reconciliation

Microsoft Excel
Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
Federal statutory income tax rate 21.00% 21.00% 21.00% 21.00% 21.00% 21.00%
State taxes, net of federal tax benefit 3.10% 2.80% 2.70% 1.30% 3.00% 7.90%
Non-U.S. operations 9.50% 9.70% -16.50% -3.10% 667.50% 89.30%
Change in valuation allowance -341.90% 15.50% -158.70% -40.70% -714.10% -196.90%
U.S. effect of foreign deferred tax assets 175.80% 0.00% 0.00% 0.00% 0.00% 0.00%
Effect of U.S. tax law change 0.00% 0.00% 0.00% 0.00% 0.00% 0.60%
Share-based compensation -16.90% -12.60% 83.60% 5.00% -5.10% 44.90%
Tax credits -13.40% -15.60% 41.50% 9.90% 17.90% 35.00%
Non-deductible expenses 1.50% 2.30% -2.50% -1.30% -3.90% -11.50%
Other, net 0.50% -0.70% 0.00% 0.60% -1.50% -0.10%
Effective income tax rate -160.80% 22.40% -28.90% -7.30% -15.20% -9.80%

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

Item Description The company
Effective income tax rate Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Palo Alto Networks Inc. effective income tax rate increased from 2022 to 2023 but then decreased significantly from 2023 to 2024.

Components of Deferred Tax Assets and Liabilities

Palo Alto Networks Inc., components of deferred tax assets and liabilities

US$ in thousands

Microsoft Excel
Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
Accruals and reserves 109,700 88,500 141,100 125,000 116,500 53,300
Operating lease liabilities 132,600 94,100 86,000
Deferred revenue 1,004,900 708,100 475,500 364,900 272,500 212,800
Net operating loss carryforwards 585,200 551,000 759,100 556,700 348,000 269,900
Tax credits 175,300 338,900 317,400 230,800 179,600 143,300
Capitalized research expenditures 626,600 354,800
Share-based compensation 75,600 66,000 59,200 53,900 33,700 25,900
Fixed assets and intangible assets 1,631,700 1,698,300 1,742,600 1,789,600 1,458,800
Interest carryforward 55,800 19,200
Gross deferred tax assets 4,341,600 3,899,700 3,636,700 3,140,100 2,409,100 705,200
Valuation allowance (243,400) (3,586,700) (3,414,100) (2,933,300) (2,240,400) (561,900)
Deferred tax assets 4,098,200 313,000 222,600 206,800 168,700 143,300
U.S. effect of foreign deferred tax assets (1,728,500)
Operating lease right-of-use assets (115,800) (73,500)
Fixed assets and intangible assets (26,000)
Deferred contract costs (199,100) (186,700) (183,600) (165,400) (130,800) (94,600)
Other deferred tax liabilities (43,500) (58,200) (27,800) (32,300) (28,900) (15,700)
Deferred tax liabilities (2,086,900) (318,400) (211,400) (197,700) (159,700) (136,300)
Net deferred tax assets (liabilities) 2,011,300 (5,400) 11,200 9,100 9,000 7,000

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

Item Description The company
Gross deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Palo Alto Networks Inc. gross deferred tax assets increased from 2022 to 2023 and from 2023 to 2024.
Deferred tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Palo Alto Networks Inc. deferred tax assets increased from 2022 to 2023 and from 2023 to 2024.
Net deferred tax assets (liabilities) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Palo Alto Networks Inc. net deferred tax assets (liabilities) decreased from 2022 to 2023 but then increased from 2023 to 2024 exceeding 2022 level.

Deferred Tax Assets and Liabilities, Classification

Palo Alto Networks Inc., deferred tax assets and liabilities, classification

US$ in thousands

Microsoft Excel
Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
Deferred tax assets 2,399,000 23,100
Deferred tax liabilities 387,700 28,100

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

Item Description The company
Deferred tax assets Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. Palo Alto Networks Inc. deferred tax assets increased from 2022 to 2023 and from 2023 to 2024.
Deferred tax liabilities Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Palo Alto Networks Inc. deferred tax liabilities increased from 2022 to 2023 and from 2023 to 2024.

Adjustments to Financial Statements: Removal of Deferred Taxes

Palo Alto Networks Inc., adjustments to financial statements

US$ in thousands

Microsoft Excel
Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
Adjustment to Total Assets
Total assets (as reported) 19,990,900 14,501,100 12,253,600 10,241,600 9,065,400 6,592,200
Less: Noncurrent deferred tax assets, net 2,399,000 23,100
Total assets (adjusted) 17,591,900 14,478,000 12,253,600 10,241,600 9,065,400 6,592,200
Adjustment to Total Liabilities
Total liabilities (as reported) 14,821,200 12,752,700 12,043,600 9,478,000 7,963,600 5,005,900
Less: Noncurrent deferred tax liabilities, net 387,700 28,100
Total liabilities (adjusted) 14,433,500 12,724,600 12,043,600 9,478,000 7,963,600 5,005,900
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported) 5,169,700 1,748,400 210,000 634,500 1,101,800 1,586,300
Less: Net deferred tax assets (liabilities) 2,011,300 (5,400) 11,200 9,100 9,000 7,000
Stockholders’ equity (adjusted) 3,158,400 1,753,800 198,800 625,400 1,092,800 1,579,300
Adjustment to Net Income (loss)
Net income (loss) (as reported) 2,577,600 439,700 (267,000) (498,900) (267,000) (81,900)
Add: Deferred income tax expense (benefit) (2,033,800) 12,500 (3,100) (12,400) (9,100) (18,000)
Net income (loss) (adjusted) 543,800 452,200 (270,100) (511,300) (276,100) (99,900)

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).


Palo Alto Networks Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Palo Alto Networks Inc., adjusted financial ratios

Microsoft Excel
Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
Net Profit Margin
Reported net profit margin 32.11% 6.38% -4.85% -11.72% -7.83% -2.82%
Adjusted net profit margin 6.77% 6.56% -4.91% -12.01% -8.10% -3.45%
Total Asset Turnover
Reported total asset turnover 0.40 0.48 0.45 0.42 0.38 0.44
Adjusted total asset turnover 0.46 0.48 0.45 0.42 0.38 0.44
Financial Leverage
Reported financial leverage 3.87 8.29 58.35 16.14 8.23 4.16
Adjusted financial leverage 5.57 8.26 61.64 16.38 8.30 4.17
Return on Equity (ROE)
Reported ROE 49.86% 25.15% -127.14% -78.63% -24.23% -5.16%
Adjusted ROE 17.22% 25.78% -135.87% -81.76% -25.27% -6.33%
Return on Assets (ROA)
Reported ROA 12.89% 3.03% -2.18% -4.87% -2.95% -1.24%
Adjusted ROA 3.09% 3.12% -2.20% -4.99% -3.05% -1.52%

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

Financial ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Palo Alto Networks Inc. adjusted net profit margin ratio improved from 2022 to 2023 and from 2023 to 2024.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Palo Alto Networks Inc. adjusted total asset turnover ratio improved from 2022 to 2023 but then slightly deteriorated from 2023 to 2024 not reaching 2022 level.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Palo Alto Networks Inc. adjusted financial leverage ratio decreased from 2022 to 2023 and from 2023 to 2024.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Palo Alto Networks Inc. adjusted ROE improved from 2022 to 2023 but then slightly deteriorated from 2023 to 2024.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Palo Alto Networks Inc. adjusted ROA improved from 2022 to 2023 but then slightly deteriorated from 2023 to 2024.

Palo Alto Networks Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel
Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss) 2,577,600 439,700 (267,000) (498,900) (267,000) (81,900)
Revenue 8,027,500 6,892,700 5,501,500 4,256,100 3,408,400 2,899,600
Profitability Ratio
Net profit margin1 32.11% 6.38% -4.85% -11.72% -7.83% -2.82%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income (loss) 543,800 452,200 (270,100) (511,300) (276,100) (99,900)
Revenue 8,027,500 6,892,700 5,501,500 4,256,100 3,408,400 2,899,600
Profitability Ratio
Adjusted net profit margin2 6.77% 6.56% -4.91% -12.01% -8.10% -3.45%

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

2024 Calculations

1 Net profit margin = 100 × Net income (loss) ÷ Revenue
= 100 × 2,577,600 ÷ 8,027,500 = 32.11%

2 Adjusted net profit margin = 100 × Adjusted net income (loss) ÷ Revenue
= 100 × 543,800 ÷ 8,027,500 = 6.77%

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Palo Alto Networks Inc. adjusted net profit margin ratio improved from 2022 to 2023 and from 2023 to 2024.

Adjusted Total Asset Turnover

Microsoft Excel
Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
As Reported
Selected Financial Data (US$ in thousands)
Revenue 8,027,500 6,892,700 5,501,500 4,256,100 3,408,400 2,899,600
Total assets 19,990,900 14,501,100 12,253,600 10,241,600 9,065,400 6,592,200
Activity Ratio
Total asset turnover1 0.40 0.48 0.45 0.42 0.38 0.44
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Revenue 8,027,500 6,892,700 5,501,500 4,256,100 3,408,400 2,899,600
Adjusted total assets 17,591,900 14,478,000 12,253,600 10,241,600 9,065,400 6,592,200
Activity Ratio
Adjusted total asset turnover2 0.46 0.48 0.45 0.42 0.38 0.44

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

2024 Calculations

1 Total asset turnover = Revenue ÷ Total assets
= 8,027,500 ÷ 19,990,900 = 0.40

2 Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= 8,027,500 ÷ 17,591,900 = 0.46

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Palo Alto Networks Inc. adjusted total asset turnover ratio improved from 2022 to 2023 but then slightly deteriorated from 2023 to 2024 not reaching 2022 level.

Adjusted Financial Leverage

Microsoft Excel
Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
As Reported
Selected Financial Data (US$ in thousands)
Total assets 19,990,900 14,501,100 12,253,600 10,241,600 9,065,400 6,592,200
Stockholders’ equity 5,169,700 1,748,400 210,000 634,500 1,101,800 1,586,300
Solvency Ratio
Financial leverage1 3.87 8.29 58.35 16.14 8.23 4.16
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted total assets 17,591,900 14,478,000 12,253,600 10,241,600 9,065,400 6,592,200
Adjusted stockholders’ equity 3,158,400 1,753,800 198,800 625,400 1,092,800 1,579,300
Solvency Ratio
Adjusted financial leverage2 5.57 8.26 61.64 16.38 8.30 4.17

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

2024 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity
= 19,990,900 ÷ 5,169,700 = 3.87

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 17,591,900 ÷ 3,158,400 = 5.57

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Palo Alto Networks Inc. adjusted financial leverage ratio decreased from 2022 to 2023 and from 2023 to 2024.

Adjusted Return on Equity (ROE)

Microsoft Excel
Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss) 2,577,600 439,700 (267,000) (498,900) (267,000) (81,900)
Stockholders’ equity 5,169,700 1,748,400 210,000 634,500 1,101,800 1,586,300
Profitability Ratio
ROE1 49.86% 25.15% -127.14% -78.63% -24.23% -5.16%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income (loss) 543,800 452,200 (270,100) (511,300) (276,100) (99,900)
Adjusted stockholders’ equity 3,158,400 1,753,800 198,800 625,400 1,092,800 1,579,300
Profitability Ratio
Adjusted ROE2 17.22% 25.78% -135.87% -81.76% -25.27% -6.33%

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

2024 Calculations

1 ROE = 100 × Net income (loss) ÷ Stockholders’ equity
= 100 × 2,577,600 ÷ 5,169,700 = 49.86%

2 Adjusted ROE = 100 × Adjusted net income (loss) ÷ Adjusted stockholders’ equity
= 100 × 543,800 ÷ 3,158,400 = 17.22%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Palo Alto Networks Inc. adjusted ROE improved from 2022 to 2023 but then slightly deteriorated from 2023 to 2024.

Adjusted Return on Assets (ROA)

Microsoft Excel
Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss) 2,577,600 439,700 (267,000) (498,900) (267,000) (81,900)
Total assets 19,990,900 14,501,100 12,253,600 10,241,600 9,065,400 6,592,200
Profitability Ratio
ROA1 12.89% 3.03% -2.18% -4.87% -2.95% -1.24%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income (loss) 543,800 452,200 (270,100) (511,300) (276,100) (99,900)
Adjusted total assets 17,591,900 14,478,000 12,253,600 10,241,600 9,065,400 6,592,200
Profitability Ratio
Adjusted ROA2 3.09% 3.12% -2.20% -4.99% -3.05% -1.52%

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

2024 Calculations

1 ROA = 100 × Net income (loss) ÷ Total assets
= 100 × 2,577,600 ÷ 19,990,900 = 12.89%

2 Adjusted ROA = 100 × Adjusted net income (loss) ÷ Adjusted total assets
= 100 × 543,800 ÷ 17,591,900 = 3.09%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Palo Alto Networks Inc. adjusted ROA improved from 2022 to 2023 but then slightly deteriorated from 2023 to 2024.