Palo Alto Networks Annual Report 2023

FY2023 Annual Report · Palo Alto Networks

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OUR VISION

Our vision is a world
where each day is safer
and more secure than
the one before

WHAT WE DO

Palo Alto Networks is the world’s cybersecurity
leader. We innovate to outpace cyberthreats so
that organizations can embrace technology with
confidence. We provide next-gen solutions to
thousands of customers across the globe, across all
sectors. Our best-in-class cybersecurity platforms
and services are strengthened by industry-leading
threat intelligence and state-of-the-art automation.

Whether deploying our products to enable the Zero
Trust Enterprise, responding to a security incident,
or partnering to deliver better security outcomes
through a world-class partner ecosystem, we’re
committed to helping ensure each day is safer than
the one before. It’s what makes us the cybersecurity
partner of choice.

Letter from the Chair

Our strategy is resonating with customers, driving continued
consolidation, and delivering superior security outcomes.

Dear Fellow Stockholders:

Fiscal 2023 required a commitment to stellar execution, and we are proud of the performance that our employees delivered
throughout the year. Despite an evolving and unpredictable macroeconomic environment, we delivered meaningful growth, met
our commitments, and advanced our long-term strategy.

Fiscal 2023 was another year of strong financial performance at Palo Alto Networks. Our billings of $9.19 billion (a 23% year-over-
year increase), revenue of $6.89 billion (a 25% year-over-year increase), and NGS ARR of $2.95 billion (a 56% year-over-year increase)
demonstrate that our platform strategy is deeply resonating with customers. Our SASE and Cortex products each achieved over
$1 billion in bookings during fiscal 2023, and our Prisma Cloud product exceeded $500 million in ARR. We are particularly proud
of the traction that our XSIAM product is achieving, with over $200 million in bookings within the first year of release. In June, we
joined the S&P 500, which reflects our consistent top-line and bottom-line execution.

More than ever, our services are critical to the sanctity of our digital way of life. Governments, intelligence experts, and
policymakers are embracing a truth that we have long known – that organizations must embrace new approaches to
implementing security solutions to defeat motivated, well-financed and ever more sophisticated cyber attackers. It is precisely for
this reason that we invested over $1.6 billion in fiscal 2023 in research and development so that our 4,400 engineers, data scientists
and other experts keep us on the bleeding edge of cybersecurity invention. Since fiscal 2019, we have deployed over 180 major
product releases and have received over 20 industry recognitions.

This heritage of innovation – and our instinct to always have an eye on the frontier of technological change – uniquely prepares
us to harness the power of a new generation of artificial intelligence tools. We recognized early how important AI would be to
cybersecurity to ensure that our customers enjoy cyber protections that meet and defeat rapidly evolving cyber threats. Generative
AI technology will accelerate the promise of AI. We embrace this signal moment of change for our company, our industry and the
broader economy and will lead in AI-powered cybersecurity solutions.

Of course, none of these accomplishments are possible without the dedication and engagement of our over 13,000 global
employees as of July 31, 2023. We continue to prioritize an employee-centric people strategy grounded on core tenants of
personalization and choice that are built upon our core values of collaboration, execution, integrity, inclusion and disruption. We
are proud of the workplace recognitions that the company received in fiscal 2023, including Newsweek’s “Most Loved Workplace”,
Glassdoor’s “Best Places to Work” and multiple award categories from Comparably, InHerSight and Military Friendly.

* * * * *

As in the past, this year’s Proxy Statement is constructed to maximize clarity and understanding about the company’s strategies,
successes and challenges. Several of our key initiatives are worth prefacing here.

Stockholder Engagement. We remain guided by, and appreciative of, the perspectives of our stockholders as expressed
through their engagement with us. Throughout fiscal 2023, we once again executed an extensive stockholder outreach program.
In total, we engaged in discussions with stockholders holding approximately 61% of our outstanding shares as of June 30, 2023.
John Donovan, our Lead Independent Director, remained at the forefront of our engagement efforts and participated in
21 meetings with stockholders holding approximately 31% of our outstanding shares as of June 30, 2023. In addition to our financial
outlook, our stockholders conversed with us about our executive compensation, sustainability, corporate governance practices,
and inclusion and diversity, as well as other topics of import to them. We will continue this valuable dialogue with our investors in
the coming year, and are committed to maintaining outreach that is truly a dialogue with our stockholders.

Executive Compensation. In June, we disclosed the terms and parameters of the retention award granted to me, and our
Compensation and People Committee wrote you a detailed letter discussing their rationale for making it. I encourage you to read
the letter from our Compensation and People Committee accompanying the CD&A in this year’s Proxy Statement for their views
on my award and on our executive compensation program more broadly, particularly as it relates to our pay-for-performance
philosophy and how we performed against that backdrop. I am honored by the Board’s faith in me, and I intend to reward that
faith by leading our company to bigger and better achievements over the years to come.

2023 Proxy Statement

Letter from the Chair

Our Commitment to Responsible Business Practices. We recognize our responsibilities
to provide safety, security and sustainability to our workforce, suppliers, communities and
environment. Elsewhere in this Proxy Statement, we discuss our efforts throughout fiscal 2023
to reduce our impacts on climate change, to uplift and help protect our communities and to
operate with integrity in all we do. Your Board and executive leadership team take seriously
their duty to oversee these environmental, social and governance (ESG) strategies and are
proud of our progress to date, which contributed to our recognition on CDP’s 2022 Climate
A-List, Sustainalytics Industry Top Rated and MSCI’s AA rating.

You are cordially invited to attend the 2023 Annual Meeting of Stockholders of Palo Alto
Networks, Inc. to be held on Tuesday, December 12, 2023 at 11:00 A.M., Pacific Time.

This year’s annual meeting will be a virtual meeting conducted via a live webcast. You will be
able to listen to the annual meeting, submit your questions, and vote during the live webcast
of the meeting by visiting www.virtualstockholdermeeting.com/PANW2023 and entering the
16-digit control number included in our Notice of Internet Availability of Proxy Materials, on
your proxy card, or in the instructions that accompanied your proxy materials. If you did not
receive a 16-digit control number, please reach out to your broker for further instructions.

On behalf of our Board, we thank you for your investment in Palo Alto Networks and for your
continued trust. We look forward to the annual meeting on December 12, 2023.

Thank you,

Nikesh Arora
Chair and
Chief Executive Officer

Letter from the Lead
Independent Director

Fiscal 2023 was a year of great achievement at Palo Alto
Networks. In the face of a challenging macroeconomic
environment, our management team and employees
delivered outstanding financial results and our company
continues to lead in cybersecurity innovation.

Dear Fellow Stockholders:

It is my honor to serve on the Palo Alto Networks Board of Directors as your lead independent director. This year, I thought it
important that I write you separately on behalf of the independent members of the Board.

Fiscal 2023 was an important year for the company. We enjoyed another strong year of execution by our management team and
our employees, and the Board is proud of the company’s achievements. We once again achieved record financial results, and
continued to blaze a trail of innovation. We also continued to make excellent progress in our goal of being best in class when it
comes to environmental sustainability, social responsibility, and corporate governance.

For fiscal 2023, as always, the Board’s primary responsibility was to oversee the company’s efforts to deliver meaningful and
sustainable value to our stockholders. Critical to fulfilling that responsibility to you was retaining Nikesh Arora as our Chief
Executive Officer for the long term. Our Compensation and People Committee undertook a rigorous and data-driven assessment
of the issue, guided not only by input from leading experts in this area, but also by feedback from you. I personally took on the
responsibility of soliciting input and guidance from our stockholders during the many meetings that I had in fiscal 2022 and fiscal
2023. We found your input to be very valuable and instructive for our deliberations.

The Board’s deliberations led us to a simple conclusion that retaining Nikesh as our Chief Executive Officer is in the best interests
of the company and our stockholders. For the past five years, Nikesh has typified our leadership ethos – one that values high
integrity and high performance for the benefit of our stockholders. He has led the transformation of our company from a market
leader in next generation firewalls into the world’s cybersecurity leader, with best-of-breed products across network security,
cloud security and security operations. During his tenure, our total revenue and total billings have grown from $2.3 billion and $2.9
billion, respectively, in fiscal 2018 to $6.9 billion and $9.2 billion, respectively, in fiscal 2023. Our product innovation has accelerated
from 13 major product releases in fiscal 2019 to 74 in fiscal 2023. And, our market capitalization increased from $19.1 billion (as of
May 31, 2018, the last trading day prior to announcing Nikesh as our Chief Executive Officer) to $76.5 billion (as of July 31, 2023, the
last day of fiscal 2023). With Nikesh at the helm, Palo Alto Networks has delivered extraordinary value creation for our stockholders
and has become the largest pure-play cybersecurity company in the world.

I encourage you to read the CD&A and the Letter from our Compensation and People Committee included in this year’s Proxy
Statement, wherein we explain in further detail the rationale for the retention award we made to Nikesh and why we believe that
it was the right thing to do for our stockholders.

On behalf of our Board, I thank you for your investment in Palo Alto Networks and for your continued trust. I look forward to the
annual meeting on December 12, 2023.

Thank you,

John M. Donovan
Lead Independent Director

2023 Proxy Statement

Palo Alto Networks, Inc.

Notice of 2023 Annual Meeting
of Stockholders

DATE AND TIME
Tuesday, December 12, 2023
11:00 AM Pacific Time

VIRTUAL MEETING SITE
www.virtualshareholdermeeting.com/
PANW2023

WHO CAN VOTE
Stockholders of record as of
October 16, 2023 are entitled
to vote

Voting Items
Proposals
1. To elect four Class III directors named in the

accompanying proxy statement to serve until our
2026 annual meeting of stockholders and until their
successors are duly elected and qualified.

2. To ratify the appointment of Ernst & Young LLP as

our independent registered public accounting firm
for our fiscal year ending July 31, 2024.

3. To approve, on an advisory basis, the compensation

of our named executive officers.

4. To approve an amendment to the 2021 Palo Alto

Networks, Inc. Equity Incentive Plan to increase the
number of plan shares reserved for issuance.

Board Vote Recommendation

For Further Details

“FOR” each director nominee

Page 45

“FOR”

Page 57

Page 60

Page 108

Stockholders will also act on such other business that may properly come before the Annual Meeting or any
adjournments or postponements thereof.

YOUR VOTE IS IMPORTANT. Please act as soon as possible to vote your shares, even if you plan to attend the
annual meeting online. On or about October 27, 2023, we expect to mail to our stockholders a Notice of Internet
Availability of Proxy Materials (the “Notice”) containing instructions on how to access our proxy statement and our
annual report and how to vote. For instructions to vote your shares and more information, see “About the Annual
Meeting” on page 123.

We appreciate your continued support of Palo Alto Networks and look forward to receiving your proxy.

By Order of the Board of Directors,

Bruce Byrd
Executive Vice President, General Counsel and Corporate Secretary
October 27, 2023

H OW TO VOT E

ONLINE
Visit www.proxyvote.com prior to
the Annual Meeting, 24 hours a
day, seven days a week.

BY PHONE
Call the phone number located
on your proxy card or voting
instruction form.

BY MAIL
Complete, sign, date and
return your proxy card or
voting instruction form in the
envelope provided.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON
DECEMBER 12, 2023: THE NOTICE OF 2023 ANNUAL STOCKHOLDERS’ MEETING AND PROXY STATEMENT AND THE 2023
ANNUAL REPORT ON FORM 10-K ARE AVAILABLE AT WWW.PROXYVOTE.COM.

Table of Contents

3 Letter from the Chair

5 Letter from the Lead Independent Director

6 Notice of 2023 Annual Meeting of Stockholders

8 About Us

10 Our Board at a Glance

12 Our Corporate Governance at a Glance

13 Stockholder Engagement at a Glance

14 Executive Compensation at a Glance

16 Corporate Responsibility at a Glance

17 Proxy Roadmap

18 Corporate Governance

18 Corporate Governance Highlights
19 Board Responsiveness to

33 Succession Planning
33 Communications with the Board

Stockholders

22 Leadership Structure
25 Board Committees and

Responsibilities

30 Annual Board and Committee

Self-Evaluations

31 Board’s Role in Strategy Oversight
32 Board’s Role in Risk Oversight

of Directors

33 Corporate Governance Guidelines
and Code of Business Conduct
and Ethics

33 Compensation and People

Committee Interlocks and Insider
Participation

34 Corporate Responsibility at Palo Alto Networks

34 An Overview of Our Environmental,
Social and Governance Strategies

34 ESG Oversight and Governance
36 Environmental

44 Voting Roadmap

Proposal No. 1 Election of Directors

38 Social
43 Our ESG Journey

46 Director Tenure and Refreshment
46 Board Diversity
47 Board Skills and Experience Matrix
48 Directors
53 Identification and Evaluation of

Director Nominees

54 Director Independence
55 Director Compensation
56 Director Stock Ownership

Guidelines

56 Director Attendance

Proposal No. 2 Ratification of Appointment of Independent Registered
Public Accounting Firm

57 Fees Paid to the Independent

58 Audit Committee Policy on Pre-

Registered Public Accounting Firm

57 Auditor Independence

Approval of Audit and Permissible
Non-Audit Services of Independent
Registered Public Accounting Firm

59 Report of the Audit Committee

Proposal No. 3 Advisory Vote on the Compensation of our Named
Executive Officers

61 Executive Compensation

61 Letter from our Compensation

93 Executive Compensation Tables

and People Committee
64 Compensation Discussion

and Analysis

92 Report of the Compensation and

People Committee

106 Executive Officers

108

Proposal No. 4 Amendment to Our 2021 Equity Incentive Plan

108 Why Should Stockholders Vote to

111 Summary of the 2021 Plan

Approve the Amendment to the
2021 Plan?

120 Security Ownership of Certain Beneficial Owners and Management

122 Related Person Transactions

123 About the Annual Meeting

129 Other Matters

130 Appendix A

132 Appendix B

HIGHLIGHTS

Our Board at a Glance

Our Corporate
Governance at a Glance

Corporate Responsibility
at Palo Alto Networks

Board Skills and
Experience Matrix

Letter from our
Compensation and
People Committee

Compensation Discussion
and Analysis

108 Amendment to Our 2021
Equity Incentive Plan

This document includes forward-
looking statements within the meaning
of the Private Securities Litigation
Reform Act of 1995. All statements
other than statements of historical or
current facts, including statements
regarding our social, environmental
and sustainability plans and goals, and
executive compensation plans, made
in this document are forward-looking.
We use words such as anticipates, plan,
believes, expects, future, intends, and
similar expressions to identify forward-
looking statements. Forward-looking
statements reflect management’s
current expectations and are inherently
uncertain. Actual results could differ
materially for a variety of reasons. Risks
and uncertainties that could cause
our actual results to differ significantly
from management’s expectations are
described in our 2023 Annual Report on
Form 10-K. Unless otherwise provided
herein, all statements in this proxy
statement are as of October 27, 2023.

References to our website in this proxy
statement are not intended to function
as a hyperlink and the information
contained on our website is not intended
to be part of this proxy statement.

In this proxy statement, the terms “the
Company”, “we,” and “our” refer to Palo
Alto Network, Inc. and the term “Board”
refers to the Board of Directors of Palo
Alto Networks, Inc.

To the extent that this proxy statement
has been or will be specifically
incorporated by reference into any
other filing of the Company under the
Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as
amended, the Letters from the Chair and
the Lead Independent Director and the
sections of this proxy statement titled
“Report of the Audit Committee” and
“Report of the Compensation and People
Committee” shall not be deemed to be
so incorporated, unless specifically stated
otherwise in such filing.

2023 Proxy Statement

About Us

Our
Company

Palo Alto Networks is a global
cybersecurity provider with a
vision of a world where each
day is safer and more secure
than the one before. We were
incorporated in Delaware in
2005 and are headquartered
in Santa Clara, California. Our
principal executive offices are
located at 3000 Tannery Way,
Santa Clara, CA 95054.

We empower enterprises,
organizations, service
providers, and government
entities to protect themselves
against today’s most
sophisticated cyber threats.
Our cybersecurity platforms
and services help secure
enterprise users, networks,
clouds, and endpoints by
delivering comprehensive
cybersecurity backed by
industry-leading artificial
intelligence and automation.
We are a leading provider of
zero trust solutions, starting
with next-generation zero
trust network access to
secure today’s remote hybrid
workforces and extending to
securing all users, applications
and infrastructure with zero
trust principles. Our security
solutions are designed to
reduce customers’ total cost
of ownership by improving
operational efficiency and
eliminating the need for siloed
point products. Our Company
focuses on delivering value
in four fundamental areas:
Network Security, Cloud
Security, Security Operations,
and Threat Intelligence and
Security Consulting.

Our Corporate Values

Our corporate decisions are guided by our corporate values, which were co-
created by our employees. Foremost among these is integrity, which is the
foundation of everything we do and every decision we make. We believe that
collaboration enhances our ability to disrupt entrenched beliefs, which we
think ultimately leads to innovation. Our ability to execute on our innovations
and deliver products and services that address the cybersecurity needs of our
customers is critical to our long-term success. Finally, we are intentional about
including diverse points of view, perspectives, experiences, backgrounds and
ideas in our decision-making process. True inclusion and diversity exists when
we have representation of all ethnicities, orientations and identities, and cultures
in our workforce. We believe that our core values make us a better company.

• When we work

together, we win together

TIO

COLLABOR

• We can rely on

each other

belief and look to the future

• We challenge entrenched
• We take risks, fearlessly

TIO
• We fail early, fail fast and move forward
• We solve real problems with new ideas

U
R

DIS

• We ensure individual

and company goals
are aligned

empower

• We seek to
• We open

ourselves to
accountability

Our Mission
Our mission is to be the
cybersecurity partner of
choice, protecting our
digital way of life.

• We’re

committed
to quality

• Our

technology

just works as
promised, always

E
X
E
C
U
T
I
O
N

• We strive tirelessly for

simplicity and usability

• We believe

diversity
strengthens
our ideas
and our

business

• We support the

communities
where we live,
work and operate

our employees

• We care about
• We strive to

reﬂect the

diversity of our
customers in
the diversity
of our

company

self-aware

• We are
• We take

pride in our
work because we
do it the right way

employees, and stockholders

• We respect our customers, partners,
• We’re transparent and share
• We inspire trust and

with our teams

we live up to it

EGRITY

Palo Alto Networks
earned multiple
workplace
recognitions
from Comparably
including #2 “Best
Company in the
Bay Area” and
“Best Company
Leadership” based
on employee
feedback.

For the second
consecutive year,
Palo Alto Networks
received a score of
100 on the Disability
Equality Index and
was recognized as a
Best Place to Work
for Disability.

Palo Alto Networks
earned a spot
among Glassdoor’s
100 Best Places
to Work, based
on employee
feedback.

Newsweek once
again recognized
Palo Alto Networks
as a “Most Loved
Workplace” based
on employee
feedback and
certification by
the Best Practice
Institute.

March & May 2023
(Comparably)

July 2023
(Disability:IN)

January 2023
(Glassdoor)

Oct. 2023
(Newsweek)

Our 2023
Financial
and Business
Highlights

We delivered another year of
outstanding results for our
stockholders in fiscal 2023,
with a strong year of financial
performance and execution.
Highlights include:

• Total revenue increased

to $6.9 billion, or by
approximately 25%
compared to fiscal 2022.

• Total billings increased
to $9.2 billion, or by
approximately 23%
compared to fiscal 2022.1

• Next-Gen Security ARR

increased to $2.95 billion,
or by approximately 56%
compared to fiscal 2022.2

• Continued to return capital
to our stockholders through
our stock repurchase
program, totaling $3.9 billion
over the last five years.

• Accelerated our product

innovation efforts, with 74
major product releases.3

About Us

Building a Stronger
Palo Alto Networks

TOTAL REVENUE
($ in millions)

$6,893

$5,502

$4,256

TOTAL BILLINGS
($ in millions)

$9,194

$7,472

$5,452

FY21

FY22

FY23

FY21

FY22

FY23

PRODUCT INNOVATION
Major Product Releases

9
6

FY21

FY22

FY23

Security Operations

Cloud Security

Network Security

NEXT- GEN
SECURIT Y ARR
($ in millions)

$2,955

$1,893

$1,180

FY21

FY22

FY23

RETURN OF CAPITAL

Fiscal 2019-2023

$3.9 Billion

1. Total billings is a key financial metric calculated as total revenue plus change in total deferred revenue, net of total acquired deferred

revenue. Appendix A includes a calculation of total billings.

2. Next-Gen Security ARR is annualized allocated revenue of all active contracts as of the final day of the reporting period for Prisma and

Cortex offerings inclusive of the VM-Series and related services, and certain cloud-delivered security services.

3. Major product release is defined as full or dot release with significant new capability, new or add-on modules, or subscription services,

new software or hardware appliance models, significant PAN-OS, acquired capabilities and significant new platform support.

2023 Proxy StatementOur Board at a Glance

Our Board comprises a diverse group of highly qualified leaders in their respective fields who bring unique perspectives. All
directors have either held senior leadership positions at large companies or otherwise gained significant and wide-ranging
management experience in their respective fields (including strategic, financial, public company financial reporting, compliance,
risk management, and leadership development). Many of our directors also have public company experience (serving as chief
executive officer, chief operating officer, or chief financial officer, or on boards of directors and board committees), and as a result
have a deep understanding of corporate governance practices, including risk and management oversight.

The tenure, age and certain other
information as of July 31, 2023, for the
members of the Board are set forth below.

B OA R D S N A P S H OT
TENURE
Average
8.3 years

0-5 years

6-10 years

>10 years

AGE
Average
57.5 years

41-50 years

51-60 years

>60 years

GENDER DIVERSIT Y

Women

Men

ETHNIC DIVERSIT Y

White

South Asian

Black

John M. Donovan
LEAD INDEPENDENT DIRECTOR
Former Chief Executive Officer, AT&T
Communications, AT&T Inc.
Director Since: 2012
Other Current Public Company Boards:
Lockheed Martin Corporation
CDC (Chair), ENC (Co-Chair), SC (Chair), CC

Right Honorable Sir John Key
INDEPENDENT
Former Prime Minister of New Zealand
Director Since: 2019
Other Current Public Company Boards: ANZ
Bank New Zealand Ltd, Australia & New Zealand
Banking Group Ltd
CC (Chair), AC, SC

Mary Pat McCarthy
INDEPENDENT
Former Vice Chair, KPMG LLP
Director Since: 2016
Other Current Public Company Boards:
Micron Technology, Inc.
AC (Chair), CDC, SC

Nir Zuk
Founder and Chief Technology Officer,
Palo Alto Networks
Director Since: 2005
Other Current Public Company
Boards: None

G D I R E C TORS

S I

UI N

S
A
L
C

IN
T
N
O
C

S III

NO M I N E E D I R

Lorraine Twohill
INDEPENDENT
Chief Marketing Officer, Google
Director Since: 2019
Other Current Public Company Boards: None
ENC (Co-Chair), SC

Our Board at a Glance

Dr. Helene D. Gayle
INDEPENDENT
President of Spelman College
Director Since: 2021
Other Current Public Company Boards:
Organon, The Coca-Cola Company
ENC, SC

G D I R E C TORS

S I

UI N

S
R
O
T
C

NO M I N E E D I R

James J. Goetz
INDEPENDENT
Managing Member, Sequoia Capital
Director Since: 2005
Other Current Public Company Boards:
Intel Corporation
AC, CDC, SC

Nikesh Arora
Chair and Chief Executive Officer,
Palo Alto Networks
Director Since: 2018
Other Current Public Company Boards:
Compagnie Financière Richemont S.A.
CDC

ENC

CDC

Audit Committee
Compensation and
People Committee
ESG and Nominating
Committee
Security Committee
Corporate Development
Committee

S III

Aparna Bawa
INDEPENDENT
Chief Operating Officer and
Interim Chief Legal Officer, Zoom
Director Since: 2021
Other Current Public Company Boards: None
AC, CC, CDC, SC

Carl Eschenbach
INDEPENDENT
Co-CEO, Workday, Inc.
Director Since: 2013
Other Current Public Company Boards: Workday, Inc.
SC

2023 Proxy Statement

Our Corporate Governance
at a Glance

• Consider nominees and candidates in light of current skill sets and needs of the Board
• All candidates and nominees evaluated and considered for their expertise, experience,

leadership and diversity, including gender, ethnicity and background

• Board comprised of diverse directors, including gender, ethnic, racial and experiential diversity
º Appointed four new directors since 2019, including three who brought gender, ethnic

and/or racial diversity to the Board

• Deliberate annual assessment of Board composition against anticipated future needs,

including succession planning

• Board leadership reviewed annually
• Clearly defined roles for Board leadership
• Strong Lead Independent Director, who leads executive sessions of the Board
• Strong Board independence, with eight independent directors
• Independent Board committees, with frequent executive sessions
• Strong partnership between Chair and Lead Independent Director

• Annual Board evaluation process includes assessments and reviews of the Board,

committees and individual directors

• Director orientation and continuing director education
• High standards of corporate governance
• Board meeting agendas set by Chair in collaboration with Lead Independent Director

• Frequent review of oversight, including over significant risks

º culture, employee retention and human capital management (Compensation and

People Committee)

º sustainability and corporate governance (ESG and Nominating Committee)
º security and cybersecurity (Security Committee)
º financial reporting, internal controls over financial reporting, and enterprise risk

relating to financial matters (Audit Committee)

º M&A and strategic transactions (Corporate Development Committee)

• Engaged in setting corporate strategy
• Engaged in management succession planning to ensure next generation of leadership
• Strong Lead Independent Director, who actively engages in management oversight

• Transparent lines of accountability to our stockholders
• A robust and interactive stockholder engagement program based on dialogue,

transparency and responsiveness to stockholder concerns
º In response to stockholder feedback, adopted majority voting for uncontested

elections of directors, including a resignation policy in the event a director does not
receive a majority of the vote

• Appropriate director compensation structured in a manner that is aligned with

stockholder interests

BOARD
COMPOSITION
▶ See Page 46

BOARD LEADERSHIP
AND STRUCTURE

▶ See Page 22

BOARD
EFFECTIVENESS

▶ See Page 30

ENGAGED
OVERSIGHT
▶ See Pages 31-32

BOARD
ACCOUNTABILIT Y

▶ See Page 19

Stockholder Engagement at a Glance

We are proud of our investor engagement program, and committed to maintaining outreach that is truly a dialogue
with our stockholders. Our relationship with our stockholders is an important part of our Company’s success. In
fiscal 2023, we once again engaged in robust stockholder engagement, with a focus on executive compensation,
environmental sustainability, social responsibility, and corporate governance (ESG), and other matters of particular
import to our stockholders. Our Lead Independent Director played a central role in developing and implementing
our program, and once again actively participated in our stockholder engagement efforts in fiscal 2023.

Our Lead Independent Director and management team regularly update our Board and Board committees on our
engagement efforts, providing summaries and analyses of our stockholders’ feedback. The feedback that we received
from our stockholders resulted in significant improvement in our compensation and corporate governance practices,
as described in detail in this proxy statement, including our adoption of majority voting for uncontested elections of our
directors in May 2022.

We believe that our approach to engaging directly and openly with our investors drives increased corporate
accountability, improves decision making, and ultimately creates long-term value.

64%

61%

31%

We reached out to
stockholders representing
64% of our outstanding
shares.

We engaged in discussions with
investors representing 61% of
our outstanding shares (which is
all stockholders that indicated a
willingness to engage with us).

Our Lead Independent Director
participated in discussions (21 meetings)
with investors representing 31% of
our outstanding shares, while offering
meetings to investors representing 48%
of our outstanding shares.

* Stockholder ownership, to our knowledge, as of June 30, 2023.

Below are the key elements of our stockholder engagement cycle:

SPRING/SUMMER

SUMMER/FALL

• Implement changes to align with

investor feedback

• Conduct proactive off-season investor outreach
• Investor meetings and conferences

• Prepare and publish Annual Report
• Engage with investors on enhanced

proxy disclosures

• Prepare and publish Proxy Statement
• Investor meetings and conferences

WINTER/SPRING

FALL/WINTER

• Consider voting results and investor feedback
• Consider changes to align with

investor feedback

• Investor meetings and conferences

• Engage with stockholders about voting matters
• Review proxy advisory firms’ analyses of voting

matters and proxy disclosures

• Publish ESG Report
• Annual Meeting of Stockholders in December
• Receive and publish voting results
• Investor meetings and conferences

2023 Proxy StatementExecutive Compensation at a Glance

Our Compensation Best Practices
In fiscal 2023, we continued to execute on our redesigned executive compensation programs, meeting the
commitments we made to our stockholders in our 2021 and 2022 proxy statements. Our compensation programs
reflect recognized best practices and principles that align the compensation of our named executive officers
("NEOs") with the long-term interests of our stockholders and are supported by market benchmarks.

ROBUST AND INDEPENDENT COMPENSATION DECISION-MAKING, ALIGNED WITH OUR
CORPORATE VALUES

% 100% independent Compensation and

% Annual review of compensation strategy

People Committee

% Independent compensation consultant

% Consideration of annual say-on-pay vote

COMPENSATION BEST PRACTICES

% Robust process and framework drive executive

compensation decisions

% Significant majority of compensation is

performance-based and at-risk

% 100% of equity awards granted to our NEOs
in fiscal 2023 were performance-based, with
different performance targets than the cash
incentive plan

% 100% of short-term incentive cash compensation

is performance-based and at-risk

% No hedging or pledging, except limited pledging
permitted with the prior approval of the ESG and
Nominating Committee

% Limited perquisites and personal benefits

% No defined benefit plans or SERPs

% Assessing and implementing the advice of

independent compensation consultant, including
a new decision-making framework that further
ensures alignment of executive compensation
decisions with our pay-for-performance philosophy

% No single trigger vesting of equity awards on

% Inclusion of ESG modifier in cash incentive

occurrence of a change in control

% No dividends paid on unvested equity

% Robust stock ownership guidelines

% Meaningful clawback policy

plan, which modifies the annual incentive cash
compensation (plus or minus 10%), based on our
performance relative to an ESG scorecard with
climate, inclusion and human capital metrics

% One-year post-vesting holding period for all
NEOs, including our Chief Executive Officer

Significant At-Risk Compensation
Our executive compensation program is tied to our financial and operational performance. The graphs below
illustrate the predominance of at-risk and performance-based components of our fiscal 2023 compensation
program for our Chief Executive Officer and other named executive officers.

CEO
2.5%
Base Salary(1)

97.5%
At-Risk

95%
Performance
Stock Units (PSU)(2)

2.5%
Target
Annual Cash
Incentive
Opportunity

AVERAGE OF OTHER NEOs
5%
Base Salary

95%
At-Risk

90%
Performance
Stock Units (PSU)

5%
Target
Annual Cash
Incentive
Opportunity

(1) Graph reflects Mr. Arora’s target base salary of $1 million, regardless of any portion that he forwent.
(2) Does not include the June 2023 long-term performance and retention award.

Executive Compensation at a Glance

CEO Retention Award
On June 2, 2023, the Compensation and People Committee of our Board granted Nikesh Arora, our Chief Executive
Officer, an award of performance-based restricted stock units ("PSUs") that will not be earned at all if our performance
is worse than 40% of the companies in the S&P 500 over a five-year period and up to 750,000 shares if our
performance is better than 90% of the companies in the S&P 500 in the same period. The PSUs provide that the
shares received upon vesting may not be sold or transferred before the earlier of the one-year anniversary of the date
the committee makes the final determination of performance in connection with the award, or a change in control of
the company.

PRINCIPLE-BASED DESIGN AND DELIBERATE DESIGN
In its deliberations, the Compensation and People Committee followed a rigorous process, sought and received
the advice of its independent compensation consultant, and was guided by the following principles in designing
the award:

• Demonstrate the Board’s confidence in Nikesh and his strategy for the company’s next phase of growth.

• Retain and engage a proven, successful and industry-leading CEO for at least the next five years so that our

stockholders reap the financial rewards that we expect to result from Nikesh’s clarity of vision, strategic acumen
and operational excellence — just as our stockholders have during the first five years of his tenure.

• Provide an award that, at its core, is performance-based, drives stockholder value creation, and requires significant

sustained performance to realize its full value.

• Mitigate the risk of potential employment offers from competitors and private equity firms.

• Take into account the views of our stockholders as expressed to us during our extensive engagement efforts. In
fiscal 2022 and fiscal 2023, our Lead Independent Director, John Donovan, participated in 30 and 21 meetings
with stockholders representing 39% and 31% of our outstanding shares, respectively, and representatives of the
company engaged in discussions with over 60% of our outstanding shares (based on stockholder ownership, to our
knowledge, as of June 30 of each fiscal year).

REALIZED PAY OF OUR CEO IS A DE MINIMUS PERCENTAGE OF INCREMENTAL STOCKHOLDER VALUE
CREATED BY THE COMPANY
As a supplement to the Summary Compensation Table of this Proxy Statement, the chart below compares the
incremental increase of our market capitalization to the realized pay of our Chief Executive Officer from June 1, 2018
(the date we announced Mr. Arora’s appointment as Chief Executive Officer) through July 31, 2023 (the last day of
fiscal 2023). The realized pay of Mr. Arora was primarily attributable to (i) the vesting of long-term incentive awards
that were granted in prior years, (ii) the exercise of stock option awards that were granted in prior years and (iii)
performance-based cash incentive earned.

REALIZED PAY AS A PERCENTAGE OF CORRESPONDING FISCAL YEAR-END
INCREMENTAL MARKET CAPITALIZATION (JUNE 1, 2018-JULY 31, 2023)

1.44%
CEO
Realized
Pay

(cid:31)57.3 billion
Stockholder
Value Creation

CEO

2023 Proxy StatementCorporate Responsibility at a Glance

As the leading cybersecurity company, it is our business and our responsibility to help our enterprise customers
keep their infrastructure safe and secure in a sustainable manner, while delivering a return for our investors.
Moreover, we believe our responsibilities extend beyond customers and investors. We are equally responsible to
provide safety, security and sustainability to our workforce, suppliers, communities and environment. Additional
information about these environmental, social and governance (ESG) initiatives are detailed elsewhere in this
Proxy Statement.

Environment

Sustainable
Value Chain
Achieve science-based
targets and renewable
energy goals

Sustainable
Operations
Achieve science-based
targets and renewable
energy goals

Sustainable
Ecosystem
Advocate for climate
action and transparency

Security
Lead by example
in safety
and security

Safe.
Secure.
Sustainable.

Communities
Uplift and
protect our
communities

Oversight
Drive transparency
and accountability
through Board

Behavior
Operate with integrity
in all we do

Workforce
Build an
employee-centric
culture and great
place to work

Suppliers
Align suppliers
to achieve
shared outcomes

Social

Proxy Roadmap

ABOUT US

Read about our corporate
values, fiscal 2023
financial and business
highlights, and learn
more about our Board,
corporate governance,
stockholder engagement
efforts, executive
compensation and
corporate responsibility
highlights at a glance.

CORPORATE GOVERNANCE AND
CORPORATE RESPONSIBILIT Y

Read more about corporate governance and
approach to corporate responsibility, including
the roles of our Board and management team in
setting our programs and priorities.

PROPOSAL NO. 2

Read about our proposal to
ratify Ernst & Young as our
independent registered public
accounting firm for fiscal 2024.

PROPOSAL NO. 3

Read about our “Say-on-
Pay” proposal to approve,
on an advisory basis, the
compensation of our named
executive officers as disclosed
in this proxy statement.

COMPENSATION, DISCUSSION AND ANALYSIS

Read the letter from our Compensation and People Committee, and
learn more about our executive compensation programs.

PROPOSAL NO. 4

Read about our proposal to
approve an increase in the
number of shares of common
stock available for issuance under
our 2021 Equity Incentive Plan.

PROPOSAL NO. 1

Read about our
proposal to elect Nikesh
Arora, Aparna Bawa,
Carl Eschenbach and
Lorraine Twohill to a
new term, and learn
more about our Board
members, Board
committees and Board
compensation.

EXECUTIVE
COMPENSATION

Learn more about the
components of each of
our named executive
officers’ compensation,
including salary, annual
cash incentive and
equity grants, and read
about our CEO pay ratio.

2023 Proxy StatementCorporate Governance

Corporate Governance Highlights

Our Board is governed by our Corporate Governance Guidelines, which are amended from time to time to
incorporate certain current best practices in corporate governance. Our Corporate Governance Guidelines may be
found on our website at https://investors.paloaltonetworks.com.

In addition to a strong, independent Board, we are committed to corporate governance structures that promote
long-term stockholder value creation through a sound leadership structure and by providing our stockholders with
both the opportunity to provide direct feedback, and substantive rights and policies to ensure accountability.

THE BOARD’S CORPORATE GOVERNANCE PRACTICES AND STOCKHOLDER RIGHTS INCLUDE
THE FOLLOWING:

% Majority voting for uncontested elections
of board members, with an associated
resignation policy

% Board-level Security Committee with oversight
over security issues, including cybersecurity

% Annual Review of Committee Charters and

% Strong Lead Independent Director

Governance Policies

% Board Composed of 80% Independent Directors

% Fair Director Compensation Practices

% 100% Independent Audit Committee, ESG and
Nominating Committee, Compensation and
People Committee and Security Committee

% Annual Review of Board leadership Structure

% Active Management Succession Oversight

% Active Management of Director Conflicts

of Interest

% Annual Say-on-Pay Vote

% Board Refreshment

% Director Changes in Circumstances

Actively Evaluated

% Continuous Stockholder Engagement Program

% Stock Ownership Guidelines for Directors and

Executive Officers

% Board and Committee Access to Management

% Code of Business Conduct and Ethics for

% Annual Board and Committee Evaluations

Directors, Officers and Employee

% Independent Compensation and People

% Anti-Hedging Policy

Committee Consultant

% Board and Committee Authority to Retain

Outside Advisors

% Board and Committee Risk Oversight,

including Security

% Board Continuing Education Program

% No Poison Pill

% Single Class of Shares

% Restrictive Pledging Policy

% Meaningful Clawback Policy

% Regular Meetings of Independent Directors

Without Management Present

% Proxy Access Bylaws

Corporate Governance

Board Responsiveness to Stockholders

Our Board is committed to actively engaging with our stockholders, and committed to maintaining outreach
that is truly a dialogue with our stockholders. Through year-round engagement and outreach, we regularly
provide stockholders with opportunities to deliver feedback on our corporate governance, executive and director
compensation, and environmental and sustainability practices. We regularly meet with investors, prospective
investors, and investment analysts. These meetings can include participation by our Chair and Chief Executive
Officer, Chief Financial Officer, Chief Products Officer, General Counsel and Corporate Secretary or other business
leaders, and are often focused on company strategy, financial performance, product strategy and ESG philosophy.
Members of our Investor Relations team also participate in meetings with our stockholders and, on occasion,
members of the Board participate as appropriate. In fiscal 2023, our Lead Independent Director participated
in 21 meetings with investors representing 31% of our outstanding shares, while offering meetings to investors
representing 48% of our outstanding shares.

Following our 2021 annual meeting of stockholders, we reinvigorated our approach and practices to stockholder
engagement and implemented a strategy that focused on extensive engagement on a wide range of topics. Our
Lead Independent Director played an active and central role in our stockholder engagement efforts in fiscal 2023,
and our management team regularly communicated topics discussed and stockholder feedback to the Board and
our Board committees for consideration in their decision-making.

Who we
met with

• Investors holding 61% of shares outstanding engaged with

in discussions

Our Primary
engagement
team

• Investors holding 31% of shares outstanding engaged by Lead

Independent Director

• Offered meetings with Lead Independent Director to stockholders

holding 48% of shares outstanding

• Lead Independent Director (participated in 21 meetings)

• Investor Relations team

• General Counsel & Corporate Secretary

• People Team (human resources)

• Corporate responsibility team

What we
discussed

• Executive compensation

• Board structure

• Board composition and governance, including Board refreshment

and diversity

• Board oversight

• Board leadership

• Stockholder engagement

• ESG initiatives

• ESG disclosure and governance

2023 Proxy StatementCorporate Governance

WHAT WE HEARD OVER THE YEARS

HOW WE RESPONDED

• Adopted a majority voting requirement for uncontested

elections of directors, including a resignation policy in the
event a director does not receive a majority of the vote.

• Annual review of our Board leadership structure, including
whether an independent director should be the Chair of
our Board.

• Maintaining a strong Lead Independent Director.

• Annual review to determine whether maintaining a
classified Board is appropriate for our Company.

• Formed a Security Committee of our Board to enhance

oversight over security issues facing our Company,
including cybersecurity.

• Reconstituted our Nominating and Corporate Governance
Committee as the ESG and Nominating Committee to
enhance the Board’s oversight of ESG matters.

• Appointed Lorraine Twohill as co-Chair of our ESG and

Nominating Committee.

• Reallocated ESG responsibilities among our Board

committees, clearly identifying the responsibilities of
each committee.

• Added additional disclosure in this proxy statement relating

to Board oversight.

• Two long-standing directors did not stand for re-election at

our 2022 Annual Meeting of Stockholders.

• The Board appointed Ms. Bawa and Dr. Gayle to our Board
during fiscal 2021, increasing the gender, racial and ethnic
diversity of the Board. Presently, four of our ten directors
are women.

• During the period between April 2019 and May 2021, we
appointed four new independent directors: Ms. Bawa,
Dr. Gayle, Ms. Twohill and Rt Hon Sir John Key.

• Expanded disclosure in our proxy statement of the rationales

as to why each of our directors continue to serve on
our Board.

• Conducted extensive stockholder and investor outreach.

• Engaged in discussion with stockholders holding 61% of our

outstanding shares in fiscal 2023.

• Our Lead Independent Director participated in 21 investor
meetings and engaged in discussion with stockholders
holding 31% of our outstanding shares in fiscal 2023.

Board Governance
Classified Board of Directors, dual role of
CEO and Chairman and annual election of all
Board members.

Board Oversight of Risks, Including
Cybersecurity and ESG Risks
How the Board is addressing oversight of
increased, varied and new risks.

Board Diversity and Refreshment
The duration of Board service by certain
long-standing directors, and the makeup of
the Board and the rationale therefore.

Stockholder Engagement
Continued 1:1 investor outreach on executive
compensation, ESG and other matters of
interest to our stockholders.

WHAT WE HEARD OVER THE YEARS

HOW WE RESPONDED

Corporate Governance

Environmental, Social & Governance
Initiatives and Disclosures
Would like to see more information about how
we develop and manage environmental, social
and governance initiatives.

Executive Compensation
Prioritize and ensure the retention of
Chief Executive Officer, stand by our
pay-for-performance philosophy and the
commitments made in our 2021 and 2022
proxy statements relating to the structure of
our executive compensation program and
enhanced disclosure, and reduce stock-based
compensation expense as a percentage
of revenue.

• Published our Corporate Responsibility report in fiscal 2023, in

which we report on our carbon emissions.

• Entered into a new revolving credit facility, the interest rates
and commitment fees of which are subject to upward and
downward adjustments based on our progress towards the
achievement of certain environmental sustainability goals
related to greenhouse gas emissions.

• Added more disclosure in our annual report on Form 10-K and

this proxy statement describing our ESG initiatives and oversight.

• Advanced our science-based emissions reduction strategies,
including external validation of our 2027 targets, deployment
of renewable energy at our Santa Clara, CA towards our 100%
renewable energy goal, and advocacy for climate action.

• Increased our social impact programs, to leverage our core
competency in cybersecurity and align those efforts to help
develop a diverse talent pipeline while uplifting communities.

• Invested in non-profit organizations aligned to our core

philanthropic areas of education and workforce, health and
wellness, diversity and environmental sustainability.

• Operationalized our ESG governance structure through

monthly ESG Steering Committee meetings consisting of
leaders from accounting, internal audit, operations, legal,
investor relations, product and corporate responsibility to
recommend strategies and lead implementation of ESG
programs, which reports regularly to our ESG Executive
Leadership Team and the Board.

• Incentivized our Chief Executive Officer to remain at the
Company for the long term to enhance our prospects of
delivering sustained stockholder value.

• 100% of the equity awards granted to our NEOs in fiscal 2023
were performance-based, with different performance targets
than the cash incentive plan awards.

• Maintained our robust stock ownership guidelines for our

NEOs, including our Chief Executive Officer.

• Maintained an ESG modifier to our cash incentive plan, and

in response to stockholder feedback, expanded our disclosure
in our Compensation Discussion and Analysis to include data
regarding the scorecard measures.

• Maintained a one-year post-vesting holding period for all

NEOs, including our Chief Executive Officer.

• Reduced stock-based compensation expense as a percentage

of revenue from 21.8% in fiscal 2021 to 15.8% of revenue in
fiscal 2023.

2023 Proxy StatementCorporate

Governance

Corporate Governance

Leadership Structure

Our Corporate Governance Guidelines provide that our Board is free to choose its chairperson (the “Chair”) based
on our Board’s view of what is in the best interest of the Company and our stockholders. The Chair and the Chief
Executive Officer may, but need not be, the same person.

Annual Evaluation of Leadership Structure and Annual
Election of Lead Independent Director
As part of its annual review and evaluation process, the Board reviews its leadership structure and whether
combining or separating the roles of Chair and Chief Executive Officer is in the best interests of the Company and
our stockholders. The Board also considers:

• The effectiveness of the policies, practices, and people in place at the Company to help ensure strong,

independent Board oversight.

• The importance of consistent, unified leadership to execute and oversee the Company’s strategy.

• The strength of Mr. Arora’s vision for the Company and the quality of his leadership.

• Our performance and the effect the leadership structure could have on our performance.

• The Board’s performance and the effect the leadership structure could have on the Board’s performance.

• The meaningful and robust responsibilities and the performance of our Lead Independent Director.

• The views of our stockholders through our ongoing engagement efforts.

• The practices at other companies and trends in governance.

• The current state of our Company.

In the circumstance that the Board determines that it remains in the best interests of the Company and its
stockholders that our Chief Executive Officer serve as our Chair, the independent members of the Board then elect
a Lead Independent Director as provided in our Corporate Governance Guidelines.

Corporate Governance

Why Our Leaders Are Ideally Suited For Their Roles
The Board believes that the independent Board members should have the flexibility to respond to changing
circumstances and choose the Board leadership structure that best fits the then-current situation. As it does annually,
in August 2023, the Board reviewed our leadership structure. Following that review, the Board determined that
the combination of the Chairman and Chief Executive Officer roles, along with the robust authority given to our
experienced Lead Independent Director, effectively maintains independent oversight of management. The Board
consists of eight independent directors, and exercises a strong, independent oversight function through frequent
executive sessions, independent Board committees and by having a strong Lead Independent Director with clearly
delineated and comprehensive duties.

The Board strongly believes that its leadership structure strikes the right balance of allowing our Chair and Chief
Executive Officer to promote a clear, unified vision of the Company’s strategies, while ensuring robust, independent
oversight by the Board and our Lead Independent Director. The Board also believes there is value in presenting a
single face to our customers through combining the Chair and Chief Executive Officer roles, and that this structure
of having the Board and management operate under the unified leadership of a highly experienced Chief Executive
Officer best positions the Company to successfully implement its next phase of growth.

Accordingly, in August 2023, the Board determined that it is in the best interests of our stockholders for Mr. Arora to
serve as Chair and John Donovan to serve as Lead Independent Director.

Nikesh Arora
Chief Executive Officer
and Chairman

John M. Donovan
Lead Independent
Director

• Substantial knowledge and deep understanding

• Independence, confidence and gravitas, enabling

of our business and the challenges we face

strong oversight of executive leadership

• Substantial international business experience and
business acumen and valued strategic, financial
and operational insights

• Day-to-day insight into our prospects,

opportunities, strategies and challenges
facilitates the timely deliberation by the Board of
the most important matters

• Brings a unique, stockholder-focused insight to
assist the Company to most effectively execute
its strategy and business plans to maximize
stockholder value

• Serves as an important bridge between the

Board and management, and provides critical
leadership for carrying out our strategic initiatives
and confronting our challenges

• Provides the Board with more complete and

timely information about the Company
• Provides a unified structure and consistent

leadership direction internally and externally
• Proven success in leading Palo Alto Networks

since joining the Company

• Deep understanding of our business
• Strong working relationship with our Chair and

Chief Executive Officer

• Strong working relationship with other

management and our independent directors

• Substantial experience leading a large

multinational company

• Strong background in corporate governance
• Strong background as a technologist
• Dedicated to his service as Lead Independent

Director, as demonstrated by the fact that, during
fiscal 2023, he held 21 meetings with stockholders
holding 31% of our outstanding shares (and
offered to meet with stockholders holding 48% of
our outstanding shares)

• Strength and effectiveness of communication with
Mr. Arora, resulting in active and visible oversight of
the issues, plans and prospects of Palo Alto Networks

• Promotes a collaborative and collegial

environment for Board decision making

2023 Proxy StatementCorporate Governance

OVERVIEW OF LEAD INDEPENDENT DIRECTOR RESPONSIBILITIES

The responsibilities of the Lead Independent Director are well-defined. The Lead Independent Director engages
in regular communication between the independent directors and Mr. Arora, keeping Mr. Arora apprised of
any concerns, issues, or determinations made during the independent sessions, and consults with Mr. Arora on
other matters pertinent to the Company and the Board. As part of the Board’s annual review and evaluation, the
Board further defined the role and responsibilities of our Lead Independent Director to include:

• Presiding at meetings of the Board at which the Chair is not present, including executive sessions of the

independent directors.

• Serving as liaison between the Chair and the independent directors.

• Developing agendas for Board meetings in collaboration with the Chair, communicating with independent
Board members to ensure that matters of interest are being included on agendas for Board meetings, and
ensuring adequate time is allocated for Board discussions.

• Communicating with independent Board members and with management to affirm that appropriate

briefing materials are being provided to Board members sufficiently in advance of Board meetings to allow
for proper preparation and participation at meetings.

• Ensuring the Board exercises appropriate risk management oversight, including providing direction related

thereto to management.

• Having the authority to call meetings of the independent directors.

• Preparing agendas for meetings of the independent directors.

• Organizing and leading the Board’s evaluation of the Chief Executive Officer.

• Leading the Board’s annual self-evaluation and assessing areas of current and future improvement in

Board performance.

• If requested by major stockholders, ensuring that he is available, as necessary after discussions with the

Chair and Chief Executive Officer, for consultation and direct communication.

In addition to the responsibilities outlined above, our Lead Independent Director also:

• Has biennial one-on-one discussions with each independent director, as part of the Board’s annual evaluation process.

• Has access to all committee materials.

• Has the authority to engage independent consultants.

• Interviews Board candidates, and assesses future Board needs.

• Spends time with senior management outside of Board meetings (as necessary) to ensure a deep understanding

of the business and strategy of the Company.

• Participates in stockholder engagement planning and activities.

Corporate Governance

Independent Directors Sessions
A meeting of the independent directors is scheduled at every regular Board meeting and the independent directors
meet in an executive session. These independent sessions are organized and chaired by our Lead Independent
Director, and our Lead Independent Director provides direct feedback to Mr. Arora after these executive sessions.

Independent Committee Leadership
The Audit, Compensation and People, Security, and ESG and Nominating Committees are each composed solely of,
and led by, independent directors, and provide independent oversight of management. In addition:

• Each committee chair meets with management in advance of meetings to review and refine agendas, add topics

of interest, and review and comment on materials to be delivered to the committee.

• Every independent director has access to all committee materials.

• Each committee chair provides a report summarizing committee meetings to the full Board at each regular

meeting of the Board.

• Each committee meeting includes adequate time for executive session and the committees meet in executive session

on a regular basis with no members of management present (unless otherwise requested by the committee).

• Each committee effectively manages its Board-delegated duties and communicates regularly with the Chair,

Lead Independent Director, the Board, and members of management.

Furthermore, the Compensation and People Committee has an effective process for monitoring and evaluating
Mr. Arora’s compensation and performance, as well as succession planning.

Board Committees and Responsibilities

Our Board has a standing Audit Committee, Compensation and People Committee, Corporate Development
Committee, ESG and Nominating Committee and Security Committee, which have the composition and
responsibilities described below. Directors serve on these committees until their resignation or until otherwise
determined by our Board.

The membership and meetings during fiscal 2023 and the primary functions of each of the standing committees
are described below.

Audit
Committee

Compensation
and People
Committee

Corporate
Development
Committee

ESG and
Nominating
Committee

Security
Committee

Board of Directors
Nikesh Arora
Aparna Bawa*
John M. Donovan**
Carl Eschenbach*
Dr. Helene D. Gayle*
James J. Goetz*
Rt Hon Sir John Key*
Mary Pat McCarthy* $
Lorraine Twohill*
Nir Zuk

Member

Committee Chair or Co-Chair

** Lead Independent Director
* Independent Director
$ Financial Expert

2023 Proxy StatementCorporate Governance

Audit
Committee
Chair:
Mary Pat McCarthy

Members:
Aparna Bawa
James J. Goetz
Right Honorable
Sir John Key

Number of meetings in
fiscal 2023: 7

Our Audit Committee is responsible for, among other things:

• selecting and hiring our

independent registered public
accounting firm, including leading
the review and selection of the
lead audit engagement partner;

• evaluating the performance and

independence of our independent
registered public accounting firm;

• approving the audit and pre-
approving any non-audit
services to be performed by our
independent registered public
accounting firm;

• reviewing our financial statements

and related disclosures and
reviewing our critical accounting
policies and practices;

• reviewing and participating
in the selection of our chief
audit executive and periodically
reviewing the activities and
reports of the internal audit
function and any major issues
encountered in the course of the
internal audit function’s work;

• reviewing the adequacy and
effectiveness of our internal
control policies and procedures
and our disclosure controls
and procedures;

• overseeing procedures for the
treatment of complaints on
accounting, internal accounting
controls, or audit matters;

• reviewing and discussing

with management and the
independent registered public
accounting firm the results of
our annual audit, our quarterly
financial statements, and our
publicly filed periodic reports;

• reviewing and approving or

ratifying any proposed related
person transactions; and

• preparing the Audit Committee

report that the SEC requires in our
annual proxy statement.

The composition of our Audit Committee meets the requirements for independence for audit committee members
under the listing standards of Nasdaq and the rules and regulations of the SEC. Each member of our Audit
Committee also meets the financial literacy and sophistication requirements of the listing standards of Nasdaq. In
addition, our Board has determined that Ms. McCarthy is an “audit committee financial expert” within the meaning
of the rules and regulations of the SEC.

Our Audit Committee operates under a written charter that was adopted by our Board and satisfies the applicable
rules and regulations of the SEC and the listing standards of Nasdaq. A copy of the charter of our Audit Committee
is available on our website at http://investors.paloaltonetworks.com.

Corporate Governance

Compensation
and People
Committee
Chair:
Right Honorable
Sir John Key

Members:
Aparna Bawa
John M. Donovan

Number of meetings in
fiscal 2023: 8

Our Compensation and People Committee is responsible for, among other things:

• reviewing and approving

our Chief Executive Officer’s
and other executive officers’
annual base salaries, incentive
compensation arrangements,
including the specific goals and
amounts, equity compensation,
employment agreements,
severance arrangements and
change in control agreements,
and any other benefits,
compensation or arrangements;

• establishing and administering
our equity compensation plans;

• overseeing our overall

compensation philosophy and
compensation plans;

• preparing the Compensation and
People Committee report that
the SEC requires to accompany
the Compensation Discussion
and Analysis contained in this
proxy statement;

• overseeing our talent

management and people
management, including the
Company’s inclusion and diversity
initiatives and results, the
Company’s pay equity reviews
and results, and the Company’s
FLEXLearning, FLEXBenefits and
FLEXWORK initiatives; and

• reviewing and discussing

with management the risks
arising from the Company’s
compensation philosophy and
practices applicable to employees
to mitigate such risks.

The composition of our Compensation and People Committee meets the requirements for independence for
Compensation Committee members under the listing standards of Nasdaq and the rules and regulations of the SEC.
Each member of our Compensation and People Committee is also a “non-employee director,” as defined pursuant to
Rule 16b-3 promulgated under the Exchange Act.

Our Compensation and People Committee operates under a written charter that was adopted by our Board and
satisfies the applicable rules and regulations of the SEC and the listing standards of Nasdaq. A copy of the charter of
our Compensation and People Committee is available on our website at http://investors.paloaltonetworks.com.

Our Compensation and People Committee may form subcommittees for any purpose and may delegate to such
subcommittees such power and authority as our Compensation and People Committee deems appropriate, except
such power or authority required by law, regulation or listing standard to be exercised by our Compensation and
People Committee as a whole.

Corporate
Development
Committee
Chair:
John M. Donovan

Members:
Nikesh Arora
Aparna Bawa
James J. Goetz
Mary Pat McCarthy

Our Corporate Development Committee is responsible for, among other things:

• assisting the Board in fulfilling its responsibilities relating to the

review, evaluation, and approval of certain acquisitions and strategic
investment transactions;

• reviewing proposed acquisition and investment strategies with

management; and

• reporting to the Board the Committee’s approval or recommendation of
acquisitions or investment transactions and of such activity in general.

Our Corporate Development Committee operates under a written charter that was adopted by our Board.

2023 Proxy StatementCorporate Governance

ESG and
Nominating
Committee
Co-Chairs:
John M. Donovan
Lorraine Twohill

Members:
Dr. Helene D. Gayle

Number of meetings in
fiscal 2023: 4

Our ESG and Nominating Committee is responsible for, among other things:

• identifying and evaluating

• evaluating and making

individuals who are qualified to
become members of the board
of directors and selecting and
recommending to the Board
individuals as director nominees
and appointments to the board
of directors;

• evaluating and making

recommendations regarding
the composition, organization,
and governance of our board of
directors and its committees,
including issues of integrity,
experience, expertise and diversity
of membership;

• considering board of director

leadership structure, including
the separation of the chairperson
and chief executive officer roles
and the appointment of a lead
independent director and making
recommendations to the board
of directors;

recommendations regarding the
creation of additional committees
or the change in mandate or
dissolution of committees;

• reviewing and making

recommendations with regard
to our corporate governance
guidelines and compliance with
laws and regulations;

• reviewing and approving
conflicts of interest of our
directors and corporate officers,
other than related person
transactions reviewed by our
Audit Committee;

• overseeing our annual board of
director and committee self-
assessment process;

• overseeing our succession

planning process for the chief
executive officer and members
of the management team; and

• overseeing our ESG efforts and
related policies and programs.

The composition of our ESG and Nominating Committee meets the requirements for independence under the listing
standards of Nasdaq and the rules and regulations of the SEC.

In February 2022, we reconstituted our Nominating and Corporate Governance Committee as the ESG and
Nominating Committee to enhance our focus on ESG matters, giving it oversight of our ESG strategies and initiatives,
including our short-and long-term goals, and to reinforce the important role that ESG practices play in our business.
The ESG and Nominating Committee is responsible for setting our ESG priorities, and monitors our performance. The
ESG and Nominating Committee receives regular updates on priority ESG issues, including information on actions
and progress toward goals.

Our ESG and Nominating Committee operates under a written charter that was adopted by our Board and satisfies
the applicable listing standards of Nasdaq. A copy of the charter of our ESG and Nominating Committee is available
on our website at http://investors.paloaltonetworks.com.

Corporate Governance

Security
Committee
Chair:
John M. Donovan

Members:
Aparna Bawa
Carl Eschenbach
Dr. Helene D. Gayle
James J. Goetz
Rt Hon Sir John Key
Mary Pat McCarthy
Lorraine Twohill

Number of meetings in
fiscal 2023: 4

Corporate Governance

Our Security Committee is responsible for, among other things:

• overseeing (i) our policies, plans,
metrics and programs relating
to the physical security of our
facilities and employees, and
enterprise cybersecurity and data
protection risks associated with
our security-related infrastructure
and related operations, and (ii) the
effectiveness of our programs and
practices for identifying, assessing
and mitigating such risks across
our business operations;

• overseeing our cyber crisis

preparedness, security breach
and incident response plans,
communication plans, and
disaster recovery and business
continuity capabilities;

• overseeing the safeguards used
to protect the confidentiality,
integrity, availability, safety and
resiliency of the Company’s
employees, facilities, intellectual
property and business operations;

• reviewing and discussing with

management the cybersecurity
risks associated with our outside
partners (such as vendors,
suppliers, operations partners, etc.);

• overseeing our compliance with
applicable information security
and data protection laws and
industry standards, new or
updated legal implications of
security, data privacy, or other
regulatory or compliance risks
to us or our employees, facilities
and business operations and
the threat landscape facing our
business operations;

• reviewing and advising on our

physical and cybersecurity strategy,
crisis or incident management
and security-related information
technology planning processes and
review strategy for investing in our
security systems; and

• reviewing and discussing

with management our public
disclosures relating to the
Company’s security of its
employees, facilities and
information technology systems,
including privacy, network
security and data security.

In November 2021, our Board formed the Security Committee to facilitate Board oversight of security issues, including
product security, data security, cybersecurity, security risk management, risk exposure and related controls and
enterprise risk management related to these risks.

Our Security Committee operates under a written charter that was adopted by our Board. A copy of the charter of our
Security Committee is available on our website at http://investors.paloaltonetworks.com.

2023 Proxy StatementCorporate Governance

Annual Board and Committee Self-Evaluations

Our Board and each of its committees perform an annual self-assessment to evaluate the effectiveness of our Board
and its committees in fulfilling their respective obligations. As part of this annual self-assessment, directors are able
to provide feedback on the performance of other directors.

Our Lead Independent Director, who is also the Chair of our ESG and Nominating Committee, leads our Board
in its review of the results of the annual self-assessment and takes further action as needed. In connection with
the annual evaluation, each director receives a survey to complete to evaluate the Board and separate surveys
for each committee on which they serve. These surveys include detailed questions regarding: the effectiveness
and performance of the Board and committees; Board and committee composition and refreshment; timing,
agenda, and content of Board and committee meetings; Board dynamics and function; peer reviews of other
members; access to and performance of management; and executive succession planning. At least biennially
our Lead Independent Director also conducts one-on-one meetings with each director to receive their feedback
and assessment of the Board and its committees. A summary of the results is presented to the Board and each
committee on an anonymous basis.

In addition, all members of our Board have the opportunity to attend director education programs to assist them in
remaining current with best practices and developments in corporate governance.

FEEDBACK
INCORPORATED
Policies and practices
updated as appropriate
as a result of the annual
self-assessment and
ongoing feedback

ONGOING
FEEDBACK

Directors are
encouraged to provide
ongoing feedback in
addition to the annual
self-assessment

SELF-ASSESSMENT
QUESTIONNAIRES

Provides director
feedback on the Board
and each of the
Committees as
well as each director

Annual
Self-Assessment

SUMMARY OF
RESULTS

Summary of the Board
and Committee
self-assessment results
provided to each
Committee and
the Board

RESULTS
ANALYZED

Results of the self-
assessment analyzed
by the Lead
Independent Director

INDIVIDUAL
DISCUSSIONS

Lead Independent
Director engages with
individual directors as
appropriate, and at
least biennially

Corporate Governance

Board’s Role in Strategy Oversight

Our Board is responsible for overseeing the development of the Company’s strategy (including product
development roadmaps), which articulates objectives for the business, helps establish and maintain effective risk
management and internal controls frameworks, and provides direction to senior management to determine which
business opportunities to pursue. The Board is also actively engaged in ensuring that Palo Alto Networks culture
reflects our commitment to our core values of disruption, execution, collaboration, integrity and inclusion.

Annually holds a strategy
offsite, receiving detailed
presentations from, and
engagement with, senior
management across
the Company

Annually reviews
and approves the
Palo Alto Networks
operating plan

Quarterly
engagement with
senior management
on critical business
matters that tie to
Palo Alto Network’s
overall strategy

Regularly interacts
with the next
generation of
leadership to ensure
the talent pipeline
remains diverse,
inclusive and up to
the task

2023 Proxy StatementCorporate Governance

Board’s Role in Risk Oversight

Risk is inherent with every business, including strategic, financial, business and operational, legal and compliance,
and reputational. We have designed and implemented processes to manage risk in our operations. Management is
responsible for the day-to-day management of risks our Company faces, while our Board, as a whole and assisted by
its committees, has responsibility for the oversight of risk management. In its risk oversight role, our Board has the
responsibility to satisfy itself that the risk management processes designed and implemented by management are
appropriate and functioning as designed.

Our Board believes that open communication between management and our Board is essential for effective risk
management and oversight.

While our Board is ultimately responsible for risk oversight, our Board committees assist our Board in fulfilling its
oversight responsibilities in certain areas of risk.

BOARD OF DIRECTORS

• Meets with our Chief Executive Officer and other members of the senior management team at quarterly
meetings of our Board, where, among other topics, they discuss risks facing our Company, as well as at
such other times as they deem appropriate.

• Reviews strategic and operational risk in the context of reports from the management team, including

data privacy, information security and cybersecurity, receives reports on all significant committee
activities at each regular meeting, and evaluates the risks inherent in significant transactions.

AUDIT COMMITTEE

ESG AND NOMINATING COMMITTEE

• Assists our Board in fulfilling its oversight

responsibilities with respect to risk
management in the areas of liquidity risk,
internal control over financial reporting and
disclosure controls and procedures, legal
and regulatory compliance, and discusses
with management and the independent
auditor guidelines and policies with respect
to risk assessment, risk management and
risk mitigation.

• Reviews our antifraud programs and controls.

• Reviews our major financial risk exposures and
the steps management has taken to monitor
and control these exposures.

COMPENSATION AND
PEOPLE COMMITTEE

• Assesses risks created by the incentives

inherent in our compensation programs
and policies, and determines whether they
encourage excessive risk taking.

responsibilities with respect to the
management of risk associated with Board
organization, leadership, membership and
structure, and corporate governance.

• Reviews and monitor compliance with

the Company’s Code of Business Conduct
and Ethics.

• Oversees and periodically reviews the

Company’s risks relating to corporate social
responsibility and environmental sustainability.

• Oversees and discusses, as needed, with

management, compliance with applicable laws,
regulations and internal compliance programs.

SECURIT Y COMMITTEE

• Assists our Board in fulfilling its oversight

responsibilities with respect to the
management of risk associated with
cybersecurity, information security and physical
security of Palo Alto Networks.

Responsible for the day-to-day management of risks our Company faces.

MANAGEMENT

Corporate Governance

Succession Planning

Our Board and management team recognize the importance of continually developing our talented employee
base. Accordingly, our management team conducts an annual talent review of the current senior leadership
positions. In addition, our Chief Executive Officer annually reviews a succession plan for the Chief Executive Officer
position, using formal criteria to evaluate potential internal and external successors and interim candidates in
the event of an emergency situation. In conducting its evaluation, our Board considers organizational needs,
competitive challenges, leadership and management potential, and development and emergency situations. As
a result of succession planning, BJ Jenkins became our President in August 2021 and Dipak Golechha became
Executive Vice President and Chief Financial Officer in March 2021.

Communications with the Board of Directors

Interested parties wishing to communicate with our Board or with an individual member or members of our
Board may do so by writing to the Board or to the particular member or members of our Board, and mailing the
correspondence to our General Counsel or our Legal Department, at Palo Alto Networks, Inc., 3000 Tannery Way,
Santa Clara, California 95054. Our General Counsel or our Legal Department, in consultation with appropriate
members of our Board, as necessary, will review all incoming communications and, if appropriate, all such
communications will be forwarded to the appropriate member or members of our Board, or if none is specified, to
the Chair.

Corporate Governance Guidelines and Code of
Business Conduct and Ethics

Our Board has adopted Corporate Governance Guidelines. These guidelines address items such as the qualifications
and responsibilities of our directors and director candidates and corporate governance policies and standards
applicable to us in general. In addition, our Board has adopted a Code of Business Conduct and Ethics that applies
to all our employees, officers and directors, including our Chief Executive Officer, Chief Financial Officer, and other
executive and senior financial officers. Our Corporate Governance Guidelines and our Code of Business Conduct
and Ethics are posted on the Investor Information portion of our website at investors.paloaltonetworks.com. We
will post amendments to our Code of Business Conduct and Ethics or waivers of our Code of Business Conduct and
Ethics for directors and executive officers on the same website.

Compensation and People Committee
Interlocks and Insider Participation

None of the members of our Compensation and People Committee is, or has been, an officer or employee of our
Company. None of our executive officers currently serves, or in the past year has served, as a member of the board
or compensation committee (or other board committee performing equivalent functions) of any entity that has one
or more of its executive officers serving on our Board or Compensation and People Committee.

2023 Proxy StatementCorporate Responsibility at Palo
Alto Networks

An Overview of Our Environmental, Social and
Governance Strategies

Our values of execution, disruption, collaboration, inclusion and integrity are the foundation of everything we do—
which extend into our approach to environmental, social and corporate governance (“ESG”) practices. From our
science-based emissions reduction strategies, our employee-centric people strategy, and our supplier responsibility
initiatives, to our social impact programs and our dedication to integrity, ethics, security and privacy, we believe
we are executing meaningful outcomes that reinforce our commitment to safety, security and sustainability. The
content that follows summarizes the actions we have taken and the impact we believe we have had through our
corporate responsibility journey.

ESG Oversight and Governance

ESG at Palo Alto Networks is overseen and governed at the highest levels and includes Board and committee
oversight, executive-level leadership, and subject-matter experts who lead our efforts across our business.

Board Oversight. The Board and its applicable committees provide guidance and oversight to management
with respect to ESG matters. The ESG and Nominating Committee is responsible for setting our ESG priorities
and monitoring our performance. Our Compensation and People Committee, Audit Committee and Security
Committee also serve an important role in ESG oversight. Our Lead Independent Director and management team
share feedback received from our stockholders with the Board.

•

AUDIT COMMITTEE
• Processes and controls to ensure ESG
disclosures are complete and accurate
Enterprise risk management (ERM)
pertaining to financial, accounting
and tax matters
Legal and regulatory
compliance related to
financial and tax matters
Internal ethics
compliance, including
code of ethics and
whistle blower program

•

COMPENSATION AND
PEOPLE COMMITTEE

• Diversity and inclusion
• Pay equity
• Human capital management,

including recruitment,
development and retention
Integrating ESG goals into executive
compensation plans/arrangements

•

• Compensation risk management
• Management succession planning

and development

Board of
Directors

SECURITY COMMITTEE
• Product security and

data security
• Cybersecurity, risk

•

exposure and related
controls
ERM related to security,
incident response and
business risk

ESG AND NOMINATING
COMMITTEE

• Primary responsibility for

ESG matters

• Board recruiting, including

diversity
Sustainability
Legal and regulatory
compliance (excluding
financial and tax)
Stakeholder engagement

•
•

•

Corporate Responsibility at Palo Alto Networks

Management Leadership. A cross-functional, executive-level ESG leadership team sets our overall ESG
strategy, objectives and initiatives, provides guidance on program implementation, and oversees the continuing
enhancement of our approach to ESG. This committee, which is led by our Chief Executive Officer and includes our
General Counsel, Chief People Officer and Chief Financial Officer, receives analysis and presentations regarding
current and emerging ESG-related risk topics and the status of our ESG programs.

Our executive-level ESG leadership team also empowers our ESG steering committee to implement our ESG
programs and to pursue activities to achieve our objective and goals. The ESG steering committee is a cross
functional team of employees, consisting of representatives from our accounting, internal audit, corporate
responsibility, legal, investor relations and operations teams, and oversees the work of our subject matter experts in
the implementation of our ESG programs.

ESG Governance Structure

ESG and Nominating
Committee

BOARD OF DIRECTORS
Approves priorities, provides guidance and oversight, and
monitors performance in all areas of our ESG programs

Chair and Chief
Executive Ofﬁcer

Chief Executive
Ofﬁcer

Chief People Ofﬁcer

ESG EXECUTIVE COUNCIL
Sets ESG strategy, objectives and initiatives, and oversees
corporate-wide ESG program implementation

General Counsel

Chief Financial Ofﬁcer

ESG STEERING COMMITTEE
Chair: Sr. Director, Global Corporate Responsibility

Recommends strategies, leads implementation of ESG programs,
pursues ESG objectives and stays on top of current developments

Senior
Director, Global
Corporate
Responsibility

SVP, Chief
Accounting
Ofﬁcer

SVP,
Worldwide
Operations

VP,
Supply Chain
Operations and
Procurement

VP, Deputy
General Counsel,
Corporate

VP, Deputy
General
Counsel, Ethics
and Compliance

SVP, Investor
Relations and
Corporate
Development

VP, Internal
Audit

VP, Hardware
Products

2023 Proxy StatementCorporate Responsibility at Palo Alto

Networks

Corporate Responsibility at Palo Alto Networks

Environmental

The negative impacts of the climate crisis are worldwide in scope and disproportionately felt by the world’s most
vulnerable people. At Palo Alto Networks, we are committed to doing our part to reduce our own impacts and
partnering with others to support community-led, global solutions.

We are future-focused and, to protect our digital way of life, we must also help protect our planet. Immediate
action is needed, and we believe that now is the time to make progress towards ambitious science-based targets,
advocate for climate policy and collaborate to create data-driven solutions.

Our climate strategy focuses on three pillars.

Sustainable Operations

Accelerate carbon- and waste-f ree growth through
energy efficiency, decarbonization, renewable energy and
science-based targets.

Sustainable Value Chain

Collaborate and partner with stakeholders throughout our
value chain to drive to zero carbon, zero waste, 100% renewable
energy and 100% circular cybersecurity products.

Sustainable Ecosystem

Drive leading public commitments, policy advocacy and
partnerships to elevate our thought leadership position.

Science-Based Targets: A Clearly Defined Pathway to
Emissions Reduction
Palo Alto Networks completed a greenhouse gas inventory in fiscal 2022. We are using science-based strategies
to reduce our climate impacts. In 2023, our ambitious Science-Based Targets (SBTs) were validated by the globally
recognized Science Based Targets initiative (SBTi). Our targets are aligned to the United Nations Framework
Convention on Climate Change (UNFCCC) guidance to limit global temperature rise to 1.5° Celsius to avoid the
catastrophic impacts of climate change.

Our Science-Based Targets are:

• Scope 1 and 2: Sustainable Operations

Palo Alto Networks commits to reduce Scope 1 and 2 greenhouse gas emissions by 35% by the end of fiscal 2027,
as compared to fiscal 2021.

• Scope 3: Sustainable Supply Chain

Palo Alto Networks commits to get 65% of our suppliers (measured by total spend) to set Science-Based Targets
by the end of fiscal 2027.

Corporate Responsibility at Palo Alto

Networks

Corporate Responsibility at Palo Alto Networks

• Scope 3: Sustainable Customers (Use of Sold Products)

Palo Alto Networks commits to reduce emissions from our customers’ use of our products by 40% by the end of
fiscal 2027.

Net Zero Emissions targets:

• We intend to achieve Net Zero across our Scope 1 and 2 emissions by fiscal 2030, by reducing emissions by 90%,

as compared to fiscal 2021, and mitigating any remaining emissions through carbon removal investments.

• We intend to achieve Net Zero across all Scope 1, 2 and 3 emissions by fiscal 2040, aligned with The Climate
Pledge, by reducing emissions by 90%, as compared to fiscal 2021, and mitigating any remaining emissions
through carbon removal investments.

Through our climate ambition across our operations, value chain and ecosystem, we are confident that we can
achieve these goals by the dates above.

Sustainable Operations: Driving Decarbonization
Our sustainable operations strategy includes a commitment to achieving 100% renewable energy by 2030 and to
materially reducing our operational greenhouse gas emissions.

We have a long history of providing our people with workplaces that have achieved LEED
(Leadership in Energy and Environmental Design) certification. New LEED-certified sites
opened to our employees in London and Amsterdam in early fiscal 2024. The Amsterdam
office, which will serve as our EMEA HQ, was certified LEED-Silver, an accreditation that
commends the site for optimized energy performance.

In January 2023, Palo Alto Networks became one of the first companies to participate
in Silicon Valley Power's (SVP) Large Customer Renewable Energy Program (LCRE). This
voluntary clean energy program gives companies the ability to purchase additional
renewable electricity above the amount already included in SVP's energy delivery
portfolio. As of January 1, 2023, as a participant in the SVP LCRE, we began purchasing
100% renewable (e.g., solar and wind) electricity to power our entire Santa Clara, California
headquarters. Our LCRE participation also led to Palo Alto Networks' listing on the U.S.
EPA's Green Power Partnership.

Sustainable Value Chain
Collaboration across our value chain promotes the large-scale action necessary to
address the climate crisis. Therefore, our environmental strategy extends to our supply
chain practices and how we partner with our suppliers.

We expect our manufacturing partners to collect, measure and report greenhouse gas
emissions, establish Science-Based Targets (SBTs) to reduce emissions and transition to
renewable energy sources. Additionally, suppliers are informed of our expectations to
follow responsible business practices while minimizing their impact on the environment
and communities through our Global Supplier Code of Conduct. Our primary contract
manufacturer is ISO 14001 certified and a member of the Responsible Business Alliance.

Two of our own SBTs address Scope 3 emissions from our value chain, including those
from the supply chain of the goods and services we purchase and our customers’ use of
our cybersecurity hardware products.

Earned placement on CDP 2022
A List for Climate disclosure
(Dec. 2022)

Became a participant in the
EPA’s Green Power Partner
Program (May 2023)

Achieved a Supplier Engagement
Rating of A-from CDP (2023)

Throughout fiscal 2023, we continued the journey to engage stakeholders throughout our value chain, from
suppliers to customers, to drive to zero carbon, zero waste, 100% renewable energy and 100% circularity in our
cybersecurity products.

2023 Proxy StatementCorporate Responsibility at Palo Alto Networks

Sustainable Ecosystem
Engaging with stakeholders across the public and private sectors – our industry peers, non-governmental
organizations, policy makers, local communities and our own employees – is the foundation of our sustainable
ecosystem strategy.

Each of our stakeholder groups has an essential role in our pursuit to solve complex environmental challenges.
Recognizing that addressing climate change will require collaboration on systemic issues, we work with the
following stakeholders to promote partnership and mutual learning: CDP, ITI, Science Based Targets Initiative, The
Climate Pledge, World Economic Forum - CEO Alliance of Climate Leaders, We Mean Business, and Ceres.

In fiscal 2023, we supported several policy initiatives that advocate for climate action and clean energy, including:
the World Economic Forum (WEF) Alliance of CEO Climate Leaders’ COP27 message, and the Information
Technology Industry Council’s (ITI) public comments supporting disclosure of Climate-Related Financial Risk.

We remained committed to transparency by submitting our 2023 CDP Climate and Supply Chain disclosures for the
fourth year in a row.

Social

During fiscal 2023, we continued to execute our People strategy, engaged with our supply chain to reinforce our
Global Supplier Code of Conduct expectations and invested in our communities.

Our People
We believe our ongoing success depends on our employees. Development and investment in our people is central
to who we are, and will continue to be so. With a global workforce of 13,948 as of July 31, 2023, our People Strategy
is a critical element of our overall company strategy. Our People Strategy is a comprehensive approach to source,
hire, onboard, develop, engage, and reward employees. Our approach is grounded on core tenants: respect each
employee as an individual, demonstrate fairness and equity in all we do, facilitate flexibility, personalization, and
choice whenever possible, and nurture a culture where employees are supported in doing the best work of their
careers. Our values of disruption, execution, collaboration, inclusion, and integrity were co-created with employees
and serve as the foundation of our culture.

We are proud to have earned multiple awards for our people programs and culture, many of which are based on
employee feedback.

Recognized as a “Most
Loved Workplace” by
Newsweek (2022)

Recognized in multiple categories including Culture, Best Company, Happiness and
Leadership by Comparably (2023 & 2022)

Recognized as a Best Places to Work by
Glassdoor (2023)

Source & Hire
Sourcing diverse talent who possess the skills and capabilities to execute and add value to our culture form the
cornerstone of our comprehensive approach to talent acquisition—a philosophy we call “The Way We Hire.” We
utilize an array of methods to identify subject matter experts in their respective fields, emphasizing sourcing
channels that connect us with underrepresented talents.

In an effort to foster career growth within Palo Alto Networks, we prioritize internal mobility. This allows current
employees to progress either through a traditional career path or by exploring roles across various business
functions, often culminating in promotions. We encourage existing employees to refer qualified individuals for
our open positions, thus leveraging the collective networks of our team to attract a diverse range of expertise
and perspectives.

Corporate Responsibility at Palo Alto Networks

We have made strides to understand job requirements and implement structured interviewing practices to identify
candidates of the highest quality. By conducting thorough job analyses and creating success profiles, we have
developed a deeper understanding of what is required for success in critical roles. We equip our hiring managers
with essential training to identify and mitigate potential unconscious biases. Our interviewing process emphasizes
values and competencies that we believe enhance our culture. This commitment extends to conducting interviews
with diverse panelists and providing a balanced evaluation and quality interview experience for a diverse slate of
candidates. We remain steadfast in our commitment to fairness, bias reduction, and equal opportunities for all
potential hires.

A key to our hiring process is the Global Hiring Committees, introduced in fiscal 2023. These committees play a
significant role in elevating our hiring standards by promoting shared understanding, reducing biases, enhancing
objectivity, and ensuring the recruitment of diverse talent. The Committees foster effective collaboration using a
common language and consensus-driven decision-making.

Onboard & Develop
We believe that each member of our workforce is unique, and that their integration into Palo Alto Networks and their
career journey involve unique needs, interests, and goals. That is why our development programs are grounded on
individualization, flexibility, and choice. From onboarding to ongoing development, our FLEXLearn philosophy offers
multiple paths to assess, develop, and grow.

Our onboarding experience starts with “pre-boarding.” Before an employee’s start date, they are provided access
to foundational tools to help them prepare to join Palo Alto Networks. We view pre-boarding as fundamental to
introducing new employees to our culture, building trust, and facilitating rapid productivity. Welcome Day is a
combination of in-person, virtual learning platforms and communication channels that provide new employees with
inspirational, often personalized, onboarding experiences that carry on through the first year of employment. We
have specialized learning tracks for interns and new graduates that have been recognized as best in class externally
to support early-in-career individuals in acclimating to our culture as they progress on their career journey. As part of
our merger and acquisition strategy, we have also established a robust integration program with the goal to enable
individuals joining our teams to feel part of our culture at speed.

Following onboarding, there are a variety of ways that employees can assess their interests and skills, build a
development plan specific to those insights, and continue to grow. Our development initiatives are delivered to
employees through a comprehensive platform, FLEXLearn. The platform contains curated content and programs,
such as assessment instruments, thousands of courses, workshops, and mentoring and coaching services. Leaders
and executives also have access to specialized learning tracks that help them strategize, mobilize, and deliver
maximum personal and team performance. Employees have full agency to direct their growth at their pace and
choosing. Development information about core business elements, working in a distributed hybrid environment,
as well as required company-wide compliance training, such as Code of Business Conduct and Ethics, privacy and
security, anti-discrimination, anti-harassment, and anti-bribery training, is also deployed through the FLEXLearn
platform for all employees. In addition, FLEXLearn provides employees with events and activities that motivate and
spark critical thinking, on topics ranging from inclusion to well-being and collaboration. On average, employees had
completed 33 hours of development through the FLEXLearn platform during fiscal 2023.

Engage & Reward
We aim to foster engagement through a multifaceted approach to collect, understand, and act on employee
feedback. Our comprehensive communication and listening strategy utilizes in-person and technology-enabled
channels. We share and collect information through corporate and functional “All Hands” meetings, including
several meetings specifically focused on employee-centered topics in an “Ask Me Anything” format. Digital Displays
across our sites, our intranet platform, monthly and weekly email communications, and an active Slack platform
provide a regular flow of information to and between employees and leadership. In addition to these channels that
reach large audiences, we conduct regular executive listening sessions, including small group convenings with
our Chief Executive Officer and other C-suite leaders, and ad-hoc pulse surveys to better understand employee
engagement, sentiment, well-being, and the ability to transition to a hybrid work model.

2023 Proxy StatementCorporate Responsibility at Palo Alto Networks

Employee sentiment is also collected from external sources, such as web platforms that crowdsource feedback.
Employees provide commentary to platforms such as Glassdoor, Comparably, and others and insights from those
platforms are used to measure engagement. In addition, based on employee participation in an anonymous survey,
the Best Practice Institute has certified Palo Alto Networks as a “most loved workplace” (2021, 2022, and 2023). Palo Alto
Networks has been recognized by Glassdoor, Comparably, Human Rights Campaign, Disability Index, and others as an
employer of choice. Our Chief Executive Officer has also earned a 92% employee approval rating on Glassdoor, a top
percentile score.

In addition to a comprehensive compensation and diverse benefits program (described below), we believe in
an always-on feedback and rewards philosophy. From recurring 1:1 sessions, quarterly performance feedback,
semi-annual performance reviews to use of our Cheers for Peers peer recognition program, employees get
continuous input about the value they bring to the organization. These engagement and recognition strategies
have informed our holistic People Strategy, including our Inclusion and Diversity (“I&D”) initiatives and Internal
Mobility program. Based on the outcomes from external sources, insights from internal sources, our modest
attrition rate (compared to market trends), and strong participation in our Internal Mobility program, we believe
employees at Palo Alto Networks feel engaged and rewarded.

Our comprehensive compensation program includes competitive base pay. In addition,
all employees participate in one of two variable pay programs: our sales incentive plans
or our variable incentive program. All employees are also eligible to participate in our
stock-based offerings through a generous employee stock purchase plan and a competitive
equity incentive plan, both of which are generally available to all of our employees where
regulations permit. We conduct annual external audits of our pay practices. Our fairness and
equity analysis includes gender for all global employees and race and ethnicity for employees
in the U.S. As a result of these measures and corrections, we believe that our employees are
paid fairly and equitably regardless of race/ethnicity (in the U.S.) or gender (globally).

As a global employer with a diverse employee population, we understand everyone’s benefit
needs are different. Our benefit plans include a variety of health, time-off, wellness and
voluntary options. And, our FLEXBenefits program provides all employees with a funding
allowance from which they can choose to obtain additional benefits.

Recognized by Comparably
as “Best Company for Perks &
Benefits (2022)

Inclusion & Diversity
We are intentional about including diverse points of view, perspectives, experiences, backgrounds, and ideas in our
decision-making processes. We deeply believe that true diversity exists when we have representation of all ethnicities,
genders, orientations and identities, and cultures in our workforce. Our corporate I&D programs focus on five
principles—our workforce should feel psychologically safe, they should understand, listen, and support one another,
and they should elevate others. These principles are the foundation of our approach to I&D, which we call P.U.L.S.E. We
also disclose our EEO-1 report on our website.

Recognized by Comparably as
a “Best Company for Perks &
Benefits” (2022)

We have eleven employee network groups (“ENG”) that play a vital role in building understanding and awareness. Over
29% of our global workforce was involved in at least one ENG as of July 31, 2023. ENGs are also allocated funding to make
charitable grants to organizations advancing their causes. We involve our ENGs in listening sessions with executive
teams and we work in partnership to develop our annual I&D plans because we believe involvement is critical.

Our I&D philosophy is fully embedded in our talent acquisition, learning and development, performance elevation,
and rewards and recognition programs. The diversity of our board of directors, with women representing 40% of our
board as of July 31, 2023, is an example of our commitment to inclusion and diversity.

Recognized as a Best Company to
Work for by InHerSight (2023)

Recognized in 5 workplace categories
by Muse (2023)

Achieved a perfect score of 100% on the
Disability Equality Index as evaluated
by Disability:IN (2022)

Recognized in multiple categories
by Military Friendly for our efforts
to support veterans and their
families (2023)

Corporate Responsibility at Palo Alto Networks

Our Supply Chain
Palo Alto Networks partners with contract manufacturers to produce our hardware products. Our ESG strategy
extends to supply chain practices and impacts how we partner with our more than 4,000 suppliers. Integrity is one
of our core values, and we expect our suppliers, and their suppliers too, to comply with the labor standards set forth
in our Global Supplier Code of Conduct (“Code”) and other applicable ESG policies and practices. This Code allows us
to reach across our supply chain to communicate our expectations regarding responsible business practices, labor
standards, workplace health and safety conditions and environmental impact.

ESG is woven into our direct material supplier framework, including a risk-based approach to our supplier selection
process and, where appropriate, incorporation of relevant contractual clauses and audit rights into our Master
Purchasing Agreements. Where appropriate, we request and review information provided in annual supplier
surveys, scorecards and supplier business reviews. We also utilize a risk-based approach and third-party risk
management tools to evaluate ESG risks and supplier diversity, including use of diversity databases.

Security and data protection are integral to Palo Alto Networks’ mission and therefore are ingrained in our hardware
product lifecycle (design, sourcing, manufacturing, fulfillment and service). Knowing that a range of threats is
possible at any stage, we have created a framework and processes to prevent potential risks and disruptions. These
include ongoing periodic oversight and assessments of our contract manufacturers, original design manufacturing
partners and direct material suppliers.

During fiscal 2023, we maintained our affiliate membership in the Responsible Business Alliance. Through the
alliance, members, suppliers and stakeholders collaborate to improve working and environmental conditions as
well as business performance through leading standards and practices. In fiscal 2023, we focused on updating our
modern slavery statement and reviewing more supplier assessments.

In fiscal 2023, we maintained our commitment to supplier diversity. We expect our manufacturing partners to
establish inclusion and diversity initiatives that result in greater equity and representation, to commit to fair and
equitable pay practices and to transparently communicate the demographics of their workforce. A cross-functional
working group continues to explore best practices and is working with partners such as Western Regional Minority
Supplier Development Council and National Minority Supplier Development Council to support our work to
enhance our procurement policies and establish metrics to measure our progress in growing the diversity of our
supply chain.

Our Communities
We value our role as a good corporate citizen and in fiscal 2023 remained committed to partnering with our
communities to make a lasting impact. We expanded our investments in cybersecurity education and programs to
diversify the cybersecurity talent pipeline. Our employees made direct investments and volunteered their time for
important causes. We made charitable investments in core causes to uplift communities.

Investing in Education and Key Cause Areas
Our vision of a safe and secure world can best be achieved through the responsible use of technology. As a
cybersecurity leader, we see firsthand that the number of cyber threats is increasing as the security landscape
becomes more and more complex. The COVID-19 pandemic accelerated changes in how we learn, connect and
socialize, and it exposed how some communities are more vulnerable than others to cybercrime.

We are uniquely positioned to address these challenges. We provide high-quality, free, educational content and
tools that demystify technical concepts and inspire youth; increase digital literacy and cultivate generations of
responsible digital citizens; prepare young professionals to pursue future careers in cybersecurity; and upskill and
diversify the workforce of today. We deliver a continuum of programs using age appropriate content, often focused
on underrepresented and vulnerable communities, they include Cyber A.C.E.S., Cyber STARS, Cyber Scholars,
Pro{tecting} Your Digital Life workbook, our Cybersecurity Academy and strategic partnerships with educational
institutions and recognized non-profit organizations.

2023 Proxy StatementCorporate Responsibility at Palo Alto Networks

Because inclusion and diversity is important to Palo Alto Networks, we allocate charitable funding to our ENGs
to enable them to support non-profit organizations committed to reaching the needs of underrepresented
communities. In fiscal 2023, we supported dozens of organizations to help them achieve their respective missions.

In addition to making charitable grants to support causes like mental health and wellness, hunger and basic needs,
we invested in expanding the talent pipeline to underrepresented communities. We also supported environmental
and social justice causes.

Engaging Employees to Increase Impact
Through our volunteering, matching and giving programs, we boost employee engagement and satisfaction, and
make a difference in the communities where we live and work.

As a feature of our robust volunteering program, employees are encouraged to take paid time off to volunteer
during the workday using Flexible Time Off (FTO). Employees volunteer as individuals, and frequently as groups
with their peers, departments, employee network groups (ENGs) or through local committees we call SMILE
(Service Making Individuals Lives Easier).

We allocate up to $1,000 per calendar year, per employee, for our volunteer Dollar-for-Doers program and charitable
matching. And we highlight causes through “drives”, such as our Annual Hunger Campaign and relief efforts for
natural disasters and humanitarian crises.

Corporate Behavior
Ethics & Compliance
Palo Alto Networks is committed to conducting business with high degrees of honesty and integrity wherever we
operate. Integrity is one of our core values and we respect our customers, partners, employees and stockholders.

Our Code of Business Conduct and Ethics summarizes the ethical standards and key policies that guide the
business conduct of the directors, officers and employees of the Company, and we have a public Global Supplier
Code of Conduct, both available on our corporate website. All employees, contractors and suppliers are informed
about our governance expectations through our Codes of Conduct and compliance training programs.

We also have a policy focused on respect in the workplace and a corresponding training through our FLEXLearn
platform. All new hires must complete the training and existing global employees are required to complete the
training every other year. The training includes anti-discrimination, anti-harassment and anti-retaliation lessons and
hypotheticals. Our Audit Committee and ESG and Nominating Committee of the Board are responsible for oversight
of our Code of Business Conduct and Ethics compliance program. Our Ethics Hotline is also publicly available.

Information Security & Privacy
Palo Alto Networks maintains a written information security program that is managed by our Chief Information
Security Officer, who is responsible for overseeing and implementing the program; includes administrative, technical
and physical safeguards reasonably designed to protect the confidentiality, integrity, and availability of end user
data; and is appropriate to the nature, size and complexity of Palo Alto Networks’ business operations. The Security
Committee of our Board of Directors reviews data privacy and cybersecurity strategies and risks and provides
oversight over risk mitigation related to cyber threats. Six of our ten Board Directors have cybersecurity and IT
technology expertise. We provide annual information security and compliance training to all of our employees.

We engage external agencies to conduct background checks for personnel. We also maintain a security process to
conduct appropriate due diligence prior to engaging contractors; assess the security capabilities of subcontractors
on a periodic basis; and require subcontractors to adhere to our key information security policies and standards.
We also restrict access to, control and monitor physical areas where we process end user data. Data centers that we
operate are in alignment with industry standards such as ISO 27001 and SSAE 16 or ISAE 3402.

Corporate Responsibility at Palo Alto Networks

We deploy firewall technology and an intrusion detection system to generate, monitor and respond to alerts which
could indicate potential compromise of our network. We also apply security by design principles throughout the
software development lifecycle, track vulnerabilities of open-source software, and run internal and external network
scans at least quarterly and after any material change in the network configuration. We conduct application
security assessments using a qualified third party, such as our annual assessment for internet-facing applications
that collect, transmit or display end user data.

Palo Alto Networks also develops, implements and maintains a business continuity management program to
address the needs of the business and the products we provide to customers. To that end, we complete a minimum
level of business impact analysis, crisis management, business continuity and disaster recovery planning.

Privacy is important to our customers and helps us build trust. Our privacy practices are informed by several key
principles including:

• Accountability. We are responsible for the protection of personal information entrusted to us.

• Transparency and Control. We inform customers about our collection of their personal information and honor

their preferences.

• Third Parties Processing Our Information. We choose trustworthy vendors and suppliers to process personal

information and we require them to commit to adequate privacy and data security standards.

• Privacy by Design. We continue to build on this principle when designing and implementing products.

• Data Integrity and Proportionality. We collect personal information for specific and legitimate business

purposes and store it safely and accurately.

• Customer Benefit/Value for Customers. We share with our customers the benefits and value we derive from

processing their personal information.

• Security. We implement technical, organizational and physical security measures to confirm an appropriate level

of security of the personal information we process. This includes employee training.

Our ESG Journey

Palo Alto Networks has always been a values-based company, and the core principles of ESG have been part of our
day-to-day operations. Still, the Company has made a dedicated focus to continuously improve and further integrate
ESG into the business. From elevated environmental initiatives, such as setting emissions reduction goals aligned to
Science-Based Targets and constantly evolving social strategies to increased transparency in our governance and
disclosures, including our fiscal 2022 ESG Report released in October 2022, we have made strides to advance our
ESG journey.

We have made improvements and yet we recognize that we have more work to do, particularly as stakeholders
become more and more interested in our efforts and as regulatory matters and ESG frameworks evolve. During
fiscal 2023, our overall ESG performance improved across all of the rating institutions we measure against. We
monitor these ratings so that we remain diligent in our practices and execute a path to achieve our place as industry
leaders in ESG.

Recognized by Sustainalytics as
“Industry Top Rated” for our overall ES
performance (2023, 2022, 2021)

Recognized by Institutional Shareholder
Services (ISS) as Prime (2023, 2022)

Achieved “Gold” rating by EcoVadis
(2023, 2022, 2021)

Rated AA, up from BBB, by MSCI
(June 2023)

2023 Proxy StatementVoting Roadmap

P R OP OS AL 1
Election of Directors

The Board of Directors recommends a vote “FOR” each of the nominees named below.

Our Board is comprised of ten members and is divided into three staggered classes of directors. At each annual
meeting of stockholders, a class of directors will be elected for a three-year term to succeed the same class
whose term is then expiring.

The following Class III directors have been nominated for election to the Board at the 2023 annual meeting
of stockholders:

• Nikesh Arora

• Aparna Bawa

• Carl Eschenbach

• Lorraine Twohill

See page 45.

P R OP OS AL 2
Ratification of Appointment of Independent Registered Public
Accounting Firm

The Board of Directors recommends a vote “FOR” the ratification of the appointment of
Ernst & Young LLP.

Our Audit Committee has appointed Ernst & Young LLP (“EY”), independent registered public accountants,
to audit our financial statements for our fiscal year ending July 31, 2024. EY has served as our independent
registered public accounting firm since 2009.

See page 57.

P R OP OS AL 3
Advisory Vote on the Compensation of our Named
Executive Officers

The Board of Directors recommends a vote “FOR” the approval, on an advisory basis, of the
compensation of our named executive officers.

We are providing our stockholders with the opportunity to vote to approve, on an advisory or non-binding basis,
the compensation of our named executive officers as disclosed in the “Executive Compensation” section of this
proxy statement.

See page 60.

P R OP OS AL 4
Approve Amendment to Palo Alto Networks, Inc. 2021 Equity
Incentive Plan

The Board of Directors recommends a vote “FOR” the approval of an amendment to our
2021 Equity Incentive Plan to increase plan shares reserved for issuance.

We are asking stockholders to approve an amendment to our equity incentive plan to increase plan shares
reserved for issuance. The ability to grant equity awards is crucial to recruiting and retaining the best personnel.
If stockholders do not approve the amendment to 2021 Equity Incentive Plan at our Annual Meeting, we may
be unable to continue to grant equity awards as needed, which could prevent us from successfully attracting
and retaining the highly skilled talent we need.

See page 108.

Proposal No. 1 Election of Directors

PR OP OS AL NO. 1

Election of Directors

Our Board is composed of ten members and is divided into three staggered classes of directors. At each annual
meeting of stockholders, a class of directors will be elected for a three-year term to succeed the same class whose
term is then expiring. Each director’s term continues until the election and qualification of his or her successor, or
such director’s earlier death, resignation, or removal. Any increase or decrease in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class will consist of one-third of our directors.
This classification of our Board may have the effect of delaying or preventing changes in control of the Company.
In fiscal 2023, as a result of two long-standing directors not standing for re-election at our 2022 annual meeting of
stockholders, we rebalanced the classes of our directors as required by our governing documents, and reclassified
John Donovan as a class II director.

The following Class III directors have been nominated for election to the Board at the Annual Meeting:

• Nikesh Arora

• Aparna Bawa

• Carl Eschenbach

• Lorraine Twohill

The sections titled “Board Skills and Experience Matrix” and “Directors” on pages 47 and 48 of this proxy statement
contain more information about the leadership skills and other experiences that helped the ESG and Nominating
Committee and our Board to determine that these nominees should serve as directors of the Company.

REQUIRED VOTE
We have implemented a majority voting standard for
elections of directors. Each director nominee will be
elected by a vote of the majority of the votes cast. A
majority of the votes cast means the number of votes
cast “For” such nominee’s election exceeds the number
of votes cast “Against” that nominee. You may vote “For,”
“Against,” or “Abstain” with respect to each director
nominee. Broker non-votes and abstentions, if any, will
have no effect on the outcome of the election.

Majority
Voting Standard

In May 2022, adopted
majority voting for
uncontested elections
of directors, including a
resignation policy in the
event a director does
not receive a majority of
the vote.

Pursuant to our Corporate Governance Guidelines, a
director shall promptly tender his or her resignation if he
or she fails to receive the required number of votes for
re-election. The ESG and Nominating Committee will act on a prompt basis to determine whether to recommend
that our Board accept the director’s resignation and will submit such recommendation for prompt consideration by
our Board. Our Board may accept the resignation, refuse the resignation, or refuse the resignation subject to such
conditions as our Board may impose. The Board will act within 90 days following certification of the stockholder
vote, and will promptly publicly disclose its decision in a filing with the SEC. Additional details about this process
are specified in our Corporate Governance Guidelines, which are available on our Investor Relations website
at https://investors.paloaltonetworks.com.

If you are a stockholder of record and you sign your proxy card, or vote by telephone or over the Internet, but
do not give instructions with respect to the voting of directors, your shares will be voted “For” the re-election of
Nikesh Arora, Aparna Bawa, Carl Eschenbach and Lorraine Twohill. We expect that each of Nikesh Arora, Aparna
Bawa, Carl Eschenbach and Lorraine Twohill will accept such nomination; however, in the event that a director
nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for
any nominee who shall be designated by our Board to fill such vacancy. If you wish to give specific instructions with
respect to the voting of directors, you may do so by indicating your instructions on your proxy card or when you vote
by telephone or over the Internet. If you are a street name stockholder and you do not give voting instructions to
your broker or nominee, your shares will not be voted on this matter.

Recommendation of the Board
The Board recommends that you vote “FOR” each of the nominees named above.

2023 Proxy StatementDirector Tenure and Refreshment

The Board generally believes that a mix of long-and shorter-tenured directors promotes an appropriate balance of
views and insights and allows the Board as a whole to benefit from the historical and institutional knowledge that
longer-tenured directors possess, and the fresh perspectives contributed
by newer directors. With the additions of Aparna Bawa, Dr. Helene Gayle,
Lorraine Twohill and Rt Hon Sir John Key in fiscal 2019 through fiscal
2021, we added directors who have brought their experiences and fresh
perspectives to our Board’s deliberations.

DIRECTOR TENURE

7.3 years
(independent directors)

8.3 years
(all directors)

Since 2019:
4
new independent directors

BOARD DIVERSIT Y

50%

50% of our Board can
be considered diverse
based on self-identiﬁed
demographic
background

As of July 31, 2023, our independent directors will have served an average
of 7.3 years on the Board. Overall, our Board, including both independent
and non-independent directors, will have an average tenure of 8.3 years.
We believe that this mix of tenure on the Board represents a collection of
individuals with both new perspectives and deep institutional knowledge.

Board Diversity

Our Corporate Governance Guidelines embody our Board’s commitment
to actively seek out women and minority candidates as well as candidates
with diverse backgrounds, experiences and skills. Our Board believes
representation of gender, race, ethnic, geographic, cultural or other
diverse perspectives expands the Board’s understanding of the needs
and viewpoints of our customers, partners, employees and other
stakeholders worldwide.

Our directors reflect diverse perspectives, including a complementary
mix of skills, experience and backgrounds that we believe are paramount
to our ability to represent your interests as stockholders. As part of
our ongoing commitment to creating a balanced Board with diverse
viewpoints and deep industry expertise, we added four new independent
directors in fiscal 2019 through fiscal 2021 to infuse new ideas and fresh
perspectives in the boardroom, two of whom are women of color. As of
July 31, 2023, 50% of our independent directors as a group and 50% of our
full Board can be considered diverse based on self-identified demographic
background and 40% of our Board members self-identify as women.

Proposal No. 1 Election of DirectorsBoard Skills and Experience Matrix

Our Board has taken a thoughtful approach to board composition to ensure that our directors have backgrounds
that collectively add significant value to the strategic decisions made by the Company and that enable them
to provide oversight of management to ensure accountability to our stockholders. The Board and the ESG and
Nominating Committee believe the skills, qualities, attributes, experience and diversity of backgrounds of our
directors provide us with a diverse range of perspectives to effectively address our evolving needs and represent the
best interests of our stockholders.

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Industry and IT/Technical Expertise
Deep insight in the cybersecurity and IT technology industry to oversee
our business and the risks we face.

Senior Leadership Experience
Senior leaders with the experience to analyze, advise and oversee
management in decision making, operations and policies.

Financial Knowledge and Expertise
Knowledge of financial markets, financing and accounting and financial
reporting processes.

Diverse Backgrounds and Experiences
Diverse backgrounds and experiences provide unique perspectives and
enhance decision-making.

Cybersecurity / Information Security / Security
Expertise overseeing cybersecurity, privacy, and information
security management.

Sales, Marketing and Brand Management Experience
Sales, marketing, and brand management experience providing expertise
and guidance to grow sales and enhance our brand.

Global/International Experience
Experience and knowledge of global operations, business conditions and
culture to advise and oversee our global business.

Risk Management
Experience in risk oversight and management.

Emerging Technologies and Business Models Experience
Experience identifying and developing emerging technologies and
business models to advise, analyze and strategize regarding emerging
technologies, business models and potential acquisitions.

Human Capital Management
Experience attracting and retaining top talent to advise and oversee our
people and compensation policies in our competitive environment.

Public Company Board Experience and Corporate Governance
Experience understanding the dynamics and operation of a public
company, and corporate governance requirements and compliance.

2023 Proxy StatementProposal No. 1 Election of DirectorsProposal No. 1 Election of Directors

Directors

Proposal No. 1 Election of Directors

DIRECTORS

Nominee Directors

Nikesh Arora

Age: 55

Director Since: 2018

Skills and Experience:

Committee Membership:
Corporate Development Committee

Other Current Public
Company Boards: Compagnie
Financière Richemont

BACKGR OUND

Nikesh Arora has served as the Chair of our Board and Chief Executive Officer since June 2018.
Prior to joining us, from 2016 through 2018 Mr. Arora was an angel investor and from June 2016
through December 2017, Mr. Arora served as an advisor to SoftBank Group Corp., a multinational
conglomerate company (“SoftBank”). From July 2015 through June 2016, Mr. Arora served as
president and chief operating officer of SoftBank and from July 2014 through June 2015, Mr. Arora
served as vice chair and chief executive officer of SoftBank Internet and Media, a subsidiary of
SoftBank. Prior to SoftBank, from December 2004 through July 2014, Mr. Arora held multiple
senior leadership operating roles at Google, Inc., including serving as senior vice president and
chief business officer, from January 2011 to June 2014. Mr. Arora also serves on the board of
Compagnie Financiere Richemont S.A., a public Switzerland-based luxury goods holding company.
Mr. Arora previously served on the boards of Sprint Corp., a communications services company,
from November 2014 to June 2016, Colgate-Palmolive Company, a worldwide consumer products
company focused on the production, distribution and provision of household, health care and
personal care products, from March 2012 to September 2014, SoftBank from 2014 to 2016, and Yahoo!
Japan, an internet company, from 2015 to 2016. Mr. Arora holds an M.S. in Business Administration
from Northeastern University, an M.S. in Finance from Boston College, and a B.Tech in electrical
engineering from the Institute of Technology at Banaras Hindu University.

QUALIFICATIO NS
AND E XPERI ENCE

Mr. Arora was chosen to
serve on our Board due to
his leadership skills and
experience as the chief
architect of the Company’s
strategic vision, as well as
his thorough knowledge of
all aspects of our business.
Through his extensive career
in executive leadership,
he brings expertise in
leading and scaling
technology businesses, risk
management oversight,
and in-depth knowledge
of the cybersecurity and
technology sectors.

Aparna Bawa INDEPENDENT

Age: 45

Director Since: 2021

Skills and Experience:

Committee Membership:

Audit Committee,
Compensation and People
Committee, Security
Committee, Corporate
Development Committee

Other Current Public
Company Boards: None

BACKGR OUND

Aparna Bawa has served as a member of our Board since May 2021. Ms. Bawa has served as
the Chief Operating Officer of Zoom Video Communications, Inc., a video communications
company, since May 2020. Ms. Bawa served as Zoom’s Chief Legal Officer from August 2019
to May 2020, its General Counsel from September 2018 to May 2020 and its Secretary from
December 2018 to November 2020. Prior to Zoom Video Communications, Ms. Bawa served
as Senior Vice President and General Counsel of Magento, Inc., an e-commerce platform
company, from June 2017 until its acquisition by Adobe Inc. in June 2018. From November 2012
to May 2017, Ms. Bawa served as Vice President, General Counsel and Secretary of Nimble
Storage, Inc., an enterprise flash storage company, which was acquired by Hewlett Packard
Enterprise in April 2017. Ms. Bawa holds a B.Sc. in Accounting from Marquette University and a
J.D. from Harvard Law School.

QUALIFICATIONS
AND E XPERI ENCE

Ms. Bawa was selected to serve
on our Board due to her senior
leadership and management
experience at public technology
companies, risk management
oversight expertise, and legal and
business operations expertise.
She has extensive experience in
technology companies.

Industry and IT/Technical

Senior Leadership

$ Financial

Diverse Backgrounds
and Experiences

Cybersecurity

Sales, Marketing and
Brand Management

Global/International

Governance, Risk Oversight
and Compliance

Emerging Technologies
and Business Models

Human Capital Management

Public Company Board Experience

Proposal No. 1 Election of Directors

Carl Eschenbach INDEPENDENT

Age: 56

Director Since: 2013

Skills and Experience:

Committee Membership:
Security Committee

Other Current Public
Company Boards: Workday

BACKGR OUND

Carl Eschenbach has served as a member of our Board since May 2013.
Mr. Eschenbach is Co-CEO of Workday, Inc., an on-demand financial management
and human capital management software vendor, a position he has held since
December 2022. Prior to Workday, Mr. Eschenbach was a general partner at
Sequoia Capital Operations, LLC, a venture capital firm, since April 2016. Prior to
joining Sequoia Capital Operations, LLC, Mr. Eschenbach served as Chief Operating
Officer and President of VMware, Inc., a provider of cloud and virtualization software
and services, a role he held from December 2012 to February 2016. Mr. Eschenbach
previously served as VMware’s President and Chief Operating Officer from
April 2012 to December 2012, as VMware’s Co-President, Customer Operations
from January 2011 to April 2012 and as VMware’s Executive Vice President of
Worldwide Field Operations from May 2005 to January 2011. Prior to joining VMware
in 2002, he was Vice President of North America Sales at Inktomi from 2000 to
2002. Mr. Eschenbach also held various sales management positions with 3Com
Corporation, Lucent Technologies Inc. and EMC. Mr. Eschenbach currently serves
on the board of Workday, Inc. Mr. Eschenbach received an electronics technician
diploma from DeVry University.

QUALIFICATIONS
AND E XPERI ENCE

Mr. Eschenbach was selected to serve
on our Board because of his extensive
experience in the technology industry
and his previous public company
management experience. He brings to
our Board over 30 years of operational
and sales experience in the technology
industry, and has extensive experience in
risk management oversight and scaling
large organizations, as well as a deep
knowledge of high-growth companies.
Mr. Eschenbach also has extensive public
company board experience.

Lorraine Twohill INDEPENDENT

Age: 52

Director Since: 2019

Skills and Experience:

Committee Membership:
ESG and Nominating
Committee (Co-Chair),
Security Committee

Other Current Public
Company Boards: None

BACKGR OUND

Lorraine Twohill has served as a member of our Board of directors since
April 2019. Ms. Twohill currently serves as Google LLC’s (formerly Google,
Inc.) Chief Marketing Officer, a position she has held since June 2009.
From July 2003 until June 2009, Ms. Twohill served as Google’s Head
of Marketing Europe, Middle East and Africa. Ms. Twohill previously
served on the board of directors of Williams-Sonoma, Inc., a consumer
retail company that sells kitchenwares and home furnishings, from
January 2012 until May 2017. Ms. Twohill holds joint honors degrees in
International Marketing and Languages from Dublin City University.

QUALIFICATIONS AND E X PERI EN C E

Ms. Twohill was selected to serve on our Board due
to her leadership skills and extensive marketing
knowledge, with over 25 years of experience. She
has deep management and business operations
experience, as well as risk management oversight
experience. She provides the Board with valuable
insights into brand management and the global issues
facing technology companies today.

Industry and IT/Technical

Senior Leadership

$ Financial

Diverse Backgrounds
and Experiences

Cybersecurity

Sales, Marketing and
Brand Management

Global/International

Governance, Risk Oversight
and Compliance

Emerging Technologies
and Business Models

Human Capital Management

Public Company Board Experience

2023 Proxy Statement

Proposal No. 1 Election of Directors

Continuing Directors

John M. Donovan LEAD INDEPENDENT DIRECTOR

Age: 62

Director Since: 2012

Skills and Experience:

Committee Membership:
Compensation and People Committee,
ESG and Nominating
Committee (Co-Chair),
Security Committee (Chair), Corporate
Development Committee (Chair)

Other Current Public Company Boards:
Lockheed Martin Corporation

BAC KGR OU ND

John M. Donovan has served as a member of our Board since September 2012.
Since May 2019, Mr. Donovan has served as Chair of The President’s National Security
Telecommunications Advisory Committee. Mr. Donovan worked at AT&T Inc., a
provider of telecommunication services, since April 2008, first as Chief Technology
Officer and subsequently as Chief Executive Officer—AT&T Communications
until his resignation, effective October 1, 2019. From November 2006 to April 2008,
Mr. Donovan was Executive Vice President of Product, Sales, Marketing and
Operations at Verisign. From November 2000 to November 2006, Mr. Donovan
served as Chair and CEO of inCode Telecom Group Inc., a provider of strategy and
consulting services to the telecommunications industry. Prior to joining inCode,
Mr. Donovan was a Partner with Deloitte Consulting where he was the Americas
industry practice director for telecommunications. Mr. Donovan serves on the board
of directors of Lockheed Martin Corporation, an aerospace, defense and technology
company. Mr. Donovan holds a B.S. in Electrical Engineering from the University of
Notre Dame and an M.B.A. from the University of Minnesota.

QUALIFICATIONS
AND E XPERI ENCE

Mr. Donovan was selected to serve on our
Board because of his technical knowledge
and extensive business leadership,
management, operations and risk
management oversight experience, as a result
of serving as the Chief Technology Officer
and later the Chief Executive Officer of AT&T
Communications. He is skilled in overseeing
global information, software development,
supply chain, network operations and big
data organizations and has expertise in
cybersecurity, artificial intelligence and
machine learning.

Dr. Helene D. Gayle INDEPENDENT

Age: 67

Director Since: 2021

Skills and Experience:

BAC KGR OU ND

Committee Membership:
ESG and Nominating Committee,
Security Committee

Other Current Public Company Boards:
Organon, The Coca-Cola Company

Dr. Helene D. Gayle has served as a member of our Board since May 2021. Dr. Gayle has been President
of Spelman College since July 2022. Prior to this position, Dr. Gayle served as President and Chief
Executive Officer of The Chicago Community Trust, a community foundation dedicated to improving
the Chicago region through strategic grant making, civic engagement and inspiring philanthropy,
from 2017 to 2022. Dr. Gayle previously served as Chief Executive Officer of McKinsey Social Initiative,
an independent non-profit organization, from 2015 to 2017 and as President and Chief Executive
Officer of CARE USA, a leading international humanitarian organization, from 2006 to 2015. From 2001
to 2006, she was an executive in the Global Health program at the Bill & Melinda Gates Foundation.
Dr. Gayle began her career in public health at the U.S. Centers for Disease Control in 1984, and held
positions of increasing responsibility over her 20-year tenure there, ultimately becoming the director
of the National Center for HIV, STD and TB Prevention and achieving the rank of Assistant Surgeon
General and Rear Admiral in the United States Public Health Service. Dr. Gayle earned a Bachelor of
Arts degree in Psychology from Barnard College of Columbia University, an M.D. from University of
Pennsylvania and a Masters in Public Health from Johns Hopkins University. She currently serves as a
member of the board of directors of The Coca-Cola Company, a beverage company, and Organon &
Co., a pharmaceutical company. Dr. Gayle previously served as a member of the board of directors of
Colgate-Palmolive Company, a global consumer products company, from 2010 to 2021.

QUALIFICATION S
AND E XPERI ENCE

Dr. Gayle was selected
to serve on our Board
because of her senior
leadership and chief
executive officer experience
and broad international
exposure and emerging
market experience, as
well as her governmental
and non-profit expertise,
risk management
expertise and corporate
governance experience as
a director of private and
public companies.

Industry and IT/Technical

Senior Leadership

$ Financial

Diverse Backgrounds
and Experiences

Cybersecurity

Sales, Marketing and
Brand Management

Global/International

Governance, Risk Oversight
and Compliance

Emerging Technologies
and Business Models

Human Capital Management

Public Company Board Experience

Proposal No. 1 Election of Directors

James J. Goetz INDEPENDENT

Age: 57

Director Since: 2005

Skills and Experience:

Committee Membership:
Audit Committee, Corporate
Development Committee,
Security Committee

Other Current Public
Company Boards: Intel

BACKGR OUND

James J. Goetz has served as a member of our Board since April 2005.
Mr. Goetz has been a managing member of Sequoia Capital
Operations, LLC, a venture capital firm, since June 2004, where
he focuses on cloud, mobile, and enterprise companies. Mr. Goetz
currently serves on the board of directors of Intel Corporation and
several privately held companies. Mr. Goetz has previously served on
the boards of directors of Barracuda Networks, Inc., a data security
and storage company from 2009 to 2017, Nimble Storage, Inc., a data
storage company, from 2007 to 2017, Jive Software, Inc., a provider of
social business software, from 2007 until 2015, and Ruckus Wireless,
Inc., a manufacturer of wireless (Wi-Fi) networking equipment, from
2012 until 2015. Mr. Goetz holds an M.S. in Electrical Engineering with
a concentration in Computer Networking from Stanford University
and a B.S. in Electrical Engineering with a concentration in Computer
Engineering from the University of Cincinnati.

QUALIFICATIONS AND E X PERI ENC E

Mr. Goetz was selected to serve on our Board because
of his senior leadership, technology, information
technology (IT), business development and cybersecurity
experience, and knowledge of emerging technologies,
arising from his experience as a partner of a venture
capital firm, where he focuses on cloud mobile, and
enterprise technology investments, as well as providing
guidance and counsel to a wide variety of internet and
technology companies. He also brings his experience
as a senior management leader in network, data
security and storage, software, and manufacturing
companies, through various senior roles and other board
experiences. Mr. Goetz also has extensive public company
board experience.

Right Honorable Sir John Key INDEPENDENT

Age: 61

Director Since: 2019

Skills and Experience:

Committee Membership:
Audit Committee, Compensation
and People Committee (Chair),
Security Committee

Other Current Public
Company Boards:
ANZ Bank New Zealand Ltd, Australia
& New Zealand Banking Group Ltd

BACKGR OUND

Right Honorable Sir John Key has served as a member of our Board since April 2019.
Sir John was a Member of Parliament for Helensville in New Zealand until April 2017.
Sir John served as Prime Minister of New Zealand from November 2008 to
December 2016 having commenced his political career as a Member of Parliament
for Helensville in July 2002. Prior to his political career, he had a nearly twenty-year
career in international finance, primarily for Bankers Trust of New Zealand and
Merrill Lynch in Singapore, London and Sydney. Sir John serves as the chair and
member of the board of directors of ANZ Bank New Zealand Ltd and is a member
of the board of directors of the parent Australia & New Zealand Banking Group Ltd,
a public bank that provides various banking and financial products and services
and also serves on the board of directors of several privately held companies. He
previously served on the board of directors of Air New Zealand Limited, a public
airline, from 2017 to 2020. Sir John has a Bachelor of Commerce in Accounting from
the University of Canterbury.

QUALIFICATIONS
AND E XPERI ENCE

Sir John was selected to serve on our Board
due to his global business leadership and
extensive financial, capital markets, and
management expertise as former Prime
Minister of New Zealand, his extensive
background in foreign affairs, and his career
in investment banking and finance. He
brings extensive experience in policy-making
and a global business perspective from his
experience and service on other boards,
which is especially valuable to us as we
grow internationally.

Industry and IT/Technical

Senior Leadership

$ Financial

Diverse Backgrounds
and Experiences

Cybersecurity

Sales, Marketing and
Brand Management

Global/International

Governance, Risk Oversight
and Compliance

Emerging Technologies
and Business Models

Human Capital Management

Public Company Board Experience

2023 Proxy Statement

Proposal No. 1 Election of Directors

Mary Pat McCarthy INDEPENDENT

Age: 68

Director Since: 2016

Skills and Experience:

Committee Membership:
Audit Committee (Chair),
Security Committee,
Corporate Development Committee

Other Current Public Company Boards:
Micron Technology

BACKGR OUND

Mary Pat McCarthy has served as a member of our Board since October 2016.
Ms. McCarthy, now retired, served as Vice Chair of KPMG LLP, the U.S.
member firm of the global audit, tax and advisory services firm, until 2011
after attaining such position in 1998. She joined KPMG LLP in 1977 and
became a partner in 1987. She held numerous senior leadership positions in
the firm, including Executive Director of the KPMG Audit Committee Institute
from 2008 to 2011, Leader of the KPMG Client Care program from 2007 to
2008, U.S. Leader, Industries and Markets from 2005 to 2006, and Global
Leader, Information, Communication and Entertainment Practice from 1998
to 2004. Ms. McCarthy also served on KPMG’s Management and Operations
Committees. Ms. McCarthy earned a Bachelor of Science degree in Business
Administration from Creighton University and completed the University of
Pennsylvania Wharton School’s KPMG International Development Program.
Ms. McCarthy serves as a director of Micron Technology, Inc., a producer of
semiconductor devices and previously served on the board of directors of
Mutual of Omaha, an insurance company, from 2012 to 2018 and Andeavor
Corporation (formerly Tesoro Corporation), a global energy corporation from
2012 to 2018.

QUALIFICATIONS AND E X PERI ENC E

Ms. McCarthy was selected to serve on our Board
because of her deep technical expertise in financial
and accounting matters from her experience as
the Vice Chair of KPMG LLP, advising numerous
companies on financial and accounting matters, as
well as her leadership experience as a member of
management at KPMG. She is an “audit committee
financial expert” with over 40 years of experience
in finance, operations and risk management
oversight of technology companies, particularly
publicly traded companies with knowledge of
complex global financial and business matters. In
addition, she brings a global business perspective
and contributes valuable insights and perspectives
to our business and operations from her service on
other boards.

Nir Zuk

Age: 52

Director Since: 2005

Skills and Experience:

Committee Membership:

None

Other Current Public
Company Boards:
None

BACKGR OUND

Nir Zuk is one of our founders and has served as our Chief Technology Officer
and as a member of our Board since March 2005. From April 2004 to March 2005,
Mr. Zuk was Chief Security Technologist at Juniper Networks, Inc., a supplier of
network infrastructure products and services. From September 2002 until its
acquisition by Juniper in April 2004, Mr. Zuk was Chief Technology Officer at
NetScreen Technologies, Inc., a provider of ASIC-based Internet security systems.
In December 1999, Mr. Zuk co-founded OneSecure, Inc., a provider of prevention
and detection appliances, and was Chief Technical Officer until its acquisition
by NetScreen in September 2002. From 1994 to 1999, Mr. Zuk served in several
technical roles, including Principal Engineer at Check Point Software Technologies
Ltd., an enterprise software security company. Mr. Zuk attended Tel Aviv University
where he studied Mathematics.

QUALIFICATIONS
AND E XPERI ENCE

Mr. Zuk is a co-founder of Palo Alto Networks,
a network security expert and brings a wealth
of network security knowledge and industry
experience to Palo Alto Networks. He brings
business leadership, operational experience,
risk management oversight experience, and
experience developing technology. He has an
in-depth knowledge of the technology and
cybersecurity industries.

Industry and IT/Technical

Senior Leadership

$ Financial

Diverse Backgrounds
and Experiences

Cybersecurity

Sales, Marketing and
Brand Management

Global/International

Governance, Risk Oversight
and Compliance

Emerging Technologies
and Business Models

Human Capital Management

Public Company Board Experience

Proposal No. 1 Election of Directors

The demographic information presented below for our directors is based on voluntary self-identification by each
director. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Listing Rule 5605(f).
Additional biographical information of our directors and executive officers as of July 31, 2023 is set forth above.

BOARD DIVERSIT Y MATRIX (AS OF OCTOBER 27, 2023)

Total Number of Directors

Female Male

Non-
Binary

Did Not
Disclose Gender

Part I: Gender Identity
Directors
Part II: Demographic Background
African American or Black
Alaskan Native or Native American
Asian
Hispanic or Latinx
Native Hawaiian or Pacific Islander
White
Two or More Races or Ethnicities
LGBTQ+
Did Not Disclose Demographic Background

1
0
1
0
0
2
0

0
0
1
0
0
5
0

0
0
0
0
0
0
0

0
3

0
0
0
0
0
0
0

Identification and Evaluation of
Director Nominees

Our ESG and Nominating Committee uses a variety of methods for identifying and evaluating director nominees.
The ESG and Nominating Committee regularly assess the appropriate size, composition and needs of our Board and
its respective committees, and the qualification of candidates considering these needs. Some of the qualifications
that our ESG and Nominating Committee considers include issues of character, integrity, judgment, diversity
(including gender and race), experience of relevance to us and the Board, independence, age, area of expertise,
potential conflicts of interest and other commitments. These factors may be weighted differently depending on the
individual being considered or the needs of the Board at the time.

Nominees must also be able to offer advice and guidance to our Chief Executive Officer based on past experience
in positions with a high degree of responsibility and be leaders in the companies or institutions with which they
are affiliated. Director candidates must have sufficient time available in the judgment of our ESG and Nominating
Committee to perform all Board and committee responsibilities. Members of our Board are expected to prepare for,
attend, and actively participate in all Board and applicable committee meetings.

Other than the foregoing, there are no stated minimum criteria for director nominees, although our ESG and
Nominating Committee may also consider such other factors as it may deem, from time to time, are in Palo Alto
Networks and our stockholders’ best interests. Our ESG and Nominating Committee will also seek appropriate input
from our Chief Executive Officer, from time to time, in assessing the needs of our Board for relevant background,
experience, diversity and skills of its members.

Our ESG and Nominating Committee considers diversity (whether based on broader principles such as diversity
of perspective, experiences, and expertise, as well as factors commonly associated with diversity such as gender,
race or national origin) in connection with its evaluation of director candidates, including the evaluation and
determination of whether to re-nominate incumbent directors. The committee also considers these and other
factors as it oversees the annual Board and committee evaluations. The committee seeks qualified and diverse
director candidates, including women and individuals from minority groups, to include in the pool from which
director candidates are chosen. Any search firm retained by the committee to find director candidates would be
instructed to account for these considerations, including diversity.

2023 Proxy StatementProposal No. 1 Election of Directors

Stockholder Recommendations for Nominations to the
Board of Directors
Our ESG and Nominating Committee will consider candidates for director recommended by stockholders, so
long as such recommendations comply with our certificate of incorporation, amended and restated bylaws
and applicable laws, rules and regulations, including those promulgated by Nasdaq and the SEC. The ESG and
Nominating Committee will evaluate the recommendations in accordance with its charter, our amended and
restated bylaws, our policies and procedures for director candidates, as well as the regular director nominee
criteria described above. This process is designed to ensure that our Board includes members with diverse
backgrounds, skills and experience, including appropriate financial and other expertise relevant to our business.
Eligible stockholders wishing to recommend a candidate for nomination should contact our Corporate Secretary
in writing. Such recommendations must include information about the candidate, a statement of support by
the recommending stockholder, evidence of the recommending stockholder’s ownership of our common stock
and a signed letter from the candidate confirming willingness to serve on our Board. Our ESG and Nominating
Committee has discretion to decide which individuals to recommend for nomination as directors.

Director Independence

Our common stock is listed on The Nasdaq Stock Market (“Nasdaq”). Under Nasdaq listing standards, independent
directors must comprise a majority of a listed company’s board of directors. In addition, the listing standards of
Nasdaq require that, subject to specified exceptions, each member of a listed company’s audit and compensation
committees be independent, and that the nomination of all directors be by either a majority of its independent
directors or a committee comprised solely of independent directors. Under Nasdaq regulations, a director will only
qualify as an “independent director” if, in the opinion of that listed company’s board of directors, that director does
not have a relationship with the listed company, either directly or indirectly, that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director.

Audit committee members must also satisfy the additional independence criteria set forth in Rule 10A-3 under the
Exchange Act and Nasdaq listing standards. In order to be considered independent for purposes of Rule 10A-3, a
member of a listed company’s audit committee may not, other than in his or her capacity as a member of the audit
committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting,
advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person
of the listed company or any of its subsidiaries.

Compensation committee members must also satisfy the additional independence criteria set forth in Rule 10C-1
under the Exchange Act and Nasdaq listing standards. In order for a member of a listed company’s compensation
committee to be considered independent for purposes of Nasdaq listing standards, the listed company’s board of
directors must consider all factors specifically relevant to determining whether a director has a relationship to the
listed company that is material to that director’s ability to be independent from management in connection with
the duties of a compensation committee member, including, but not limited to: (1) the source of compensation of
such director, including any consulting, advisory, or other compensatory fee paid by the listed company to such
director; and (2) whether such director is affiliated with the listed company, a subsidiary of the listed company, or an
affiliate of a subsidiary of the listed company.

Our Board has undertaken a review of the independence of each of our directors. Based on information provided
by each director concerning his or her background, employment, and affiliations, our Board has determined that
each of Mmes. Bawa, McCarthy and Twohill, Dr. Gayle and each of Messrs. Donovan, Eschenbach, Goetz, and the
Rt Hon Sir John Key do not have a material relationship with our Company, either directly or indirectly, that would
interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that
each of these directors is “independent” as that term is defined under the applicable rules and regulations of the
SEC and Nasdaq listing standards. In making these determinations, our Board considered the current and prior
relationships that each non-employee director has with our Company and all other facts and circumstances our
Board deemed relevant in determining their independence, including the beneficial ownership of our common
stock by each non-employee director and the transactions involving them described in the section titled “Related
Person Transactions.” There are no family relationships among any of the Company’s directors or executive officers.

Proposal No. 1 Election of Directors

Director Compensation

Our ESG and Nominating Committee has approved a policy for the compensation of the non-employee
members of our Board (the “Director Compensation Policy”) to attract, retain and reward these individuals and
align their financial interests with those of our stockholders. Only non-employee directors who are not affiliated
with investment funds that hold shares of our common stock are eligible for compensation under the Director
Compensation Policy. There is no cash compensation paid under the Director Compensation Policy.

Initial Award. Under the Director Compensation Policy, when an eligible director initially joins our Board, the eligible
director receives an initial award of restricted stock units having a value of $1 million (as determined based on the
average closing price of our common stock on Nasdaq during the month prior to the month in which the grant
is made). This initial award will vest as to one third of the shares covered by the restricted stock unit award on the
first anniversary of the date the eligible director joined our board of directors, and the remaining shares will vest
quarterly over the following two years, subject to the director’s continued service as of each such date.

Annual Award. Under the Director Compensation Policy, at each annual meeting of stockholders, each eligible
director receives an annual restricted stock unit award having a value equal to $300,000 (as determined based on
the average closing price of our common stock on Nasdaq during the 30 calendar days ending on the business day
prior to the annual meeting). In addition, at each annual meeting of stockholders, our Lead Independent Director
receives an additional annual restricted stock unit award having a value equal to $50,000 (as determined based on
the average closing price of our common stock on Nasdaq during the 30 calendar days ending on the business day
prior to the annual meeting). All annual awards, including the annual awards to the Lead Independent Director, will
vest quarterly over a period of one year, subject to the director’s continued service as of each such date.

Committee Awards. At each annual meeting of stockholders, the chairpersons and members of the five standing
committees of our Board will receive additional annual restricted stock unit awards for committee service having
the following values (as determined based on the average closing price of our common stock on Nasdaq during the
30 calendar days ending on the business day prior to the annual meeting):

Board Committee(1)
Audit Committee
Compensation and People Committee
ESG and Nominating Committee
Security Committee

Chairperson
Retainer
$35,000
$25,000
$15,000
$50,000

Member
Retainer
$20,000
$15,000
$10,000
$50,000

(1) No additional compensation is paid for serving on the Corporate Development Committee.

Any eligible director who serves as chairperson of a committee is not entitled to a member retainer for the same
committee. The committee awards will vest quarterly over a period of one year, subject to the director’s continued
service as of each such date.

2023 Proxy StatementProposal No. 1 Election of Directors

Fiscal 2023 Director Compensation Table
The following table presents summary information regarding the compensation paid to our non-employee
directors for our fiscal year ended July 31, 2023.

Director(1)
Aparna Bawa(3)
John M. Donovan(3)
Carl Eschenbach(3)
Dr. Helene D. Gayle(3)
James J. Goetz(4)
Rt Hon Sir John Key(3)
Mary Pat McCarthy(3)
Lorraine Twohill(3)

Stock
Awards(2)
$356,383
$413,931
$337,254
$346,738
–
$380,335
$370,850
$361,045

Total
$356,383
$413,931
$337,254
$346,738
–
$380,335
$370,850
$361,045

(1) Asheem Chandna and Mark McLaughlin served on our Board until the date of 2022 Annual Meeting of Stockholders. They did

not receive any compensation for our fiscal year ended July 31, 2023.

(2) The amounts reported in this column represent the aggregate grant date fair value of these restricted stock units (“RSUs”)
as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718,
Compensation—Stock Compensation, or ASC Topic 718. The assumptions used in the valuation of these awards are set forth in
the notes to our consolidated financial statements, which are included in our Annual Report on Form 10-K for our fiscal year
ended July 31, 2023. These amounts do not necessarily correspond to the actual value that may be recognized by the director
upon the vesting of such awards.

(3) As of July 31, 2023, Ms. Bawa held 3,955 RSUs, Mr. Donovan held 1,287 RSUs, Mr. Eschenbach held 1,048 RSUs, Dr. Gayle held 3,967

RSUs, Rt Hon Sir John Key held 1,182 RSUs, Ms. McCarthy held 1,153 RSUs and Ms. Twohill held 1,122 RSUs.

(4) Mr. Goetz receives no compensation under the Director Compensation Policy.

Director Stock Ownership Guidelines

Our Board believes that our directors should hold a meaningful financial stake in our Company in order to further
align their interests with those of our stockholders and therefore adopted stock ownership guidelines in fiscal
2017. Under the guidelines, each non-employee director must own Company stock with a value of five times the
annual retainer for board service within five years of such director’s initial appointment or election date. As of
September 30, 2023, all of our non-employee directors comply with our stock ownership guidelines.

Director Attendance

During our fiscal year ended July 31, 2023, the Board held five meetings (including regularly scheduled and
special meetings), and no director attended fewer than 75% of the total number of meetings of the Board and the
committees of which he or she was a member.

Although we do not have a formal policy regarding attendance by members of our Board at annual meetings of
stockholders, we encourage, but do not require, our directors to attend. Eleven of our twelve directors, serving
on our Board at that time, attended our 2022 Annual Meeting of Stockholders, either telephonically or by
video conference.

Proposal No. 2 Ratification of Appointment of

Independent Registered Public Accounting Firm

PR OP OS AL NO. 2

Ratification of Appointment of
Independent Registered Public
Accounting Firm

Our Audit Committee has appointed Ernst & Young LLP (“EY”), independent registered public accountants, to audit
our financial statements for our fiscal year ending July 31, 2024. EY has served as our independent registered public
accounting firm since 2009.

At the Annual Meeting, our stockholders are being asked to ratify the appointment of EY as our independent
registered public accounting firm for our fiscal year ending July 31, 2024. Our Audit Committee is submitting the
selection of EY to our stockholders because we value our stockholders’ views on our independent registered public
accounting firm and as a matter of good corporate governance. Representatives of EY will be present at the Annual
Meeting, and they will have an opportunity to make statements and will be available to respond to appropriate
questions from our stockholders.

Notwithstanding the selection of EY and even if our stockholders ratify the selection, our Audit Committee, in
its discretion, may appoint another independent registered public accounting firm at any time during our fiscal
year if our Audit Committee believes that such a change would be in the best interests of Palo Alto Networks and
its stockholders. If our stockholders do not ratify the appointment of EY, our Audit Committee may reconsider
the appointment.

Fees Paid to the Independent Registered Public
Accounting Firm

The following table presents fees for professional audit services and other services rendered to our Company by EY
for our fiscal years ended July 31, 2022 and 2023.

Audit Fees(1)
Audit-Related Fees(2)
Tax Fees(3)
All Other Fees(4)

2022

2023

$6,139,000
—
477,000
5,000
$6,621,000

$6,401,000
—
1,460,000
9,000
$7,870,000

(1) Audit fees consist of professional services rendered in connection with (a) the audit of our annual consolidated financial

statements, including audited financial statements presented in our Annual Report on Form 10-K, (b) review of our quarterly
consolidated financial statements presented in our Quarterly Reports on Form 10-Q, (c) professional services provided for new
and existing statutory audits of subsidiaries or affiliates of the Company, and (d) other regulatory filings.

(2) Audit-Related fees consist of fees for professional services for assurance and related services that are reasonably related to the
performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” These
services include acquisition due diligence services, technical accounting guidance and other attestation services.
(3) Tax Fees consist of fees for professional services for federal, state and international tax compliance and tax planning.
(4) All Other Fees includes fees for professional services other than these services reported above. These services specifically relate

to subscriptions to an accounting regulatory database.

Auditor Independence

In our fiscal year ended July 31, 2023, there were no other professional services provided by EY that would have
required our Audit Committee to consider their compatibility with maintaining the independence of EY.

2023 Proxy StatementProposal No. 2 Ratification of Appointment of Independent

Registered Public Accounting Firm

Proposal No. 2 Ratification of Appointment of Independent Registered Public Accounting Firm

Audit Committee Policy on Pre-Approval of
Audit and Permissible Non-Audit Services of
Independent Registered Public Accounting Firm

Consistent with requirements of the SEC and the Public Company Accounting Oversight Board (the “PCAOB”)
regarding auditor independence, our Audit Committee is responsible for the appointment, compensation and
oversight of the work of our independent registered public accounting firm. In recognition of this responsibility,
our Audit Committee has established a policy for the pre-approval of all audit and permissible non-audit services
provided by our independent registered public accounting firm. These services may include audit services,
audit-related services, tax services and other services.

Before engagement of the independent registered public accounting firm for the next year’s audit, the
independent registered public accounting firm submits a detailed description of services expected to be rendered
during that year for each of the following categories of services to our Audit Committee for approval:

• Audit services. Audit services include work performed for the audit of our financial statements and the review
of financial statements included in our quarterly reports, as well as subsidiary audits, equity investment audits
and other procedures required to be performed by the independent auditor to be able to form an opinion on our
consolidated financial statements.

• Audit-related services. Audit-related services are for assurance and related services that are (1) reasonably

related to the performance of the audit or review of our financial statements (2) are traditionally performed by our
independent registered public accounting firm and (3) not covered above under “audit services.”

• Tax services. Tax services include all services performed by the independent registered public accounting firm’s

tax personnel for tax compliance, tax advice and tax planning.

• Other services. Other services are those services not described in the other categories.

Our Audit Committee pre-approves particular services or categories of services on a case-by-case basis. The fees are
budgeted, and our Audit Committee requires our independent registered public accounting firm and management
to report actual fees versus budgeted fees periodically throughout the year by category of service. During the year,
circumstances may arise when it may become necessary to engage the independent registered public accounting
firm for additional services not contemplated in the original pre-approval. In those instances, (a) if the additional
services do not require specific approval by the Audit Committee, a detailed description of the services will be
submitted to the Chief Financial Officer or Chief Accounting Officer, who will determine whether such services are
included within the list of services that have received the general pre-approval of the Audit Committee and the
Audit Committee will be informed on a timely basis of any such services rendered by the independent auditor, or (b)
if the additional services require specific approval by the Audit Committee, they will be submitted for pre-approval
to the Audit Committee by both the independent auditor and the Chief Financial Officer or Chief Accounting
Officer, and shall only be submitted if the independent auditor and such officer mutually agree that the request or
application is consistent with the SEC’s rules on auditor independence. All fees paid to EY for our fiscal year ended
July 31, 2023 were pre-approved by our Audit Committee.

Required Vote
The ratification of the appointment of EY as our independent registered public accounting firm requires the
affirmative vote of a majority of the shares of our common stock present virtually or by proxy at the Annual Meeting
and entitled to vote thereon. Abstentions are treated as shares present virtually or by proxy and entitled to vote at
the Annual Meeting and, therefore, will have the same effect as a vote “Against” this proposal. Any broker non-votes
will have no effect on the outcome of the vote.

Recommendation of the Board
The Board recommends that you vote “FOR” the ratification of the appointment of
Ernst & Young LLP.

Proposal No. 2 Ratification of Appointment of Independent

Registered Public Accounting Firm

Proposal No. 2 Ratification of Appointment of Independent Registered Public Accounting Firm

Report of the Audit Committee

The Audit Committee consists of Mmes. Bawa and McCarthy, Mr. Goetz and the Rt Hon Sir John Key. Each
member of the committee is an independent director as required by the listing standards of Nasdaq and rules and
regulations of the SEC. The Audit Committee operates under a written charter approved by the Board of Directors,
which is available on the Investor Information portion of our website at https://investors.paloaltonetworks.com/. The
composition of the Audit Committee, the attributes of its members and the responsibilities of the Audit Committee,
as reflected in its charter, are intended to be in accordance with applicable requirements for corporate audit
committees. The Audit Committee reviews and assesses the adequacy of its charter and the Audit Committee’s
performance on an annual basis.

The Audit Committee assists our Board in the Board’s oversight and monitoring of:

• Accounting and financial reporting processes and internal controls as well as the audit and integrity of our

financial statements;

• The qualifications, independence and performance of our independent registered public accounting firm;

• The performance of our internal audit function;

• Compliance with applicable law; and

• Risk assessment and risk management pertaining to financial, accounting and tax matters of the Company.

With respect to the Company’s financial reporting process, the management of the Company is responsible
for (1) establishing and maintaining internal controls and (2) preparing the Company’s consolidated financial
statements. Our independent registered public accounting firm, EY, is responsible for auditing these financial
statements and the Audit Committee oversees these activities. It is not the responsibility of the Audit Committee to
prepare or certify our financial statements or guarantee the audits or reports of the independent auditors. These are
the fundamental responsibilities of management and our independent registered public accounting firm.

The Audit Committee is responsible for the appointment, compensation, retention, and oversight of the work
performed by EY. In fulfilling its oversight responsibility, the Audit Committee carefully reviews the policies and
procedures for the engagement of the independent registered public accounting firm, including the scope of the
audit, audit fees, auditor independence matters, performance of the independent auditors, and the extent to which
the independent registered public accounting firm may be retained to perform non-audit services.

In the performance of its oversight function, the Audit Committee has:

• Reviewed and discussed the audited financial statements with management and EY;

• Discussed with EY the applicable requirements of the PCAOB and the SEC; and

• Received the written disclosures and the letter from EY required by applicable requirements of the PCAOB

regarding the independent accountant’s communications with the Audit Committee concerning independence,
and has discussed with EY its independence.

Based on the Audit Committee’s review and discussions with management and EY, the Audit Committee
recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K
for the fiscal year ended July 31, 2023, for filing with the Securities and Exchange Commission.

Respectfully submitted by the members of the Audit Committee of the Board:

Mary Pat McCarthy (Chair)
Aparna Bawa
James J. Goetz
Rt Hon Sir John Key

2023 Proxy StatementProposal No. 3 Advisory Vote on

the Compensation of our Named

Executive Officers

PR OP OS AL NO. 3

Advisory Vote on the Compensation
of our Named Executive Officers

We are providing our stockholders with the opportunity to vote to approve, on an advisory or non-binding basis,
the compensation of our named executive officers as disclosed in accordance with the rules and regulations of
the SEC in the “Executive Compensation” section of this Proxy Statement. This proposal, commonly known as
a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive
officers’ compensation as a whole. This vote is not intended to address any specific item of compensation or any
specific named executive officer, but rather the overall compensation of our named executive officers and the
philosophy, policies and practices described in this Proxy Statement.

The say-on-pay vote is advisory, and therefore is not binding on us, our Compensation and People Committee or
our Board. The say-on-pay vote will, however, provide information to us regarding stockholder sentiment about our
executive compensation philosophy, policies and practices, which our Compensation and People Committee will
be able to consider when determining executive compensation for the remainder of the current fiscal year and
beyond. Our Board and our Compensation and People Committee value the opinions of our stockholders and to
the extent there is any significant vote against the compensation of our named executive officers as disclosed in
this proxy statement, we will endeavor to communicate with stockholders to better understand the concerns that
influenced the vote and our Compensation and People Committee will evaluate whether any actions are necessary
to address those concerns. We currently conduct advisory votes on our named executive officer compensation on
an annual basis, and we expect to conduct our next advisory vote at our 2024 annual meeting of stockholders.

We believe that the information we have provided in this “Executive Compensation” section, and in particular
the information discussed in the sections titled “Executive Compensation—Letter from our Compensation and
People Committee” and “Executive Compensation—Compensation Discussion and Analysis,” demonstrates that
our executive compensation program has been designed appropriately and is working to ensure management’s
interests are aligned with our stockholders’ interests to support long-term value creation. Accordingly, we ask our
stockholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that Palo Alto Networks, Inc.’s stockholders approve, on an advisory basis, the compensation
of the named executive officers, as disclosed in Palo Alto Networks, Inc.’s proxy statement for the 2023
Annual Meeting of Stockholders pursuant to the compensation disclosure rules and regulations of the SEC,
including the compensation discussion and analysis, the compensation tables and narrative discussion, and
other related disclosure.”

Required Vote
The approval, on an advisory basis, of the compensation of our named executive officers requires the affirmative
vote of a majority of the shares of our common stock present virtually or by proxy at the virtual Annual Meeting
and entitled to vote thereon to be approved. You may vote “for,” “against,” or “abstain” with respect to this proposal.
Abstentions are considered votes present and entitled to vote on this proposal, and thus will have the same effect as
votes “against” this proposal. Broker non-votes will have no effect on the outcome of this proposal.

Although the advisory vote is non-binding, our Board values our stockholders’ opinions. The Compensation and
People Committee will review the results of the vote and, consistent with our record of stockholder responsiveness,
consider stockholders’ concerns and take into account the outcome of the vote when considering future decisions
concerning our executive compensation program.

Recommendation of the Board
The Board recommends that you vote “FOR” the approval, on an advisory basis, of the
compensation of our named executive officers.

Executive Compensation

Letter from our Compensation and
People Committee

October 27, 2023

Dear Fellow Stockholders,

The Compensation and People Committee of the Palo Alto Networks Board of Directors is committed to ensuring
that we retain and attract individuals of outstanding character and ability who are champions of our company
culture and mission. To do so, we design programs that fairly compensate our employees and allow us to maintain a
world-class leadership team worthy of your confidence. As a committee, we strongly believe in, and are committed
to, executing a pay-for-performance compensation philosophy that closely aligns executive compensation to our
financial and operational performance.

Fiscal 2023 was a year marked by disruption and uncertainty in a challenging macroeconomic environment.
Our management team once again embraced these challenges by mobilizing our people and resources
to keep our employees healthy, safe and professionally fulfilled, while delivering very strong financial and
operational performance.

Program Design

In designing the executive compensation program for fiscal 2023, we sought and received advice from our
independent compensation consultant, Meridian Compensation Partners. Based on this advice and in consultation
with Meridian, we developed a framework that further made certain that our executive compensation program was
designed in a structured and objective manner to ensure that compensation levels reflect our pay for performance
philosophy, align compensation with our stockholders’ interests, motivate our executives, are competitive, and
reflect our stockholders’ input and compensation best practices. This framework served as the basis upon which we
structured, and made, fiscal 2023 compensation decisions:

• Financial Performance. Our fiscal 2022 financial and operation results measured against plan and consensus

estimates on key financial measures.

• Shareholder Returns. Our one-year, two-year, and three-year total stockholder return (TSR) performance relative

to our compensation peer group.

• Strategic Objectives. Our fiscal 2022 performance measured against our strategic objectives.

• Individual Performance Assessment. A performance assessment by the Board for our CEO, and by our CEO for

the other executive officers, including other named executive officers.

Consistent with this framework and our pay-for-performance philosophy, we designed our fiscal 2023 executive
compensation program to provide strong rewards for strong performance. The framework provided a target pay
range, dependent on the results of the inputs, ranging from 50th percentile or lower of our peers for performance
below targets to the 90th percentile or above our peers for performance well above targets.

• Paid For Performance Based on Aggressive Targets. We set our executive cash incentive and performance

stock unit award targets above the guidance we provided in our August 23, 2022 earnings release, which aligns
with our pay-for-performance philosophy of requiring strong performance for strong rewards.

• Adopted Multiple Year Measurement Period. 100% of fiscal 2023 named executive officer equity awards are

performance based, require sustained performance over three years for any payout, and include a relative total
stockholder return multiplier in addition to financial metrics, which aligns a significant portion of our executive
compensation to long-term financial performance.

2023 Proxy StatementExecutive Compensation

• Portfolio of Performance Measures Aligned to Shareholder Value Creation. We carefully evaluated the

metrics that we believed will most impact long-term value for our stockholders and other stakeholders, and set
very aggressive targets for annual billings growth. Billings growth is an important indicator of the health and
visibility of our business because it includes subscription and support revenue, which is recognized ratably over
the contractual service period, and product revenue, which is recognized at the time of shipment, provided that
all other conditions for revenue recognition have been met. In addition, we tied achievement to a comparative
analysis of our TSR performance to ensure that payout percentages are aligned with our performance relative to
that of our peer group.

• Tied Compensation to ESG Goals. We again included an ESG modifier to our cash incentive plan to ensure a

linkage between compensation and our ESG goals, which provided for the calculated result to be adjusted up or
down by up to 10% based on an ESG scorecard with climate, inclusion and diversity, and human capital metrics.

CEO Compensation

Retaining Nikesh Arora as the company’s Chief Executive Officer for the long term was a key area of focus for the
Board and our Committee. We firmly believe that Nikesh is one of only a very few executive leaders who can deliver
the caliber of performance critical to Palo Alto Networks’ successful attainment of our next phase of growth. We
reach this conclusion based on Nikesh’s track record of undeniable success, our extensive conversations with the
Company’s leadership team, our regular assessment of company strategy, consistent attention to the marketplace
for high-caliber senior executives, and of course the concurrence of the entire Board. Moreover, our conclusion
is buttressed by the advent of a new generation of artificial intelligence tools and technologies that promise to
transform virtually every industry, including cybersecurity. As much as any Chief Executive Officer, Nikesh embraces
this transformation and intends to place Palo Alto Networks at the forefront of AI innovation. This is a signal
moment of change for our company, our industry and the broader economy, and Nikesh is the right person to
navigate us through it.

Accordingly, in fiscal 2023, we began exploring with our independent compensation consultant equity incentives
that would allow us to retain Nikesh as our leader for the foreseeable future. The equity award described in the
accompanying Compensation Discussion and Analysis is true to our commitment to always carefully align our
executive compensation programs with stockholder interests. We followed these principles in designing the award:

• Demonstrate the Board’s confidence in Nikesh and his strategy for the company’s next phase of growth.

• Retain and engage a proven, successful and industry-leading CEO for at least the next five years so that our

• Provide an award that, at its core, is performance-based, drives stockholder value creation, and requires

significant sustained performance to realize its full value.

• Mitigate the risk of potential employment offers from competitors and private equity firms.

• Take into account the views of our stockholders as expressed to us during our extensive engagement efforts,
which are led by our Lead Independent Director, John Donovan. In fiscal 2023, John led 21 meetings with
stockholders representing 31% of our outstanding shares, and the company offered stockholders holding over
48% of our outstanding shares a meeting with John (based on stockholder ownership, to our knowledge, as of
June 30, 2023).

In addition, we compared the value of Nikesh’s performance-based stock options and other vested stock holdings
to the markedly lower amount that is currently projected to vest over the next several years. With these principles in
mind, we granted Nikesh an award of performance-based restricted stock units that can amount to as few as zero
shares, if the Company’s performance is less than 40% of the companies in the S&P 500 over a five-year period, and
up to 750,000 shares if the Company’s performance is better than 90% of the companies in the S&P 500.

So that outsized performance under the grant is not possible if the Company’s stock price does not increase, if our
stock price is lower at the end of the performance period than at the beginning, no more than 500,000 shares may
be earned, even if our performance is better than all of the S&P 500. During the performance period for this award,
we expect that Nikesh will continue to be eligible for annual equity grants determined based on performance
and based on the structure of awards granted to the rest of the executive team. The Compensation and People
Committee aligned the award to the S&P 500 because Meridian, its independent compensation consultant, advised
the Committee that it is a broad market index that is commonly used as the benchmark for rTSR awards, and the
Committee anticipated that the Company would be included in the S&P 500 index during the term of the award.

Executive Compensation

In sum, the Board believes that the majority of our stockholders share our desire, and deem it critical, to retain such
a proven leader to guide the Company over the next five years. We designed an award that provides meaningful
rewards for the continued delivery of exceptional stockholder value.

We are confident that our fiscal 2023 executive compensation program continues to deliver on the commitments
we made to our stockholders in our 2021 and 2022 proxy statements when we described our retooled
compensation program.

We are again asking for your support of our executive compensation program. After gathering extensive feedback
from stockholders and engaging an independent consulting firm, we believe that our Compensation and People
Committee has implemented a sustainable, best-in-class program that is supported by market benchmarks aligned
with best practices and the interests of our stockholders.

Thank you for your continued support and investment in Palo Alto Networks.

Sincerely,

The Compensation and People Committee

Rt Hon Sir John Key (Chair)
Aparna Bawa
John Donovan

2023 Proxy StatementExecutive Compensation

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) describes in detail our executive compensation programs and
the resulting pay decisions for our named executive officers (“NEOs”).

Our Compensation and People Committee believes that the fiscal 2023 compensation of our NEOs is commensurate
with our size and performance, the significant scope of their roles and responsibilities, and their strong leadership in
a manner consistent with our corporate values of disruption, collaboration, execution, integrity and inclusion.

Named Executive Officers

Nikesh Arora
Chief Executive
Officer, Chair of
the Board

Dipak Golechha
Executive Vice
President, Chief
Financial Officer

William
“BJ” Jenkins
President

Lee Klarich
Executive Vice
President, Chief
Product Officer

Nir Zuk
Executive Vice
President,
Founder, Chief
Technology
Officer

CD& A HIGHLIGHTS
• Our employees, led by our NEOs, continued to deliver strong financial results for our stockholders in

fiscal 2023.

• Our financial performance has led to strong financial returns, a one-year total shareholder return (“TSR”) at
the 99th percentile and three-year TSR at the 100th percentile of our compensation peer group, and a return
of capital through our stock buyback program.

• We engaged in discussions with stockholders holding 61% of our outstanding shares (as of June 30, 2023), with
a concentrated focus on the issues that mattered to them, including our executive compensation program.
• We followed through on the commitments we made to our stockholders in the proxy statements for our

2021 and 2022 annual meetings of stockholders.

• Our fiscal 2023 executive compensation programs align with recognized best practices.

Philosophy and Objectives
As a global cybersecurity provider based in the San Francisco Bay Area, we operate in a highly competitive and
rapidly evolving market, and we expect competition among companies in our market to continue to increase. We
compete with many other technology companies in seeking to attract and retain highly skilled top talent. Our
continued success has made our employees and executives more attractive as candidates for employment with
other companies, and we are intently focused on maintaining competitive compensation programs, in part, to
address recruiting efforts by other companies in the technology industry.

As a result, our compensation philosophy is designed to establish and maintain a compensation program that
attracts and rewards talented individuals who possess the skills necessary to support our near-term objectives and
create long-term value for our stockholders, grow our business and assist in the achievement of our strategic goals.
We believe that a performance-based culture is crucial to our growth and success.

The specific objectives of our executive compensation program are to:

Executive Compensation

Drive the development of a successful and profitable business through our next phase
of growth.

Create sustainable long-term value for our stockholders by aligning the interests of our
executive officers with those of our stockholders.

Reward our executive officers for the successful achievement of our financial and strategic
growth objectives.

Attract, motivate and retain highly qualified executives who possess the skills and leadership
necessary to continue to grow our business, and provide compensation packages that are
comparable to our peers and the overall competitive market and that are heavily weighted to
be based on our performance.

While remaining true to our compensation objectives, as well as sound compensation policies and practices, our
compensation program also has the flexibility to incorporate feedback and evolving compensation practices that
are important to us and our stockholders, such as the addition of an ESG modifier to our NEOs’ cash incentive plan
ensuring a linkage between NEO compensation and our ESG commitments.

Stockholder Engagement in Fiscal 2023
Our Compensation and People Committee routinely considers the results of our annual say-on-pay vote and
stockholder feedback on our executive compensation program gathered throughout the year.

In fiscal 2023, we once again undertook extensive engagement efforts to obtain our stockholders’ views on
executive compensation, corporate governance and other matters, and to determine how best to respond to
that feedback. Our Lead Independent Director once again played a central role in our stockholder engagement
efforts in fiscal 2023. The Chair of our Compensation and People Committee also met with numerous
stockholders to discuss their views regarding our executive compensation program.

Our Lead Independent Director and management team regularly update our Board on our engagement
efforts, providing summaries of our stockholders’ feedback. The continuous feedback that we receive from
our stockholders has shaped the executive compensation program and practices implemented by our
Compensation and People Committee.

At our 2022 annual meeting of stockholders, we were pleased with our second year in a row of increased votes
cast in favor of our say-on-pay proposal. At our 2022 annual meeting of stockholders approximately 94% of votes
were cast in favor of our say-on-pay proposal, which was higher than the approximately 81% support we received
the prior year.

64%

61%

31%

We reached out to
stockholders representing
64% of our outstanding shares.

We engaged in discussions with
investors representing 61% of our
outstanding shares (which is all
stockholders that indicated a
willingness to engage with us).

* Stockholder ownership, to our knowledge, as of June 30, 2023.

Our Lead Independent
Director participated in
discussions (21 meetings) with
investors representing 31% of
our outstanding shares, while
offering meetings to investors
representing 48% of our
outstanding shares.

2023 Proxy StatementExecutive Compensation

Our Compensation Best Practices
In line with the feedback that we received from our stockholders and our independent compensation consultant,
we did not make extensive changes to our executive compensation program in fiscal 2023.

We believe our executive compensation program represents recognized best practice and reflects principles that
align the compensation of our NEOs with the long-term interests of our stockholders.

ROBUST AND INDEPENDENT COMPENSATION DECISION-MAKING, ALIGNED WITH OUR
CORPORATE VALUES

% 100% independent Compensation and

% Annual review of compensation strategy

People Committee

% Independent compensation consultant

COMPENSATION BEST PRACTICES

% Consideration of annual say-on-pay vote

% Majority of compensation is performance-based

% No dividends paid on unvested equity

and at-risk

% 100% short-term incentive cash compensation

is performance-based and at-risk

% Inclusion of ESG modifier to cash incentive

plan, which modifies the annual incentive cash
compensation (plus or minus 10%), based on our
performance relative to an ESG scorecard with
climate, inclusion and human capital metrics

% 100% of equity awards granted to our NEOs

in fiscal 2023 were performance-based, with
different performance targets than the cash
incentive plan

% No single trigger vesting of equity awards on

occurrence of a change in control

% Robust stock ownership guidelines

% One-year post-vesting holding period for all
NEOs, including our Chief Executive Officer

% No hedging or pledging, except limited

pledging permitted with the prior approval of
the ESG and Nominating Committee

% Meaningful clawback policy

% Limited perquisites and personal benefits

% No defined benefit plans or SERPs

% Assessing and implementing the advice

of independent compensation consultant,
including a new decision making
framework to further ensure alignment of
executive compensation decision with our
pay-for-performance philosophy

We Followed Through On Our Commitments
We made several commitments with respect to the design of our executive compensation program and related
policies. We made these commitments following receipt of extensive feedback from our stockholders and advice
from our independent compensation consultant, Meridian Compensation Partners.

Summarized below are our fiscal 2023 commitments, and our follow through in meeting those commitments.

Executive Compensation

OUR FISCAL 2023 COMMITMENTS

Maintain a robust stockholder outreach program

Provide more transparency in our executive compensation disclosures, as well as more
robust CD&A disclosures

Disclose the target value of equity grants to our NEOs for the completed fiscal year in
the CD&A

Maintain robust stock ownership guidelines

Make any one-time awards to NEOs outside of the normal grant cycle (other than
new hire awards) a majority performance-based and only make such grants in
exceptional circumstances

Annual equity grants to our NEOs to be at least 75% performance-based in line with
market best practices

Require a one-year minimum vesting period for all grants to our Chief Executive Officer
and other NEOs going forward, and implement a policy to require our Chief Executive
Officer and other NEOs to hold all net shares for one year after vesting subject to
certain exceptions

Use a PSU award design that requires sustained performance over multiple years for
any payout

Include a relative TSR modifier to our executive PSU awards

Ensure that ongoing incentive goals are considered challenging with targets set at or
above management guidance

Disclose performance targets compared to actual results and corresponding
payout scale

Avoid duplicate performance metrics in our cash incentive plan and PSU awards

No upward discretionary adjustments except for extraordinary circumstances (such as
the COVID-19 pandemic)

Include an ESG metric into fiscal 2023 cash incentive plan to ensure linkage between
compensation and our ESG goals

OUR FOLLOW
THROUGH

2023 Proxy StatementExecutive Compensation

Executive Compensation

Responsible Use of Equity Compensation
In response to the feedback that we have received from our stockholders over the past several fiscal years, the
Compensation and People Committee have undertaken a concerted program of reducing our annual stock-based
compensation expense, and is committed to further reductions in our stock-based compensation expense as a
percentage of revenue in the future. The graph below illustrates our stock-based compensation expense for fiscal
years 2021, 2022 and 2023, including as a percentage of revenue.

FY21-FY23 SBCE and Percent of Revenue

$1,250.0M

$1,000.0M

$750.0M

$500.0M

$250.0M

$0.0M

21.8%

18.4%

15.8%

FY21

FY22

FY23

Annual SBCE

SBCE Percent of Revenue

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

Executive Compensation

Compensation-Setting Process
Compensation Timeline and Process
The compensation setting timeline and process of our Compensation and People Committee is summarized below.

August

Review preceding full ﬁscal year performance
Review and approve annual budget and
operating goals for ﬁscal year
Set target compensation for ﬁscal year
Determine and approve incentive
equity awards to NEOs
Determine and approve cash
incentive plan

P R O V E

P
A

September-February

Consider stockholder feedback from
outreach discussions

Consider results of say-on-pay vote

Review year to date performance

to goals

Review trends in executive

compensation and governance

May-July

Review year-to-date performance
relating to cash incentive plan
and equity awards to goals
Engage with independent
compensation consultant and receive
recommendations regarding executive
compensation on design of cash incentive
plan (measures, targets and payout curves)
and annual PSU design (measures, targets and
payout curves)

E
R

M
O

NITOR

March-April
Review executive compensation program
to ensure that it remains competitive and
aligned with stockholder interests

Engage with management to provide
feedback on design of cash incentive plan

(measures, targets and payout curves) and

annual PSU design (measures, targets and

payout curves)
Work with independent compensation consultant
on peer group
Engage with independent compensation
consultant regarding trends in compensation
and governance
Review year to date performance to goals

Our Compensation and People Committee makes compensation decisions after considering factors that include:

• The performance and experience of each executive officer;

• The scope and strategic impact of the executive officer’s responsibilities;

• Our past business performance and future expectations;

• Our long-term goals and strategies;

• The performance of our executive team as a whole;

• An analysis of competitive market conditions, with the assistance of its external compensation consultant(s);

• The incentives provided to our executives to remain with the Company and drive the Company’s continued growth;

• The value of each executive’s unvested equity holdings;

• For each executive officer, other than our CEO, the recommendation of our CEO based on an evaluation of

his performance;

• The challenge and cost of replacing high-performing leaders with in-demand skills; and

• The internal parity of compensation among our executive officers.

Our Compensation and People Committee does not apply a formula or assign relative weights to specific
compensation elements.

2023 Proxy StatementExecutive Compensation

Roles and Responsibilities

PARTICIPANT

ROLE IN COMPENSATION DETERMINATION PROCESS

Compensation and
People Committee

• Review, evaluate and approve the compensation arrangements, plans, policies, and

practices for our NEOs

Management

• Oversee and administer cash-based and equity-based compensation plans
• Review our executive compensation program, from time to time, to determine

whether they are appropriate, properly coordinated, achieve their intended purposes
and to make any modifications to existing plans and arrangements or to adopt new
plans or arrangements

• Retain the services of external advisors, including compensation consultants, legal
counsel and other advisors, from time to time, as it sees fit, in connection with
carrying out its duties

• Together with our independent compensation consultant, the Chief Executive Officer
and the Chief People Officer assist the Compensation and People Committee in the
execution of its responsibilities by providing information on corporate and individual
performance, market data with respect to compensation and management’s
perspective and recommendations on compensation matters

• Chief Executive Officer makes recommendations to the Compensation and People

Committee regarding compensation matters, including the compensation of
executive officers (other than himself)

• Chief Executive Officer participates in meetings of the Compensation and People

Committee (other than portions of meetings that involve discussions of his
own compensation)

While our Compensation and People Committee solicits the recommendations and
proposals of our Chief Executive Officer with respect to compensation-related matters,
these recommendations and proposals are only one factor in our Compensation and
People Committee’s decision-making process.

Independent
Compensation
Consultant

For fiscal 2023 advice,
the Compensation and
People Committee
engaged Meridian
Compensation
Partners, a national
compensation
consulting firm

• Assist the Compensation and People Committee in executing the executive

compensation strategy and guiding principles, assessing the current target total
direct compensation opportunities of our executive officers, including comparing
them against competitive market practices, developing a compensation peer group
and advising on executive compensation decisions

• Meridian Compensation Partners did not provide any services to the Company other

than the services provided to our Compensation and People Committee

• Our Compensation and People Committee assessed the independence of Meridian
Compensation Partners taking into account, among other things, the factors set
forth in Exchange Act Rule 10C-1 and the listing standards of Nasdaq and has
concluded that no conflict of interest exists with respect to the work that Meridian
Compensation Partners performs for our Compensation and People Committee

Executive Compensation

Use of Competitive Data
To assess the competitiveness of our executive compensation program and to assist in setting compensation
levels, at the Compensation and People Committee’s request, Meridian Compensation Partners, our independent
compensation consultant, compiled market data from a compensation peer group approved by our Compensation
and People Committee and industry surveys, including the Radford Global Technology Executive Compensation
Survey. The Compensation and People Committee, with the assistance of Meridian Compensation Partners, then
analyzed the market and survey data when making fiscal 2023 compensation decisions.

Competitive Positioning
For fiscal 2023, our Compensation and People Committee continued to compare and analyze our executive
compensation program and each component of executive compensation against data from a formal compensation
peer group of companies.

In the context of our annual executive compensation review, with assistance from Meridian Compensation Partners
and input from management, in February 2022, our Compensation and People Committee reviewed the peer
group of publicly-traded technology companies used to provide information regarding compensation practices for
fiscal 2022 to determine if any changes were appropriate for use for fiscal 2023 pay decisions. In determining which
companies to include in the peer group, our Compensation and People Committee considered companies that met
some or all of the following updated criteria:

• had (i) revenue between 0.33 to 3.0 times our revenue, (ii) a market capitalization between 0.33 to 3.0 times our

market capitalization, (iii) a market capitalization to revenue ratio greater than 2.0, and (iv) a number of employees
between 0.5 to 2.0 times the number of our employees;

• had revenue growth greater than 10% in at least two of the last three years and TSR growth greater than 10% in at

least two of the last three years;

• was headquartered on the west coast of the United States, operated in the software industry, provided some

cybersecurity services, and was selected by Institutional Shareholder Services as one of our peer companies; and

• whether we were included in the company’s peer group, whether the company’s chief executive officer was a

founder with an atypical compensation structure, and the company’s relevant acquisition activity.

Based on this review, Arista Networks, Inc., Block, Inc., f5, Inc, Okta, Inc., Snap Inc., Synopsys, Inc. and Twitter, Inc.
were removed from the peer group, and Crowdstrike Holdings, Inc., Intuit Inc., Juniper Networks, Inc., Keysight
Technologies, Inc., NetApp, Inc., Roper Technologies, Snowflake Inc., and VMware, Inc. were added based on the
identified criteria. After these changes, the Company was at the 76th percentile of the peer group in terms of revenue
and 89th percentile in terms of market capitalization.

The following publicly-traded companies made up our compensation peer group for fiscal 2023:

Akamai Technologies, Inc.

Fortinet, Inc.

Paychex, Inc.

Autodesk, Inc.

Intuit Inc.

Roper Technologies, Inc.

Cadence Design Systems, Inc.

Juniper Networks, Inc.

ServiceNow, Inc.

CrowdStrike Holdings, Inc.

Keysight Technologies, Inc.

Snowflake Inc.

Gen Digital Inc.

NetApp, Inc.

Splunk Inc.

SS&C Technologies
Holdings, Inc.

VMWare, Inc.

Workday, Inc.

2023 Proxy StatementExecutive Compensation

CEO and NEO Pay for Performance Alignment For
Fiscal 2023

Pay for performance is a cornerstone of our compensation philosophy. We balance our strong
pay-for-performance compensation philosophy – where the vast majority of our Chief Executive Officer
and other NEO compensation is at-risk and performance-based – with our need to recruit, incentivize, and
retain talented executives in a highly competitive market. The result is an executive compensation program
that is significantly weighted toward at-risk compensation tied to our financial and operational performance.

The graphs below illustrate the predominance of at-risk and performance-based components of our fiscal 2023
compensation program for our Chief Executive Officer and other named executive officers.

CEO

2.5%
Base Salary(1)

97.5%
At-Risk

95%
Performance
Stock Units (PSU)(2)

2.5%
Target
Annual Cash
Incentive
Opportunity

AVERAGE OF OTHER NEOs

5%
Base Salary

95%
At-Risk

90%
Performance
Stock Units (PSU)

(1) Graph reflects Mr. Arora’s target base salary of $1 million, regardless of any portion that he forwent.
(2) Does not include the June 2023 long-term performance and retention award.

5%
Target
Annual Cash
Incentive
Opportunity

In line with our pay for performance compensation philosophy, our Compensation and People Committee also
focuses on awarding compensation commensurate with the position and responsibilities held by our NEOs. If an
NEO’s position or responsibilities change, our Compensation and People Committee undertakes a review of that
NEO’s compensation to ensure that it remains commensurate with the new position and responsibilities.

How We Compensate Our Chief Executive Officer
As a result of feedback from our stockholders requesting detailed insights into the compensation of our Chief
Executive Officer, we include in this section a summary of the rationale for the decisions reached by our Board and
Compensation and People Committee regarding Mr. Arora’s compensation.

MARKET COMPETITIVE PAY LEVELS AND EVOLVING COMPENSATION IN DIRECT
RESPONSE TO STOCKHOLDER FEEDBACK

In designing Mr. Arora’s compensation packages since he joined the Company in 2018, our Board and
Compensation and People Committee sought to deliver market-competitive compensation commensurate with
Mr. Arora’s capabilities and experience, and reflective of the considerable challenge of leading the Company’s
transformation from a provider of hardware delivered security to a provider of security delivered through the cloud,
with a platform of products to protect our customers’ enterprise, cloud, endpoints, Security Operation Centers and
more. When determining Mr. Arora’s compensation, our Board and Compensation and People Committee listened
carefully to stockholder feedback and modified compensation structures in response to that feedback. After his
new hire compensation, Mr. Arora’s target compensation has been predominantly performance-based as follows:

Executive Compensation

FY19 Target FY20 Target FY21 Target

FY22 Target

$1.0M(2)

$1.0M

n/a

$1.0M(2)

$1.0M

n/a

FY23
Target(1)

$1.0M(2)

$1.0M

n/a

Annual Salary
Target Bonus

Time-Based RSUs

Performance Stock
Units/Stock Options

New Hire
Compensation

$1.0M

$60M (including
$20M of
matching RSUs)
$66M in
performance-
based stock
options to be
earned over
7 years

Total Target
Performance-Based
(total compensation)(3)

$128M
52.3%

Percentile versus
peer group -
target compensation

$1.0M

None

$1.0M

$11M
vesting over
3 years
$11M in
PSUs vesting
over 3 years
based on
achievement
of revenue
growth in
each year

$2M
50.0%

$24M
50.0%

$21M in
PSUs vesting
over 4 years
(backweighted)
based on
achievement
of normalized
billings growth
and organic
operating
margin
$23M
95.7%

$15M in
PSUs vesting
over 3 years
based on
achievement
of revenue
growth
and relative
TSR metrics

$38M in
PSUs vesting
at the end
of 3 years
based on
achievement
of billings
growth
and relative
TSR metric

$17M
94.1%

$40M
97.5%

44th

92nd

(1) Does not include the long-term performance and retention award described below.
(2) Mr. Arora forwent a portion of his annual salary in each of fiscal 2021 through fiscal 2023, in connection with our funding efforts
to support colleagues and communities impacted by the COVID-19 pandemic. He opted to receive only approximately $0.3
million of his salary in fiscal 2021, approximately $0.25 million of his salary in fiscal 2022, and approximately $0.75 million of his
salary in fiscal 2023.

(3) These percentages do not take into account the amount of salary Mr. Arora forwent.

The year-over-year increase in Mr. Arora’s equity compensation was attributable to our strong performance
during fiscal 2022, while his level of compensation as compared to our compensation peer group, was below the
mean target compensation of his peers. The Compensation and People Committee determined that Mr. Arora
substantially outperformed his level of compensation, as demonstrated by our one-year TSR at the 92nd
percentile of our compensation peer group for fiscal 2022. Accordingly, the Compensation and People Committee
determined that an increase in Mr. Arora’s compensation was warranted to reflect his and the Company’s
strong performance relative to our compensation peer group. In fiscal 2023, our one-year TSR was at the 99th
percentile of our compensation peer group, further demonstrating Mr. Arora’s high level of performance as our
Chief Executive Officer.

FISCAL 2023 LONG -TERM PERFORMANCE AND RETENTION AWARD

We firmly believe that Mr. Arora is one of only a very few executive leaders who can deliver the caliber of
performance critical to the Company’s successful attainment of our next phase of growth. We reach this conclusion
based on Mr. Arora’s track record of undeniable success, our extensive conversations with the Company’s leadership
team, our regular assessment of company strategy, consistent attention to the marketplace for high-caliber senior
executives, and of course the concurrence of the entire Board.

The cybersecurity threat landscape is intensifying. Attackers are becoming very sophisticated with the tools they
use, and cybercrime has increased 20 times since 2011 to over 1 billion new malicious programs. What we think lies
ahead is the challenge and need for cybersecurity products to stop attackers in real-time. To accomplish this, we
believe it requires a fundamentally different way of thinking about cybersecurity. The advent of a new generation
of artificial intelligence tools and technologies promises to transform the cybersecurity industry. In order for us
to remain competitive and continue to lead our industry, we must continue to transform our company through
relentless innovation. This is a signal moment of change for the Company, our industry and the broader economy,
and Mr. Arora is the right person to navigate us through it.

2023 Proxy StatementExecutive Compensation

Prior to exploring and ultimately making the long-term performance and retention award to Mr. Arora, the
Compensation and People Committee considered the commitment that we made to our shareholders that
one-time equity awards would only be in limited or exceptional circumstances, as further discussed on page 86
of this Proxy Statement. The Compensation and People Committee considered various factors, including:

• The feedback from our stockholders, which confirmed our Board’s view that many of our stockholders considered

retaining Mr. Arora as our Chief Executive Officer is important to our future success.

• The significant drop in Mr. Arora’s unvested equity (as discussed further below).

• The market for Chief Executive Officers with Mr. Arora’s experience and success, and the Compensation and

People Committee’s belief that Mr. Arora would be at or near the top of the list for many companies in a search
for a new Chief Executive Officer, including vacancies in the market at the time Mr. Arora’s grant was under
consideration by the Compensation and People Committee.

• As described on page 86 of this Proxy Statement, we previously advised stockholders that retention awards could

be the basis for making a one-time equity award.

Accordingly, the Compensation and People Committee determined that making a one-time retention award to
Mr. Arora was inline and consistent with the commitment we made to our stockholders.

Thus, in fiscal 2023, we began exploring with our independent compensation consultant –– Meridian Compensation
Partners — equity incentives that would allow us to retain Mr. Arora as our leader for the foreseeable future. The
long-range performance and retention award described below is true to our commitment to always carefully
align our executive compensation programs with stockholder interests. We followed these principles in designing
the award:

• Demonstrate the Board’s confidence in Mr. Arora and his strategy for the Company’s next phase of growth.

• Retain and engage a proven, successful and industry-leading CEO for at least the next five years so that our
stockholders reap the financial rewards that we expect to result from Mr. Arora’s clarity of vision, strategic
acumen and operational excellence — just as our stockholders have during the first five years of his tenure.

• Provide an award that, at its core, is performance-based, drives stockholder value creation, and requires

significant sustained performance to realize its full value.

• Mitigate the risk of potential employment offers from competitors and private equity firms.

• Take into account the views of our stockholders as expressed to us during our extensive engagement efforts.

The Compensation and People Committee also considered the value of Mr. Arora’s performance-based stock
options and other vested stock holdings to the markedly lower amount that is currently projected to vest over the
next several years. In doing so, we noted that one impact of the sustained performance of the Company during
Mr. Arora’s tenure as our Chief Executive Officer is that he has vested in an average of approximately $102 million
of value in each year through fiscal 2023. In addition, we noted that Mr. Arora’s expected vesting value, assuming
target performance and no stock price growth, for his existing equity awards will be $69 million in fiscal 2024, $38
million in fiscal 2025, and $42 million in fiscal 2026. Accordingly, it was clear that the value delivered to stockholders
in the first five years of Mr. Arora’s tenure resulted in significant compensation to him, but it was also clear that his
existing equity awards will not continue to deliver that level of value in the future.

Because of this significant vested ownership and the amount that Mr. Arora was projected to vest in over the
next several years, the Board determined that a meaningful equity award would be necessary to ensure that such
award retains and engages Mr. Arora. Based on the award size described below (and as of the date Mr. Arora’s
award was approved), if our growth over the next five years matches our growth during the first five years that
Mr. Arora was our Chief Executive Officer, the value of this award will be only approximately 0.36% of our increase in
market capitalization.

The Board also considered the incremental increase of our market capitalization compared to the realized pay of
Mr. Arora from June 1, 2018 (the date we announced Mr. Arora’s appointment as Chief Executive Officer) through

July 31, 2023 (the last day of fiscal 2023). The realized pay of Mr. Arora was primarily attributable to (i) the vesting
of long-term incentive awards that were granted in prior years, (ii) the exercise of stock option awards that were
granted in prior years and (iii) performance-based cash incentive award.

Executive Compensation

1.44%
CEO
Realized
Pay

(cid:31)57.3 billion
Stockholder
Value Creation

CEO

In June 2023, the Board granted Mr. Arora an entirely performance-based award of PSUs that will not be earned at
all unless the Company’s stock price performance through June 2, 2028 is the same as or better than 40% of the
companies in the S&P 500. The maximum number of shares that can be earned if the Company’s performance is
better than 90% of the companies in the S&P 500 is 750,000 shares. The full scale is shown in this table:

Performance Thresholds

Percentile vs.
S&P 500

Shares Earned

90th percentile
75th percentile
55th percentile
40th percentile
Below 40th percentile

750,000
625,000
500,000
250,000
0

In addition, so that outsized performance is not possible if the Company’s stock price does not increase, if our stock
price at the end of the performance period is lower than at the beginning of the performance period, then no more
than the target number of shares may be earned, even if our performance is better than all of the S&P 500. No
shares earned pursuant to this award may be sold before the earlier of (i) the first anniversary of the date on which
they vest, or (ii) a change in control of the Company.

The long-range performance and retention award made to Mr. Arora is intended to cover a period of five years from
the date of grant, and do not anticipate making any additional one-time equity award grants to Mr. Arora during
this period. During the performance period for this award, we expect that Mr. Arora will continue to be eligible for
annual equity grants determined based on performance and based on the structure of awards granted to the rest
of the executive team.

MR. ARORA’S LEADERSHIP TRANSFORMED OUR COMPANY
After Mr. Arora joined the Company, we set an ambition to become the cybersecurity partner of choice, to innovate
and to stay ahead of the curve. To make this a reality, Mr. Arora established three strategic priorities critical to
our long-term success: transforming network security, delivering comprehensive cloud native security and
revolutionizing security operations. Under Mr. Arora’s leadership, our successful implementation of this strategy has
led to:

• A $57.3 billion increase in market capitalization (as measured by our market capitalization as of May 31, 2018, the

day prior to our announcing Mr. Arora as our Chief Executive Officer, and July 31, 2023).

• $3.9 billion returned to our stockholders in fiscal 2019 through fiscal 2023 through our stock repurchase program.

• Compound annual growth rates of 24% and 27% in revenue and billings, respectively, over fiscal 2019 through

fiscal 2023, culminating in fiscal year 2023 with record revenue of $6.89 billion and record billings of $9.19 billion.

• An unprecedented acceleration of our product development efforts.

• A significant increase in the trading price of our common stock.

2023 Proxy Statement
Executive Compensation

Additionally, Mr. Arora successfully steered the Company through the unprecedented global impact of the COVID-19
pandemic and ongoing global economic uncertainty throughout fiscal 2023.

Transformed Our Business Through Innovation

A transformation that has born a differentiated
position that spans our three platforms
• Network Security - Comprehensive Zero Trust
Network Security Platform with best-in-class
products in multiple form factors - hardware,
software and SASE - infused with AI for near
real-time protection

• Cloud Security - An integrated platform securing
code to cloud against risks and breaches in near
real-time

• Security Operations - Built on category leading
products - Cortex XDR, XSOAR and Xpanse - and
category changing XSIAM

Became an innovation leader by delivering

• 74 product releases across our three platforms in

fiscal 2023

• Cortex XSIAM, which uses AI to reimagine how

the security operations center works

• Prisma Cloud updates (including three new

security modules)

• Prisma Access 4.0 and PAN-OS 11.0
• Cloud NGFW for AWS, and Cloud NGFW for Azure

Delivered Zero Trust Security

Delivered Strong Financial Performance
and Stockholder Return

ACCELERATING REVENUE GROW TH

DELIVERING TOTAL
SHAREHOLDER RETURN

$6.89B

1-Year TSR
Palo Alto Networks vs.
Percentiles of Peer Group

$5.5B

$4.3B

FY21

FY22

FY23

ACCELERATING NEXT- GEN
SECURIT Y ARR GROW TH

$2.95B

$1.89B

$1.18B

FY21

FY22

FY23

Palo Alto
Networks, Inc.
99th Percentile

75th Percentile

50th Percentile

25th Percentile

3-Year TSR
Palo Alto Networks vs.
Percentiles of Peer Group

Palo Alto
Networks, Inc.
100th Percentile

75th Percentile

50th Percentile

25th Percentile

-10

200
180
160
140
120
100
80
60
40
20
0
-20

Executive Compensation

STOCKHOLDER DIRECTION AND FEEDBACK
John Donovan, our Lead Independent Director, leads our Board’s stockholder engagement efforts. He held 30
and 21 meetings with stockholders, representing 39% and 31% of our outstanding shares (as of June 30, 2022
and June 30, 2023), during fiscal 2022 and fiscal 2023, respectively. When doing so, he personally took on the
responsibility of soliciting input and guidance from our stockholders as it relates to Mr. Arora’s compensation, and
the Board’s desire to retain Mr. Arora as our Chief Executive Officer for the long-term. Sir John Key, the Chair of our
Compensation and People Committee, often joined Mr. Donovan in these meetings.

During these meetings, we sought stockholder input regarding the form and quantum of compensation paid to
Mr. Arora, and in particular, our stockholders’ views as to whether the Board should seek to retain Mr. Arora for
the long term, including through a significant equity award. As a result of these meetings, it became apparent
to the Board, as well as the Compensation and People Committee, that our stockholders were very pleased with
Mr. Arora’s performance as our Chief Executive Officer. Our stockholders also consistently expressed a desire for
the Company to retain Mr. Arora for the long term, and recognized that doing so would represent a significant
financial commitment on behalf of the Company. Our stockholders also expressed a strong recommendation
that Mr. Arora’s compensation, including any retention compensation, should be consistent with the Company’s
pay-for-performance philosophy, with vesting events aligning with performance levels that deliver significant
value creation for the Company’s stockholders. In addition, stockholders expressed the view that Mr. Arora’s
retention compensation should also be subject to reduction or risk if the Company failed to deliver expected
financial performance.

Following their meetings with our stockholders, Mr. Donovan and Sir John Key informed the Compensation and
People Committee and the independent members of our Board of their engagement with stockholders, including
the feedback received from them. The Compensation and People Committee sought to align Mr. Arora’s long-term
performance and retention award with the guidance and input provided by our stockholders. In this respect, the
Committee included the following features, which it believes aligns with the feedback received by numerous of
our stockholders:

• A five-year cliff, which enhances retention benefits of the award, and only pays out based on sustained

performance. Mr. Arora must remain in the employ of the Company throughout the entire duration of the
five-year performance period. Failure to do so will result in Mr. Arora receiving no value or compensation from
the award.

• A minimum level of required performance, where the award can result in as few as zero shares, if the Company’s

performance is less than 40% of the companies in the S&P 500 over the five-year performance period.

• A median performance level that is tied to performance at the 55th percentile of the S&P 500 index, rather than

the 50th percentile.

• A graduated payout curve, where Mr. Arora will only receive the maximum level of compensation if the Company

delivers exceptional stock price performance, as measured against the S&P 500 index.

During fiscal 2023, the Board’s primary responsibility was to oversee the Company’s efforts to deliver meaningful
and sustainable value to our stockholders. As discussed in his letter to our stockholders at the beginning of this
Proxy Statement, our Lead Independent Director, John Donovan, believes that retaining Mr. Arora as our Chief
Executive Officer for the long-term is critical to fulfilling that responsibility. Since Mr. Arora’s award was granted
on June 2, 2023, Mr. Donovan conducted 15 stockholder meetings representing 19% of our shares, and received no
major objections from stockholders. Sir John Key participated in numerous of these meetings.

2023 Proxy StatementExecutive Compensation

Fiscal 2023 Executive Compensation Program
Our executive compensation programs are tied to the Company’s financial and operational performance, support
our commitment to good compensation governance and provide market-based opportunities to attract, retain and
motivate our executives in an intensely competitive market for qualified talent.

FISCAL 2023 PROGRAM HIGHLIGHTS

• No base salary or target annual incentive opportunity increases in fiscal 2023 for continuing NEOs.

• Equity compensation granted in fiscal 2023 was 100% performance-based PSUs.

• Performance measures aligned with business strategy.

• Chief Executive Officer received a long-range performance and retention award to incentivize and reward

him for continuing to deliver significant stockholder value.

• Chief Executive Officer donated 25% of his fiscal 2023 base salary.

• Outstanding performance resulted in (i) 150% achievement for our NEOs under the cash incentive plan,

(ii) with respect to the PSUs granted to our NEOs in fiscal 2022, a payout percentage of 96% for fiscal 2023
and an rTSR modifier of 1.5 for the two-year performance period that ended in fiscal 2023, and (iii) with
respect to the PSUs granted to our NEOs in fiscal 2023, a payout percentage of 193% for fiscal 2023.

Elements of Compensation
The following table lists the pay elements of our fiscal 2023 programs and the purpose they served:

Pay Element

Purpose

Performance Period Performance Metric

Base Salary

d
e
x
i
F

y
a
P

Designed to be market-
competitive and attract and
retain talent

n/a

Annual

Annual revenue for fiscal 2023

Annual Cash
Incentive
Opportunity

Incentivize achievement of near-
term financial and operational
objectives, consistent with
longer-term goals

Revenue/TSR
Performance
Stock Units
(PSU)

Reward long-term profitability
and long-term performance
relative to peers

Three years

Create alignment
with stockholders

Facilitate executive retention

Annual organic operating
margin for fiscal 2023

Annual billings growth for
fiscal 2023, 2024, and 2025 and
TSR of the Company relative
to indexed companies (the
“relative TSR” or “rTSR”) for fiscal
2023 through 2025

y
a
P
k
s
i
R
t
A

Executive Compensation

Compensation Decision Making Framework
In designing the executive compensation program for fiscal 2023, our Compensation and People Committee
sought and received advice from our independent compensation consultant, Meridian Compensation Partners.
Based on this advice and in consultation with Meridian, the Committee developed a framework that further
made certain that our executive compensation program was designed in a structured and objective manner to
ensure that target compensation levels reflect our pay for performance philosophy, aligned compensation with
our stockholders’ interests, motivated our executives, was competitive, and reflected our stockholders’ input and
compensation best practices. This framework consists of the following elements:

• Financial Performance. Our fiscal 2022 financial and operation results measured against plan and consensus

estimates on key financial measures.

• Shareholder Returns. Our one-year, two-year, and three-year TSR performance relative to our compensation

peer group.

• Strategic Objectives. Our fiscal 2022 performance measured against our strategic objectives.

• Individual Performance Assessment. A performance assessment by the Board for our Chief Executive Officer,

and by our Chief Executive Officer for the other executive officers, including other NEOs.

Decision Making Inputs

FY23 Target Pay
Decision

Financial
Performance

Shareholder
Returns

Strategic
Objectives

Performance
Assessment

Other
Considerations

Market
Percentile

For CEO

For Other
Executives

FY22 results
vs. plan and
consensus
on key
ﬁnancial
measures

1, 2, and 3
year TSR
performative
relative to
peers

FY22
Strategic
Objective

As
determined
by Board

As
determined
by CEO

∙ Say on Pay

∙ Retention

∙ Tenure /
Time in
Role

∙ Role

critically

P90+ of
peers

P75 of
peers

P50 of
peers or
lower

Quantum of Compensation
Palo Alto Networks delivered another year of outstanding results for our stockholders in fiscal 2023, with a strong
year of financial performance and execution. Our TSR for fiscal 2023 was at the 99th percentile and our three-year
TSR was at the 100th percentile of our compensation peer group. The year-over-year increase in Messrs. Arora,
Golechha, Klarich and Zuk’s target compensation was attributable to increased performance-based equity
awards. Such increased equity compensation was primarily attributable to our strong performance during fiscal
2022, as compared to our compensation peer group. The Compensation and People Committee determined
that our NEOs substantially outperformed their level of compensation, as demonstrated by our one-year TSR at
the 92nd percentile of our compensation peer group for fiscal 2022. Accordingly, the Compensation and People
Committee determined that an increase in compensation was warranted to reflect their and the Company’s strong
performance relative to our compensation peer group. In fiscal 2023, our one-year TSR was at the 99th percentile of
our compensation peer group, further demonstrating our NEOs’ high level of performance during fiscal 2023. For
Mr. Golechha, the increase in his compensation is also related to his growth and performance as our Chief Executive
Officer following his promotion to that position. As indicated in the proxy statement for our 2021 annual meeting
of stockholders, we anticipated a decrease in the amount of Mr. Jenkins compensation because his fiscal 2022
compensation reflected new hire equity awards.

2023 Proxy StatementExecutive Compensation

The table below shows the targeted value of total compensation to our Chief Executive Officer and each other NEO
for fiscal 2023, as compared to fiscal 2022.

Name
Mr. Arora

Mr. Golechha

Mr. Jenkins

Mr. Klarich
Mr. Zuk(2)

Targeted
Value of Total
Compensation
for fiscal 2022
$17,000,000

$ 5,200,000

Targeted
Value of Total
Compensation
for fiscal 2023
$40,000,000(1)
$10,200,000

$15,500,000

$11,500,000

$11,100,000

$16,100,000

$ 4,400,000

$ 8,900,000

(1) Does not include the long-range performance and retention award granted to Mr. Arora in June 2023.

(2) The dollar amounts listed in the table for Mr. Zuk reflect the target value of his total compensation after the conversion of his
base salary and target annual cash incentive compensation opportunity from Israeli new shekels to U.S. dollars. Since Mr. Zuk
did not receive any increase to his base salary and target annual cash incentive compensation opportunity in fiscal 2023, in this
table, the same exchange rate of approximately 0.30 U.S. dollars for one Israeli new shekel was used to convert these elements
of his compensation for both fiscal 2022 and fiscal 2023, in order to avoid including any difference in the target value of his total
compensation resulting from currency fluctuations.

Fiscal 2023 Executive Compensation Program Components
B A S E S A L A R Y
Base salary is the primary fixed component of our executive compensation program. We use base salary to
compensate our executive officers for services rendered during the fiscal year and to ensure that we remain
competitive in attracting and retaining executive talent.

Generally, we establish the initial base salaries of our executive officers through arm’s-length negotiation at the time
of hire taking into account his or her position, qualifications, experience, prior salary level, and the base salaries of our
other executive officers. Thereafter, our Compensation and People Committee reviews the base salaries of each NEO
annually and makes adjustments as it determines to be reasonable and necessary in line with the factors described
under “Compensation Timeline and Process” above.

NO INCREASE IN BASE SAL ARY FOR ANY NEO IN FISCAL 2023.

The table below shows the base salary for each NEO for fiscal 2023.

Name
Mr. Arora(1)
Mr. Golechha
Mr. Jenkins
Mr. Klarich
Mr. Zuk(2)

Base Salary

End of Fiscal 2022

$ 1,000,000
$ 600,000
$ 750,000
$ 550,000
1,482,000

Base Salary
End of Fiscal 2023
$1,000,000
$ 600,000
$ 750,000
$ 550,000
1,482,000

(1) Mr. Arora elected to forgo his base salary of $1 million for the period beginning on November 1, 2021 through October 31, 2022.
(2) Mr. Zuk is employed by our Israel subsidiary and his base salary is expressed in Israeli currency.

A N N UA L C A S H I N C E N T I V E C O M P E N S AT I O N
We use annual cash incentive compensation to motivate our NEOs to achieve our annual financial and operational
objectives, while making progress towards our longer-term strategic and growth goals. Generally, we establish
the target annual cash incentive compensation opportunities of our executive officers through arm’s-length
negotiation at the time of hire taking into account his or her position, qualifications, experience, prior target annual
cash incentive compensation opportunity, and the target annual cash incentive compensation opportunities

Executive Compensation

of our other executive officers. Thereafter, our Compensation and People Committee reviews the target annual
cash incentive compensation opportunities of each NEO annually and makes adjustments as it determines to be
reasonable and necessary in line with the factors described under “Compensation Timeline and Process” above.

FISCAL 2023 CASH INCENTIVE PL AN
In August 2022, our Compensation and People Committee adopted a cash incentive plan for all employees not
paid commissions (including our NEOs) and approved the target levels for the annual financial objectives at
levels that were challenging and required substantial skill and effort on the part of senior management. The cash
incentive plan included an annual performance period with (i) payouts of up to 100% of the target cash incentive
compensation opportunities made on a semi-annual basis based on year to date results and, in the case of the
payouts for the first half of fiscal 2023, projected performance for the second half of fiscal 2023 and (ii) payouts for
over-performance (referred to as accelerator payments and discretionary payments, as described below) made after
the end of the fiscal year. See the section titled “Fiscal 2023 Cash Incentive Plan Measures and Curves” below for
additional information regarding the target payout and actual payout under our cash incentive plan.

TARGET ANNUAL INCENTIVE COMPENSATION OPPORTUNITIES
As in prior years, the target annual cash incentive compensation opportunities for our NEOs were expressed as a
percentage of their respective base salaries.

NO INCREASE IN TARGET ANNUAL CASH INCENTIVE COMPENSATION FOR ANY NEO IN
FISCAL 2023.

The table below shows the target annual cash incentive compensation percentage for fiscal 2023 and the
corresponding target and maximum dollar values:

Name
Mr. Arora

Mr. Golechha

Mr. Jenkins

Mr. Klarich

Mr. Zuk(1)

Target Annual Incentive
Compensation Opportunity
(as a % of base salary) at

Fiscal 2023 Target
Annual Incentive
Compensation

end of Fiscal 2023

100%

Opportunity
$1,000,000

$ 600,000

$ 750,000

$ 550,000

1,482,000

Fiscal 2023 Maximum
Annual Incentive
Compensation
Opportunity
$ 1,650,000

$ 990,000

$ 1,237,500

$ 907,500

2,445,300

CORPORATE PERFORMANCE MEASURES
For fiscal 2023, our Compensation and People Committee selected revenue and annual organic operating margin
as the corporate performance measures.

Corporate
Performance Metric What It Is
Annual revenue

Fiscal 2023 revenue as reported in our
Form 10-K

Annual organic
operating margin

Fiscal 2023 non-GAAP operating margin,
excluding the effects of acquisitions and
dispositions in fiscal 2023 and bonus payout
in excess of 100% of the target cash incentive
under our cash incentive plan

Why It’s Important
Revenue is an important growth metric
that is directly tied to stockholder
value creation
This profitability measure is tied to
management performance and profit we
generate for stockholders

2023 Proxy Statement
Executive Compensation

Potential payouts under the plan were based on a set of curves representing different levels of organic operating
margin and revenue performance.

• Design: To provide an incentive to management to make appropriate trade off decisions between investments in

growth and profitability.

• Pay and Performance Relationship: The curves were designed to require significant performance above

each curve to move to the next curve so that performance slightly above target would not result in an above
target payout. Performance below the minimum curve would result in 0% of target payout and performance
above the maximum curve would result in a formulaic payment maximum of 150% regardless of the level
of overperformance.

• Target Setting: Our fiscal 2023 operating plan approved in August 2022, which was used to set the incentive plan
targets, provided revenue and organic operating margin targets. Performance above the high end of the targets
were required for an above 100% payout.

• Difficulty of Achieving Targets: Fiscal 2023 target for revenue represented growth of approximately 26% above
the prior year revenue. When we set the targets in August 2022, we decided that these targets were set at an
appropriate level of stretch performance based on our internal financial projections and the macroeconomic
environment. The fiscal 2023 target for revenue growth was set above the guidance we provided in our August 22,
2022 earnings release.

The graph below contains the curves used to determine payouts in the fiscal 2023 cash incentive plan.

FISCAL 2023 CASH INCENTIVE PL AN MEASURES AND CURVES

600 bps

500 bps

400 bps

300 bps

200 bps

100 bps

0 bps

-100 bps

-200 bps

-300 bps

-400 bps

-500 bps

FY23 Target

150%

140%

130%

120%

110%

100%

90%
80%
70%
60%
50%

VIP
Funding as
a Percent
of Target

n
g
r
a
M
g
n
i
t
a
r
e
p
O
c
n
a
g
r
O
3
2
Y
F

95%

98%

100%

103%

105%

FY23 Revenue as a Percent of Target

* Represents revenue of $6,918 million and non-GAAP operating margin of 19.3% for fiscal 2023.

Revenue

Organic Operating Margin

FY23 Targets
$6,918M

19.3%

FY23 Actual
$6,893M

25.2%

FY23 Payout
150% of
Target

The calculation of organic operating margin is provided in Appendix A to this Proxy Statement.

PERFORMANCE REQUIREMENTS AND ESG MODIFIER
Under the cash incentive plan, funding would be made as the organic operating margin target and the revenue
target are achieved as per the chart above. Achievement above the minimum achievement would increase funding
on a non-linear basis, with achievement of 100% of both performance targets resulting in funding at 100% of the
target cash incentive compensation opportunity. Payouts of up to 100% of the target cash incentive compensation
opportunities are made on a semi-annual basis and any payouts for performance exceeding 100% of the annual
targets (referred to as accelerator payments) are paid out as described in the following paragraph.

Executive Compensation

For achievement in excess of 100%, funding would increase on a non-linear basis, based on overperformance on
revenue and/or organic operating margin versus the annual targets.

The total potential payouts under the cash incentive plan to all participants (which includes any accelerator and/
or discretionary payments) were capped at 150% of the target amounts, before application of the ESG modifier
described in the following paragraph.

To ensure a linkage between compensation and our ESG goals, we included an ESG modifier for our NEOs in the
cash incentive plan for fiscal 2023, which provided for the calculated result to be adjusted up or down by up to
10% based on an ESG scorecard with climate, inclusion and diversity, and human capital metrics. For fiscal 2023,
no adjustments to our NEOs’ calculated payouts under the cash incentive plan were made as a result of the
ESG modifier, and our Compensation and People Committee made no discretionary changes to cash incentive
plan payouts.

The following table sets forth the fiscal 2023 scorecard measures and results related to the ESG modifier to our
fiscal 2023 cash incentive plan.

FY23 ESG Scorecard
Measures

FY23 Results

Climate

1. FY23 progress
towards our
2030 climate
commitment

Exceptional Progress
Participation in Silicon Valley Power’s Large Company
Green Power Program enable 100% renewable energy
for Santa Clara headquarters as of January 1, 2023.
Prioritization of LEED certified office buildings, improved
our ratio of LEED office space.
Achieved CDP’s “A-List” and “Supplier Leaderboard”, ISS
Quality Score of 1, MSCI Environment category score of
10 (out of 10) and EPA’s Green Power Leader Award.

ESG
Modifier
(90% to
110% modifier)

Inclusion
& Diversity

2. Leadership

Representation
(Dir+; Women
globally; URM in US)

Slower Progress
Women: Increased 0.2% to 24.4% from 24.2% at Director
and above.
URM: Increased 0.1% to 11.5% from 11.4% at Director
and above.

Human
Capital
Practices

3. Employee

engagement

Exceptional Progress
41 non-paid for external awards, 93% CEO Approval
rating on Glassdoor Achieving return to office targets in
key offices – Santa Clara, Bangalore and Tel Aviv.

• Compensation and People Committee assessment is objectively based on the totality of

fiscal 2023 results on the scorecard.

• Compensation and People Committee determined, based on the results for fiscal year

2023, there would be no adjustment to the fiscal 2023 cash incentive plan based on the
ESG modifier.

• In response to stockholder feedback, we have included expanded disclosure of the scorecard

measures (as set forth above).

LO N G -T E R M E Q U I T Y C O M P E N S AT I O N
Our long-term equity compensation is designed to encourage executives to achieve stretch goals in key
performance metrics selected to drive long-term performance of our Company and value creation for
stockholders. As shown in the graph below, in fiscal 2023, 100% of the long-term equity compensation granted to
our NEOS was performance-based.

2023 Proxy StatementExecutive Compensation

RSU VS PSU/PSO MIX (1)

2%
98%

57%

100%

43%

Fiscal 2019

Fiscal 2020

Fiscal 2021

Fiscal 2022

Fiscal 2023

PSUs / PSOs

RSUs

(1) Values above represent the target value of annual awards to NEOs. Certain grants that were made in July 2019 represented
advanced grants for fiscal year 2020 and are reflected as fiscal year 2020 above. Values exclude any new hire awards and
Mr. Arora’s fiscal 2023 long-range performance and retention award (which was entirely performance based).

FISCAL 2023 EQUIT Y COMPENSATION

100% OF ANNUAL EQUIT Y GRANTED TO NEOS IN FISCAL 2023 WAS PERFORMANCE-BASED.

In fiscal 2023, 100% of the annual equity awards granted to our NEOs continued to be in the form of PSUs, resulting
in the entirety of such equity awards being at risk and performance-based. The Compensation and People
Committee determined the size of the awards based on the strong performance, leadership skills and valuable
contributions to the Company of our NEOs, especially in the context of the significant transition in our business to
expand to a more cloud-centric platform.

To determine the size of the fiscal 2023 PSU awards, the Compensation and People Committee utilized the
framework developed in partnership with Meridian to identify objective factors - financial performance, stockholder
returns and achievement of strategic objectives - that should be considered in determining the size of any
compensation. In addition to this assessment, the Compensation and People Committee also considered the
individual performance of each NEO to determine the appropriate fiscal 2023 target compensation levels.

The table below shows the targeted value of PSU grants made to our NEOs in fiscal 2022 and fiscal 2023, with the
actual target number of shares subject to the fiscal 2023 PSUs determined based on the trailing 14-day average
closing price as of the date of grant rounded down to the nearest whole share.

Name
Mr. Arora
Mr. Golechha
Mr. Jenkins*
Mr. Klarich
Mr. Zuk

Targeted Value for PSUs
Granted for fiscal 2022
($)*
15,000,000
4,000,000
14,000,000
10,000,000
3,500,000

Targeted Value for PSUs
Granted in fiscal 2023
($)
38,000,000
9,000,000
10,000,000
15,000,000
8,000,000

* Mr. Jenkins received the PSU award for fiscal 2022 in connection with his hire. He also received RSUs with a target value of

$10,000,000 in connection with his hire, which are not reflected in the table.

Similar to the second tranche of fiscal 2022 PSUs (which was the portion of those PSUs that did not represent
a transitional grant), the Compensation and People Committee set a 3-year performance period for the fiscal
2023 PSUs and determined that such PSUs will vest based on the achievement of the performance goals for the
Company’s 2023, 2024, and 2025 fiscal years.

The number of fiscal 2023 PSUs that become eligible to vest (“Eligible PSUs”) will be equal to the product of (i) the
target number of PSUs and (ii) the average of the payout percentages for each fiscal year in the performance period.

Executive Compensation

The payout percentage for a fiscal year will be determined based on whether annual billings growth for the fiscal
year is below, at or exceeds the target annual billings growth for the fiscal year, as follows: (i) if the annual billings
growth is less than the threshold level (which is 400 bps below the target annual billings growth), the payout will
be 0%, (ii) if the annual billings growth is equal to the target annual billings growth, the payout percentage will be
100%, (iii) if the annual billings growth is 600bps above the target annual billings growth, the payout percentage
will be 280%, and (iv) if the annual billings growth is at least 700bps above the target annual billings growth, the
payout percentage will be 300%. If the annual billings growth is both above the threshold level and between any of
the levels described above, the payout percentage will be determined based on linear interpolation between the
corresponding payout percentages for those levels. The target annual billings growth will be (i) for the Company’s
2023 fiscal year, 20%, and (ii) for each other fiscal year, a percentage to be determined by the Compensation and
People Committee by the end of the first month of such fiscal year.

Annual billings growth is the percentage increase in billings in a fiscal year over the billings in the immediately
preceding fiscal year. For these purposes, billings is the amount of billings reported on our annual report on Form
10-K or quarterly report on Form 10-Q, as adjusted to exclude the impact of merger and acquisition transactions but
with no adjustments for changes in backlog, billings plans, or contract length. The calculation of billings is provided
in Appendix A to this Proxy Statement.

The number of fiscal 2023 PSUs that vest on November 1, 2025 (up to a maximum of 600% of the target number) will
be equal to the product of (x) the number of Eligible PSUs and (y) the rTSR modifier, subject to the applicable NEO’s
continued service through the vesting date.

A tentative rTSR modifier will be determined based on the TSR of the Company during the performance period
relative to the TSRs of the indexed companies (which are the companies that are a component of the S&P 500
Index or any successor index on the last day of the performance period and were also a component of such index
on the first day of the performance period) during the performance period, as follows: (i) if the relative TSR is at the
90th percentile or above, the tentative rTSR modifier will be 2.0, (ii) if the relative TSR is at the 75th percentile, the
tentative rTSR modifier will be 1.50, (iii) if the relative TSR is at the 50th percentile, the tentative rTSR modifier will be
1.0, and (iv) if the relative TSR is at the 25th percentile or below, the tentative rTSR modifier will be 0.75. If the relative
TSR is between any of these thresholds, the tentative rTSR modifier will be determined based on linear interpolation
between the corresponding numbers for those thresholds. The rTSR modifier will be equal to the tentative rTSR
modifier if the Company’s TSR is 0% or greater, but if the Company’s TSR is less than 0%, then the rTSR modifier will
be the lower of the tentative TSR modifier or 1.0.

Any fiscal 2023 PSUs that do not become Eligible PSUs due to the minimum performance metrics threshold not
being achieved are forfeited without consideration.

With respect to annual billings growth, the Compensation and People Committee steepened the curve above
and below the target annual billings growth to create a symmetrical pay versus performance relationship that
increases the severity of the curve below target (i.e., offering less “protection” for below target performance) and
increases the maximum potential payout about target only when performance is exceptional. The changes made
to the maximum payout percentage and rTSR modifier in fiscal 2023 were made to strengthen the relationship
between pay and performance and add a strict focus on stockholder returns. With respect to the rTSR modifier,
the Compensation and People Committee added a strict cap on the modifier of 1.0x if stockholder returns are not
positive for the period even if relative performance is exceptional, and added additional upside for significantly
above target performance.

Based on our actual annual billings growth of 23% (compared to a target of 20%), our Compensation and People
Committee determined a payout percentage of 193% for fiscal 2023.

2023 Proxy StatementExecutive Compensation

FISCAL 2022 ACHIEVEMENT WITH RESPECT TO FISCAL 2022 PSUS
The fiscal 2022 PSUs were allocated into two halves, each of which included a component that vests based on the
achievement of the performance goals for the Company’s 2022 fiscal year, as follows:

• for each NEO (other than Mr. Jenkins), (i) 50% of the PSUs vest based on the achievement of the performance

goals for the Company’s 2022 and 2023 fiscal years, and (ii) 50% of the PSUs vest based on the achievement of the
performance goals for the Company’s 2022, 2023, and 2024 fiscal years; and

• for Mr. Jenkins, (i) 33% of the PSUs vest based on the achievement of the revenue goal for the Company’s 2022
fiscal year, (ii) 33% of the PSUs vest based on the achievement of the performance goals for the Company’s
2022 and 2023 fiscal years (“Jenkins Tranche 2”), and (iii) 34% of the PSUs vest based on the achievement of the
performance goals for the Company’s 2022, 2023, and 2024 fiscal years.

The number of PSUs covered by a tranche that become Eligible PSUs will be equal to the product of (i) the target
number of PSUs for the tranche and (ii) the average of the payout percentages for each fiscal year in the applicable
performance period. Based on our actual annual revenue growth of 25.3% (compared to a target of 25.7%), our
Compensation and People Committee determined a payout percentage of 96% for fiscal 2023.

For Jenkins Tranche 2 and the first tranche of the fiscal 2022 PSUs granted to each other NEO, the number of fiscal
2022 PSUs that vested in each of these tranches (up to a maximum of 300% of the target number) was equal to the
product of (x) the number of Eligible PSUs for the tranche and (y) the rTSR modifier for the tranche, subject to the
applicable NEO’s continued service through the certification date. The rTSR modifier for each of these tranches was
determined based on relative TSR during the 2-year performance period ending on June 30, 2023, which was at the
97th percentile. Based on this relative TSR for these tranches, the rTSR modifier was 1.5x, and the number of PSUs
that vested was 174% of target.

OUR APPROACH TO ONE-TIME AWARDS TO NAMED EXECUTIVES
The Compensation and People Committee believes it may be necessary from time-to-time to make one-time awards
outside of the normal grant cycle in certain circumstances, primarily to attract new executives, internally promote an
executive or counter an external competing offer to one of our existing executives for retention purposes.

In considering these awards, the Compensation and People Committee follows the following principles:

• For new hire awards, time-vested equity should compensate the executive for a portion of the unvested equity
they would forfeit from their current role or forgo from a competing offer. Any additional upside should be
delivered through performance-based equity, such that a majority of the total equity value is performance-based.

• For promotion and retention awards, the majority of the award should be performance-based and any time
vested equity should be granted only if the employee’s existing unvested equity is low compared to market
benchmarks or internal peers.

As described under “How We Compensate Our Chief Executive Officer” above, in fiscal 2023, we granted Mr. Arora,
our Chief Executive Officer, a long-term performance and retention award that was entirely performance-based to
incentivize and reward him for continuing to deliver significant stockholder value.

Executive Compensation

OUTSTANDING PERFORMANCE-BASED AWARDS
The following table shows outstanding performance-based grants made to our NEOs as of July 31, 2023 which
have remaining performance targets. This table, together with the long-term performance and retention award
granted to our CEO as discussed above, illustrates that a significant portion of performance-based awards remain
outstanding and continue to incentivize our NEOs’ performance going forward.

% of Total
PSU Grant Measure Type

Grant
Executive PSU Program

FY22

FY23

FY24

FY25

FY26

FY22 Grant
(Made
August 2021)

FY23 Grant
(Made
August 2022)

50%

Financial
Metrics

Revenue
Growth

FY22 Target
27.5%

FY23 Target
25.7%

FY24 Target
TBD

100%

Relative TSR
Financial
Metrics

FY22 Actual
29.3%

FY23 Actual
25.3%
3 Year Relative TSR vs S&P 500
Billings
Growth

Billings
Growth

FY23
Target 20%

FY24 Target
TBD

FY25 Target
TBD

FY 23 Actual
23.1%

Relative TSR

3 Year Relative TSR vs S&P 500

Final Payout = Average of Annual Financial Metric Payouts
X
Relative TSR Modifier

Start and End of Performance Period

Other Aspects of Our Executive Compensation Programs
Employment Agreements
Each of our NEOs is a party to an employment arrangement setting forth the material terms of his employment.
For a summary of the material terms and conditions of these arrangements, see the section titled “—Executive
Employment Agreements.”

Post-Employment Compensation
The employment arrangement for each of our NEOs provides for payments and/or benefits related to an involuntary
termination of employment, including in connection with a change in control of our Company, on a “double trigger”
basis. We believe that these protections assist us in retaining the services of these individuals. We also believe that
these protections serve our business objectives by helping our NEOs maintain continued focus and dedication
to their responsibilities to maximize stockholder value, including in the event that there is a potential transaction
that could involve a change in control of our Company. The terms of these post-employment compensation
arrangements were determined after our Board and Compensation and People Committee reviewed our retention
goals for each NEO and an analysis of relevant market data.

For a summary of the material terms and conditions of these post-employment compensation arrangements,
as well as an estimate of the amounts potentially payable pursuant to such arrangements, see the sections titled
“—Executive Employment Agreements” and “—Potential Payments Upon Termination or Change in Control.”

2023 Proxy StatementExecutive Compensation

Our Compensation and People Committee has adopted a continued service policy as an additional tool to serve
several critical interests when circumstances warrant. These interests include maintaining distinctive executive
ability; providing continuity of expertise in servicing our customers; minimizing the business disruption that can
follow executive attrition; and solidifying succession planning.

Employees holding the title of Senior Vice President or higher are eligible for continued vesting of equity awards
if such employee (i) voluntarily resigns from full-time employment; (ii) has attained the age of 55 years and has
been continuously employed by the Company as a full-time employee for at least five years as of the date of such
resignation or has been continuously employed by the Company as a full-time employee for at least 10 years as of
the date of such resignation or transition; and (iii) maintains a continued service relationship with the Company,
including by transitioning employment to an advisory role, whether as employee or independent contractor.
Eligible employees are not guaranteed benefits under the policy. Each award of benefits under the policy will be
individually assessed and determined by the administrator of the policy (which is our Board or Compensation and
People Committee), including the determination of which equity awards that will be subject to continued vesting
and the related terms and conditions. Eligible employees will enter into a continued service agreement with the
Company in a form approved by the administrator.

Executive Officer Stock Ownership Guidelines
Purpose. Our Board believes that our executive officers should hold a meaningful financial stake in our Company to
closely align their interests with those of our stockholders and has therefore adopted stock ownership guidelines as
part of our corporate governance guidelines.

Ownership Definition. Unvested PSUs, RSUs, and unexercised stock options do not count toward satisfying these
ownership guidelines.

Ownership. The following is a summary of our robust stock ownership guidelines. Our Chief Executive Officer
and executive officers who report directly to our Chief Executive Officer must accumulate and hold shares of our
common stock based on a multiple of base salary within five years of their appointment as, or promotion to, an
executive officer.

As of September 30, 2023, each of our NEOs have met their respective ownership guideline.

The following table lists the specific ownership requirements for our NEOs, their status in meeting the guidelines,
and their deadlines to meet the current requirements.

Officer
Nikesh Arora
Dipak Golechha
William “BJ” Jenkins
Lee Klarich
Nir Zuk

Multiple of
Base Salary
Requirement

10x
1x
1x
1x
1x

Status
Met
Met
Met
Met
Met

Deadline
June 2023
March 2026
August 2026
May 2011
February 2010

Risk Assessment and Compensation Practices
Our management assesses and discusses with our Compensation and People Committee our compensation
policies and practices as they relate to our risk management. Based upon this assessment, the Compensation and
People Committee believes that any risks arising from such policies and practices are not reasonably likely to have a
material adverse effect on us.

In reaching this conclusion, we have considered, among other things, the following factors:

• our cash incentive plan reflects a “pay for performance philosophy” that rewards our NEOs and other eligible

employees for achievement of performance targets;

• discretionary bonuses are reserved for extraordinary performance and achievement;

Executive Compensation

• total compensation features a balance of short- and long-term incentives (LTI), with the majority of pay delivered

in LTI for senior executives;

• our equity awards include multi-year vesting schedules requiring long-term employee commitment;

• our performance expectations reward long-term value creation, profitability and excellence;

• our use of multiple performance measures in incentive plans;

• our regular monitoring of short-term and long-term compensation practices to determine whether

management’s objectives are satisfied;

• performance goals require sufficient “stretch,” yet are achievable;

• both the short-term and long-term incentive programs have caps for significant upside performance; and

• our independent compensation consultant evaluated and assessed our compensation policies and practices and

confirmed that our practices do not encourage excessive risk taking.

Compensation Recovery Policy
We have adopted a Clawback Policy through which we may seek the recovery of performance-based incentive
compensation paid by us under certain circumstances. The Clawback Policy applies to our Chief Executive
Officer and to all officers who report directly to the Chief Executive Officer, including our NEOs (the “covered
executives”). The Clawback Policy provides that if (i) we restate our financial statements as a result of a material
error; (ii) the amount of cash incentive compensation or performance-based equity compensation that was paid,
or is payable based on achievement of specific financial results, to a covered executive would have been less if
the financial statements had been correct; (iii) no more than two years have elapsed since the original filing date
of the financial statements upon which the incentive compensation was determined; and (iv) our Compensation
and People Committee unanimously concludes, in its sole discretion, that fraud or intentional misconduct by
such covered executive caused the material error and it would be in our best interests to seek from such covered
executive recovery of the excess compensation, then our Compensation and People Committee may, in its sole
discretion, seek repayment from such covered executive. We anticipate adopting a new Clawback Policy in
November 2023 in compliance with Nasdaq Rule 5608, which will become effective on December 1, 2023.

Hedging and Pledging Policies
Our insider trading policy prohibits our executive officers and members of our board of directors from engaging in
derivative securities transactions, including hedging or other transactions that offset, or are designed to hedge or
offset, any decrease in the market value of our equity securities and from pledging Company securities as collateral
or holding Company securities in a margin account, except, in the case of pledging, with the prior approval of the
ESG and Nominating Committee. This policy does not restrict ownership of, or transactions related to, Company-
granted awards, such as PSUs, RSUs, employee stock options, and other securities issued by the Company or the
deferral of equity awards pursuant to our non-qualified deferred compensation plan.

Our executive officers have significant holdings of our stock to align their interests to those of our stockholders.
Establishing a conservative pledging policy enables our executive officers to continue to hold those shares, while
providing them flexibility in financial planning and allowing them to achieve financial diversification. By enabling
our executives to maintain their stock ownership in the Company, our conservative pledging program helps ensure
that they continue to have a meaningful financial interest in the success of the Company under their leadership. For
these reasons, in fiscal 2022, the Board adopted a conservative policy that allows limited pledging of our stock by
our executive officers.

Our pledging policy establishes the parameters of pledging arrangements, and provides that any pledging
arrangement must be approved in advance by our ESG and Nominating Committee, as well as sets an overall
limit of $100 million on the total value of shares pledged by our executive officers (as a group). Under this policy,
all pledges of shares of Company stock by our executives must comply with the following requirements:

• any proposed pledge of shares must be approved in advance by the ESG and Nominating Committee;

• the loan amount against which shares are pledged must not exceed 30% of the aggregate fair market value of

the individual’s total stock ownership at the time the arrangement is executed;

2023 Proxy StatementExecutive Compensation

• only outstanding shares held by an individual may be pledged (i.e., no shares subject to options or unvested RSUs,

PSUs or other unvested equity awards may be pledged);

• no shares may be pledged that would cause the total value of all pledged shares of our executive officers in the

aggregate (as a group) to exceed $100 million;

• pledged shares cannot consist of any shares that remain subject to the Company’s One Year Hold Policy; and

• the stock ownership requirements applicable to our executives are in addition to, and cannot include,

pledged shares.

When approving a pledging arrangement, in addition to the requirements above, the ESG and Nominating
Committee will consider any other factors deemed relevant by the Committee, including, without limitation, the
total number of shares of Company stock beneficially owned by the applicable executive, the pledged shares as
a percentage of the executive’s aggregate beneficially owned shares, the pledged shares as a percentage of the
Company’s total outstanding shares, whether the pledged shares were purchased by the executive, and whether
the executive has entered into any other pledging arrangement.

Tax and Accounting Considerations
Deductibility of Executive Compensation. Section 162(m) of the Code generally disallows public companies a tax
deduction for federal income tax purposes of remuneration in excess of $1 million paid to the chief executive officer
and certain other highly compensated executive officers in any taxable year.

While our Compensation and People Committee is mindful of the benefit of being able to fully deduct the
compensation paid to our NEOs, our Compensation and People Committee believes that we should retain the
flexibility to provide compensation to our NEOs that is not fully tax deductible when it believes that such payments
are appropriate to attract and retain executive talent or meet other business objectives. Our Compensation and
People Committee intends to continue to compensate our NEOs in a manner consistent with the best interests of
our Company and our stockholders even if any portion of such compensation is non-deductible.

Taxation of “Parachute” Payments. Sections 280G and 4999 of the Code provide that executive officers and
directors who hold significant equity interests and certain other service providers may be subject to significant
additional taxes if they receive payments or benefits in connection with a change in control that exceeds certain
prescribed limits and that we (or a successor) may forfeit a deduction on the amounts subject to this additional
tax. We did not provide any of our NEOs with a “gross-up” or other reimbursement payment for any tax liability
that the NEO might owe as a result of the application of Sections 280G or 4999 during fiscal 2023, and we have
not agreed and are not otherwise obligated to provide any NEO with such a “gross-up” or other reimbursement in
the future.

Accounting for Share-Based Compensation. We follow ASC Topic 718 for our share-based compensation awards.
ASC Topic 718 requires companies to measure the compensation expense for all share-based compensation
awards made to employees and directors, including stock options and other stock-based awards, based on the
grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the
compensation tables below, even though our NEOs may never realize any value from their awards. ASC Topic 718
also requires companies to recognize the compensation cost of their share-based compensation awards in their
income statements over the period that an executive officer is required to render service in exchange for the
option or other award.

Perquisites and Other Personal Benefits
Retirement Plans. We have established a U.S. tax-qualified Section 401(k) retirement plan for all employees who
satisfy certain eligibility requirements, including requirements relating to age and length of service. We currently
match contributions made to the plan by our employees up to $1,000, including our NEOs. In fiscal 2023, Messrs.
Golechha, Jenkins and Klarich participated in our Section 401(k) retirement plan and each received a matching
contribution of $1,000. We intend for the plan to qualify under Section 401(a) of the Internal Revenue Code, or the
Code, so that contributions by employees to the plan, and income earned on plan contributions, are not taxable to
employees until withdrawn from the plan. We made payments for Mr. Zuk to certain Israeli pension and severance
funds available to employees of our Israel subsidiaries.

Executive Compensation

Health and Welfare Plans. In addition, we provide other benefits to our NEOs on the same basis as all of our
full-time employees in the country in which they are resident. These benefits include medical, dental, and vision
benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance,
accidental death and dismemberment insurance, and basic life insurance coverage. We design our employee
benefits programs to be affordable and competitive in relation to the market, as well as compliant with applicable
laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of
applicable laws and practices and the competitive market. We made payments for Mr. Zuk to certain Israeli
health insurance plans available to employees of our Israel subsidiaries.

Deferred Compensation Plan. We have adopted a deferred compensation plan, which is a non-qualified deferred
compensation plan established in compliance with Section 409A of the Code. Participation in the deferred
compensation plan is voluntary and limited to U.S. employees of the Company and affiliates that are at the Vice
President level or above, as determined by the Compensation and People Committee, which administers the
deferred compensation plan, and includes the Company’s executive officers. For a summary of the material terms
and conditions of the deferred compensation plan, see the section titled “—Executive Compensation Tables.”

Other Personal Benefits. The Board continued to take reasonable steps to ensure the safety and security of Mr. Arora,
considering the nature of the position and its criticality to the operation of the Company.

We previously retained a leading global risk management and security consulting firm to analyze and determine if
there was a bona-fide business related security concern for Mr. Arora. Based on the results of its investigation (which
included a personal security incident involving Mr. Arora), this firm determined that there was a bona-fide, business
related security concern for Mr. Arora and credible threat actors existed with both the willingness and resources
necessary for conducting an attack on Mr. Arora. Accordingly, the firm recommended that the Company take
various steps to ensure the safety of Mr. Arora. In fiscal 2023, our Compensation and People Committee approved an
amendment to our chartered aircraft policy to require the use of chartered aircraft for business and personal-related
air travel by Mr. Arora. As a result of certain vehicle-related incidents involving our executives and Board members, we
also retained a driving service for Mr. Arora to ensure his safety during vehicular travel. Our Compensation and People
Committee determined that, if any harm occurred to our Chief Executive Officer, our business operations, investor
confidence and employee productivity would be severely impacted.

Our Compensation and People Committee periodically reviews the nature and cost of this program in relation to
his security profile. Even though this security program was put in place for business reasons, the component of
the program that includes security at Mr. Arora’s residence and during personal travel is required to be disclosed
as a perquisite under the relevant SEC disclosure rules and is included in the “All Other Compensation” column in
the Summary Compensation Table. The amount paid in fiscal 2023 was $1,660,554. The value of Mr. Arora’s use of
chartered aircraft for personal travel in fiscal 2023, was $1,822,296. Mr. Arora recognizes imputed income when aircraft
is used for personal travel and in fiscal 2023, we paid $286,043 of his taxes on such imputed income. On occasion,
guests of Mr. Arora also may accompany him, at a de minimis incremental cost to the Company.

Our Compensation and People Committee believes that amounts paid by the Company for this security program
have been reasonable, necessary and for our benefit. We require these security measures for the Company’s benefit
because of the importance of Mr. Arora to the Company, and we believe that the scope and costs of these security
programs are appropriate and necessary.

We also paid a filing fee of $30,000 for each of Messrs. Arora and Klarich in connection with a regulatory filing related
to their ownership of our stock which predominantly arose from equity award compensation granted to them as
officers of the Company.

In the future, we may provide perquisites or other personal benefits in limited circumstances, such as where we
believe it is appropriate to assist an individual NEO in the performance of his or her duties, to make our NEOs more
efficient and effective, and for recruitment, motivation, or retention purposes. All future practices with respect to
perquisites or other personal benefits will be approved and subject to periodic review by our Compensation and
People Committee.

2023 Proxy StatementExecutive Compensation

Report of the Compensation and
People Committee

Our Compensation and People Committee has reviewed and discussed the Compensation Discussion and
Analysis with management. Based on such review and discussion, our Compensation and People Committee
has recommended to our board of directors that the Compensation Discussion and Analysis be included in this
proxy statement.

Respectfully submitted by the members of the Compensation and People Committee of our Board:

Rt Hon Sir John Key (Chair)

Aparna Bawa

John Donovan

Executive Compensation

Executive Compensation Tables

Fiscal 2023 Summary Compensation Table
The following table presents summary information regarding the compensation paid to, or earned by, our Named
Executive Officers for our fiscal year ended July 31, 2023.

Name and
Principal Position

Nikesh Arora
Chief Executive Officer

Dipak Golechha
Chief Financial Officer

William “BJ” Jenkins
President

Lee Klarich
Chief Product Officer

Nir Zuk(7)
Founder and Chief
Technology Officer

Salary
($)

Stock
Awards
($)(1)
Year
2023 750,000(2) 145,374,318
7,007,348
2022 250,000
20,355,789
2021 333,333
7,879,645
2023 600,000
1,868,557
2022 600,000
8,292,144
2021 325,821
12,116,568
2023 750,000
17,835,150
2022 734,375
15,685,347
2023 550,000
4,671,565
2022 550,000
9,693,233
2021 550,000
6,961,334
2023 419,515
1,635,031
2022 459,420
2,907,970
2021 444,073

Non-Equity
Incentive Plan
Compensation
($)

All
Other
Compensation
($)

1,500,000
1,500,000
1,500,000
900,000
900,000
368,407
1,125,000
1,125,000
825,000
825,000
825,000
629,272
689,130
666,900

3,800,885(3)
1,653,129
1,094,736

2,023(4)

251,946
3,929
31,836(5)
1,996
32,023(6)
1,996
1,957
76,091(8)
83,576
63,227

Total
($)

151,425,203
10,410,477
23,283,858
9,381,668
3,620,503
8,990,301
14,023,404
19,696,521
17,092,370
6,048,561
11,070,190
8,086,212
2,867,157
4,082,170

(1) The amounts reported in the Stock Awards column represent the grant date fair value of the RSUs (including time-based RSUs
and PSUs) that were considered, under ASC Topic 718, to have been granted to our Named Executive Officers in each reported
fiscal year, as computed in accordance with ASC Topic 718. The disclosure rules for stock awards in the summary compensation
table are based on when there is a measurement date under financial accounting rules, because that is when it is possible
to determine grant date fair value. As a result, performance-based stock awards are not always disclosed in the summary
compensation table during the year that they were legally granted if performance metrics for a portion of the awards are set in
a subsequent year. In the table above:

i. The amounts included for fiscal 2021 includes the grant date fair value of the portion of PSUs legally granted in fiscal 2019

that were eligible to vest based on achievement against fiscal 2021 revenue growth and the grant date fair value of all of the
PSUs legally granted in 2021 because the performance metrics for those PSUs were set in fiscal 2021.

ii. The amounts included for fiscal 2022 includes the grant date fair value of the portion of PSUs legally granted in fiscal

2019 that were eligible to vest based on achievement against fiscal 2022 revenue growth and the grant date fair value of
approximately 42% (or in Mr. Jenkins’ case, 61%) of the PSUs legally granted in fiscal 2022 because the performance metrics
for those PSUs were set in fiscal 2022.

iii. The amounts included for fiscal 2023 includes the grant date fair value of approximately 42% (or in Mr. Jenkins’ case, 28%) of
the PSUs legally granted in fiscal 2022, the grant date fair value of 1/3rd of the PSUs legally granted in August 2022 and the
grant date fair value of all of the PSUs legally granted to Mr. Arora in June 2023 because the performance metrics for those
PSUs were set in fiscal 2023.

The result of this disclosure regime is that the increase in our stock price year over year results in larger grant date fair values
reported in years subsequent to the year awards were legally granted because the higher stock price is used to establish the
grant date fair value of the portion of an award that is set in those subsequent years. The grant date fair value of the awards
included in fiscal 2023, assuming that the highest level of performance conditions will be achieved, is $197,537,575 for Mr. Arora,
$20,576,207 for Mr. Golechha, $29,585,267 for Mr. Jenkins, $39,398,890 for Mr. Klarich, and $18,204,373 for Mr. Zuk. The portions of
any awards that vest based on the achievement of performance goals (other than relative TSR) for fiscal years after fiscal 2023
do not have a reportable grant date fair value under ASC Topic 718 and are not included in this table. The assumptions used in
calculating the grant date fair value of the awards reported in this column are set forth in the notes to our audited consolidated
financial statements included in our Annual Report on Form 10-K for our fiscal year ended July 31, 2023. For more information,
see footnote 3 to the Fiscal 2023 Grants of Plan-Based Awards Table. Note that the amounts reported in this column do
not correspond to the actual economic value that may be received by our Named Executive Officers from their restricted
stock units.

(2) From November 1, 2021 to October 31, 2022, Mr. Arora elected to forgo his salary.

2023 Proxy StatementExecutive Compensation

(3) Consists of life insurance premiums of $816, disability insurance premiums of $207, a fee of $30,000 for a regulatory filing related
to ownership of our stock, $969 of miscellaneous expenses, personal security costs of $1,660,554 based on invoices provided by
a third party security company, approximately $1,822,296 for costs related to personal usage of private aircraft and $286,043 of
associated taxes. For purposes of reporting the value of personal usage of private aircraft in this table, we use costs provided by
the applicable charter company, which include contracted hourly charges, and fuel charges. On occasion, guests of Mr. Arora
also may accompany him, at a de minimis incremental cost to the Company, on the private aircraft. For more information
regarding Mr. Arora’s overall security program, and personal usage of private aircraft, see the section entitled “Compensation
Discussion and Analysis-Perquisites and Other Benefits” above.

(4) Consists of life insurance premiums of $816, disability insurance premiums of $207 and 401(k) plan matching contributions by

our Company of $1,000.

(5) Consists of life insurance premiums of $816, disability insurance premiums of $207, reimbursement of expenses related to
participation at certain Company events and nominal gift cards of $29,813 and 401(k) plan matching contributions by our
Company of $1,000.

(6) Consists of life insurance premiums of $816, disability insurance premiums of $207 and 401(k) plan matching contributions by

our Company of $1,000 and a fee of $30,000 for a regulatory filing related to ownership of our stock.

(7) For fiscal 2023, Mr. Zuk’s base salary, non-equity incentive compensation and all other compensation was paid in Israeli
currency. The amounts set forth in the table reflect the conversion from Israeli currency to U.S. dollars using an average
exchange rate of 0.28 U.S. dollars for one Israeli new shekel for fiscal 2023.

(8) Consists of $812 for expenses related to attendance at certain Company events and nominal gift cards and $813 of associated

taxes, $397 for health insurance contributions and $395 of associated taxes, $38,728 contributed for social security and pension
benefits and $34,946 contributed for severance benefits under Israeli government schemes.

CEO Pay Ratio
Under SEC rules, we are required to provide information regarding the relationship between the annual total
compensation of our Chief Executive Officer and the annual total compensation of our median employee. For our
last completed fiscal year, which ended July 31, 2023:

• The median of the annual total compensation of all employees (other than Mr. Arora) of our company and
our consolidated subsidiaries in fiscal 2023 was approximately $206,035. This annual total compensation
was calculated in accordance with Item 402(c)(2)(x) of Regulation S-K, and reflects, among other things,
salary, all bonuses earned, 401(k) contribution matches, life and disability insurance premiums paid by the
Company and the aggregate “grant date fair value” of equity awards granted during fiscal 2023.

• Mr. Arora’s annual total compensation, as reported in the Fiscal 2023 Summary Compensation Table

included in this Proxy Statement, was $151,425,203.

• Based on the above, for fiscal 2023, the ratio of Mr. Arora’s annual total compensation to the median of the

annual total compensation of all employees was approximately 735 to 1.

This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under
the Securities Act of 1933, as amended, and based upon our reasonable judgment and assumptions. The SEC rules do
not specify a single methodology for identification of the median employee or calculation of the pay ratio, and other
companies may use assumptions and methodologies that are different from those used by us in calculating their pay
ratio. Accordingly, the pay ratio disclosed by other companies may not be comparable to our pay ratio as disclosed above.

The methodology we used to calculate the pay ratio is described below.

• We determined the median of the annual total compensation of our employees as of May 1, 2023 at

which time we (including our consolidated subsidiaries) had approximately 14,081 full-time and part-time
employees, including interns, approximately 8,148 of whom are U.S. employees, and approximately 5,933 (or
approximately 42% of our total employee population) of whom are located outside of the United States. As
permitted under the SEC rules, we then determined the median employee as of such date by excluding
138 employees from certain jurisdictions, totaling approximately 1% of our workforce, leaving 13,943
employees in our median analysis. The countries excluded (and the number of individuals in each such
country) were as follows: Algeria, Argentina, Azerbaijan, Bulgaria, Dominican Republic, Ecuador, Greece,
Guernsey, Hungary, Kenya, Kuwait, Latvia, Luxembourg, Macao, Morocco, Nigeria, Panama, Peru, Romania,
Senegal, Slovenia, Sri Lanka, Tunisia, and Ukraine (fewer than ten individuals in each of these countries);
Chile, Colombia, Egypt, and Vietnam (fewer than 20 individuals in each of these countries); and the
Philippines (fewer than 30 individuals).

Executive Compensation

• To determine the median employee’s compensation, we then compared the sum of (i) the annual base

salary of each of these employees for fiscal 2023, plus (ii) the total annual cash incentive bonus, commission
or other cash compensation, as applicable, earned by each of these employees for fiscal 2023 as reflected
in our payroll records, plus (iii) the aggregate employer benefit, 401(k) contribution benefits and ESPP
purchase gains, plus (iv) the aggregate grant date fair value of equity awards that were considered, under
ASC Topic 718, to have been granted to these employees in fiscal 2023, as computed in accordance with
ASC Topic 718. Compensation paid in foreign currency was converted to U.S. dollars using a spot exchange
rate on May 1, 2023. In determining the median total compensation of all employees, we did not make any
cost of living adjustments to the compensation paid to any employee outside the U.S. Using this measure,
we identified a “median employee” who is a full-time, salaried employee located in the United States.
Initially, a different employee had been identified, but in the process of determining that employee’s
total compensation in accordance with applicable SEC rules, we recognized that there were anomalous
elements in that employee’s compensation which we believe did not reasonably reflect the annual
compensation of our employees generally. Consequently, we identified an employee whose amount for the
consistently applied compensation measure was very close to the initial employee, but who did not have
such unusual elements.

• Once we identified our median employee, we estimated the median employee’s annual total compensation
in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, yielding the median annual total
compensation disclosed above. With respect to Mr. Arora’s annual total compensation, we used the amount
reported in the “Total” column of our Fiscal 2023 Summary Compensation Table.

Fiscal 2023 Grants of Plan-Based Awards
The following table presents information regarding the amount of equity awards granted to our Named Executive
Officers during our fiscal year ended July 31, 2023.

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)

Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)

Date of
Board or
Committee
Action to
Grant the
Award

Name
Mr. Arora

Mr. Golechha

Mr. Jenkins

Mr. Klarich

Grant
Date
—
8/20/21
8/23/22
6/2/23
—
8/20/21
8/23/22
—
8/20/21
8/23/22
—
8/20/21

—
—
—

Target
($)

Threshold
($)

Target
(#)
—

Threshold
(#)
—

Maximum
($)
— 450,000 1,000,000 1,650,000

Maximum
(#)
—
— 18,989 50,637 151,911
1 72,505 435,030
—
— 250,000 500,000 750,000
—
40,509
1 17,172 103,032
—
—
—
— 11,185 29,826
89,470
1 19,080 114,480
—
—
—
—
— 247,500 550,000 907,500
— 12,660 33,759 101,277

— 270,000 600,000 990,000
—
—
— 337,500 750,000 1,237,500

—
5,064 13,503

—
—

—

8/17/21
8/18/22
6/2/23

8/17/21
8/18/22

8/17/21

8/23/22

8/18/22

—

1 28,620 171,720

Mr. Zuk(4)

—

— 188,782 419,515 692,199

—

8/20/21

8/17/21

8/23/22

8/18/22

—

4,430 11,814

35,422

1 15,264

91,584

All Other
Grant
Stock
Date Fair
Awards:
Value of
Number of
Stock
Shares of
Awards
Stock or
($)(3)
Units (#)
—
—
— 11,485,379
— 20,338,939
— 113,550,000
—
—
3,062,727
—
4,816,918
—
—
—
6,764,437
—
5,352,131
—
—
—
—

7,657,151

—

8,028,196

—

2,679,630

4,281,704

(1) Amounts in the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” columns relate to target incentive
compensation opportunities under the fiscal 2023 cash incentive plan and assumes achievement at target levels for our
corporate performance measures. For achievement in excess of target, overperformance could be rewarded with a payout of
up to 165% of each NEO’s target. The actual amounts paid to our NEOs are set forth in the “Fiscal 2023 Summary Compensation
Table” above and the calculation of the actual amounts paid is discussed more fully in the section titled “Fiscal 2023 Executive
Compensation Program—Fiscal 2023 Executive Compensation Program Components—Annual Cash Incentive Compensation.”
(2) Represents PSUs that were considered, under ASC Topic 718, to have been granted in fiscal 2023. The threshold is calculated as
if the threshold of Company performance measure was reached and/or the lowest TSR modifier was reached. The maximum
is calculated assuming all maximum Company performance targets were met and/or the relative TSR modifier was also at

2023 Proxy StatementExecutive Compensation

the maximum value. For more information, see the section titled “Fiscal 2023 Executive Compensation Program—Fiscal 2023
Executive Compensation Program Components—Fiscal 2023 Equity Compensation” and with respect to the award of PSUs
granted to Mr. Arora in June 2023, “How We Have and Will Continue to Compensate our Chief Executive Officer—Fiscal 2023
Long-Term Performance and Retention Award.”

(3) The amounts reported in the Grant Date Fair Value of Stock Awards column represent the grant date fair value of the portions
of the PSU awards that were considered, under ASC Topic 718, to have been granted in fiscal 2023. The assumptions used in
calculating the grant date fair value of the PSUs reported in this column are set forth in the notes to our audited consolidated
financial statements included in our Annual Report on Form 10-K for our fiscal year ended July 31, 2023. The value of the PSUs is
calculated using a Monte-Carlo simulation valuation performed as of the date of grant by an independent third party. Because
the grant date for a PSU under ASC Topic 718 occurs when performance targets are approved, and we approved performance
targets only with respect to fiscal year 2023, PSU values in this column include
(i) with respect to PSUs granted in August 2021, 42% of the PSUs granted to Mr. Arora, Golechha, Klarich and Zuk and 20% of

the PSUs granted to Mr. Jenkins;

(ii) with respect to PSUs granted in August 2022, ⅓ of the PSUs granted; and
(iii) with respect to PSUs granted to Mr. Arora in June 2023, all of the PSUs granted.

Note that the amounts reported in this column do not correspond to the actual economic value that may be received by our

NEOs from their PSU awards.

(4) The amounts set forth in the table for Mr. Zuk for estimated future payouts under Non-Equity Incentive Plan Awards reflect the
conversion from Israeli currency to U.S. dollars using an average exchange rate of 0.28 U.S. dollars for one Israeli new shekel for
fiscal 2023.

Fiscal 2023 Outstanding Equity Awards at Fiscal Year-End
The following table presents information regarding outstanding stock options and other equity awards held by our
Named Executive Officers as of July 31, 2023.

Option
Awards—
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable

Option
Awards—
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

Option
Awards—
Option
Exercise
Price ($)

Option
Awards—
Option
Expiration
Date

Stock
Awards—
Number
of Shares
or Units of
Stock That
Have Not
Vested (#)

Stock
Awards—
Market Value
of Shares or
Units of Stock
That Have Not
Vested ($)(1)

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested (#)

Equity Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other Rights
That Have Not
Vested ($)

6/7/2018(7) 3,000,000

— 66.17 12/6/25

Named
Executive Officer

Mr. Arora

Grant Date

6/2/2023(2)

8/20/2022(3)

8/20/2021(4)

10/20/2020(5)

6/7/2018(6)

Mr. Golechha

8/20/2022(3)

8/20/2021(4)

3/20/2021(8)

12/20/2020(9)

8/20/2022(3)

8/20/2021(4)

8/20/2021(10)

8/20/2022(3)

8/20/2021(4)

10/20/2020(11)

Mr. Jenkins

Mr. Klarich

Mr. Zuk

—

10/20/2018(7) 1,742,079

— 64.50 4/19/26

8/20/2022(3)

8/20/2021(4)

10/20/2020(12)

—

750,000 187,470,000

— 1,305,090 326,220,296

— 105,727 26,427,521

182,292 45,565,708

— 271,164 67,780,153

— 170,232 42,551,191

—

309,096 77,261,636

— 28,193 7,047,122

48,609 12,150,306

— 29,088 7,270,836

— 15,126 3,780,895

—

343,440 85,846,262

— 61,531 15,380,187

109,303 27,321,428

— 28,701 7,174,102

—

515,160 128,769,394

— 70,485 17,618,431

121,527 30,376,889

— 75,954 18,985,462

—

274,752 68,677,010

— 24,669 6,166,263

42,534 10,631,799

— 36,462 9,114,042

—

10/20/2018(7) 1,509,057

— 64.50 4/19/26

—

(1) The market value of unvested or unearned shares is calculated by multiplying the number of unvested or unearned shares held
by the applicable NEO by the closing market price of our common stock on the Nasdaq on July 31, 2023 (the last trading day of
our 2023 fiscal year), which was $249.96 per share.

Executive Compensation

(2) Represents PSUs that were granted under our 2021 Plan. Values included in the Equity Incentive Plan Awards: Number of

Unearned Shares, Units or Other Rights That Have Not Vested and Equity Incentive Plan Awards: Market or Payout Value of
Unearned Shares, Units or Other Rights That Have Not Vested columns include the maximum values for number of shares
and market value (i.e., calculated assuming the highest relative TSR target was met). For more information, see the section
titled “How We Have and Will Continue to Compensate Our Chief Executive Officer—Fiscal 2023 Long-Term Performance and
Retention Award.”

(3) Represents PSUs that were granted under our 2021 Plan. Values included in the “Equity Incentive Plan Awards: Number of

Unearned Shares, Units or Other Rights That Have Not Vested” and “Equity Incentive Plan Awards: Market or Payout Value of
Unearned Shares, Units or Other Rights That Have Not Vested” columns include the maximum values for number of shares and
market value (i.e., calculated assuming all maximum company performance targets were met and the relative TSR modifier was
also at the maximum value). For more information, see the section titled “Fiscal 2023 Executive Compensation Program—Fiscal
2023 Executive Compensation Program Components—Fiscal 2023 Equity Compensation.”

(4) Represents PSUs that were granted under our 2012 Equity Incentive Plan (the “2012 Plan”). Values included in the “Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested” and “Equity Incentive
Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested” columns include the
maximum values for number of shares and market value (i.e., calculated assuming all maximum company performance targets
were met and the relative TSR modifier was also at the maximum value). Values included in the “Stock Awards—Number
of Shares or Units of Stock That Have Not Vested” and “Stock Awards—Market Value of Shares or Units of Stock That Have
Not Vested” columns reflect the PSUs that were eligible to vest, as of July 31, 2023, based upon achievement of the specified
performance metric.

(5) Represents PSUs that were granted under our 2012 Plan. A specified performance metric having been achieved, the PSUs that
became eligible to vest will vest over a four-year period, with 15% of such PSUs having vested in equal quarterly increments
during year two with the first vesting on January 20, 2022; 42.5% of such PSUs vesting in equal quarterly increments during year
three; and 42.5% of such PSUs vesting in equal quarterly increments during year four, in each case subject to the executive’s
continued service through the applicable vesting date.

(6) Vested as to 1/7th of the restricted stock units on June 7, 2019 and the remaining restricted stock units vest in equal increments
each quarter thereafter with full vesting occurring on June 7, 2025, in each case subject to the executive’s continued service
through the applicable vesting date.

(7) All shares subject to this PSO have vested due to the achievement of certain stock price targets and continued service.
(8) A specified performance metric having been achieved, the PSUs that became eligible to vest will vest over a four-year period
with one fourth (1/4th) of such PSUs having vested on the one-year anniversary of the grant date; and one-sixteenth (1/16th)
of such PSUs vesting quarterly thereafter, in each case subject to the executive’s continued service through the applicable
vesting date.

(9) Vests over a four-year period, with one fourth (1/4th) of the restricted stock units having vested on the one-year anniversary of
the grant date; and one-sixteenth (1/16th) of the restricted stock units vesting quarterly thereafter, in each case subject to the
executive’s continued service through the applicable vesting date.

(10) Vests over a four-year period, with forty percent (40%) of the restricted stock units having vested on the one-year anniversary of
the grant date; thirty percent (30%) of the restricted stock units vesting in equal quarterly increments during the second year;
twenty percent (20%) of the restricted stock units vesting in equal quarterly increments during the third year; and ten percent
(10%) of the restricted stock units vesting in equal quarterly increments during the fourth year, in each case subject to the
executive’s continued service through the applicable vesting date.

(11) A specified performance metric having been achieved, the PSUs that became eligible to vest will vest over a four-year period,

with 25% of such PSUs having vested on October 20, 2021; 25% of such PSUs having vested in equal quarterly increments
during year two; 25% of such PSUs vesting in equal quarterly increments during year three; and 25% of such PSUs vesting
in equal quarterly increments during year four, in each case subject to the executive’s continued service through the
applicable vesting date.

(12) A specified performance metric having been achieved, the PSUs that became eligible to vest will vest over a four-year period,

with 20% of such PSUs having vested during year two with the first vest on January 20, 2022; 40% of such PSUs vesting in equal
quarterly increments during year three; and 40% of such PSUs vesting in equal quarterly increments during year four, in each
case subject to the executive’s continued service through the applicable vesting date.

2023 Proxy StatementExecutive Compensation

Fiscal 2023 Option Exercises and Stock Vested
The following table presents information regarding the exercise of stock options and the vesting of stock awards by
our NEOs during our fiscal year ended July 31, 2023.

Named Executive Officer
Mr. Arora
Mr. Golechha
Mr. Jenkins
Mr. Klarich
Mr. Zuk

Option Awards—
Number of Shares
Acquired on
Exercise (#)
474,300
—
—
270,000
45,000

Option
Awards—Value
Realized on
Exercise ($)
104,070,289
—
—
55,569,753
6,230,576

Stock Awards—
Number of Shares
Acquired on Vesting
(#)

315,510(2)
26,712
95,931 (3)
88,353
39,309

Stock Awards—
Value Realized on
Vesting ($)(1)
58,139,845(2)
5,085,143
15,882,974 (3)
15,650,779
7,035,157

(1) Based on the market price of our Company’s common stock on the vesting date, multiplied by the number of shares vested.

(2) Includes 245,673 shares (valued at $46,602,103 on vesting) issuable pursuant to RSUs that vested during fiscal 2023 but for which
settlement has been deferred under the Company’s deferred compensation plan, as described in the Nonqualified Deferred
Compensation section below.

(3) Includes 65,313 shares valued at $10,642,091 on vesting issuable pursuant to RSUs that vested during fiscal 2023 but for which
settlement has been deferred under the Company’s deferred compensation plan, as described in the Nonqualified Deferred
Compensation section below.

We did not sponsor any defined benefit pension or other actuarial plan for our NEOs during our fiscal year ended
July 31, 2023.

Nonqualified Deferred Compensation
In May 2022, our Compensation and People Committee adopted a deferred compensation plan, which is a non-
qualified deferred compensation plan established in compliance with Section 409A of the Code. Participation in the
deferred compensation plan is voluntary and limited to U.S. employees of the Company and affiliates that are at the
Vice President level or above, as determined by the administrator of the deferred compensation plan, and includes
the Company’s executive officers, except Mr. Zuk who is not a U.S. employee. The plan allows eligible participants to
defer salary, annual bonuses, commissions, other cash compensation approved by the administrator, time-based
RSUs, and PSUs, excluding any compensation that has already been deferred and cash compensation that is not
paid through U.S. payroll.

The administrator may permit different deferral amounts for each component of compensation and may establish
a minimum or maximum deferral amount for each component. Unless otherwise specified by the administrator,
participants may defer (i) a minimum of 5% and a maximum of 50% of their annual base salary, (ii) a minimum of 5%
and a maximum of 100% of their annual cash bonuses and commission, and (iii) a minimum of 5% and a maximum
of 100% of any equity award or, to the extent a participant is permitted to defer the unvested tranche(s) of an equity
award, the applicable unvested tranche(s). Participants’ deferrals will be credited to their accounts on the date that
deferred compensation would have been paid. Participants will be 100% vested at all times in their deferred cash
compensation, and participants’ deferred equity awards will vest according to the provisions of the award. Each
participant may allocate his or her deferrals to accounts under the deferred compensation plan that provide for
payment of deferred amounts upon specified events, such as the participant’s separation from service or other
predetermined times. Participants may elect to receive payment of their account balances in a single lump-sum
distribution or in annual installments (as elected by the participant in accordance with the deferred compensation
plan), except in certain limited circumstances and provided that payments upon a participant’s death will be
provided in a single lump sum.

The Company may make discretionary matching, profit sharing, or other contributions to any participant account
under the deferred compensation plan, and these contributions will vest according to the schedule specified by the
administrator on or before the time the contributions are made. The Company has the discretion to accelerate the
vesting of any of these contributions at any time.

Executive Compensation

Each account under the deferred compensation plan will be credited with earnings on each business day (unless
another period is specified by the administrator with respect to a particular investment option), based upon the
participant’s investment allocation, with respect to each deferral, among a menu of investment options selected in
advance by the administrator. If a participant fails to make an investment allocation with respect to a deferral of an
equity award, the deferral will be invested in notional shares of the Company’s common stock. If a participant fails to
make an investment allocation with respect to a deferral of any other compensation, the deferral will be invested in
a notional mutual fund specified by the administrator.

Upon a participant’s death, the balances under all of the participant’s accounts will be paid in a single lump sum no
later than the end of the following year. In addition, the administrator has the discretion to accelerate or delay the
payment of account balances, as long as such changes are permitted under applicable tax rules and requirements.

All accounts will be paid in shares of the Company’s common stock issued under the Company’s equity plan, except
that an account will be paid in cash to the extent there are not enough shares available under the Company’s equity
plan to make such payment in shares.

The following table summarizes the activity under the deferred compensation plan in fiscal 2023.

Named Executive Officer
Mr. Arora
Mr. Golechha
Mr. Jenkins
Mr. Klarich

Executive
contributions in
last fiscal year ($)(1)
$46,602,103
—
$10,642,091
—

Aggregate earnings
or loss in last fiscal
year ($)(2)
$14,806,320
—
$5,683,546
—

Aggregate balance
at last fiscal year
end ($)(3)
$61,408,423
—
$16,325,637
—

(1) Represents the value of the RSUs that vested and were earned and deferred by our Named Executive Officers in fiscal 2023.

The value of each vested deferred RSU is based on the closing price of the Company’s common stock on the applicable vesting
date No portion of the amount for any Named Executive Officer is included as compensation for fiscal 2023 in the Fiscal 2023
Summary Compensation Table.

(2) Represents the net increase in the value of the shares underlying our Named Executive Officers’ vested deferred RSUs from the
vesting date to July 31, 2023. No portion of the amount for any Named Executive Officer is included as compensation for fiscal
2023 in the Fiscal 2023 Summary Compensation Table.

(3) Represents the aggregate value of the vested deferred RSUs held by our Named Executive Officers as of July 31, 2023. The value
of each vested deferred RSU is based on the closing market price of our common stock on the Nasdaq on July 31, 2023 (which
was $249.96).

For Mr. Arora, (i) $15,956,697 of this amount represents the value of 181,836 RSUs granted to him in fiscal 2018, which were
included in the amount reported in the Stock Award column of the Summary Compensation Table for fiscal 2018, and
(ii) $45,451,726 of this amount represents the value of 63,837 PSUs granted to him in fiscal 2021, which were included in the
amount reported in the Stock Award column of the Summary Compensation Table for fiscal 2021.

For Mr. Jenkins, (i) $4,305,061 of this amount represents the value of 17,223 RSUs granted to him in fiscal 2022, which were
included in the amount reported in the Stock Award column of the Summary Compensation Table for fiscal 2022, and
(ii) $12,020,576 of this amount represents the value of 48,090 PSUs granted to him in fiscal 2022, which were included in the
amount reported in the Stock Award column of the Summary Compensation Table for fiscal 2022.

Executive Employment Agreements
We have entered into employment offer letters with each of our NEOs in connection with his or her
commencement of employment with us.

In December 2011, we entered into confirmatory new employment agreements with Messrs. Klarich and Zuk
to achieve consistency in the employment terms and conditions of our then-serving executive officers. In
February 2022, we entered into addendums to the offer letters of Messrs. Jenkins and Golechha to achieve
consistency in the employment terms and conditions of our then-serving executive officers.

Each of our NEOs is eligible to receive certain severance payments and/or benefits in connection with his or her
termination of employment under various circumstances, including following a change in control, pursuant to
written severance and change in control arrangements.

2023 Proxy StatementExecutive Compensation

For a summary of the material terms and conditions of these arrangements, as well as an estimate of the potential
payments and/or benefits payable to our NEOs under these arrangements, see the description below and the
section titled “—Potential Payments Upon Termination or Change in Control” below. The estimated potential
severance payments and/or benefits payable to each NEO in the event of termination of employment as of July 31,
2023, pursuant to the arrangements under the employment agreements, are described below.

The actual amounts that would be paid or distributed to our NEOs as a result of one of the termination events
occurring in the future may be different than those presented below as many factors will affect the amount of any
payments and/or benefits upon a termination of employment. For example, some of the factors that could affect
the amounts payable include the NEO’s base salary and the market price of our common stock. Although we have
entered into written arrangements to provide severance payments and/or benefits to our NEOs in connection with
a termination of employment under particular circumstances, we or an acquirer may mutually agree with the NEOs
on severance terms that vary from those provided in these pre-existing arrangements. Finally, in addition to the
amounts presented below, each NEO would also be able to exercise any previously-vested stock options that he or
she held. For more information about the NEOs outstanding equity awards as of July 31, 2023, see the section titled
“—Fiscal 2023 Outstanding Equity Awards at Fiscal Year-End.”

Along with the severance payments and/or benefits described in an NEO’s individual severance and change in
control arrangement, they are eligible to receive any benefits accrued under our broad-based benefit plans, such as
accrued vacation pay, in accordance with those plans and policies.

Termination of Employment Unrelated to a Change in Control
M R . A R O R A
In the event of an involuntary termination of employment (a termination of employment by us without “cause”),
at any time before a “change in control” or more than 12 months following a “change in control,” provided that he
executes an appropriate release and waiver of claims, Mr. Arora will be entitled to receive:

• continued payment of his then-current base salary for a period of 12 months and reimbursement of 12 months of

COBRA premiums; and

• accelerated vesting of the time-based restricted stock units, investment restricted stock units and eligible option

shares for shares that would vest through the date 12 months after termination of employment.

TE RMINATI O N OF EMP LOYME NT— OTHER NAMED E XECUTIVE OFFI CER S
None of the remaining NEOs are eligible to receive any specific payments or benefits in the event of an involuntary
termination of employment unrelated to a change in control.

Termination of Employment in Connection with a Change in Control
M R . A R O R A
In the event of an involuntary termination of employment (a termination of employment by us or our successor
without “cause or a termination of employment for “good reason”) within 12 months following a “change in control,”
provided that he executes an appropriate release and waiver of claims, Mr. Arora will be entitled to receive:

• a lump sum payment equal to his then-current annual base salary;

• 100% of his incentive compensation for that fiscal year;

• reimbursement of 12 months of COBRA premiums;

• accelerated vesting of each of his awards of time-based restricted stock units or investment restricted stock units

as to the greater of: (x) 50% of the then-unvested portion of such award or (y) the portion of such award that
would vest through the date 24 months after termination of employment; and

• accelerated vesting of 100% of his eligible option shares subject to the performance option.

100

Executive Compensation

M E S S R S . G O L E C H H A , J E N K I N S , K L A R I C H , A N D Z U K
In the event of an involuntary termination of employment (a termination of employment by us without “cause” or
a termination of employment for “good reason”) within 12 months following a “change in control,” provided that
the executive officer executes an appropriate release and waiver of claims, provided that they each execute an
appropriate release and waiver of claims, Messrs. Golechha, Jenkins, Klarich and Zuk will each be entitled to receive:

• a lump sum cash payment equal to 12 months of his base salary as in effect as of the date of termination;

• a lump sum cash payment equal to 100% of his target incentive payment for that fiscal year;

• a lump sum cash payment equal to the amount payable for premiums for continued COBRA benefits for a period

of 12 months (except Mr. Zuk); and

• accelerated vesting of each of his then outstanding time-based equity awards, as to (i) in the cases of

Messrs. Golechha and Jenkins, 12 months’ vesting of such award, or (ii) in the cases of Messrs. Klarich and Zuk,
the greater of 12 months’ vesting of such award and 50% of the then-unvested portion of such award.

A P P L I C A B L E D E F I N I T I O N S
Generally, for purposes of the foregoing provisions, a “change in control” means:

• the sale or other disposition of all or substantially all of our assets;

• any sale or exchange of our capital stock by stockholders in a transaction or series of related transactions where
more than 50% of the outstanding voting power of our company is acquired by a person or entity or group of
related persons or entities;

• any reorganization, consolidation, or merger of our company where our outstanding voting securities

immediately before the transaction represent or are converted into less than 50% of the outstanding voting
power of the surviving entity (or its parent organization) immediately after the transaction; or

• the consummation of the acquisition of 51% or more of our outstanding stock pursuant to a tender offer validly

made under any state or federal law (other than a tender offer by us).

Generally, for purposes of the foregoing provisions, “cause” is limited to:

• conviction of any felony or any crime involving moral turpitude or dishonesty;

• participation in intentional fraud or an act of willful dishonesty against us;

• willful breach of our policies that materially harms us;

• intentional damage of a substantial amount of our property;

• willful and material breach of the NEO’s employment offer letter, employment agreement or his employee

invention assignment and confidentiality agreement; or

• a willful failure or refusal in a material respect to follow the lawful, reasonable policies or directions of us as

specified by our board of directors or Chief Executive Officer after being provided with notice of such failure,
which failure is not remedied within 30 days after receipt of written notice from us.

Generally, for purposes of the foregoing provisions, “good reason” means a resignation within 12 months following
the occurrence, without the Named Executive Officer’s written consent, of one or more of the following:

• there is a material reduction in the NEO’s authority, status, obligations, or responsibilities;

• there is a reduction in the NEO’s total annual compensation of more than 10% unless such reduction is no greater
(in percentage terms) than compensation reductions imposed on substantially all of our employees pursuant to a
directive of our board of directors;

• any failure by us to pay the NEO’s base salary; or

• the relocation of the principal place of our business to a location that is more than a specified number of miles

further away from the NEO’s home than our current location.

A resignation for “good reason” will not be deemed to have occurred unless the NEO gives us written notice of
one of the above conditions within 90 days of its occurrence, and we fail to remedy the condition within 30 days of
receipt of such notice.

101

2023 Proxy StatementExecutive Compensation

In August 2023, we adopted an Equity Incentive Plan Survivor Benefit Policy (the “Survivor Benefit Policy”), which
provides that if an individual’s death occurs while the individual is providing services as an employee to the
Company or any subsidiary of the Company and is not located in Israel, all of the equity awards (other than equity
awards issued in accordance with or subject to the provisions of the Israel Income Tax Ordinance and its applicable
rules, regulations, orders or procedures) that the individual holds as of the date of death will be accelerated in
accordance with the terms of the Survivor Benefit Policy. Since the Survivor Benefit Policy was adopted in fiscal
2024, the section titled “—Potential Payments Upon Termination or Change in Control” below (which provides
estimates of the payments and benefits that our Named Executive Officers may receive upon a termination of their
employment on the last day of fiscal 2023) does not include the potential vesting acceleration benefits that our
Named Executive Officers may receive under the Survivor Benefit Policy.

Potential Payments Upon Termination or Change in Control
Termination of Employment Unrelated to a Change in Control

Value of Accelerated Equity
Awards ($)

Salary
Continuation
($)
1,000,000

Target
Restricted
Annual Cash
Stock and
Bonus
Restricted
Stock Units(1)
($)
— 101,926,439

Options
—

Value of
Continued
Health Care
Coverage
Premiums
($)

Total ($)
31,713 102,958,152

Named Executive Officer
Mr. Arora

(1) The amounts reported in the table reflect the aggregate market value of the unvested shares of our common stock underlying
outstanding RSUs and PSUs which remain subject to time-based vesting only. The aggregate market value is computed by
multiplying (i) the number of unvested shares of our common stock, subject to outstanding RSUs and PSUs which remain
subject to time-based vesting only on July 31, 2023, that would become vested by (ii) $249.96 (the closing market price of our
common stock on the Nasdaq on July 31, 2023).

Termination of Employment in Connection with a Change in Control

Value of Accelerated Equity
Awards ($)

Named Executive Officer
Mr. Arora
Mr. Golechha
Mr. Jenkins
Mr. Klarich
Mr. Zuk

Salary
Continuation
($)
1,000,000
600,000
750,000
550,000
419,515

Target
Annual Cash
Bonus
($)

Restricted
Stock and
Restricted
Stock Units(1)
1,000,000 136,757,365
13,723,054
19,684,998
32,807,250
13,456,847

600,000
750,000
550,000
419,515

Options
—
—
—
—
—

Value of
Continued
Health Care
Coverage
Premiums
($)

Total ($)
31,713 138,789,078
14,954,767
31,713
21,216,711
31,713
33,938,963
31,713
— 14,295,877

(1) The amounts reported in this column reflect the aggregate market value of the unvested shares of our common stock

underlying outstanding RSUs and PSUs which remain subject to time-based vesting only. The aggregate market value is
computed by multiplying (i) the number of unvested shares of our common stock subject to outstanding RSUs and PSUs which
remain subject to time-based vesting only on July 31, 2023, that would become vested by (ii) $249.96 (the closing market price of
our common stock on the Nasdaq on July 31, 2023).

102

Executive Compensation

Pay vs. Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item
402(v) of Regulation S-K, we are providing the following information about the relationship between executive
compensation and certain financial performance measures of the Company. For further information concerning
the Company’s pay-for-performance philosophy and how executive compensation aligns with the Company’s
performance, please see the “Executive Compensation — Compensation Discussion and Analysis” section of this
proxy statement.

Pay vs Performance Table

Summary
Comp Table
Total for PEO
(2)

Compensation
Actually Paid
to PEO
(3)

PANW
Year
TSR
(1)
(5)
2023 $151,425,203 $266,368,755 $12,145,914 $31,768,696 $293.01
2022 $ 10,410,477 $208,514,831 $ 8,058,186 $56,805,285 $195.02
2021 $ 23,283,858 $219,731,970 $10,279,163 $54,811,159 $155.93

Average
Summary
Comp Table
Total for Non-
PEO NEOs
(2)

Average
Compensation
Actually Paid
for Non-
PEO NEOs
(4)

Value of $100 initial
investment based on

Peer Group
TSR
(6)
$ 167.84
$ 132.31
$ 140.03

PANW Net
Income
(in millions)
(7)
$439.7
-$267.0
-$498.9

Annual
Billings
Growth
(8)
23.1%
37.0%
26.7%

(1) During each of the years presented, our PEO was Nikesh Arora. During fiscal 2023 and fiscal 2022, our non-PEO NEOs were

Dipak Golechha, William “BJ” Jenkins, Lee Klarich and Nir Zuk. During fiscal 2021, our non-PEO NEOs were Dipak Golechha, Lee
Klarich, Amit Singh, Luis Felipe Visoso and Nir Zuk.

(2) Amounts reported in this column represent (i) the total compensation, as reported in the Summary Compensation Table in our
annual proxy statement (“SCT”), for the applicable year for Mr. Arora and (ii) the average of the total compensation, as reported
in the SCT in our annual proxy statement, for the applicable year for our non-PEO NEOs.

(3) “Compensation actually paid” is calculated in accordance with Item 402(v) of Regulation S-K. The table below sets forth each

adjustment made during each year presented in the table to calculate the “compensation actually paid” to our PEO during each
year in the table.

PEO

Total Reported in SCT for the covered fiscal year
Less, grant date fair value of equity awards reported in SCT for the covered
fiscal year
Plus, fair value (as of the end of the covered fiscal year) of equity awards
granted in the covered fiscal year that are unvested and outstanding as
of the end of the covered fiscal year, computed in accordance with ASC
Topic 718
Plus, change in fair value (from the end of the prior fiscal year to the end
of the covered fiscal year) of equity awards granted in any prior fiscal year
that are outstanding and unvested as of the end of the covered fiscal year,
computed in accordance with ASC Topic 718
Plus, fair value (as of the vesting date) of equity awards that are granted
and vested in the covered fiscal year, computed in accordance with ASC
Topic 718
Plus, change in fair value (from the end of the prior fiscal year to the vesting
date) of equity awards granted in any prior fiscal year that vested in the
covered fiscal year, computed in accordance with ASC Topic 718
Less, fair value (as of the end of the prior fiscal year) of equity awards granted
in any prior fiscal year that failed to meet the applicable vesting conditions in
the covered fiscal year, computed in accordance with ASC Topic 718
Total Adjustments
Compensation Actually Paid

2023

2021
$ 151,425,203 $ 10,410,477 $ 23,283,858
7,007,348 -$ 20,355,789
-$ 145,374,318 -$

2022

$ 207,303,528 $ 15,010,593 $ 67,895,182

$ 47,372,535 $ 25,242,815 $ 124,376,337

0 $

5,641,807 $ 164,858,294 $ 24,532,382

0 $

$ 114,943,552 $ 198,104,354 $ 196,448,112
$266,368,755 $208,514,831 $219,731,970

(4) “Compensation actually paid” is calculated in accordance with Item 402(v) of Regulation S-K. The table below sets forth each
adjustment made during each year presented in the table to calculate the average “compensation actually paid” to our non-
PEO NEOs during each year in the table.

103

2023 Proxy StatementExecutive Compensation

Non-PEO NEOs

Average of total reported in SCT for the covered fiscal year
Less, average grant date fair value of equity awards reported in SCT for the
covered fiscal year
Plus, average fair value (as of the end of the covered fiscal year) of equity
awards granted in the covered fiscal year that are unvested and outstanding
as of the end of the covered fiscal year, computed in accordance with ASC
Topic 718
Plus, average change in fair value (from the end of the prior fiscal year to the
end of the covered fiscal year) of equity awards granted in any prior fiscal year
that are outstanding and unvested as of the end of the covered fiscal year,
computed in accordance with ASC Topic 718
Plus, average fair value (as of the vesting date) of equity awards that are
granted and vested in the covered fiscal year, computed in accordance with
ASC Topic 718
Plus, average change in fair value (from the end of the prior fiscal year to the
vesting date) of equity awards granted in any prior fiscal year that vested in the
covered fiscal year, computed in accordance with ASC Topic 718
Less, average fair value (as of the end of the prior fiscal year) of equity awards
granted in any prior fiscal year that failed to meet the applicable vesting
conditions in the covered fiscal year, computed in accordance with ASC
Topic 718
Total Adjustments
Average Compensation Actually Paid

2023

2021
$ 12,145,914 $ 8,058,186 $ 10,279,163
-$ 10,660,724 -$ 6,502,576 -$ 9,117,307

2022

$ 22,857,122 $ 11,771,915 $ 17,714,393

$ 8,469,904 $ 11,633,271 $ 33,836,535

0 $

-$ 1,043,520 $ 31,844,489 $ 4,733,071

0 $

0 -$ 2,634,696

$ 19,622,782 $ 48,747,099 $ 44,531,996
$31,768,696 $56,805,285 $54,811,159

(5) Pursuant to Item 402(v) of Regulation S-K, assumes $100 was invested on July 31, 2020 in our common stock and reinvestment

of dividends. Historic stock price performance is not necessarily indicative of future stock price performance.

(6) Pursuant to Item 402(v) of Regulation S-K, assumes $100 was invested on July 31, 2020 in the stocks represented by the peer

group and reinvestment of dividends. The peer group consists of the S&P 500 Information Technology Index, an independently
prepared index, which is the peer group we used for the stock performance graph required by Item 201(e) of Regulation S-K
included in our Annual Report for the year ended July 31, 2023.

(7) Represents net (loss) income, as reflected in the Company’s audited financial statements included in our Annual Reports on

Form 10-K.

(8) We have selected annual billings growth as the Company-Selected Measure because it is a core driver of our performance and
stockholder value creation and, accordingly, was utilized as a performance measure in the PSUs granted in fiscal 2023. Annual
billings growth is the percentage increase in billings in a fiscal year over the billings in the immediately preceding fiscal year. For
these purposes, billings is the amount of billings reported on our annual report on Form 10-K.

2023 Performance Measures
In accordance with SEC rules, listed below are the four financial performance measures that, in the company’s
assessment, represent the most important financial performance measures used to link “compensation actually
paid” to our NEOs to company performance for fiscal 2023, as further described in our Compensation Discussion
and Analysis.

Financial Performance Measures
• Annual Billings Growth

• Annual Revenue Growth

• Company’s Relative TSR Percentile Rank (how the Company’s TSR compares to the TSRs of the companies that are

a component of the S&P 500 Index on the last day of fiscal 2023)

• Non-GAAP Organic Operating Margin

104

Executive Compensation

Relationship Between “Compensation Actually Paid” and
Performance Measures
In accordance with SEC rules, the charts below illustrate how “compensation actually paid” (CAP) to our NEOs
aligns with our company’s financial performance as measured by our total shareholder return, our peer group total
shareholder return, our net income, and annual billings growth rate.

CAP VS. TSR

CAP VS. NET INCOME

$293.01

$439.7M

(cid:31)$498.9M

(cid:31)$267.0M

$219.7M

$208.5M

$266.4M

$54.8M

$56.8M

$31.8M

2021

2022

2023

Compensation
Actually Paid (CEO)

Avg. Compensation
Actually Paid
(Non-CEO NEO)

Net income (millions)

$195.02

$155.93

$167.84

$140.03

$132.31

$219.7M

$208.5M

$266.4M

$54.8M

$56.8M

$31.8M

2021

2022

2023

Compensation
Actually Paid (CEO)

Avg. Compensation
Actually Paid
(Non-CEO NEO)

Company TSR

Peer Group TSR

CAP VS. ANNUAL BILLINGS GROWTH

37.0%

26.7%

$219.7M

$208.5M

23.1%

$266.4M

$54.8M

$56.8M

$31.8M

2021

2022

2023

Compensation
Actually Paid (CEO)

Avg. Compensation
Actually Paid
(Non-CEO NEO)

Annual Billings Growth

105

2023 Proxy StatementExecutive Compensation

Executive Officers

The following table identifies certain information about our executive officers as of October 16, 2023. Officers are
appointed by our board of directors to hold office until their successors are elected and qualified.

Name
Nikesh Arora
Dipak Golechha
William “BJ” Jenkins
Lee Klarich
Nir Zuk

Age
55
49
57
48
52

Position(s)

Chief Executive Officer and Chairman
Executive Vice President and Chief Financial Officer
President
Chief Product Officer
Chief Technology Officer and Director

Nikesh Arora. For a brief biography of Mr. Arora, please see “Proposal No. 1 - Election of Directors - Directors -
Nominee Directors.”

Dipak Golechha has served as our Chief Financial Officer since March 2021. Mr. Golechha joined the Company
in December 2020 as Senior Vice President, Finance. Prior to joining the Company, from August 2020 until
December 2020, Mr. Golechha served as senior advisor at Boston Consulting Group, a management consulting
firm. From December 2016 to April 2020, Mr. Golechha was President and Chief Executive Officer of Excelligence
Learning Corporation, a tech-enabled platform company in early childhood education. From August 2014 through
July 2016, Mr. Golechha served as the chief financial officer of NBTY Inc., also known as The Nature’s Bounty
Company, a manufacturer of vitamins, minerals and health supplements. During 2014, Mr. Golechha served as
the chief financial officer of Chobani, a yogurt company. Prior to Chobani, Mr. Golechha worked at The Procter &
Gamble Company, an American multinational consumer goods corporation, for 18 years, most recently serving as
chief financial officer / chief operating officer of the Global Feminine Care / Adult Care Division from August 2012 to
December 2013. Mr. Golechha holds a bachelor’s degree and a master’s degree from St. John’s College, Cambridge
University in Economics.

William “BJ” Jenkins has served as our President since August 2021. Prior to joining the Company, Mr. Jenkins
served as President and CEO of Barracuda Networks, Inc., a computer security and data storage company, from
November 2012 through July 2021. Prior to this position, Mr. Jenkins held multiple business unit and sales and
marketing leadership roles at EMC Corporation, a provider of enterprise storage systems, software, and networks.
Mr. Jenkins holds an engineering degree from the University of Illinois and an M.B.A. from Harvard Business School.

Lee Klarich has served as our Chief Product Officer since August 2017. Prior to this appointment, Mr. Klarich served
as our Executive Vice President of Product Management, a role he held since November 2015. From November 2012
to November 2015, Mr. Klarich served as our Senior Vice President, Product Management and our Vice President,
Product Management from May 2006 to November 2012. Prior to joining us, Mr. Klarich held various positions
at NetScreen Technologies, Juniper Networks, Excite@Home, and Packard Bell-NEC. Mr. Klarich holds a B.S. in
Engineering from Cornell University.

Nir Zuk. For a brief biography of Mr. Zuk, please see “Proposal No. 1 - Election of Directors - Directors -
Continuing Directors.”

106

Executive Compensation

Equity Compensation Plan Information
The following table provides information as of July 31, 2023, with respect to the shares of our common stock that
may be issued under our existing equity compensation plans.

(a) Number of Securities
to be Issued Upon
Exercise of Outstanding
Options, Warrants and
Rights

(b) Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights ($)(2)

(c) Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))

23,185,169

$65.20

28,847,455

256,832
23,442,001

—

—
28,847,455

Plan Category
Equity compensation plans
approved by stockholders(1)
Equity compensation plans not
approved by stockholders
Total

(1) Includes the following plans: the 2012 Plan, 2021 Equity Incentive Plan and 2012 Employee Stock Purchase Plan (“2012 ESPP”).

Our 2012 ESPP provides that on the first day of each fiscal year beginning with fiscal year 2014 the number of shares authorized
for issuance under the 2012 ESPP is automatically increased by a number equal to the lesser of (i) 6,000,000 shares of common
stock, (ii) one percent (1.0%) of the aggregate number of shares of common stock outstanding on such date, or (iii) an amount
determined by our board of directors or a duly authorized committee of our board of directors.

(2) The weighted average exercise price does not take into account outstanding restricted stock, PSUs or time-based RSUs, which

have no exercise price.

107

2023 Proxy StatementProposal No. 4 Amendment to Our 2021

Equity Incentive Plan

PR OP OS AL NO. 4

Amendment to Our 2021 Equity
Incentive Plan

We are asking our stockholders to approve an amendment to our 2021 Plan to increase the number of shares of our
common stock (“Shares”) reserved for issuance under the 2021 Plan by 5,000,000 Shares. Other than this increase,
no changes have been made to the 2021 Plan.

Why Should Stockholders Vote to Approve the
Amendment to the 2021 Plan?

The Amendment to the 2021 Plan Will Allow Us to Continue
Attracting and Retaining the Best Talent
Our Board believes that our success depends on the ability to attract and retain the best available personnel for
positions of substantial responsibility and that the ability to grant equity awards is crucial to recruiting and retaining
the services of these individuals. In addition, our Board believes that equity awards provide additional incentive to
our employees, directors and consultants and promote our success. Without a motivated and dedicated workforce,
we could not deliver the strong financial performance we experienced in fiscal 2023 (as described elsewhere in this
proxy). If stockholders do not approve the amendment to the 2021 Plan at the Annual Meeting, we may be unable to
continue granting equity awards as needed, which could prevent us from successfully attracting and retaining the
highly skilled talent we need.

A Principled and Disciplined Approach
When considering the amendment to our 2021 Plan to increase the number of Shares reserved for issuance under
the plan, the Compensation and People Committee adopted the following principles which it believes aligns with
best practices:

• Share requests should align with our commitments to reduce stock-based compensation expense as a

percentage of revenue.

• Share reserves should be sufficient to cover one and a half to two years of grants, which the Committee believes

is aligned with best practices and provides the Company with a reasonable buffer in case of extraordinary
circumstances (e.g., stock price volatility, changes in hiring, acquisitions, etc.).

• Share requests should be subject to stockholder approval on an annual basis, which the Committee believes

provides transparency to our stockholders and more flexibility to manage our needs.

A Reasonable Number of Shares Will Be Added to the
2021 Plan
If our stockholders approve the amendment to the 2021 Plan, 5,000,000 Shares will be added to the 2021 Plan. We
anticipate these Shares will be enough to meet our expected needs for the next one to two years.

• Number of Shares Remaining under the 2021 Plan. As of October 16, 2023, 10,165,060 Shares remained available

for issuance under the 2021 Plan.

• Overhang. As of October 16, 2023, outstanding equity awards under our 2012 Plan and the 2021 Plan covered

24,322,017 Shares which represented approximately 8% of our outstanding Shares as of that date.

• Historical Grant Practices. In fiscal 2021, 2022 and 2023, we granted equity awards (excluding RSUs assumed in
acquisitions) covering 14.2 million, 6.6 million and 9.2 million Shares, respectively, for approximately 30.0 million
equity awards over that three-year period.

108

Proposal No. 4 Amendment to Our

2021 Equity Incentive Plan

Proposal No. 4 Amendment to Our 2021 Equity Incentive Plan

• Forecasted Grants. To determine how long the Shares to be added to the 2021 Plan will enable us to make
grants of equity awards, our Compensation and People Committee and our Board reviewed a forecast that
considered these factors: (i) the remaining number of Shares available for future grants under the 2021 Plan and
(ii) forecasted future grants, with the future grant numbers determined based on assumptions about stock price
and the competitive dollar value to be delivered to the grant recipient. Because we generally determine the size
of equity awards to be granted based on the value of the award, if the stock price used to determine the number
of Shares subject to an award differs significantly from the stock price assumed in the forecast (which was $225
to $275 per share), our actual Share usage will deviate significantly from our forecasted Share usage. For example,
if our stock price used to determine the number of Shares subject to an award is lower than the stock price
assumed in the forecast, we would need a larger number of Shares than anticipated to deliver the same intended
value to participants.

We Have Used our Equity Plans Responsibly
We recognize the dilutive impact of our equity compensation on our stockholders and continuously strive to
balance this concern with the competition for talent. In the process it used to determine the number of Shares
to be added to the 2021 Plan, our Compensation and People Committee and Board reviewed analyses prepared
by Meridian Compensation Partners, independent compensation consultant, which included analysis of the
burn rate and overhang metrics discussed below. If approved, the Shares added to the 2021 Plan would represent
approximately 1.6% of our 310,815,919 outstanding Shares as of October 16, 2023. Our Board believes the potential
dilution to stockholders is reasonable and sustainable to meet our business goals.

Gross burn rate can be used by some to assess a company’s use of equity compensation. Gross burn rate is defined
as the number of shares underlying equity awards granted in a given fiscal year (excluding any RSUs assumed in
acquisitions) divided by the number of shares of weighted average common stock outstanding (“CSO”).

Potential actual dilution to stockholders is often measured by analyzing the net burn rate. Net burn rate is defined
as (i) the number of shares underlying equity awards granted in a given fiscal year (excluding any RSUs assumed in
acquisitions) minus shares subject to outstanding equity awards forfeited during the year and returned to the plan
divided by (ii) CSO. This measure indicates the rate at which we actually create potential future stockholder dilution.
We have managed our net burn rate to 3.8% in fiscal 2021, 1.0% in fiscal 2022, and 2.4% in fiscal 2023.

The following table shows our gross and net burn rate over the past three fiscal years and the average CSO of those
three years.

in millions
Performance-based stock options (“PSOs”) granted
PSOs earned
RSUs granted(1)
PSUs granted(2)
PSUs earned
Total awards granted(3)

Weighted average common stock outstanding
Gross Burn Rate
Forfeitures of Options
Forfeitures of PSOs
Forfeitures of PSUs and time-based RSUs
Net Burn Rate

Fiscal 2021
0.6
1.2
11.1
2.5
0.2
14.2

Fiscal 2022
0
5.6
5.8
0.8
1.1
6.6

Fiscal 2023
0
1.2
5.6
3.6
1.3
9.2

Average
0.2
2.7
7.5
2.3
0.9
10.0

289.1

295.6

303.2

296.0

4.9%
0
0.5
2.8
3.8 %

2.2 %
0
0.3
3.2
1.0 %

3.0 %
0
0
1.9
2.4 %

3.4 %
0
0.3
2.6
2.4 %

(1) Excludes RSUs assumed in acquisitions.
(2) For PSUs, shares granted represent the aggregate maximum number of shares that may be earned and issued with respect to

these awards over their full terms.

(3) Includes time-based RSUs, PSOs and PSUs granted.

109

2023 Proxy StatementProposal No. 4 Amendment to Our 2021 Equity Incentive Plan

The 2021 Plan Includes Compensation and Governance
Best Practices
The 2021 Plan includes provisions considered best practices for compensation and corporate governance purposes.
These provisions protect our stockholders’ interests:

• Administration. The 2021 Plan is administered by our Compensation and People Committee, which consists

entirely of independent non-employee directors.

• Repricing is Not Allowed without Stockholder Approval. The 2021 Plan does not permit awards to be repriced

or exchanged for other awards unless stockholders approve the repricing or exchange.

• No Single-Trigger Vesting Acceleration upon a Change in Control for Employees and Consultants. Awards

under the 2021 Plan will be treated in a change in control (as defined in the 2021 Plan) in the manner determined
by the administrator, and except for awards granted to our non-employee directors for their service as
non-employee directors, the terms of the 2021 Plan provide for no automatic vesting of awards upon a change
in control unless the award is not assumed or substituted.

• Limited transferability. Awards under the 2021 Plan generally may not be sold, assigned, hypothecated,

transferred, or disposed of in any manner, unless otherwise approved by the administrator (on such terms as the
administrator deems appropriate) or required by applicable laws.

• No Tax Gross-ups. The 2021 Plan does not provide for any tax gross-ups.

• Forfeiture Events. Each award under the 2021 Plan and any other incentive compensation paid to a participant
is subject to our clawback policy that was in effect when the 2021 Plan was originally adopted and any clawback
policy that we establish or amend to comply with applicable laws, and the administrator may require a
participant to forfeit, return, or reimburse all or a portion of the award or other compensation and any amounts
paid under the award or other compensation to comply with such clawback policy or applicable laws.

• Reasonable Annual Limits on Non-Employee Director Compensation. The 2021 Plan sets limits as to the total
compensation that non-employee directors may receive (for service as a non-employee director) during each
fiscal year.

• No Dividends on Unvested Awards. No dividends or other distributions may be paid with respect to any Shares

underlying the unvested portion of an award.

Our executive officers and directors have an interest in the approval of the amendment to the 2021 Plan because
they are eligible to receive equity awards under the 2021 Plan.

Required Vote
The approval of an amendment of our 2021 Equity Incentive Plan requires the affirmative vote of a majority of the
shares of our common stock present virtually or by proxy at the virtual Annual Meeting and entitled to vote thereon
to be approved. You may vote “for,” “against,” or “abstain” with respect to this proposal. Abstentions are considered
votes present and entitled to vote on this proposal, and thus will have the same effect as votes “against” this
proposal. Broker non-votes will have no effect on the outcome of this proposal.

Recommendation of the Board
The Board recommends that you vote “FOR” the approval of the amendment to the 2021 Equity
Incentive Plan and the number of shares reserved for issuance under the 2021 Plan.

110

Proposal No. 4 Amendment to Our 2021 Equity Incentive Plan

Summary of the 2021 Plan

The following paragraphs summarize the principal features of the 2021 Plan, as amended, and its operation.
However, this summary is not a complete description of the provisions of the 2021 Plan and is qualified in its entirety
by the specific language of the 2021 Plan. A copy of the 2021 Plan is provided as Appendix B to this proxy statement.

Purpose of the 2021 Plan
The purpose of the 2021 Plan is to attract and retain the best available personnel for positions of substantial
responsibility, provide additional incentive to employees, directors, and consultants, and promote the success of our
business. These incentives can be provided through the grant of stock options, stock appreciation rights, restricted
stock, restricted stock units, performance units, and performance shares.

Shares Available for Issuance
Subject to the adjustment provisions in the 2021 Plan, the number of Shares reserved for issuance under the 2021
Plan is equal to (a) 24,185,000 Shares plus (b) any Shares subject to awards previously granted under the 2012 Plan
that, on or after the date our stockholders initially approve the 2021 Plan, expire or otherwise terminate without
having been exercised or issued in full, are tendered to or withheld by us for payment of an exercise price or for
tax withholding obligations, or that are forfeited to or repurchased by us due to failure to vest, with the maximum
number of shares to be added under the foregoing clause equal to 31,740,063 Shares. If we substitute equity
awards for equity awards of acquired entities in connection with mergers, reorganizations, separations, or other
transactions as described in the 2021 Plan, the grant of such substituted awards will not decrease the number
of Shares available for issuance under the 2021 Plan. Shares may be authorized, but unissued, or reacquired
common stock.

If an award granted under the 2021 Plan expires or becomes unexercisable without having been exercised in full or
is forfeited to or repurchased by us due to failure to vest, then the expired, unexercised, forfeited, or repurchased
Shares subject to that award will become available for future grant or sale under the 2021 Plan. If an award of stock
appreciation rights is exercised, the gross number of Shares underlying the portion of a stock appreciation right
that is exercised will cease to be available under the 2021 Plan. Shares actually issued under the 2021 Plan under any
award will not be returned to the 2021 Plan and will not become available for future grant or sale under the 2021
Plan; provided, however, that if Shares issued under awards of restricted stock, restricted stock units, performance
shares or performance units are repurchased by us or are forfeited to us due to failure to vest, such Shares will
become available for future grant under the 2021 Plan. Shares used to pay the exercise price of an award or to satisfy
tax withholding obligations related to an award will not become available for future grant or sale under the 2021
Plan. If an award is paid in cash rather than Shares, such payment will not reduce the number of Shares available for
issuance under the 2021 Plan.

In the event of certain dividends or other distributions (whether in the form of cash, Shares, other securities, or
other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase or exchange of Shares or other securities or other change in the corporate
structure affecting our Shares, the 2021 Plan administrator, in order to prevent diminution or enlargement of the
benefits or potential benefits intended to be made available under the 2021 Plan, will adjust the number and class
of shares that may be delivered under the 2021 Plan, and/or the number, class and price of shares of stock subject to
outstanding awards, and the award grant limitations discussed above.

During the term of the 2021 Plan, we will at all times reserve and keep available a number of Shares sufficient to
satisfy the requirements of the 2021 Plan.

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2023 Proxy StatementProposal No. 4 Amendment to Our 2021 Equity Incentive Plan

Limitations
The 2021 Plan also provides that no non-employee director may be paid compensation for service as a
non-employee director that, in the aggregate, exceeds $2,000,000 for any fiscal year of ours, increased to
$4,000,000 for the non-employee director for our fiscal year in which he or she joins our Board as a non-employee
director. For these purposes, compensation includes equity awards (including any awards issued under the 2021
Plan), with the value of such equity awards measured based on their grant date fair value (determined under
U.S. generally accepted accounting principles), and any other compensation (such as cash retainers or fees) for
director service. Any award granted to a participant while he or she was an employee or a consultant (other than
a non-employee director) will not count for this limitation.

Administration
Our Board, any committee of individuals satisfying applicable laws appointed by our Board, or any duly authorized
committee of our Board acts as the “administrator” of the 2021 Plan. Different administrators may administer the
2021 Plan with respect to different groups of service providers. Our Board has designated our Compensation and
People Committee as an administrator of the 2021 Plan. To make grants to certain officers and key employees, the
members of the committee must qualify as “non-employee directors” under Rule 16b-3 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”).

Subject to the terms of the 2021 Plan, the administrator has the authority to make any determinations and perform
any actions that it deems necessary or advisable to administer the 2021 Plan, such as the authority to: determine
the fair market value of a Share, select the service providers who will receive awards; determine the number of
Shares covered by each award and the terms of each award; approve forms of award agreements for use with the
2021 Plan; interpret, modify or amend each award (subject to the repricing restrictions of the 2021 Plan), including
to accelerate vesting or waive forfeiture restrictions; interpret the 2021 Plan; and delegate ministerial duties to any
of our employees. The administrator may allow a participant to defer the receipt of payment of cash or delivery of
Shares otherwise due to such participant. The administrator may make rules and regulations relating to the 2021
Plan, including rules, regulations, and sub-plans to facilitate compliance with applicable non-U.S. laws, easing the
administration of the 2021 Plan, and/or take advantage of tax-favorable treatment of awards granted to service
providers outside the U.S., and may make all other determinations deemed necessary or advisable for administering
the 2021 Plan.

Eligibility
All types of awards, other than incentive stock options, may be granted to our non-employee directors and to
employees and consultants of ours or any parent or subsidiary corporation of ours. Incentive stock options may be
granted only to employees of ours or any parent or subsidiary corporation of ours. As of July 31, 2023, we and our
parent and subsidiary corporations had approximately 13,948 employees (including two employee directors), and
eight non-employee directors.

Stock Options
An option gives a participant the right to purchase a specified number of Shares for a fixed exercise price during a
specified period. Each option granted under the 2021 Plan will be evidenced by an award agreement specifying the
number of Shares subject to the option and the other terms of the option, consistent with the 2021 Plan.

The exercise price per Share of each option may not be less than the fair market value of a Share on the date of
grant (except, in the case of a nonstatutory stock option, as otherwise required by applicable laws). However, any
incentive stock option granted to a person who at the time of grant owns stock representing more than 10% of
the total combined voting power of all classes of our stock or any parent or subsidiary corporation of ours (a “ten
percent stockholder”) must have an exercise price per Share equal to at least 110% of the fair market value of a Share
on the date of grant. The aggregate fair market value of the Shares (determined on the grant date) covered by
incentive stock options which first become exercisable by any participant during any calendar year also may not
exceed $100,000. For this purpose, the fair market value of a Share is generally the closing sales price of our stock, as
reported on the primary stock exchange on which it is traded. On October 16, 2023, the closing price of a Share on
Nasdaq was $261.52.

112

Proposal No. 4 Amendment to Our 2021 Equity Incentive Plan

Options will be exercisable at such times or under such conditions as determined by the administrator and set
forth in the award agreement. When a participant’s service ends, the unvested portion of the participant’s option
generally expires. The vested portion of the option will remain exercisable for the period following the end of the
participant’s service that was determined by the administrator and specified in the participant’s award agreement,
and if no such period was specified in the award agreement, the vested portion of the option will remain exercisable
for: (i) 3 months following the end of the participant’s service provider status for reasons other than death or
disability or (ii) 12 months following the end of the participant’s service provider status due to death or disability.
In addition, a participant’s award agreement may provide for an extension of the post-service exercise period if
the participant’s service ends for reasons other than his or her death or disability and the exercise of the option
following the termination of service would result in liability under Section 16(b) of the Exchange Act or would violate
the registration requirements under the Securities Act of 1933, as amended (the “Securities Act”).

The term of an option will be specified in the award agreement, but the term of an incentive stock option may not
be more than ten years (or five years for an incentive stock option granted to a ten percent stockholder).

The administrator will determine the acceptable form(s) of consideration for exercising an option. An option will
be deemed exercised when we receive the notice of exercise and full payment for the Shares to be exercised,
together with any amounts necessary to satisfy withholding obligations for tax-related items. At any time after
the grant of an option, the administrator has the discretion to accelerate the time at which the option will vest or
become exercisable.

Stock Appreciation Rights
A stock appreciation right gives a participant the right to receive the appreciation in the value of a Share between
the date an award is granted and the date it is exercised. Upon exercise of a stock appreciation right, the holder
of the award will be entitled to receive an amount determined as the product of: (i) the difference between the
fair market value of a Share on the date of exercise and the exercise price per Share and (ii) the number of Shares
covered by the exercised portion of the stock appreciation right. We may pay that amount in cash, Shares, or a
combination of both. Each stock appreciation right granted under the 2021 Plan will be evidenced by an award
agreement specifying the exercise price and the other terms of the award.

The exercise price per Share of each stock appreciation right may not be less than the fair market value of a Share
on the date of grant, unless otherwise required by applicable laws.

Stock appreciation rights will be exercisable at such times or under such conditions as determined by the
administrator and set forth in the award agreement. The terms relating to the period of exercise of stock
appreciation rights following the termination of a participant’s service are similar to those for options described
above. At any time after the grant of a stock appreciation right, the administrator has the discretion to accelerate
the time at which the stock appreciation right will vest or become exercisable.

Restricted Stock Awards
Awards of restricted stock are rights to acquire or purchase Shares that vest under the terms established by the
administrator in its sole discretion. Unless the administrator provides otherwise, participants holding Shares of
restricted stock will have voting rights with respect to such Shares without regard to vesting. After an award of
restricted stock has been granted, the administrator has the discretion to reduce or waive any restrictions and to
accelerate the time at which any restrictions will lapse or be removed.

Restricted Stock Units
A restricted stock unit represent a right to receive cash or Shares if the performance goals or other vesting criteria
set by the administrator are achieved or the restricted stock unit otherwise vests. Each award of restricted stock
units granted under the 2021 Plan will be evidenced by an award agreement specifying the number of Shares
subject to the award and other terms of the award.

113

2023 Proxy StatementProposal No. 4 Amendment to Our 2021 Equity Incentive Plan

The administrator may set vesting conditions based upon the achievement of company-wide, divisional, business
unit or individual goals (such as continued employment or service), applicable U.S. or non-U.S. federal or state
securities laws, or any other basis determined by the administrator, in its discretion.

After an award of restricted stock units has been granted, the administrator has the discretion to reduce or waive
any restrictions or vesting criteria that must be met to receive a payout or to accelerate the time at which any
restrictions will lapse or be removed. A participant will forfeit any unearned restricted stock units on the date
specified in the participant’s award agreement. The administrator in its sole discretion may pay earned restricted
stock units in cash, Shares, or a combination of both.

Performance Units and Performance Shares
Performance units and performance shares are awards that will result in a payment to a participant only if
performance goals established by the administrator are achieved or the awards otherwise vest. Performance
units will have an initial value established by the administrator on or before the date of grant. Each performance
share will have an initial value equal to the fair market value of a Share on the grant date. Performance units and
performance shares will result in a payment to a participant only if the performance goals or other vesting criteria
set by the administrator are achieved or the awards otherwise vest.

Each award of performance units or performance shares granted under the 2021 Plan will be evidenced by an
award agreement specifying the performance period and other terms of the award. The administrator may set
vesting criteria based upon the achievement of company-wide, divisional, business unit or individual goals (such
as continued employment or service), applicable U.S. or non-U.S. federal or state securities laws, or any other basis
determined by the administrator, in its discretion.

After an award of performance units or performance shares has been granted, the administrator has the discretion
to accelerate, reduce or waive any performance objectives or other vesting provisions for such performance units or
performance shares.

The administrator has the discretion to pay earned performance units or performance shares in the form of cash,
Shares (which will have an aggregate fair market value equal to the earned performance units or performance
shares at the close of the performance period), or a combination of both.

A participant will forfeit any performance units or performance shares not earned and not vested as of the date
specified in the participant’s award agreement.

Transferability of Awards
Unless otherwise specified by the administrator or required by applicable laws, awards are not transferable other
than by will or by the laws of descent or distribution. The administrator may permit an award to be transferred
(i) under a domestic relations order, official marital settlement agreement, or other divorce or separation
agreement, or (ii) to the extent permitted by Form S-8 under the Securities Act and any other applicable laws. Any
individual or entity to whom an award is transferred will be subject to all of the terms and conditions applicable
to the participant who transferred the award, including the terms and conditions in the 2021 Plan and the award
agreement. If an award is unvested, then the service of the participant will continue to determine whether the
award will vest and when it will terminate.

Dissolution or Liquidation
In the event of our proposed dissolution or liquidation, the administrator will notify each participant as soon as
practicable prior to the effective date of such proposed transaction. An award will terminate immediately prior to
consummation of such proposed action to the extent the award has not been previously exercised.

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Proposal No. 4 Amendment to Our 2021 Equity Incentive Plan

Merger or Change in Control
The 2021 Plan provides that, in the event of a merger or change in control, each award will be treated as the
administrator determines without a participant’s consent. The administrator will not be required to treat all awards,
all awards held by a participant, all awards of the same type, or all portions of awards the same in the transaction.

If the successor corporation does not assume or substitute for the award (or portion thereof), the participant will
vest in and may exercise all of the participant’s outstanding options and stock appreciation rights (or portion
thereof) that is not assumed or substituted for, all restrictions on restricted stock and restricted stock units
will lapse. With respect to awards with performance-based vesting that are not assumed or substituted for, all
performance goals or other vesting criteria will be deemed achieved at 100% of target levels, and all other terms
met, in each case, unless specifically provided otherwise under the applicable award agreement. In addition, if an
option or stock appreciation right (or its applicable portion) is not assumed or substituted for, the administrator will
notify the participant in writing or electronically that the option or stock appreciation right will be exercisable for a
period of time determined by the administrator, in its sole discretion, and the option or stock appreciation right (or
its applicable portion) will terminate upon the expiration of such period.

For awards granted to each of our non-employee directors, in the event of a change in control, (i) the non-employee
director will fully vest in and have the right to exercise all of his or her outstanding options and stock appreciation
rights, (ii) all restrictions on the non-employee director’s restricted stock and restricted stock units will lapse, and
(iii) with respect to the non-employee director’s awards with performance-based vesting, all performance goals or
other vesting criteria will be deemed achieved at target levels and all other terms and conditions will be deemed
met, unless specifically provided otherwise under the applicable award agreement.

Forfeiture Events
Each award under the 2021 Plan and any other compensation paid or payable to a participant (including, but
not limited to, equity awards issued outside of the 2021 Plan) will be subject to any clawback policy of ours, and
the administrator also may specify in an award agreement that the participant’s rights, payments, and benefits
regarding an award will be subject to reduction, cancellation, forfeiture, recoupment, reimbursement, or
reacquisition upon the occurrence of certain specified events. An award will be subject to the Company’s clawback
policy in effect when the award is granted and any other clawback policy of ours as established and/or amended
to comply with applicable laws (such as under the listing standards of any national securities exchange or
association on which our securities are listed or as required by the Dodd-Frank Wall Street Reform and Consumer
Protection Act). The administrator may require a participant to forfeit, return, or reimburse all or a portion of the
award and any amounts paid under the award to comply with such clawback policy or applicable laws.

No recovery of compensation under a clawback policy or otherwise will constitute an event that triggers or
contributes to any right of a participant to resign for “good reason” or “constructive termination” (or similar term)
under any agreement with us or any of our parent or subsidiary corporations, unless the 2021 Plan provisions
described in the prior paragraph specifically are mentioned and waived in an award agreement or other document.

Termination or Amendment
The administrator may amend, alter, suspend, or terminate the 2021 Plan at any time, provided that no amendment
may be made without stockholder approval to the extent approval is necessary to comply with any applicable
laws. No amendment, alteration, suspension, or termination may materially impair the rights of any participant
with respect to his or her outstanding awards unless mutually agreed otherwise between the participant and the
administrator. The 2021 Plan will continue until terminated by the administrator, but no incentive stock option may
be granted after the tenth anniversary of the date the 2021 Plan was originally adopted by our Board.

115

2023 Proxy StatementProposal No. 4 Amendment to Our 2021 Equity Incentive Plan

Notwithstanding the prior paragraph, the Administrator may amend the terms of any one or more awards without
an affected participant’s consent even if it does materially impair the participant’s rights, subject to the limitations
of applicable laws, if any, if such amendment is done (i) in a manner expressly permitted under the 2021 Plan; (ii) to
maintain the qualified status of the award as an incentive stock option under Section 422 of the Code; (iii) to change
the terms of an incentive stock option, if such change results in impairment of the award only because it impairs
the qualified status of the award as an incentive stock option under Section 422 of the Code; (iv) to clarify the
manner of exemption from, or to bring the award into compliance with, Section 409A of the Code; or (v) to comply
with other applicable laws.

Summary of U.S. Federal Income Tax Consequences
The following summary is intended only as a general guide to the U.S. federal income tax consequences of participation
in the 2021 Plan. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those
laws and regulations will not change. The summary is not complete and does not discuss the tax consequences upon
a participant’s death, or the income tax laws of any municipality, state, or non-U.S. country in which a participant may
reside. Tax consequences for any particular participant may vary based on individual circumstances.

Incentive Stock Options
A participant recognizes no taxable income for regular income tax purposes because of the grant or exercise of
an option that qualifies as incentive stock option under Section 422 of the Code. If a participant exercises the
option and then later sells or otherwise disposes of the Shares acquired through the exercise the option after both
the two-year anniversary of the date the option was granted and the one-year anniversary of the exercise, the
participant will recognize a capital gain or loss equal to the difference between the sale price of the Shares and the
exercise price.

However, if the participant disposes of such Shares either on or before the two-year anniversary of the date of grant
or on or before the one-year anniversary of the date of exercise (a “disqualifying disposition”), any gain up to the
excess of the fair market value of the Shares on the date of exercise over the exercise price generally will be taxed as
ordinary income, unless the Shares are disposed of in a transaction in which the participant would not recognize a
loss (such as a gift). Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no
ordinary income, and such loss will be a capital loss.

For purposes of the alternative minimum tax, the difference between the option exercise price and the fair market
value of the Shares on the exercise date is treated as an adjustment item in computing the participant’s alternative
minimum taxable income in the year of exercise. In addition, special alternative minimum tax rules may apply to
certain subsequent disqualifying dispositions of the Shares or provide certain basis adjustments or tax credits.

Nonstatutory Stock Options
A participant generally recognizes no taxable income as the result of the grant of a nonstatutory stock option.
However, upon exercising the option with respect to any Shares, the participant normally recognizes ordinary
income equal to the amount that the fair market value of such Shares on such date exceeds the exercise price for
such Shares. If the participant is an employee, such ordinary income generally is subject to withholding of income
and employment taxes. Upon the sale of the Shares acquired by exercising a nonstatutory stock option, any gain or
loss (based on the difference between the sale price and the fair market value on the exercise date) will be taxed as
capital gain or loss.

Stock Appreciation Rights
A participant generally recognizes no taxable income as the result of the grant of a stock appreciation right.
However, upon exercising the stock appreciation right with respect to any Shares, the participant normally
recognizes ordinary income equal to the amount that the fair market value of such Shares on such date exceeds
the exercise price for such Shares. If the participant is an employee, such ordinary income generally is subject
to withholding of income and employment taxes. Upon the sale of the Shares acquired by exercising a stock
appreciation right, any gain or loss (based on the difference between the sale price and the fair market value on the
exercise date) will be taxed as capital gain or loss.

116

Proposal No. 4 Amendment to Our 2021 Equity Incentive Plan

Restricted Stock Awards
A participant acquiring Shares of restricted stock generally will recognize ordinary income equal to the amount that
the fair market value of the Shares on the vesting date exceeds the purchase price paid by the participant for such
Shares (if any). If the participant is an employee, such ordinary income generally is subject to withholding of income
and employment taxes. The participant may elect, under Section 83(b) of the Code, to accelerate the ordinary income
tax event to the date of acquisition by filing an election with the Internal Revenue Service no later than thirty days
after the date the Shares are acquired. Upon the sale of Shares acquired under a restricted stock award, any gain or
loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax
event occurs, will be taxed as capital gain or loss.

Restricted Stock Unit Awards
There are no immediate tax consequences of receiving an award of restricted stock units. A participant who is
awarded restricted stock units generally will have to recognize ordinary income equal to the fair market value of
Shares issued to such participant at the end of the applicable vesting period or, if later, the settlement date elected
by the administrator or a participant. If the participant is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. Any additional gain or loss recognized upon any later disposition of
any Shares received would be capital gain or loss.

Performance Shares and Performance Unit Awards
A participant generally will recognize no income upon the grant of a performance share or a performance unit
award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year
of receipt in an amount equal to the cash received and the fair market value of any cash or unrestricted Shares
received. If the participant is an employee, such ordinary income generally is subject to withholding of income
and employment taxes. Upon the sale of any Shares received, any gain or loss, based on the difference between
the sale price and the fair market value on the date the ordinary income tax event occurs, will be taxed as capital
gain or loss.

Section 409A
Section 409A provides certain requirements for non-qualified deferred compensation arrangements with respect
to an individual’s deferral and distribution elections and permissible distribution events. Awards granted under
the 2021 Plan with a deferral feature will be subject to the requirements of Section 409A. If an award is subject to
and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income
on the amounts deferred under the award, when vested, which may be before the compensation is actually or
constructively received. Also, if an award subject to Section 409A violates Section 409A’s provisions, Section 409A
imposes an additional 20% federal income tax on compensation recognized as ordinary income and potentially
penalties and interest on such deferred compensation.

Tax Effect for Us
We generally will be entitled to a tax deduction in connection with an award under the 2021 Plan equal to the
ordinary income realized by a participant when the participant recognizes such income (for example, the exercise of
a nonstatutory stock option or the disqualifying disposition of Shares acquired through the exercise of an incentive
stock option) except to the extent such deduction is limited by applicable provisions of the Code. Special rules limit
the deductibility of compensation paid to our chief executive officer and other “covered employees” as determined
under Section 162(m) and applicable guidance. Under Section 162(m), the annual compensation paid to any of these
specified executives will be deductible only to the extent that it does not exceed $1,000,000.

THE SUMMARY ABOVE IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME TAXATION ON PARTICIPANTS
AND US WITH RESPECT TO AWARDS UNDER THE 2021 PLAN. IT IS NOT INTENDED TO BE COMPLETE AND MAY
NOT DISCUSS THE IMPACT OF EMPLOYMENT OR OTHER TAX REQUIREMENTS, THE TAX CONSEQUENCES OF A
PARTICIPANT’S DEATH, OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR NON-U.S.
COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.

117

2023 Proxy StatementProposal No. 4 Amendment to Our 2021 Equity Incentive Plan

Number of Awards Granted to Employees, Consultants, and
Directors
The number of awards that an employee, director, or consultant may receive under the 2021 Plan is in the discretion
of the administrator and therefore cannot be determined in advance. The following table sets forth: (i) time-based
restricted stock units (“RSUs”), and performance-based restricted stock units (“PSUs”) granted under the 2012 Plan
and the 2021 Plan during fiscal 2023 to each of our named executive officers; our executive officers, as a group; our
directors who are not executive officers, as a group; and all of our employees who are not executive officers, as a
group; and (ii) the aggregate grant date fair value of such RSUs and PSUs.

Name of Individual or Group
Nikesh Arora
Chief Executive Officer and Chair of the Board
Dipak Golechha
Executive Vice President, Chief Financial Officer
William “BJ” Jenkins
President
Lee Klarich
Chief Product Officer
Nir Zuk
Chief Technology Officer
All executive officers, as a group
All directors who are not executive officers, as a group
All employees who are not executive officers, as a group

Number of
Shares Subject
to RSUs and
PSUs Granted(1)

Dollar Value of
Shares Subject
to RSUs and
PSUs Granted(1)

623,144(2)

$ 145,374,318

30,675(2)

48,906(2)

62,379(2)

27,078(2)

792,182

15,966(3)
6,882,074(4)

7,879,645

12,116,568

15,685,347

$
6,961,334
$ 188,017,212
$
2,566,535
$1,127,331,216

(1) The amounts reported represent the grant date fair value of the PSUs and the RSUs granted in fiscal 2023, calculated in accordance

with ASC Topic 718. The assumptions used in calculating the grant date fair value of the PSUs and the RSUs reported in this
column are set forth in the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K
for our fiscal year ended July 31, 2023. The value of the PSUs is calculated using a Monte-Carlo simulation valuation performed
as of the date of grant by an independent third party. With respect to the FY23 PSUs and the FY22 PSUs, in fiscal year 2023, we
approved only the fiscal year 2023 performance targets. As a result, only these portions of the FY23 PSUs (covering 33% of the
FY23 PSUs for Messrs. Arora, Golechha, Jenkins, Klarich and Zuk have a reportable grant date fair value under ASC Topic 718 and
are included in this table. As a result, only these portions of the FY22 PSUs (covering 42% of the FY22 PSUs for Messrs. Arora,
Golechha, Klarich and Zuk and 28% of the FY22 PSUs for Mr. Jenkins) have a reportable grant date fair value under ASC Topic
718 and are included in this table. The remaining PSUs do not have a reportable grant date fair value under ASC Topic 718 and
are not included in this table. In addition, the target number of shares subject to PSUs granted in fiscal 2023, which have a
reportable grant date fair value under ASC Topic 718, are shown in this table.

(2) Consists of PSUs only.
(3) Consists of RSUs only.
(4) Does not include shares subject to vesting conditions that were issued outside of our 2012 Plan and 2021 Plan in connection

with acquisitions. See Note 7 in our Annual Report on Form 10-K for our fiscal year ended July 31, 2023, for information regarding
these issuances.

118

Proposal No. 4 Amendment to Our 2021 Equity Incentive Plan

Additional Equity Plan Information
The following table provides certain additional information regarding our equity compensation plans, excluding the
Employee Stock Purchase Plan:

Total Stock Options (including PSOs) Outstanding
Weighted-Average Exercise Price of Stock Options Outstanding
Weighted-Average Remaining Duration of Stock Options Outstanding
Total Restricted Stock Units (including PSUs) Outstanding
Total Shares Available for Issuance under the 2021 Equity Incentive Plan

As of 10/16/2023
6,276,744
$65.22 per share
1.97 years
18,045,273
10,165,060

For more information regarding our equity compensation plans, including the Employee Stock Purchase Plan,
please see “Equity Compensation Plan Information.”

119

2023 Proxy StatementSecurity Ownership of Certain
Beneficial Owners and Management

The following table sets forth certain information with respect to the beneficial ownership of our common stock as
of September 21, 2023 for:

• each of our directors and nominees for director;

• each of our NEOs;

• all of our current directors and executive officers as a group; and

• each person or group, who beneficially owned more than 5% of our common stock.

We have determined beneficial ownership in accordance with the rules and regulations of the SEC, and the
information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the
footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table
below have sole voting and sole investment power with respect to all shares of common stock that they beneficially
owned, subject to applicable community property laws.

Applicable percentage ownership is based on 309,912,522 shares of our common stock outstanding at September 21,
2023. In computing the number of shares of common stock beneficially owned by a person and the percentage
ownership of such person, we deemed to be outstanding all shares of common stock subject to options held
by the person that are currently exercisable or exercisable (or issuable upon vesting of restricted stock units or
performance stock unit awards) within 60 days of September 21, 2023. However, we did not deem such shares
outstanding for the purpose of computing the percentage ownership of any other person.

Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Palo Alto Networks,
Inc., 3000 Tannery Way, Santa Clara, California 95054. The information provided in the table below is based on our
records, information filed with the SEC and information provided to us, except where otherwise noted.

5% Stockholders:
The Vanguard Group(1)

BlackRock, Inc.(2)

Named Executive Officers and Directors:

Nikesh Arora(3)

William “BJ” Jenkins(4)

Dipak Golechha(5)

Lee Klarich(6)

Nir Zuk(7)

Aparna Bawa(8)

John M. Donovan(9)

Carl Eschenbach(10)

Helene D. Gayle(10)

James J. Goetz(11)

Rt Hon Sir John Key(10)

Mary Pat McCarthy(10)

Lorraine Twohill(10)

Number of
Shares

Percent of
Shares
Outstanding

19,851,052

17,034,005

6.4%

5.5%

3,943,428

1.3%

150,806

78,043

2,349,014

3,338,372

711

142,275

16,436

8,119

201,132

15,073

43,542

18,359

1.1%

All current directors and executive officers as a group (13 Persons)(12)

10,305,310

3.3%

120

Security Ownership of Certain Beneficial Owners and Management

* Represents beneficial ownership of less than one percent (1%).
(1) According to a Schedule 13G/A filed with the SEC on February 9, 2023, The Vanguard Group, Inc. (“Vanguard”), as investment
advisor, has sole voting power with respect to none of the reported shares, shared voting power with respect to 240,205 of
the reported shares, sole dispositive power with respect to 19,196,315 of the reported shares and shared dispositive power with
respect to 654,737 of the reported shares. The address of Vanguard is 100 Vanguard Blvd., Malvern, PA 19355.

(2) According to a Schedule 13G/A filed with the SEC on February 7, 2023, BlackRock, Inc. (“BlackRock”) has sole voting power with
respect to 14,899,448 of the reported shares, and sole dispositive power with respect to 17,034,005 of the reported shares. The
address of BlackRock is 55 East 52nd Street, New York, NY 10055.

(3) Consists of (i) 500,512 shares held of record by Mr. Arora, (ii) 16,005 shares held of record by Bacchey Investments L.P., of

which Bacchey Management LLC (the “LLC”) is the General Partner, Mr. Arora is the manager of the LLC and the sole member
of the LLC is the Aurora Trust, for which Mr. Arora serves as a trustee, (iii) 266,952 RSUs that vested and were earned and deferred
under our deferred compensation plan, (iv) 159,959 shares issuable upon the vesting of performance stock unit awards within
60 days of September 21, 2023 and (v) 3,000,000 PSOs exercisable within 60 days of September 21, 2023.

(4) Consists of (i) 14,393 shares held of record by Mr. Jenkins, (ii) 71,055 RSUs that vested and were earned and deferred under our
deferred compensation plan and (iii) 65,358 shares issuable upon the vesting of restricted stock units and performance stock
unit awards within 60 days of September 21, 2023.

(5) Consists of (i) 49,851 shares held of record by Mr. Golechha and (ii) 28,192 shares that are issuable upon the vesting of

performance stock unit awards within 60 days of September 21, 2023.

(6) Consists of (i) 101,259 shares held of record by Mr. Klarich, (ii) 420,000 shares held of record by the Lee and Susan Klarich 2005
Trust, (iii) 85,676 shares that are issuable upon the vesting of restricted stock units and performance stock unit awards within
60 days of September 21, 2023 and (iv) 1,742,079 PSOs exercisable within 60 days of September 21, 2023.

(7) Consists of (i) 1,522,436 shares held of record by Mr. Zuk, (ii) 274,914 shares held by the Cliff Family Trusts, for which Mr. Zuk serves
as a trustee, (iii) 31,965 shares that are issuable upon the vesting of restricted stock units and performance stock unit awards
within 60 days of September 21, 2023 and (iv) 1,509,057 PSOs exercisable within 60 days of September 21, 2023.
(8) Consists of 711 shares issuable upon the vesting of restricted stock units within 60 days of September 21, 2023.
(9) Consists of (i) 83,811 shares held of record by Mr. Donovan and (ii) 58,464 shares held of record by SRJ Norway Partners LP, for

which Mr. Donovan serves as the general partner.

(10) Consists of shares held of record by the director or officer.
(11) Consists of (i) 157,290 shares held of record by Mr. Goetz and (ii) 43,842 shares held of record by the Goetz Children’s Trust

4/24/1998.

(12) Consists of (i) 3,344,306 shares beneficially owned by the current directors and executive officers, (ii) 371,861 shares issuable
upon the vesting of restricted stock units and performance stock unit awards within 60 days of September 21, 2023 and
(iii) 338,007 RSUs that vested and were earned and deferred under our deferred compensation plan and (iv) 6,251,136 PSOs
exercisable within 60 days of September 21, 2023.

121

2023 Proxy StatementRelated Person Transactions

The Audit Committee of the Board of Directors has adopted a written policy and procedures for the review, approval
and ratification, if necessary, of the transactions among the Company and its directors, executive officers and their
related interests.

We have entered into employment arrangements with our executive officers. See also the section titled “Discussion
of our Fiscal 2023 Executive Compensation Program—Executive Employment Agreements.”

We have also entered into indemnification agreements with our directors and executive officers. The
indemnification agreements and our amended and restated certificate of incorporation and amended and restated
bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.

Policies and Procedures for Related Person Transactions
Our Audit Committee has the primary responsibility for reviewing and approving or ratifying transactions with
related persons.

We have a formal written policy providing that any transactions in which the aggregate amount exceeds or may be
expected to exceed $120,000 between us and a related person (defined as an executive officer, director, nominee
for election as director, beneficial owner of more than 5% of any class of our capital stock, any member of the
immediate family of any of the foregoing persons, and any firm, corporation or other entity in which any of the
foregoing persons is employed, is a general partner or principal or in a similar position, or in which such person
has a 5% or greater beneficial ownership interest) are reviewed and approved or ratified quarterly by our Audit
Committee. In approving or rejecting any such proposal, our Audit Committee is to consider the relevant facts and
circumstances available and deemed relevant to our Audit Committee, including, whether the transaction is on
terms generally available to an unaffiliated third party under the same or similar circumstances, and the extent
of the related person’s interest in the transaction. In addition, it is our policy that directors interested in a related
person transaction will recuse themselves from any discussion or vote on a related person transaction in which they
may have an interest.

122

About the Annual Meeting

Why are you holding a virtual meeting and how can
stockholders attend?
We have adopted a virtual meeting format for our Annual Meeting this year to provide a consistent experience
to all stockholders regardless of geographic location and enhance stockholder access and engagement.
To participate in our virtual Annual Meeting, including to vote and ask questions during the meeting, visit
www.virtualshareholdermeeting.com/PANW2023 with your 16-digit control number included in the Notice, on
your proxy card, or in the instructions that accompanied your proxy materials. If you did not receive a 16-digit
control number, please reach out to your broker for instructions. If you are not a stockholder or do not have a
control number, you may still access the meeting as a guest, but you will not be able to submit questions or vote at
the meeting.

How can I ask questions during the Annual Meeting?
The virtual format allows stockholders to communicate with us during the Annual Meeting. Stockholder questions
may be submitted in the field provided in the web portal prior to or during the Annual Meeting for consideration.
Detailed guidelines for submitting written questions during the Annual Meeting are available at http://www.
virtualshareholdermeeting.com/PANW2023. You can submit questions in advance of the Annual Meeting by
visiting www.proxyvote.com. The chairperson of the meeting will review the questions and determine whether
the questions are relevant to the subject matter of the meeting and otherwise appropriate for answering at the
meeting. We reserve the right to edit profanity or other inappropriate language and to exclude questions regarding
topics that are not pertinent to meeting matters or our business, or are otherwise not appropriate for answering
at the meeting. If we receive substantially similar questions, we may group such questions together and provide a
single response to avoid repetition.

Who is entitled to vote?
Only holders of our common stock as of the close of business on October 16, 2023 (the “Record Date”), are entitled
to vote at the Annual Meeting. As of the Record Date, 310,815,919 shares of our common stock were outstanding
and entitled to vote. For each proposal at the Annual Meeting, each stockholder will be entitled to one vote for each
share of our common stock held by them on the Record Date. Stockholders may not cumulate votes in the election
of directors. Our list of stockholders, as of the Record Date, will be available for inspection for the ten days prior to
the Annual Meeting. If you would like to inspect the stockholder list, email our Investor Relations department at
ir@paloaltonetworks.com to make arrangements.

Registered Stockholders of Record. If shares of our common stock are registered directly in your name with our
transfer agent, you are considered the stockholder of with respect to those shares, and the Notice was provided
to you directly by us. As the stockholder of record, you have the right to grant your voting proxy directly to the
individuals listed on your proxy card, or to vote online, by telephone or virtually at the virtual Annual Meeting as
described above. Throughout this proxy statement, we refer to these registered stockholders as “stockholders
of record.”

Street Name Stockholders. If shares of our common stock are held on your behalf in a brokerage account or by
a bank or other nominee, you are considered to be the beneficial owner of shares that are held in “street name,”
and the Notice was forwarded to you by your broker, bank or other nominee, who is considered the stockholder of
record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or other
nominee as to how to vote your shares. Beneficial owners are also invited to participate in and vote online at the
Annual Meeting; however, since a beneficial owner is not the stockholder of record, you may not vote your shares of
our common stock virtually at the virtual Annual Meeting unless you follow your broker’s procedures for obtaining
a legal proxy. If you request a printed copy of our proxy materials by mail, your broker, bank or other nominee will
provide a voting instruction form for you to use. Throughout this proxy statement, we refer to stockholders who hold
their shares through a broker, bank or other nominee as “street name stockholders.”

123

2023 Proxy StatementAbout the Annual Meeting

How do I vote?
If you are a stockholder of record, there are four ways to vote:

• by Internet, prior to the virtual Annual Meeting at http://www.proxyvote.com, 24 hours a day, seven days a week

(have your proxy card in hand when you visit the website);

• by toll-free telephone at 1-800-690-6903 until 11:59 p.m. Eastern Standard Time, on December 11, 2023 (have your

proxy card in hand when you call);

• by completing and mailing your proxy card so it is received prior to the Annual Meeting (if you received printed

proxy materials); or

• by attending and voting during the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/

PANW2023. Please have your 16-digit control number to join the virtual Annual Meeting.

Even if you plan to attend the virtual Annual Meeting, we recommend that you also vote by Internet, telephone, or
returning a proxy card so that your vote will be counted if you later decide not to attend the virtual Annual Meeting.

If you are a street name stockholder, you will receive voting instructions from your broker, bank or other nominee.
You must follow the voting instructions provided by your broker, bank or other nominee in order to direct your
broker, bank or other nominee on how to vote your shares. Street name stockholders should generally be able to
vote by returning a voting instruction form, or by telephone or on the Internet. However, the availability of telephone
and Internet voting will depend on the voting process of your broker, bank or other nominee. As discussed above,
if you are a street name stockholder, you may not vote your shares online at the virtual Annual Meeting unless you
obtain a legal proxy from your broker, bank, or other nominee.

Can I change my vote or revoke my proxy?
Yes. If you are a stockholder of record, you can change your vote or revoke your proxy any time before the Annual
Meeting by:

• entering a new vote by Internet or by telephone on a later date;

• completing and returning a later-dated proxy card;

• sending a written notice of revocation to the Corporate Secretary of Palo Alto Networks, at Palo Alto Networks,

Inc., 3000 Tannery Way, Santa Clara, CA 95054; or

• attending and voting online during the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/

PANW2023. Please have your 16-digit control number to join the Annual Meeting.

If you are a street name stockholder, your broker, bank or other nominee can provide you with instructions on how
to change your vote or revoke your proxy.

How does the Board recommend I vote on these proposals?
Our Board recommends a vote:

• “FOR” all the Company’s nominees Nikesh Arora, Aparna Bawa, Carl Eschenbach, and Lorraine Twohill to be

elected as Class III directors;

• “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting

firm for our fiscal year ending July 31, 2024;

• “FOR” the approval, on an advisory basis, of the compensation of our named executive officers; and

• “FOR” the approval of an amendment of our 2021 Equity Incentive Plan to increase the number of plan shares

reserved for issuance.

124

About the Annual Meeting

How many votes are needed for approval of each proposal?
• Proposal No. 1: Each director nominee will be elected by a vote of the majority of the votes cast. A majority
of the votes cast means the number of votes cast “For” such nominee’s election exceeds the number of
votes cast “Against” that nominee. An affirmative vote of a majority means the number of votes cast “for” such
nominee’s election exceeds the number of votes cast “against” that nominee. You may vote “for,” “against,” or
“abstain” on each of the nominees for election as a director. Broker non-votes and abstentions will have no effect
on the outcome of this proposal.

• Proposal No. 2: The ratification of the appointment of Ernst & Young LLP as our independent registered public
accounting firm for our fiscal year ending July 31, 2024 requires the affirmative vote of a majority of the shares
of our common stock present virtually or by proxy at the virtual Annual Meeting and entitled to vote thereon to
be approved. You may vote “for,” “against,” or “abstain” with respect to this proposal. Abstentions are considered
votes present and entitled to vote on this proposal, and thus will have the same effect as a vote “against” this
proposal. Broker non-votes will have no effect on the outcome of this proposal.

• Proposal No. 3: The approval, on an advisory basis, of the compensation of our named executive officers requires
the affirmative vote of a majority of the shares of our common stock present virtually or by proxy at the virtual
Annual Meeting and entitled to vote thereon to be approved. You may vote “for,” “against,” or “abstain” with
respect to this proposal. Abstentions are considered votes present and entitled to vote on this proposal, and thus
will have the same effect as votes “against” this proposal. Broker non-votes will have no effect on the outcome of
this proposal. Although the advisory vote is non-binding, our board of directors values our stockholders’ opinions.
The Compensation and People Committee will review the results of the vote and, consistent with our record
of stockholder responsiveness, consider stockholders’ concerns and take into account the outcome of the vote
when considering future decisions concerning our executive compensation program.

• Proposal No. 4: The approval of an amendment of our 2021 Equity Incentive Plan requires the affirmative vote
of a majority of the shares of our common stock present virtually or by proxy at the virtual Annual Meeting and
entitled to vote thereon to be approved. You may vote “for,” “against,” or “abstain” with respect to this proposal.
Abstentions are considered votes present and entitled to vote on this proposal, and thus will have the same effect
as votes “against” this proposal. Broker non-votes will have no effect on the outcome of this proposal.

What is the effect of giving a proxy?
Proxies are solicited by and on behalf of our Board. The persons named in the proxy have been designated as
proxies by our Board. When a proxy card is properly dated, executed and returned, the shares represented by such
proxies will be voted at the virtual Annual Meeting in accordance with the instruction of the stockholder. If a proxy
card is signed, but no specific instructions are given, the shares represented by such proxy card will be voted in
accordance with the recommendations of our board of directors, as described above. If any matters not described in
this proxy statement are properly presented at the Annual Meeting, the proxy holders will use their own judgment
to determine how to vote the shares subject to proxies. If the Annual Meeting is adjourned, the proxy holders can
vote your shares subject to proxies when the Annual Meeting is rescheduled, unless you have properly revoked your
proxy instructions, as described above.

Why did I receive the Notice instead of a full set of proxy materials?
In accordance with the rules of the SEC, we have elected to furnish our proxy materials, including this proxy
statement and our annual report, primarily via the Internet. The Notice containing instructions on how to access
our proxy materials is first being mailed on or about October 27, 2023 to all stockholders entitled to vote at the
virtual Annual Meeting. Stockholders may request to receive all future proxy materials in printed form by mail or
electronically by e-mail by following the instructions contained in the Notice. We encourage stockholders to take
advantage of the availability of our proxy materials on the Internet to help reduce the environmental impact of our
annual meetings of stockholders.

125

2023 Proxy StatementAbout the Annual Meeting

What is a quorum?
A quorum is the minimum number of shares required to be present for the virtual Annual Meeting to be properly
held under our amended and restated bylaws and Delaware law. The presence, virtually or by proxy, of a majority of
all issued and outstanding shares of our common stock entitled to vote at the virtual Annual Meeting will constitute
a quorum at the virtual Annual Meeting. A proxy submitted by a stockholder may indicate that all or a portion of the
shares represented by the proxy are not being voted (“stockholder withholding”) with respect to a particular matter.
Similarly, a broker may not be permitted to vote shares held in street name on a particular matter in the absence of
instructions from the beneficial owner of such shares (“broker non-vote”). See the question below titled “How may
my broker, bank or other nominee vote my shares if I fail to timely provide voting instructions?” The shares of our
common stock subject to a proxy that are not being voted on a particular matter because of a broker non-vote will
count for purposes of determining the presence of a quorum. Abstentions are also counted in the determination of
a quorum.

Where can I find the voting results of the Annual Meeting?
We will announce preliminary voting results at the Annual Meeting. We will also disclose voting results on a Current
Report on Form 8-K that we will file with the SEC within four business days after the Annual Meeting. If final voting
results are not available to us in time to file a Current Report on Form 8-K within four business days after the Annual
Meeting, we will file a Current Report on Form 8-K to publish preliminary voting results and will provide the final
voting results in an amendment to the Current Report on Form 8-K as soon as they become available.

How are proxies solicited for the Annual Meeting?
Our Board is soliciting proxies for use at the Annual Meeting. All expenses associated with this solicitation will be
borne by us. We will reimburse brokers, banks or other nominees for reasonable expenses that they incur in sending
our proxy materials to you if a broker, bank or other nominee holds your shares of our common stock. In addition
to using the internet, our directors, officers and employees may solicit proxies in person and by mail, telephone,
facsimile, or electronic transmission, for which they will not receive any additional compensation. We have retained
Georgeson LLC to assist us in soliciting proxies for a fee of approximately $37,000, plus reasonable out-of-pocket
expenses incurred in the process of soliciting proxies.

How may my broker, bank or other nominee vote my shares if I fail
to timely provide voting instructions?
Brokerage firms, banks or other nominees holding shares of our common stock in street name for beneficial
owners are generally required to vote such shares in the manner directed by the beneficial owner. In the absence
of timely directions, your broker, bank or other nominee will have discretion to vote your shares on our sole
“routine” matter, the proposal to ratify the appointment of Ernst & Young LLP as our independent registered public
accounting firm for our fiscal year ending July 31, 2024. Your broker will not have discretion to vote on any other
proposals, which are “non-routine” matters, absent direction from you.

Who will count the votes?
A representative of Broadridge Financial Solutions, Inc. will serve as the independent inspector of election and, in
such capacity, will count and tabulate the votes.

126

About the Annual Meeting

I share an address with another stockholder, and we received
only one paper copy of the proxy materials. How may I obtain an
additional copy of the proxy materials?
We have adopted a procedure called “householding,” which the SEC has approved. Under this procedure, we deliver
a single copy of the Notice, and if applicable, our proxy materials to multiple stockholders who share the same
address unless we receive contrary instructions from one or more of the stockholders sharing the same address.
This procedure reduces our printing costs, mailing costs, and fees. Stockholders who participate in householding will
continue to be able to access and receive separate copies of the Notice, and if applicable, our proxy materials. Upon
written or oral request, we will deliver promptly separate copies of the Notice, or if applicable, our proxy materials, to
any stockholder at a shared address which we delivered a single copy of any of these materials. To receive a separate
copy, or, if a stockholder is receiving multiple copies, to request that we only send a single copy of the Notice, or if
applicable our proxy materials, stockholders may contact us at our principal executive address: Palo Alto Networks,
Inc., Attention: Investor Relations, 3000 Tannery Way, Santa Clara, California 95054 or Tel: (408) 753-4000.

Stockholders who hold shares of our common stock in street name may contact their brokerage firm, bank, broker-
dealer or other similar organization to request information about householding.

What is the deadline to propose actions for consideration at next
year’s annual meeting of stockholders or to nominate individuals to
serve as directors?
S TO C K H O L D E R P R O P O S A L S
Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at the next
annual meeting of stockholders pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) by submitting their proposals in writing to our Corporate Secretary in a timely manner. For a
Rule 14a-8 stockholder proposal to be considered for inclusion in our proxy statement for our 2024 annual meeting
of stockholders, our Corporate Secretary must receive the written proposal at our principal executive offices not
later than June 29, 2024. In addition, stockholder proposals must comply with the requirements of Rule 14a-8
under the Exchange Act regarding the inclusion of stockholder proposals in Company-sponsored proxy materials.
Stockholder proposals should be addressed to:

Palo Alto Networks, Inc., Attention: Corporate Secretary, 3000 Tannery Way, Santa Clara, California 95054.

Our amended and restated bylaws also establish an advance notice procedure for stockholders who wish to present
a proposal before an annual meeting of stockholders but do not intend for the proposal to be included in our proxy
statement pursuant to Rule 14a-8. Our amended and restated bylaws provide that the only business that may be
conducted at an annual meeting is business that is (i) specified in our proxy materials with respect to such annual
meeting, (ii) otherwise properly brought before the annual meeting by or at the direction of our board of directors,
or (iii) properly brought before the annual meeting by a stockholder of record entitled to vote at the annual meeting
who has delivered timely written notice to our Corporate Secretary, which notice must contain the information
specified in our amended and restated bylaws. To be timely for our 2024 annual meeting of stockholders, our
Corporate Secretary must receive the proper written notice at our principal executive offices:

• not earlier than 5:00 p.m. Pacific Time on August 14, 2024; and

• not later than 5:00 p.m. Pacific Time on September 13, 2024.

In the event that we hold our 2024 annual meeting of stockholders more than 30 days before or more than 60 days
after the one-year anniversary of the Annual Meeting, then notice of a stockholder proposal that is not intended to
be included in our proxy statement must be received no earlier than 5:00 p.m. Pacific Time on the 120th day before
such annual meeting and no later than 5:00 p.m. Pacific Time on the later of the following two dates:

• the 90th day prior to such annual meeting; or

• the 10th day following the day on which public announcement of the date of such annual meeting is first made.

127

2023 Proxy StatementAbout the Annual Meeting

If a stockholder who has notified us of his, her or its intention to present a proposal at an annual meeting does not
appear to present his, her or its proposal at such annual meeting, we are not required to present the proposal for a
vote at such annual meeting.

D I R E C TO R N O M I N AT I O N S
Stockholders may recommend director candidates for consideration by our ESG and Nominating Committee. Any
such recommendations should include the nominee’s name and qualifications for membership on our Board
of Directors and should be directed to our Corporate Secretary at the address set forth above. For additional
information regarding stockholder recommendations for director candidates, see the section titled “Identification
and Evaluation of Director Nominees—Stockholder Recommendations for Nominations to the Board of Directors”
beginning on page 53 of this proxy statement.

In addition, our amended and restated bylaws permit stockholders to nominate directors for election at an annual
meeting of stockholders. To nominate a director, the stockholder must provide the information required by our
amended and restated bylaws, which includes the information required by Rule 14a-19 of the Exchange Act. In
addition, the stockholder must give timely notice to our Secretary in accordance with our amended and restated
bylaws, which, in general, require that the notice be received at the address set forth above within the time periods
described above under the section titled “Stockholder Proposals” for stockholder proposals that are not intended to
be included in a proxy statement.

Furthermore, our amended and restated bylaws permit stockholders or a group of stockholders that wish to
nominate one or more directors through proxy access for inclusion in our proxy statement. To nominate a director
using this process, the stockholder must provide the information required by the proxy access provision of our
amended and restated bylaws. In addition, the stockholder must give timely notice to our Corporate Secretary in
accordance with our amended and restated bylaws, which, in general, require that the notice be received by our
Corporate Secretary at our principal executive offices:

• not earlier than the close of business on May 30, 2024; and

• not later than the close of business on June 29, 2024.

AVA I L A B I L I T Y O F B Y L AWS
A copy of our amended and restated bylaws may be obtained by accessing our public filings on the SEC’s website at
www.sec.gov. You may also contact our Corporate Secretary at our principal executive offices for a copy of the relevant
bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.

128

Other Matters

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires the Company’s officers and directors and persons who beneficially own
more than 10% of the Company’s common stock (collectively, “Reporting Persons”) to file reports of beneficial
ownership and changes in beneficial ownership with the SEC. Based solely on our review of filed reports or written
representations from certain Reporting Persons relating to fiscal 2023, the Company believes that all reports were
filed on a timely basis except that an acquisition of shares was reported late on a Form 4 filed on behalf of Nikesh
Arora, our Chief Executive Officer and on a Form 4 filed on behalf of Lee Klarich, our Chief Product Officer.

Fiscal Year 2023 Annual Report and SEC Filings

Our financial statements for our fiscal year ended July 31, 2023, are included in our Annual Report on Form 10-K,
which we will make available to stockholders at the same time as this proxy statement. This proxy statement and
our annual report are posted on our website at www.paloaltonetworks.com and are available from the SEC at its
website at www. sec.gov. You may also obtain a copy of our annual report without charge by sending a written
request to Investor Relations, Palo Alto Networks, Inc., 3000 Tannery Way, Santa Clara, California 95054.

* * *

The board of directors does not know of any other matters to be presented at the Annual Meeting. If any additional
matters are properly presented at the Annual Meeting, the persons named in the enclosed proxy card will have
discretion to vote the shares of our common stock they represent in accordance with their own judgment on
such matters.

It is important that your shares of our common stock be represented at the Annual Meeting, regardless of the
number of shares that you hold. You are, therefore, urged to vote by telephone or by using the Internet as instructed
on your proxy card or execute and return, at your earliest convenience, your proxy card in the envelope provided.

THE BOARD OF DIRECTORS

Santa Clara, California
October 27, 2023

129

2023 Proxy StatementAppendix A

Calculation of Billings and Organic
Operating Margin

CALCUL ATION OF BILLINGS

(in millions):

Billings
Total Revenue

Add: Change in total deferred revenue, net of acquired deferred revenue

Total billings

FY’23
6,892.7
2,301.7
9,194.4

CALCUL ATION OF ORGANIC OPERATING INCOME AND ORGANIC OPERATING MARGIN

$ In millions

FY’23

Organic Operating Income and Operating Margin:
GAAP operating income and operating margin
Share-based compensation-related charges
Acquisition-related costs(1)
Amortization expense of acquired intangible assets

Litigation-related charges(2)
Restructuring and other costs(3)
Non-GAAP operating income and operating margin
Operating loss from acquired entities(4)
Incremental bonus payout(5)
Organic operating income and operating margin

$
$ 387.3

%
5.6%
1,145.1 16.6%
0.3%
1.5%

19.5
103.1

7.1
(2.2)

0.1%
0.0%
$1,659.9 24.1%

9.1
69.6

0.1%
1.0%
$1,738.6 25.2%

(1) Consists of acquisition transaction costs, share-based compensation related to the cash settlement of certain equity awards,

and costs to terminate certain employment, operating lease, and other contracts of the acquired companies.

(2) Consists of the amortization of intellectual property licenses and covenant not to sue.
(3) Consists of adjustments to restructuring and other costs.
(4) Consists of operating loss from the entities acquired in fiscal 2023.
(5) Consists of bonus payout in excess of 100% of the target cash incentive of the 2023 Incentive Compensation Plan.

130

Appendix A

Non-GAAP Financial Measures and Other
Key Metrics

Palo Alto Networks has provided in this Proxy Statement financial information that has not been prepared in
accordance with generally accepted accounting principles in the United States (GAAP). The Company uses these
non-GAAP financial measures and other key metrics internally to set targets for employee compensation programs.

Non-GAAP Operating Margin. Palo Alto Networks defines non-GAAP operating margin as operating margin plus
share-based compensation-related charges, including share-based payroll tax expense, acquisition-related costs,
amortization expense of acquired intangible assets, litigation-related charges, including legal settlements, along
with certain non-recurring expenses. The Company believes that excluding these items from non-GAAP operating
margin provides management and investors with greater visibility into the underlying performance of the
Company’s core business operating results, meaning its operating performance excluding these items and, from
time to time, other discrete charges that are infrequent in nature, over multiple periods.

Organic operating margin. Palo Alto Networks defines organic operating margin as non-GAAP operating margin,
excluding the effects of acquisitions and dispositions and bonus payout in excess of 100% of the target cash
incentive under the 2023 Cash Incentive Compensation Plan.

Billings. Palo Alto Networks defines billings as total revenue plus the change in total deferred revenue, net
of acquired deferred revenue, during the period. The Company considers billings to be a key metric used by
management to manage the Company’s business and believes billings provides investors with an important
indicator of the health and visibility of the Company’s business because it includes subscription and support
revenue, which is recognized ratably over the contractual service period, and product revenue, which is recognized
at the time of hardware shipment or delivery of software license, provided that all other conditions for revenue
recognition have been met. The Company considers billings to be a useful metric for management and investors,
particularly if sales of subscriptions continue to increase and the Company experiences strong renewal rates for
subscriptions and support.

Next-Gen Security ARR is annualized allocated revenue of all active contracts as of the final day of the reporting
period for Prisma and Cortex offerings inclusive of the VM-Series and related services, and certain cloud-delivered
security services.

Investors are cautioned that there are a number of limitations associated with the use of non-GAAP financial
measures and key metrics as analytical tools. In particular, the billings metric reported by the Company includes
amounts that have not yet been recognized as revenue. Furthermore, these non-GAAP financial measures are not
based on any standardized methodology prescribed by GAAP.

131

2023 Proxy StatementAppendix B

Amended and Restated 2021 Equity
Incentive Plan

PALO ALTO NETWORKS, INC.
2021 EQUITY INCENTIVE PLAN

(As amended and restated, subject to, and contingent upon, stockholder approval at the
2023 annual meeting of the Company’s stockholders)

1. Purpose of the Plan. The purpose of this Plan is to:

• to attract and retain the best available personnel for positions of substantial responsibility,

• to provide additional incentive to Employees, Directors and Consultants, and

• to promote the success of the Company’s business.

The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted

Stock Units, Stock Appreciation Rights, Performance Units and Performance Shares.

2. Definitions. The following definitions are used in this Plan:

(a)

(b)

(c)

(d)

(e)

(f)

“Administrator” means the Board or any of its Committees as will be administering the Plan, in
accordance with Section 4 of the Plan.

“Applicable Laws” means the legal and regulatory requirements relating to the administration of
equity-based awards and issuance of shares of Common Stock, including under U.S. state corporate
laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which
the Common Stock is listed or quoted and the applicable laws of any non-U.S. country or jurisdiction
where Awards are, or will be, granted under the Plan. Reference to a specific section of an Applicable
Law or regulation related to that section shall include such section or regulation, any valid regulation
or other official guidance issued under that section, and any comparable provision of any future
legislation or regulation amending, supplementing or superseding that section or regulation.

“Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation
Rights, Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares.

“Award Agreement” means the written or electronic agreement between the Company and Participant
setting forth the terms and provisions applicable to an Award granted under the Plan. The Award
Agreement is subject to the terms and conditions of the Plan.

“Board” means the Board of Directors of the Company.

“Change in Control” means the occurrence of any of the following events:

(i)

(ii)

Change in Ownership of the Company. A change in the ownership of the Company which
occurs on the date that any one person, or more than one person acting as a group (“Person”),
acquires ownership of the stock of the Company that, together with the stock held by such
Person, constitutes more than 50% of the total voting power of the stock of the Company;
provided, however, that for purposes of this subsection, if any one Person is already considered
to own more than 50% of the total voting power of the stock of the Company, the acquisition of
additional stock by such Person will not be considered a Change in Control; or

Change in Effective Control of the Company. A change in the effective control of the Company
which occurs on the date that a majority of members of the Board is replaced during any
12-month period by Directors whose appointment or election is not endorsed by a majority of
the members of the Board prior to the date of the appointment or election. For purposes of
this subsection (ii), if any Person is considered to be in effective control of the Company, the
acquisition of additional control of the Company by the same Person will not be considered a
Change in Control; or

132

Appendix B

(iii) Change in Ownership of a Substantial Portion of the Company’s Assets. A change in the

ownership of a substantial portion of the Company’s assets which occurs on the date that
any Person acquires (or has acquired during the 12-month period ending on the date of the
most recent acquisition by such Person) assets from the Company that have a total gross fair
market value equal to or more than 50% of the total gross fair market value of all of the assets
of the Company immediately prior to such acquisition or acquisitions; provided, however, that
for purposes of this subsection (iii), the following will not constitute a change in the ownership
of a substantial portion of the Company’s assets: (A) a transfer to an entity that is controlled
by the Company’s stockholders immediately after the transfer, or (B) a transfer of assets by
the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in
exchange for or with respect to the Company’s stock, (2) an entity, 50% or more of the total value
or voting power of which is owned, directly or indirectly, by the Company, (3) a Person, that
owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding
stock of the Company, or (4) an entity, at least 50% of the total value or voting power of which is
owned, directly or indirectly, by a Person described in subsection (iii)(B)(3). For purposes of this
subsection (iii), gross fair market value means the value of the assets of the Company, or the
value of the assets being disposed of, determined without regard to any liabilities associated
with such assets.

For purposes of this definition, persons will be considered to be acting as a group if they are owners of a corporation
that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with
the Company.

Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction
qualifies as a change in control event within the meaning of Section 409A. Further and for the avoidance of
doubt, a transaction will not constitute a Change in Control if: (x) its primary purpose is to change the jurisdiction
of the Company’s incorporation, or (y) its primary purpose is to create a holding company that will be owned
in substantially the same proportions by the persons who held the Company’s securities immediately before
such transaction.

(g)

(h)

(i)

(j)

(k)

“Code” means the U.S. Internal Revenue Code of 1986.

“Committee” means a committee of Directors or of other individuals satisfying Applicable Laws
appointed by the Board, or a duly authorized committee of the Board, in accordance with
Section 4 hereof.

“Common Stock” means the common stock of the Company.

“Company” means Palo Alto Networks, Inc., a Delaware corporation, or any successor thereto.

“Consultant” means any person, including an advisor, engaged by the Company or a Parent or
Subsidiary of the Company to render bona fide services to such entity, provided the services (i) are
not in connection with the offer or sale of securities in a capital-raising transaction, and (ii) do not
directly promote or maintain a market for the Company’s securities, in each case, within the meaning
used with respect to Form S-8 promulgated under the Securities Act, and provided, further, that a
Consultant will include only those persons to whom the issuance of Shares may be registered under
Form S-8 promulgated under the Securities Act.

(l)

“Director” means a member of the Board.

(m)

(n)

“Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided
that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may
determine whether a permanent and total disability exists in accordance with uniform and non-
discriminatory standards adopted by the Administrator from time to time.

“Employee” means any person, including Officers and Inside Directors, providing services as an
employee to the Company or any Parent or Subsidiary of the Company. Neither service as a Director
nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by
the Company.

(o)

“Exchange Act” means the U.S. Securities Exchange Act of 1934.

133

2023 Proxy StatementAppendix B

(p)

“Exchange Program” means a program under which (i) outstanding Awards are surrendered or
cancelled in exchange for awards of the same type (which may have higher or lower exercise prices and
different terms), awards of a different type, and/or cash, (ii) Participants would have the opportunity
to transfer any outstanding Awards to a financial institution or other person or entity selected by
the Administrator, and/or (iii) the exercise price of an outstanding Award is reduced. As described in
Section 4(i), the Administrator may not institute an Exchange Program.

(q)

“Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

(i)

(ii)

If the Common Stock is listed on any established stock exchange or a national market system,
including without limitation Nasdaq Global Select Market, Nasdaq Global Market or Nasdaq
Capital Market of Nasdaq Stock Market or the New York Stock Exchange, its Fair Market Value will
be the closing sales price for such stock (or, the closing bid, if no sales were reported) as quoted
on such exchange or system on the day of determination, as reported by such source as the
Administrator deems reliable;

If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are
not reported, the Fair Market Value of a Share will be the mean between the high bid and low
asked prices for the Common Stock on the day of determination (or the closing bid, if no sales
were reported), as reported by such source as the Administrator deems reliable; or

(iii)

In the absence of an established market for the Common Stock, the Fair Market Value will be
determined in good faith by the Administrator.

If the Fair Market Value is to be determined under subsection (i) or (ii) above and the determination
date for the Fair Market Value occurs on a day other than a Trading Day, the Fair Market Value will
be the price as determined under subsection (i) or (ii) above, as applicable, on the immediately
preceding Trading Day, unless otherwise determined by the Administrator. In addition, for purposes
of determining the fair market value of shares for any reason other than the determination of the
exercise price of Options or Stock Appreciation Rights, fair market value will be determined by the
Administrator in a manner compliant with Applicable Laws and applied consistently for such purpose.
Note that the determination of fair market value for purposes of withholding Tax-Related Items may
be made in the Administrator’s sole discretion subject to Applicable Laws and is not required to be
consistent with the determination of Fair Market Value for other purposes.

(r)

(s)

(t)

(u)

(v)

“Fiscal Year” means the fiscal year of the Company.

“Incentive Stock Option” means an Option that is intended to qualify, and actually qualifies, as
an incentive stock option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.

“Inside Director” means a Director who is an Employee.

“Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to
qualify as an Incentive Stock Option.

“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.

(w)

“Option” means a stock option granted pursuant to the Plan.

(x)

(y)

“Outside Director” means a Director who is not an Employee.

“Parent” means a “parent corporation” of the Company, whether now or hereafter existing, as defined
in Section 424(e) of the Code.

(z)

“Participant” means the holder of an outstanding Award.

(aa)

(bb)

“Performance Share” means an Award denominated in Shares which may be earned in whole or in part
upon attainment of performance goals or other vesting criteria as the Administrator may determine
pursuant to Section 10.

“Performance Unit” means an Award denominated in Shares or cash, which may be earned in whole
or in part upon attainment of performance goals or other vesting criteria as the Administrator may
determine and which may be settled for cash, Shares or other securities or a combination of the
foregoing pursuant to Section 10.

134

Appendix B

(cc)

“Period of Restriction” means the period (if any) during which the transfer of Shares of Restricted Stock
are subject to restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such
restrictions may be based on the passage of time, the achievement of target levels of performance, or
the occurrence of other events as determined by the Administrator.

(dd)

“Plan” means this Palo Alto Networks, Inc. 2021 Equity Incentive Plan.

(ee)

(ff)

“Restricted Stock” means Shares issued pursuant to a Restricted Stock award under Section 7 of the
Plan, or issued pursuant to the early exercise of an Option.

“Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market
Value of one Share, granted pursuant to Section 8. Each Restricted Stock Unit represents an unfunded
and unsecured obligation of the Company.

(gg)

“Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when
discretion is being exercised with respect to the Plan.

(hh)

“Section 16(b)” means Section 16(b) of the Exchange Act.

(ii)

(jj)

“Section 409A” means Section 409A of the Code.

“Securities Act” means the U.S. Securities Act of 1933.

(kk)

“Service Provider” means an Employee, Director or Consultant.

(ll)

“Share” means a share of the Common Stock, as adjusted in accordance with Section 14 of the Plan.

(mm) “Stock Appreciation Right” means an Award, granted alone or in connection with an Option, that

pursuant to Section 9 is designated as a Stock Appreciation Right.

(nn)

(oo)

(pp)

“Subsidiary” means a “subsidiary corporation” of the Company whether now or hereafter existing, as
defined in Section 424(f) of the Code.

“Substituted Award” means an Award granted in substitution for an equity award of an acquired entity
in connection with a merger, reorganization, separation, or other transaction to which Section 424(a) of
the Code applies.

“Tax-Related Items” means any U.S. and non–U.S. federal, state, or local taxes (including, without
limitation, income tax, social insurance, payroll tax, fringe benefits tax, payment on account and any
other tax-related items) related to a Participant’s participation in the Plan and legally applicable or
deemed applicable to the Participant, or have been transferred to the Participant.

(qq)

“Trading Day” means a day that the primary stock exchange, national market system, or other trading
platform, as applicable, upon which the Common Stock is listed is open for trading.

3. Stock Subject to the Plan.

(a)

(b)

Stock Subject to the Plan. Subject to the provisions of Section 14 of the Plan, the maximum aggregate
number of Shares that may be issued under the Plan is (i) 24,185,000 Shares, plus (ii) any Shares subject
to awards granted under the Company’s 2012 Equity Incentive Plan, as amended, that, on or after
the date stockholders initially approve the Plan, expire or otherwise terminate without having been
exercised or issued in full, are tendered to or withheld by the Company for payment of an exercise price
or for tax withholding obligations, or are forfeited to or repurchased by the Company due to failure
to vest, with the maximum number of Shares to be added to the Plan pursuant to clause (ii) equal
to 31,740,063 Shares. In addition, Shares may become available for issuance under the Plan pursuant
to Section 3(b). The Shares may be authorized, but unissued, or reacquired Common Stock. If the
Committee grants Substituted Awards in substitution for equity awards outstanding under a plan
maintained by an entity acquired by or consolidated with the Company, the grant of those Substituted
Awards will not decrease the number of Shares available for issuance under the Plan.

Lapsed Awards. If an Award expires or becomes unexercisable without having been exercised in full,
or, with respect to Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares,
is forfeited to or repurchased by the Company due to failure to vest, then the unpurchased Shares (or
for Awards other than Options or Stock Appreciation Rights, the forfeited or repurchased Shares) that
were subject thereto will become available for future grant or sale under the Plan (unless the Plan has
terminated). With respect to Stock Appreciation Rights, the gross number of Shares underlying the
portion of a Stock Appreciation Right that is exercised will cease to be available under the Plan. Shares
that actually have been issued under the Plan under any Award will not be returned to the Plan and

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will not become available for future distribution under the Plan; provided, however, that if Shares issued
pursuant to Awards of Restricted Stock, Restricted Stock Units, Performance Shares or Performance
Units are repurchased by the Company or are forfeited to the Company due to failure to vest, such
Shares will become available for future grant under the Plan. Shares used to pay the exercise price or
purchase price of an Award or to satisfy the tax withholding obligations related to an Award will not
become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid
out in cash rather than Shares, such cash payment will not reduce the number of Shares available for
issuance under the Plan. Notwithstanding the foregoing and, subject to adjustment as provided in
Section 14, the maximum number of Shares that may be issued upon the exercise of Incentive Stock
Options will equal the aggregate Share number stated in Section 3(a), plus, to the extent allowable
under Section 422 of the Code and the Treasury Regulations promulgated thereunder, any Shares that
become available for issuance under the Plan pursuant to this Section 3(b).

(c)

Share Reserve. The Company, at all times during the term of this Plan, will reserve and keep available
such number of Shares as will be sufficient to satisfy the requirements of the Plan.

4. Administration of the Plan.

(a)

Procedure.

(i)

(ii)

General. The Plan will be administered by (A) the Board or (B) a Committee constituted to satisfy
Applicable Laws. The Board or Committee will be the Administrator. Different Administrators
may administer the Plan with respect to different groups of Service Providers. The Board may
retain the authority to concurrently administer the Plan with a Committee and may, at any time,
revoke the delegation of some or all authority previously delegated.

Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3,
the transactions contemplated hereunder will be structured to satisfy the requirements for
exemption under Rule 16b-3.

(b)

Powers of the Administrator. Subject to the Plan, any limitations on delegations specified by the Board,
and any requirements imposed by Applicable Laws, the Administrator will have the authority, in its sole
discretion, to make any determinations and perform any actions deemed necessary or advisable to
administer the Plan including to:

(i)

(ii)

(iii)

(iv)

(v)

(vi)

determine the Fair Market Value;

select the Service Providers to whom Awards may be granted hereunder;

determine the number of Shares to be covered by each Award granted hereunder;

approve forms of Award Agreements for use under the Plan;

determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award
granted hereunder. The terms and conditions include, but are not limited to, the exercise price,
the time or times when Awards may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Award or the Shares relating to an Award;

establish, amend and rescind rules and regulations and adopt sub-plans relating to the Plan,
including rules, regulations, and sub-plans for the purposes of facilitating compliance with
non-U.S. laws, easing the administration of the Plan and/or taking advantage of tax-favorable
treatment for Awards granted to Service Providers outside the U.S.;

(vii)

interpret the Plan and make any decision necessary to administer the Plan;

(viii)

interpret, modify or amend each Award (subject to Section 17(c) of the Plan), including without
limitation the discretionary authority to extend the post-termination exercisability period
of Awards;

(ix)

(x)

allow Participants to satisfy tax withholding obligations in a manner prescribed in Section 15 of
the Plan;

authorize any person to execute on behalf of the Company any instrument required to effect the
grant of an Award previously granted by the Administrator;

(xi)

delegate ministerial duties to any of the Company’s employees;

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(xii)

temporarily suspend the exercisability of an Award if the Administrator deems such suspension
to be necessary or appropriate for administrative purposes;

(xiii) allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that

otherwise would be due to the Participant under an Award; and

(xiv) make all other determinations deemed necessary or advisable for administering the Plan.

(c)

Grant Date. The grant date of an Award (“Grant Date”) will be the date that the Administrator makes
the determination granting such Award or may be a later date if such later date is designated by the
Administrator on the date of the determination or under an automatic grant policy. Notice of the
determination will be provided to each Participant within a reasonable time after the Grant Date.

(d) Waiver. The Administrator may waive any terms, conditions or restrictions.

(e)

(f)

(g)

Fractional Shares. Except as otherwise provided by the Administrator, any fractional Shares that
result from the adjustment of Awards will be cancelled. Any fractional Shares that result from vesting
percentages will be accumulated and vested on the date that an accumulated full Share is vested.

Electronic Delivery. The Company may deliver by e-mail or other electronic means (including posting
on a website maintained by the Company or its agent) all documents relating to the Plan or any Award
and all other documents that the Company is required to deliver to its security holders (including
prospectuses, annual reports and proxy statements).

Choice of Law; Choice of Forum. The Plan, all Awards and all determinations made and actions taken
under the Plan, to the extent not otherwise governed by the laws of the United States, will be governed
by the laws of the State of Delaware without giving effect to principles of conflicts of law. For purposes
of litigating any dispute that arises under this Plan, a Participant’s acceptance of an Award is his or
her consent to the jurisdiction of the State of Delaware, and agreement that any such litigation will be
conducted in Delaware Court of Chancery, or the federal courts for the United States for the District of
Delaware, and no other courts, regardless of where a Participant’s services are performed.

(h)

Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations
will be final and binding on all Participants and any other holders of Awards and will be given the
maximum deference permitted by Applicable Laws.

(i)

Exchange Program. The Administrator may not institute an Exchange Program.

5. Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,

Performance Shares and Performance Units may be granted to Service Providers. Incentive Stock Options may
be granted only to Employees.

6. Stock Options.

(a)

(b)

(c)

Grant of Options. Subject to the terms and provisions of the Plan, the Administrator, at any time and
from time to time, may grant Options to Service Providers in such amounts as the Administrator
determines in its sole discretion.

Stock Option Agreement. Each Option will be evidenced by an Award Agreement that will specify the
exercise price, the number of Shares subject to the Option, the exercise restrictions, if any, applicable to
the Option, and such other terms and conditions as the Administrator determines in its sole discretion.

Limitations. Each Option will be designated in the Award Agreement as either an Incentive Stock
Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent
that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by the Participant during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options will be treated as Nonstatutory
Stock Options. For purposes of this Section 6(c), Incentive Stock Options will be taken into account in
the order in which they were granted. The Fair Market Value of the Shares will be determined as of the
time the Option with respect to such Shares is granted.

(d)

Term of Option. The term of each Option will be stated in the Award Agreement. In the case of an
Incentive Stock Option, the term will be 10 years from the Grant Date or such shorter term as may
be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted to
a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more

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than 10% of the total combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option will be 5 years from the Grant Date or such shorter
term as may be provided in the Award Agreement.

(e) Option Exercise Price and Consideration.

(i)

Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an
Option will be determined by the Administrator, subject to the following:

(1)

In the case of an Incentive Stock Option

(A)

(B)

granted to an Employee who, at the time the Incentive Stock Option is granted,
owns stock representing more than 10% of the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the per Share exercise price will be no less
than 110% of the Fair Market Value per Share on the Grant Date.

granted to any Employee other than an Employee described in paragraph (A)
immediately above, the per Share exercise price will be no less than 100% of the Fair
Market Value per Share on the Grant Date.

In the case of a Nonstatutory Stock Option, the per Share exercise price will be determined
by the Administrator and may no less than 100% of the Fair Market Value per Share on the
Grant Date unless otherwise required by Applicable Laws.

Notwithstanding the foregoing, Options may be granted with a per Share exercise price
of less than 100% of the Fair Market Value per Share on the Grant Date pursuant to a
transaction described in, and in a manner consistent with, Section 424(a) of the Code.

(2)

(3)

(ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix
the period within which the Option may be exercised and will determine any conditions that
must be satisfied before the Option may be exercised.

(iii)

Form of Consideration. The Administrator will determine the acceptable form of consideration for
exercising an Option, including the method of payment. In the case of an Incentive Stock Option,
the Administrator will determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of: (1) cash; (2) check or wire transfer; (3) promissory note, to
the extent permitted by Applicable Laws; (4) other Shares, provided that such Shares have a fair
market value on the date of surrender equal to the aggregate exercise price of the Shares as
to which such Option will be exercised and provided that accepting such Shares will not result
in any adverse accounting consequences to the Company, as the Administrator determines
in its sole discretion; (5) consideration received by the Company under a broker-assisted (or
other) cashless exercise program (whether through a broker or otherwise) implemented by the
Company in connection with the Plan; (6) net exercise, under which Shares are withheld from
otherwise deliverable Shares that has been approved by the Board or a Committee; (7) such
other consideration and method of payment for the issuance of Shares to the extent permitted
by Applicable Laws; or (8) any combination of the foregoing methods of payment.

(f)

Exercise of Option.

(i)

Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be
exercisable according to the terms of the Plan and at such times and under such conditions as
determined by the Administrator and set forth in the Award Agreement. Notwithstanding the
foregoing, at any time after the grant of an Option, the Administrator, in its sole discretion, may
accelerate the time at which the Option will vest or become exercisable. An Option may not be
exercised for a fraction of a Share.

An Option will be deemed exercised when the Company receives: (i) notice of exercise (in
accordance with the procedures that the Administrator may specify from time to time) from the
person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which
the Option is exercised (together with any amounts necessary to satisfy withholding obligations
for Tax-Related Items). Full payment may consist of any consideration and method of payment
authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares
issued upon exercise of an Option will be issued in the name of the Participant or, if requested
by the Participant and approved by the Administrator, in the name of the Participant and his or

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(ii)

her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder will exist with respect to the Shares subject to
an Option, notwithstanding the exercise of the Option. The Company will issue (or cause to be
issued) such Shares promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the Shares are issued, except
as provided in Section 14 of the Plan.

Exercising an Option in any manner will decrease the number of Shares thereafter available, both
for purposes of the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider,
other than upon the cessation of the Participant’s Service Provider status as the result of the
Participant’s death or Disability, the Participant may exercise his or her Option within such
period of time as is specified in the Award Agreement to the extent that the Option is vested
on the date of cessation of the Participant’s Service Provider status (but in no event later than
the expiration of the term of such Option as set forth in the Award Agreement). In the absence
of a specified time in the Award Agreement, the Option will remain exercisable for 3 months
following cessation of the Participant’s Service Provider status. Unless otherwise provided by
the Administrator, if on the date of cessation of the Participant’s Service Provider status the
Participant is not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will revert to the Plan. If, after cessation of the Participant’s Service Provider
status, the Participant does not exercise his or her Option within the time specified in the Award
Agreement or herein, the Option will terminate, and the Shares covered by such Option will
revert to the Plan.

(iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of the

Participant’s Disability, the Participant may exercise his or her Option within such period of
time as is specified in the Award Agreement to the extent the Option is vested on the date of
cessation of the Participant’s Service Provider status (but in no event later than the expiration of
the term of such Option as set forth in the Award Agreement). In the absence of a specified time
in the Award Agreement, the Option will remain exercisable for 12 months following cessation of
the Participant’s Service Provider status. Unless otherwise provided by the Administrator, if on
the date of cessation of the Participant’s Service Provider status the Participant is not vested as
to his or her entire Option, the Shares covered by the unvested portion of the Option will revert
to the Plan. If, after cessation of the Participant’s Service Provider status, the Participant does
not exercise his or her Option within the time specified in the Award Agreement or herein, the
Option will terminate, and the Shares covered by such Option will revert to the Plan.

(iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised
following the Participant’s death within such period of time as is specified in the Award
Agreement to the extent that the Option is vested on the date of death (but in no event may
the Option be exercised later than the expiration of the term of such Option as set forth in the
Award Agreement), by the Participant’s designated beneficiary, provided the Administrator has
permitted the designation of a beneficiary and provided such beneficiary has been designated
prior to the Participant’s death in a form acceptable to the Administrator. If the Administrator
has not permitted the designation of a beneficiary or if no such beneficiary has been designated
by the Participant, then such Option may be exercised by the personal representative of the
Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the
Participant’s will or in accordance with the laws of descent and distribution. In the absence
of a specified time in the Award Agreement, the Option will remain exercisable for 12 months
following the Participant’s death. Unless otherwise provided by the Administrator, if at the
time of death, the Participant is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option will immediately revert to the Plan. If the Option is not so
exercised within the time specified in the Award Agreement or herein, the Option will terminate,
and the Shares covered by such Option will revert to the Plan.

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(v)

Tolling Expiration. A Participant’s Award Agreement may also provide that:

(1)

(2)

if the exercise of the Option following the cessation of the Participant’s status as a Service
Provider (other than upon the Participant’s death or Disability) would result in liability
under Section 16(b), then the Option will terminate on the earlier of (A) the expiration of
the term of the Option set forth in the Award Agreement, or (B) the 10th day after the last
date on which such exercise would result in liability under Section 16(b); or

if the exercise of the Option following the cessation of the Participant’s status as a Service
Provider (other than upon the Participant’s death or Disability) would be prohibited at any
time solely because the issuance of Shares would violate the registration requirements
under the Securities Act, then the Option will terminate on the earlier of (A) the expiration
of the term of the Option or (B) the expiration of a period of 30 days after the cessation
of the Participant’s status as a Service Provider during which the exercise of the Option
would not be in violation of such registration requirements.

7. Restricted Stock.

(a)

(b)

(c)

Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any
time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts
as the Administrator determines in its sole discretion.

Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement
that will specify any Period of Restriction, the number of Shares granted, and such other terms and
conditions as the Administrator determines in its sole discretion. Unless the Administrator determines
otherwise, the Company as escrow agent will hold Shares of Restricted Stock until the restrictions on
such Shares have lapsed.

Transferability. Except as provided in this Section 7 of the Award Agreement, Shares of Restricted Stock
may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end
of any applicable Period of Restriction.

(d) Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on

Shares of Restricted Stock as it may deem advisable or appropriate.

(e)

(f)

(g)

Removal of Restrictions. Except as otherwise provided in this Section 7, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan will be released from escrow as soon
as practicable after the last day of any applicable Period of Restriction or at such other time as the
Administrator may determine. Notwithstanding the foregoing, at any time after the grant of an Option,
the Administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or
be removed.

Voting Rights. During any applicable Period of Restriction, Service Providers holding Shares of
Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless
the Administrator determines otherwise.

Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted
Stock for which restrictions have not lapsed will revert to the Company and again will become available
for grant under the Plan.

8. Restricted Stock Units.

(a)

(b)

(c)

Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the
Administrator. After the Administrator determines that it will grant Restricted Stock Units under the
Plan, it will advise the Participant in an Award Agreement of the terms, conditions, and restrictions
related to the grant, including the number of Restricted Stock Units.

Restricted Stock Unit Agreement. Each Award of Restricted Stock Units will be evidenced by an Award
Agreement that will specify vesting criteria, the number of Restricted Stock Units granted, and such
other terms and conditions as the Administrator determines in its sole discretion.

Vesting Criteria and Other Terms. The Administrator will set vesting criteria in its discretion, which,
depending on the extent to which the criteria are met, will determine the number of Restricted Stock
Units that will be paid out to the Participant. The Administrator may set vesting criteria based upon the

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achievement of Company-wide, divisional, business unit, or individual goals (including, but not limited
to, continued employment or service), applicable U.S. or non-U.S. federal or state securities laws or any
other basis determined by the Administrator in its discretion.

(d)

(e)

Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be
entitled to receive a payout as determined by the Administrator. Notwithstanding the foregoing, at any
time after the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or
waive any vesting criteria that must be met to receive a payout.

Form and Timing of Payment. Payment of earned Restricted Stock Units will be made as soon as
practicable after the date(s) determined by the Administrator and set forth in the Award Agreement.
The Administrator, in its sole discretion, may settle earned Restricted Stock Units only in cash, Shares, or
a combination of both.

(f)

Cancellation. On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be
forfeited to the Company.

9. Stock Appreciation Rights.

(a)

(b)

(c)

(d)

(e)

(f)

Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan, a Stock
Appreciation Right may be granted to Service Providers at any time and from time to time as will be
determined by the Administrator, in its sole discretion.

Stock Appreciation Right Agreement. Each Stock Appreciation Right grant will be evidenced by an
Award Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the
conditions of exercise, and such other terms and conditions as the Administrator determines in its sole
discretion. Notwithstanding the foregoing, at any time after the grant of a Stock Appreciation Right,
the Administrator, in its sole discretion, may accelerate the time at which the Stock Appreciation Right
will vest or become exercisable.

Number of Shares. The Administrator will have complete discretion to determine the number of Stock
Appreciation Rights granted to any Service Provider.

Exercise Price and Other Terms. The per share exercise price for the Shares to be issued pursuant to
exercise of a Stock Appreciation Right will be determined by the Administrator and will be no less than
100% of the Fair Market Value per Share on the Grant Date. Otherwise, the Administrator, subject to the
provisions of the Plan, will have complete discretion to determine the terms and conditions of Stock
Appreciation Rights granted under the Plan.

Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted under the Plan will expire
upon the date as determined by the Administrator, in its sole discretion, and set forth in the Award
Agreement. Notwithstanding the foregoing, the tolling and expiration rules of Section 6(f) relating to
exercise also will apply to Stock Appreciation Rights.

Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation Right, a
Participant will be entitled to receive payment from the Company in an amount determined as the
product of:

(i)

The difference between the Fair Market Value of a Share on the date of exercise over the exercise
price; and

(ii)

The number of Shares with respect to which the Stock Appreciation Right is exercised.

At the discretion of the Administrator, the payment upon exercise of a Stock Appreciation Right may
be in cash, in Shares of equivalent value, or in some combination of both.

10. Performance Units and Performance Shares.

(a)

(b)

Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to
Service Providers at any time and from time to time, as will be determined by the Administrator, in
its sole discretion. The Administrator will have complete discretion in determining the number of
Performance Units and Performance Shares granted to each Participant.

Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established
by the Administrator on or before the Grant Date. Each Performance Share will have an initial value
equal to the Fair Market Value of a Share on the Grant Date.

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(c)

(d)

(e)

(f)

Performance Objectives and Other Terms. The Administrator will set performance objectives or other
vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion
which, depending on the extent to which they are met, will determine the number or value of
Performance Units/Shares that will be paid out to the Service Providers. The time period during which
the performance objectives or other vesting provisions must be met will be called the “Performance
Period.” Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will
specify the Performance Period, and such other terms and conditions as the Administrator determines
in its sole discretion. The Administrator may set performance objectives based upon the achievement
of Company-wide, divisional, business unit or individual goals (including, but not limited to, continued
employment or service), applicable U.S. or non-U.S. federal or state securities laws, or any other basis
determined by the Administrator in its discretion.

Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder
of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/
Shares earned by the Participant over the Performance Period, to be determined as a function of the
extent to which the corresponding performance objectives or other vesting provisions have been
achieved. Notwithstanding the foregoing, at any time after the grant of a Performance Unit/Share, the
Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting
provisions for such Performance Unit/Share.

Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/
Shares will be made as soon as practicable after the expiration of the applicable Performance Period.
The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash,
in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance
Units/ Shares at the close of the applicable Performance Period) or in a combination thereof.

Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned
or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for
grant under the Plan.

11. Award Limitations.

(a) Outside Director Award Limitations. No Outside Director may be paid compensation for service as an
Outside Director that, in the aggregate, exceeds $2,000,000, increased to $4,000,000 for such Outside
Director for the Fiscal Year in which he or she joins the Board as an Outside Director. Compensation
includes equity awards, including any Awards issued under this Plan, the value of which will be based
on their grant date fair value determined in accordance with U.S. generally accepted accounting
principles and any other compensation (including without limitation any cash retainers or fees). Any
Awards or other compensation paid or provided to an individual for his or her services as an Employee,
or for his or her services as a Consultant (other than as an Outside Director), will not count for purposes
of the limitation under this Section 11(a).

(b) Dividends and Other Distributions. No dividends or other distributions shall be paid with respect to any

Shares underlying any unvested portion of an Award.

12. Leaves of Absence/Transfer Between Locations. Unless the Administrator provides otherwise or Applicable Laws
require otherwise, vesting of Awards will be suspended during any unpaid leave of absence. A Participant will
not cease to be an Employee in the case of (i) any leave of absence approved by the Company or the Participant’s
employer or (ii) transfers between locations of the Company or between the Company, its Parent, or any of its
Subsidiaries. For purposes of Incentive Stock Options, no such leave may exceed 3 months, unless reemployment
upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave
of absence approved by the Company or the Participant’s employer is not so guaranteed, then 6 months
following the 1st day of such leave any Incentive Stock Option held by the Participant will cease to be treated as
an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.

13. Transferability of Awards.

(a)

General Rule. Unless determined otherwise by the Administrator, or otherwise required by Applicable
Laws, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be exercised, during the

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Appendix B

lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable,
the Award will be limited by any additional terms and conditions imposed by the Administrator. Any
unauthorized transfer of an Award will be void.

(b) Domestic Relations Orders. If approved by the Administrator, an Award may be transferred pursuant

to the terms of a domestic relations order, official marital settlement agreement or other divorce or
separation instrument as permitted by Treasury Regulations Section 1.421-1(b)(2). An Incentive Stock
Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.

(c)

(d)

Limited Transfers for the Benefit of Family Members. The Administrator may permit an Award or Share
issued under this Plan to be assigned or transferred subject to the applicable limitations, set forth in
the General Instructions to Form S-8 Registration Statement under the Securities Act, if applicable, and
any other Applicable Laws. For the avoidance of doubt, during the lifetime of the Participant, no Award
may be assigned or transferred to a third-party financial institution.

Permitted Transferees. Any individual or entity to whom an Award is transferred will be subject to all of
the terms and conditions applicable to the Participant who transferred the Award, including the terms
and conditions in this Plan and the Award Agreement. If an Award is unvested, then the service of the
Participant will continue to determine whether the Award will vest and when it will terminate.

14. Adjustments; Dissolution or Liquidation; Merger or Change in Control; Death.

(a)

Adjustments. In the event that any extraordinary dividend or other extraordinary distribution (whether
in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination, reclassification, repurchase,
or exchange of Shares or other securities of the Company, or other change in the corporate structure
of the Company affecting the Shares occurs (other than any ordinary dividends or other ordinary
distributions), the Administrator, in order to prevent diminution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, will adjust the number and class of
shares of stock that may be delivered under the Plan and/or the number, class, and price of shares of
stock covered by each outstanding Award, and the numerical Share limits in Section 3 of the Plan.

(b) Dissolution or Liquidation. In the event of a proposed dissolution or liquidation of the Company, the

Administrator will notify each Participant as soon as practicable prior to the effective date of such
proposed transaction. To the extent it has not been previously exercised, an Award will terminate
immediately prior to the consummation of such proposed action.

or other entity or a Change in Control, each outstanding Award will be treated as the Administrator
determines (subject to the provisions of the following paragraph) without a Participant’s consent,
including, without limitation, that each Award be assumed or an equivalent option or right substituted
by the successor corporation or its Parent. The Administrator will not be obligated to treat all Awards, all
Awards held by a Participant, all Awards of the same type, or all portions of Awards, similarly.

In the event that the successor corporation does not assume or substitute for the Award (or portion
thereof), the Participant will fully vest in and have the right to exercise the Participant’s outstanding
Option and Stock Appreciation Right (or portion thereof) that is not assumed or substituted for,
including Shares as to which such Award would not otherwise be vested or exercisable, all restrictions
on Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units (or
portions thereof) not assumed or substituted for will lapse, and, with respect to such Awards with
performance-based vesting (or portions thereof) not assumed or substituted for, all performance
goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms
and conditions met, in each case, unless specifically provided otherwise under the applicable
Award Agreement or other written agreement between the Participant and the Company or any
of its Subsidiaries or Parents, as applicable. In addition, if an Option or Stock Appreciation Right (or
portion thereof) is not assumed or substituted for in the event of a merger or Change in Control,
the Administrator will notify the Participant in writing or electronically that such Option or Stock
Appreciation Right (or its applicable portion) will be exercisable for a period of time determined by
the Administrator in its sole discretion, and the Option or Stock Appreciation Right (or its applicable
portion) will terminate upon the expiration of such period.

143

2023 Proxy Statement
Appendix B

For the purposes of this Section 14(c), an Award will be considered assumed if, following the merger
or Change in Control, the Award confers the right to purchase or receive, for each Share subject to the
Award immediately prior to the merger or Change in Control, the consideration (whether stock, cash, or
other securities or property) received in the merger or Change in Control by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or Change in Control is not solely
common stock of the successor corporation or its Parent, the Administrator may, with the consent
of the successor corporation, provide for the consideration to be received upon the exercise of an
Option or Stock Appreciation Right or upon the payout of a Restricted Stock Unit, Performance Unit or
Performance Share, for each Share subject to such Award, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share consideration received by holders of
Common Stock in the merger or Change in Control.

Notwithstanding anything in this Section 14(c) to the contrary, and unless otherwise provided in an
Award Agreement or other written agreement between the Participant and the Company or any of its
Subsidiaries or Parents, as applicable, an Award that vests, is earned or paid-out upon the satisfaction
of one or more performance goals will not be considered assumed if the Company or its successor
modifies any of such performance goals without the Participant’s consent; provided, however, a
modification to such performance goals only to reflect the successor corporation’s post-Change in
Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.

Notwithstanding anything in this Section 14(c) to the contrary, if a payment under an Award
Agreement is subject to Section 409A and if the change in control definition contained in the Award
Agreement or other written agreement related to the Award does not comply with the definition of
“change in control” for purposes of a distribution under Section 409A, then any payment of an amount
that otherwise is accelerated under this Section will be delayed until the earliest time that such
payment would be permissible under Section 409A without triggering any penalties applicable under
Section 409A.

(d) Outside Director Awards. With respect to Awards granted to Outside Directors for their service as
Outside Directors, in the event of a Change in Control, such Participants will fully vest in and have
the right to exercise Options and/or Stock Appreciation Rights as to all of the Shares underlying
such Awards, including those Shares which would not be vested or exercisable, all restrictions on
such Participants’ Restricted Stock and Restricted Stock Units will lapse, and, with respect to such
Participants’ Awards with performance-based vesting, all performance goals or other vesting criteria
will be deemed achieved at 100% of target levels and all other terms and conditions met, unless
specifically provided otherwise under the applicable Award Agreements or other written agreements
between the Participants and the Company or any of its Subsidiaries or Parents, as applicable.

15. Tax Matters.

(a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or

exercise thereof) or such earlier time as any withholding obligations for Tax-Related Items are due,
the Company (or any of its Subsidiaries, Parents or affiliates employing or retaining the services of
a Participant, as applicable) will have the power and the right to deduct or withhold, or require a
Participant to remit to the Company (or any of its Subsidiaries, Parents or affiliates, as applicable), an
amount sufficient to satisfy any Tax-Related Items required to be withheld with respect to such Award
(or exercise thereof).

(b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures

as it may specify from time to time, may permit a Participant to satisfy such withholding obligation
for Tax-Related Items, in whole or in part by (without limitation) (i) paying cash, check or other cash
equivalents, (ii) electing to have the Company withhold otherwise deliverable Shares having a fair
market value equal to the minimum statutory amount applicable in a Participant’s jurisdiction or such
greater amount as the Administrator may determine (including up to a maximum statutory amount)
if such amount would not have adverse accounting consequences, as the Administrator determines
in its sole discretion, (iii) delivering to the Company already-owned Shares having a fair market value
equal to the minimum statutory amount applicable in a Participant’s jurisdiction or such greater

144

Appendix B

amount as the Administrator may determine (including up to a maximum statutory amount), in each
case, provided the delivery of such Shares will not result in any adverse accounting consequences, as
the Administrator determines in its sole discretion, (iv) selling a sufficient number of Shares otherwise
deliverable to the Participant through such means as the Administrator may determine in its sole
discretion (whether through a broker or otherwise) to cover the amount of the withholding obligation
for Tax-Related Items, (v) having the Company or a Parent or Subsidiary withhold from wages or any
other cash amount due or to become due to the Participant and payable by the Company or any
Parent or Subsidiary, (vi) any other method of withholding determined by the Administrator, or
(vii) any combination of the foregoing methods of payment. The withholding amount will be deemed
to include any amount which the Administrator agrees may be withheld at the time the election is
made, not to exceed the amount determined by using the maximum statutory rates applicable in a
Participant’s jurisdiction with respect to the Award on the date that the amount of Tax-Related Items
to be withheld is to be determined or such greater amount as the Administrator may determine if such
amount would not have adverse accounting consequences, as the Administrator determines in its sole
discretion. The fair market value of the Shares to be withheld or delivered will be determined as of the
date that the amount of Tax-Related Items to be withheld is calculated.

Compliance With Section 409A. Awards will be designed and operated in such a manner that they are
either exempt from the application of, or comply with, the requirements of Section 409A such that the
grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable
under Section 409A, except as otherwise determined in the sole discretion of the Administrator. The
Plan and each Award Agreement under the Plan is intended to meet the requirements of Section 409A
and will be construed and interpreted in accordance with such intent, except as otherwise determined
in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement
or deferral thereof, is subject to Section 409A the Award will be granted, paid, settled or deferred in a
manner that will meet the requirements of Section 409A, such that the grant, payment, settlement or
deferral will not be subject to the additional tax or interest applicable under Section 409A. In no event
will the Company or any of its Subsidiaries or Parents have any obligation or liability under the terms
of this Plan to reimburse, indemnify, or hold harmless any Participant or any other person in respect of
Awards, for any taxes, interest or penalties imposed, or other costs incurred, as a result of Section 409A.

(c)

16. Miscellaneous.

(a)

(b)

(c)

(d)

Stockholder Approval and Term of Plan. The Plan will become effective upon its approval by the
Company’s stockholders within 12 months after the date the Plan is adopted by the Board. Such
stockholder approval will be obtained in the manner and to the degree required under Applicable
Laws. The Plan will continue in effect until terminated earlier under Section 17 of the Plan, but no
Incentive Stock Options may be granted after 10 years from the date the Plan is adopted by the Board.

Legal Compliance. Shares will not be issued pursuant an Award unless the exercise or vesting of such
Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be
further subject to the approval of counsel for the Company with respect to such compliance.

Investment Representations. As a condition to the exercise or vesting of an Award, the Company
may require the person exercising or vesting in such Award to represent and warrant at the time of
any such exercise or vesting that the Shares are being acquired only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.

Inability to Obtain Authority. If the Company determines it to be impossible or impracticable to obtain
authority from any regulatory body having jurisdiction or to complete or comply with the requirements
of any registration or other qualification of the Shares under any U.S. state or federal law or non-U.S.
law or under the rules and regulations of the U.S. Securities and Exchange Commission, the stock
exchange on which Shares of the same class are then listed, or any other governmental or regulatory
body, which authority, registration, qualification or rule compliance is deemed by the Company’s
counsel to be necessary or advisable for the issuance and sale of any Shares hereunder, the Company
will be relieved of any liability in respect of the failure to issue or sell such Shares as to which such
requisite authority, registration, qualification or rule compliance will not have been obtained.

145

2023 Proxy StatementAppendix B

(e)

(f)

No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant
any right with respect to continuing the Participant’s relationship as a Service Provider, nor interfere
in any way with the Participant’s right or the right of the Company and its Subsidiaries or Parents, as
applicable, to terminate such relationship at any time, with or without cause, to the extent permitted
by Applicable Laws.

Forfeiture Events. The Administrator may specify in an Award Agreement that the Participant’s rights,
payments, and benefits with respect to an Award will be subject to reduction, cancellation, forfeiture,
recoupment, reimbursement, or reacquisition upon the occurrence of certain specified events, in
addition to any otherwise applicable vesting or performance conditions of an Award. Notwithstanding
any provisions to the contrary under this Plan, an Award and any other compensation paid or
payable to a Participant (including, but not limited to, equity awards issued outside of this Plan) (such
compensation, “Other Compensation”) will be subject to the Company’s clawback policy in effect as
of the adoption of this Plan, and will be subject to any other clawback policy of the Company as may
be established and/or amended from time to time to comply with applicable laws (including without
limitation pursuant to the listing standards of any national securities exchange or association on which
the Company’s securities are listed or as may be required by the U.S. Dodd-Frank Wall Street Reform
and Consumer Protection Act) (the “Clawback Policy”). The Administrator may require a Participant to
forfeit, return or reimburse the Company all or a portion of the Award or Other Compensation and any
amounts paid thereunder pursuant to the terms of the Clawback Policy or as necessary or appropriate
to comply with Applicable Laws. Unless this subsection (f) specifically is mentioned and waived in
an Award Agreement or other document, no recovery of compensation under a Clawback Policy or
otherwise will constitute an event that triggers or contributes to any right of a Participant to resign for
“good reason” or “constructive termination” (or similar term) under any agreement with the Company
or any Parent or Subsidiary.

17. Amendment and Termination of the Plan.

(a)

(b)

(c)

Amendment and Termination. The Administrator, at any time, may amend, alter, suspend or terminate
the Plan.

Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the
extent necessary and desirable to comply with Applicable Laws.

Consent of Participants Generally Required. Subject to Section 17(d) below, no amendment, alteration,
suspension or termination of the Plan or an Award under it will materially impair the rights of any
Participant, unless mutually agreed otherwise between the Participant and the Administrator, which
agreement must be in writing and signed by the Participant and the Company. Termination of the
Plan will not affect the Administrator’s ability to exercise the powers granted to it regarding Awards
granted under the Plan prior to such termination.

(d)

Exceptions to Consent Requirement.

(i)

(ii)

A Participant’s rights will not be deemed to have been impaired by any amendment, alteration,
suspension or termination if the Administrator, in its sole discretion, determines that the
amendment, alteration, suspension or termination taken as a whole, does not materially impair
the Participant’s rights, and

Subject to the limitations of Applicable Laws, if any, the Administrator may amend the terms
of any one or more Awards without the affected Participant’s consent even if it does materially
impair the Participant’s right if such amendment is done

(1)

(2)

(3)

(4)

in a manner expressly permitted under the Plan;

to maintain the qualified status of the Award as an Incentive Stock Option under Section
422 of the Code;

to change the terms of an Incentive Stock Option, if such change results in impairment of
the Award only because it impairs the qualified status of the Award as an Incentive Stock
Option under Section 422 of the Code;

to clarify the manner of exemption from, or to bring the Award into compliance with,
Section 409A; or

(5)

to comply with other Applicable Laws.

146

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_____________________

FORM 10-K

_____________________

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended July 31, 2023

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☒

☐

For the transition period from to

Commission File Number 001-35594

Palo Alto Networks, Inc.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

20-2530195
(I.R.S. Employer
Identification No.)

3000 Tannery Way
Santa Clara, California 95054
(Address of principal executive offices, including zip code)

(408) 753-4000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common stock, $0.0001 par value per share

Trading Symbol(s)
PANW

Name of each exchange on which registered

The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes

☒ No

☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes

☐ No

☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files). Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒
Non-accelerated filer ☐

Accelerated filer
☐
Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act.

☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15
U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements
of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period
pursuant to §240.10D-1(b).

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes

☐

☒

The aggregate market value of voting stock held by non-affiliates of the registrant was $47,351,509,692 as of January 31,
2023, the last business day of the registrant’s most recently completed second fiscal quarter (based on the closing sales
price for the common stock on the Nasdaq Global Select Market on such date). Shares of common stock held by each
executive officer and director have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination for other purposes.

On August 18, 2023, 308,594,604 shares of the registrant’s common stock, $0.0001 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the information called for by Part III of this Annual Report on Form 10-K is hereby incorporated by reference
from the definitive proxy statement for the registrant’s 2023 annual meeting of stockholders, which will be filed with
the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended July 31, 2023.

Table Of Contents

Item 1.

Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4. Mine Safety Disclosures

PART I

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities

Item 6.

[Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

Item 10.

Directors, Executive Officers and Corporate Governance

Item 11.

Executive Compensation

PART III

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary

Signatures

PART IV

- 2 -

Page

100

Part I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, including the sections entitled “Business,” “Risk Factors,” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” 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. The
words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,”
“expect,” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-
looking statements.

These forward-looking statements include, but are not limited to, statements concerning the following:

• expectations regarding drivers of and factors affecting growth in our business;
• statements regarding trends in billings, 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;

• our 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;

• our expectation that we will continue to expand our global presence;
• expectations regarding our revenues, including the seasonality and cyclicality from quarter to quarter;
• our expectation that we will expand our facilities or add new facilities as we add employees and enter new

geographic markets;

• our expectation that we will increase 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 our expectations and intentions with

respect to the products and technologies that we acquire and introduce;

• the timing and amount of capital expenditures and share repurchases; and
• other statements regarding our future operations, financial condition and prospects, and business strategies.

These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those
described in “Risk Factors” included in Part I, Item 1A and elsewhere in this Annual Report on Form 10-K. Moreover, we
operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not
possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the
extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained
in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-
looking events and circumstances discussed in this Annual Report on Form 10-K may not occur, and actual results
could differ materially and adversely from those anticipated or implied in the forward-looking statements. We
undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements,
except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on
such forward-looking statements.

- 3 -

Item 1. Business

General

Palo Alto Networks, Inc. is a global cybersecurity provider with a vision of a world where each day is safer and more
secure than the one before. We were incorporated in 2005 and are headquartered in Santa Clara, California.

We empower enterprises, organizations, service providers, and government entities to protect themselves against
today’s most sophisticated cyber threats. Our cybersecurity platforms and services help secure enterprise users,
networks, clouds, and endpoints by delivering comprehensive cybersecurity backed by industry-leading artificial
intelligence and automation. We are a leading provider of zero trust solutions, starting with next-generation zero trust
network access to secure today’s remote hybrid workforces and extending to securing all users, applications, and
infrastructure with zero trust principles. Our security solutions are designed to reduce customers’ total cost of
ownership by improving operational efficiency and eliminating the need for siloed point products. Our company
focuses on delivering value in four fundamental areas:

Network Security:

• Our network security platform, designed to deliver complete zero trust solutions to our customers, includes our

hardware and software ML-Powered Next-Generation Firewalls, as well as a cloud-delivered Secure Access Service
Edge (“SASE”). Prisma® Access, our Security Services Edge (“SSE”) solution, when combined with Prisma SD-WAN,
provides a comprehensive single-vendor SASE offering that is used to secure remote workforces and enable the
cloud-delivered branch. We have been recognized as a leader in network firewalls, SSE, and SD-WAN. Our network
security platform also includes our cloud-delivered security services, such as Advanced Threat Prevention, Advanced
WildFire®, Advanced URL Filtering, DNS Security, IoT/OT Security, GlobalProtect®, Enterprise Data Loss Prevention
(“Enterprise DLP”), Artificial Intelligence for Operations (“AIOps”), SaaS Security API, and SaaS Security Inline. Through
these add-on security services, our customers are able to secure their content, applications, users, and devices across
their entire organization. Panorama®, our network security management solution, can centrally manage our network
security platform irrespective of form factor, location, or scale.

Cloud Security:

• We enable cloud-native security through our Prisma Cloud platform. As a comprehensive Cloud Native Application
Protection Platform (“CNAPP”), Prisma Cloud secures multi- and hybrid-cloud environments for applications, data,
and the entire cloud native technology stack across the full development lifecycle; from code to runtime. For
inline network security on multi- and hybrid-cloud environments, we also offer our VM-Series and CN-Series
Firewall offerings.

Security Operations:

• We deliver the next generation of security automation, security analytics, endpoint security, and attack surface
management solutions through our Cortex portfolio. These include Cortex XSIAM, our AI security automation
platform, Cortex XDR® for the prevention, detection, and response to complex cybersecurity attacks on the endpoint,
Cortex XSOAR® for security orchestration, automation, and response (“SOAR”), and Cortex XpanseTM for attack surface
management (“ASM”). These products are delivered as SaaS or software subscriptions.

Threat Intelligence and Security Consulting (Unit 42):

• Unit 42 brings together world-renowned threat researchers with an elite team of incident responders and security
consultants to create an intelligence-driven, response-ready organization to help customers proactively manage
cyber risk. Our consultants serve as trusted advisors to our customers by assessing and testing their security controls
against the right threats, transforming their security strategy with a threat-informed approach, and responding to
security incidents on behalf of our clients.

- 4 -

Product, Subscription, and Support

Our customer offerings are available in the form of the product, subscription, and support offerings described below:

PRODUCTS

Hardware and software firewalls. Our ML-Powered Next Generation Firewalls embed machine learning in the core of the
firewall and employ inline deep learning in the cloud, empowering our customers to stop zero-day threats in real time,
see and secure their entire enterprise including IoT, and reduce errors with automatic policy recommendations. All of
our hardware and software firewalls incorporate our PAN-OS® operating system and come with the same rich set of
features, ensuring consistent operation across our entire product line. The content, applications, users, and devices—
the elements that run a business—become integral components of an enterprise’s security policy via our Content-ID™,
App-ID™, User-ID™, and Device-ID technologies. In addition to these components, key features include site-to-site
virtual private network (“VPN”), remote access Secure Sockets Layer (“SSL”) VPN, and Quality-of-Service (“QoS”). Our
appliances and software are designed for different performance requirements throughout an organization and are
classified based on throughput, ranging from our PA-410, which is designed for small organizations and branch offices,
to our top-of-the-line PA-7080, which is designed for large-scale data centers and service provider use. Our firewalls
come in a hardware form factor, a containerized form factor, called CN-Series, as well as a virtual form factor, called VM-
Series, that is available for virtualization and cloud environments from companies such as VMware, Inc. (“VMware”),
Microsoft Corporation (“Microsoft”), Amazon.com, Inc. (“Amazon”), and Google, Inc. (“Google”), and in Kernel-based
Virtual Machine (“KVM”)/OpenStack environments. We also offer Cloud NGFW, a managed next-generation firewall
(“NGFW”) offering, to secure customers’ applications on Amazon Web Services (“AWS”) and Microsoft Azure (“Azure”).

SD-WAN. Our SD-WAN is integrated with PAN-OS so that our end-customers can get the security features of our PAN-OS
ML-Powered Next-Generation Firewall together with SD-WAN functionality. The SD-WAN overlay supports dynamic,
intelligent path selection based on the applications, services, and conditions of the links that each application or service
is allowed to use, allowing applications to be prioritized based on criteria such as whether the application is mission-
critical, latency-sensitive, or meets certain health criteria.

Panorama. Panorama is our centralized security management solution for global control of our network security
platform. Panorama can be deployed as a virtual appliance or a physical appliance. Panorama is used for centralized
policy management, device management, software licensing and updates, centralized logging and reporting, and log
storage. Panorama controls the security, network address translation (“NAT”), QoS, policy-based forwarding, decryption,
application override, captive portal, and distributed denial of service/denial of service (“DDoS/DoS”) protection aspects
of the network security systems under management. Panorama centrally manages device software and associated
updates, including SSL-VPN clients, SD-WAN, dynamic content updates, and software licenses. Panorama offers
network security monitoring through the ability to view logs and run reports for our network security platform in one
location without the need to forward the logs and reliably expands log storage for long-term event investigation and
analysis.

SUBSCRIPTIONS

We offer a number of subscriptions as part of our network security platform. Of these subscription offerings, cloud-
delivered security services, such as Advanced Threat Prevention, Advanced WildFire, Advanced URL Filtering, DNS
Security, IoT/OT Security, SaaS Security Inline, GlobalProtect, Enterprise DLP, and AIOps, are sold as options to our
hardware and software firewalls, whereas SaaS Security API, Prisma Access, Prisma SD-WAN, Prisma Cloud, Cortex
XSIAM, Cortex XDR, Cortex XSOAR, and Cortex Xpanse are sold on a per-user, per-endpoint, or capacity-based basis. Our
subscription offerings include:

Cloud-delivered security services:

• Advanced Threat Prevention. This cloud-delivered security service provides intrusion detection and prevention

capabilities and blocks vulnerability exploits, viruses, spyware, buffer overflows, denial-of-service attacks, and port
scans from compromising and damaging enterprise information resources. It includes mechanisms—such as
protocol decoder-based analysis, protocol anomaly-based protection, stateful pattern matching, statistical anomaly
detection, heuristic-based analysis, custom vulnerability and spyware “phone home” signatures, and workflows—to
manage popular open-source signature formats to extend our coverage. In addition, it offers inline deep learning to
deliver real-time detection and prevention of unknown, evasive, and targeted command-and-control (“C2”)
communications over HTTP, unknown-TCP, unknown-UDP, and encrypted over SSL. Advanced Threat Prevention is
the first offering to protect patient zero from unknown command and control in real-time.

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• Advanced WildFire. This cloud-delivered security service provides protection against targeted malware and advanced
persistent threats and provides a near real-time analysis engine for detecting previously unseen malware while
resisting attacker evasion techniques. Advanced WildFire combines dynamic and static analysis, recursive analysis,
and a custom-built analysis environment with network traffic profiling and fileless attack detection to discover even
the most sophisticated and evasive threats. A machine learning module derived from the cloud sandbox
environment is now delivered inline on the ML-Powered Next-Generation Firewalls to identify the majority of
unknown threats without cloud connectivity. In addition, Advanced WildFire defeats highly evasive modern malware
at scale with a new infrastructure and patented analysis techniques, including intelligent runtime memory analysis,
dependency emulation, malware family fingerprinting, and more. Once identified, whether in the cloud or inline,
preventive measures are automatically generated and delivered in seconds or less to our network security platform.

• Advanced URL Filtering. This cloud-delivered security service offers the industry’s first Inline Deep Learning powered

web protection engine. It delivers real-time detection and prevention of unknown, evasive, and targeted web-based
threats, such as phishing, malware, and C2. While many vendors use machine learning to categorize web content or
prevent malware downloads, Advanced URL Filtering is the industry’s first inline web protection engine capable of
detecting never-before-seen web-based threats and preventing them in real-time. In addition, it includes a cloud-
based URL filtering database which consists of millions of URLs across many categories and is designed to analyze
web traffic and prevent web-based threats, such as phishing, malware, and C2.

• DNS Security. This cloud-delivered security service uses machine learning to proactively block malicious domains and

stop attacks in progress. Unlike other solutions, it does not require endpoint routing configurations to be maintained
and therefore cannot be bypassed. It allows our network security platform access to DNS signatures that are
generated using advanced predictive analysis, machine learning, and malicious domain data from a growing threat
intelligence sharing community of which we are a part. Expanded categorization of DNS traffic and comprehensive
analytics allow deep insights into threats, empowering security personnel with the context to optimize their security
posture. It offers comprehensive DNS attack coverage and includes industry-first protections against multiple
emerging DNS-based network attacks.

• IoT/OT Security. This cloud-delivered security service uses machine learning to accurately identify and classify various
IoT and operational technology (“OT”) devices, including never-been-seen-before devices, mission-critical OT devices,
and unmanaged legacy systems. It uses machine learning to baseline normal behavior, identify anomalous activity,
assess risk, and provide policy recommendations to allow trusted behavior with a new Device-ID policy construct on
our network security platform. Other subscriptions have also been enhanced with IoT context to prevent threats on
various devices, including IoT and OT devices.

• SaaS Security API. SaaS Security API (formerly Prisma SaaS) is a multi-mode, cloud access security broker (“CASB”) that
helps govern sanctioned SaaS application usage across all users and helps prevent breaches and non-compliance.
Specifically, the service enables the discovery and classification of data stored in supported SaaS applications,
protects sensitive data from accidental exposure, identifies and protects against known and unknown malware, and
performs user activity monitoring to identify potential misuse or data exfiltration. It delivers complete visibility and
granular enforcement across all user, folder, and file activity within sanctioned SaaS applications, and can be
combined with SaaS Security Inline for a complete integrated CASB.

• SaaS Security Inline. SaaS Security Inline adds an inline service to automatically gain visibility and control over

thousands of known and new sanctioned, unsanctioned and tolerated SaaS applications in use within organizations
today. It provides enterprise data protection and compliance across all SaaS applications and prevents cloud threats
in real time with best-in-class security. The solution is easy to deploy being natively integrated on network security
platform, eliminating the architectural complexity of traditional CASB products, while offering low total cost of
ownership. It can be combined with SaaS Security API as a complete integrated CASB.

• GlobalProtect. This subscription provides protection for users of both traditional laptop and mobile devices. It expands
the boundaries of the end-users’ physical network, effectively establishing a logical perimeter that encompasses
remote laptop and mobile device users irrespective of their location. When a remote user logs into the device,
GlobalProtect automatically determines the closest gateway available to the roaming device and establishes a
secure connection. Regardless of the operating systems, laptops, tablets, and phones will stay connected to the
corporate network when they are on a network of any kind and, as a result, are protected as if they never left the
corporate campus. GlobalProtect ensures that the same secure application enablement policies that protect users at
the corporate site are enforced for all users, independent of their location.

• Enterprise DLP. This cloud-delivered security service provides consistent, reliable protection of sensitive data, such as
personally identifiable information (“PII”) and intellectual property, for all traffic types, applications, and users. Native
integration with our products makes it simple to deploy, and advanced machine learning minimizes management
complexity. Enterprise DLP allows organizations to consistently discover, classify, monitor, and protect sensitive data,
wherever it may reside. It helps minimize the risk of a data breach both on-premises and in the cloud—such as in
Office/Microsoft 365™, Salesforce®, and Box—and assists in meeting stringent data privacy and compliance
regulations, including GDPR, CCPA, PCI DSS, HIPAA, and others.

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• AIOps: AIOps is available in both free and licensed premium versions. AIOps redefines network operational experience
by empowering security teams to proactively strengthen security posture and resolve network disruptions. AIOps
provides continuous best practice recommendations powered by machine learning (“ML”) based on industry
standards, security policy context, and advanced telemetry data collected from our network security customers to
improve security posture. It also intelligently predicts health, performance, and capacity problems up to seven days
in advance and provides actionable insights to resolve the predicted disruptions.

Secure Access Service Edge:

• Prisma Access. Prisma Access is a cloud-delivered security offering that helps organizations deliver consistent security

to remote networks and mobile users. Located in more than 100 locations around the world, Prisma Access
consistently inspects all traffic across all ports and provides bidirectional networking to enable branch-to-branch and
branch-to-headquarter traffic. Prisma Access consolidates point-products into a single converged cloud-delivered
offering, transforming network security and allowing organizations to enable secure hybrid workforces. Prisma
Access protects all application traffic with complete, best-in-class security while ensuring an exceptional user
experience with industry-leading service-level agreements (“SLA”s).

• Prisma SD-WAN. Our Prisma SD-WAN solution is a next-generation SD-WAN solution that makes the secure cloud-

delivered branch possible. Prisma SD-WAN enables organizations to replace traditional Multiprotocol Label
Switching (“MPLS”) based WAN architectures with affordable broadband and internet transport types that promote
improved bandwidth availability, redundancy and performance at a reduced cost. Prisma SD-WAN leverages real-
time application performance SLAs and visibility to control and intelligently steer application traffic to deliver an
exceptional user experience. Prisma SD-WAN also provides the flexibility of deploying with an on-premises controller
to help businesses meet their industry-specific security compliance requirements and manage deployments with
application-defined policies. Our Prisma SD-WAN simplifies network and security operations using machine learning
and automation.

Cloud Security:

• Prisma Cloud. Prisma Cloud is a comprehensive Cloud-Native Application Protection Platform (“CNAPP”), securing

both cloud-native and lift-and-shift applications across multi- and hybrid-cloud environments. With broad security
and compliance coverage and a flexible agentless, as well as agent-based, architecture, Prisma Cloud protects cloud-
native applications across their lifecycle from code to cloud. The platform helps developers prevent risks as they code
and build the application, secures the software supply chain and the continuous integration and continuous
development (“CI/CD”) pipeline, and provides complete visibility and real-time protection for applications in the
cloud.

With its code-to-cloud security capabilities, Prisma Cloud uniquely stitches together a complete security picture by
tracing back thousands of cloud risks and vulnerabilities that occur in the application runtime to their origin in the
code-and-build phase of the application. The platform enables organizations to “shift security left” and fix issues at
the source (in code) before they proliferate as a large number of risks in the cloud. The contextualized visibility to
alerts, attack paths, and vulnerabilities delivered by Prisma Cloud facilitates collaboration between security and
development teams to drive down risks and deliver better security outcomes. The context helps security teams block
attacks in the cloud runtime and developers fix risks in source code.

A comprehensive library of compliance frameworks included in Prisma Cloud vastly simplifies the task of maintaining
compliance. Seamless integration with security orchestration tools ensures rapid remediation of vulnerabilities and
security issues.

With a flexible, integrated platform that enables customers to license and activate cloud security capabilities that
match their need, Prisma Cloud helps secure organizations at every stage in their cloud adoption journey. The
platform enables security teams to consolidate multiple products that address individual risks with an integrated
solution that also delivers best-in-class capabilities. Including the recently launched CI/CD security module, Prisma
Cloud’s code-to-cloud CNAPP delivers comprehensive protection for applications and their code, infrastructure
(workloads, network, and storage), data, APIs, and associated identities.

Security Operations:

• Cortex XSIAM. This cloud-based subscription is the AI security automation platform for the modern SOC, harnessing
the power of AI to radically improve security outcomes and transform security operations. Cortex XSIAM customers
can consolidate multiple products into a single unified platform, including EDR, XDR, SOAR, ASM, user behavior
analytics (“UBA”), threat intelligence platform (“TIP”), and security information and event management (“SIEM”).
Using a security-specific data model and applying AI, Cortex XSIAM automates data integration, analysis, and triage
to respond to most alerts, enabling analysts to focus on only the incidents that require human intervention.

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• Cortex XDR. This cloud-based subscription enables organizations to collect telemetry from endpoint, network, identity

and cloud data sources and apply advanced analytics and machine learning, to quickly find and stop targeted
attacks, insider abuse, and compromised endpoints. Cortex XDR has two product tiers: XDR Prevent and XDR Pro.
XDR Prevent delivers enterprise-class endpoint security focused on preventing attacks. XDR Pro extends endpoint
detection and response (“EDR”) to include cross-data analytics, including network, cloud, and identity data. Going
beyond EDR, Cortex XDR detects the most complex threats using analytics across key data sources and reveals the
root cause, which can significantly reduce investigation time as compared to siloed tools and manual processes.

• Cortex XSOAR. Available as a cloud-based subscription or an on-premises appliance, Cortex XSOAR is a comprehensive

security orchestration automation and response (“SOAR”) offering that unifies playbook automation, case
management, real-time collaboration, and threat intelligence management to serve security teams across the
incident lifecycle. With Cortex XSOAR, security teams can standardize processes, automate repeatable tasks, and
manage incidents across their security product stack to improve response time and analyst productivity. It learns
from the real-life analyst interactions and past investigations to help SOC teams with analyst assignment
suggestions, playbook enhancements, and best next steps for investigations. Many of our customers see significantly
faster SOC response times and a significant reduction in the number of SOC alerts which require
human intervention.

• Cortex Xpanse. This cloud-based subscription provides attack surface management (“ASM”), which is the ability for an
organization to identify what an attacker would see among all of its sanctioned and unsanctioned Internet-facing
assets. In addition, Cortex Xpanse detects risky or out-of-policy communications between Internet-connected assets
that can be exploited for data breaches or ransomware attacks. Cortex Xpanse continuously identifies Internet assets,
risky services, or misconfigurations in third parties to help secure a supply chain or identify risks for mergers and
acquisitions due diligence. Finally, compliance teams use Cortex Xpanse to improve their audit processes and stay in
compliance by assessing their access controls against regulatory frameworks.

SUPPORT

Customer Support. Global customer support helps our customers achieve their security outcomes with services and
support capabilities covering the customer's entire journey with Palo Alto Networks. This post-sales, global organization
advances our customers’ security maturity, supporting them when, where, and how they need it. We offer Standard
Support, Premium Support, and Platinum Support to our end-customers and channel partners. Our channel partners
that operate a Palo Alto Networks Authorized Support Center (“ASC”) typically deliver level-one and level-two support.
We provide level-three support 24 hours a day, seven days a week through regional support centers that are located
worldwide. We also offer a service offering called Focused Services that includes Customer Success Managers (“CSM”)
to provide support for end-customers with unique or complex support requirements. We offer our end-customers
ongoing support for hardware, software, and certain cloud offerings, which includes ongoing security updates, PAN-OS
upgrades, bug fixes, and repairs. End-customers typically purchase these services for a one-year or longer term at the
time of the initial product sale and typically renew for successive one-year or longer periods. Additionally, we provide
expedited replacement for any defective hardware. We use a third-party logistics provider to manage our worldwide
deployment of spare appliances and other accessories.

Threat Intelligence, Incident Response and Security Consulting. Unit 42 brings together world-renowned threat researchers,
incident responders, and security consultants to create an intelligence-driven, response-ready organization that is
passionate about helping clients proactively manage cyber risk. We help security leaders assess and test their security
controls, transform their security strategy with a threat-informed approach, and respond to incidents rapidly. The
Unit 42 Threat Intelligence team provides threat research that enables security teams to understand adversary intent
and attribution, while enhancing protections offered by our products and services to stop advanced attacks. Our
security consultants serve as trusted partners with state-of-the-art cyber risk expertise and incident response
capabilities, helping customers focus on their business before, during, and after a breach.

Professional Services. Professional services are primarily delivered directly by Palo Alto Networks and through a global
network of authorized channel partners to our end-customers and include on-location and remote, hands-on experts
who plan, design, and deploy effective security solutions tailored to our end-customers’ specific requirements. These
services include architecture design and planning, implementation, configuration, and firewall migrations for all our
products, including Prisma and Cortex deployments. Customers can also purchase on-going technical experts to be
part of customer’s security teams to aid in the implementation and operation of their Palo Alto Networks capabilities.
Our education services include certifications, as well as free online technical courses and in-classroom training, which
are primarily delivered through our authorized training partners.

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RESEARCH AND DEVELOPMENT

Our research and development efforts are focused on developing new hardware and software and on enhancing and
improving our existing product and subscription offerings. We believe that hardware and software are both critical to
expanding our leadership in the enterprise security industry. Our engineering team has deep networking, endpoint,
and security expertise and works closely with end-customers to identify their current and future needs. Our scale and
position in multiple areas of the security market enable us to leverage core competencies across hardware, software,
and SaaS and also share expertise and research around threats, which allows us to respond to the rapidly changing
threat landscape. We supplement our own research and development efforts with technologies and products that we
license from third parties. We test our products thoroughly to certify and ensure interoperability with third-party
hardware and software products.

We believe that innovation and timely development of new features and products is essential to meeting the needs of
our end-customers and improving our competitive position. During fiscal 2023, we introduced several new offerings,
including: Cortex XSIAM 1.0, major updates to Prisma Cloud (including three new security modules), Prisma Access 4.0,
PAN-OS 11.0, Cloud NGFW for AWS, and Cloud NGFW for Azure. Additionally, we acquired productive investments that
fit well within our long-term strategy. For example, we acquired Cider Security Ltd. (“Cider”), which we expect will
support our Prisma Cloud’s platform approach to securing the entire application security lifecycle from code to cloud.

We plan to continue to significantly invest in our research and development efforts as we evolve and extend the
capabilities of our portfolio.

INTELLECTUAL PROPERTY

Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation
regarding patent and other intellectual property rights. In particular, leading companies in the enterprise security
industry have extensive patent portfolios and are regularly involved in both offensive and defensive litigation. We
continue to grow our patent portfolio and own intellectual property and related intellectual property rights around the
world that relate to our products, services, research and development, and other activities, and our success depends in
part upon our ability to protect our core technology and intellectual property. We file patent applications to protect our
intellectual property and believe that the duration of our issued patents is sufficient when considering the expected
lives of our products.

We actively seek to protect our global intellectual property rights and to deter unauthorized use of our intellectual
property by controlling access to, and use of, our proprietary software and other confidential information through the
use of internal and external controls, including contractual protections with employees, contractors, end-customers,
and partners, and our software is protected by U.S. and international copyright laws. Despite our efforts to protect our
intellectual property rights, our rights may not be successfully asserted in the future or may be invalidated,
circumvented, or challenged. In addition, the laws of various foreign countries where our offerings are distributed may
not protect our intellectual property rights to the same extent as laws in the United States. See “Risk Factors-Claims by
others that we infringe their intellectual property rights could harm our business,” “Risk Factors-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,” and “Legal Proceedings” below for additional information.

GOVERNMENT REGULATION

We are subject to numerous U.S. federal, state, and foreign laws and regulations covering a wide variety of subject
matters. Like other companies in the technology industry, we face scrutiny from both U.S. and foreign governments
with respect to our compliance with laws and regulations. Our compliance with these laws and regulations may be
onerous and could, individually or in the aggregate, increase our cost of doing business, impact our competitive
position relative to our peers, and/or otherwise have an adverse impact on our business, reputation, financial condition,
and operating results. For additional information about government regulation applicable to our business, see Part I,
Item 1A “Risk Factors” in this Form 10-K.

COMPETITION

We operate in the intensely competitive enterprise security industry that is characterized by constant change and
innovation. Changes in the application, threat, and technology landscape result in evolving customer requirements for
the protection from threats and the safe enablement of applications. Our main competitors fall into four categories:

•

large companies that incorporate security features in their products, such as Cisco Systems, Inc. (“Cisco”), Microsoft,
or those that have acquired, or may acquire, security vendors and have the technical and financial resources to bring
competitive solutions to the market;

independent security vendors, such as Check Point Software Technologies Ltd. (“Check Point”), Fortinet, Inc.
(“Fortinet”), Crowdstrike, Inc. (“Crowdstrike”), and Zscaler, Inc. (“Zscaler”), that offer a mix of security products;

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• startups and point-product vendors that offer independent or emerging solutions across various areas of security;

and

• public cloud vendors and startups that offer solutions for cloud security (private, public, and hybrid cloud).

As our market grows, it will attract more highly specialized vendors, as well as larger vendors that may continue to
acquire or bundle their products more effectively.

The principal competitive factors in our market include:

• product features, reliability, performance, and effectiveness;
• product line breadth, diversity, and applicability;
• product extensibility and ability to integrate with other technology infrastructures;
• price and total cost of ownership;
• adherence to industry standards and certifications;
• strength of sales and marketing efforts; and
• brand awareness and reputation.

We believe we generally compete favorably with our competitors on the basis of these factors as a result of the features
and performance of our portfolio, the ease of integration of our security solutions with technological infrastructures,
and the relatively low total cost of ownership of our products. However, many of our competitors have substantially
greater financial, technical, and other resources, greater name recognition, larger sales and marketing budgets,
broader distribution, more diversified product lines, and larger and more mature intellectual property portfolios.

SALES, MARKETING, SERVICES, AND SUPPORT

Customers. Our end-customers are predominantly medium to large enterprises, service providers, and government
entities. Our end-customers operate in a variety of industries, including education, energy, financial services,
government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications. Our end-
customers deploy our portfolio of solutions for a variety of security functions across a variety of deployment scenarios.
Typical deployment scenarios include the enterprise network, the enterprise data center, cloud locations, and branch or
remote locations. No single end-customer accounted for more than 10% of our total revenue in fiscal 2023, 2022, or 2021.

Distribution. We primarily sell our products and subscription and support offerings to end-customers through our
channel partners utilizing a two-tier, indirect fulfillment model whereby we sell our products and subscription and
support offerings to our distributors, which, in turn, sell to our resellers, which then sell to our end-customers. Sales are
generally subject to our standard, non-exclusive distributor agreement, which provides for an initial term of one year,
one-year renewal terms, termination by us with 30 to 90 days written notice prior to the renewal date, and payment to
us from the channel partner within 30 to 45 calendar days of the date we issue an invoice for such sales. For fiscal 2023,
49.7% of our total revenue was derived from sales to three distributors.

We also sell our VM-Series virtual firewalls directly to end-customers through Amazon’s AWS Marketplace, Microsoft’s
Azure Marketplace, and Google’s Cloud Platform Marketplace under a usage-based licensing model.

Sales. Our sales organization is responsible for large-account acquisition and overall market development, which
includes the management of the relationships with our channel partners, working with our channel partners in
winning and supporting end-customers through a direct-touch approach, and acting as the liaison between our end-
customers and our marketing and product development organizations. We pursue sales opportunities both through
our direct sales force and as assisted by our channel partners, including leveraging cloud service provider marketplaces.
We expect to continue to grow our sales headcount to expand our reach in all key growth sectors.

Our sales organization is supported by sales engineers with responsibility for pre-sales technical support, solutions
engineering for our end-customers, and technical training for our channel partners.

Channel Program. Our NextWave Channel Partner program is focused on building in-depth relationships with solutions-
oriented distributors and resellers that have strong security expertise. The program rewards these partners based on a
number of attainment goals, as well as provides them access to marketing funds, technical and sales training, and
support. To promote optimal productivity, we operate a formal accreditation program for our channel partners’ sales
and technical professionals. As of July 31, 2023, we had more than 7,100 channel partners.

Global Customer Success. Our Global Customer Success (“GCS”) organization is responsible for delivering professional,
educational, and support services directly to our channel partners and end-customers. We leverage the capabilities of
our channel partners and train them in the delivery of professional, educational, and support services to enable these
services to be locally delivered. We believe that a broad range of support services is essential to the successful customer
deployment and ongoing support of our products, and we have hired support engineers with proven experience to
provide those services.

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Marketing. Our marketing is focused on building our brand reputation and the market awareness of our portfolio and
driving pipeline and end-customer demand. Our marketing team consists primarily of product marketing, brand,
demand generation, field marketing, digital marketing, communications, analyst relations, and marketing analytics
functions. Marketing activities include pipeline development through demand generation, social media and advertising
programs, managing the corporate website and partner portal, trade shows and conferences, analyst relationships,
customer advocacy, and customer awareness. Every year we organize multiple signature events, such as our end-
customer conference “Ignite” and focused conferences such as “Cortex Symphony” and “SASE Converge.” We also
publish threat intelligence research, such as the Unit 42 Cloud Threat Report and the Unit 42 Network Threat Trends
Research Report, which are based on data from our global threat intelligence team, Unit 42. These activities and tools
benefit both our direct and indirect channels and are available at no cost to our channel partners.

Backlog. Orders for subscription and support offerings for multiple years are generally billed upfront upon fulfillment
and are included in deferred revenue. Contract amounts that are not recorded in deferred revenue or revenue are
considered backlog. We expect backlog related to subscription and support offerings will change from period to period
for various reasons, including the timing and duration of customer orders and varying billing cycles of those orders.
Products are billed upon hardware shipment or delivery of software license. The majority of our product revenue comes
from orders that are received and shipped in the same quarter. However, insufficient supply and inventory may delay
our hardware product shipments. As such, we do not believe that our product backlog at any particular time is
necessarily indicative of our future operating results.

Seasonality. Our business is affected by seasonal fluctuations in customer spending patterns. We have begun to see
seasonal patterns in our business, which we expect to become more pronounced as we continue to grow, with our
strongest sequential revenue growth generally occurring in our fiscal second and fourth quarters.

MANUFACTURING

We outsource the manufacturing of our products to various manufacturing partners, which include our electronics
manufacturing services provider (“EMS provider”) and original design manufacturers. This approach allows us to reduce
our costs as it reduces our manufacturing overhead and inventory and also allows us to adjust more quickly to
changing end-customer demand. Our EMS provider is Flextronics International, Ltd. (“Flex”), who assembles our
products using design specifications, quality assurance programs, and standards that we establish, and procures
components and assembles our products based on our demand forecasts. These forecasts represent our estimates of
future demand for our products based upon historical trends and analysis from our sales and product management
functions as adjusted for overall market conditions.

The component parts within our products are either sourced by our manufacturing partners or by us from various
component suppliers. Our manufacturing and supply contracts, generally, do not guarantee a certain level of supply or
fixed pricing, which increases our exposure to supply shortages or price increases.

HUMAN CAPITAL

We believe our ongoing success depends on our employees. Development and investment in our people is central to
who we are, and will continue to be so. With a global workforce of 13,948 as of July 31, 2023, our People Strategy is a
critical element of our overall company strategy. Our People Strategy is a comprehensive approach to source, hire,
onboard, develop, engage, and reward employees. Our approach is grounded on core tenants: respect each employee
as an individual, demonstrate fairness and equity in all we do, facilitate flexibility, personalization, and choice whenever
possible, and nurture a culture where employees are supported in doing the best work of their careers. Our values of
disruption, execution, collaboration, inclusion, and integrity were co-created with employees and serve as the
foundation of our culture.

Source & Hire. Sourcing diverse talent who possess the skills and capabilities to execute and add value to our culture
form the cornerstone of our comprehensive approach to talent acquisition—a philosophy we call “The Way We Hire.”
We utilize an array of methods to identify subject matter experts in their respective fields, emphasizing sourcing
channels that connect us with underrepresented talents.

In an effort to foster career growth within Palo Alto Networks, we prioritize internal mobility. This allows current
employees to progress either through a traditional career path or by exploring roles across various business functions,
often culminating in promotions. We encourage existing employees to refer qualified individuals for our open positions,
thus leveraging the collective networks of our team to attract a diverse range of expertise and perspectives.

We have made strides to understand job requirements and implement structured interviewing practices to identify
candidates of the highest quality. By conducting thorough job analyses and creating success profiles, we have
developed a deeper understanding of what is required for success in critical roles. We equip our hiring managers with
essential training to identify and mitigate potential unconscious biases. Our interviewing process emphasizes values
and competencies that we believe enhance our culture. This commitment extends to conducting interviews with
diverse panelists and providing a balanced evaluation and quality interview experience for a diverse slate of candidates.
We remain steadfast in our commitment to fairness, bias reduction, and equal opportunities for all potential hires.

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Onboard & Develop. We believe that each member of our workforce is unique, and that their integration into Palo Alto
Networks and their career journey involve unique needs, interests, and goals. That is why our development programs
are grounded on individualization, flexibility, and choice. From onboarding to ongoing development, our FLEXLearn
philosophy offers multiple paths to assess, develop, and grow.

Our onboarding experience starts with “pre-boarding.” Before an employee’s start date, they are provided access to
foundational tools to help them prepare to join Palo Alto Networks. We view pre-boarding as fundamental to
introducing new employees to our culture, building trust, and facilitating rapid productivity. Welcome Day is a
combination of in-person, virtual learning platforms and communication channels that provide new employees with
inspirational, often personalized, onboarding experiences that carry on through the first year of employment. We have
specialized learning tracks for interns and new graduates that have been recognized as best in class externally to
support early-in-career individuals in acclimating to our culture as they progress on their career journey. As part of our
merger and acquisition strategy, we have also established a robust integration program with the goal to enable
individuals joining our teams to feel part of our culture at speed.

Following onboarding, there are a variety of ways that employees can assess their interests and skills, build a
development plan specific to those insights, and continue to grow. Our development initiatives are delivered to
employees through a comprehensive platform, FLEXLearn. The platform contains curated content and programs, such
as assessment instruments, thousands of courses, workshops, and mentoring and coaching services. Leaders and
executives also have access to specialized learning tracks that help them strategize, mobilize, and deliver maximum
personal and team performance. Employees have full agency to direct their growth at their pace and choosing.
Development information about core business elements, working in a distributed hybrid environment, as well as
required company-wide compliance training, such as Code of Conduct, privacy and security, anti-discrimination, anti-
harassment, and anti-bribery training, is also deployed through the FLEXLearn platform for all employees. In addition,
FLEXLearn provides employees with events and activities that motivate and spark critical thinking, on topics ranging
from inclusion to well-being and collaboration. On average, employees had completed 33 hours of development
through the FLEXLearn platform during fiscal 2023.

Engage & Reward. We aim to foster engagement through a multifaceted approach to collect, understand, and act on
employee feedback. Our comprehensive communication and listening strategy utilizes in-person and technology-
enabled channels. We share and collect information through corporate and functional “All Hands” meetings, including
several meetings specifically focused on employee-centered topics in an “Ask Me Anything” format. Digital Displays
across our sites, our intranet platform, monthly and weekly email communications, and an active Slack platform
provide a regular flow of information to and between employees and leadership. In addition to these channels that
reach large audiences, we conduct regular executive listening sessions, including small group convenings with our CEO
and other C-suite leaders, and ad-hoc pulse surveys to better understand employee engagement, sentiment, well-
being, and the ability to transition to a hybrid work model.

Employee sentiment is also collected from external sources, such as web platforms that crowdsource feedback.
Employees provide commentary to platforms such as Glassdoor, Comparably, and others and insights from those
platforms are used to measure engagement. In addition, based on employee participation in an anonymous survey, the
Best Practice Institute has certified Palo Alto Networks as a “most loved workplace” (2021, 2022, and 2023). Palo Alto
Networks has been recognized by Glassdoor, Comparably, Human Rights Campaign, Disability Index, and others as an
employer of choice. Our CEO has also earned a 92% employee approval rating on Glassdoor, a top percentile score.

In addition to a comprehensive compensation and diverse benefits program, we believe in an always-on feedback and
rewards philosophy. From recurring 1:1 sessions, quarterly performance feedback, semi-annual performance reviews to
use of our Cheers for Peers peer recognition program, employees get continuous input about the value they bring to
the organization.

These engagement and recognition strategies have informed our holistic People Strategy, including our Inclusion and
Diversity (“I&D”) initiatives and Internal Mobility program. Based on the outcomes from external sources, insights from
internal sources, our modest attrition rate (compared to market trends), and strong participation in our Internal
Mobility program, we believe employees at Palo Alto Networks feel engaged and rewarded.

Inclusion & Diversity. We are intentional about including diverse points of view, perspectives, experiences, backgrounds,
and ideas in our decision-making processes. We deeply believe that true diversity exists when we have representation
of all ethnicities, genders, orientations and identities, and cultures in our workforce. Our corporate I&D programs focus
on five principles—our workforce should feel psychologically safe, they should understand, listen, and support one
another, and they should elevate others. These principles are the foundation of our approach to I&D, which we call
P.U.L.S.E.

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We have eleven employee network groups (“ENG”s) that play a vital role in building understanding and awareness.
Over 29% of our global workforce was involved in at least one ENG as of July 31, 2023. ENGs are also allocated funding to
make charitable grants to organizations advancing their causes. We involve our ENGs in listening sessions with
executive teams and we work in partnership to develop our annual I&D plans because we believe involvement is critical.

Our I&D philosophy is fully embedded in our talent acquisition, learning and development, performance elevation, and
rewards and recognition programs. The diversity of our board of directors, with women representing 40% of our board
as of July 31, 2023, is an example of our commitment to inclusion and diversity.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE

We recognize our duty to address environmental, social, and governance (“ESG”) practices. From our science-based
approach to emissions reductions and our social impact programs to our Supplier Responsibility initiatives and Code of
Business Conduct and Ethics, we value the opportunity to have meaningful outcomes that reinforce our intention to
respect our planet, uplift our communities, and advance our industry.

Environmental. We recognize climate change is a global crisis and are committed to doing our part to reduce
environmental impacts. We remain committed to our goals of utilizing 100% renewable energy by 2030, reducing our
greenhouse gas (“GHG”) emissions and working across our value chain, and with coalitions, to address climate change.
We made progress towards our goals in fiscal 2023 through several milestones. We engaged with a local utility provider
to power our Santa Clara, California headquarters with 100% renewable energy effective January 1, 2023. Our near-term
scope 1, 2, and 3 emissions reduction goals, aligned to a warming scenario of 1.5° Celsius, were verified by the Science
Based Targets initiative. We were recognized by Carbon Disclosure Project (“CDP”) as an “A-List” company and a
“Supplier Engagement Leader.” We remain committed to being transparent about our progress over time through
annual reporting.

Social. In addition to our People Strategy described in the section titled “Human Capital” above, we prioritized the health
and safety of our global workforce. Through the deployment of our Global Supplier Code of Conduct, we continued to
reach across our supply chain to communicate our expectations regarding labor standards, business practices, and
workplace health and safety conditions. During fiscal 2023, we maintained our affiliate membership in the Responsible
Business Alliance and maintained our commitment to Supplier Diversity. We value our role as a good corporate citizen
and in fiscal 2023 continued to execute our social impact programs. We made charitable grants to support
organizations providing services in our core funding areas of education, including academic scholarships, diversity, and
basic needs. We expanded our work to provide cybersecurity curriculum to schools, universities, and nonprofit
organizations to help individuals of all ages protect their digital way of life and to prepare diverse adults for careers in
cybersecurity. Employees continued to participate in our giving, matching, and volunteer programs to make impacts in
their local communities.

Governance. Integrity is one of our core values. Our corporate behavior and leadership practices model ethical decision-
making. All employees are informed about our governance expectations through our Codes of Conduct, compliance
training programs, and ongoing communications. Our board of directors is governed by Corporate Governance
Guidelines, which are amended from time to time to incorporate best practices in corporate governance. Reinforcing
the importance of our ESG performance, the charter of the ESG and Nominating Committee of the board of directors
includes the primary oversight of ESG.

AVAILABLE INFORMATION

Our website is located at www.paloaltonetworks.com, and our investor relations website is located at
investors.paloaltonetworks.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), are available free of charge on the Investors portion of our website as
soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and
Exchange Commission (“SEC”). We also provide a link to the section of the SEC’s website at www.sec.gov that has all of
our public filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-
K, all amendments to those reports, our Proxy Statements, and other ownership-related filings.

We also use our investor relations website as a channel of distribution for important company information. For
example, webcasts of our earnings calls and certain events we participate in or host with members of the investment
community are on our investor relations website. Additionally, we announce investor information, including news and
commentary about our business and financial performance, SEC filings, notices of investor events, and our press and
earnings releases, on our investor relations website. Investors and others can receive notifications of new information
posted on our investor relations website in real time by signing up for email alerts and RSS feeds. Further corporate
governance information, including our corporate governance guidelines, board committee charters, and code of
conduct, is also available on our investor relations website under the heading “Governance.” The contents of our
websites are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we
file with the SEC, and any references to our websites are intended to be inactive textual references only. All trademarks,
trade names, or service marks used or mentioned herein belong to their respective owners.

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Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties including those described below.
The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we
are unaware of, or that we currently believe are not material, also may become important factors that affect us. If
any of the following risks or others not specified below materialize, our business, financial condition, and operating
results could be materially adversely affected, and the market price of our common stock could decline. In addition,
the impacts of any worsening of the economic environment may exacerbate the risks described below, any of which
could have a material impact on us.

Risk Factor Summary

Our business is subject to numerous risks and uncertainties. These risks include, but are not limited to, the following:

• Our operating results may be adversely affected by unfavorable economic and market conditions and the uncertain

geopolitical environment.

• Our business and operations have experienced growth in recent periods, and if we do not effectively manage any

future growth or are unable to improve our systems, processes, and controls, our operating results could be
adversely affected.

• Our revenue growth rate in recent periods may not be indicative of our future performance, and we may not be able

to maintain profitability, which could cause our business, financial condition, and operating results to suffer.

• Our operating results may vary significantly from period to period, which makes our results difficult to predict and
could cause our results to fall short of expectations, and such results may not be indicative of future performance.

• Seasonality may cause fluctuations in our revenue.
• If we are unable to sell new and additional product, subscription, and support offerings to our end-customers,

especially to large enterprise customers, our future revenue and operating results will be harmed.

• We rely on revenue from subscription and support offerings, and because we recognize revenue from subscription

and support over the term of the relevant service period, downturns or upturns in sales or renewals of these
subscription and support offerings are not immediately reflected in full in our operating results.

• 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.

• We rely on our channel partners to sell substantially all of our products, including subscriptions and support, and if

these channel partners fail to perform, our ability to sell and distribute our products and subscriptions will be limited
and our operating results will be harmed.

• We are exposed to the credit and liquidity risk of our customers, and to credit exposure in weakened markets, which

could result in material losses.

• A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges

and risks.

• We face intense competition in our market and we may lack sufficient financial or other resources to maintain or

improve our competitive position.

• We may acquire other businesses, which could subject us to adverse claims or liabilities, require significant

management attention, disrupt our business, adversely affect our operating results, may not result in the expected
benefits of such acquisitions, and may dilute stockholder value.

• If we do not accurately predict, prepare for, and respond promptly to rapidly evolving technological and market

developments and successfully manage product and subscription introductions and transitions to meet changing
end-customer needs in the enterprise security industry, our competitive position and prospects will be harmed.

• Issues in the development and deployment of Artificial Intelligence (“AI”) may result in reputational harm and legal

liability and could adversely affect our results of operations.

• A network or data security incident may allow unauthorized access to our network or data, harm our reputation,

create additional liability, and adversely impact our financial results.

• Defects, errors, or vulnerabilities in our products, subscriptions, or support offerings, the failure of our products or
subscriptions to block a virus or prevent a security breach or incident, misuse of our products, or risks of product
liability claims could harm our reputation and adversely impact our operating results.

• Our ability to sell our products and subscriptions is dependent on the quality of our technical support services and
those of our channel partners, and the failure to offer high-quality technical support services could have a material
adverse effect on our end-customers’ satisfaction with our products and subscriptions, our sales, and our
operating results.

• Claims by others that we infringe their intellectual property rights could harm our business.

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• 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.

• Our use of open source software in our products and subscriptions could negatively affect our ability to sell our

products and subscriptions and subject us to possible litigation.

• We license technology from third parties, and our inability to maintain those licenses could harm our business.

• Because we depend on manufacturing partners to build and ship our hardware products, we are susceptible to

manufacturing and logistics delays and pricing fluctuations that could prevent us from shipping customer orders on
time, if at all, or on a cost-effective basis, which may result in the loss of sales and end-customers.

• Managing the supply of our hardware products and product components is complex. Insufficient supply and
inventory would result in lost sales opportunities or delayed revenue, while excess inventory would harm our
gross margins.

• Because some of the key components in our hardware products come from limited sources of supply, we are

susceptible to supply shortages or supply changes, which, in certain cases, have disrupted or delayed our scheduled
product deliveries to our end-customers, increased our costs and may result in the loss of sales and end-customers.

• If we are unable to attract, retain, and motivate our key technical, sales, and management personnel, our business

could suffer.

• We generate a significant amount of revenue from sales to distributors, resellers, and end-customers outside of the
United States, and we are therefore subject to a number of risks associated with international sales and operations.

• We are exposed to fluctuations in foreign currency exchange rates, which could negatively affect our financial

condition and operating results.

• We face risks associated with having operations and employees located in Israel.
• We are subject to governmental export and import controls that could subject us to liability or impair our ability to

compete in international markets.

• Our actual or perceived failure to adequately protect personal data could have a material adverse effect on

our business.

• We may have exposure to greater than anticipated tax liabilities.
• If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or

prove to be incorrect, our operating results could fall below our publicly announced guidance or the expectations of
securities analysts and investors, resulting in a decline in the market price of our common stock.

• We are obligated to maintain proper and effective internal control over financial reporting. We may not complete our

analysis of our internal control over financial reporting in a timely manner, or our internal control may not be
determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value
of our common stock.

• Our reputation and/or business could be negatively impacted by environmental, social, and governance (“ESG”)

matters and/or our reporting of such matters.

• Failure to comply with governmental laws and regulations could harm our business.
• We may not have the ability to raise the funds necessary to settle conversions of our Notes, repurchase our Notes

upon a fundamental change, or repay our Notes in cash at their maturity, and our future debt may contain
limitations on our ability to pay cash upon conversion or repurchase of our Notes.

• We may still incur substantially more debt or take other actions that would diminish our ability to make payments on

our Notes when due.

• The market price of our common stock historically has been volatile, and the value of an investment in our common

stock could decline.

• The convertible note hedge and warrant transactions may affect the value of our common stock.
• The issuance of additional stock in connection with financings, acquisitions, investments, our stock incentive plans,

the conversion of our Notes or exercise of the related Warrants, or otherwise will dilute stock held by all other
stockholders.

• We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance

shareholder value, and share repurchases could affect the price of our common stock.

• We do not intend to pay dividends for the foreseeable future.
• Our charter documents and Delaware law, as well as certain provisions contained in the indentures governing our
Notes, could discourage takeover attempts and lead to management entrenchment, which could also reduce the
market price of our common stock.

• Our business is subject to the risks of earthquakes, fire, power outages, floods, health risks, and other catastrophic

events, and to interruption by man-made problems, such as terrorism.

• Our failure to raise additional capital or generate the significant capital necessary to expand our operations and
invest in new products and subscriptions could reduce our ability to compete and could harm our business.

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Risks Related to Global Economic and Geopolitical Conditions

Our operating results may be adversely affected by unfavorable economic and market conditions and the uncertain geopolitical
environment.

We operate globally, and as a result, our business and revenues are impacted by global economic and geopolitical
conditions. The instability in the global credit markets, inflation, changes in public policies such as domestic and
international regulations, taxes, any increases in interest rates, fluctuations in foreign currency exchange rates, or
international trade agreements, international trade disputes, geopolitical turmoil, and other disruptions to global and
regional economies and markets continue to add uncertainty to global economic conditions. Military actions or armed
conflict, including Russia’s invasion of Ukraine and any related political or economic responses and counter-responses,
and uncertainty about, or changes in, government and trade relationships, policies, and treaties could also lead to
worsening economic and market conditions and geopolitical environment. In response to Russia’s invasion of Ukraine,
the United States, along with the European Union, has imposed restrictive sanctions on Russia, Russian entities, and
Russian citizens (“Sanctions on Russia”). We are subject to these governmental sanctions and export controls, which
may subject us to liability if we are not in full compliance with applicable laws. Any continued or further uncertainty,
weakness or deterioration in economic and market conditions or the geopolitical environment could have a material
and adverse impact on our business, financial condition, and results of operations, including reductions in sales of our
products and subscriptions, longer sales cycles, reductions in subscription or contract duration and value, slower
adoption of new technologies, alterations in the spending patterns or priorities of current and prospective customers
(including delaying purchasing decisions), increased costs for the chips and components to manufacture our products,
and increased price competition.

Risks Related to Our Business

RISKS RELATED TO OUR GROWTH

Our business and operations have experienced growth in recent periods, and if we do not effectively manage any future growth or are
unable to improve our systems, processes, and controls, our operating results could be adversely affected.

We have experienced growth and increased demand for our products and subscriptions over the last few years. As a
result, our employee headcount has increased, and we expect it to continue to grow over the next year. For example,
from the end of fiscal 2022 to the end of fiscal 2023, our headcount increased from 12,561 to 13,948 employees. In
addition, as we have grown, the number of end-customers has also increased, and we have managed more complex
deployments of our products and subscriptions with larger end-customers. The growth and expansion of our business
and product, subscription, and support offerings places a significant strain on our management, operational, and
financial resources. To manage any future growth effectively, we must continue to improve and expand our information
technology and financial infrastructure, our operating and administrative systems and controls, and our ability to
manage headcount, capital, and processes in an efficient manner.

We may not be able to successfully implement, scale, or manage improvements to our systems, processes, and controls
in an efficient or timely manner, which could result in material disruptions of our operations and business. In addition,
our existing systems, processes, and controls may not prevent or detect all errors, omissions, or fraud. We may also
experience difficulties in managing improvements to our systems, processes, and controls, or in connection with third-
party software licensed to help us with such improvements. Any future growth would add complexity to our
organization and require effective coordination throughout our organization. Failure to manage any future growth
effectively could result in increased costs, disrupt our existing end-customer relationships, reduce demand for or limit
us to smaller deployments of our products, or materially harm our business performance and operating results.

Our revenue growth rate in recent periods may not be indicative of our future performance, and we may not be able to maintain
profitability, which could cause our business, financial condition, and operating results to suffer.

We have experienced revenue growth rates of 25.3% and 29.3% in fiscal 2023 and fiscal 2022, respectively. Our revenue
for any quarterly or annual period should not be relied upon as an indication of our future revenue or revenue growth
for any future period. If we are unable to maintain consistent or increasing revenue or revenue growth, the market price
of our common stock could be volatile, and it may be difficult for us to maintain profitability or maintain or increase
cash flow on a consistent basis.

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In addition, we have incurred losses in fiscal years prior to fiscal 2023 and, as a result, we had an accumulated deficit of
$1.2 billion as of July 31, 2023. We anticipate that our operating expenses will continue to increase in the foreseeable
future as we continue to grow our business. Our growth efforts may prove more expensive than we currently anticipate,
and we may not succeed in increasing our revenues sufficiently, or at all, to offset increasing expenses. Revenue growth
may slow or revenue may decline for a number of possible reasons, including slowing demand for our products or
subscriptions, increasing competition, a decrease in the growth of, or a demand shift in, our overall market, or a failure
to capitalize on growth opportunities. We have also entered into a substantial amount of capital commitments for
operating lease obligations and other purchase commitments. Any failure to increase our revenue as we grow our
business could prevent us from maintaining profitability or maintaining or increasing cash flow on a consistent basis, or
satisfying our capital commitments. If we are unable to navigate these challenges as we encounter them, our business,
financial condition, and operating results may suffer.

Our operating results may vary significantly from period to period, which makes our results difficult to predict and could cause our
results to fall short of expectations, and such results may not be indicative of future performance.

Our operating results have fluctuated in the past, and will likely continue to fluctuate in the future, as a result of a
number of factors, many of which are outside of our control and may be difficult to predict, including those factors
described in this Risk Factor section. For example, we have historically received a substantial portion of sales orders and
generated a substantial portion of revenue during the last few weeks of each fiscal quarter. If expected revenue at the
end of any fiscal quarter is delayed for any reason, including the failure of anticipated purchase orders to materialize
(particularly for large enterprise end-customers with lengthy sales cycles), our logistics partners’ inability to ship
products prior to fiscal quarter-end to fulfill purchase orders received near the end of a fiscal quarter, our failure to
manage inventory to meet demand, any failure of our systems related to order review and processing, or any delays in
shipments based on trade compliance requirements (including new compliance requirements imposed by new or
renegotiated trade agreements), our revenue could fall below our expectations and the estimates of analysts for that
quarter. Due to these fluctuations, comparing our revenue, margins, or other operating results on a period-to-period
basis may not be meaningful, and our past results should not be relied on as an indication of our future performance.

This variability and unpredictability could also result in our failure to meet our revenue, margin, or other operating
result expectations contained in any forward-looking statements (including financial or business expectations we have
provided) or those of securities analysts or investors for a particular period. If we fail to meet or exceed such
expectations for these, or any other, reasons, the market price of our common stock could fall substantially, and we
could face costly lawsuits, including securities class action suits.

Seasonality may cause fluctuations in our revenue.

We believe there are significant seasonal factors that may cause our second and fourth fiscal quarters to record greater
revenue sequentially than our first and third fiscal quarters. We believe that this seasonality results from a number of
factors, including:

• end-customers with a December 31 fiscal year-end choosing to spend remaining unused portions of their

discretionary budgets before their fiscal year-end, which potentially results in a positive impact on our revenue in our
second fiscal quarter;

• our sales compensation plans, which are typically structured around annual quotas and commission rate
accelerators, which potentially results in a positive impact on our revenue in our fourth fiscal quarter; and

• the timing of end-customer budget planning at the beginning of the calendar year, which can result in a delay in

spending at the beginning of the calendar year, potentially resulting in a negative impact on our revenue in our third
fiscal quarter.

As we continue to grow, seasonal or cyclical variations in our operations may become more pronounced, and our
business, operating results, and financial position may be adversely affected.

RISKS RELATED TO OUR PRODUCTS AND TECHNOLOGY

If we are unable to sell new and additional product, subscription, and support offerings to our end-customers, especially to large
enterprise customers, our future revenue and operating results will be harmed.

Our future success depends, in part, on our ability to expand the deployment of our portfolio with existing end-
customers, especially large enterprise customers, and create demand for our new offerings, The rate at which our end-
customers purchase additional products, subscriptions, and support depends on a number of factors, including the
perceived need for additional security products, including subscription and support offerings, as well as general
economic conditions. If our efforts to sell additional products and subscriptions to our end-customers are not
successful, our revenues may grow more slowly than expected or decline.

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Sales to large enterprise end-customers, which is part of our growth strategy, involve risks that may not be present, or
that are present to a lesser extent, with sales to smaller entities, such as (a) longer sales cycles and the associated risk
that substantial time and resources may be spent on a potential end-customer that elects not to purchase our
products, subscriptions, and support, and (b) increased purchasing power and leverage held by large end-customers in
negotiating contractual arrangements. Deployments for large enterprise end-customers are also more complex,
require greater product functionality, scalability, and a broader range of services, and are more time-consuming. All
of these factors add further risk to business conducted with these end-customers. Failure to realize sales from large
enterprise end-customers could materially and adversely affect our business, operating results, and financial condition.

We rely on revenue from subscription and support offerings, and because we recognize revenue from subscription and support over
the term of the relevant service period, downturns or upturns in sales or renewals of these subscription and support offerings are not
immediately reflected in full in our operating results.

Subscription and support revenue accounts for a significant portion of our revenue, comprising 77.1% of total revenue in
fiscal 2023, 75.2% of total revenue in fiscal 2022, and 73.7% of total revenue in fiscal 2021. Sales and renewals of
subscription and support contracts may decline and fluctuate as a result of a number of factors, including end-
customers’ level of satisfaction with our products and subscriptions, the frequency and severity of subscription outages,
our product uptime or latency, the prices of our products and subscriptions, and reductions in our end-customers’
spending levels. Existing end-customers have no contractual obligation to, and may not, renew their subscription and
support contracts after the completion of their initial contract period. Additionally, our end-customers may renew their
subscription and support agreements for shorter contract lengths or on other terms that are less economically
beneficial to us. If our sales of new or renewal subscription and support contracts decline, our total revenue and
revenue growth rate may decline, and our business will suffer. In addition, because we recognize subscription and
support revenue over the term of the relevant service period, which is typically one to five years, a decline in
subscription or support contracts in any one fiscal quarter will not be fully or immediately reflected in revenue in that
fiscal quarter but will negatively affect our revenue in future fiscal quarters.

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.

The sales prices for our products, subscriptions, and support offerings may decline for a variety of reasons, including
competitive pricing pressures, discounts, a change in our mix of products, subscriptions, and support offerings,
anticipation of the introduction of new products, subscriptions, or support offerings, or promotional programs or
pricing pressures. Furthermore, we anticipate that the sales prices and gross profits for our products could decrease
over product life cycles. Declining sales prices could adversely affect our revenue, gross profits, and profitability.

We rely on our channel partners to sell substantially all of our products, including subscriptions and support, and if these channel
partners fail to perform, our ability to sell and distribute our products and subscriptions will be limited and our operating results will
be harmed.

Substantially all of our revenue is generated by sales through our channel partners, including distributors and resellers.
For fiscal 2023, three distributors individually represented 10% or more of our total revenue and in the aggregate
represented 49.7% of our total revenue. As of July 31, 2023, two distributors individually represented 10% or more of our
gross accounts receivable and in the aggregate represented 37.6% of our gross accounts receivable.

We provide our channel partners with specific training and programs to assist them in selling our products, including
subscriptions and support offerings, but there can be no assurance that these steps will be utilized or effective. In
addition, our channel partners may be unsuccessful in marketing, selling, and supporting our products and
subscriptions. We may not be able to incentivize these channel partners to sell our products and subscriptions to end-
customers and, in particular, to large enterprises. These channel partners may also have incentives to promote our
competitors’ products and may devote more resources to the marketing, sales, and support of competitive products.
Our agreements with our channel partners may generally be terminated for any reason by either party with advance
notice prior to each annual renewal date. We cannot be certain that we will retain these channel partners or that we
will be able to secure additional or replacement channel partners. In addition, any new channel partner requires
extensive training and may take several months or more to achieve productivity. Our channel partner sales structure
could subject us to lawsuits, potential liability, and reputational harm if, for example, any of our channel partners
misrepresent the functionality of our products or subscriptions to end-customers or violate laws or our corporate
policies. If we fail to effectively manage our sales channels or channel partners, our ability to sell our products and
subscriptions and operating results will be harmed.

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We are exposed to the credit and liquidity risk of our customers, and to credit exposure in weakened markets, which could result in
material losses.

Most of our sales are made on an open credit basis. Beyond our open credit arrangements, we have also experienced
demands for customer financing and deferred payments due to, among other things, macro-economic conditions. To
respond to this demand, our customer financing activities have increased and will likely continue to increase in the
future. Increases in deferred payments result in payments being made over time, negatively impacting our short-term
cash flows, and subject us to risk of non-payment by our customers, including as a result of insolvency. We monitor
customer payment capability in granting such financing arrangements, seek to limit the amounts to what we believe
customers can pay and maintain reserves we believe are adequate to cover exposure for doubtful accounts to mitigate
credit risks of these customers. However, there can be no assurance that these programs will be effective in reducing
our credit risks. To the degree that turmoil in the credit markets makes it more difficult for some customers to obtain
financing, those customers’ ability to pay could be adversely impacted, which in turn could have a material adverse
impact on our business, operating results, and financial condition.

Our exposure to the credit risks relating to the financing activities described above may increase if our customers are
adversely affected by a global economic downturn or periods of economic uncertainty. If we are unable to adequately
control these risks, our business, operating results, and financial condition could be harmed. In addition, in the past, we
have experienced non-material losses due to bankruptcies among customers. If these losses increase due to global
economic conditions, they could harm our business and financial condition.

A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks.

Sales to government entities are subject to a number of risks. Selling to government entities can be highly competitive,
expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these
efforts will generate a sale. The substantial majority of our sales to date to government entities have been made
indirectly through our channel partners. Government certification requirements for products and subscriptions like
ours may change, thereby restricting our ability to sell into the federal government sector until we have attained the
revised certification. If our products and subscriptions are late in achieving or fail to achieve compliance with these
certifications and standards, or our competitors achieve compliance with these certifications and standards, we may be
disqualified from selling our products, subscriptions, and support offerings to such governmental entity, or be at a
competitive disadvantage, which would harm our business, operating results, and financial condition. Government
demand and payment for our products, subscriptions, and support offerings may be impacted by government
shutdowns, public sector budgetary cycles, contracting requirements, and funding authorizations, with funding
reductions or delays adversely affecting public sector demand for our products, subscriptions, and support offerings.
Government entities may have statutory, contractual, or other legal rights to terminate contracts with our distributors
and resellers for convenience or due to a default, and any such termination may adversely impact our future operating
results. Governments routinely investigate and audit government contractors’ administrative processes, and any
unfavorable audit could result in the government refusing to continue buying our products, subscriptions, and support
offerings, a reduction of revenue, or fines or civil or criminal liability if the audit uncovers improper or illegal activities,
which could adversely impact our operating results in a material way. Additionally, the U.S. government may require
certain of the products that it purchases to be manufactured in the United States and other relatively high-cost
manufacturing locations, and we may not manufacture all products in locations that meet such requirements, affecting
our ability to sell these products, subscriptions, and support offerings to the U.S. government.

We face intense competition in our market and we may lack sufficient financial or other resources to maintain or improve our
competitive position.

The industry for enterprise security products is intensely competitive, and we expect competition to increase in the
future from established competitors and new market entrants. Our main competitors fall into four categories:

•

large companies that incorporate security features in their products, such as Cisco, Microsoft, or those that have
acquired, or may acquire, security vendors and have the technical and financial resources to bring competitive
solutions to the market;

independent security vendors, such as Check Point, Fortinet, Crowdstrike, and Zscaler, that offer a mix of security
products;

• startups and point-product vendors that offer independent or emerging solutions across various areas of security;

and

• public cloud vendors and startups that offer solutions for cloud security (private, public, and hybrid cloud).

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Many of our competitors have greater financial, technical, marketing, sales, and other resources, greater name
recognition, longer operating histories, and a larger base of customers than we do. They may be able to devote greater
resources to the promotion and sale of products and services than we can, and they may offer lower pricing than we do.
Further, they may have greater resources for research and development of new technologies, the provision of customer
support, and the pursuit of acquisitions. They may also have larger and more mature intellectual property portfolios,
and broader and more diverse product and service offerings, which allow them to leverage their relationships based on
other products or incorporate functionality into existing products to gain business in a manner that discourages users
from purchasing our products and subscriptions, including incorporating cybersecurity features into their existing
products or services and product bundling, selling at zero or negative margins, and offering concessions or a closed
technology offering. Some competitors may have broader distribution and established relationships with distribution
partners and end-customers. Other competitors specialize in providing protection from a single type of security threat,
which may allow them to deliver these specialized security products to the market more quickly than we can.

We also face competition from companies that have entrenched legacy offerings at end-user customers. End-user
customers have also often invested substantial personnel and financial resources to design and operate their networks
and have established deep relationships with other providers of networking and security products. As a result, these
organizations may prefer to purchase from their existing suppliers rather than add or switch to a new supplier such as
us. In addition, as our customers refresh the security products bought in prior years, they may seek to consolidate
vendors, which may result in current customers choosing to purchase products from our competitors. Due to budget
constraints or economic downturns, organizations may add solutions to their existing network security infrastructure
rather than replacing it with our products and subscriptions.

Conditions in our market could change rapidly and significantly as a result of technological advancements, partnering
or acquisitions by our competitors, or continuing market consolidation. Our competitors and potential competitors may
be able to develop new or disruptive technologies, products, or services, and leverage new business models that are
equal or superior to ours, achieve greater market acceptance of their products and services, disrupt our markets, and
increase sales by utilizing different distribution channels than we do. In addition, new and enhanced technologies,
including AI and machine learning, continue to increase our competition. To compete successfully, we must accurately
anticipate technology developments and deliver innovative, relevant, and useful products, services, and technologies in
a timely manner. Some of our competitors have made or could make acquisitions of businesses that may allow them to
offer more directly competitive and comprehensive solutions than they had previously offered and adapt more quickly
to new technologies and end-customer needs. Our current and potential competitors may also establish cooperative
relationships among themselves or with third parties that may further enhance their resources.

These competitive pressures in our market or our failure to compete effectively may result in price reductions, fewer
orders, reduced revenue and gross margins, and loss of market share. If we are unable to compete successfully, or if
competing successfully requires us to take aggressive pricing or other actions, our business, financial condition, and
results of operations would be adversely affected.

We may acquire other businesses, which could subject us to adverse claims or liabilities, require significant management attention,
disrupt our business, adversely affect our operating results, may not result in the expected benefits of such acquisitions, and may
dilute stockholder value.

As part of our business strategy, we acquire and make investments in complementary companies, products, or
technologies. The identification of suitable acquisition candidates is difficult, and we may not be able to complete such
acquisitions on favorable terms, if at all. In addition, we may be subject to claims or liabilities assumed from an acquired
company, product, or technology; acquisitions we complete could be viewed negatively by our end-customers,
investors, and securities analysts; and we may incur costs and expenses necessary to address an acquired company’s
failure to comply with laws and governmental rules and regulations. Additionally, we may be subject to litigation or
other claims in connection with the acquired company, including claims from terminated employees, customers,
former stockholders, or other third parties, which may differ from or be more significant than the risks our business
faces.

If we are unsuccessful at integrating past or future acquisitions in a timely manner, or the technologies and operations
associated with such acquisitions, into our company, our revenue and operating results could be adversely affected.
Any integration process may require significant time and resources, which may disrupt our ongoing business and
divert management’s attention, and we may not be able to manage the integration process successfully or in a timely
manner. We may have difficulty retaining key personnel of the acquired business. We may not successfully evaluate or
utilize the acquired technology or personnel, realize anticipated synergies from the acquisition, or accurately forecast
the financial impact of an acquisition transaction and integration of such acquisition, including accounting charges and
any potential impairment of goodwill and intangible assets recognized in connection with such acquisitions. In
addition, any acquisitions may be viewed negatively by our customers, financial markets, or investors and may not
ultimately strengthen our competitive position or achieve our goals and business strategy.

We may have to pay cash, incur debt, or issue equity or equity-linked securities to pay for any future acquisitions, each
of which could adversely affect our financial condition or the market price of our common stock. Furthermore, the sale
of equity or issuance of equity-linked debt to finance any future acquisitions could result in dilution to our stockholders.
The occurrence of any of these risks could harm our business, operating results, and financial condition.

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If we do not accurately predict, prepare for, and respond promptly to rapidly evolving technological and market developments and
successfully manage product and subscription introductions and transitions to meet changing end-customer needs in the enterprise
security industry, our competitive position and prospects will be harmed.

The enterprise security industry has grown quickly and continues to evolve rapidly. Moreover, many of our end-
customers operate in markets characterized by rapidly changing technologies and business plans, which require them
to add numerous network access points and adapt increasingly complex enterprise networks, incorporating a variety of
hardware, software applications, operating systems, and networking protocols. If we fail to effectively anticipate,
identify, and respond to rapidly evolving technological and market developments in a timely manner, our business will
be harmed.

In order to anticipate and respond effectively to rapid technological changes and market developments, as well as
evolving security threats, we must invest effectively in research and development to increase the reliability, availability,
and scalability of our existing products and subscriptions and introduce new products and subscriptions. Our
investments in research and development, including investments in AI, may not result in design or performance
improvements, marketable products, subscriptions, or features, or may not achieve the cost savings or additional
revenue that we expect. In addition, new and evolving products and services, including those that use AI, require
significant investment and raise ethical, technological, legal, regulatory, and other challenges, which may negatively
affect our brands and demand for our products and services. Because all of these investment areas are inherently risky,
no assurance can be given that such strategies and offerings will be successful or will not harm our reputation, financial
condition, and operating results.

In addition, we must continually change our products and expand our business strategy in response to changes in
network infrastructure requirements, including the expanding use of cloud computing. For example, organizations are
moving portions of their data to be managed by third parties, primarily infrastructure, platform, and application service
providers, and may rely on such providers’ internal security measures. While we have historically been successful in
developing, acquiring, and marketing new products and product enhancements that respond to technological change
and evolving industry standards, we may not be able to continue to do so, and there can be no assurance that our new
or future offerings will be successful or will achieve widespread market acceptance. If we fail to accurately predict and
address end-customers’ changing needs and emerging technological trends in the enterprise security industry,
including in the areas of AI, mobility, virtualization, cloud computing, and software-defined networks, our business
could be harmed.

The technology in our portfolio is especially complex because it needs to effectively identify and respond to new and
increasingly sophisticated methods of attack, while minimizing the impact on network performance. Additionally,
some of our new features and related enhancements may require us to develop new hardware architectures that
involve complex, expensive, and time-consuming research and development processes. The development of our
portfolio is difficult and the timetable for commercial release and availability is uncertain as there can be long time
periods between releases and availability of new features. If we experience unanticipated delays in the availability of
new products, features, and subscriptions, and fail to meet customer expectations for such availability, our competitive
position and business prospects will be harmed.

The success of new features depends on several factors, including appropriate new product definition, differentiation of
new products, subscriptions, and features from those of our competitors, and market acceptance of these products,
services, and features. Moreover, successful new product introduction and transition depends on a number of factors,
including our ability to manage the risks associated with new product production ramp-up issues, the availability of
application software for new products, the effective management of purchase commitments and inventory, the
availability of products in appropriate quantities and costs to meet anticipated demand, and the risk that new products
may have quality or other defects or deficiencies, especially in the early stages of introduction. There can be no
assurance that we will successfully identify opportunities for new products and subscriptions, develop and bring new
products and subscriptions to market in a timely manner, achieve market acceptance of our products and
subscriptions, or that products, subscriptions, and technologies developed by others will not render our products,
subscriptions, and technologies obsolete or noncompetitive.

Issues in the development and deployment of AI may result in reputational harm and legal liability and could adversely affect our
results of operations.

We have incorporated, and are continuing to develop and deploy, AI into many of our products and solutions, including
services that support our products and solutions. AI presents challenges and risks that could affect our products and
solutions, and therefore our business. For example, AI algorithms may have flaws, and datasets used to train models
may be insufficient or contain biased information. These potential issues could subject us to regulatory risk, legal
liability, including under new proposed legislation regulating AI in jurisdictions such as the EU and regulations being
considered in other jurisdictions, and brand or reputational harm.

The rapid evolution of AI, including potential government regulation of AI, requires us to invest significant resources to
develop, test, and maintain AI in our products and services in a manner that meets evolving requirements and
expectations. The rules and regulations adopted by policymakers over time may require us to make changes to our
business practices. Developing, testing, and deploying AI systems may also increase the cost profile of our offerings due
to the nature of the computing costs involved in such systems.

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The intellectual property ownership and license rights surrounding AI technologies, as well as data protection laws
related to the use and development of AI, are currently not fully addressed by courts or regulators. The use or adoption
of AI technologies in our products may result in exposure to claims by third parties of copyright infringement or other
intellectual property misappropriation, which may require us to pay compensation or license fees to third parties. The
evolving legal, regulatory, and compliance framework for AI technologies may also impact our ability to protect our
own data and intellectual property against infringing use.

A network or data security incident may allow unauthorized access to our network or data, harm our reputation, create additional
liability, and adversely impact our financial results.

Increasingly, companies are subject to a wide variety of attacks on their networks on an ongoing basis. In addition to
traditional computer “hackers,” malicious code (such as viruses and worms), phishing attempts, employee theft or
misuse, and denial of service attacks, sophisticated nation-state and nation-state supported actors engage in intrusions
and attacks (including advanced persistent threat intrusions and supply chain attacks), and add to the risks to our
internal networks, cloud-deployed enterprise and customer-facing environments and the information they store and
process. Incidences of cyberattacks and other cybersecurity breaches and incidents have increased and are likely to
continue to increase. We and our third-party service providers face security threats and attacks from a variety of
sources. Despite our efforts and processes to prevent breaches of our internal networks, systems, and websites, our
data, corporate systems, and security measures, as well as those of our third-party service providers, are still vulnerable
to computer viruses, break-ins, phishing attacks, ransomware attacks, or other types of attacks from outside parties, or
breaches due to employee error, malfeasance, or some combination of these. We cannot guarantee that the measures
we have taken to protect our networks, systems, and websites will provide adequate security. Furthermore, as a well-
known provider of security solutions, we may be a more attractive target for such attacks. The conflict in Ukraine and
associated activities in Ukraine and Russia may increase the risk of cyberattacks on various types of infrastructure and
operations, and the United States government has warned companies to be prepared for a significant increase in
Russian cyberattacks in response to the Sanctions on Russia.

A security breach or incident, or an attack against our service availability suffered by us, or our third-party service
providers, could impact our networks or networks secured by our products and subscriptions, creating system
disruptions or slowdowns and exploiting security vulnerabilities of our products. In addition, the information stored or
otherwise processed on our networks, or those of our third-party service providers, could be accessed, publicly
disclosed, altered, lost, stolen, rendered unavailable, or otherwise used or processed without authorization, which could
subject us to liability and cause us financial harm. Any actual or perceived breach of security in our systems or networks,
or any other actual or perceived data security incident we or our third-party service providers suffer, could result in
significant damage to our reputation, negative publicity, loss of channel partners, end-customers, and sales, loss of
competitive advantages over our competitors, increased costs to remedy any problems and otherwise respond to any
incident, regulatory investigations and enforcement actions, demands, costly litigation, and other liability. In addition,
we may incur significant costs and operational consequences of investigating, remediating, eliminating, and putting in
place additional tools, devices, and other measures designed to prevent actual or perceived security breaches and
other security incidents, as well as the costs to comply with any notification obligations resulting from any security
incidents. Any of these negative outcomes could adversely impact the market perception of our products and
subscriptions and end-customer and investor confidence in our company and could seriously harm our business or
operating results.

Defects, errors, or vulnerabilities in our products, subscriptions, or support offerings, the failure of our products or subscriptions to
block a virus or prevent a security breach or incident, misuse of our products, or risks of product liability claims could harm our
reputation and adversely impact our operating results.

Because our products and subscriptions are complex, they have contained and may contain design or manufacturing
defects or errors that are not detected until after their commercial release and deployment by our end-customers. For
example, from time to time, certain of our end-customers have reported defects in our products related to
performance, scalability, and compatibility. Additionally, defects may cause our products or subscriptions to be
vulnerable to security attacks, cause them to fail to help secure networks, or temporarily interrupt end-customers’
networking traffic. Because the techniques used by computer hackers to access or sabotage networks change
frequently and generally are not recognized until launched against a target, we may be unable to anticipate these
techniques and provide a solution in time to protect our end-customers’ networks. In addition, due to the Russian
invasion of Ukraine, there could be a significant increase in Russian cyberattacks against our customers, resulting in an
increased risk of a security breach of our end-customers’ systems. Furthermore, defects or errors in our subscription
updates or our products could result in a failure to effectively update end-customers’ hardware and cloud-based
products. Our data centers and networks may experience technical failures and downtime or may fail to meet the
increased requirements of a growing installed end-customer base, any of which could temporarily or permanently
expose our end-customers’ networks, leaving their networks unprotected against the latest security threats. Moreover,
our products must interoperate with our end-customers’ existing infrastructure, which often have varied specifications,
utilize multiple protocol standards, deploy products from multiple vendors, and contain multiple generations of
products that have been added over time. As a result, when problems occur in a network, it may be difficult to identify
the sources of these problems.

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The occurrence of any such problem in our products and subscriptions, whether real or perceived, could result in:

• expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate, or

work-around errors or defects or to address and eliminate vulnerabilities;

loss of existing or potential end-customers or channel partners;

•
• delayed or lost revenue;
• delay or failure to attain market acceptance;
• an increase in warranty claims compared with our historical experience, or an increased cost of servicing warranty

claims, either of which would adversely affect our gross margins; and

•

litigation, regulatory inquiries, investigations, or other proceedings, each of which may be costly and harm
our reputation.

Further, our products and subscriptions may be misused by end-customers or third parties that obtain access to our
products and subscriptions. For example, our products and subscriptions could be used to censor private access to
certain information on the Internet. Such use of our products and subscriptions for censorship could result in negative
press coverage and negatively affect our reputation.

The limitation of liability provisions in our standard terms and conditions of sale may not fully or effectively protect us
from claims as a result of federal, state, or local laws or ordinances, or unfavorable judicial decisions in the United States
or other countries. The sale and support of our products and subscriptions also entails the risk of product liability claims.
Although we may be indemnified by our third-party manufacturers for product liability claims arising out of
manufacturing defects, because we control the design of our products and subscriptions, we may not be indemnified
for product liability claims arising out of design defects. While we maintain insurance coverage for certain types of
losses, our insurance coverage may not adequately cover any claim asserted against us, if at all. In addition, even claims
that ultimately are unsuccessful could result in our expenditure of funds in litigation, divert management’s time and
other resources, and harm our reputation.

In addition, our classifications of application type, virus, spyware, vulnerability exploits, data, or URL categories may
falsely detect, report, and act on applications, content, or threats that do not actually exist. This risk is heightened by the
inclusion of a “heuristics” feature in our products and subscriptions, which attempts to identify applications and other
threats not based on any known signatures but based on characteristics or anomalies which indicate that a particular
item may be a threat. These false positives may impair the perceived reliability of our products and subscriptions and
may therefore adversely impact market acceptance of our products and subscriptions and could result in damage to
our reputation, negative publicity, loss of channel partners, end-customers and sales, increased costs to remedy any
problem, and costly litigation.

Our ability to sell our products and subscriptions is dependent on the quality of our technical support services and those of our
channel partners, and the failure to offer high-quality technical support services could have a material adverse effect on our end-
customers’ satisfaction with our products and subscriptions, our sales, and our operating results.

After our products and subscriptions are deployed within our end-customers’ networks, our end-customers depend on
our technical support services, as well as the support of our channel partners, to resolve any issues relating to our
products. Many larger enterprise, service provider, and government entity end-customers have more complex networks
and require higher levels of support than smaller end-customers. If our channel partners do not effectively provide
support to the satisfaction of our end-customers, we may be required to provide direct support to such end-customers,
which would require us to hire additional personnel and to invest in additional resources. If we are not able to hire such
resources fast enough to keep up with unexpected demand, support to our end-customers will be negatively impacted,
and our end-customers’ satisfaction with our products and subscriptions will be adversely affected. Additionally, to the
extent that we may need to rely on our sales engineers to provide post-sales support while we are ramping up our
support resources, our sales productivity will be negatively impacted, which would harm our revenues. Accordingly, our
failure, or our channel partners’ failure, to provide and maintain high-quality support services could have a material
adverse effect on our business, financial condition, and operating results.

RISKS RELATED TO INTELLECTUAL PROPERTY AND TECHNOLOGY LICENSING

Claims by others that we infringe their intellectual property rights could harm our business.

Companies in the enterprise security industry own large numbers of patents, copyrights, trademarks, domain names,
and trade secrets and frequently enter into litigation based on allegations of infringement, misappropriation, or other
violations of intellectual property rights. In addition, non-practicing entities also frequently bring claims of infringement
of intellectual property rights. Third parties are asserting, have asserted, and may in the future assert claims of
infringement of intellectual property rights against us.

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Third parties may also assert such claims against our end-customers or channel partners, whom our standard license
and other agreements obligate us to indemnify against claims that our products and subscriptions infringe the
intellectual property rights of third parties. In addition, to the extent we hire personnel from competitors, we may be
subject to allegations that they have been improperly solicited, that they have divulged proprietary or other
confidential information, or that their former employers own their inventions or other work product. Furthermore, we
may be unaware of the intellectual property rights of others that may cover some or all of our technology, products,
subscriptions, and services. As we expand our footprint, both in our platforms, products, subscriptions, and services and
geographically, more overlaps occur and we may face more infringement claims both in the United States and abroad.

While we have been increasing the size of our patent portfolio, our competitors and others may now and in the future
have significantly larger and more mature patent portfolios than we have. In addition, litigation has involved and will
likely continue to involve patent-holding companies or other adverse patent owners who have no relevant product
revenue and against whom our own patents may therefore provide little or no deterrence or protection. In addition, we
have not registered our trademarks in all of our geographic markets and failure to secure those registrations could
adversely affect our ability to enforce and defend our trademark rights. Any claim of infringement by a third party, even
those without merit, could cause us to incur substantial costs defending against the claim, could distract our
management from our business, and could require us to cease use of such intellectual property. Furthermore, because
of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that
some of our confidential information could be compromised by disclosure during this type of litigation. A successful
claimant could secure a judgment, or we may agree to a settlement that prevents us from distributing certain products
or performing certain services or that requires us to pay substantial damages, royalties, or other fees. Any of these
events could seriously harm our business, financial condition, and operating results.

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 with whom we have relationships, as well as trademark, copyright, patent, and trade
secret protection laws, to protect our proprietary rights. We have filed various applications for certain aspects of our
intellectual property. Valid patents may not issue from our pending applications, and the claims eventually allowed on
any patents may not be sufficiently broad to protect our technology or products and subscriptions. We cannot be
certain that we were the first to make the inventions claimed in our pending patent applications or that we were the
first to file for patent protection, which could prevent our patent applications from issuing as patents or invalidate our
patents following issuance. Additionally, the process of obtaining patent protection is expensive and time-consuming,
and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely
manner. Any issued patents may be challenged, invalidated or circumvented, and any rights granted under these
patents may not actually provide adequate defensive protection or competitive advantages to us. Additional
uncertainty may result from changes to patent-related laws and court rulings in the United States and other
jurisdictions. As a result, we may not be able to obtain adequate patent protection or effectively enforce any issued
patents.

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products
or subscriptions or obtain and use information that we regard as proprietary. We generally enter into confidentiality or
license agreements with our employees, consultants, vendors, and end-customers, and generally limit access to and
distribution of our proprietary information. However, we cannot be certain that we have entered into such agreements
with all parties who may have or have had access to our confidential information or that the agreements we have
entered into will not be breached. We cannot guarantee that any of the measures we have taken will prevent
misappropriation of our technology. Because we may be an attractive target for computer hackers, we may have a
greater risk of unauthorized access to, and misappropriation of, our proprietary information. In addition, the laws of
some foreign countries do not protect our proprietary rights to as great an extent as the laws of the United States, and
many foreign countries do not enforce these laws as diligently as government agencies and private parties in the
United States. From time to time, we may need to take legal action to enforce our patents and other intellectual
property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of
resources and could negatively affect our business, operating results, and financial condition. Attempts to enforce our
rights against third parties could also provoke these third parties to assert their own intellectual property or other rights
against us or result in a holding that invalidates or narrows the scope of our rights, in whole or in part. If we are unable
to protect our proprietary rights (including aspects of our software and products protected other than by patent rights),
we may find ourselves at a competitive disadvantage to others who need not incur the additional expense, time, and
effort required to create the innovative products that have enabled us to be successful to date. Any of these events
would have a material adverse effect on our business, financial condition, and operating results.

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Our use of open source software in our products and subscriptions could negatively affect our ability to sell our products and
subscriptions and subject us to possible litigation.

Our products and subscriptions contain software modules licensed to us by third-party authors under “open source”
licenses. Some open source licenses contain requirements that we make available applicable source code for
modifications or derivative works we create based upon the type of open source software we use. If we combine our
proprietary software with open source software in a certain manner, we could, under certain open source licenses, be
required to release the source code of our proprietary software to the public. This would allow our competitors to create
similar products or subscriptions with lower development effort and time and ultimately could result in a loss of
product sales for us.

Although we monitor our use of open source software to avoid subjecting our products and subscriptions to conditions
we do not intend, the terms of many open source licenses have not been interpreted by United States courts, and there
is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on
our ability to commercialize our products and subscriptions. From time to time, there have been claims against
companies that distribute or use open source software in their products and subscriptions, asserting that open source
software infringes the claimants’ intellectual property rights. We could be subject to suits by parties claiming
infringement of intellectual property rights in what we believe to be licensed open source software. If we are held to
have breached the terms of an open source software license, we could be required to seek licenses from third parties to
continue offering our products and subscriptions on terms that are not economically feasible, to reengineer our
products and subscriptions, to discontinue the sale of our products and subscriptions if reengineering could not be
accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which
could adversely affect our business, operating results, and financial condition.

In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of
third-party commercial software, as open source licensors generally do not provide warranties or assurance of title or
controls on origin of the software. In addition, many of the risks associated with usage of open source software, such as
the lack of warranties or assurances of title, cannot be eliminated, and could, if not properly addressed, negatively affect
our business. We have established processes to help alleviate these risks, including a review process for screening
requests from our development organizations for the use of open source software, but we cannot be sure that our
processes for controlling our use of open source software in our products and subscriptions will be effective.

We license technology from third parties, and our inability to maintain those licenses could harm our business.

We incorporate technology that we license from third parties, including software, into our products and subscriptions.
We cannot be certain that our licensors are not infringing the intellectual property rights of third parties or that our
licensors have sufficient rights to the licensed intellectual property in all jurisdictions in which we may sell our products
and subscriptions. In addition, some licenses may be non-exclusive, and therefore our competitors may have access to
the same technology licensed to us. Some of our agreements with our licensors may be terminated for convenience by
them. We may also be subject to additional fees or be required to obtain new licenses if any of our licensors allege that
we have not properly paid for such licenses or that we have improperly used the technologies under such licenses, and
such licenses may not be available on terms acceptable to us or at all. If we are unable to continue to license any of this
technology because of intellectual property infringement claims brought by third parties against our licensors or
against us, or claims against us by our licensors, or if we are unable to continue our license agreements or enter into
new licenses on commercially reasonable terms, our ability to develop and sell products and subscriptions containing
such technology would be severely limited and our business could be harmed. Additionally, if we are unable to license
necessary technology from third parties, we may be forced to acquire or develop alternative technology, which we may
be unable to do in a commercially feasible manner or at all, and we may be required to use alternative technology of
lower quality or performance standards. This would limit and delay our ability to offer new or competitive products and
subscriptions and increase our costs of production. As a result, our margins, market share, and operating results could
be significantly harmed.

RISKS RELATED TO OPERATIONS

Because we depend on manufacturing partners to build and ship our hardware products, we are susceptible to manufacturing and
logistics delays and pricing fluctuations that could prevent us from shipping customer orders on time, if at all, or on a cost-effective
basis, which may result in the loss of sales and end-customers.

We depend on manufacturing partners, primarily our EMS provider, Flex, to manufacture our hardware product lines.
Our reliance on these manufacturing partners reduces our control over the manufacturing process and exposes us to
risks, including reduced control over quality assurance, product costs, product supply, timing, and transportation risk.
Our hardware products are manufactured by our manufacturing partners at facilities located primarily in the United
States. Some of the components in our products are sourced either through Flex or directly by us from component
suppliers outside the United States. The portion of our hardware products that are sourced outside the United States
may subject us to geopolitical risks, additional logistical risks or risks associated with complying with local rules and
regulations in foreign countries.

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Significant changes to existing international trade agreements could lead to sourcing or logistics disruption resulting
from import delays or the imposition of increased tariffs on our sourcing partners. For example, the United States and
Chinese governments have each enacted, and discussed additional, import tariffs. Some components that we import
for final manufacturing in the United States have been impacted by these tariffs. As a result, our costs have increased
and we have raised, and may be required to further raise, prices on our hardware products, all of which could severely
impair our ability to fulfill orders.

Our manufacturing partners typically fulfill our supply requirements on the basis of individual purchase orders. We do
not have long-term contracts with these manufacturers that guarantee capacity, the continuation of particular pricing
terms, or the extension of credit limits. Accordingly, they are not obligated to continue to fulfill our supply requirements
and the prices we pay for manufacturing services could be increased on short notice. Our contract with Flex permits
them to terminate the agreement for their convenience, subject to prior notice requirements. If we are required to
change manufacturing partners, our ability to meet our scheduled product deliveries to our end-customers could be
adversely affected, which could cause the loss of sales to existing or potential end-customers, delayed revenue or an
increase in our costs which could adversely affect our gross margins. Any production interruptions for any reason, such
as a natural disaster, epidemic or pandemic, capacity shortages, or quality problems at one of our manufacturing
partners would negatively affect sales of our product lines manufactured by that manufacturing partner and adversely
affect our business and operating results.

Managing the supply of our hardware products and product components is complex. Insufficient supply and inventory would result in
lost sales opportunities or delayed revenue, while excess inventory would harm our gross margins.

Our manufacturing partners procure components and build our hardware products based on our forecasts, and we
generally do not hold inventory for a prolonged period of time. These forecasts are based on estimates of future
demand for our products, which are in turn based on historical trends and analyses from our sales and product
management organizations, adjusted for overall market conditions. In order to reduce manufacturing lead times and
plan for adequate component supply, from time to time we may issue forecasts for components and products that are
non-cancelable and non-returnable.

Our inventory management systems and related supply chain visibility tools may be inadequate to enable us to
forecast accurately and effectively manage supply of our hardware products and product components. If we ultimately
determine that we have excess supply, we may have to reduce our prices and write-down inventory, which in turn
could result in lower gross margins. If our actual component usage and product demand are lower than the forecast we
provide to our manufacturing partners, we accrue for losses on manufacturing commitments in excess of forecasted
demand. Alternatively, insufficient supply levels may lead to shortages that result in delayed hardware product revenue
or loss of sales opportunities altogether as potential end-customers turn to competitors’ products that are readily
available. If we are unable to effectively manage our supply and inventory, our operating results could be adversely
affected.

Because some of the key components in our hardware products come from limited sources of supply, we are susceptible to supply
shortages or supply changes, which, in certain cases, have disrupted or delayed our scheduled product deliveries to our end-
customers, increased our costs and may result in the loss of sales and end-customers.

Our hardware products rely on key components, including integrated circuit components, which our manufacturing
partners purchase on our behalf from a limited number of component suppliers, including sole source providers. The
manufacturing operations of some of our component suppliers are geographically concentrated in Asia and elsewhere,
which makes our supply chain vulnerable to regional disruptions, such as natural disasters, fire, political instability, civil
unrest, power outages, or health risks. In addition, we continue to experience supply chain disruption and have incurred
increased costs resulting from inflationary pressures. We are also monitoring the tensions between China and Taiwan,
and between the U.S. and China, which could have an adverse impact on our business or results of operations in
future periods.

Further, we do not have volume purchase contracts with any of our component suppliers, and they could cease selling
to us at any time. If we are unable to obtain a sufficient quantity of these components in a timely manner for any
reason, sales of our hardware products could be delayed or halted, or we could be forced to expedite shipment of such
components or our hardware products at dramatically increased costs. Our component suppliers also change their
selling prices frequently in response to market trends, including industry-wide increases in demand. Because we do not
have, for the most part, volume purchase contracts with our component suppliers, we are susceptible to price
fluctuations related to raw materials and components and may not be able to adjust our prices accordingly.
Additionally, poor quality in any of the sole-sourced components in our products could result in lost sales or
sales opportunities.

If we are unable to obtain a sufficient volume of the necessary components for our hardware products on commercially
reasonable terms or the quality of the components do not meet our requirements, we could also be forced to redesign
our products and qualify new components from alternate component suppliers. The resulting stoppage or delay in
selling our hardware products and the expense of redesigning our hardware products would result in lost sales
opportunities and damage to customer relationships, which would adversely affect our business and operating results.

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If we are unable to attract, retain, and motivate our key technical, sales, and management personnel, our business could suffer.

Our future success depends, in part, on our ability to continue to attract, retain, and motivate the members of our
management team and other key employees. For example, we are substantially dependent on the continued service of
our engineering personnel because of the complexity of our offerings. Competition for highly skilled personnel,
particularly in engineering, including in the areas of AI and machine learning, is often intense, especially in the San
Francisco Bay Area, where we have a substantial presence and need for such personnel. In addition, the industry in
which we operate generally experiences high employee attrition. Our future performance depends on the continuing
services and contributions of our senior management to execute on our business plan and to identify and pursue new
opportunities and product innovations. If we are unable to hire, integrate, train, or retain the qualified and highly skilled
personnel required to fulfill our current or future needs, our business, financial condition, and operating results could be
harmed.

Further, we believe that a critical contributor to our success and our ability to retain highly skilled personnel has been
our corporate culture, which we believe fosters innovation, inclusion, teamwork, passion for end-customers, focus on
execution, and the facilitation of critical knowledge transfer and knowledge sharing. As we grow and change, we may
find it difficult to maintain these important aspects of our corporate culture. While we are taking steps to develop a
more inclusive and diverse workforce, there is no guarantee that we will be able to do so. Any failure to preserve our
culture as we grow could limit our ability to innovate and could negatively affect our ability to retain and recruit
personnel, continue to perform at current levels or execute on our business strategy.

We generate a significant amount of revenue from sales to distributors, resellers, and end-customers outside of the United States, and
we are therefore subject to a number of risks associated with international sales and operations.

Our ability to grow our business and our future success will depend to a significant extent on our ability to expand our
operations and customer base worldwide. Many of our customers, resellers, partners, suppliers, and manufacturers
operate around the world. Operating in a global marketplace, we are subject to risks associated with having an
international reach and compliance and regulatory requirements. We may experience difficulties in attracting,
managing, and retaining an international staff, and we may not be able to recruit and maintain successful strategic
distributor relationships internationally. Business practices in the international markets that we serve may differ from
those in the United States and may require us in the future to include terms other than our standard terms related to
payment, warranties, or performance obligations in end-customer contracts.

Additionally, our international sales and operations are subject to a number of risks, including the following:

• political, economic, and social uncertainty around the world, health risks such as epidemics and pandemics like

COVID-19, macroeconomic challenges in Europe, terrorist activities, Russia’s invasion of Ukraine, tensions between
China and Taiwan, and continued hostilities in the Middle East;

• unexpected changes in, or the application of, foreign and domestic laws and regulations (including intellectual

property rights protections), regulatory practices, trade restrictions, and foreign legal requirements, including those
applicable to the importation, certification, and localization of our products, tariffs, and tax laws and treaties,
including regulatory and trade policy changes adopted by the current administration, such as the Sanctions on
Russia, or foreign countries in response to regulatory changes adopted by the current administration; and

• non-compliance with U.S. and foreign laws, including antitrust regulations, anti-corruption laws, such as the U.S.

Foreign Corrupt Practices Act and the U.K. Bribery Act, U.S. or foreign sanctions regimes and export or import control
laws, and any trade regulations ensuring fair trade practices.

These and other factors could harm our future international revenues and, consequently, materially impact our
business, operating results, and financial condition. The expansion of our existing international operations and entry
into additional international markets will require significant management attention and financial resources. Our failure
to successfully manage our international operations and the associated risks effectively could limit the future growth of
our business.

We are exposed to fluctuations in foreign currency exchange rates, which could negatively affect our financial condition and operating
results.

Our sales contracts are denominated in U.S. dollars, and therefore, our revenue is not subject to foreign currency risk;
however, in the event of a strengthening of the U.S. dollar against foreign currencies in which we conduct business, the
cost of our products to our end-customers outside of the United States would increase, which could adversely affect our
financial condition and operating results. In addition, increased international sales in the future, including through our
channel partners and other partnerships, may result in foreign currency denominated sales, increasing our foreign
currency risk.

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Our operating expenses incurred outside the United States and denominated in foreign currencies are generally
increasing and are subject to fluctuations due to changes in foreign currency exchange rates. If we are not able to
successfully hedge against the risks associated with foreign currency fluctuations, our financial condition and operating
results could be adversely affected. We have entered into forward contracts in an effort to reduce our foreign currency
exchange exposure related to our foreign currency denominated expenditures. As of July 31, 2023, the total notional
amount of our outstanding foreign currency forward contracts was $957.5 million. For more information on our
hedging transactions, refer to Note 6. Derivative Instruments in Part II, Item 8 of this Annual Report on Form 10-K. The
effectiveness of our existing hedging transactions and the availability and effectiveness of any hedging transactions we
may decide to enter into in the future may be limited, and we may not be able to successfully hedge our exposure,
which could adversely affect our financial condition and operating results.

We face risks associated with having operations and employees located in Israel.

As a result of various of our acquisitions, including Cider, Cyber Secdo Ltd. (“Secdo”), PureSec Ltd. (“PureSec”), and
Twistlock Ltd. (“Twistlock”), we have offices and employees located in Israel. Accordingly, political, economic, and
military conditions in Israel directly affect our operations, including the recent political unrest in Israel. The future of
peace efforts between Israel and its Arab neighbors remains uncertain. The effects of hostilities and violence on the
Israeli economy and our operations in Israel are unclear, and we cannot predict the effect on us of further increases in
these hostilities or future armed conflict, political instability, or violence in the region. Current or future tensions and
conflicts in the Middle East could adversely affect our business, operating results, financial condition, and cash flows.

In addition, many of our employees in Israel are obligated to perform annual reserve duty in the Israeli military and are
subject to being called for active duty under emergency circumstances. We cannot predict the full impact of these
conditions on us in the future, particularly if emergency circumstances or an escalation in the political situation occurs.
If many of our employees in Israel are called for active duty for a significant period of time, our operations and our
business could be disrupted and may not be able to function at full capacity. Any disruption in our operations in Israel
could adversely affect our business.

We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in
international markets.

Because we incorporate encryption technology into our products, certain of our products are subject to U.S. export
controls and may be exported outside the United States only with the required export license or through an export
license exception. If we were to fail to comply with U.S. export licensing requirements, U.S. customs regulations, U.S.
economic sanctions, or other laws, we could be subject to substantial civil and criminal penalties, including fines,
incarceration for responsible employees and managers, and the possible loss of export or import privileges. Obtaining
the necessary export license for a particular sale may be time-consuming and may result in the delay or loss of sales
opportunities. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products
to U.S. embargoed or sanctioned countries, governments, and persons. Even though we take precautions to ensure
that our channel partners comply with all relevant regulations, any failure by our channel partners to comply with such
regulations could have negative consequences for us, including reputational harm, government investigations, and
penalties.

In addition, various countries regulate the import of certain encryption technology, including through import permit
and license requirements, and have enacted laws that could limit our ability to distribute our products or could limit
our end-customers’ ability to implement our products in those countries. Changes in our products or changes in export
and import regulations may create delays in the introduction of our products into international markets, prevent our
end-customers with international operations from deploying our products globally or, in some cases, prevent or delay
the export or import of our products to certain countries, governments, or persons altogether. Any change in export or
import regulations, economic sanctions, such as the Sanctions on Russia, or related legislation, shift in the enforcement
or scope of existing regulations, or change in the countries, governments, persons, or technologies targeted by such
regulations could result in decreased use of our products by, or in our decreased ability to export or sell our products to,
existing or potential end-customers with international operations. Any decreased use of our products or limitation on
our ability to export to or sell our products in international markets would likely adversely affect our business, financial
condition, and operating results.

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RISKS RELATED TO PRIVACY AND DATA PROTECTION

Our actual or perceived failure to adequately protect personal data could have a material adverse effect on our business.

A wide variety of laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other
processing of personal data in jurisdictions where we and our customers operate. Compliance with these laws and
regulations is difficult and costly. These laws and regulations are also subject to frequent and unexpected changes, new
or additional laws or regulations may be adopted, and rulings that invalidate prior laws or regulations may be issued.
For example, we are subject to the E.U. General Data Protection Regulation (“E.U. GDPR”) and the U.K. General Data
Protection Regulation (‘U.K. GDPR,” and collectively the “GDPR”), both of which impose stringent data protection
requirements, provide for costly penalties for noncompliance (up to the greater of (a) €20 million under the “E.U. GDPR”
or £17.5 million under the “U.K. GDPR,” and (b) 4% of annual worldwide turnover), and confer the right upon data
subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and
obtain compensation for damages resulting from violations.

The GDPR requires, among other things, that personal data be transferred outside of the E.U. (or, in the case of the U.K.
GDPR, the U.K.) to the United States and other jurisdictions only where adequate safeguards are implemented or a
derogation applies. In practice, we rely on standard contractual clauses approved under the GDPR to carry out such
transfers and to receive personal data subject to the GDPR (directly or indirectly) in the United States. In the future, we
may self-certify to the EU-U.S. Data Privacy Framework (“EU-U.S. DPF”), which has been approved for transfers of
personal data subject to the GDPR to the United States and requires public disclosures of adherence to data protection
principles and the submission of jurisdiction to European regulatory authorities. Following the “Schrems II” decision by
the Court of Justice of the European Union, transfers of personal data to recipients in third countries are also subject to
additional assessments and safeguards beyond the implementation of approved transfer mechanisms. The decision
imposed a requirement for companies to carry out an assessment of the laws and practices governing access to
personal data in the third country to ensure an essentially equivalent level of data protection to that afforded in the E.U.

Among other effects, we may experience additional costs associated with increased compliance burdens, reduced
demand for our offerings from current or prospective customers in the European Economic Area (“EEA”), Switzerland,
and the U.K. (collectively, “Europe”) to use our products, on account of the risks identified in the Schrems II decision, and
we may find it necessary or desirable to make further changes to our processing of personal data of European
residents. The regulatory environment applicable to the handling of European residents’ personal data, and our actions
taken in response, may cause us to assume additional liabilities or incur additional costs, including in the event we self-
certify to the EU-U.S. DPF. Moreover, much like with Schrems II, we anticipate future legal challenges to the approved
data transfer mechanisms between Europe and the United States, including a challenge to the EU-U.S. DPF. Such legal
challenges could result in additional legal and regulatory risk, compliance costs, and in our business, operating results,
and financial condition being harmed. Additionally, we and our customers may face risk of enforcement actions by data
protection authorities in Europe relating to personal data transfers to us and by us from Europe. Any such enforcement
actions could result in substantial costs and diversion of resources, and distract management and technical personnel.
These potential liabilities and enforcement actions could also have an overall negative affect on our business, operating
results, and financial condition.

We are also subject to the California Consumer Privacy Act, as amended by the California Privacy Rights Act
(collectively, the “CCPA”). The CCPA requires, among other things, covered companies to provide enhanced disclosures
to California consumers and to afford such consumers certain rights regarding their personal data, including the right
to opt out of data sales for targeted advertising, and creates a private right of action to individuals affected by a data
breach, if the breach was caused by a lack of reasonable security. The effects of the CCPA have been significant,
requiring us to modify our data processing practices and policies and to incur substantial costs and expenses for
compliance. Moreover, additional state privacy laws have been passed and will require potentially substantial efforts to
obtain compliance. These include laws enacted in at least ten states, which all go into effect by January 1, 2026.

We may also from time to time be subject to obligations relating to personal data by contract, or face assertions that
we are subject to self-regulatory obligations or industry standards. Additionally, the Federal Trade Commission and
many state attorneys general are more regularly bringing enforcement actions in connection with federal and state
consumer protection laws for false or deceptive acts or practices in relation to the online collection, use, dissemination,
and security of personal data. Internationally, data localization laws may mandate that personal data collected in a
foreign country be processed and stored within that country. New legislation affecting the scope of personal data and
personal information where we or our customers and partners have operations, especially relating to classification of
Internet Protocol (“IP”) addresses, machine identification, AI, location data, and other information, may limit or inhibit
our ability to operate or expand our business, including limiting strategic partnerships that may involve the sharing or
uses of data, and may require significant expenditures and efforts in order to comply. Notably, public perception of
potential privacy, data protection, or information security concerns—whether or not valid—may harm our reputation
and inhibit adoption of our products and subscriptions by current and future end-customers. Each of these laws and
regulations, and any changes to these laws and regulations, or new laws and regulations, could impose significant
limitations, or require changes to our business model or practices or growth strategy, which may increase our
compliance expenses and make our business more costly or less efficient to conduct.

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Tax, Accounting, Compliance, and Regulatory Risks

We may have exposure to greater than anticipated tax liabilities.

Our income tax obligations are based in part on our corporate structure and intercompany arrangements, including
the manner in which we develop, value, and use our intellectual property and the valuations of our intercompany
transactions. 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, including in an effort to raise additional tax revenue. The tax authorities of the jurisdictions in which we
operate may challenge our methodologies for valuing developed or acquired technology or determining the proper
charges for intercompany arrangements, which could increase our worldwide effective tax rate and harm our financial
position and operating results. Some tax authorities of jurisdictions other than the United States may seek to assert
extraterritorial taxing rights on our transactions or operations. 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 and otherwise have a negative effect on our financial position and operating results. Further, the
determination of our worldwide provision for or benefit from income taxes and other tax liabilities requires significant
judgment by management, and there are transactions where the ultimate tax determination is uncertain. Although we
believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded on our
consolidated financial statements and may materially affect our financial results in the period or periods for which such
determination is made.

In addition, our future income tax obligations could be adversely affected by changes in, or interpretations of, tax laws,
regulations, policies, or decisions in the United States or in the other jurisdictions in which we operate.

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be
incorrect, our operating results could fall below our publicly announced guidance or the expectations of securities analysts and
investors, resulting in a decline in the market price of our common stock.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the amounts reported on our consolidated financial statements and
accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe
to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets, liabilities, equity, revenue, and expenses that are not readily apparent from other sources. For
more information, refer to the section entitled “Critical Accounting Estimates” in “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report on Form 10-K. In
general, if our estimates, judgments, or assumptions relating to our critical accounting policies change or if actual
circumstances differ from our estimates, judgments, or assumptions, our operating results may be adversely affected
and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting
in a decline in the market price of our common stock.

We are obligated to maintain proper and effective internal control over financial reporting. We may not complete our analysis of our
internal control over financial reporting in a timely manner, or our internal control may not be determined to be effective, which may
adversely affect investor confidence in our company and, as a result, the value of our common stock.

If we are unable to assert that our internal controls are effective, our independent registered public accounting firm
may not be able to formally attest to the effectiveness of our internal control over financial reporting. If, in the future,
our chief executive officer, chief financial officer, or independent registered public accounting firm determines that our
internal control over financial reporting is not effective as defined under Section 404, we could be subject to one or
more investigations or enforcement actions by state or federal regulatory agencies, stockholder lawsuits, or other
adverse actions requiring us to incur defense costs, pay fines, settlements, or judgments, causing investor perceptions
to be adversely affected and potentially resulting in a decline in the market price of our stock.

Our reputation and/or business could be negatively impacted by ESG matters and/or our reporting of such matters.

There is an increasing focus from regulators, certain investors, and other stakeholders concerning ESG matters, both in
the United States and internationally. We communicate certain ESG-related initiatives, goals, and/or commitments
regarding environmental matters, diversity, responsible sourcing and social investments, and other matters in our
annual ESG Report, on our website, in our filings with the SEC, and elsewhere. These initiatives, goals, or commitments
could be difficult to achieve and costly to implement. We could fail to achieve, or be perceived to fail to achieve, our
ESG-related initiatives, goals, or commitments. In addition, we could be criticized for the timing, scope or nature of
these initiatives, goals, or commitments, or for any revisions to them. To the extent that our required and voluntary
disclosures about ESG matters increase, we could be criticized for the accuracy, adequacy, or completeness of such
disclosures. Our actual or perceived failure to achieve our ESG-related initiatives, goals, or commitments could
negatively impact our reputation, result in ESG-focused investors not purchasing and holding our stock, or otherwise
materially harm our business.

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Failure to comply with governmental laws and regulations could harm our business.

Our business is subject to regulation by various federal, state, local, and foreign governmental agencies, including
agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, product safety,
environmental laws, consumer protection laws, privacy, data security, and data-protection laws, anti-bribery laws
(including the U.S. Foreign Corrupt Practices Act and the U.K. Anti-Bribery Act), import/export controls, federal
securities laws, and tax laws and regulations. These laws and regulations may also impact our innovation and business
drivers in developing new and emerging technologies (e.g., AI and machine learning). In certain jurisdictions, these
regulatory requirements may be more stringent than those in the United States. Noncompliance with applicable
regulations or requirements could subject us to investigations, sanctions, mandatory product recalls, enforcement
actions, disgorgement of profits, fines, damages, civil and criminal penalties, or injunctions. If any governmental
sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation resulting from any alleged
noncompliance, our business, operating results, and financial condition could be materially adversely affected. In
addition, responding to any action will likely result in a significant diversion of management’s attention and resources
and an increase in professional fees. Enforcement actions, litigation, and sanctions could harm our business, operating
results, and financial condition.

Risks Related to Our Notes and Common Stock

We may not have the ability to raise the funds necessary to settle conversions of our Notes, repurchase our Notes upon a fundamental
change, or repay our Notes in cash at their maturity, and our future debt may contain limitations on our ability to pay cash upon
conversion or repurchase of our Notes.

In June 2020, we issued our 2025 Notes (the “2025 Notes”). We will need to make cash payments (a) if holders of our
2025 Notes require us to repurchase all, or a portion of, their 2025 Notes upon the occurrence of a fundamental change
(e.g., a change of control of Palo Alto Networks, Inc.) before the maturity date, (b) upon conversion of our 2025 Notes, or
(c) to repay our 2025 Notes in cash at their maturity unless earlier converted or repurchased. Effective August 1, 2023
through October 31, 2023, all of the 2025 Notes are convertible. If all of the note holders decided to convert their 2025
Notes, we would be obligated to pay the $2.0 billion principal amount of the 2025 Notes in cash. Under the terms of the
2025 Notes, we also have the option to settle the amount of our conversion obligation in excess of the aggregate
principal amount of the 2025 Notes in cash or shares of our common stock. If our cash provided by operating activities,
together with our existing cash, cash equivalents, and investments, and existing sources of financing, are inadequate to
satisfy these obligations, we will need to obtain third-party financing, which may not be available to us on commercially
reasonable terms or at all, to meet these payment obligations.

In addition, our ability to repurchase or to pay cash upon conversion of our 2025 Notes may be limited by law,
regulatory authority, or agreements governing our future indebtedness. Our failure to repurchase our 2025 Notes at a
time when the repurchase is required by the applicable indenture governing such 2025 Notes or to pay cash upon
conversion of such 2025 Notes as required by the applicable indenture would constitute a default under the indenture.
A default under the applicable indenture or the fundamental change itself could also lead to a default under
agreements governing our future indebtedness. If the payment of the related indebtedness were to be accelerated
after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and
repurchase our 2025 Notes or to pay cash upon conversion of our 2025 Notes.

We may still incur substantially more debt or take other actions that would diminish our ability to make payments on our Notes when
due.

We and our subsidiaries may incur substantial additional debt in the future, subject to the restrictions contained in our
debt instruments, that could have the effect of diminishing our ability to make payments on our Notes when due.

The market price of our common stock historically has been volatile, and the value of an investment in our common stock could
decline.

The market price of our common stock has historically been, and is likely to continue to be, volatile and could be
subject to wide fluctuations in response to various factors, some of which are beyond our control and unrelated to our
business, operating results, or financial condition. These fluctuations could cause a loss of all or part of an investment in
our common stock. Factors that could cause fluctuations in the market price of our common stock include, but are not
limited to:

• announcements of new products, subscriptions or technologies, commercial relationships, strategic partnerships,

acquisitions, or other events by us or our competitors;

• price and volume fluctuations in the overall stock market from time to time;
• news announcements that affect investor perception of our industry, including reports related to the discovery of

significant cyberattacks;

• significant volatility in the market price and trading volume of technology companies in general and of companies in

our industry;

• fluctuations in the trading volume of our shares or the size of our public float;

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• actual or anticipated changes in our operating results or fluctuations in our operating results;
• whether our operating results meet the expectations of securities analysts or investors;
• actual or anticipated changes in the expectations of securities analysts or investors, whether as a result of our

forward-looking statements, our failure to meet such expectations or otherwise;

•

inaccurate or unfavorable research reports about our business and industry published by securities analysts or
reduced coverage of our company by securities analysts;

litigation involving us, our industry, or both;

•
• actions instituted by activist shareholders or others;
• regulatory developments in the United States, foreign countries, or both;
• major catastrophic events;
• sales or repurchases of large blocks of our common stock or substantial future sales by our directors, executive

officers, employees, and significant stockholders;

• departures of key personnel; or
• geopolitical or economic uncertainty around the world.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation
has often been brought against that company. Securities litigation could result in substantial costs, divert our
management’s attention and resources from our business, and have a material adverse effect on our business,
operating results, and financial condition.

The convertible note hedge and warrant transactions may affect the value of our common stock.

In connection with the sale of our 2025 Notes, we entered into convertible note hedge transactions (the “2025 Note
Hedges”) with certain counterparties. In connection with each such sale of the 2025 Notes, we also entered into warrant
transactions with the counterparties pursuant to which we sold warrants (the “2025 Warrants”) for the purchase of our
common stock. In addition, we also entered into warrant transactions in connection with our 2023 Notes (together with
the 2025 Warrants, the “Warrants”). The Note Hedges for our 2025 Notes are generally expected to reduce the potential
dilution to our common stock upon any conversion of our 2025 Notes. The Warrants could separately have a dilutive
effect to the extent that the market price per share of our common stock exceeds the applicable strike price of the
Warrants unless, subject to certain conditions, we elect to cash settle such Warrants.

The applicable counterparties or their respective affiliates may modify their hedge positions by entering into or
unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or
other securities of ours in secondary market transactions prior to the maturity of the outstanding 2025 Notes (and are
likely to do so during any applicable observation period related to a conversion of our 2025 Notes). This activity could
also cause or prevent an increase or a decrease in the market price of our common stock or our 2025 Notes, which
could affect a note holder’s ability to convert its 2025 Notes and, to the extent the activity occurs during any observation
period related to a conversion of our 2025 Notes, it could affect the amount and value of the consideration that the note
holder will receive upon conversion of our 2025 Notes.

We do not make any representation or prediction as to the direction or magnitude of any potential effect that the
transactions described above may have on the price of our 2025 Notes or our common stock. In addition, we do not
make any representation that the counterparties or their respective affiliates will engage in these transactions or that
these transactions, once commenced, will not be discontinued without notice.

The issuance of additional stock in connection with financings, acquisitions, investments, our stock incentive plans, the conversion of
our Notes or exercise of the related Warrants, or otherwise will dilute stock held by all other stockholders.

Our amended and restated certificate of incorporation authorizes us to issue up to 1.0 billion shares of common stock
and up to 100.0 million shares of preferred stock with such rights and preferences as may be determined by our board
of directors. Subject to compliance with applicable rules and regulations, we may issue shares of common stock or
securities convertible into shares of our common stock from time to time in connection with a financing, acquisition,
investment, our stock incentive plans, the conversion of our Notes, the settlement of our Warrants related to each such
series of the Notes, or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and
cause the market price of our common stock to decline.

We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance shareholder value, and
share repurchases could affect the price of our common stock.

As of July 31, 2023, we had $750.0 million available under our share repurchase program which will expire on
December 31, 2023. Such share repurchase program may be suspended or discontinued by the Company at any time
without prior notice. Although our board of directors has authorized a share repurchase program, we are not obligated
to repurchase any specific dollar amount or to acquire any specific number of shares under the program. The share
repurchase program could affect the price of our common stock, increase volatility, and diminish our cash reserves. In
addition, the program may be suspended or terminated at any time, which may result in a decrease in the price of our
common stock.

- 32 -

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid any dividends on our common stock. We intend to retain any earnings to finance the
operation and expansion of our business, and we do not anticipate paying any cash dividends in the future. As a
result, stockholders may only receive a return on their investments in our common stock if the market price of our
common stock increases.

Our charter documents and Delaware law, as well as certain provisions contained in the indentures governing our Notes, could
discourage takeover attempts and lead to management entrenchment, which could also reduce the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the
effect of delaying or preventing a change in control of our company or changes in our management. Our amended and
restated certificate of incorporation and amended and restated bylaws include provisions that:

• establish that our board of directors is divided into three classes, Class I, Class II, and Class III, with three-year

staggered terms;

• authorize our board of directors to issue shares of preferred stock and to determine the price and other terms of

those shares, including preferences and voting rights, without stockholder approval;

• provide our board of directors with the exclusive right to elect a director to fill a vacancy created by the expansion of

our board of directors or the resignation, death, or removal of a director;

• prohibit our stockholders from taking action by written consent;
• specify that special meetings of our stockholders may be called only by the chairman of our board of directors, our

president, our secretary, or a majority vote of our board of directors;

• require the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then outstanding shares of

the voting stock, voting together as a single class, to amend the provisions of our amended and restated certificate of
incorporation relating to the issuance of preferred stock and management of our business or our amended and
restated bylaws;

• authorize our board of directors to amend our bylaws by majority vote; and
• establish advance notice procedures with which our stockholders must comply to nominate candidates to our board

of directors or to propose matters to be acted upon at a stockholders’ meeting.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current
management by making it more difficult for our stockholders to replace members of our board of directors, which is
responsible for appointing the members of management. In addition, as a Delaware corporation, we are subject to
Section 203 of the Delaware General Corporation Law. These provisions may prohibit large stockholders, in particular
those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of
time. Additionally, certain provisions contained in the indenture governing our Notes could make it more difficult or
more expensive for a third party to acquire us. The application of Section 203 or certain provisions contained in the
indenture governing our Notes also could have the effect of delaying or preventing a change in control of us. Any of
these provisions could, under certain circumstances, depress the market price of our common stock.

General Risk Factors

Our business is subject to the risks of earthquakes, fire, power outages, floods, health risks, and other catastrophic events, and to
interruption by man-made problems, such as terrorism.

Both our corporate headquarters and the location where our products are manufactured are located in the San
Francisco Bay Area, a region known for seismic activity. In addition, other natural disasters, such as fire or floods, a
significant power outage, telecommunications failure, terrorism, an armed conflict, cyberattacks, epidemics and
pandemics such as COVID-19, or other geo-political unrest could affect our supply chain, manufacturers, logistics
providers, channel partners, end-customers, or the economy as a whole, and such disruption could impact our
shipments and sales. These risks may be further increased if the disaster recovery plans for us and our suppliers prove
to be inadequate. To the extent that any of the above should result in delays or cancellations of customer orders, the
loss of customers, or the delay in the manufacture, deployment, or shipment of our products, our business, financial
condition, and operating results would be adversely affected.

Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new
products and subscriptions could reduce our ability to compete and could harm our business.

- 33 -

We intend to continue to make investments to support our business growth and may require additional funds to
respond to business challenges, including the need to develop new features to enhance our portfolio, improve our
operating infrastructure, or acquire complementary businesses and technologies. Accordingly, we may need to engage
in equity or debt financings to secure additional funds. If we engage in future debt financings, the holders of such
additional debt would have priority over the holders of our common stock. Current and future indebtedness may also
contain terms that, among other things, restrict our ability to incur additional indebtedness. In addition, we may be
required to take other actions that would otherwise be in the interests of the debt holders and would require us to
maintain specified liquidity or other ratios, any of which could harm our business, operating results, and financial
condition. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our
ability to continue to support our business growth and to respond to business challenges could be significantly
impaired, and our business may be adversely affected.

- 34 -

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

Our corporate headquarters is located in Santa Clara, California, where we lease approximately 941,000 square feet of
space under three lease agreements that expire in July 2028, with options to extend the lease terms through July 2046.
We also lease space for personnel around the world, including Israel and India. In addition, we provide our cloud-based
subscription offerings through data centers operated under co-location arrangements in the United States, Europe,
and Asia. Refer to Note 11. Leases in Part II, Item 8 of this Annual Report on Form 10-K for more information on our
operating leases. Additionally, we own 10.4 acres of land adjacent to our headquarters in Santa Clara, California, which
we intend to develop to accommodate future expansion, the speed of which development has been slowed due to the
current environment.

We believe that our current facilities are adequate to meet our current needs. We intend to expand our facilities or add
new facilities as we add employees and enter new geographic markets, and we believe that suitable additional or
alternative space will be available as needed to accommodate ongoing operations and any such growth. However, we
expect to incur additional expenses in connection with such new or expanded facilities.

Item 3. Legal Proceedings

The information set forth under the “Litigation” subheading in Note 12. Commitments and Contingencies in Part II,
Item 8 of this Annual Report on Form 10-K is incorporated herein by reference.

Item 4. Mine Safety Disclosures

Not applicable.

- 35 -

Part II

Item 5. Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases
of Equity Securities

Market Information

Our common stock, $0.0001 par value per share, is traded on the Nasdaq Global Select Market under the symbol
“PANW.” Prior to October 22, 2021, our common stock traded on the New York Stock Exchange (“NYSE”) under the
symbol “PANW.”

Holders of Record

As of August 18, 2023, there were 414 holders of record of our common stock. Because many of our shares of common
stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number
of stockholders represented by these record holders.

Dividend Policy

We have never declared or paid, and do not anticipate declaring or paying in the foreseeable future, any cash dividends
on our capital stock. Any future determination as to the declaration and payment of dividends, if any, will be at the
discretion of our board of directors, subject to applicable laws, and will depend on then existing conditions, including
our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other
factors our board of directors may deem relevant.

Securities Authorized for Issuance under Equity
Compensation Plans

See Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters” of this Annual Report on Form 10-K for more information regarding securities authorized for issuance.

Recent Sales of Unregistered Equity Securities

During the three months ended July 31, 2023, we issued a total of 3,569 shares of our unregistered common stock in
connection with certain of our acquisitions (the “Transactions”).

The Transactions did not involve any underwriters, any underwriting discounts or commissions, or any public offering.
The issuances of the securities pursuant to the Transactions were exempt from registration under the Securities Act
of 1933, as amended (the “Act”) by virtue of Section 4(a)(2) of the Act and Rule 506 of Regulation D promulgated
thereunder.

Purchases of Equity Securities by the Issuer and
Affiliated Purchasers

In February 2019, we announced that our board of directors authorized a $1.0 billion share repurchase program, which is
funded from available working capital. In December 2020, August 2021, and August 2022, we announced additional
$700.0 million, $676.1 million, and $915.0 million increases to this share repurchase program, respectively, bringing the
total authorization to $3.3 billion, with $750.0 million remaining as of July 31, 2023. The expiration date of this repurchase
authorization was extended to December 31, 2023, and our repurchase program may be suspended or discontinued at
any time. Repurchases under our program are to be made at management’s discretion on the open market, through
privately negotiated transactions, transactions structured through investment banking institutions, block purchase
techniques, 10b5-1 trading plans, or a combination of the foregoing. During the three months ended July 31, 2023, we
did not repurchase any shares pursuant to our share repurchase program.

- 36 -

Between June 1, 2023 and June 30, 2023 and July 1, 2023 and July 31, 2023, shares of restricted stock were delivered by
certain employees upon vesting of equity awards to satisfy tax withholding requirements. The average value of shares
delivered to satisfy tax withholding requirements during these periods were $246.53 per share and $243.33 per share,
respectively. The number of shares delivered to satisfy tax withholding requirements during these periods was
not significant.

Stock Price Performance Graph

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), or incorporated by reference into any filing of Palo Alto Networks, Inc. under the
Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in
such filing.

This performance graph compares the cumulative total return on our common stock with that of the Nasdaq 100 Index,
the Standard & Poor’s 500 Index, and the Standard & Poor’s 500 Information Technology Index for the five years ended
July 31, 2023. This performance graph assumes $100 was invested on July 31, 2018, in each of the common stock of Palo
Alto Networks, Inc., the Nasdaq 100 Index, the Standard & Poor’s 500 Index, and the Standard & Poor’s 500 Information
Technology Index, and assumes the reinvestment of any dividends. The stock price performance on this performance
graph is not necessarily indicative of future stock price performance.

Palo Alto Networks, Inc. Comparison of Total Return Performance

Company/Index
Palo Alto Networks, Inc.
Nasdaq 100 Index
S&P 500 Index
S&P 500 Information Technology Index

7/31/2018
100.00 $
100.00 $
100.00 $
100.00 $

$
$
$
$

7/31/2019

7/31/2020

7/31/2021

114.26 $
109.74 $
107.99 $
115.72 $

129.08 $
154.04 $
120.90 $
160.75 $

201.28 $
212.86 $
164.96 $
225.10 $

7/31/2022

7/31/2023
251.74 $ 378.23
185.61 $ 227.88
157.31 $
177.78
212.69 $ 269.79

Item 6. [Reserved]

- 37 -

Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual
Report on Form 10-K. The following discussion and analysis contains forward-looking statements based on current
expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to
differ materially from those anticipated or implied by any forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K,
and in particular, the risks discussed under the caption “Risk Factors” in Part I, Item 1A of this report.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is organized
as follows:

• Overview. A discussion of our business and overall analysis of financial and other highlights in order to provide context

for the remainder of MD&A.

• Key Financial Metrics. A summary of our U.S. GAAP and non-GAAP key financial metrics, which management monitors

to evaluate our performance.

• Results of Operations. A discussion of the nature and trends in our financial results and an analysis of our financial

results comparing fiscal 2023 to fiscal 2022. For discussion and analysis related to our financial results comparing
fiscal 2022 to 2021, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations in our Annual Report on Form 10-K for fiscal 2022, which was filed with the Securities and Exchange
Commission on September 6, 2022.

• Liquidity and Capital Resources. An analysis of changes on our balance sheets and cash flows, and a discussion of our

financial condition and our ability to meet cash needs.

• Critical Accounting Estimates. A discussion of our accounting policies that require critical estimates, assumptions, and

judgments.

Overview

We empower enterprises, organizations, service providers, and government entities to protect themselves against
today’s most sophisticated cyber threats. Our cybersecurity platforms and services help secure enterprise users,
networks, clouds, and endpoints by delivering comprehensive cybersecurity backed by industry-leading artificial
intelligence and automation. We are a leading provider of zero trust solutions, starting with next-generation zero trust
network access to secure today’s remote hybrid workforces and extending to securing all users, applications, and
infrastructure with zero trust principles. Our security solutions are designed to reduce customers’ total cost of
ownership by improving operational efficiency and eliminating the need for siloed point products. Our company
focuses on delivering value in four fundamental areas:

Network Security:

• Our network security platform, designed to deliver complete zero trust solutions to our customers, includes our

Cloud Security:

- 38 -

Security Operations:

Threat Intelligence and Security Consulting (Unit 42):

For fiscal 2023 and 2022, total revenue was $6.9 billion and $5.5 billion, respectively, representing year-over-year growth
of 25.3%. 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 July 31, 2023, 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.

Our product revenue grew to $1.6 billion or 22.9% of total revenue for fiscal 2023, representing year-over-year growth of
15.8%. Product revenue is derived from sales of our appliances, primarily our ML-Powered Next-Generation Firewall.
Product revenue also includes revenue derived from software licenses of Panorama, SD-WAN, and the VM-Series. 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 appliances 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-410, which is designed for small organizations and
remote or branch offices, to our top-of-the-line PA-7080, which is designed for large-scale data centers and service
provider use. The same firewall functionality that is delivered in our physical appliances 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.

Our subscription and support revenue grew to $5.3 billion or 77.1% of total revenue for fiscal 2023, representing year-
over-year growth of 28.4%. Our subscriptions provide our end-customers with near real-time access to the latest
antivirus, intrusion prevention, web filtering, modern malware prevention, data loss prevention, and cloud access
security broker capabilities across the network, endpoints, and the cloud. When end-customers purchase our physical,
virtual, or container firewall appliances, 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
appliances, end-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.

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 new features and products are essential to meeting the needs of our end-
customers and improving our competitive position. During fiscal 2023, we introduced several new offerings, including:
Cortex XSIAM 1.0, major updates to Prisma Cloud (including three new security modules), Prisma Access 4.0, PAN-
OS 11.0, Cloud NGFW for AWS, and Cloud NGFW for Azure. Additionally, we acquired productive investments that fit well
within our long-term strategy. For example, in December 2022, we acquired Cider, which we expect will support our
Prisma Cloud’s platform approach to securing the entire application security lifecycle from code to cloud.

We believe that the growth of our business and our short-term and long-term success are dependent upon many
factors, including our ability to extend our technology leadership, grow our base of end-customers, expand deployment
of our portfolio and support offerings within existing end-customers, and focus on end-customer satisfaction. To
manage any future growth effectively, we must continue to improve and expand our information technology and
financial infrastructure, our operating and administrative systems and controls, and our ability to manage headcount,
capital, and processes in an efficient manner. While these areas present significant opportunities for us, they also pose
challenges and risks that we must successfully address in order to sustain the growth of our business and improve our
operating results. For additional information regarding the challenges and risks we face, see the “Risk Factors” section
in Part I, Item 1A of this Annual Report on Form 10-K.

- 39 -

Impact of Macroeconomic Developments and Other Factors on
Our Business

Our overall performance depends in part on worldwide economic and geopolitical conditions and their impact on
customer behavior. Worsening economic conditions, including inflation, higher interest rates, slower growth,
fluctuations in foreign exchange rates, and other conditions, may adversely affect our results of operations and financial
performance.

We continue to experience supply chain disruption and incur increased costs resulting from inflationary pressures. We
are monitoring the tensions between China and Taiwan, and between the U.S. and China, which could have an adverse
impact on our business or results of operations in future periods.

Key Financial Metrics

We monitor the key financial metrics set forth in the tables below to help us evaluate growth trends, establish budgets,
measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. We discuss revenue,
gross margin, and the components of operating income (loss) and margin below under “Results of Operations.”

Total deferred revenue
Cash, cash equivalents, and investments

Total revenue
Total revenue year-over-year percentage increase
Gross margin
Operating income (loss)
Operating margin
Billings
Billings year-over-year percentage increase
Cash flow provided by operating activities
Free cash flow (non-GAAP)

July 31,

2023
(in millions)

9,296.4 $
5,437.9 $

2022

6,994.0
4,686.4

Year Ended July 31,

2023

2022

2021

$ 6,892.7

(dollars in millions)
$ 5,501.5

$ 4,256.1

25.3%
72.3%
387.3

5.6%

29.3%
68.8%
(188.8) $
(3.4) %

24.9%
70.0%
(304.1)
(7.1) %

$ 9,194.4

$ 7,471.5

$ 5,452.2

23.1%

37.0%

26.7%

$ 2,777.5

$ 2,631.2

$
$

1,984.7

1,791.9

$
$

1,503.0

1,387.0

• Deferred Revenue. Our deferred revenue primarily consists of amounts that have been invoiced but have not been
recognized as revenue as of the period end. The majority of our deferred revenue balance consists of subscription
and support revenue that is recognized ratably over the contractual service period. We monitor our deferred revenue
balance because it represents a significant portion of revenue to be recognized in future periods.

• Billings. We define billings as total revenue plus the change in total deferred revenue, net of acquired deferred

revenue, during the period. We consider billings to be a key metric used by management to manage our business.
We believe billings provides investors with an important indicator of the health and visibility of our business because
it includes subscription and support revenue, which is recognized ratably over the contractual service period, and
product revenue, which is recognized at the time of hardware shipment or delivery of software license, provided that
all other conditions for revenue recognition have been met. We consider billings to be a useful metric for
management and investors, particularly if we continue to experience increased sales of subscriptions and strong
renewal rates for subscription and support offerings, and as we monitor our near-term cash flows. While we believe
that billings provides useful information to investors and others in understanding and evaluating our operating
results in the same manner as our management, it is important to note that other companies, including companies
in our industry, may not use billings, may calculate billings differently, may have different billing frequencies, or may
use other financial measures to evaluate their performance, all of which could reduce the usefulness of billings as a
comparative measure. We calculate billings in the following manner:

- 40 -

Year Ended July 31,

2023

2022
(in millions)

2021

Billings:

Total revenue
Add: change in total deferred revenue, net of acquired deferred revenue
Billings

6,892.7 $
2,301.7
9,194.4 $

5,501.5 $
1,970.0
7,471.5 $

4,256.1
1,196.1
5,452.2

• Cash Flow Provided by Operating Activities. We monitor cash flow provided by operating activities as a measure of our
overall business performance. Our cash flow provided by operating activities is driven in large part by sales of our
products and from up-front payments for subscription and support offerings. Monitoring cash flow provided by
operating activities enables us to analyze our financial performance without the non-cash effects of certain items
such as share-based compensation costs, depreciation and amortization, thereby allowing us to better understand
and manage the cash needs of our business.

• 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:

Free cash flow (non-GAAP):

Net cash provided by operating activities
Less: purchases of property, equipment, and other assets
Free cash flow (non-GAAP)
Net cash used in investing activities
Net cash used in financing activities

Year Ended July 31,

2023

2022
(in millions)

2021

2,777.5 $
146.3
2,631.2 $
(2,033.8) $
(1,726.3) $

1,984.7 $
192.8
1,791.9 $
(933.4) $
(806.6) $

1,503.0
116.0
1,387.0
(1,480.6)
(1,104.0)

- 41 -

Results of Operations

The following table summarizes our results of operations for the periods presented and as a percentage of our total
revenue for those periods based on our consolidated statements of operations data. The period-to-period comparison
of results is not necessarily indicative of results for future periods.

Revenue:

Product
Subscription and support

Total revenue
Cost of revenue:
Product
Subscription and support

Total cost of revenue(1)
Total gross profit
Operating expenses:

Research and development
Sales and marketing
General and administrative

Total operating expenses(1)
Operating income (loss)
Interest expense
Other income, net
Income (loss) before income taxes
Provision for income taxes
Net income (loss)

(1) Includes share-based compensation as follows:

Cost of product revenue
Cost of subscription and support revenue
Research and development
Sales and marketing
General and administrative

Total share-based compensation

2023

Year Ended July 31,
2022

2021

Amount

% of

Revenue Amount

% of

Revenue Amount

% of
Revenue

(dollars in millions)

$ 1,578.4
5,314.3
6,892.7

22.9% $ 1,363.1
77.1% 4,138.4
100.0% 5,501.5

24.8% $ 1,120.3
75.2% 3,135.8
100.0% 4,256.1

26.3%
73.7%
100.0%

418.3
1,491.4
1,909.7
4,983.0

1,604.0
2,544.0
447.7
4,595.7
387.3
(27.2)
206.2
566.3
126.6
$ 439.7

455.5
6.1%
1,263.2
21.6%
27.7%
1,718.7
72.3% 3,782.8

308.5
8.3%
966.4
22.9%
31.2%
1,274.9
68.8% 2,981.2

1,417.7
23.3%
36.9% 2,148.9
6.5%
405.0
66.7% 3,971.6
(188.8)
5.6%
(27.4)
(0.4) %
9.0
3.0%
(207.2)
8.2%
1.8%
59.8
6.4% $ (267.0)

1,140.4
25.8%
1,753.8
39.0%
7.4%
391.1
72.2% 3,285.3
(304.1)
(3.4) %
(163.3)
(0.5) %
2.4
0.1%
(465.0)
(3.8) %
1.1%
33.9
(4.9) % $ (498.9)

Year Ended July 31,

2023

2022
(in millions)

9.8 $
123.4
488.4
335.3
130.4
1,087.3 $

9.3 $
110.2
471.1
304.7
118.1
1,013.4 $

7.2%
22.8%
30.0%
70.0%

26.8%
41.1%
9.2%
77.1%
(7.1) %
(3.8) %
—%
(10.9) %
0.8%
(11.7) %

2021

6.2
93.0
428.9
269.9
128.9
926.9

- 42 -

REVENUE

Our revenue consists of product revenue and subscription and support revenue. Revenue is recognized upon transfer
of control of the corresponding promised products and subscriptions and support to our customers in an amount that
reflects the consideration we expect to be entitled to in exchange for those products and subscriptions and support.
We expect our revenue to vary from quarter to quarter based on seasonal and cyclical factors.

PRODUCT REVENUE

Product revenue is derived from sales of our appliances, primarily our ML-Powered Next-Generation Firewall. Product
revenue also includes revenue derived from software licenses of Panorama, SD-WAN, and the VM-Series. Our
appliances and software licenses include a broad set of built-in networking and security features and functionalities.
We recognize product revenue at the time of hardware shipment or delivery of software license.

Year Ended July 31,
2022

2023

Change

Year Ended July 31,
2021

2022

Change

Amount Amount Amount

% Amount Amount Amount

(dollars in millions)

Product

$ 1,578.4 $ 1,363.1 $ 215.3

15.8% $ 1,363.1 $ 1,120.3 $ 242.8

21.7%

Product revenue increased for fiscal 2023 compared to fiscal 2022 driven by increased demand for our new generation
of hardware products, increased software revenue primarily due to a new go-to-market strategy for certain Network
Security offerings and an increased demand for our VM-Series virtual firewalls, partially offset by decreased revenue
from our prior generation of hardware products.

SUBSCRIPTION AND SUPPORT REVENUE

Subscription and support revenue is derived primarily from sales of our subscription and support offerings. Our
subscription and support contracts are typically one to five years. We recognize revenue from subscriptions and
support over time as the services are performed. As a percentage of total revenue, we expect our subscription and
support revenue to vary from quarter to quarter and increase over the long term as we introduce new subscriptions,
renew existing subscription and support contracts, and expand our installed end-customer base.

Year Ended July 31,
2022

2023

Change

Year Ended July 31,
2021

2022

Change

Amount Amount Amount

% Amount Amount Amount

(dollars in millions)

Subscription
Support

$ 3,335.4 $ 2,539.0 $ 796.4
379.5
1,978.9 1,599.4
Total subscription and support $ 5,314.3 $ 4,138.4 $ 1,175.9

31.4% $ 2,539.0 $ 1,898.8 $ 640.2
23.7% 1,599.4 1,237.0
362.4
28.4% $ 4,138.4 $ 3,135.8 $ 1,002.6

33.7%
29.3%
32.0%

Subscription and support revenue increased for fiscal 2023 compared to fiscal 2022 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.

- 43 -

REVENUE BY GEOGRAPHIC THEATER

Year Ended July 31,
2022

2023

Change

Year Ended July 31,
2021

2022

Change

Amount Amount Amount

% Amount Amount Amount

(dollars in millions)

$ 4,719.9 $ 3,802.6 $ 917.3
303.8
1,359.6 1,055.8
170.1
643.1
$ 6,892.7 $ 5,501.5 $ 1,391.2

813.2

24.1% $ 3,802.6 $ 2,937.5 $ 865.1
238.5
28.8% 1,055.8
26.5%
141.8
643.1
25.3% $ 5,501.5 $ 4,256.1 $ 1,245.4

817.3
501.3

29.5%
29.2%
28.3%
29.3%

Americas
EMEA
APAC

Total revenue

Revenue from the Americas, Europe, the Middle East, and Africa (“EMEA”) and Asia Pacific and Japan (“APAC”) increased
year-over-year for fiscal 2023 as we continued to increase investment in our global sales force in order to support our
growth and innovation. Our three geographic theaters had similar year-over-year revenue growth rates for fiscal 2023,
with the Americas contributing the highest increase in revenue due to its larger scale.

COST OF REVENUE

Our cost of revenue consists of cost of product revenue and cost of subscription and support revenue.

COST OF PRODUCT REVENUE

Cost of product revenue primarily includes costs paid to our manufacturing partners for procuring components and
manufacturing our products. Our cost of product revenue also includes personnel costs, which consist of salaries,
benefits, bonuses, share-based compensation, and travel associated with our operations organization, amortization of
intellectual property licenses, product testing costs, shipping and tariff costs, and shared costs. Shared costs consist of
certain facilities, depreciation, benefits, recruiting, and information technology costs that we allocate based on
headcount. We expect our cost of product revenue to fluctuate with our revenue from hardware products.

Year Ended July 31,
2022

2023

Change

Year Ended July 31,
2021

2022

Change

Amount Amount Amount

% Amount Amount Amount

(dollars in millions)

Cost of product revenue

$ 418.3 $ 455.5 $

(37.2)

(8.2) % $ 455.5 $ 308.5 $

147.0

47.6%

Cost of product revenue decreased for fiscal 2023 compared to fiscal 2022 due to a favorable hardware product mix.

COST OF SUBSCRIPTION AND SUPPORT REVENUE

Cost of subscription and support revenue includes personnel costs for our global customer support and technical
operations organizations, customer support and repair costs, third-party professional services costs, data center and
cloud hosting service costs, amortization of acquired intangible assets and capitalized software development costs, and
shared costs. We expect our cost of subscription and support revenue to increase as our installed end-customer base
grows and adoption of our cloud-based subscription offerings increases.

Year Ended July 31,
2022

2023

Change

Year Ended July 31,
2021

2022

Change

Amount Amount Amount

% Amount Amount Amount

(dollars in millions)

Cost of subscription and support
revenue

$ 1,491.4 $ 1,263.2 $ 228.2

18.1 % $ 1,263.2 $ 966.4 $ 296.8

30.7%

Cost of subscription and support revenue increased for fiscal 2023 compared to fiscal 2022 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 $101.0 million for fiscal 2023 compared to fiscal 2022. Personnel costs grew
$97.0 million for fiscal 2023 compared to fiscal 2022 primarily due to headcount growth.

- 44 -

GROSS MARGIN

Gross margin has been and will continue to be affected by a variety of factors, including the introduction of new
products, manufacturing costs, the average sales price of our products, cloud hosting service costs, personnel costs, the
mix of products sold, and the mix of revenue between product and subscription and support offerings. Our virtual and
higher-end firewall products generally have higher gross margins than our lower-end firewall products within each
product series. We expect our gross margins to vary over time depending on the factors described above.

2023

Amount

Gross
Margin

Year Ended July 31,
2022

Gross
Margin

Amount
(dollars in millions)

2021

Amount

Product
Subscription and support

Total gross profit

1,160.1
3,822.9
$ 4,983.0

73.5% $
71.9%
72.3% $

907.6
2,875.2
3,782.8

66.6% $
69.5%
68.8% $

811.8
2,169.4
2,981.2

Gross
Margin

72.5%
69.2%
70.0%

Product gross margin increased for fiscal 2023 compared to fiscal 2022 primarily due to increased software revenue and
a favorable hardware product mix.

Subscription and support gross margin increased for fiscal 2023 compared to fiscal 2022, primarily due to our growth in
subscription and support revenue, which outpaced the subscription and support costs.

OPERATING EXPENSES

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 decrease over the long term as a percentage of
revenue as we continue to scale our business. As of July 31, 2023, we expect to recognize approximately $2.0 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.

RESEARCH AND DEVELOPMENT

Research and development expense consists primarily of personnel costs. Research and development expense also
includes prototype-related expenses and shared costs. We expect research and development expense to increase in
absolute dollars as we continue to invest in our future products and services, although our research and development
expense may fluctuate as a percentage of total revenue.

Year Ended July 31,
2022

2023

Change

Year Ended July 31,
2021

2022

Change

Amount Amount Amount

% Amount Amount Amount

(dollars in millions)

Research and development

$ 1,604.0 $ 1,417.7 $

186.3

13.1 % $ 1,417.7 $ 1,140.4 $ 277.3

24.3%

Research and development expense increased for fiscal 2023 compared to fiscal 2022 primarily due to increased
personnel costs, which grew $154.2 million, largely due to headcount growth.

- 45 -

SALES AND MARKETING

Sales and marketing expense consists primarily of personnel costs, including commission expense. Sales and
marketing expense also includes costs for market development programs, promotional and other marketing costs,
professional services, and shared costs. We continue to strategically invest in headcount and have grown our sales
presence. We expect sales and marketing expense to continue to increase in absolute dollars as we increase the size of
our sales and marketing organizations to grow our customer base, increase touch points with end-customers,
and expand our global presence, although our sales and marketing expense may fluctuate as a percentage of
total revenue.

Year Ended July 31,
2022

2023

Change

Year Ended July 31,
2021

2022

Change

Amount Amount Amount

% Amount Amount Amount

(dollars in millions)

Sales and marketing

$ 2,544.0 $ 2,148.9 $ 395.1

18.4% $ 2,148.9 $ 1,753.8 $ 395.1

22.5%

Sales and marketing expense increased for fiscal 2023 compared to fiscal 2022 primarily due to increased personnel
costs, which grew $290.7 million, largely due to headcount growth and increased travel and entertainment expenses.
The increase in sales and marketing expense was further driven by increased costs associated with sales and marketing
events and go-to-market initiatives.

GENERAL AND ADMINISTRATIVE

General and administrative expense consists primarily of personnel costs and shared costs for our executive, finance,
human resources, information technology, and legal organizations, and professional services costs, which consist
primarily of legal, auditing, accounting, and other consulting costs. We expect general and administrative expense to
increase in absolute dollars over time as we increase the size of our general and administrative organizations and incur
additional costs to support our business growth, although our general and administrative expense may fluctuate as a
percentage of total revenue.

Year Ended July 31,
2022

2023

Change

Year Ended July 31,
2021

2022

Change

Amount Amount Amount

% Amount Amount Amount

(dollars in millions)

General and administrative

$ 447.7 $ 405.0 $

42.7

10.5% $ 405.0 $ 391.1 $

13.9

3.6%

General and administrative expenses increased for fiscal 2023 compared to fiscal 2022 primarily due to increased
personnel costs, which grew $23.2 million, largely due to share-based compensation related to our recent acquisitions
and headcount growth. The increase in general and administrative expense was further driven by slightly higher
reserves due to increased receivables as a result of our business growth.

INTEREST EXPENSE

Interest expense primarily consists of interest expense related to our 0.75% Convertible Senior Notes due 2023 (the
“2023 Notes”) and the 0.375% Convertible Senior Notes due 2025 (the “2025 Notes,” and together with “2023 Notes,” the
“Notes”).

Year Ended July 31,
2022

2023

Change

Year Ended July 31,
2021

2022

Change

Amount Amount Amount

% Amount Amount Amount

(dollars in millions)

Interest expense

(0.7) % $
Interest expense remained relatively flat for fiscal 2023 compared to fiscal 2022.

27.4 $

27.2 $

(0.2)

27.4 $

163.3 $ (135.9)

(83.2) %

- 46 -

OTHER INCOME, NET

Other income, net includes interest income earned on our cash, cash equivalents, and investments, and gains and
losses from foreign currency remeasurement and foreign currency transactions.

Year Ended July 31,
2022

2023

Change

Year Ended July 31,
2021

2022

Change

Amount Amount Amount

% Amount Amount Amount

(dollars in millions)

Other income, net

$ 206.2 $

9.0 $

197.2 2,191.1% $

9.0 $

2.4 $

6.6 275.0%

Other income, net increased for fiscal 2023 compared to fiscal 2022 primarily due to higher interest income as a result
of higher interest rates and higher average cash, cash equivalent, and investments balances for fiscal 2023 compared to
fiscal 2022.

PROVISION FOR INCOME TAXES

Provision for income taxes consists primarily of U.S. taxes driven by capitalization of research and development
expenditures, foreign income taxes, and withholding taxes. We maintain a full valuation allowance for domestic and
certain foreign deferred tax assets, including net operating loss carryforwards and certain domestic tax credits. Our
valuation allowance has caused, and may continue to cause, disproportionate relationships between our overall
effective tax rate and other jurisdictional measures. We regularly evaluate the need for a valuation allowance. Due
to recent profitability, a reversal of our valuation allowance in certain jurisdictions in the foreseeable future is
reasonably possible.

Year Ended July 31,
2022

2023

Change

Year Ended July 31,
2021

2022

Change

Amount Amount Amount

% Amount Amount Amount

Provision for income taxes
Effective tax rate

$ 126.6

$ 59.8

$ 66.8

22.4%

(28.9) %

(dollars in millions)
111.7% $ 59.8

$ 33.9

25.9

76.4%

(28.9) %

(7.3) %

Our provision for income taxes for fiscal 2023 was primarily due to U.S. federal and state income taxes, withholding
taxes, and foreign income taxes. Our effective tax rate varied for fiscal 2023 compared to fiscal 2022, primarily due to our
profitability in fiscal 2023 and an increase in U.S. taxes driven by capitalization of research and development
expenditures with no offsetting deferred benefit due to our valuation allowance. This increase was offset by releases of
uncertain tax positions during fiscal 2023 resulting from tax settlements. Refer to Note 15. Income Taxes in Part II, Item 8
of this Annual Report on Form 10-K for more information.

Liquidity and Capital Resources

Working capital(1)
Cash, cash equivalents, and investments:

Cash and cash equivalents
Investments

Total cash, cash equivalents, and investments

July 31,

2023
(in millions)

2022

(1,689.5) $

(1,891.4)

1,135.3 $
4,302.6
5,437.9 $

2,118.5
2,567.9
4,686.4

(1) Current liabilities included net carrying amounts of convertible senior notes of $2.0 billion and $3.7 billion as of July 31, 2023 and

2022, respectively. Refer to Note 10. Debt in Part II, Item 8 of this Annual Report on Form 10-K for information on the Notes.

As of July 31, 2023, our total cash, cash equivalents, and investments of $5.4 billion were held for general corporate
purposes. As of July 31, 2023, 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 expected to be material.

- 47 -

DEBT

In July 2018, we issued the 2023 Notes with an aggregate principal amount of $1.7 billion. The 2023 Notes were
converted prior to or settled on the maturity date of July 1, 2023. During fiscal 2023, we repaid in cash $1.7 billion in
aggregate principal amount of the 2023 Notes and issued 11.4 million shares of common stock to the holders for the
conversion value in excess of the principal amount of the 2023 Notes converted, which were fully offset by shares we
received from our exercise of the associated note hedges. In June 2020, we issued the 2025 Notes with an aggregate
principal amount of $2.0 billion. The 2025 Notes mature on June 1, 2025; however, under certain circumstances, holders
may surrender their 2025 Notes for conversion prior to the applicable maturity date. Upon conversion of the 2025 Notes,
we will pay cash equal to the aggregate principal amount of the 2025 Notes to be converted, and, at our election, will
pay or deliver cash and/or shares of our common stock for the amount of our conversion obligation in excess of the
aggregate principal amount of the 2025 Notes being converted. The sale price condition for the 2025 Notes was met
during the fiscal quarter ended July 31, 2023, and as a result, holders may convert their 2025 Notes during the fiscal
quarter ending October 31, 2023. If all of the holders convert their 2025 Notes during this period, we would be obligated
to settle the $2.0 billion principal amount of the 2025 Notes in cash. We believe that our cash provided by operating
activities, our existing cash, cash equivalents and investments, and existing sources of and access to financing will be
sufficient to meet our anticipated cash needs should the holders choose to convert their 2025 Notes during the fiscal
quarter ending October 31, 2023 or hold the 2025 Notes until maturity on June 1, 2025. As of July 31, 2023, substantially all
of our 2025 Notes remained outstanding. Refer to Note 10. Debt in Part II, Item 8 of this Annual Report on Form 10-K for
more information on the Notes.

In April 2023, we entered into a new credit agreement (the “2023 Credit Agreement”) that provides for a $400.0 million
unsecured revolving credit facility (the “2023 Credit Facility”), with an option to increase the amount of the 2023 Credit
Facility by up to an additional $350.0 million, subject to certain conditions. The interest rates and commitment fees are
also subject to upward and downward adjustments based on our progress towards the achievement of certain
sustainability goals related to greenhouse gas emissions. As of July 31, 2023, there were no amounts outstanding, and
we were in compliance with all covenants under the 2023 Credit Agreement. Refer to Note 10. Debt in Part II, Item 8 of
this Annual Report on Form 10-K for more information on the Credit Agreement.

CAPITAL RETURN

In February 2019, our board of directors authorized a $1.0 billion share repurchase program. In December 2020, August
2021, and August 2022, our board of directors authorized additional $700.0 million, $676.1 million, and $915.0 million
increases to this share repurchase program, respectively, bringing the total authorization under this share repurchase
program to $3.3 billion. Repurchases will be funded from available working capital and may be made at management’s
discretion from time to time. The expiration date of this repurchase authorization was extended to December 31, 2023,
and our repurchase program may be suspended or discontinued at any time. As of July 31, 2023, $750.0 million
remained available for future share repurchases under this repurchase program. Refer to Note 13. Stockholders’ Equity
in Part II, Item 8 of this Annual Report on Form 10-K for information on these repurchase programs.

LEASES AND OTHER MATERIAL CASH REQUIREMENTS

We have entered into various non-cancelable operating leases primarily for our facilities with original lease periods
expiring through the year ending July 31, 2033, with the most significant leases relating to our corporate headquarters
in Santa Clara, California. As of July 31, 2023, we have total operating lease obligations of $339.4 million recorded on our
consolidated balance sheet.

As of July 31, 2023, our commitments to purchase products, components, cloud and other services totaled $1.8 billion.
Refer to Note 12. Commitments and Contingencies in Part II, Item 8 of this Annual Report on Form 10-K for more
information on these commitments.

CASH FLOWS

The following table summarizes our cash flows for the years ended July 31, 2023, 2022, and 2021:

Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Net increase (decrease) in cash, cash equivalents, and restricted cash

- 48 -

Year Ended July 31,

2023

2022
(in millions)

2021

2,777.5 $
(2,033.8)
(1,726.3)
(982.6) $

1,984.7 $
(933.4)
(806.6)
244.7 $

1,503.0
(1,480.6)
(1,104.0)
(1,081.6)

CASH FLOWS

The following table summarizes our cash flows for the years ended July 31, 2023, 2022, and 2021:

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities
Net increase (decrease) in cash, cash equivalents, and restricted cash

Year Ended July 31,

2023

2022

(in millions)

2021

2,777.5 $

(2,033.8)
(1,726.3)
(982.6) $

1,984.7 $

(933.4)
(806.6)
244.7 $

1,503.0

(1,480.6)

(1,104.0)
(1,081.6)

Cash from operations could be affected by various risks and uncertainties detailed in Part I, Item 1A “Risk Factors” in this
Form 10-K. We believe that our cash flow from operations with existing cash and cash equivalents will be sufficient to
meet our anticipated cash needs for at least the next 12 months and thereafter for the foreseeable future. Our future
capital requirements will depend on many factors including our growth rate, the timing and extent of spending to
support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced
products and subscription and support offerings, the costs to acquire or invest in complementary businesses and
technologies, the costs to ensure access to adequate manufacturing capacity, the investments in our infrastructure to
support the adoption of our cloud-based subscription offerings, the repayment obligations associated with our Notes,
the continuing market acceptance of our products and subscription and support offerings and macroeconomic events.
In addition, from time to time, we may incur additional tax liability in connection with certain corporate structuring
decisions.

We may also choose to seek additional equity or debt financing. In the event that additional financing is required from
outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional
capital when desired, our business, operating results, and financial condition may be adversely affected.

OPERATING ACTIVITIES

Our operating activities have consisted of net income (losses) adjusted for certain non-cash items and changes in
assets and liabilities. Our largest source of cash provided by our operations is receipts from our billings.

Cash provided by operating activities during fiscal 2023 was $2.8 billion, an increase of $792.8 million compared to fiscal
2022. The increase was primarily due to growth of our business as reflected by increases in collections during fiscal 2023,
partially offset by higher cash expenditure to support our business growth.

INVESTING ACTIVITIES

Our investing activities have consisted of capital expenditures, net investment purchases, sales, and maturities, and
business acquisitions. We expect to continue such activities as our business grows.

Cash used in investing activities during fiscal 2023 was $2.0 billion, an increase of $1.1 billion compared to fiscal 2022. The
increase was primarily due to an increase in purchases of investments and an increase in net cash payments for
business acquisitions, partially offset by an increase in proceeds from sales and maturities of investments during
fiscal 2023.

FINANCING ACTIVITIES

Our financing activities have consisted of cash used to repurchase shares of our common stock, proceeds from sales of
shares through employee equity incentive plans, and payments for tax withholding obligations of certain employees
related to the net share settlement of equity awards.

Cash used in financing activities during fiscal 2023 was $1.7 billion, an increase of $919.7 million compared to fiscal 2022.
The increase was primarily due to repayments of our 2023 Notes upon maturity, partially offset by a decrease in
repurchases of our common stock during fiscal 2023.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these
consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and
on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates
and assumptions on an ongoing basis. Actual results could differ materially from those estimates due to risks and
uncertainties, including uncertainty in the current economic environment. To the extent that there are material
differences between these estimates and our actual results, our future consolidated financial statements will
be affected.

- 49 -

We believe that of our significant accounting policies described in Note 1. Description of Business and Summary of
Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K, the critical accounting estimates,
assumptions, and judgments that have the most significant impact on our consolidated financial statements are
described below.

- 49 -

- 50 -

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these

consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts

of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and

on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates

and assumptions on an ongoing basis. Actual results could differ materially from those estimates due to risks and

uncertainties, including uncertainty in the current economic environment. To the extent that there are material

differences between these estimates and our actual results, our future consolidated financial statements will

be affected.

We believe that of our significant accounting policies described in Note 1. Description of Business and Summary of

Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K, the critical accounting estimates,

assumptions, and judgments that have the most significant impact on our consolidated financial statements are
described below.

REVENUE RECOGNITION

The majority of our contracts with our customers include various combinations of our products and subscriptions and
support. Our appliances and software licenses have significant standalone functionalities and capabilities. Accordingly,
these appliances and software licenses are distinct from our subscriptions and support services as the customer can
benefit from the product without these services and such services are separately identifiable within the contract. We
account for multiple agreements with a single customer as a single contract if the contractual terms and/or substance
of those agreements indicate that they may be so closely related that they are, in effect, parts of a single contract. The
amount of consideration we expect to receive in exchange for delivering on the contract is allocated to each
performance obligation based on its relative standalone selling price.

We establish standalone selling price using the prices charged for a deliverable when sold separately. If the standalone
selling price is not observable through past transactions, we estimate the standalone selling price based on our pricing
model and our go-to-market strategy, which include factors such as type of sales channel (channel partner or end-
customer), the geographies in which our offerings were sold (domestic or international), and offering type (products,
subscriptions, or support). As our business offerings evolve over time, we may be required to modify our estimated
standalone selling prices, and as a result the timing and classification of our revenue could be affected.

INCOME TAXES

We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have been recognized in our consolidated
financial statements or tax returns. In addition, deferred tax assets are recorded for all future benefits including, but not
limited to, net operating losses, research and development credit carryforwards, and basis differences relating to our
global intangible low-taxed income. Valuation allowances are provided when necessary to reduce deferred tax assets to
the amount more likely than not to be realized.

Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In
assessing the need for a valuation allowance, we consider all available evidence, including past operating results,
estimates of future taxable income, and the feasibility of tax planning strategies. In the event that we change our
determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with
a corresponding impact to the provision for income taxes in the period in which such determination is made.

We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax
position for recognition by determining if the weight of available evidence indicates that it is more likely than not that
the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second
step requires us to estimate and measure the tax benefit as the largest amount that is more likely than not to be
realized upon ultimate settlement.

Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income
taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these
matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust
these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an
estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such
differences may impact the provision for income taxes in the period in which such determination is made.

MANUFACTURING PARTNER AND SUPPLIER LIABILITIES

We outsource most of our manufacturing, repair, and supply chain management operations to our EMS provider,
which procures components and assembles our products based on our demand forecasts. These forecasts of future
demand are based upon historical trends and analysis from our sales and product management functions as adjusted
for overall market conditions. We accrue costs for manufacturing purchase commitments in excess of our forecasted
demand, including costs for excess components or for carrying costs incurred by our manufacturing partners and
component suppliers. Actual component usage and product demand may be materially different from our forecast and
could be caused by factors outside of our control, which could have an adverse impact on our results of operations.
Through July 31, 2023, we have not accrued significant costs associated with this exposure.

- 50 -

LOSS CONTINGENCIES

We are subject to the possibility of various loss contingencies arising in the ordinary course of business. We accrue for
loss contingencies when it is probable that an asset has been impaired or a liability has been incurred and the amount
of loss can be reasonably estimated. If we determine that a loss is reasonably possible, then we disclose the possible loss
or range of the possible loss or state that such an estimate cannot be made. We regularly evaluate current information
available to us to determine whether an accrual is required, an accrual should be adjusted, or a range of possible loss
should be disclosed.

the need to adjust our liability and record additional expenses. Refer to the “Litigation” subheading in Note 12.

Commitments and Contingencies in Part II, Item 8 of this Annual Report on Form 10-K for more information regarding

our litigation.

MANUFACTURING PARTNER AND SUPPLIER LIABILITIES

We outsource most of our manufacturing, repair, and supply chain management operations to our EMS provider,

which procures components and assembles our products based on our demand forecasts. These forecasts of future

demand are based upon historical trends and analysis from our sales and product management functions as adjusted

for overall market conditions. We accrue costs for manufacturing purchase commitments in excess of our forecasted

demand, including costs for excess components or for carrying costs incurred by our manufacturing partners and

component suppliers. Actual component usage and product demand may be materially different from our forecast and

could be caused by factors outside of our control, which could have an adverse impact on our results of operations.

Through July 31, 2023, we have not accrued significant costs associated with this exposure.

LOSS CONTINGENCIES

We are subject to the possibility of various loss contingencies arising in the ordinary course of business. We accrue for

loss contingencies when it is probable that an asset has been impaired or a liability has been incurred and the amount

of loss can be reasonably estimated. If we determine that a loss is reasonably possible, then we disclose the possible loss

or range of the possible loss or state that such an estimate cannot be made. We regularly evaluate current information
available to us to determine whether an accrual is required, an accrual should be adjusted, or a range of possible loss
should be disclosed.

From time to time, we are involved in disputes, litigation, and other legal actions. However, there are many
uncertainties associated with any litigation, and these actions or other third-party claims against us may cause us to
incur substantial settlement charges, which are inherently difficult to estimate and could adversely affect our results of
operations. The actual liability in any such matters may be materially different from our estimates, which could result in
the need to adjust our liability and record additional expenses. Refer to the “Litigation” subheading in Note 12.
Commitments and Contingencies in Part II, Item 8 of this Annual Report on Form 10-K for more information regarding
our litigation.

Item 7A. Quantitative and Qualitative Disclosures
About Market Risk

Foreign Currency Exchange Risk

Our sales contracts are denominated in U.S. dollars. A portion of our operating expenditures are incurred outside of the
United States and are denominated in foreign currencies and are subject to fluctuations due to changes in foreign
currency exchange rates. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize
transaction gains and losses in our statement of operations. The effect of an immediate 10% adverse change in foreign
exchange rates on monetary assets and liabilities at July 31, 2023 would not be material to our financial condition or
results of operations. As of July 31, 2023, foreign currency transaction gains and losses and exchange rate fluctuations
have not been material to our consolidated financial statements. We enter into foreign currency derivative contracts
with maturities of 24 months or less, which we designate as cash flow hedges, to manage the foreign currency
exchange risk associated with our foreign currency denominated operating expenditures. The effectiveness of our
existing hedging transactions and the availability and effectiveness of any hedging transactions we may decide to
enter into in the future may be limited, and we may not be able to successfully hedge our exposure, which could
adversely affect our financial condition and operating results. Refer to Note 6. Derivative Instruments in Part II, Item 8 of
this Annual Report on Form 10-K for more information.

As our international operations grow, our risks associated with fluctuations in foreign currency exchange rates will
become greater, and we will continue to reassess our approach to managing this risk. In addition, a weakening U.S.
dollar can increase the costs of our international expansion and a strengthening U.S. dollar can increase the real cost of
our products and services to our end-customers outside of the United States, leading to delays in the purchase of our
products and services. For additional information, see the risk factor entitled “W e a re e xp o s e d t o flu c t u a t io n s in fo re ig n
c u rre n c y e xc h a n g e ra t e s , w h ic h c o u ld n e g a t ive ly a ffe c t o u r fin a n c ia l c o n d it io n a n d o p e ra t in g re s u lt s .” in Part 1,
Item 1A of this Annual Report on Form 10-K.

Interest Rate Risk

The primary objectives of our investment activities are to preserve principal, provide liquidity, and maximize income
without significantly increasing risk. Most of the securities we invest in are subject to interest rate risk. To minimize this
risk, we maintain a diversified portfolio of cash, cash equivalents, and investments, consisting only of investment-grade
securities. To assess the interest rate risk, we performed a sensitivity analysis to determine the impact a change in
interest rates would have on the value of the investment portfolio. Based on investment positions as of July 31, 2023, a
hypothetical 100 basis point increase in interest rates across all maturities would result in a $55.5 million decline in the
fair market value of the portfolio. Such losses would only be realized if we sold the investments prior to maturity.
Conversely, a hypothetical 100 basis point decrease in interest rates would lead to a $55.5 million increase in the fair
market value of the portfolio.

- 51 -

In June 2020, we issued $2.0 billion aggregate principal amount of 0.375% Convertible Senior Notes due 2025 (the “2025
Notes”). We carry these instruments at face value less unamortized issuance costs on our consolidated balance sheets.
As these instruments have a fixed annual interest rate, we have no financial and economic exposure associated with
changes in interest rates. However, the fair value of fixed rate debt instruments fluctuates when interest rates change,
and additionally, in the case of the 2025 Notes, when the market price of our common stock fluctuates.

- 51 -

- 52 -

Item 8. Financial Statements and
Supplementary Data

Index To Consolidated
Financial Statements

Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Page

- 53 -
- 52 -

Report of Independent Registered Public
Accounting Firm

To the Stockholders and the Board of Directors of Palo Alto Networks, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Palo Alto Networks, Inc. (the Company) as of
July 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’
equity and cash flows for each of the three years in the period ended July 31, 2023, and the related notes (collectively
referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company at July 31, 2023 and 2022, and the results of its
operations and its cash flows for each of the three years in the period ended July 31, 2023, in conformity with U.S.
generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of July 31, 2023, based on criteria established
in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) and our report dated September 1, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter
below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

- 54 -
- 53 -

REVENUE RECOGNITION

Description
of the Matter

As described in Note 1 to the consolidated financial statements, the Company’s contracts with
customers sometimes contain multiple performance obligations, which are accounted for separately
if they are distinct. In such cases, the transaction price is then allocated to the distinct performance
obligations on a relative standalone selling price basis, and revenue is recognized when control of the
distinct performance obligation is transferred. For example, product revenue is recognized at the time
of hardware shipment or delivery of software license, and subscription and support revenue is
recognized over time as the services are performed.

How We
Addressed
the Matter in
Our Audit

Auditing the Company’s revenue recognition was complex, including the identification and
determination of distinct performance obligations and the timing of revenue recognition. For
example, there were nonstandard terms and conditions that required judgment to determine the
distinct performance obligations and the impact on the timing of revenue recognition.

We obtained an understanding, evaluated the design and tested the operating effectiveness of the
Company’s process and controls to identify and determine the distinct performance obligations and
the timing of revenue recognition.

To test the identification and determination of the distinct performance obligations and the timing of
revenue recognition, our audit procedures included, among others, reading the executed contract
and purchase order to understand the contract, identifying the performance obligation(s),
determining the distinct performance obligations, and evaluating the timing of revenue recognition
for a sample of individual sales transactions. We evaluated the accuracy of the Company’s contract
summary documentation, specifically related to the identification and determination of distinct
performance obligations and the timing of revenue recognition.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2009.

San Jose, California
September 1, 2023

- 55 -
- 54 -

Report of Independent Registered Public
Accounting Firm

To the Stockholders and the Board of Directors of Palo Alto Networks, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Palo Alto Networks, Inc.’s internal control over financial reporting as of July 31, 2023, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Palo Alto Networks, Inc. (the Company)
maintained, in all material respects, effective internal control over financial reporting as of July 31, 2023, based on the
COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of July 31, 2023 and 2022, the related consolidated
statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years
in the period ended July 31, 2023, and the related notes and our report dated September 1, 2023 expressed an
unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over
Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.

/s/ Ernst & Young LLP

San Jose, California
September 1, 2023

- 56 -
- 55 -

PALO ALTO NETWORKS, INC.

CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)

Assets
Current assets:

Cash and cash equivalents
Short-term investments

Accounts receivable, net of allowance for credit losses of $7.8 and $8.9 at July 31,
2023 and July 31, 2022, respectively
Short-term financing receivables, net
Short-term deferred contract costs
Prepaid expenses and other current assets

Total current assets
Property and equipment, net
Operating lease right-of-use assets
Long-term investments
Long-term financing receivables, net
Long-term deferred contract costs
Goodwill
Intangible assets, net
Other assets
Total assets
Liabilities and stockholders’ equity
Current liabilities:

Accounts payable
Accrued compensation
Accrued and other liabilities
Deferred revenue
Convertible senior notes, net

Total current liabilities
Long-term deferred revenue
Long-term operating lease liabilities
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 12)
Stockholders’ equity:

Preferred stock; $0.0001 par value; 100.0 shares authorized; none issued and
outstanding at July 31, 2023 and July 31, 2022

Common stock and additional paid-in capital; $0.0001 par value; 1,000.0 shares
authorized; 308.3 and 298.8 shares issued and outstanding at July 31, 2023 and
July 31, 2022, respectively
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity

See notes to consolidated financial statements.

- 57 -
- 56 -

July 31,

2023

2022

1,135.3 $
1,254.7

2,463.2
388.8
339.2
466.8
6,048.0
354.5
263.3
3,047.9
653.3
547.1
2,926.8
315.4
344.8
14,501.1 $

132.3 $
548.3
390.8
4,674.6
1,991.5
7,737.5
4,621.8
279.2
114.2
12,752.7

2,118.5
1,516.0

2,142.5
111.3
317.7
208.9
6,414.9
357.8
242.0
1,051.9
192.1
550.1
2,747.7
384.5
312.6
12,253.6

128.0
461.1
399.2
3,641.2
3,676.8
8,306.3
3,352.8
276.1
108.4
12,043.6

—

3,019.0
(43.2)
(1,227.4)
1,748.4
14,501.1 $

1,932.7
(55.6)
(1,667.1)
210.0
12,253.6

CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)

PALO ALTO NETWORKS, INC.

Revenue:

Product
Subscription and support

Total revenue
Cost of revenue:
Product
Subscription and support

Total cost of revenue
Total gross profit
Operating expenses:

Research and development
Sales and marketing
General and administrative

Total operating expenses
Operating income (loss)
Interest expense
Other income, net
Income (loss) before income taxes
Provision for income taxes
Net income (loss)
Net income (loss) per share, basic
Net income (loss) per share, diluted
Weighted-average shares used to compute net income (loss)
per share, basic

Weighted-average shares used to compute net income (loss)
per share, diluted

Year Ended July 31,

2023

2022

1,578.4 $
5,314.3
6,892.7

1,363.1 $
4,138.4
5,501.5

418.3
1,491.4
1,909.7
4,983.0

455.5
1,263.2
1,718.7
3,782.8

1,604.0
2,544.0
447.7
4,595.7
387.3
(27.2)
206.2
566.3
126.6
439.7 $
1.45 $
1.28 $

1,417.7
2,148.9
405.0
3,971.6
(188.8)
(27.4)
9.0
(207.2)
59.8
(267.0) $
(0.90) $
(0.90) $

303.2

295.6

342.3

295.6

2021

1,120.3
3,135.8
4,256.1

308.5
966.4
1,274.9
2,981.2

1,140.4
1,753.8
391.1
3,285.3
(304.1)
(163.3)
2.4
(465.0)
33.9
(498.9)
(1.73)
(1.73)

289.1

See notes to consolidated financial statements.

- 58 -
- 57 -

PALO ALTO NETWORKS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)

Net income (loss)
Other comprehensive income (loss), net of tax:

Change in unrealized gains (losses) on investments
Cash flow hedges:

Change in unrealized gains (losses)
Net realized (gains) losses reclassified into earnings

Net change on cash flow hedges
Other comprehensive income (loss)
Comprehensive income (loss)

Year Ended July 31,

2023
439.7 $

2022
(267.0) $

2021
(498.9)

(13.0)

(25.0)

(3.0)

(0.2)
25.6
25.4
12.4
452.1 $

(54.0)
33.3
(20.7)
(45.7)
(312.7) $

1.1
(18.5)
(17.4)
(20.4)
(519.3)

See notes to consolidated financial statements.

- 59 -
- 58 -

PALO ALTO NETWORKS, INC.

Balance as of July 31, 2020

Net loss
Other comprehensive loss

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
Common Stock
and
Additional Paid-In Capital
Amount

Accumulated
Other
Comprehensive
Income (Loss)

Shares
288.8 $ 2,259.2 $
—
—

—
—

Accumulated
Deficit
(1,167.9) $
(498.9)
—

10.5 $
—
(20.4)

Total
Stockholders’
Equity
1,101.8
(498.9)
(20.4)

Issuance of common stock in connection
with employee equity incentive plans

Taxes paid related to net share settlement of
equity awards

Share-based compensation for equity-based
awards

Repurchase and retirement of common
stock

Issuance of common and restricted common
stock in connection with acquisitions
Temporary equity reclassification

Balance as of July 31, 2021

Cumulative-effect adjustment from adoption
of new accounting pronouncement
Net loss
Other comprehensive loss

Issuance of common stock in connection
with employee equity incentive plans

Taxes paid related to net share settlement of
equity awards

Share-based compensation for equity-based
awards

Repurchase and retirement of common
stock

Balance as of July 31, 2022

Net income
Other comprehensive income

Issuance of common stock in connection
with employee equity incentive plans

Taxes paid related to net share settlement of
equity awards

Share-based compensation for equity-based
awards

Repurchase and retirement of common
stock
Settlement of convertible notes
Settlement of note hedges

Balance as of July 31, 2023

11.1

104.0

—

(28.9)

943.4

(12.0)

(1,178.1)

4.0
—
291.9

—
—
—

340.7
(129.1)
2,311.2

(581.9)
—
—

12.3

137.3

—

(50.3)

—

1,031.4

(5.4)
298.8
—
—

(915.0)
1,932.7
—
—

11.3

259.7

—

(20.4)

—

1,097.0

—

—
—
(9.9)

—
—
(45.7)

—

—
—
(1,666.8)

266.7
(267.0)
—

—

—
(55.6)
—
12.4

—
(1,667.1)
439.7
—

—

(1.8)
(250.0)
11.4
—
(11.4)
—
308.3 $ 3,019.0 $

—
—
—
(43.2) $

—
—
—
(1,227.4) $

104.0

(28.9)

943.4

(1,178.1)

340.7
(129.1)
634.5

(315.2)
(267.0)
(45.7)

137.3

(50.3)

1,031.4

(915.0)
210.0
439.7
12.4

259.7

(20.4)

1,097.0

(250.0)
—
—
1,748.4

See notes to consolidated financial statements.

- 60 -
- 59 -

PALO ALTO NETWORKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

Cash flows from operating activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by
operating activities:

Share-based compensation for equity-based awards
Depreciation and amortization
Amortization of deferred contract costs
Amortization of debt discount and debt issuance costs
Reduction of operating lease right-of-use assets

Amortization of investment premiums, net of accretion of purchase
discounts
Repayments of convertible senior notes attributable to debt discount

Changes in operating assets and liabilities, net of effects of acquisitions:

Accounts receivable, net
Financing receivables, net
Deferred contract costs
Prepaid expenses and other assets
Accounts payable
Accrued compensation
Accrued and other liabilities
Deferred revenue

Net cash provided by operating activities
Cash flows from investing activities

Purchases of investments
Proceeds from sales of investments
Proceeds from maturities of investments
Business acquisitions, net of cash acquired
Purchases of property, equipment, and other assets

Net cash used in investing activities
Cash flows from financing activities

Repayments of convertible senior notes
Payments for debt issuance costs
Repurchases of common stock
Proceeds from sales of shares through employee equity incentive plans
Payments for taxes related to net share settlement of equity awards

Net cash used in financing activities
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash—beginning of period
Cash, cash equivalents, and restricted cash—end of period

Reconciliation of cash, cash equivalents, and restricted cash to the
consolidated balance sheets
Cash and cash equivalents

- 61 -
- 60 -

Year Ended July 31,

2023

2022

2021

439.7 $

(267.0) $

(498.9)

1,074.5
282.2
413.4
6.7
49.9

(52.2)
—

(320.3)
(738.7)
(431.9)
(265.3)
1.0
84.4
(67.6)
2,301.7
2,777.5

(5,460.4)
965.9
2,811.5
(204.5)
(146.3)
(2,033.8)

(1,692.0)
—
(272.7)
258.8
(20.4)
(1,726.3)
(982.6)
2,124.8
1,142.2 $

1,011.1
282.6
362.1
7.2
54.4

13.5
—

(902.0)
(30.1)
(458.8)
(110.9)
69.3
30.4
(47.1)
1,970.0
1,984.7

(2,271.7)
449.2
1,118.9
(37.0)
(192.8)
(933.4)

(0.6)
—
(892.3)
136.6
(50.3)
(806.6)
244.7
1,880.1
2,124.8 $

894.5
260.4
298.0
142.9
44.5

13.1
(0.1)

(172.4)
(272.6)
(440.8)
(26.5)
(11.8)
105.1
(28.5)
1,196.1
1,503.0

(1,958.9)
131.1
1,240.5
(777.3)
(116.0)
(1,480.6)

(0.9)
(0.2)
(1,178.1)
104.0
(28.8)
(1,104.0)
(1,081.6)
2,961.7
1,880.1

1,135.3 $

2,118.5 $

1,874.2

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

Restricted cash included in prepaid expenses and other current assets
Restricted cash included in other assets
Total cash, cash equivalents, and restricted cash

Non-cash investing and financing activities

Equity consideration for business acquisitions
Supplemental disclosures of cash flow information

Cash paid for income taxes
Cash paid for contractual interest

Year Ended July 31,

2023
6.9
—
1,142.2 $

2022
6.3
—
2,124.8 $

2021
5.4
0.5
1,880.1

(0.3) $

(2.5) $

(365.4)

147.1 $
20.2 $

34.6 $
20.2 $

24.9
20.0

See notes to consolidated financial statements.

- 62 -
- 61 -

Notes To Consolidated
Financial Statements

1. Description of Business and Summary of Significant Accounting Policies

Description of Business

Palo Alto Networks, Inc. (the “Company,” “we,” “us,” or “our”), headquartered in Santa Clara, California, was incorporated
in March 2005 under the laws of the State of Delaware and commenced operations in April 2005. We empower
enterprises, organizations, service providers, and government entities to secure their users, networks, clouds and
endpoints by delivering comprehensive cybersecurity enabled by artificial intelligence and automation.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted
accounting principles (“U.S. GAAP”). The consolidated financial statements include all adjustments necessary for a fair
presentation of our annual results. All adjustments are of a normal recurring nature.

Principles of Consolidation

The consolidated financial statements include our accounts and our wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.

Reclassification

Certain prior period amounts in the consolidated financial statements and accompanying notes have been reclassified
to conform to the current period presentation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements
and the accompanying notes. We evaluate our estimates on an ongoing basis. Management estimates include, but are
not limited to, the standalone selling price for our products and services, share-based compensation, fair value of assets
acquired and liabilities assumed in business combinations, the assessment of recoverability of our intangibles and
goodwill, valuation allowance against deferred tax assets, manufacturing partner and supplier liabilities, deferred
contract cost benefit period, and loss contingencies. We base our estimates on assumptions, both historical and
forward looking, that we believe are reasonable. Actual results could differ materially from those estimates due to risks
and uncertainties, including uncertainty in the current economic environment.

Stock Split Effected in the Form of a Stock Dividend (“Stock Split”)

On September 13, 2022, we executed a three-for-one stock split of our common stock, effected in the form of a stock
dividend. The par value per share of our common stock remains unchanged at $0.0001 per share after the Stock Split.
All references made to share or per share amounts on the accompanying consolidated financial statements and
applicable disclosures have been retroactively adjusted to reflect the effects of the Stock Split.

Concentrations

Financial instruments that subject us to concentrations of credit risk consist primarily of cash and cash equivalents,
investments, derivative contracts, accounts receivable and financing receivables.

We invest only in high-quality credit instruments and our cash and cash equivalents and available-for-sale investments
consist primarily of fixed income securities. Management believes that the financial institutions that hold our
investments are financially sound and, accordingly, are subject to minimal credit risk. Deposits held with banks may
exceed the amount of insurance provided on such deposits.

Our derivative contracts expose us to credit risk to the extent that the counterparties may be unable to meet the terms
of the arrangement. We mitigate this credit risk by transacting with major financial institutions with high credit ratings
and also enter into master netting arrangements, which permit net settlement of transactions with the same
counterparty. We are not required to pledge, and are not entitled to receive, cash collateral related to these derivative
instruments. We do not enter into derivative contracts for trading or speculative purposes.

Our accounts receivable are primarily derived from our distributors in various geographical locations. Our financing
receivables are with qualified end-customers and channel partners. We perform ongoing credit evaluations and
generally do not require collateral on accounts receivable or financing receivables.

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As of July 31, 2023, two distributors individually represented 10% or more of our gross accounts receivable, and in the
aggregate represented 37.6% of our gross accounts receivable. As of July 31, 2023, no end-customers or channel
partners represented 10% or more of our gross financing receivables.

For fiscal 2023, three distributors represented 10% or more of our total revenue, representing 25.0%, 12.8%, and 11.9%,
respectively. No single end-customer accounted for more than 10% of our total revenue in fiscal 2023, 2022, or 2021.

We rely on an electronics manufacturing services provider (“EMS provider”) to assemble most of our products and sole
source component suppliers for certain components.

Comprehensive Income (Loss)

Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). Our other
comprehensive income (loss) includes unrealized gains and losses on available-for-sale investments and unrealized
gains and losses on cash flow hedges.

Foreign Currency Transactions

The functional currency of our foreign subsidiaries is the U.S. dollar. Monetary assets and liabilities denominated in
foreign currencies have been remeasured into U.S. dollars using the exchange rates in effect at the balance sheet dates.
Foreign currency remeasurement gains and losses and foreign currency transaction gains and losses are not significant
to the consolidated financial statements.

Fair Value

We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When determining the fair value measurements
for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous
market in which to transact and the market-based risk.

We categorize assets and liabilities recorded or disclosed at fair value on our consolidated balance sheets based upon
the level of judgment associated with inputs used to measure their fair value. The categories are as follows:

• Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
• Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for

the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the
financial instruments.

• Level 3—Inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair

value. The inputs require significant management judgment or estimation.

Our financial assets and liabilities that are measured at fair value on a recurring basis include marketable securities and
derivative financial instruments. Goodwill, intangible assets, and other long-lived assets are measured at fair value on a
nonrecurring basis, only if impairment is indicated. The carrying amounts reported in the consolidated financial
statements approximate the fair value for cash and cash equivalents, accounts receivable, accounts payable, and
accrued liabilities due to their short-term nature.

Cash, Cash Equivalents, and Investments

We consider all highly liquid investments with original maturities of three months or less at the date of purchase to be
cash equivalents. Investments not considered cash equivalents and with maturities of one year or less from the
consolidated balance sheet date are classified as short-term investments. Investments with maturities greater than one
year from the consolidated balance sheet date are classified as long-term investments.

We determine the classification of our investments in marketable debt securities at the time of purchase and
reevaluate such determination at each balance sheet date. Our marketable debt securities are classified as available-
for-sale. Debt securities in an unrealized loss position are written down to its fair value with the corresponding charge
recorded in other income, net on our consolidated statements of operations, if it is more likely than not that we will be
required to sell the impaired security before recovery of its amortized cost basis, or we have the intention to sell the
security. If neither of these conditions are met, we determine whether a credit loss exists by comparing the present
value of the expected cash flows of the security with its amortized cost basis. An allowance for credit losses is recorded
in other income, net on our consolidated statements of operations for an amount not to exceed the unrealized loss.
Unrealized losses that are not credit-related are included in accumulated other comprehensive income (loss) (“AOCI”) in
stockholders’ equity.

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount, net of allowances for credit losses. The allowance for
credit losses is based on our assessment of collectability. Management regularly reviews the adequacy of the allowance
for credit losses on a collective basis by considering the age of each outstanding invoice, each customer’s expected
ability to pay and collection history, current market conditions, and, where appropriate, reasonable and supportable
forecasts of future economic conditions. Accounts receivable deemed uncollectible are charged against the allowance
for credit losses. For the years ended July 31, 2023 and 2022, the allowance for credit losses activity was not significant.

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Financing Receivables

We provide financing arrangements for certain qualified end-customers and channel partners to purchase our
products and services. Payment terms on these financing arrangements are up to five years. Financing receivables are
recorded at amortized cost, which approximates fair value. We may sell, in certain instances, these financing
arrangements on a non-recourse basis to third-party financial institutions. The financing receivables are derecognized
upon transfer as these sales qualify as true sales.

We evaluate the allowance for credit losses by assessing the risks and losses inherent in our financing receivables on
either an individual or a collective basis. Our assessment considers various factors, including lifetime expected losses
determined using customer risk profile, current economic conditions that may affect a customer’s ability to pay, and
forward-looking economic considerations. Financing receivables deemed uncollectible are charged against the
allowance for credit losses.

Derivatives

We are exposed to foreign currency exchange risk. Our revenue is transacted in U.S. dollars, however, a portion of our
operating expenditures are incurred outside of the United States and are denominated in foreign currencies, making
them subject to fluctuations in foreign currency exchange rates. We enter into foreign currency derivative contracts
with maturities of 24 months or less, which we designate as cash flow hedges, to manage the foreign currency
exchange risk associated with our operating expenditures.

Our derivative financial instruments are recorded at fair value, on a gross basis, as either assets or liabilities on our
consolidated balance sheets. Gains or losses related to our cash flow hedges are recorded as a component of AOCI on
our consolidated balance sheets and are reclassified into the financial statement line item associated with the
underlying hedged transaction on our consolidated statements of operations when the underlying hedged transaction
is recognized in earnings. Gains or losses related to non-designated derivative instruments are recognized in other
income, net on our consolidated statements of operations for each period until the instrument matures, is terminated,
is re-designated as a qualified cash flow hedge, or is sold. Derivatives designated as cash flow hedges are classified on
our consolidated statements of cash flows in the same manner as the underlying hedged transaction, primarily within
cash flows from operating activities.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. Land is not depreciated. The estimated useful lives of
our depreciable assets are as follows:

Asset category

Useful life

Computers, equipment, and software

Demonstration units

Furniture and fixtures

Leasehold improvements

Business Combinations

3 - 5 years
3 - 4 years
5 years
Lesser of 10 years or remaining lease term

We include the results of operations of the businesses that we acquire as of the respective dates of acquisition. We
allocate the fair value of the purchase price of our acquisitions to the assets acquired and liabilities assumed, generally
based on their estimated fair values. The excess of the purchase price over the fair values of these identifiable assets
and liabilities is recorded as goodwill. Additional information existing as of the acquisition date but unknown to us may
become known during the remainder of the measurement period, not to exceed 12 months from the acquisition date,
which may result in changes to the amounts and allocations recorded.

Intangible Assets

Purchased intangible assets with finite lives are carried at cost, less accumulated amortization. Amortization is
computed using the straight-line method over the estimated useful lives of the respective assets. Acquisition-related
in-process research and development represents the fair value of incomplete research and development projects that
have not reached technological feasibility as of the date of acquisition. Initially, these assets are not subject to
amortization. Assets related to projects that have been completed are transferred to developed technology, which are
subject to amortization.

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Impairment of Goodwill, Intangible Assets, and Other Long-Lived Assets

Goodwill is evaluated for impairment on an annual basis in the fourth quarter of our fiscal year, and whenever events or
changes in circumstances indicate the carrying amount of goodwill may not be recoverable. We have elected to first
assess qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is
less than its carrying amount, including goodwill. If we determine that it is more likely than not that the fair value is less
than its carrying amount, then the quantitative impairment test will be performed. Under the quantitative impairment
test, if the carrying amount exceeds its fair value, we will recognize an impairment loss in an amount equal to that
excess but limited to the total amount of goodwill.

We evaluate events and changes in circumstances that could indicate carrying amounts of purchased intangible assets
and other long-lived assets may not be recoverable. When such events or changes in circumstances occur, we assess
the recoverability of these assets or asset groups by determining whether or not the carrying amount will be recovered
through undiscounted expected future cash flows. If the total of the future undiscounted cash flows is less than the
carrying amount of an asset or asset group, we record an impairment loss for the amount by which the carrying
amount exceeds the fair value of the asset or asset group.

We did not recognize any impairment losses on our goodwill, intangible assets, or other long-lived assets during the
years ended July 31, 2023, 2022, and 2021.

Manufacturing Partner and Supplier Liabilities

We outsource most of our manufacturing, repair, and supply chain management operations to our EMS provider and
payments to it are a significant portion of our cost of product revenue. Although we are contractually obligated to
purchase manufactured products and components, we generally do not own the components and manufactured
products. Product title transfers from our EMS provider to us and immediately to our customers upon shipment. Our
EMS provider assembles our products using design specifications, quality assurance programs, and standards that we
establish, and it procures components and assembles products based on our demand forecasts. These forecasts
represent our estimates of future demand for our products based upon historical trends and analysis from our sales
and product management functions as adjusted for overall market conditions. If the actual component usage and
product demand are significantly lower than forecast, we record a liability for manufacturing purchase commitments in
excess of our forecasted demand, including costs for excess components or for carrying costs incurred by our
manufacturing partners and component suppliers. Through July 31, 2023, we have not accrued any significant costs
associated with this exposure.

Convertible Senior Notes

Prior to August 1, 2021, our convertible senior notes were separated into a liability and an equity component. The
carrying amount of the liability component was calculated by measuring the fair value of a similar liability that did not
have an associated convertible feature, using a discounted cash flow model with a risk-adjusted yield. The carrying
amount of the equity component representing the conversion option was determined by deducting the fair value of
the liability component from the par value of the notes as a whole. This difference represented a debt discount that was
amortized to interest expense using the effective interest method over the term of the notes. The equity component
was not remeasured as it continued to meet the conditions for equity classification. Transaction costs related to the
issuance of the notes were allocated to the liability and equity components using the same proportions as the proceeds
from the notes. Transaction costs attributable to the liability component were netted with the liability component and
amortized to interest expense using the effective interest method over the term of the notes. Transaction costs
attributable to the equity component were netted with the equity component of the notes in additional paid-in capital.
Upon the notes becoming convertible, the net carrying amount of the liability component was classified as a current
liability and a portion of the equity component representing the conversion option was reclassified to temporary equity.
The portion of the equity component classified as temporary equity was measured as the difference between the
principal and net carrying amount of the notes, excluding debt issuance costs.

Upon adoption of the new debt guidance on August 1, 2021, our convertible senior notes are accounted for entirely as a
liability and measured at their amortized cost. Transaction costs related to the issuance of the notes are netted with the
liability and are amortized on a straight-line basis, which approximates the effective interest rate method, to interest
expense over the term of the notes.

Revenue Recognition

Our revenue consists of product revenue and subscription and support revenue. Revenue is recognized when control of
promised products, subscriptions and support services are transferred to customers, in an amount that reflects the
expected consideration in exchange for those products and services.

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We determine revenue recognition through the following steps:

• Identification of the contract, or contracts, with a customer.
• Identification of the performance obligations in the contract.
• Determination of the transaction price.
• Allocation of the transaction price to the performance obligations in the contract.
• Recognition of revenue when, or as, we satisfy a performance obligation.

Revenues are reported net of sales taxes. Shipping charges billed to our customers are included in revenue and related
costs are included in cost of revenue.

Product Revenue

Product revenue is derived primarily from sales of our appliances. Product revenue also includes revenue derived from
software licenses of Panorama, SD-WAN, and the VM-Series. Our appliances and software licenses include a broad set
of built-in networking and security features and functionalities. We recognize product revenue at the time of hardware
shipment or delivery of software license.

Subscription and Support Revenue

Subscription and support revenue is derived primarily from sales of our subscription and support offerings. We
recognize subscription and support revenue over time as the services are performed. Our contractual subscription and
support contracts are typically one to five years.

Contracts with Multiple Performance Obligations

Deferred Revenue

We record deferred revenue when cash payments are received or due in advance of our performance. Our payment
terms typically require payment within 30 to 45 days of the date we issue an invoice. The current portion of deferred
revenue represents the amounts that are expected to be recognized as revenue within one year of the consolidated
balance sheet date.

Deferred Contract Costs

We defer contract costs that are recoverable and incremental to obtaining customer sales contracts. Contract costs,
which primarily consist of sales commissions, are amortized on a systematic basis that is consistent with the transfer to
the customer of the goods or services to which the asset relates. Sales commissions paid for initial contracts are
generally not commensurate with the commissions paid for renewal contracts, given the substantive difference in
commission rates in proportion to their respective contract values. Sales commissions for initial contracts that are not
commensurate are amortized over a benefit period of five years. The benefit period is determined by taking into
consideration contract length, expected renewals, technology life, and other quantitative and qualitative factors. Sales
commissions for initial contracts that are commensurate and sales commissions for renewal contracts are amortized
over the related contractual period.

We classify deferred contract costs as short-term or long-term based on when we expect to recognize the expense. The
amortization of deferred contract costs is included in sales and marketing expense on our consolidated statements of
operations. Deferred contract costs are periodically reviewed for impairment. We did not recognize any impairment
losses on our deferred contract costs during the years ended July 31, 2023, 2022, or 2021.

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Software Development Costs

Internally developed software includes security software developed to deliver our cloud-based subscription offerings to
our end-customers. These capitalized costs consist of internal compensation-related costs and external direct costs
incurred during the application development stage and will be amortized over a useful life of three years. As of July 31,
2023 and 2022, we capitalized as other assets on our consolidated balance sheets $132.1 million and $130.9 million in
costs, respectively, net of accumulated amortization, for security software developed to deliver our cloud-based
subscription offerings. We recognized amortization expense of $79.5 million, $62.4 million, and $47.8 million related to
these capitalized costs as cost of subscription and support revenue on our consolidated statements of
operations during the years ended July 31, 2023, 2022, and 2021, respectively.

The costs to develop software that is marketed externally have not been capitalized as we believe our current software
development process is essentially completed concurrent with the establishment of technological feasibility. As such,
all related software development costs are expensed as incurred and included in research and development expense
on our consolidated statements of operations.

Share-Based Compensation

Compensation expense related to share-based transactions is measured at fair value on the grant date. We recognize
share-based compensation expense for awards with only service conditions on a straight-line basis over the requisite
service period. We recognize share-based compensation expense for awards with market conditions and awards with
performance conditions on a straight-line basis over the requisite service period for each separately vesting portion of
the award. We recognize share-based compensation expense for awards with performance conditions when it is
probable that the performance condition will be achieved. We account for forfeitures of all share-based payment
awards when they occur.

Leases

We determine if an arrangement is a lease at inception. We evaluate the classification of leases at commencement and,
as necessary, at modification. Operating lease related balances are included in operating lease right-of-use assets,
accrued and other liabilities, and long-term operating lease liabilities on our consolidated balance sheets. We did not
have any material finance leases in any of the periods presented.

Operating lease right-of-use assets represent our right to use an underlying asset for the lease term. Operating lease
liabilities represent our obligation to make payments arising from the lease. Operating lease right-of-use assets and
liabilities are recognized at the present value of the future lease payments at the lease commencement date. The
interest rate used to determine the present value of the future lease payments is our incremental borrowing rate,
because the interest rates implicit in most of our leases are not readily determinable. Our incremental borrowing rate is
estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic
environments where the leased asset is located. Operating lease right-of-use assets also include adjustments related to
lease incentives, prepaid or accrued rent and initial direct lease costs. Operating lease right-of-use assets are subject to
evaluation for impairment or disposal on a basis consistent with other long-lived assets.

Our lease terms may include periods under options to extend or terminate the lease when it is reasonably certain that
we will exercise that option. We generally use the base, non-cancelable lease term when determining the lease right-
of-use assets and lease liabilities. Operating lease cost is recognized on a straight-line basis over the lease term.

We account for lease and non-lease components as a single lease component and do not recognize right-of-use assets
and lease liabilities for leases with a term of 12 months or less. Payments under our lease arrangements are primarily
fixed, however, certain lease agreements contain variable payments, which are expensed as incurred and not included
in the operating lease right-of-use assets and liabilities. Variable lease payments are primarily comprised of real estate
taxes, common area maintenance charges, and insurance costs.

Income Taxes

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Loss Contingencies

We are subject to the possibility of various loss contingencies arising in the ordinary course of business. In determining
loss contingencies, we consider the likelihood of loss or impairment of an asset, or the incurrence of a liability, as well as
our ability to reasonably estimate the amount of loss. An estimated loss contingency is accrued when it is probable that
an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. If we
determine that a loss is reasonably possible, then we disclose the possible loss or range of the possible loss or state that
such an estimate cannot be made. We regularly evaluate current information available to us to determine whether an
accrual is required, an accrual should be adjusted, or a range of possible loss should be disclosed.

2. Revenue

Disaggregation of Revenue

The following table presents revenue by geographic theater (in millions):

Revenue:

Americas

United States
Other Americas

Total Americas
Europe, the Middle East, and Africa (“EMEA”)
Asia Pacific and Japan (“APAC”)

Total revenue

Year Ended July 31,

2023

2022

2021

4,424.2 $
295.7
4,719.9
1,359.6
813.2
6,892.7 $

3,560.3 $
242.3
3,802.6
1,055.8
643.1
5,501.5 $

2,747.8
189.7
2,937.5
817.3
501.3
4,256.1

The following table presents revenue for groups of similar products and services (in millions):

Revenue:

Product
Subscription and support

Subscription
Support

Total subscription and support

Total revenue

Deferred Revenue

Year Ended July 31,

2023

2022

2021

1,578.4 $

1,363.1 $

1,120.3

3,335.4
1,978.9
5,314.3
6,892.7 $

2,539.0
1,599.4
4,138.4
5,501.5 $

1898.8
1,237.0
3,135.8
4,256.1

During the years ended July 31, 2023 and 2022, we recognized approximately $3.6 billion and $2.7 billion of revenue
pertaining to amounts that were deferred as of July 31, 2022 and 2021, respectively.

Remaining Performance Obligations

Remaining performance obligations were $10.6 billion as of July 31, 2023, of which we expect to recognize as revenue
approximately $5.1 billion over the next 12 months and the remainder thereafter.

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3. Fair Value Measurements

The following table presents our financial assets and liabilities measured at fair value on a recurring basis as of July 31,
2023 and 2022 (in millions):

Cash equivalents:
Money market funds
Certificates of deposit
Commercial paper
Corporate debt securities

U.S. government and agency
securities

Non-U.S. government and
agency securities

Total cash equivalents

Short-term investments:
Certificates of deposit
Commercial paper
Corporate debt securities

U.S. government and agency
securities

Non-U.S. government and
agency securities
Asset-backed securities

Total short-term
investments

Long-term investments:
Corporate debt securities

U.S. government and agency
securities

Non-U.S. government and
agency securities
Asset-backed securities

Total long-term
investments

Prepaid expenses and other
current assets:

Foreign currency forward
contracts

Total prepaid expenses and
other current assets

Other assets:

Foreign currency forward
contracts

Total other assets

Total assets measured at fair
value
Accrued and other liabilities:

July 31, 2023

July 31, 2022

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

$ 476.1 $
—
—
—

— $
—
151.4
—

— $ 476.1 $ 1,205.2 $
—
—
—
—
151.4
—
—
—
—

— $
155.3
69.1
19.5

— $ 1,205.2
155.3
—
69.1
—
19.5
—

—

—
476.1

—
151.4

—

—
—

—

10.0

—

10.0

—

—
627.5 1,205.2

5.1
259.0

—
5.1
— 1,464.2

48.1
—
—
213.8
— 798.0

—
—
—

116.4
79.0
505.0

—

190.6

—

190.6

—

798.2

—
—

—
4.2

—
—

—
4.2

—
—

17.4
—

—
—
—

—

—
—

116.4
79.0
505.0

798.2

17.4
—

— 1,254.7

—

1,516.0

—

1,516.0

— 2,484.3

—

761.2

—

—
—

22.0

36.6
505.0

—

—
—

22.0

—

118.2

36.6
505.0

—
—

—
172.5

—

—
—

761.2

118.2

—
172.5

— 3,047.9

—

1,051.9

—

1,051.9

—

—
—

19.1

1.7
1.7

—

—
—

19.1

1.7
1.7

—

—
—

2.4

0.7
0.7

—

—
—

2.4

0.7
0.7

$ 476.1 $ 4,474.8 $

— $ 4,950.9 $ 1,205.2 $ 2,830.0 $

— $ 4,035.2

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Foreign currency forward
contracts

Total accrued and other
liabilities

Other long-term liabilities:

Foreign currency forward
contracts

Total other long-term
liabilities

Total liabilities measured at fair
value

July 31, 2023

July 31, 2022

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

— $

18.7 $

— $

18.7 $

— $

32.4 $

— $

32.4

—

18.7

—

18.7

—

32.4

—

32.4

—

1.6

—

1.6

—

0.8

—

0.8

— $

20.3 $

— $

20.3 $

— $

33.2 $

— $

33.2

Refer to Note 10. Debt, for the carrying amount and estimated fair value of our convertible senior notes as of July 31,
2023 and 2022.

4. Cash Equivalents and Investments

Available-for-sale Debt Securities

The following tables summarize the amortized cost, unrealized gains and losses, and fair value of our available-for-sale
debt securities (in millions):

Cash equivalents:

Commercial paper

Total available-for-sale cash equivalents

Investments:

Certificates of deposit
Commercial paper
Corporate debt securities
U.S. government and agency securities
Non-U.S. government and agency securities
Asset-backed securities

Total available-for-sale investments

July 31, 2023

Amortized Cost

Unrealized
Gains

Unrealized
Losses

Fair Value

151.4 $
151.4 $

48.1 $
214.1
3,313.5
214.2
37.2
512.0
4,339.1 $

— $
— $

— $
—
1.3
—
—
0.2
1.5 $

— $
— $

151.4
151.4

— $
(0.3)
(32.5)
(1.6)
(0.6)
(3.0)
(38.0) $

48.1
213.8
3,282.3
212.6
36.6
509.2
4,302.6

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Cash equivalents:

Certificates of deposit
Commercial paper
Corporate debt securities
U.S. government and agency securities
Non-U.S. government and agency securities
Total available-for-sale cash equivalents

Investments:

Certificates of deposit
Commercial paper
Corporate debt securities
U.S. government and agency securities
Non-U.S. government and agency securities
Asset-backed securities

Total available-for-sale investments

July 31, 2022

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair Value

155.3 $
69.1
19.5
10.0
5.0
258.9 $

116.5 $
79.1
1,276.8
928.1
17.6
173.4
2,591.5 $

— $
—
—
—
0.1
0.1 $

— $
—
1.3
0.1
—
0.2
1.6 $

— $
—
—
—
—
— $

(0.1) $
(0.1)
(11.9)
(11.8)
(0.2)
(1.1)
(25.2) $

155.3
69.1
19.5
10.0
5.1
259.0

116.4
79.0
1,266.2
916.4
17.4
172.5
2,567.9

As of July 31, 2023, the gross unrealized losses that have been in a continuous unrealized loss position for less than 12
months were $30.7 million, which were related to $3.4 billion of available-for-sale debt securities, and the gross
unrealized losses that have been in a continuous unrealized loss position for more than 12 months were $7.3 million,
which were related to $481.8 million of available-for-sale debt securities. As of July 31, 2022 the gross unrealized losses
that have been in a continuous unrealized loss position for less than 12 months were $24.8 million, which were related
to $2.0 billion of available-for-sale debt securities, and the gross unrealized losses that have been in a continuous
unrealized loss position for more than 12 months were not material.

Unrealized losses related to our available-for-sale debt securities are primarily due to interest rate fluctuations as
opposed to credit quality. We do not intend to sell any of the securities in an unrealized loss position and it is not likely
that we would be required to sell these securities before recovery of their amortized cost basis, which may be at
maturity. We did not recognize any credit losses related to our available-for-sale debt securities during the years ended
July 31, 2023 and 2022.

The following table summarizes the amortized cost and fair value of our available-for-sale debt securities as of July 31,
2023, by contractual years-to-maturity (in millions):

Due within one year
Due between one and three years
Due between three and five years
Due between five and ten years
Due after ten years

Total

Marketable Equity Securities

Amortized Cost
$

1,414.8 $
2,478.8
523.4
52.5
21.0
4,490.5 $

Fair Value
1,406.1
2,456.0
518.8
52.3
20.8
4,454.0

Marketable equity securities consist of money market funds and are included in cash and cash equivalents on our
consolidated balance sheets. As of July 31, 2023 and 2022, the carrying value of our marketable equity securities were
$476.1 million and $1.2 billion, respectively. There were no unrealized gains or losses recognized for these securities
during the years ended July 31, 2023, 2022, and 2021.

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5. Financing Receivables

The following table summarizes our short-term and long-term financing receivables (in millions):

Short-term financing receivables, gross

Unearned income

Allowance for credit losses

Short-term financing receivables, net

Long-term financing receivables, gross

Unearned income

Allowance for credit losses

Long-term financing receivables, net

July 31,

2023
435.1 $
(42.9)
(3.4)
388.8 $
698.6 $
(39.2)
(6.1)
653.3 $

2022
115.0
(2.4)
(1.3)
111.3
196.1
(1.5)
(2.5)
192.1

Our financing receivables portfolio primarily consists of high-quality investment-grade receivables as of July 31, 2023
and 2022. There was no significant activity in allowance for credit losses during the years ended July 31, 2023 and 2022.
Past due amounts on financing receivables were not material as of July 31, 2023 and 2022.

6. Derivative Instruments

As of July 31, 2023 and 2022, the total notional amount of our outstanding foreign currency forward contracts was
$957.5 million and $856.9 million, respectively. Refer to Note 3. Fair Value Measurements for the fair value of our
derivative instruments as reported on our consolidated balance sheets as of July 31, 2023.

As of July 31, 2023, unrealized gains and losses in AOCI related to our cash flow hedges were a $0.7 million net gain, of
which $2.7 million in gains are expected to be recognized into earnings within the next 12 months. As of July 31, 2022,
unrealized gains and losses in AOCI related to our cash flow hedges were a $24.8 million net loss.

7. Acquisitions

Fiscal 2023

Cider Security Ltd.

On December 20, 2022, we completed our acquisition of Cider Security Ltd. (“Cider”), a privately-held cloud security
company. We expect the acquisition will support Prisma Cloud’s platform approach to securing the entire application
security lifecycle from code to cloud. The total purchase consideration for the acquisition of Cider was $198.3 million,
which consisted of the following (in millions):

Cash
Fair value of replacement awards

Total

Amount
198.0
0.3
198.3

As part of the acquisition, we issued replacement equity awards, which included 0.2 million shares of our restricted
common stock. The total fair value of the replacement equity awards was $48.6 million, of which the portion
attributable to services performed prior to the acquisition date was allocated to purchase consideration. The remaining
fair value was allocated to future services and will be expensed over the remaining service periods as share-based
compensation.

We have accounted for this transaction as a business combination and allocated the purchase consideration to assets
acquired and liabilities assumed based on preliminary estimated fair values, as presented in the following table
(in millions):

Goodwill
Identified intangible assets
Cash
Net liabilities assumed

Total

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Amount
164.6
27.8
12.4
(6.5)
198.3

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected
post-acquisition synergies from integrating Cider technology into our platforms. The goodwill is expected to be
deductible for U.S. income tax purposes.

The following table presents the identified intangible asset acquired (in millions, except years):

Developed technology

Other acquisition

Fair Value
27.8

Estimated
Useful Life
5 years

In April 2023, we completed an acquisition for total purchase consideration of $18.9 million in cash. We have accounted
for this transaction as a business combination and recorded goodwill of $14.5 million. The goodwill is not deductible for
income tax purposes.

Fiscal 2022

During the year ended July 31, 2022, we completed acquisitions for a combined total purchase consideration of $40.1
million, which was primarily cash. We have accounted for these transactions as business combinations, and recorded
goodwill of $37.6 million. The goodwill is not deductible for income tax purposes.

Fiscal 2021

Bridgecrew Inc.

On March 2, 2021, we completed our acquisition of Bridgecrew Inc. (“Bridgecrew”), a privately-held cloud security
company. We expect the acquisition will expand our Prisma Cloud offering to deliver security across the full application
lifecycle. The total purchase consideration for the acquisition of Bridgecrew was $156.9 million, which consisted of the
following (in millions):

Cash
Fair value of replacement awards

Total

Amount
155.9
1.0
156.9

As part of the acquisition, we issued $42.5 million of replacement awards, of which the portion attributable to services
performed prior to the acquisition date was allocated to purchase consideration. The remaining fair value was allocated
to future services and will be expensed over the remaining service periods as share-based compensation.

We have accounted for this transaction as a business combination and allocated the purchase consideration to assets
acquired and liabilities assumed based on estimated fair values, as presented in the following table (in millions):

Goodwill
Identified intangible assets
Cash
Net liabilities assumed

Total

Amount
129.6
21.6
9.0
(3.3)
156.9

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected
post-acquisition synergies from integrating Bridgecrew technology into our platforms. The goodwill is not deductible
for income tax purposes.

The following table presents the identified intangible asset acquired (in millions, except years):

Developed technology

Fair Value
21.6

Estimated
Useful Life
6 years

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Expanse Inc.

On December 15, 2020, we completed our acquisition of Expanse Inc. (“Expanse”), a privately-held company specializing
in attack surface management. We expect the acquisition will enrich our Cortex offerings and provide organizations an
integrated view of the enterprise to combine external, internal, and threat data. The total purchase consideration for
the acquisition of Expanse was $797.2 million, which consisted of the following (in millions):

Cash
Common stock (1.1 million shares)
Fair value of replacement awards

Total

Amount
434.9
340.7
21.6
797.2

As part of the acquisition, we issued replacement equity awards, which included 0.2 million shares of our restricted
common stock. The total fair value of the replacement equity awards was $160.0 million, of which the portion
attributable to services performed prior to the acquisition date was allocated to purchase consideration. The remaining
fair value was allocated to future services and will be expensed over the remaining service periods as share-based
compensation.

Goodwill
Identified intangible assets
Cash
Net liabilities assumed

Total

Amount
598.2
160.3
51.1
(12.4)
797.2

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected
post-acquisition synergies from integrating Expanse technology into our platforms. The goodwill is not deductible for
income tax purposes.

The following table presents details of the identified intangible assets acquired (in millions, except years):

Developed technology
Customer relationships

Total

Sin e fa Gro u p , In c .

Fair Value
123.4
36.9
160.3

Estimated
Useful Life
6 years
10 years

On November 24, 2020, we completed our acquisition of Sinefa Group, Inc. and its wholly owned subsidiaries (“Sinefa”),
a privately-held digital experience monitoring company. We expect the acquisition will extend our Prisma Access
offering. The total purchase consideration for the acquisition of Sinefa was $27.0 million, which consisted of the
following (in millions):

Cash
Fair value of replacement awards

Total

Amount
26.9
0.1
27.0

As part of the acquisition, we issued $11.5 million of replacement equity awards, of which the portion attributable to
services performed prior to the acquisition date was allocated to purchase consideration. The remaining fair value was
allocated to future services and will be expensed over the remaining service periods as share-based compensation.

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Goodwill
Identified intangible assets
Net liabilities assumed

Total

Amount
13.7
20.4
(7.1)
27.0

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected
post-acquisition synergies from integrating Sinefa technology into our platforms. The goodwill is deductible for income
tax purposes.

The following table presents details of the identified intangible assets acquired (in millions, except years):

Developed technology
Customer relationships

Total

The Crypsis Group

Fair Value
18.6
1.8
20.4

Estimated
Useful Life
6 years
8 years

On September 17, 2020, we completed our acquisition of The Crypsis Group (“Crypsis”), an incident response, risk
management, and digital forensics consulting firm. We expect the acquisition will expand our capabilities and
strengthen our Cortex strategy. The total purchase consideration for the acquisition of Crypsis was $227.7 million, which
consisted of the following (in millions):

Cash
Fair value of replacement awards

Total

Amount
225.7
2.0
227.7

As part of the acquisition, we issued $27.1 million of replacement awards, of which the portion attributable to services
performed prior to the acquisition date was allocated to purchase consideration. The remaining fair value was allocated
to future services and will be expensed over the remaining service periods as share-based compensation.

Goodwill
Identified intangible assets
Net assets acquired

Total

Amount
157.6
54.4
15.7
227.7

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected
post-acquisition synergies from integrating Crypsis technology into our platforms. The goodwill is deductible for
income tax purposes.

The following table presents details of the identified intangible assets acquired (in millions, except years):

Developed technology
Customer relationships

Total

Fair Value
6.9
47.5
54.4

Estimated
Useful Life
3 years
7 years

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Additional Acquisition-Related Information

Pro forma results of operations have not been presented because the effects of the acquisitions were not material to
our consolidated statements of operations.

Additional information related to our acquisitions completed in fiscal 2023, such as that related to income tax and other
contingencies, existing as of the acquisition date may become known during the remainder of the measurement
period, not to exceed 12 months from the respective acquisition date, which may result in changes to the amounts and
allocations recorded.

8. Goodwill and Intangible Assets

Goodwill

The following table presents details of our goodwill during the year ended July 31, 2023 (in millions):

Balance as of July 31, 2022
Goodwill acquired
Balance as of July 31, 2023

Purchased Intangible Assets

Amount
2,747.7
179.1
2,926.8

The following table presents details of our purchased intangible assets (in millions):

Intangible assets subject to amortization:

Developed technology
Customer relationships
Acquired intellectual property
Trade name and trademarks
Other

Total intangible assets subject to
amortization

Intangible assets not subject to amortization:
In-process research and development
Total purchased intangible assets

July 31,

2023

2022

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

$ 633.2 $
172.7
14.6
9.4
0.9

(429.4) $ 203.8 $ 600.7 $
172.7
98.8
(73.9)
11.3
8.4
(6.2)
9.4
—
(9.4)
0.9
0.5
(0.4)

(347.9) $ 252.8
(52.2)
120.5
6.5
(4.8)
(9.4)
—
0.8
(0.1)

830.8

(519.3)

311.5

795.0

(414.4)

380.6

3.9
$ 834.7 $

—

3.9
3.9
(519.3) $ 315.4 $ 798.9 $

—

3.9
(414.4) $ 384.5

We recognized amortization expense of $104.9 million, $126.9 million, and $117.8 million for the years ended July 31, 2023,
2022, and 2021, respectively.

The following table summarizes estimated future amortization expense of our intangible assets subject to amortization
as of July 31, 2023 (in millions):

Future amortization expense

Total
311.5 $

2024
97.9 $

2025
84.2 $

2026
62.4 $

2027
35.3 $

2029 and
Thereafter
18.0

2028
13.7 $

Fiscal years ending July 31,

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9. Property and Equipment

The following table presents details of our property and equipment, net (in millions):

Computers, equipment, and software
Leasehold improvements
Land
Demonstration units
Furniture and fixtures

Total property and equipment, gross

Less: accumulated depreciation

Total property and equipment, net

July 31,

2023
432.9 $
268.9
87.2
46.9
46.9
882.8
(528.3)
354.5 $

2022
404.3
249.3
87.2
41.6
45.1
827.5
(469.7)
357.8

During the year ended July 31, 2022, we purchased 4.6 acres of land adjacent to our headquarters in Santa Clara,
California, along with the associated buildings, for $39.5 million to accommodate future expansion of our headquarters.

We recognized depreciation expense of $95.9 million, $92.8 million, and $94.2 million related to property and
equipment during the years ended July 31, 2023, 2022, and 2021, respectively.

10. Debt

Convertible Senior Notes

In July 2018, we issued $1.7 billion aggregate principal amount of 0.75% Convertible Senior Notes due 2023 (the “2023
Notes”) and in June 2020, we issued $2.0 billion aggregate principal amount of 0.375% Convertible Senior Notes due
2025 (the “2025 Notes,” and together with the 2023 Notes, the “Notes”). The 2023 Notes bear interest at a fixed rate of
0.75% per year, payable semi-annually in arrears on January 1 and July 1 of each year, beginning on January 1, 2019. The
2025 Notes bear interest at a fixed rate of 0.375% per year, payable semi-annually in arrears on June 1 and December 1 of
each year, beginning on December 1, 2020. Each series of the convertible notes is governed by an indenture between
us, as the issuer, and U.S. Bank National Association, as Trustee (individually, each an “Indenture,” and together, the
“Indentures”). The Notes of each series are unsecured, unsubordinated obligations and the applicable Indenture
governing each series of Notes does not contain any financial covenants or restrictions on the payments of dividends,
the incurrence of indebtedness, or the issuance or repurchase of securities by us or any of our subsidiaries. The 2023
Notes were converted prior to or settled on the maturity date of July 1, 2023 in accordance with their terms. The 2025
Notes mature on June 1, 2025. We may redeem for cash all or any portion of the 2025 Notes, at our option, on or after
June 5, 2023 and prior to the 31st scheduled trading day immediately preceding the maturity date if the last reported
sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days
during any 30 consecutive trading day period ending on and including the trading day preceding the date on which we
provide notice of redemption. The redemption will be at a price equal to 100% of the principal amount of the 2025 Notes
and adjusted for interest. If we call any or all of the 2025 Notes for redemption, holders may convert such 2025 Notes
called for redemption at any time prior to the close of business on the second scheduled trading day immediately
preceding the redemption date.

The following table presents details of our Notes (number of shares in millions):

Initial Conversion
Price
88.78
99.20
(1) The 2023 Notes were converted prior to or settled on the maturity date of July 1, 2023.

Conversion Rate
per $1,000 Principal

11.2635 $
10.0806 $

2023 Notes(1)
2025 Notes

Convertible Date
April 1, 2023
March 1, 2025

Initial Number of
Shares
19.1
20.1

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Holders of the Notes may surrender their Notes for conversion at their option at any time prior to the close of business
on the business day immediately preceding their respective convertible dates only under the following circumstances:

• during any fiscal quarter commencing after the fiscal quarters ending on October 31, 2018 and October 31, 2020 for

the 2023 Notes and the 2025 Notes, respectively (and only during such fiscal quarter), if the last reported sale price of
our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading
days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of
the applicable conversion price for the respective Notes on each applicable trading day (the “sale price condition”);

• during the five business day period after any five consecutive trading day period (the “measurement period”) in
which the trading price per $1,000 principal amount of the applicable series of Notes for each trading day of the
measurement period was less than 98% of the product of the last reported sale price of our common stock and the
applicable conversion rate for the respective Notes on each such trading day; or

• upon the occurrence of specified corporate events.

On or after the respective convertible date, holders may surrender all or any portion of their Notes for conversion at any
time prior to the close of business on the second scheduled trading day immediately preceding the applicable maturity
date regardless of the foregoing conditions, and such conversions will be settled upon the applicable maturity date.
Upon conversion, holders of the Notes of a series will receive cash equal to the aggregate principal amount of the Notes
of such series to be converted, and, at our election, cash and/or shares of our common stock for any amounts in excess
of the aggregate principal amount of the Notes of such series being converted.

The conversion price will be subject to adjustment in some events. Holders of the Notes of a series who convert their
Notes of such series in connection with certain corporate events that constitute a “make-whole fundamental change”
under the applicable Indenture are, under certain circumstances, entitled to an increase in the conversion rate for such
series of Notes. Additionally, upon the occurrence of a corporate event that constitutes a “fundamental change” under
the applicable Indenture, holders of the Notes of such series may require us to repurchase for cash all or a portion of the
Notes of such series at a repurchase price equal to 100% of the principal amount of the Notes of such series plus
accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Holders of the 2023 Notes were able to early convert their 2023 Notes in fiscal 2023 up to April 1, 2023 as the sales price
condition had been met. Conversion requests for the 2023 Notes received on or after April 1, 2023 were settled upon
maturity of the 2023 Notes. Holders of the 2025 Notes were able to early convert their 2025 Notes in fiscal 2023 as the
sales price condition was met. During the year ended July 31, 2023, we repaid in cash $1.7 billion in aggregate principal
amount of the Notes and issued 11.4 million shares of common stock to the holders of the Notes for the conversion
value in excess of the principal amount. These shares were fully offset by shares we received from the corresponding
exercise of the associated note hedges.

The sale price condition for the 2025 Notes was met during the fiscal quarter ended July 31, 2023, and as a result, holders
may convert their 2025 Notes during the fiscal quarter ending October 31, 2023. The net carrying amount of the 2025
Notes was classified as a current liability on our consolidated balance sheet as of July 31, 2023.

The sale price condition for the Notes was met during the fiscal quarter ended July 31, 2022, and as a result, holders
could convert their Notes during the fiscal quarter ended October 31, 2022. The net carrying amount of the Notes was
classified as a current liability on our consolidated balance sheet as of July 31, 2022.

The following table sets forth the net carrying amount of our Notes (in millions):

Principal
Less: debt issuance costs, net of amortization

Net carrying amount

July 31, 2023

2023
Notes

2025
Notes

July 31, 2022
2025
Notes

2023
Notes

Total

Total
— $ 1,999.3 $ 1,999.3 $ 1,691.9 $ 1,999.4 $ 3,691.3
(14.5)
—
— $ 1,991.5 $ 1,991.5 $ 1,689.3 $ 1,987.5 $ 3,676.8

(11.9)

(7.8)

(2.6)

(7.8)

The total estimated fair value of the 2025 Notes was $5.0 billion at July 31, 2023. The total estimated fair value of the 2023
Notes and 2025 Notes were $3.2 billion and $3.5 billion at July 31, 2022, respectively. The fair value was determined based
on the closing trading price per $100 of the applicable series of the Notes as of the last day of trading for the period. We
consider the fair value of the Notes at July 31, 2023 and 2022 to be a Level 2 measurement. The fair value of the Notes is
primarily affected by the trading price of our common stock and market interest rates.

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The following table sets forth interest expense recognized related to the Notes (dollars in millions):

Contractual interest expense
Amortization of debt discount(1)

$
$ 11.6
— —
2.6
Total interest expense recognized $ 14.2

Amortization of debt issuance costs

$ 7.5

4.1
$ 11.6

Year Ended July 31, 2023 Year Ended July 31, 2022
2023
Notes

2023
Notes

2025
Notes

Year Ended July 31, 2021
2025
2023
Notes
Notes

Total
19.1 $ 12.7

$ 7.5

— — —
6.7 2.8
$ 25.8 $ 15.5

4.4
$ 11.9

Total
$ 20.2 $ 12.7
— 63.5
7.2 2.3
$ 27.4 $ 78.5

Total
$ 20.2
137.8
5.1
$ 163.1

$ 7.5
74.3
2.8
$ 84.6

Effective interest rate of the liability
component

0.9%

0.6%

0.9%

0.6%

5.2%

5.4%

(1) Upon adoption of the new debt guidance on August 1, 2021, the conversion option is no longer separately accounted for as debt

discount. Our convertible senior notes are accounted for entirely as a liability.

Note Hedges

To minimize the impact of potential economic dilution upon conversion of our convertible senior notes, we entered into
separate convertible note hedge transactions (the “2023 Note Hedges,” with respect to the 2023 Notes, the “2025 Note
Hedges,” with respect to the 2025 Notes, and the 2023 Notes Hedges together with 2025 Note Hedges, the “Note
Hedges”) with respect to our common stock concurrent with the issuance of each series of the Notes.

The following table presents details of our Note Hedges (in millions):

2023 Note Hedges(1)
2025 Note Hedges

Initial Number
of Shares

19.1 $
20.1 $

Aggregate
Purchase
332.0
370.8

(1) The 2023 Note Hedges were settled as a result of the conversions of the 2023 Notes prior to or on July 1, 2023.

The Note Hedges cover shares of our common stock at a strike price per share that corresponds to the initial applicable
conversion price of the applicable series of the Notes, which are also subject to adjustment, and are exercisable upon
conversion of the applicable series of the Notes. The Note Hedges will expire upon maturity of the applicable series of
the Notes. The Note Hedges are separate transactions and are not part of the terms of the applicable series of the
Notes. Holders of the Notes of either series will not have any rights with respect to the Note Hedges. Any shares of our
common stock receivable by us under the Note Hedges are excluded from the calculation of diluted earnings per share
as they are antidilutive. The aggregate amounts paid for the Note Hedges are included in additional paid-in capital on
our consolidated balance sheets.

As a result of the conversions of the 2023 Notes settled during the year ended July 31, 2023, we exercised the
corresponding portion of our 2023 Note Hedges and received 11.4 million shares of our common stock during the
period. As of July 31, 2023, none of our 2023 Note Hedges were outstanding.

Warrants

Separately, but concurrently with the issuance of each series of our convertible senior notes, we entered into
transactions whereby we sold warrants (the “2023 Warrants,” with respect to the 2023 Notes, the “2025 Warrants,” with
respect to the 2025 Notes, and the 2023 Warrants together with the 2025 Warrants, the “Warrants”) to acquire shares of
our common stock, subject to anti-dilution adjustments. The 2023 Warrants and 2025 Warrants are exercisable over 60
scheduled trading days beginning October 2023 and September 2025, respectively.

The following table presents details of our Warrants (in millions, except per share data):

2023 Warrants
2025 Warrants

Initial Number
of Shares

19.1 $
20.1 $

Strike Price
per Share

139.27 $
136.16 $

Aggregate
Proceeds
145.4
202.8

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The shares issuable under the Warrants are included in the calculation of diluted earnings per share when the average
market value per share of our common stock for the reporting period exceeds the applicable strike price for such series
of Warrants. The Warrants are separate transactions and are not part of either series of Notes or Note Hedges and are
not remeasured through earnings each reporting period. Holders of the Notes of either series will not have any rights
with respect to the Warrants. The aggregate proceeds received from the sale of the Warrants are included in additional
paid-in capital on our consolidated balance sheets.

Revolving Credit Facility

On September 4, 2018, we entered into a credit agreement (the “2018 Credit Agreement”) with certain institutional
lenders that provides for a $400.0 million unsecured revolving credit facility (the “2018 Credit Facility”), with an option to
increase the amount of the 2018 Credit Facility by up to an additional $350.0 million, subject to certain conditions. The
2018 Credit Facility expired in April 2023.

On April 13, 2023, we entered into a new credit agreement (the “2023 Credit Agreement”) with certain institutional
lenders that provides for a $400.0 million unsecured revolving credit facility (the “2023 Credit Facility”), with an option to
increase the amount by up to an additional $350.0 million, subject to certain conditions. The 2023 Credit Facility
matures on April 13, 2028.

The borrowings under the 2023 Credit Facility bear interest, at our option, at a base rate plus a spread of 0.000% to
0.375%, or an adjusted term Secured Overnight Financing Rate (“SOFR”) plus a spread of 1.000% to 1.375%, in each case
with such spread being determined based on our leverage ratio. We are obligated to pay an ongoing commitment fee
on undrawn amounts at a rate of 0.090% to 0.150%, depending on our leverage ratio. The interest rates and
commitment fees are also subject to upward and downward adjustments based on our progress towards the
achievement of certain sustainability goals related to greenhouse gas emissions.

As of July 31, 2023, there were no amounts outstanding and we were in compliance with all covenants under the 2023
Credit Agreement.

11. Leases

In May 2015 and October 2015, we entered into a total of three lease agreements for approximately 941,000 square feet
of corporate office space in Santa Clara, California, which serves as our current corporate headquarters. The leases
contain rent holiday periods, scheduled rent increases, lease incentives, and renewal options which allow the lease
terms to be extended beyond their expiration dates of July 2028 through July 2046. Rental payments under the three
lease agreements are approximately $412.0 million over the lease term.

During the years ended July 31, 2023, 2022, and 2021, our net cost for operating leases was $91.3 million, $89.7 million,
and $75.2 million, respectively, primarily consisting of operating lease costs of $64.2 million, $67.6 million, and
$59.3 million, respectively. Our net cost for operating leases also included variable lease costs, short-term lease costs,
and sublease income in the periods presented.

The following tables present additional information for our operating leases (in millions, except for years
and percentages):

Operating cash flows used in payments of operating lease liabilities
Right-of-use assets obtained in exchange for new operating lease liabilities

Year Ended July 31,

2023
82.7 $
71.1 $

2022
81.5 $
33.0 $

2021
81.7
48.6

Weighted-average remaining lease term
Weighted-average discount rate

July 31, 2023

July 31, 2022

5.7 years
4.7%

5.5 years
4.0%

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The following table presents maturities of operating lease liabilities as of July 31, 2023 (in millions):

Fiscal years ending July 31:

2024
2025
2026
2027
2028
2029 and thereafter

Total operating lease payments
Less: imputed interest
Present value of operating lease liabilities
Current portion of operating lease liabilities(1)
Long-term operating lease liabilities

Amount

74.3
73.4
67.8
60.5
59.6
57.2
392.8
(53.4)
339.4
60.2
279.2

(1) Current portion of operating lease liabilities is included in accrued and other liabilities on our consolidated balance sheet.

As of July 31, 2023, we had additional non-cancelable operating leases for office space that had been signed but had not
yet commenced with total future minimum lease payments of $72.1 million. These leases are expected to commence
on or after fiscal 2024, with lease terms ranging from two to twelve years.

12. Commitments and Contingencies

Purchase Commitments

Manufacturing Purchase Commitments

In order to reduce manufacturing lead times and plan for adequate supply, we enter into agreements with
manufacturing partners and component suppliers to procure inventory based on our demand forecasts. The following
table presents details of the aggregate future minimum or fixed purchase commitments under these arrangements
excluding obligations under contracts that we can cancel as of July 31, 2023 (in millions):

Total

2024

2025

2026

2027

2028

2029 and
Thereafter

Fiscal years ending July 31,

157.4 $

82.4 $

35.0 $

40.0 $

— $

—

Manufacturing purchase
commitments

Other Purchase Commitments

We have entered into various non-cancelable agreements with certain service providers, under which we are
committed to minimum or fixed purchases. The following table presents details of the aggregate future non-
cancelable purchase commitments under these agreements as of July 31, 2023 (in millions):

Fiscal years ending July 31,

Other purchase commitments

2024
94.0 $
Additionally, we have a $155.6 million minimum purchase commitment with a service provider through September
2027 with no specified annual commitments.

Total
1,519.2 $

2025
420.6 $

2027
483.8 $

2026
519.4 $

2028
0.6 $

2029 and
Thereafter
0.8

Mutual Covenant Not to Sue and Release Agreement

In January 2020, we executed a Mutual Covenant Not to Sue and Release Agreement for $50.0 million to extend an
existing covenant not to sue for seven years. As the primary benefit of the arrangement was attributable to future use,
the amount was recorded in other assets on our consolidated balance sheets and is amortized to cost of product
revenue on our consolidated statements of operations over the estimated period of benefit of seven years.

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Litigation

We are subject to legal proceedings, claims, tax matters, and litigation arising in the ordinary course of business,
including, for instance, intellectual property and patent litigation. We accrue for contingencies when we believe that a
loss is probable and that we can reasonably estimate the amount of any such loss. As of July 31, 2023, we have not
recorded any significant accruals for loss contingencies associated with such matters.

Legal matters could include speculative, substantial or indeterminate monetary amounts. Significant judgment is
required to determine both the likelihood of there being a loss and the estimated amount of a loss related to such
matters, and we may be unable to estimate the reasonably possible loss or range of loss. The outcomes of outstanding
legal matters are inherently unpredictable, and could, either individually or in aggregate, have a material adverse effect
on us and our results of operations. To the extent there is a reasonable possibility that a loss exceeding amounts already
recognized may be incurred, we will either disclose the estimated additional loss or state that such an estimate cannot
be made.

The following matters arose in the ordinary course of business.

Centripetal Networks, Inc. v. Palo Alto Networks

On March 12, 2021, Centripetal Networks, Inc., filed a lawsuit against us in the United States District Court for the Eastern
District of Virginia. The lawsuit alleges that our products infringe multiple Centripetal patents. We successfully
challenged certain of these patents, which were found unpatentable by the U.S. Patent and Trademark Office. The
complaint requests injunctive relief, monetary damages, and attorneys fees. In addition, Centripetal filed infringement
contentions on certain of their patents in the European Patent Office in Germany, to which we filed invalidity
challenges. Those matters are still pending. The court has set a trial date of January 22, 2024 on the remaining patents.
We are unable, at this time, to reasonably estimate a possible loss or potential range of loss, if any.

Finjan, Inc. v. Palo Alto Networks

On November 4, 2014, Finjan, Inc., filed a lawsuit against us in the United States District Court for the Northern District
of California. The lawsuit alleges that our products infringe multiple Finjan patents. The complaint requests injunctive
relief, monetary damages, and attorneys fees. The court has set a trial date of April 8, 2024. We are unable, at this time,
to reasonably estimate a possible loss or potential range of loss, if any.

Taasera v. Palo Alto Networks

On March 22, 2022, we filed a declaratory judgment action in the United States District Court for the Southern District of
New York (“S.D.N.Y”) seeking a ruling that we are not infringing various Taasera patents. Taasera challenged jurisdiction
in S.D.N.Y, which issue is currently on appeal with the Federal Circuit. Pursuant to an order of the Judicial Panel on
Multidistrict Litigation, this matter has been consolidated in the United States District Court for the Eastern District of
Texas with several other patent infringement matters brought by Taasera. The court has set April 1, 2024 as the date for
the start of consecutive trials of these consolidated matters. The complaint requests injunctive relief, monetary
damages, and attorneys fees. We are unable, at this time, to reasonably estimate a possible loss or potential range of
loss, if any.

Indemnification

Under the indemnification provisions of our standard sales related contracts, we agree to defend our end-customers
against third-party claims asserting infringement of certain intellectual property rights, which may include patents,
copyrights, trademarks, or trade secrets, and to pay judgments entered on such claims. Our exposure under these
indemnification provisions is generally limited to payments made to us for the alleged infringing products over the
preceding twelve months under the agreement. However, certain agreements include indemnification provisions that
could potentially expose us to losses in excess of these payments. In addition, we indemnify our officers, directors, and
certain key employees while they are serving in good faith in their company capacities. To date, we have not recorded
any accruals for loss contingencies associated with indemnification claims or determined that an unfavorable outcome
is probable or reasonably possible.

13. Stockholders’ Equity

Share Repurchase Program

In February 2019, our board of directors authorized a $1.0 billion share repurchase program, which is funded from
available working capital. In December 2020, August 2021, and August 2022, our board of directors authorized
additional $700.0 million, $676.1 million, and $915.0 million increases to this share repurchase program, respectively,
bringing the total authorization under this share repurchase program to $3.3 billion (our “current authorization”). The
expiration date of our current authorization was extended to December 31, 2023, and our repurchase program may be
suspended or discontinued at any time. Repurchases may be made at management’s discretion from time to time on
the open market, through privately negotiated transactions, transactions structured through investment banking
institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing.

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The following table summarizes the share repurchase activity under our share repurchase program (in millions, except
per share amounts):

Number of shares repurchased
Weighted-average price per share (1)

Aggregate purchase price (1)

(1) Includes transaction costs

Year Ended July 31,

2023
1.8
138.65 $
250.0 $

2022
5.4
170.83 $
915.0 $

2021
12.0
98.29
1,178.1

As of July 31, 2023, $750.0 million remained available for future share repurchases under our current repurchase
authorization. The total price of the shares repurchased and related transaction costs are reflected as a reduction to
common stock and additional paid-in capital on our consolidated balance sheets.

14. Equity Award Plans

Share-Based Compensation Plans

Equity Incentive Plans

Our 2021 Equity Incentive Plan (our “2021 Plan”) became effective in December 2021 and replaced our 2012 Equity
Incentive Plan (our “2012 Plan”). Our 2021 Plan provides for the granting of stock options, stock appreciation rights,
restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance shares (“PSAs”), performance-based stock
units (“PSUs”) and performance stock options (“PSOs”) to our employees, directors, and consultants. Upon effectiveness
of the 2021 Plan, the 2012 Plan was terminated and no further awards will be granted under the 2012 Plan. Awards that
were outstanding upon such termination remained outstanding pursuant to their original terms, and any subsequent
expiration, cancellation or forfeiture of awards under our 2012 Plan are returned to our 2021 Plan.

The majority of our equity awards are RSUs, which generally vest over a period of three to four years from the date of
grant. Until vested, RSUs do not have the voting and dividend participation rights of common stock and the shares
underlying the awards are not considered issued and outstanding.

Our PSUs generally vest over a period of one to four years from the date of grant. The number of PSUs eligible to vest is
determined based on the level of achievement against certain performance conditions, market conditions, and a
combination thereof.

During the year ended July 31, 2023, we granted 0.9 million shares of PSUs with both service and market conditions. The
market conditions are satisfied when the price of our common stock is equal to or exceeds stock price targets of
$233.33, $266.67, $300.00, and $333.33 based on the average closing price for 30 consecutive trading days during the
three- or four-year period following the date of grant. To the extent the market conditions have been met, one-fourth of
the awards will vest on each anniversary date of the grant date, subject to continued service. During the year ended
July 31, 2023, the first stock price target for these PSU awards was met, and the related shares will vest when the
underlying service conditions are satisfied.

During the year ended July 31, 2023, we granted 0.8 million shares of PSUs, which contain service and market
conditions. The service conditions are satisfied after a period of five years. The market condition is measured based on
our TSR relative to the TSR of the companies listed in the Standard & Poor’s 500 index.

During the years ended July 31, 2023 and 2022, we granted 1.6 million and 0.6 million shares of PSUs, respectively, which
contain service, performance and market conditions. The service conditions are satisfied after a period of one to three
years. The performance conditions are based on revenue growth or billing growth. The market condition is measured
based on our total shareholder return (“TSR”) relative to the TSR of the companies listed in the Standard & Poor’s 500
index. As of July 31, 2023, we have approved 2.3 million shares of PSUs, which will be granted upon the performance
condition being established during the next two years.

We have also granted PSOs with both service and market conditions. The market condition for PSOs granted in the
fiscal years 2018 and 2019 requires the price of our common stock to equal or exceed $99.25, $132.33, $165.42, and
$198.50 based on the average closing price for 30 consecutive trading days during the four-, five-, six-, and seven-and-a-
half-year periods following the date of grant in fiscal year 2018 and 2019, respectively. The market condition for PSOs
granted in the fiscal year 2021 requires the price of our common stock to equal or exceed $132.33, $165.42, $198.50 and
$233.33 based on the average closing price for 30 consecutive trading days during the three-, four-, five-, and six-and-a-
half-year periods following the date of grant. All of the PSOs granted in the fiscal year 2021 were forfeited in the same
fiscal year and are no longer outstanding. To the extent that the market conditions are met, one-fourth of the PSOs vest
on each anniversary date of the grant date for such PSOs, subject to continued service. The maximum contractual term
of our outstanding PSOs is seven and a half years from the date of grant, depending on vesting period. As of July 31,
2023, all of our outstanding PSOs have been fully vested.

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We net-share settle equity awards held by certain employees by withholding shares upon vesting to satisfy tax
withholding obligations. The shares withheld to satisfy employee tax withholding obligations are returned to our 2021
Plan and will be available for future issuance. Payments for employees’ tax obligations to the tax authorities are
recognized as a reduction to additional paid-in capital and reflected as financing activities on our consolidated
statements of cash flows.

A total of 35.6 million shares of our common stock are reserved for issuance pursuant to our equity incentive plans as of
July 31, 2023.

2012 Employee Stock Purchase Plan

Our 2012 Employee Stock Purchase Plan was adopted by our board of directors and approved by the stockholders on
June 5, 2012, and was effective upon completion of our initial public offering (“IPO”). On August 29, 2017, we amended
and restated our 2012 Employee Stock Purchase Plan (our “2012 ESPP”) to extend the length of our offering periods
from 6 to 24 months.

Our 2012 ESPP permits eligible employees to acquire shares of our common stock at 85% of the lower of the fair market
value of our common stock on the first trading day of each offering period or on the purchase date. If the fair market
value of our common stock on the purchase date is lower than the first trading day of the offering period, the current
offering period will be cancelled after purchase and a new 24-month offering period will begin. Under our 2012 ESPP,
each 24-month offering period consists of four consecutive 6-month purchase periods, with purchase dates on the first
trading day on or after February 28 and August 31 of each year. Participants may purchase shares of common stock
through payroll deductions of up to 15% of their eligible compensation, subject to purchase limits of 1,875 shares per six-
month purchase period and $25,000 worth of stock for each calendar year. Shares purchased under our 2012 ESPP
during the fiscal years ended July 31, 2023, 2022 and 2021 were 1.2 million, 2.1 million and 1.9 million, at an average
exercise price of $138.30 per share, $64.27 per share, and $53.69 per share, respectively.

A total of 16.4 million shares of our common stock are available for sale under our 2012 ESPP as of July 31, 2023. On the
first day of each fiscal year, the number of shares in the reserve may be increased by the lesser of (i) 6,000,000 shares,
(ii) 1% of the outstanding shares of our common stock on the first day of the fiscal year, or (iii) such other amount as
determined by our board of directors.

Assumed Share-Based Compensation Plans

In connection with our acquisitions, we have assumed equity incentive plans of certain acquired companies
(collectively “the Assumed Plans”). The equity awards assumed in connection with each acquisition were granted from
their respective assumed plans. The assumed equity awards will be settled in shares of our common stock and will
retain the terms and conditions under which they were originally granted. No additional equity awards will be granted
under and forfeited awards will not be returned to the Assumed Plans. Refer to Note 7. Acquisitions for more
information on our acquisitions and the related equity awards assumed.

Stock Option Activities

The following table summarizes the stock option and PSO activity under our stock plans during the years ended July 31,
2023, 2022, and 2021 (in millions, except per share amounts):

Stock Options Outstanding

PSOs Outstanding

Number
of
Shares

Weighted-
Average
Exercise
Price Per
Share
6.53
—
4.27
2.61
8.74
6.24
—
18.45
18.45
—
—

0.4 $
— $
(0.2) $
0.0 $
0.2 $
(0.2) $
— $
0.0 $
0.0 $
— $
— $

Balance—July 31, 2020

Granted
Exercised
Forfeited

Balance—July 31, 2021

Exercised
Forfeited

Balance—July 31, 2022

Exercised

Balance—July 31, 2023
Exercisable—July 31, 2023

Weighted-
Average
Remaining
Contractual
Term
(Years)

Aggregate
Intrinsic
Value
34.2

Number
of
Shares

1.5 $

Weighted-
Average
Remaining
Contractual
Term
(Years)

Aggregate
Intrinsic
Value
170.9

5.2 $

Weighted-
Average
Exercise
Price Per
Share
64.71
101.43
—
101.43
64.71
—
61.41
64.85
63.39
65.20
65.20

8.3 $
0.5 $
— $
(0.5) $
8.3 $
— $
(0.3) $
8.0 $
(1.6) $
6.4 $
6.4 $

4.2 $

566.8

3.2 $ 809.3

2.2 $
2.2 $

1,184.6
1,184.6

0.8 $

27.4

0.5 $

6.7

0.0 $
0.0 $

—
—

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- 84 -

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Stock Option Activities

The following table summarizes the stock option and PSO activity under our stock plans during the years ended July 31,

2023, 2022, and 2021 (in millions, except per share amounts):

Stock Options Outstanding

Weighted-

Average

Remaining

PSOs Outstanding

Weighted-

Average

Remaining

Balance—July 31, 2020

Number

Exercise

Contractual

Aggregate

Number

Exercise

Contractual

Aggregate

Price Per

Intrinsic

Price Per

Term

(Years)

Value

1.5 $

34.2

Term

(Years)

Intrinsic

Value

5.2 $

170.9

Granted

Exercised

Forfeited

Exercised

Forfeited

Exercised

Balance—July 31, 2022

Balance—July 31, 2023

Exercisable—July 31, 2023

0.4 $

— $

(0.2) $

0.0 $

0.2 $

(0.2) $

— $

0.0 $

— $
— $

6.53

—

4.27

2.61

8.74

6.24

—

18.45

—
—

64.71

101.43

—

101.43

64.71

—

61.41

64.85

63.39

65.20
65.20

8.3 $

0.5 $

— $

(0.5) $

8.3 $

— $

(0.3) $

8.0 $

(1.6) $

6.4 $
6.4 $

0.5 $

6.7

0.0 $
0.0 $

—
—

3.2 $ 809.3

2.2 $
2.2 $

1,184.6

Balance—July 31, 2021

0.8 $

27.4

4.2 $

566.8

The intrinsic value of options exercised during the years ended July 31, 2023, 2022, and 2021 was $237.7 million,
$29.2 million, and $22.2 million, respectively.

RSU and PSU Activities

The following table summarizes the RSU and PSU activity under our stock plans during the years ended July 31, 2023,
2022, and 2021 (in millions, except per share amounts):

RSUs Outstanding

PSUs Outstanding

Balance—July 31, 2020

Granted(1)(2)

Vested(3)
Forfeited

Balance—July 31, 2021

Granted(1)

Vested(3)
Forfeited

Balance—July 31, 2022

Granted(1)

Vested(3)
Forfeited

Balance—July 31, 2023

Weighted-
Average
Grant-Date
Fair Value
Per Share

Number of
Shares

Aggregate
Intrinsic
Value
1,688.1

67.75 $
99.30
66.97
75.60
85.85 $ 2,760.2
164.85
85.69
95.50
115.51 $
169.04
110.93
128.05
142.61 $

2,456.9

3,013.0

19.8 $
12.3 $
(8.8) $
(2.6) $
20.7 $
5.9 $
(9.0) $
(2.8) $
14.8 $
5.8 $
(7.0) $
(1.5) $
12.1 $

Weighted-
Average
Grant-Date
Fair Value
Per Share

Number of
Shares

Aggregate
Intrinsic
Value
147.2

1.7 $
2.5 $
(0.2) $
(0.2) $
3.8 $
0.8 $
(1.1) $
(0.4) $
3.1 $
3.6 $
(1.3) $
(0.4) $
5.0 $

77.14 $
107.15
65.20
78.65
97.64 $
117.05
83.47
107.31
106.38 $
142.88
112.72
136.95
128.64 $

498.4

513.7

1,242.3

(1) For PSUs, shares granted represent the aggregate maximum number of shares that may be earned and issued with respect to

these awards over their full terms.

(2) Includes 1.2 million RSUs assumed in connection with the acquisitions of Crypsis, Sinefa, Expanse and Bridgecrew, with weighted-

average grant-date fair values of $80.48, $99.06, $105.82 and $118.22, respectively, for the year ended July 31, 2021.

(3) Includes time-based vesting for PSUs.

The aggregate fair value, as of the respective vesting dates, of RSUs vested during the years ended July 31, 2023, 2022,
and 2021 was $1.3 billion, $1.6 billion, and $986.4 million, respectively. The aggregate fair value, as of the respective
vesting dates, of PSUs vested during the years ended July 31, 2023, 2022, and 2021 was $218.9 million, $184.0 million, and
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$20.8 million, respectively.

Shares Available for Grant

The following table presents the stock activity and the total number of shares available for grant under our equity
incentive plans as of July 31, 2023 (in millions):

Balance—July 31, 2022

Authorized
RSUs and PSUs granted
RSUs and PSUs forfeited
Shares withheld for taxes

Balance—July 31, 2023

Share-Based Compensation

Number of shares
13.9
6.0
(9.4)
1.8
0.1
12.4

We record share-based compensation awards based on estimated fair value as of the grant date. The fair value of RSUs
and PSUs not subject to market conditions is based on the closing market price of our common stock on the date of
grant.

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The fair value of the PSUs subject to market conditions is estimated on the grant date using a Monte Carlo simulation
model. No such PSUs were granted during the year ended July 31, 2021. The following table summarizes the
assumptions used and the resulting grant-date fair value of our PSUs subject to market conditions granted during the
years ended July 31, 2023 and 2022:

Year Ended July 31,

Volatility
Expected term (in years)
Dividend yield
Risk-free interest rate
Grant-date fair value per share

2022
36.0% - 41.1%

2023
38.3% - 44.8%
1.0 - 5.0
—%
3.2% - 4.1%

1.4 - 3.0
—%
0.2% - 2.0%
$91.77 - $280.41 $137.16 - $260.71

The expected volatility is based on the historical volatility of our common stock. The expected term is based on the
length of each tranche’s performance period from the grant date. The dividend yield assumption is based on our
current expectations about our anticipated dividend policy. The risk-free interest rate is based on the implied yield
available on U.S. Treasury zero-coupon issues with maturities that approximate the expected term.

The fair value of PSOs is estimated on the grant date using a Monte Carlo simulation model, which predicts settlement
of the PSOs midway between the vesting term and the contractual term. No PSOs were granted during the years
ended July 31, 2023 and 2022. The following table summarizes the assumptions used and the resulting grant-date fair
values of our PSOs granted during the year ended July 31, 2021:

Volatility
Dividend yield
Risk-free interest rate
Weighted-average grant-date fair value per share

Year Ended July 31, 2021
35.9%
—%
0.6%

$27.37

The expected volatility is based on a combination of implied volatility from traded options on our common stock and
the historical volatility of our common stock. The dividend yield assumption is based on our current expectations about
our anticipated dividend policy. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-
coupon issues with terms equal to the contractual terms of each tranche.

The fair value of shares issued under our 2012 ESPP are estimated on the grant date using the Black-Scholes option
pricing model. The following table summarizes the assumptions used and the resulting grant-date fair values of
our ESPP:

Volatility
Expected term (in years)
Dividend yield
Risk-free interest rate
Grant-date fair value per share

2023
38.6% - 44.7%
0.5 - 2.0
—%
3.3% - 5.2%
$48.78 - $74.06

Year Ended July 31,
2022
33.6% - 39.4%
0.5 - 2.0
—%
0.1% - 1.4%
$37.59 - $74.10

2021
34.9% - 42.6%

0.5 - 2.0
—%
0.1%

$23.16 - $43.02

The expected volatility is based on a combination of implied volatility from traded options on our common stock and
the historical volatility of our common stock. The expected term represents the term from the first day of the offering
period to the purchase dates within each offering period. The dividend yield assumption is based on our current
expectations about our anticipated dividend policy. The risk-free interest rate is based on the implied yield available on
U.S. Treasury zero-coupon issues with maturities that approximate the expected term.

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The following table summarizes share-based compensation included in costs and expenses (in millions):

Cost of product revenue
Cost of subscription and support revenue
Research and development
Sales and marketing
General and administrative

Total share-based compensation

Year Ended July 31,

2023
9.8 $
123.4
488.4
335.3
130.4
1,087.3 $

2022
9.3 $
110.2
471.1
304.7
118.1
1,013.4 $

2021
6.2
93.0
428.9
269.9
128.9
926.9

As of July 31, 2023, total compensation cost related to unvested share-based awards not yet recognized was $2.0 billion.
This cost is expected to be amortized over a weighted-average period of approximately 2.6 years. Future grants will
increase the amount of compensation expense to be recorded in these periods.

15. Income Taxes

The following table presents the components of income (loss) before income taxes (in millions):

United States
Foreign
Total

The following table summarizes our provision for income taxes (in millions):

Federal:

Current
Deferred

State:

Current
Deferred

Foreign:

Current
Deferred

Total

Year Ended July 31,

2023
374.3 $
192.0
566.3 $

2022
(152.3) $
(54.9)
(207.2) $

2021
(482.2)
17.2
(465.0)

Year Ended July 31,

2023

2022

26.1 $
19.3

44.0
0.4

44.0
(7.2)
126.6 $

2.6 $
(0.3)

1.5
0.1

58.8
(2.9)
59.8 $

2021

3.3
(5.9)

1.7
0.1

41.3
(6.6)
33.9

For the year ended July 31, 2023, our provision for income taxes increased compared to the year ended July 31, 2022,
primarily due to our profitability in fiscal 2023 and an increase in U.S. taxes driven by capitalization of research and
development expenditure with no offsetting deferred benefit due to our valuation allowance.

For the year ended July 31, 2022, our provision for income taxes increased compared to the year ended July 31, 2021,
primarily due to foreign income and withholding taxes.

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The following table presents the items accounting for the difference between income taxes computed at the federal
statutory income tax rate and our provision for income taxes:

Federal statutory rate
Effect of:

State taxes, net of federal tax benefit
Effects of non-U.S. operations
Change in valuation allowance
Share-based compensation
Tax credits
Non-deductible expenses
Other, net

Total

Year Ended July 31,

2023
21.0%

2.8

9.7

15.5
(12.6)
(15.6)
2.3
(0.7)
22.4%

2022
21.0%

2.7
(16.5)
(158.7)
83.6

41.5
(2.5)
—
(28.9) %

2021
21.0%

1.3
(3.1)
(40.7)
5.0

9.9
(1.3)
0.6
(7.3) %

The following table presents the components of our deferred tax assets and liabilities as of July 31, 2023 and 2022
(in millions):

Deferred tax assets:

Accruals and reserves
Operating lease liabilities
Deferred revenue
Net operating loss carryforwards
Tax credits
Capitalized research expenditures
Share-based compensation
Fixed assets and intangible assets
Interest carryforward

Gross deferred tax assets
Valuation allowance

Total deferred tax assets

Deferred tax liabilities:

Operating lease right-of-use assets
Deferred contract costs
Other deferred tax liabilities

Total deferred tax liabilities

Net deferred tax assets (liabilities)

July 31,

2023

88.5 $
94.1
708.1
551.0
338.9
354.8
66.0
1,698.3
—
3,899.7
(3,586.7)
313.0

(73.5)
(186.7)
(58.2)
(318.4)
(5.4) $

2022

141.1
86.0
475.5
759.1
317.4
—
59.2
1,803.6
55.8
3,697.7
(3,414.1)
283.6

(61.0)
(183.6)
(27.8)
(272.4)
11.2

A valuation allowance is provided when it is more likely than not that the deferred tax asset will not be realized. We
regularly evaluate the need for a valuation allowance. We evaluate and weigh all available positive and negative
evidence such as historic results, future reversals of existing deferred tax liabilities, projected future taxable income, as
well as prudent and feasible tax-planning strategies. The assessment requires significant judgment and is performed in
each of the applicable jurisdictions. Due to recent profitability, a reversal of our valuation allowance in certain
jurisdictions in the foreseeable future is reasonably possible. As of July 31, 2023, we have provided a valuation allowance
for our federal, state, United Kingdom, and certain other foreign deferred tax assets that we believe will, more likely
than not, be unrealizable. The net valuation allowance increased by $172.6 million from the year ended July 31, 2022 to
the year ended July 31, 2023, primarily due to capitalization of research and development expenditures and deferred
revenue, partially offset by net operating losses and intangible assets.

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- 88 -

As of July 31, 2023, we had federal, state, and foreign net operating loss carryforwards of approximately $66.2 million,
$447.8 million, and $2.0 billion, respectively, as reported on our tax returns, available to reduce future taxable income, if
any. If not utilized, our federal and state net operating loss carryforwards will expire in various amounts at various dates
beginning in the years ending July 31, 2034 and July 31, 2026, respectively. Our foreign net operating loss will carry
forward indefinitely.

As of July 31, 2023, we had federal and state research and development tax credit carryforwards of approximately
$323.9 million and $249.3 million, respectively, as reported on our tax returns. If not utilized, the federal credit
carryforwards will expire in various amounts at various dates beginning in the year ending July 31, 2028. The state credit
carryforwards have no expiration.

As of July 31, 2023, we had foreign tax credit carryforwards of $10.6 million as reported on our tax returns. If not utilized,
the foreign tax credit carryforwards will expire in various amounts at various dates beginning in the year ending July 31,
2024.

Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to
the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state
provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

As of July 31, 2023, we had $360.0 million of unrecognized tax benefits, $70.4 million of which would affect income tax
expense if recognized, after consideration of our valuation allowance in the United States and other assets. As of July 31,
2022, we had $414.0 million of unrecognized tax benefits, $76.1 million of which would affect income tax expense if
recognized, after consideration of our valuation allowance in the United States and other assets. We do not expect the
amount of unrecognized tax benefits as of July 31, 2023 to materially change over the next 12 months.

We file federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitations. Generally, all
years remain subject to adjustment due to our net operating loss and credit carryforwards. We currently have ongoing
tax audits in various jurisdictions and at various times. The primary focus of these audits is, generally, profit allocation.
The ultimate amount and timing of any future settlements cannot be predicted with reasonable certainty.

We recognize both interest and penalties associated with uncertain tax positions as a component of income tax
expense. During the year ended July 31, 2023, we recognized a net income tax benefit related to interest and penalties
of $4.8 million. During the years ended July 31, 2022 and 2021, we recognized income tax expense related to interest and
penalties of $5.2 million and $3.5 million, respectively. We had accrued interest and penalties on our consolidated
balance sheets related to unrecognized tax benefits of $5.1 million and $20.9 million as of July 31, 2023 and
2022, respectively.

The following table presents a reconciliation of the beginning and ending amount of our gross unrecognized tax
benefits (in millions):

Unrecognized tax benefits at the beginning of the period

Additions for tax positions taken in prior years
Reductions for tax positions taken in prior years
Additions for tax positions taken in the current year
Reduction relating to audit settlement

Unrecognized tax benefits at the end of the period

Year Ended July 31,

2023
414.0 $
7.8
(99.8)
66.9
(28.9)
360.0 $

2022
372.9 $
3.5
(7.4)
45.0
—
414.0 $

2021
326.4
26.5
(2.5)
22.5
—
372.9

During the year ended July 31, 2023, our reductions in uncertain tax positions primarily related to settlements with non-
U.S. tax authorities and remeasurement of certain unrecognized tax benefits. As a result of our settlement agreements
with non-U.S. tax authorities, we paid a total of $39.8 million, including interest and penalties.

Our additions for tax positions taken in the years ended July 31, 2023, 2022 and 2021 were primarily attributable to
uncertain tax positions related to tax credits.

As of July 31, 2023, 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.

16. Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by basic weighted-average shares
outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by diluted
weighted-average shares outstanding during the period giving effect to all potentially dilutive securities to the extent
they are dilutive. Potentially dilutive securities include shares issuable upon conversion of our convertible senior notes
using the if-converted method, warrants related to the issuance of convertible senior notes, and equity awards under
our employee equity incentive plans using the treasury stock method.

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- 89 -

The following table presents the computation of basic and diluted net income (loss) per share of common stock (in
millions, except per share data):

Net income (loss)
Weighted-average shares used to compute net income (loss)
per share, basic
Weighted-average effect of potentially dilutive securities:

Convertible senior notes
Warrants related to the issuance of convertible senior notes
Employee equity incentive plans

Weighted-average shares used to compute net income (loss)
per share, diluted
Net income (loss) per share, basic
Net income (loss) per share, diluted

Year Ended July 31,

2023
439.7 $

2022
(267.0) $

2021
(498.9)

303.2

295.6

289.1

17.9
9.3
11.9

—
—
—

342.3

1.45 $
1.28 $

295.6
(0.90) $
(0.90) $

—
—
—

289.1
(1.73)
(1.73)

The following securities were excluded from the computation of diluted net income (loss) per share of common stock
for the periods presented as their effect would have been antidilutive (in millions):

Convertible senior notes
Warrants related to the issuance of convertible senior notes
Employee equity incentive plans

Total

17. Other Income, Net

The following table sets forth the components of other income, net (in millions):

Year Ended July 31,

2023
—
—
3.9
3.9

2022
39.2
39.2
26.8
105.2

Interest income
Foreign currency exchange gains (losses), net
Other, net

Total other income, net

Year Ended July 31,

2023
224.4 $
(7.9)
(10.3)
206.2 $

2022
15.6 $
1.8
(8.4)
9.0 $

2021
39.2
39.2
34.9
113.3

2021
8.5
(5.4)
(0.7)
2.4

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- 90 -

18. Segment Information

We conduct business globally and sales are primarily managed on a geographic theater basis. Our chief operating
decision maker reviews financial information presented on a consolidated basis accompanied by information about
revenue by geographic region for purposes of allocating resources and evaluating financial performance. We have one
business activity and there are no segment managers who are held accountable for operations, operating results, and
plans for levels, components, or types of products or services below the consolidated unit level. Accordingly, we are
considered to be in a single reportable segment and operating unit structure.

The following table presents our long-lived assets, which consist of property and equipment, net and operating lease
right-of-use assets, by geographic region (in millions):

Long-lived assets:
United States
Israel
Other countries

Total long-lived assets

Year Ended July 31,

2023

400.4 $
76.8
140.6
617.8 $

2022

446.1
55.4
98.3
599.8

Refer to Note 2. Revenue for revenue by geographic theater and revenue for groups of similar products and services for
the years ended July 31, 2023, 2022, and 2021.

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- 91 -

Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure

Not applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the
effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). In designing and evaluating the disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and
procedures must reflect the fact that there are resource constraints and that management is required to apply its
judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on our evaluation, our chief executive officer and chief financial officer concluded that, as of July 31, 2023, our
disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable
assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange
Commission (“SEC”) rules and forms, and that such information is accumulated and communicated to our
management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions
regarding required disclosure.

Management’s Annual Report on Internal Control over
Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control
over financial reporting as of July 31, 2023, based on the framework set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013 framework).
Based on that assessment, management concluded that, as of July 31, 2023, our internal control over financial reporting
was effective.

The effectiveness of our internal control over financial reporting as of July 31, 2023 has been audited by Ernst & Young
LLP, the independent registered public accounting firm that audits our consolidated financial statements, as stated in
their report which is included in Part II, Item 8 of this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation
required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended July 31, 2023 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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- 92 -

Item 9B. Other Information

Trading Plans of Directors and Executive Officers

Set forth below is certain information regarding Rule 10b5-1 trading plans adopted by our directors and officers (as
defined in Rule 16a-1(f)) during the fourth quarter of fiscal 2023. The Rule 10b5-1 trading plans listed below are each
intended to satisfy the affirmative defense of Rule 10b5-1(c).

Name
Nikesh Arora

Title
Chairman and Chief
Executive Officer

Date Plan Was
Adopted
June 8, 2023

William “BJ” Jenkins, Jr.

President

May 26, 2023

Total Amount of
Common Stock to
be Sold Under the
Plan
2,000,000

13,000

Expiration Date
August 30, 2024 or
when all shares have
been sold

June 29, 2024 or when
all shares have been
sold

No other officers or directors, as defined in Rule 16a-1(f), adopted, modified and/or terminated a “Rule 10b5-1 trading
arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Regulation S-K Item 408, during the fourth
quarter of fiscal 2023.

Item 9C. Disclosure Regarding Foreign
Jurisdictions That Prevent Inspections

Not applicable.

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- 93 -

Part III

Item 10. Directors, Executive Officers and
Corporate Governance

The information required by this item will be contained in our definitive proxy statement to be filed with the SEC in
connection with our 2023 annual meeting of stockholders (the “Proxy Statement”), which is expected to be filed not
later than 120 days after the end of our fiscal year ended July 31, 2023 and is incorporated herein by reference.

Item 11. Executive Compensation

The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related
Stockholder Matters

The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference.

Item 13. Certain Relationships and Related
Transactions, and Director Independence

The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference.

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- 94 -

Part IV

Item 15. Exhibits and Financial Statement
Schedules

Documents filed as part of this Annual Report on Form 10-K are as follows:

1. Consolidated Financial Statements

Our Consolidated Financial Statements are listed in the “Index to Consolidated Financial Statements” under Part II,
Item 8 of this Annual Report on Form 10-K.

2. Financial Statement Schedules

Financial statement schedules have been omitted because they are not required, not applicable, not present in
amounts sufficient to require submission of the schedule, or the required information is shown in the Consolidated
Financial Statements or the notes thereto.

3. Exhibits

The following documents are incorporated by reference or are filed with this Annual Report on Form 10-K, in each
case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

Exhibit Index

Exhibit
Number
3.1

Exhibit Description
Restated Certificate of Incorporation of the Registrant.
Amended and Restated Bylaws of the Registrant.

Incorporated by Reference
Exhibit
3.1

File No.

Form
10-K 001-35594
001-35594
001-35594

8-K
8-K

Filing Date
October 4, 2012
May 23, 2022

August 30, 2016

3.1

3.2

3.3

4.1

4.2

4.3

10.1*

10.2*

10.3*

10.4*

10.5*

10.6*

10.7*

Certificate of Change of Location of Registered Agent
and/or Registered Office.

Indenture between the Registrant and U.S. Bank
National Association, dated as of June 8, 2020.

Form of Global 0.375% Convertible Senior Note due
2025 (included in Exhibit 4.1).

Description of Registrant’s Securities.

Form of Indemnification Agreement between the
Registrant and its directors and officers.

2012 Equity Incentive Plan and related
form agreements.

Form of 2012 Equity Incentive Plan Performance-
Based Restricted Stock Unit Award Agreement.

2021 Equity Incentive Plan.

Form of 2021 Equity Incentive Plan Global Stock
Option Award Agreement.

Form of 2021 Equity Incentive Plan Global Restricted
Stock Unit Award Agreement.

2012 Employee Stock Purchase Plan, as amended and
restated, and related form agreements.

- 97 -
- 95 -

8-K

001-35594

4.1

June 8, 2020

8-K

001-35594

4.2

June 8, 2020

S-1/A

333-180620

10.1

July 9, 2012

10-Q

001-35594

10.2

November 26, 2019

10-Q

001-35594

10.4

November 19, 2021

S-8

333-268930
333-261697

99.1

99.2

December 21, 2022
December 16, 2021

S-8

333-261697

99.3

December 16, 2021

10-K

001-35594

10.7

September 6, 2022

Exhibit
Number
10.8*

Exhibit Description

RedLock Inc. 2015 Stock Plan, as amended, and related
form agreements under RedLock Inc. 2015 Stock Plan,
as amended.

Form
S-8

Incorporated by Reference
Exhibit
99.1

File No.
333-227901

Filing Date
October 19, 2018

10.9*

10.10*

10.11*

10.12*

10.13*

10.14*

10.15*

10.16*

10.17*

10.18*

10.19*

10.20*

10.21*

10.22*

10.23*

10.24*

10.25*

10.26*

10.27*

10.28*

Aporeto, Inc. Amended and Restated 2015 Stock
Option and Grant Plan.

CloudGenix Inc. 2013 Equity Incentive Plan.
Crypsis Group Holdings, LLC 2017 Equity
Incentive Plan.

Sinefa Group, Inc. 2020 Stock Plan.

Expanse Holding Company, Inc. Amended and
Restated 2012 Stock Incentive Plan

S-8

333-235854

99.1

January 8, 2020

S-8

333-238014
333-249387

99.1

May 5, 2020

October 8, 2020

S-8

333-251423
333-251425

99.1

December 17, 2020
December 17, 2020

Gamma Networks, Inc. 2018 Stock Option and Grant
Plan.

S-8

333-259327

99.1

September 3, 2021

Bridgecrew, Inc. 2019 Stock Incentive Plan.
Cider Security Ltd. 2020 Equity Incentive Plan.
US Sub-Plan to Cider Security Ltd. 2020 Equity
Incentive Plan.

S-8

99.1

333-254042
333-268931 99.1
99.2

333-268931

March 9, 2021
December 21, 2022
December 21, 2022

Employee Incentive Compensation Plan, as amended
and restated.

10-Q

001-35594

10.2

November 25, 2014

Clawback Policy, adopted as of August 29, 2017.

Amended and Restated Outside Director
Compensation Policy (last amended
February 16, 2022).

Continued Service Policy.

Palo Alto Networks, Inc. Deferred Compensation Plan
effective June 1, 2022

Employment Agreement between Palo Alto
Networks (Israel Analytics) Ltd. and Nir Zuk, dated
August 18, 2020.

Offer Letter between the Registrant and Nikesh Arora,
dated May 30, 2018.

Offer Letter between the Registrant and Josh Paul,
dated August 5, 2021.

Confirmatory Employment Letter with Updated
Change in Control Protection between the Registrant
and Lee Klarich, dated December 19, 2011.

Addendum to Employment Offer Letter by and
between the Registrant and Dipak Golechha, dated
March 17, 2021.

Addendum to Employment Offer Letter by and
between the Registrant and Dipak Golechha, dated
February 18, 2022.

10-Q 001-35594
001-35594
10-Q

10.3

10.4

November 21, 2017
February 23, 2022

10-Q 001-35594
001-35594
10-K

10.3

May 20, 2022

10.23

September 6, 2022

10-Q

001-35594

10.1

November 19, 2020

8-K

001-35594

10.2

June 4, 2018

8-K

001-35594

10.1

September 8, 2021

10-Q

001-35594

10.4

November 30, 2018

8-K

001-35594

10.1

March 19, 2021

10-Q

001-35594

10.1

May 20, 2022

- 98 -
- 96 -

Exhibit
Number
10.29*

10.30*

10.31*

10.32**

Exhibit Description

Employment Offer Letter by and between the
Registrant and William “BJ” Jenkins, dated
July 27, 2021.

Addendum to Employment Offer Letter between
the Registrant and William “BJ” Jenkins, dated
February 18, 2022.

Form of Offer Letter between the Registrant and its
directors.

Amended and Restated Flextronics Manufacturing
Services Agreement, by and between the Registrant
and Flextronics Telecom Systems Ltd., dated
April 1, 2019.

10.33

10.34

10.35

10.36

10.37

10.38

10.39

10.40

10.41

10.42

10.43

10.44

10.45

10.46

Vendor Information Security Terms between the
Registrant and Flextronics Telecom Systems Ltd.,
dated July 23, 2021.

Form of Convertible Note Hedge Confirmation.
Form of Warrant Confirmation.

Lease between the Registrant and Santa Clara
Campus Property Owner I LLC, dated May 28, 2015.

Lease by and between the Registrant and Santa Clara
Campus Property Owner I LLC, dated October 7, 2015.
Amendment No. 1 to Lease by and between the
Registrant and Santa Clara Phase I Property LLC,
dated November 9, 2015.

Amendment No. 1 to Lease by and between the
Registrant and Santa Clara Campus Property Owner I
LLC, dated November 9, 2015.

Amendment No. 1 to Lease by and between the
Registrant and Santa Clara Campus Property Owner I
LLC, dated September 16, 2016.

Amendment No. 2 to Lease by and between the
Registrant and Santa Clara Campus Property Owner I
LLC, dated September 16, 2016.

Amendment No. 2 to Lease by and between the
Registrant and Santa Clara Campus Property Owner I
LLC, dated November 16, 2016.

- 99 -
- 97 -

Form
8-K

Incorporated by Reference
Exhibit
10.1

File No.
001-35594

Filing Date
August 12, 2021

10-Q

001-35594

10.2

May 20, 2022

10-K

001-35594

10.27

September 3, 2021

10-Q

001-35594

10.1

May 30, 2019

10-K

001-35594

10.29

September 3, 2021

8-K
8-K
10-K

001-35594
001-35594
001-35594

10.2

10.3

June 8, 2020

10.29

September 17, 2015

10-K

001-35594

10.30

September 17, 2015

10-K

001-35594

10.31

September 17, 2015

8-K/A

001-35594

10.1

October 19, 2015

10-Q

001-35594

10.2

November 24, 2015

10-Q

001-35594

10.3

November 24, 2015

10-Q

001-35594

10.1

November 22, 2016

10-Q

001-35594

10.2

November 22, 2016

10-Q

001-35594

10.3

November 22, 2016

10-Q

001-35594

10.1

March 1, 2017

10-Q

001-35594

10.2

March 1, 2017

Exhibit Description

Amendment No. 3 to Lease by and between the
Registrant and Santa Clara Campus Property Owner I
LLC, dated November 16, 2016.

Amendment No. 3 to Lease by and between the
Registrant and Santa Clara EFH LLC, dated
June 22, 2017.

Amendment No. 3 to Lease by and between the
Registrant and Santa Clara G LLC, dated June 22, 2017.
Amendment No. 4 to Lease by and between the
Registrant and Santa Clara EFH LLC, dated
June 22, 2017.

Amendment No. 4 to Lease by and between the
Registrant and Santa Clara Phase III EFH LLC, dated
September 29, 2017.

Amendment No. 4 to Lease by and between the
Registrant and Santa Clara Phase III G LLC, dated
September 29, 2017.

Amendment No. 5 to Lease by and between the
Registrant and Santa Clara Phase III EFH LLC, dated
September 29, 2017.

Credit Agreement, dated as of April 13, 2023 among
the Registrant, the lenders party thereto and Wells
Fargo, National Association, as administrative agent.

Form
10-Q

Incorporated by Reference
Exhibit
10.3

File No.
001-35594

Filing Date
March 1, 2017

10-K

001-35594

10.40

September 7, 2017

10-K

001-35594

10.41

September 7, 2017

10-K

001-35594

10.42

September 7, 2017

10-Q

001-35594

10.5

November 21, 2017

10-Q

001-35594

10.6

November 21, 2017

10-Q

001-35594

10.7

November 21, 2017

8-K

001-35594

10.1

April 19, 2023

Exhibit
Number
10.47

10.48

10.49

10.50

10.51

10.52

10.53

10.54

21.1

23.1

24.1

31.1

31.2

32.1†

32.2†

List of subsidiaries of the Registrant.

Consent of Independent Registered Public
Accounting Firm.

Power of Attorney (contained in the signature page to
this Annual Report on Form 10-K).

Certification of the Chief Executive Officer pursuant to
Section 302(a) of the Sarbanes-Oxley Act of 2002.

Certification of the Chief Financial Officer pursuant to
Section 302(a) of the Sarbanes-Oxley Act of 2002.

Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.

XBRL Instance Document.

101.INS
101.SCH XBRL Taxonomy Schema Linkbase Document.
101.CAL XBRL Taxonomy Calculation Linkbase Document.
101.DEF XBRL Taxonomy Definition Linkbase Document.
101.LAB XBRL Taxonomy Labels Linkbase Document.
101.PRE XBRL Taxonomy Presentation Linkbase Document.

- 100 -
- 98 -

Exhibit
Number
104

Exhibit Description

Form

Cover Page Interactive Data File (formatted as inline
XBRL and contained in Exhibit 101)

Indicates a management contract or compensatory plan or arrangement.

Incorporated by Reference
Exhibit

File No.

Filing Date

** Certain portions of this exhibit have been omitted as the Registrant has determined (i) the omitted information is not material and

(ii) the omitted information would likely cause harm to the Registrant if publicly disclosed.

† The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Annual Report on Form 10-K, are not deemed filed
with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date
of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.

Item 16. Form 10-K Summary

Not applicable.

- 101 -
- 99 -

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on September 1, 2023.

PALO ALTO NETWORKS, INC.

By:

/s/ NIKESH ARORA
Nikesh Arora
Chairman and Chief Executive Officer

- 102 -
- 100 -

Power of Attorney

KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Nikesh Arora, Dipak Golechha, and Josh Paul, and each of them, as his or her true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes
as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their, his or her substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature

Title

Date

/s/ NIKESH ARORA
Nikesh Arora

/s/ DIPAK GOLECHHA

Dipak Golechha

/s/ JOSH PAUL
Josh Paul

/s/ NIR ZUK

Nir Zuk

/s/ APARNA BAWA
Aparna Bawa

/s/ JOHN M. DONOVAN
John M. Donovan

/s/ CARL ESCHENBACH

Carl Eschenbach

/s/ DR. HELENE D. GAYLE
Dr. Helene D. Gayle

/s/ JAMES J. GOETZ

James J. Goetz

/s/ RT HON SIR JOHN KEY
Rt Hon Sir John Key

/s/ MARY PAT MCCARTHY

Mary Pat McCarthy

/s/ LORRAINE TWOHILL
Lorraine Twohill

Chairman, Chief Executive Officer and
Director (Principal Executive Officer)

September 1, 2023

Chief Financial Officer (Duly Authorized
Officer and Principal Financial Officer)

September 1, 2023

Chief Accounting Officer (Duly Authorized
Officer and Principal Accounting Officer)

September 1, 2023

Chief Technology Officer and Director

September 1, 2023

Director

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BOARD OF DIRECTORS

CORPORATE HEADQUARTERS

Nikesh Arora
Chief Executive Officer and
Chair of the Board of Directors

Nir Zuk
Chief Technology Officer and Director

Aparna Bawa
Chief Operating Officer
Zoom Video Communications, Inc.

John M. Donovan
Former Chief Executive Officer
AT&T Communications

Carl Eschenbach
Co-Chief Executive Officer, Workday, Inc.

Dr. Helene D. Gayle
President, Spelman College

James J. Goetz
Managing Member, Sequoia Capital

Rt Hon Sir John Key
Former Prime Minister of New Zealand

Mary Pat McCarthy
Former Vice Chair, KPMG LLP

Lorraine Twohill
Chief Marketing Officer, Google

CORPORATE EXECUTIVES

Nikesh Arora
Chief Executive Officer and
Chair of the Board of Directors

Dipak Golechha
Chief Financial Officer

BJ Jenkins
President

Lee Klarich
Chief Product Officer

Nir Zuk
Chief Technology Officer and Director

Palo Alto Networks, Inc.
3000 Tannery Way
Santa Clara, California 95054
T: (408) 753-4000

www.paloaltonetworks.com

VIRTUAL ANNUAL MEETING OF STOCKHOLDERS

Tuesday, December 12, 2023 at 11:00 a.m. PST
www.virtualshareholdermeeting.com/PANW2023

REGISTRAR AND TRANSFER AGENT

For questions regarding your account, changes of
address or the consolidation of accounts, please
contact the Company’s transfer agent:

Computershare Trust Company, N.A.
P.O. Box 43006
Providence RI 02940-3006
T: (877) 373-6374
Foreign Stockholders: (781) 575-2879

www.computershare.com/investor

LEGAL COUNSEL

Wilson Sonsini Goodrich & Rosati
Professional Corporation
Palo Alto, California

INDEPENDENT AUDITORS

Ernst & Young LLP
San Jose, California

INVESTOR RELATIONS

Palo Alto Networks, Inc. Investor Relations
3000 Tannery Way
Santa Clara, California 95054

Email: ir@paloaltonetworks.com
T: (408) 753-4000

3000 Tannery Way
Santa Clara, CA 95054

Main: +1.408.753.4000

Sales: +1.866.320.4788

Support: +1.866.898.9087