Common-Size Income Statement
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- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Return on Assets (ROA) since 2012
- Current Ratio since 2012
- Total Asset Turnover since 2012
- Price to Earnings (P/E) since 2012
- Analysis of Debt
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Palo Alto Networks Inc., common-size consolidated income statement
Based on: 10-K (reporting date: 2025-07-31), 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31).
The common-size income statement reveals significant shifts in the company’s financial performance over the six-year period. Revenue consistently represents 100% of itself, as expected. A notable trend is the increasing proportion of revenue derived from subscription and support services, while product revenue declines. Simultaneously, the cost of revenue as a percentage of revenue demonstrates a decrease, improving gross profitability.
- Revenue Composition
- Product revenue decreased from 31.22% in 2020 to 19.54% in 2025, indicating a strategic shift or changing market dynamics. Conversely, subscription and support revenue increased substantially, rising from 68.78% in 2020 to 80.46% in 2025. This suggests a growing emphasis on recurring revenue models.
- Profitability
- Gross profit as a percentage of revenue initially declined from 70.68% to 68.76% before recovering to 73.41% in 2025. This improvement is likely linked to the decreasing cost of revenue percentage. Operating income experienced a dramatic turnaround, moving from an operating loss of -5.25% in 2020 to a substantial gain of 13.48% in 2025. This is driven by both revenue mix and expense management.
- Expense Management
- Operating expenses as a percentage of revenue decreased consistently from 75.93% in 2020 to 59.94% in 2025. This reduction is observed across all major expense categories: research and development, sales and marketing, and general and administrative expenses all show decreasing percentages of revenue. The most significant reduction is in sales and marketing expenses. General and administrative expenses show a particularly sharp decline in the later years.
- Non-Operating Items
- Interest expense decreased significantly over the period, while interest income increased. Other income, net, also shows a positive trend. These factors contribute to the overall improvement in income before income taxes. The provision for (benefit from) income taxes fluctuates considerably, moving from a provision in earlier years to a benefit in 2024 and back to a provision in 2025.
- Net Income
- Net income as a percentage of revenue demonstrates the most striking improvement, transitioning from a loss of -7.83% in 2020 to a gain of 32.11% in 2024, before decreasing to 12.30% in 2025. This substantial increase reflects the combined effects of improved gross margin, reduced operating expenses, and favorable non-operating items.
In summary, the company has undergone a significant transformation, shifting towards a subscription-based revenue model, improving operational efficiency, and achieving substantial profitability growth. While net income decreased slightly in the final year of the period, the overall trend indicates a positive trajectory.