Common-Size Income Statement
Quarterly Data
Palo Alto Networks Inc., common-size consolidated income statement (quarterly data)
Based on: 10-K (reporting date: 2026-07-31), 10-Q (reporting date: 2026-04-30), 10-Q (reporting date: 2026-01-31), 10-Q (reporting date: 2025-10-31), 10-K (reporting date: 2025-07-31), 10-Q (reporting date: 2025-04-30), 10-Q (reporting date: 2025-01-31), 10-Q (reporting date: 2024-10-31), 10-K (reporting date: 2024-07-31), 10-Q (reporting date: 2024-04-30), 10-Q (reporting date: 2024-01-31), 10-Q (reporting date: 2023-10-31), 10-K (reporting date: 2023-07-31), 10-Q (reporting date: 2023-04-30), 10-Q (reporting date: 2023-01-31), 10-Q (reporting date: 2022-10-31), 10-K (reporting date: 2022-07-31), 10-Q (reporting date: 2022-04-30), 10-Q (reporting date: 2022-01-31), 10-Q (reporting date: 2021-10-31), 10-K (reporting date: 2021-07-31), 10-Q (reporting date: 2021-04-30), 10-Q (reporting date: 2021-01-31), 10-Q (reporting date: 2020-10-31).
The financial trajectory shows a strategic transition in the revenue model, characterized by a consistent shift from hardware-centric product sales toward a subscription and support-based ecosystem. This evolution is mirrored by a general improvement in operational efficiency and a transition from operating losses to profitability, although recent periods indicate increased volatility.
- Revenue Composition
- A long-term migration toward recurring revenue is evident. Product revenue, which accounted for approximately 25% of total revenue in late 2020, declined to a range between 16% and 22% by 2025. Conversely, subscription and support revenue grew from roughly 75% to peak at over 83% in late 2024, indicating a successful pivot toward a software-as-a-service (SaaS) or subscription-oriented business model.
- Gross Margin Trends
- Gross profit margins exhibited an upward trend for several years, rising from approximately 69% in 2020 to a peak of 74.83% in late 2023. This improvement was driven by a reduction in the cost of revenue as a percentage of total sales. However, a notable contraction occurred in early 2026, where gross margins fell to approximately 67.5%, coinciding with a spike in the cost of revenue to over 32%.
- Operating Expense Dynamics
- Operating expenses as a percentage of revenue showed a general downward trend, falling from peaks of nearly 80% in 2021 to lows of approximately 53% in mid-2025. Sales and marketing expenses, the largest component of operating spend, decreased from 41% to roughly 32% over the period, suggesting increased scaling efficiency. Research and development spending remained relatively stable but trended slightly downward from 25% to 20% before rising again in 2026. General and administrative costs remained low, typically under 10%, with a significant outlier in January 2024.
- Operating and Net Profitability
- The company transitioned from consistent operating losses—reaching as low as -10.28% of revenue in April 2021—to sustained operating profitability starting in mid-2022. Operating margins peaked at 19.60% in July 2025 before reverting to a loss of -6.10% in April 2026. Net income was heavily influenced by non-operational items, most notably a significant tax benefit in January 2024 that resulted in a net income spike to 88.45% of revenue.
- Financial Volatility in Recent Periods
- The data for 2026 reveals a sharp reversal in profitability trends. A significant increase in cost of revenue and a rise in sales and marketing expenses led to a decline in gross profit and a return to operating losses. This is further compounded by a substantial negative impact from other income/expense items in July 2026, which reached -12.93% of revenue, contributing to a net loss of -8.27%.
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