Palo Alto Networks Inc. (NASDAQ:PANW)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibits a generally increasing trend from 2020 to 2023, rising from approximately 696 million US dollars to over 2.61 billion US dollars. However, there is a noticeable decline in 2024 and a further reduction projected for 2025, with NOPAT decreasing to about 2.50 billion and then 1.79 billion US dollars respectively.

Cost of Capital

The cost of capital shows a gradual upward trend over the analyzed periods, starting at 13.83% in 2020 and steadily increasing to 15.72% projected in 2025. This indicates a rising required rate of return, potentially reflecting increased risk or changes in the market environment affecting the company’s capital expenses.

Invested Capital

Invested capital consistently increases over the years without any observed reversals. The figure grows from roughly 7.03 billion US dollars in 2020 to an estimated 12.43 billion US dollars in 2025, indicating ongoing investments and capital allocation aimed at supporting growth or operational needs.

Economic Profit

Economic profit reveals significant fluctuations across the timeline. Initially, there are negative values in 2020 and 2021 at approximately -276 million and -217 million US dollars respectively, signifying returns below the cost of capital. A positive turnaround occurs in 2022, with economic profit reaching nearly 500 million US dollars, expanding substantially through 2023 to over 1.26 billion US dollars. In 2024, economic profit declines to approximately 845 million US dollars and turns negative again in 2025 with an estimated loss of 164 million US dollars. This pattern suggests varying efficiency in wealth creation relative to the invested capital and cost of capital over time.

Net Income (Loss)

The net income exhibited significant volatility across the periods presented. Initially, there was a substantial loss of $267 million in 2020, which deepened to nearly $499 million in 2021. In 2022, the loss reduced to $267 million, indicating some recovery. Subsequently, in 2023, the company returned to profitability with a net income of approximately $440 million.

Notably, in 2024 net income surged dramatically to approximately $2.58 billion, representing a significant upward trend. However, in 2025, net income declined to about $1.13 billion, still maintaining a profit but at a reduced level compared to the previous year.

Net Operating Profit After Taxes (NOPAT)

NOPAT demonstrated a continuous growth trend from 2020 through 2023. Starting at approximately $696 million in 2020, it increased to $845 million in 2021. The upward trajectory accelerated in 2022 with NOPAT reaching about $1.72 billion and peaked at around $2.61 billion in 2023.

Following the peak, NOPAT decreased in 2024 and 2025 to approximately $2.50 billion and $1.79 billion, respectively. Although these declines represent a downward adjustment from the 2023 high, NOPAT levels in 2024 and 2025 remain substantially higher than in the initial years.

Overall Trends and Insights

There is a clear pattern of financial improvement over the period analyzed. Both net income and NOPAT shifted from negative or moderate levels in the earlier years to significant positive figures in later periods.

The net income recovery and subsequent profits after 2022 suggest enhanced operational efficiency or impactful business activities, given that NOPAT, a measure of operational profitability, generally increased prior to and during the years of rising net income.

The reduction in net income and NOPAT in 2025 compared to the previous year could indicate emerging challenges or a normalization after an exceptionally high period in 2024. Nevertheless, profitability remains robust relative to earlier years.

Provision for (benefit from) income taxes

The provision for income taxes shows considerable volatility over the analyzed period. Initially, the values remain positive and relatively stable from 2020 through 2023, increasing from 35,200 to 126,600 thousand US dollars. However, in 2024, there is a significant negative spike, with the provision recorded as a benefit amounting to -1,589,300 thousand US dollars. This sudden reversal likely indicates a substantial tax credit or adjustment during this year. In 2025, the provision shifts back to a positive figure of 461,800 thousand US dollars, indicating another major change in tax positioning.

Cash operating taxes

Cash operating taxes demonstrate a steady upward trend from 2020 to 2025. The figures increase from 57,464 thousand US dollars in 2020 to 74,038 thousand US dollars in 2023, showing consistent growth. Notably, cash taxes surge dramatically in 2024 and 2025, reaching 384,452 and 740,528 thousand US dollars, respectively. This sharp increase in cash taxes contrasts with the provision for income taxes' negative spike in 2024, suggesting differences in the timing or nature of book versus cash tax recognition during these years.

The analysis of the financial data reveals several notable trends over the observed periods.

Total Reported Debt & Leases

This item shows a decreasing trend from the fiscal year ending July 31, 2020 through July 31, 2025. The debt stood at approximately 3.48 billion USD in 2020 and increased slightly to around 3.61 billion USD in 2021. Afterward, the amount peaked in 2022 at roughly 4.02 billion USD before embarking on a steady decline each year. By 2025, the total reported debt and leases had decreased significantly to about 417 million USD, indicating a substantial reduction in the company's leverage or obligations over the period.

Stockholders’ Equity

Stockholders’ equity initially decreased sharply from approximately 1.10 billion USD in 2020 to 210 million USD by 2022, suggesting potential losses, share repurchases, or other equity-reducing activities during this interval. However, beginning in 2023, equity increased markedly, reaching 1.75 billion USD and continuing to grow substantially to about 5.17 billion USD in 2024 and further to 7.82 billion USD in 2025. This strong recovery and subsequent growth may indicate improved profitability, capital infusions, or retained earnings enhancement.

Invested Capital

Invested capital displayed a consistent upward trajectory throughout all periods. Starting at roughly 7.03 billion USD in 2020, it increased gradually each year, reaching approximately 12.43 billion USD by 2025. This steady rise suggests ongoing investment into the company's operations and assets, potentially to support growth strategies or expansion initiatives.

In summary, the financial data indicates a strategic reduction of debt alongside a significant increase in equity and invested capital over the observed period. This combination points towards strengthening financial stability and potentially enhanced capacity for growth and value creation.

The economic profit of the company exhibited significant fluctuations over the observed periods. Initially, economic profit was negative, starting at -275,933 thousand US dollars in 2020 and improving slightly to -217,100 thousand US dollars in 2021. However, in 2022, there was a notable positive shift with economic profit reaching 499,492 thousand US dollars. This upward trend continued in 2023, peaking at 1,263,026 thousand US dollars, followed by a decrease to 844,868 thousand US dollars in 2024. In 2025, economic profit turned negative again, registering -164,330 thousand US dollars.

The invested capital steadily increased throughout the period, beginning at 7,029,200 thousand US dollars in 2020 and rising each year, reaching 12,434,500 thousand US dollars by 2025. This continuous growth indicates ongoing investment and expansion of the company’s capital base.

The economic spread ratio mirrored the pattern of economic profit. It was negative in 2020 and 2021 at -3.93% and -2.95% respectively, transitioned to positive figures from 2022 through 2024, peaking at 13.83% in 2023. However, in 2025, the economic spread ratio declined sharply to -1.32%, turning negative once again.

Overall, the data depict a company that experienced initial losses with gradual improvement in economic profitability, reaching strong positive performance in 2022 and 2023 supported by rising invested capital. Nonetheless, profitability metrics declined again in 2025, suggesting challenges in maintaining economic value generation despite continued growth in invested capital.

Adjusted Revenue

The adjusted revenue shows a consistent upward trend over the presented periods. Starting from approximately $4.33 billion in 2020, it increases steadily each year, reaching about $10.49 billion by 2025. This reflects sustained revenue growth with a significant acceleration particularly between 2021 and 2024, although the growth rate slightly moderates toward 2025.

Economic Profit

The economic profit exhibits considerable volatility throughout the timeframe. Initially, the company experiences negative economic profit in 2020 and 2021, with losses decreasing from roughly -$276 million to -$217 million, indicating some improvement. A substantial turnaround occurs in 2022, with economic profit turning positive to nearly $499 million, followed by further increases in 2023, peaking at approximately $1.26 billion. Despite this positive momentum, economic profit declines in 2024 to about $845 million and reverses to a negative result around -$164 million in 2025.

Economic Profit Margin

The economic profit margin mirrors the pattern of economic profit, starting negative at -6.37% in 2020 and improving to -3.97% in 2021. It turns positive by 2022 at 6.69% and peaks sharply at 13.74% in 2023, indicating enhanced profitability relative to revenue. The margin subsequently decreases to 8.27% in 2024 and turns negative again at -1.57% in 2025, suggesting reduced efficiency or increased costs impacting profit relative to revenue.

Overall Analysis

The financial data reveal robust revenue growth through the period, contrasting with a more fluctuating profit profile. Economic profit shifts from losses to gains before declining once more towards the end of the period, indicating potential challenges in maintaining profitability despite increasing sales. The peak profitability in 2023 followed by a decline suggests operational or market factors adversely affecting cost management or revenue quality after that year. Continuous growth in revenue alongside volatile profitability highlights the importance of addressing efficiency and cost control to sustain economic profit margins in future periods.