Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Return on Sales
Return on Investment
Palo Alto Networks Inc., profitability ratios
Based on: 10-K (reporting date: 2026-07-31), 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).
The financial trajectory from 2021 to 2026 is characterized by a significant transition from operational losses to a period of peak profitability, followed by a notable contraction in the final year. A consistent recovery phase occurred between 2021 and 2024, with profitability metrics reaching their zenith before trending downward in 2025 and 2026.
- Gross Profit Margin
- Gross profitability remained robust and relatively stable throughout the period, consistently staying above 68%. A peak of 74.35% was reached in 2024, followed by a gradual decline to 70.36% by 2026. This suggests a strong underlying ability to manage direct costs, despite the volatility observed in bottom-line metrics.
- Operating and Net Profit Margins
- Operational efficiency showed a clear upward trend from 2021, with the operating profit margin moving from -7.15% to a peak of 13.48% in 2025. Net profit margins exhibited higher volatility, transitioning from a loss of -11.72% in 2021 to an exceptional spike of 32.11% in 2024. However, both metrics experienced a downturn in 2026, with the net profit margin compressing to 2.67%.
- Return on Equity (ROE) and Return on Assets (ROA)
- Return metrics mirrored the trajectory of net margins. ROE experienced extreme volatility, dropping to -127.14% in 2022 before rebounding sharply to 49.86% in 2024. Similarly, ROA transitioned from negative territory to a high of 12.89% in 2024. By 2026, both metrics declined significantly, with ROE reaching 1.12% and ROA falling to 0.63%, indicating a diminished efficiency in generating returns from equity and assets.
Overall, the data indicates a successful pivot to profitability between 2023 and 2025, though the sharp decline in all margin and return ratios in 2026 suggests a recent erosion of profitability and operational efficiency.
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Gross Profit Margin
Palo Alto Networks Inc., gross profit margin calculation, comparison to benchmarks
| Jul 31, 2026 | Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Gross profit | 8,077) | 6,770) | 5,968) | 4,983) | 3,783) | 2,981) | |
| Revenue | 11,480) | 9,222) | 8,028) | 6,893) | 5,502) | 4,256) | |
| Profitability Ratio | |||||||
| Gross profit margin1 | 70.36% | 73.41% | 74.35% | 72.29% | 68.76% | 70.05% | |
| Benchmarks | |||||||
| Gross Profit Margin, Competitors2 | |||||||
| Accenture PLC | — | 31.91% | 32.61% | 32.34% | 31.99% | 32.38% | |
| Adobe Inc. | — | 89.27% | 89.04% | 87.87% | 87.70% | 88.18% | |
| AppLovin Corp. | — | 87.86% | 75.22% | 67.74% | 55.41% | 64.62% | |
| Cadence Design Systems Inc. | — | 86.36% | 86.05% | 89.36% | 89.57% | 89.73% | |
| Datadog Inc. | — | 79.96% | 80.79% | 80.74% | 79.30% | 77.23% | |
| International Business Machines Corp. | — | 58.19% | 56.65% | 55.45% | 54.00% | 54.90% | |
| Intuit Inc. | 80.17% | 79.57% | 78.72% | 78.13% | 81.09% | 82.53% | |
| Microsoft Corp. | 67.94% | 68.82% | 69.76% | 68.92% | 68.40% | 68.93% | |
| Oracle Corp. | 65.82% | 70.51% | 71.41% | 72.85% | 79.08% | 80.59% | |
| Palantir Technologies Inc. | — | 82.37% | 80.25% | 80.62% | 78.56% | 77.99% | |
| Salesforce Inc. | 77.68% | 77.19% | 75.50% | 73.34% | 73.48% | 74.41% | |
| ServiceNow Inc. | — | 77.53% | 79.18% | 78.59% | 78.29% | 77.05% | |
| Synopsys Inc. | — | 76.98% | 79.68% | 79.08% | 79.07% | 79.50% | |
| Workday Inc. | 75.70% | 75.50% | 75.60% | 72.41% | 72.21% | 72.25% | |
Based on: 10-K (reporting date: 2026-07-31), 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).
1 2026 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenue
= 100 × 8,077 ÷ 11,480 = 70.36%
2 Click competitor name to see calculations.
Financial performance from 2021 to 2026 is characterized by consistent expansion in both total revenue and absolute gross profit. Revenue grew from US$ 4,256 million in 2021 to US$ 11,480 million by 2026, while gross profit increased from US$ 2,981 million to US$ 8,077 million over the same period.
- Gross Profit Margin Trends
- The gross profit margin exhibited volatility throughout the analyzed timeframe. An initial decrease occurred between 2021 and 2022, with the margin sliding from 70.05% to 68.76%. This was followed by a period of steady expansion, culminating in a peak of 74.35% in 2024.
- Margin Contraction Phase
- Following the 2024 peak, a downward trajectory is observed. The margin declined to 73.41% in 2025 and further contracted to 70.36% by 2026. This return to 2021 baseline levels indicates that the cost of revenue began to grow at a faster rate than total revenue in the final two years of the period.
- Analysis of Absolute versus Percentage Growth
- A divergence is noted between absolute profit growth and margin percentages. While the gross profit margin percentage declined after 2024, absolute gross profit continued to increase, rising from US$ 5,968 million in 2024 to US$ 8,077 million in 2026. This suggests that scale expansion continued to drive total profit gains despite the erosion of marginal efficiency.
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Operating Profit Margin
Palo Alto Networks Inc., operating profit margin calculation, comparison to benchmarks
| Jul 31, 2026 | Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Operating income (loss) | 695) | 1,243) | 684) | 387) | (189) | (304) | |
| Revenue | 11,480) | 9,222) | 8,028) | 6,893) | 5,502) | 4,256) | |
| Profitability Ratio | |||||||
| Operating profit margin1 | 6.05% | 13.48% | 8.52% | 5.62% | -3.43% | -7.15% | |
| Benchmarks | |||||||
| Operating Profit Margin, Competitors2 | |||||||
| Accenture PLC | — | 14.68% | 14.79% | 13.74% | 15.21% | 15.08% | |
| Adobe Inc. | — | 36.63% | 31.35% | 34.26% | 34.64% | 36.76% | |
| AppLovin Corp. | — | 75.75% | 39.78% | 19.74% | -1.70% | 5.37% | |
| Cadence Design Systems Inc. | — | 28.17% | 29.10% | 30.59% | 30.15% | 26.07% | |
| Datadog Inc. | — | -1.29% | 2.02% | -1.57% | -3.50% | -1.86% | |
| International Business Machines Corp. | — | 17.50% | 14.95% | 15.17% | 13.50% | 11.97% | |
| Intuit Inc. | 27.43% | 26.14% | 22.29% | 21.86% | 20.20% | 25.95% | |
| Microsoft Corp. | 46.78% | 45.62% | 44.64% | 41.77% | 42.06% | 41.59% | |
| Oracle Corp. | 30.59% | 30.80% | 28.99% | 26.21% | 25.74% | 37.58% | |
| Palantir Technologies Inc. | — | 31.59% | 10.83% | 5.39% | -8.46% | -26.66% | |
| Salesforce Inc. | 20.06% | 19.01% | 14.38% | 3.29% | 2.07% | 2.14% | |
| ServiceNow Inc. | — | 13.74% | 12.42% | 8.49% | 4.90% | 4.36% | |
| Synopsys Inc. | — | 12.97% | 22.13% | 21.72% | 22.87% | 17.48% | |
| Workday Inc. | 7.55% | 4.91% | 2.52% | -3.57% | -2.27% | -5.76% | |
| Operating Profit Margin, Sector | |||||||
| Software & Services | — | 32.68% | 30.48% | 27.37% | 27.20% | 28.02% | |
| Operating Profit Margin, Industry | |||||||
| Information Technology | — | 30.76% | 26.46% | 24.34% | 26.23% | 26.58% | |
Based on: 10-K (reporting date: 2026-07-31), 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).
1 2026 Calculation
Operating profit margin = 100 × Operating income (loss) ÷ Revenue
= 100 × 695 ÷ 11,480 = 6.05%
2 Click competitor name to see calculations.
The financial trajectory reflects a strategic transition from operational losses to a period of margin expansion, followed by a projected contraction in profitability efficiency despite continued revenue growth.
- Revenue Growth Trends
- A consistent upward trajectory in revenue is observed, growing from US$ 4,256 million in 2021 to a projected US$ 11,480 million by 2026. This represents a steady expansion of the top line over the six-year period.
- Operational Profitability Transition
- The company shifted from an operational deficit to profitability between 2022 and 2023. Operating income improved from a loss of US$ 304 million in 2021 to a positive US$ 387 million in 2023, indicating a successful pivot toward operational viability.
- Operating Profit Margin Expansion
- The operating profit margin exhibited a strong recovery and expansion phase, rising from -7.15% in 2021 to a peak of 13.48% in 2025. This trend suggests an increase in operational efficiency and the ability to scale revenue faster than operating expenses during this interval.
- 2026 Performance Divergence
- A notable divergence occurs in 2026, where revenue reaches its highest point at US$ 11,480 million, yet the operating profit margin declines sharply to 6.05%. This compression is mirrored in the operating income, which falls to US$ 695 million from a previous high of US$ 1,243 million in 2025, suggesting a significant increase in operating costs relative to revenue growth in the final period.
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Net Profit Margin
Palo Alto Networks Inc., net profit margin calculation, comparison to benchmarks
| Jul 31, 2026 | Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net income (loss) | 307) | 1,134) | 2,578) | 440) | (267) | (499) | |
| Revenue | 11,480) | 9,222) | 8,028) | 6,893) | 5,502) | 4,256) | |
| Profitability Ratio | |||||||
| Net profit margin1 | 2.67% | 12.30% | 32.11% | 6.38% | -4.85% | -11.72% | |
| Benchmarks | |||||||
| Net Profit Margin, Competitors2 | |||||||
| Accenture PLC | — | 11.02% | 11.19% | 10.72% | 11.17% | 11.69% | |
| Adobe Inc. | — | 30.00% | 25.85% | 27.97% | 27.01% | 30.55% | |
| AppLovin Corp. | — | 60.83% | 33.55% | 10.87% | -6.84% | 1.27% | |
| Cadence Design Systems Inc. | — | 20.94% | 22.74% | 25.46% | 23.84% | 23.29% | |
| Datadog Inc. | — | 3.14% | 6.85% | 2.28% | -2.99% | -2.02% | |
| International Business Machines Corp. | — | 15.69% | 9.60% | 12.13% | 2.71% | 10.01% | |
| Intuit Inc. | 21.29% | 20.55% | 18.19% | 16.59% | 16.23% | 21.41% | |
| Microsoft Corp. | 40.31% | 36.15% | 35.96% | 34.15% | 36.69% | 36.45% | |
| Oracle Corp. | 25.37% | 21.68% | 19.76% | 17.02% | 15.83% | 33.96% | |
| Palantir Technologies Inc. | — | 36.31% | 16.13% | 9.43% | -19.61% | -33.75% | |
| Salesforce Inc. | 17.96% | 16.35% | 11.87% | 0.66% | 5.45% | 19.16% | |
| ServiceNow Inc. | — | 13.16% | 12.97% | 19.30% | 4.49% | 3.90% | |
| Synopsys Inc. | — | 18.89% | 36.94% | 21.05% | 19.38% | 18.02% | |
| Workday Inc. | 7.26% | 6.23% | 19.02% | -5.90% | 0.57% | -6.54% | |
| Net Profit Margin, Sector | |||||||
| Software & Services | — | 26.19% | 24.83% | 21.91% | 21.55% | 25.12% | |
| Net Profit Margin, Industry | |||||||
| Information Technology | — | 25.66% | 20.48% | 20.24% | 22.27% | 23.48% | |
Based on: 10-K (reporting date: 2026-07-31), 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).
1 2026 Calculation
Net profit margin = 100 × Net income (loss) ÷ Revenue
= 100 × 307 ÷ 11,480 = 2.67%
2 Click competitor name to see calculations.
The financial performance between July 2021 and July 2026 exhibits a volatile trajectory in profitability despite a consistent and strong growth in top-line revenue.
- Revenue Growth Trend
- Revenue demonstrates a sustained upward trajectory, increasing from US$ 4,256 million in 2021 to US$ 11,480 million by 2026. This steady climb indicates a consistent expansion of the business scale over the analyzed period.
- Net Profit Margin Evolution
- The net profit margin underwent a significant transition, moving from a deficit of -11.72% in 2021 to a positive margin of 6.38% by 2023. A sharp spike is observed in July 2024, where the margin peaked at 32.11%. This peak was followed by a substantial contraction, falling to 12.30% in 2025 and further declining to 2.67% by 2026.
- Net Income Volatility and Margin Compression
- Net income shifted from losses in 2021 and 2022 to a peak of US$ 2,578 million in 2024. However, a notable divergence occurs between 2024 and 2026; while revenue continued to grow, net income plummeted to US$ 307 million. This trend suggests a significant increase in operating expenses or non-operating costs that outpaced revenue growth, leading to the observed compression of the net profit margin.
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Return on Equity (ROE)
Palo Alto Networks Inc., ROE calculation, comparison to benchmarks
| Jul 31, 2026 | Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net income (loss) | 307) | 1,134) | 2,578) | 440) | (267) | (499) | |
| Stockholders’ equity | 27,492) | 7,824) | 5,170) | 1,748) | 210) | 635) | |
| Profitability Ratio | |||||||
| ROE1 | 1.12% | 14.49% | 49.86% | 25.15% | -127.14% | -78.63% | |
| Benchmarks | |||||||
| ROE, Competitors2 | |||||||
| Accenture PLC | — | 24.61% | 25.68% | 26.75% | 31.11% | 30.25% | |
| Adobe Inc. | — | 61.34% | 39.42% | 32.86% | 33.85% | 32.59% | |
| AppLovin Corp. | — | 156.17% | 144.96% | 28.39% | -10.13% | 1.66% | |
| Cadence Design Systems Inc. | — | 20.26% | 22.58% | 30.58% | 30.93% | 25.39% | |
| Datadog Inc. | — | 2.89% | 6.77% | 2.40% | -3.56% | -1.99% | |
| International Business Machines Corp. | — | 32.45% | 22.06% | 33.29% | 7.47% | 30.38% | |
| Intuit Inc. | 24.04% | 19.63% | 16.07% | 13.81% | 12.57% | 20.89% | |
| Microsoft Corp. | 30.23% | 29.65% | 32.83% | 35.09% | 43.68% | 43.15% | |
| Oracle Corp. | 40.20% | 60.84% | 120.26% | 792.45% | — | 262.43% | |
| Palantir Technologies Inc. | — | 22.00% | 9.24% | 6.04% | -14.57% | -22.71% | |
| Salesforce Inc. | 12.61% | 10.13% | 6.93% | 0.36% | 2.48% | 9.81% | |
| ServiceNow Inc. | — | 13.48% | 14.83% | 22.69% | 6.46% | 6.22% | |
| Synopsys Inc. | — | 4.70% | 25.17% | 20.01% | 17.85% | 14.31% | |
| Workday Inc. | 8.88% | 5.82% | 17.09% | -6.57% | 0.65% | -8.62% | |
| ROE, Sector | |||||||
| Software & Services | — | 26.90% | 28.81% | 28.49% | 30.78% | 35.91% | |
| ROE, Industry | |||||||
| Information Technology | — | 34.38% | 28.82% | 31.26% | 38.03% | 41.64% | |
Based on: 10-K (reporting date: 2026-07-31), 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).
1 2026 Calculation
ROE = 100 × Net income (loss) ÷ Stockholders’ equity
= 100 × 307 ÷ 27,492 = 1.12%
2 Click competitor name to see calculations.
The financial trajectory between 2021 and 2026 exhibits a significant transition from net losses to profitability, followed by a period of substantial equity expansion and subsequent margin compression in return on equity.
- Net Income Trends
- An initial period of instability is characterized by net losses in 2021 and 2022. A pivot occurred in 2023 with the recording of 440 million USD in net income, which peaked in 2024 at 2,578 million USD. However, a downward trend in profitability followed, with net income decreasing to 1,134 million USD in 2025 and further contracting to 307 million USD by 2026.
- Stockholders' Equity Growth
- Equity levels demonstrated an aggressive upward trajectory over the analyzed period. Following a decrease to 210 million USD in 2022, equity grew exponentially, increasing from 1,748 million USD in 2023 to 27,492 million USD by 2026. This represents a massive expansion of the company's capital base.
- Return on Equity (ROE) Dynamics
- The ROE exhibited extreme volatility, beginning at -78.63% in 2021 and reaching a low of -127.14% in 2022. The shift toward profitability resulted in a sharp increase in ROE, peaking at 49.86% in 2024. This metric subsequently declined steeply to 14.49% in 2025 and reached 1.12% by 2026. The precipitous decline in ROE during the final two years is attributable to the simultaneous reduction in net income and the rapid accumulation of stockholders' equity, indicating a substantial decrease in the efficiency of capital utilization.
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Return on Assets (ROA)
Palo Alto Networks Inc., ROA calculation, comparison to benchmarks
| Jul 31, 2026 | Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net income (loss) | 307) | 1,134) | 2,578) | 440) | (267) | (499) | |
| Total assets | 48,460) | 23,576) | 19,991) | 14,501) | 12,254) | 10,242) | |
| Profitability Ratio | |||||||
| ROA1 | 0.63% | 4.81% | 12.89% | 3.03% | -2.18% | -4.87% | |
| Benchmarks | |||||||
| ROA, Competitors2 | |||||||
| Accenture PLC | — | 11.74% | 12.99% | 13.41% | 14.55% | 13.68% | |
| Adobe Inc. | — | 24.17% | 18.39% | 18.23% | 17.51% | 17.70% | |
| AppLovin Corp. | — | 45.92% | 26.92% | 6.66% | -3.30% | 0.58% | |
| Cadence Design Systems Inc. | — | 10.92% | 11.76% | 18.36% | 16.53% | 15.87% | |
| Datadog Inc. | — | 1.62% | 3.18% | 1.23% | -1.67% | -0.87% | |
| International Business Machines Corp. | — | 6.97% | 4.39% | 5.55% | 1.29% | 4.35% | |
| Intuit Inc. | 12.41% | 10.47% | 9.22% | 8.58% | 7.45% | 13.29% | |
| Microsoft Corp. | 17.64% | 16.45% | 17.21% | 17.56% | 19.94% | 18.36% | |
| Oracle Corp. | 6.53% | 7.39% | 7.42% | 6.33% | 6.15% | 10.48% | |
| Palantir Technologies Inc. | — | 18.26% | 7.29% | 4.64% | -10.80% | -16.02% | |
| Salesforce Inc. | 6.64% | 6.02% | 4.14% | 0.21% | 1.52% | 6.14% | |
| ServiceNow Inc. | — | 6.71% | 6.99% | 9.96% | 2.44% | 2.13% | |
| Synopsys Inc. | — | 2.76% | 17.31% | 11.90% | 10.45% | 8.66% | |
| Workday Inc. | 3.83% | 2.93% | 8.39% | -2.72% | 0.28% | -3.24% | |
| ROA, Sector | |||||||
| Software & Services | — | 12.15% | 12.26% | 11.19% | 11.32% | 12.19% | |
| ROA, Industry | |||||||
| Information Technology | — | 15.31% | 11.80% | 12.34% | 14.33% | 14.52% | |
Based on: 10-K (reporting date: 2026-07-31), 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).
1 2026 Calculation
ROA = 100 × Net income (loss) ÷ Total assets
= 100 × 307 ÷ 48,460 = 0.63%
2 Click competitor name to see calculations.
The financial trajectory over the analyzed period reveals a significant transition from initial net losses to a peak in profitability, followed by a period of declining returns relative to asset growth. The company shifted from a negative return on assets (ROA) in the first two years to a positive return, reaching a maximum efficiency peak in 2024 before experiencing a sharp contraction in the final two years.
- Net Income Performance
- A transition from net losses of US$ 499 million in 2021 to positive earnings is observed, with net income peaking at US$ 2,578 million in 2024. However, a subsequent downward trend occurred, with net income falling to US$ 1,134 million in 2025 and further declining to US$ 307 million in 2026.
- Asset Base Expansion
- Total assets exhibited consistent and accelerated growth throughout the period. The asset base increased from US$ 10,242 million in 2021 to US$ 23,576 million by 2025, followed by a substantial surge to US$ 48,460 million in 2026. This indicates a rapid expansion of the company's resource base, particularly in the final year of the sequence.
- Return on Assets (ROA) Volatility
- The ROA mirrored the net income trend but was further influenced by the expanding asset base. After improving from -4.87% in 2021 to a peak of 12.89% in 2024, the ratio declined to 4.81% in 2025 and dropped significantly to 0.63% in 2026. The precipitous decline in ROA during the final two years is attributable to the combination of decreasing net income and a massive increase in total assets, which diluted the efficiency of asset utilization.
Overall, while the company successfully moved beyond its initial loss-making phase, the recent data indicates a decoupling between asset accumulation and profit generation. The sharp increase in total assets in 2026, coinciding with a decline in net income, has resulted in a near-zero ROA, suggesting that recent capital investments or asset acquisitions have not yet translated into proportional earnings growth.
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