Palo Alto Networks, Inc. · NASDAQ:PANW

Palo Alto Networks — Q4 2023 Earnings Presentation

134 slides from Palo Alto Networks's earnings presentation, Aug 18, 2023

Slide 3: Safe Harbor
Safe Harbor This presentation contains “forward-looking” statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including statements related to our financial guidance for the first quarter of fiscal 2024 and fiscal year 2024, our financial estimates f
Slide 5: Q4 capped a strong year of execution
Q4 capped a strong year of execution TOTAL REVENUE OPERATING MARGIN (NON-GAAP) DELIVERED AT OR ABOVE ALL INITIAL FY’23 GUIDANCE TARGETS $1.95B 28.4% GUIDANCE AS OF 8/22/22 ACTUAL RESULTS +26% y/y +760 bps y/y Total Billings 1 $8.95B - $9.05B $9.19B +20%-21% yr/yr +23%yr/yr TOTAL BILLINGS ADJ. FREE C
Slide 6: Continued strong demand for cybersecurity drove our NGS business
Continued strong demand for cybersecurity drove our NGS business We achieved key milestones Q4’23 NGS ARR ¹ Q4’23 NGS ARR growth y/y SASE >$1B in FY’23 bookings $2.95B +56% Net New NGS ARR q/q Cortex >$1B in FY’23 bookings +$381M Largest Net New ARR in PANW history Prisma Cloud Largest Net New ARR o
Slide 7: Platformization continues to drive large deal momentum
Platformization continues to drive large deal momentum Six out of top-10 deals were Driven by NGS Large deal growth Deal1 size (TCV) Deal 1 ✓ ✓ Deal 2 ✓ Deal 3 ✓ Deal 4 Deal 5 +37% y/y +43% Top 10 y/y Q4'23 ✓ Deal 6 deals ✓ Deal 7 ✓ Deal 8 ✓ Deal 9 Number of Deals 1 Number of Deals 1 ✓ Deal 10 % of
Slide 8: XSIAM traction amplifying Cortex trajectory
XSIAM traction amplifying Cortex trajectory XSIAM Transactions are Large and Strategic Driving MTTR ² 3-5 Year >$1M from days to customer commitments Average ACV 1 hours / minutes >$200M Cortex Active Customers Q4'23 Average Cortex Deal Size XSIAM Bookings within first year of release >5K +28% y/y +
Slide 9: SASE continues to display strong performance
SASE SASE continues to display strong performance Marquee deals in Q4 Q4’23 SASE ARR Growth FY’23 Bookings 1 $43M ~60% y/y >$1B New win with a Business Consulting and Services Company Two new SASE leadership position $26M Expansion with a US Technology Company A Leader in Forrester Zero Leader in ID
Slide 10: SASE continues to display strong performance
SASE SASE continues to display strong performance Marquee deals in Q4 Q4’23 SASE ARR Growth FY’23 Bookings 1 $43M ~60% y/y >$1B New win with a Business Consulting and Services Company Two new SASE leadership position BREAKING Single Vendor SASE $26M Expansion with a US Technology Magic Quadrant Comp
Slide 11: Sustained credit consumption propels Prisma Cloud through $500M in ARR
Sustained credit consumption propels 1 Prisma Cloud through $500M in ARR +57% +179% Growth in +31% y/y y/y y/y multi-module adoption 2+ 3+ 5+ customers 2 modules modules modules Enhancing Cloud Security Launched 11th module based Extending capabilities on Cider acquisition Platform Lead in API Agent
Slide 12: FY23: Successful execution through a tough macro environment
FY23: Successful execution through a tough macro environment Go to market Platformization transformation Strong product Driving efficiency innovation and leverage © 2023 Palo Alto Networks, Inc. All rights reserved. 12
Slide 14: Strong top-line growth at industry leading scale
Strong top-line growth at industry leading scale Total 27% 25% 26% 24% 26% Next-Gen 60% 67% 63% 60% 56% Revenue Security ARR $2,955M $1,953M 2,574M Total $1,563M $1,655M $1,721M Next-Gen 2,332M $1,551M $2,111M Revenue Security ARR $1,893M Next-Gen Total Security ARR Revenue (y/y) (y/y) Q4’22 Q1’23 Q
Slide 15: Managing through the impact of the rising cost of money
Managing through the impact of the rising cost of money % of Bookings under Deferred Remaining Performance Obligation Payment Plans 1 40% 38% 39% 35% 30% $10.6B $8.8B $9.2B $8.3B $8.2B Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 % of Bookings under deferred payment plans Remaining Pe
Slide 16: Industry hardware growth trend is returning to expected baseline level
Industry hardware growth trend is returning to expected baseline level 20% 10% Pandemic headwinds 0% Pandemic Supply chain Macro headwinds, reopening drives constraints driving shipments still catch up early orders buoyed by backlog + Industry pricing impacts -10%% CY19 CY20 CY21 CY22 CY23 CY24 Futu
Slide 17: Software transition and NGS growth is driving more recurring revenue
Software transition and NGS growth is driving more recurring revenue FWaaP Billings Growth & Recurring Revenue as a % SW as a % of FWaaP of Total Revenue 45% 79% 26% 26% 72% 73% 19% 68% 66% 46% 49% 28% Q4’20 Q4’21 Q4’22 Q4’23 Q4’20 Q4’21 Q4’22 Q4’23 SW % of FWaaP Billings Recurring Revenue3 % of Tot
Slide 18: Profitability supporting a higher free cash flow baseline
Profitability supporting a higher free cash flow baseline Operating Income Growth & Margin Fiscal Year Adjusted Non-GAAP % of Bookings on (Non-GAAP) Free Cash Flow Margin Deferred Payment Plans1 59% 34% 30% -6% 39% 24% 33% 33% 19% 19% 18% 28% FY’20 FY’21 FY’22 FY’23 FY’20 FY’21 FY’22 FY’23 FY’20 FY’
Slide 19: Q4 Results Summary
Q4 Results Summary Q4’23 Guidance (as of 5/23/23) Q4’23 Actual $3.15B-$3.20B $3.16B Total Billings 17%-19% yr/yr 18% yr/yr $1.937B-$1.967B $1.95B Total Revenue 25%-27% yr/yr 26% yr/yr Product Revenue $507M 24% yr/yr Remaining Performance Obligation $10.6B 30% yr/yr Next-Gen Security ARR $2.95B 56% y
Slide 20: Fiscal Year 2024 Guidance
Fiscal Year 2024 Guidance FY 2023 FY 2024 Actuals Guidance as of 8/18/23 $9.19B $10.9B - $11.0B Total Billings +23% yr/yr +19%-20% yr/yr $2.95B $3.95B - $4.00B Next-Gen Security ARR +56% yr/yr +34%-36% yr/yr $6.89B $8.15B - $8.20B Total Revenue +25% yr/yr +18%-19% yr/yr Op Margin (Non-GAAP) 24.1% 25
Slide 21: Q1 Fiscal 2024 Guidance
Q1 Fiscal 2024 Guidance Q1’24 Guidance as of 8/18/23 Total Billings $2.05B - $2.08B 17%-19% yr/yr Total Revenue $1.82B - $1.85B 16%-18% yr/yr $1.15 - $1.17 EPS (Non-GAAP) 39%-41% yr/yr A reconciliation of forward-looking non-GAAP financial measures to the corresponding GAAP measures has not been pro
Slide 22: Modeling Points
Modeling Points Q1’24 and FY24 non-GAAP effective tax rate: 22% Cash taxes for FY24 of $230-280M Q1’24 net interest and other income of $50M – $55M Q1’24 diluted shares outstanding 336 – 339 million FY24 diluted shares outstanding 338 – 343 million Q1’24 capital expenditures of $40M – $45M FY24 capi
Slide 25: Over the last 5 years, the cybersecurity market has evolved significantly
Over the last 5 years, the cybersecurity market has evolved significantly Enterprise Cybersecurity Market TAM ’23 (‘18-‘23 CAGR) $29B New segments (35%) SASE, Cloud Security, IoT Security $72B Segments undergoing transformation (19%) Endpoint / XDR, SecOps (+SIEM), Network Security $31B Largely stea
Slide 26: Looking back, we envisioned three transformations
Looking back, we envisioned three transformations The network would need Public CloudWeb adoption AI & MLNetwork would Vuln. Threat be THE Adv. AIOps ZTNA Threat to be reimagined ADEM CASB SD-WAN SASE IoT VPN / OT SWG DLP Secrets CNS CWP IaC WAAS CI/CD SCA CIEM SAST CDS Scanning App FW would scale r
Slide 27: These transformations ended up driving rapid growth in cybersecurity
These transformations ended up driving rapid growth in cybersecurity SCA SIEM Adv. Threat CNS CWP IoT / OT VPN XDR MTH The network would need Public Cloud adoption AI & ML would be THE DLP SAST IaC SWG to be reimagined CDS would scale rapidly way we ‘solve’ security Threat ZTNA AIOps Intel. ASM CIEM
Slide 28: These transformations ended up driving rapid growth in cybersecurity
These transformations ended up driving rapid growth in cybersecurity AI & ML would be THE way we ‘solve’ security Autonomous Code to Cloud ZeroZero Trust Platform Trust Platform Th X R reork H w gm n. VPNIoT / A e N InADt 19 N A T M RM at t. A SE M l CASBN 5 B eb M SO I Vu t ISnetl.el. T 17B Z D -W
Slide 29: What we have achieved in the last 5 years / Looking ahead
What we have achieved in the last 5 years Looking ahead— Proved Platforms are the Made Innovation the Executed “Build & Buy” way to deliver security lifeblood of our multi- strategy to become the outcomes product business largest cyber player The future will require ubiquitous platformization 20+ In
Slide 30: Looking ahead: Shift to more real-time and autonomous security
Looking ahead Shift to more real-time and autonomous security The future will require ubiquitous platformization to deliver real-time security outcomes 30 © 2023 Palo Alto Networks, Inc. All rights reserved.
Slide 31: Our addressable market continues to expand
Our addressable market continues to expand Zero Trust Code to Cloud Autonomous 45B Platform 19B Platform Security Ops Platform 8 B ~$80B ~$ 40B 4 ~ $ 90B 2023 TAM by 2028 2023 TAM by 2028 2023 TAM by 2028 Security for network traffic Scalable and Security reaching ‘real-time’ managed comprehensively
Slide 32: Our strategy to win
Our Be an evergreen innovation company Fortify our multi-category lead strategy Make our platforms more comprehensive & ubiquitous to win Deliver near real-time security outcomes Leverage AI across our portfolio Supercharge our Products, Processes & People Innovation Team Underpinning Platformizatio
Slide 34: To stay ahead of relentless adversaries, we must be an innovation-led company
A Innovation B Platformization D Leverage AI C Go-To-Market E Team To stay ahead of relentless adversaries, we must be an innovation-led cybersecurity company Our innovation pipeline drove our success… …and we plan to accelerate the pace Number of major product releases by year 74 ~5x Underpinning M
Slide 35: We are enhancing our platforms to deliver real-time security outcomes
A Innovation B Platformization D Leverage AI C Go-To-Market E Team We are enhancing our platforms to deliver real-time security outcomes ZERO TRUST PLATFORM Radically more integration across form-factors… Comprehensiveness across form-factors enabling Zero Trust ‘Single pane of glass’ offering insta
Slide 36: We will leverage AI across our entire portfolio
A Innovation B Platformization D Leverage AI C Go-To-Market E Team We will leverage AI across our entire portfolio Unique Assets Sensors installed across ~48k customers 1 Precision AI Precision AI will allow us to deliver unparalleled detection and response to achieve near real-time security 4.86 PB
Slide 37: Continued evolution of our Go-To-Market model
A Innovation B Platformization D Leverage AI C Go-To-Market E Team Continued evolution of our Go-To-Market model… FROM TO Transactional vendor Strategic partner helping customers on their transformation journey Selling products Architecting outcomes jointly with ecosystem solution providers Reactive
Slide 38: Delivering on our strategy is only possible with the best team
A Innovation B Platformization D Leverage AI C Go-To-Market E Team Delivering on our strategy is only possible with the best team We will attract the best… …and empower them with opportunity to make an impact, by radically eliminating friction, flexibility to get the job done and providing informati
Slide 39: The continued business transformation of Palo Alto Networks
The continued business transformation of Palo Alto Networks… Strong & sustained top-line growth Target markets Relentless innovation Closer GTM partnerships Software & Cloud undergoing inflection across all 3 platforms to expand platform reach increasingly fueling growth Unique opportunity to delive
Slide 42: The threat landscape is intensifying
The threat landscape is intensifying Elevated attacker motivation Organizations are heavily impacted… $8T cost of cybercrime 1 and it’s getting worse 20x increase to 1.3 billion new Integral part of modern warfare malicious programs since 2014 1.3B Nation-state economic gain 967M 594M Tech is enabli
Slide 43: Attacks are happening faster than organizations can respond
Attacks are happening faster than organizations can respond Average Days from “Compromise” to “Exfil” 1 Industry average 6 DAYS to remediate 44 days 30days days 5 Hours SEC adopted rule 4 DAYS to disclose material 2021 2022 2023 Latest cybersecurity incident2 attacks Sources: 1 Unit 42 Cloud Threat
Slide 44: AI will transform the threat landscape
AI will transform the threat landscape The threat future, powered by Al Increased speed to near real-time Decreased time from compromise to ex ltration Using a technique called ‘prompt injections’, hackers CVE exploitation in record time can break AI systems using plain English Aug 10, 2023 Increase
Slide 45: Threat trends demand a high-powered innovation engine
Threat trends demand a high-powered innovation engine 4,400+ product team While leveraging the Embracing AI from drives innovation broader market the early days From single-product to Continuously identifying great tech AI used in all 3 platforms, across 3 leading platforms in 5 years to include in
Slide 46: We will continue to be leading innovators
We will continue to be leading innovators 4,400+ product team While leveraging the Embracing AI from drives innovation broader market the early days From single-product to Continuously identifying great tech AI used in all 3 platforms, across 3 leading platforms in 5 years to include in our journey
Slide 47: Data, architecture, expertise key to being an AI-first company
Data, architecture, expertise key to being an AI-first company The most security data The right Deep per customer architecture expertise Each day we analyze and detect 750M+ All services running in the cloud ~150 AI experts across product new and unique events organization Enforcement points leverag
Slide 48: The industry approach leads to point product proliferation
The industry approach leads to point product proliferation CSPM WAF SIEM VPN MDR Host FW CNS FW CIEM IaC XDR CWP Secrets EPP ~$210B Scanning URL CASB SD-WAN SCA TIP SWG CI/CD Vuln. IPS DNS DLP SAST API Mgmt. ZTNA SASE Compliance ASM Remote DAST ASPM DSPM to “solve” the problem IoT / Access ITDR Host
Slide 49: The industry approach leads to point product proliferation
The industry approach leads to point product proliferation CSPM WAF SIEM VPN MDR Host FW CNS FW CIEM IaC XDR CWP Secrets EPP Scanning URL CASB SD-WAN SCA TIP SWG CI/CD Vuln. IPS DNS DLP SAST API Mgmt. ZTNA SASE Compliance ASM Remote DAST DSPM IoT / ASPM Host Access OT DEM ITDR Encryption Malware EDR
Slide 50: Only a platform approach will work
Only a platform approach will work Vuln. SWG XDR DLP TIP SOAR MDR NDR ASM EDR EPP DoS SIEM Mgmt. Secrets Remote SD-WAN Malware IoT AIOps CASB ZTNA SASE SWG WAF DEM DNS VPN DLP URL DoS FW IPS / OT CNS DSPM ASPM CSPM CI/CD CIEM SAST CWP WAF CDR SCA API IaC DAST Scanning Zero Trust Platform Access Code
Slide 53: Network Security: Increased integration for real-time security
Network Security: Increased integration for real-time security Network traffic will continue to Threat sophistication will Real-time in-line security increase; all traffic must be necessitate faster response for every connection inspected AI enables self remediation Great user experience across self
Slide 54: Network security has become increasingly complex
Network security has become increasingly complex One Platform, One Security Stack, Campus Data Center Hardware Security Stack Branch Internet Software Security Stack Mobile Public cloud Unified Security Stack Home SaaS SASE Security Stack © 2023 Palo Alto Networks, Inc. All rights reserved. 54
Slide 55: What if we could take a radically new approach?
What if we could take a radically new approach? One Platform, One Security Stack, One User Experience, One Security Policy Campus Data Center Branch Internet Software Hardware Security SASE Security Stack Stack Security Stack Mobile Public cloud Unified Security Stack Home SaaS Enterprise-wide Zero
Slide 56: Zero Trust Platform with best-in-class products
Over the last 5 years, we have developed a Zero Trust Platform with best-in-class products Zero Trust Network Security Platform Unified Management & Experience Cloud-Delivered Security Services Hardware Software SASE Firewalls Firewalls © 2023 Palo Alto Networks, Inc. All rights reserved. 56
Slide 57: Best-in-class form factors — Hardware, Software and SASE
Best-in-class form factors — Hardware, Software and SASE Unified Management & Experience Cloud-Delivered Security Services Hardware Software SASE Firewalls Firewalls NGFW Zero Trust SSE SD-WAN A Leader in Gartner Magic A Leader in Forrester Zero A Leader in Gartner Magic A Leader in Gartner Magic Qu
Slide 58: Best-in-class security services — Infused with AI
Best-in-class security services — Infused with AI for near real-time protection Unified Management & Experience b Hardware Software SASE Firewalls Firewalls Core Security IOT Data Security Inline deep learning 76% of malicious URLs 99% prevention of known and 90% of devices discovered in 80% higher
Slide 59: Best-in-class security services — Extended to AI-powered operations
Best-in-class security services — Extended to AI-powered operations Unified Management & Experience b Hardware Software SASE Firewalls Firewalls GlobalProtect AIOps ADEM 86M users leverage Predict 51% of network disruptions Quickly identify the problem GlobalProtect for securing before any customer
Slide 60: The next transformation in network security
The next transformation in network security — Unified management and experience Zero Trust Network Security Platform Unified Management & Experience Cloud-Delivered Security Services Hardware Software SASE Firewalls Firewalls © 2023 Palo Alto Networks, Inc. All rights reserved. 60
Slide 75: The opportunity ahead
The opportunity ahead 10,000+ potential customers ~1,700 5+ Deliver near real time security outcomes with 3.4 Zero-trust platform 2.8 ~800 Consolidate additional security services 2021 2023 2028 2021 2023 2028 Customers with full # of services attached Deliver operational network security platform s
Slide 77: Cloud Security: Only an integrated platform can secure from code to cloud
Cloud Security: Only an integrated platform can secure from code to cloud 500M+ cloud-native applications Applications are increasingly Today, securing code and cloud globally 1 assembled - 75% of cloud code requires 15+ tools bases consist of open source 4 33M devs building apps, and Continued evol
Slide 78: Cloud applications are assembled in multiple stages
Cloud applications are assembled in multiple stages Code Cloud Infrastructure Cloud Runtime Cloud Application Payments Open Source Custom IaC VMs Serverless Containers CI/CD pipeline CI/CD pipeline Catalog Billing DBaaS PaaS Identity Shipping Analytics © 2023 Palo Alto Networks, Inc. All rights rese
Slide 79: Security risks multiply across the application lifecycle
Security risks multiply across the application lifecycle Code Cloud Infrastructure Cloud Runtime Cloud Application Payments ! ! ! ! ! ! ! ! ! Open Source ! Custom ! ! IaC VMs Serverless Containers ! ! ! ! ! ! CI/CD pipeline CI/CD pipeline Catalog Billing ! ! DBaaS PaaS Identity ! Shipping Analytics
Slide 80: Our Code-to-Cloud Platform approach prevents risks and breaches in real-time
Security risks go unaddressed as the industry delivers multiple point products Our Code-to-Cloud Platform approach Our Code-to-Cloud Platform approach Prevents Risks & Breaches in Real-Time prevents risks & breaches in near real-time Integrated context helps prioritize actions to Fix at Source and B
Slide 81: Our Code-to-Cloud Platform approach prevents risks & breaches in near real-time
Our Code-to-Cloud Platform approach prevents risks & breaches in near real-time Integrated context helps prioritize actions to Fix at Source and Block in Runtime Code Cloud Infrastructure Cloud Runtime Secure the source Secure the infrastructure Secure the runtime Cloud Application Payments ✔ Open S
Slide 82: Our strategy is resonating well
Our strategy is resonating well Code Cloud Infrastructure Cloud Runtime Secure the source Secure the infrastructure Secure the runtime DevSecOps Code Security CSPM Vuln Mgmt CWP LEADER LEADER LEADER LEADER LEADER Dev Security Tools 2021 Radar Policy as Code 2022 Report CSPM 2022 Radar Vuln Mgmt 2021
Slide 84: The opportunity ahead
The opportunity ahead Customers expand rapidly into multiple modules as they adopt the full platform 4x >7,000 Potential customers ~400 8 2x MODULES 1x 5 MODULES ~80 2 MODULES 2021 2022 2023 2021 2023 2028 Credit consumption growth - evolution of Number of customers using current 8-module customers
Slide 86: Security Operations: fundamental transformation needed for real-time outcomes
Security Operations: fundamental transformation needed for real-time outcomes Fragmented stack leaves processing AI is the “only option” for near Large, previously independent to a human analyst real-time attack detection and categories driven to integrate (93% of SOCs dependent on remediation manua
Slide 87: The human-driven SOC architecture doesn't work
The human-driven SOC architecture doesn’t work EDR NTA UEBA Every tool was built to perform one function. CDR No holistic end-to-end management of detection, investigation, and response. Teams try to solve for highest- TIP priority issues ASM ~11K 1 ALERTS PER DAY SOAR ~93% 2 SOCS STILL DEPENDENT ON
Slide 88: Real-time Security Operations requires a single data platform powered by AI
Real-time Security Operations requires a single data platform powered by AI and Automation Massive data enhanced with stitching and Machines automate detection, investigation, Empowered analysts correlation dramatically reduces the # of alerts and response and make recommendations become more proact
Slide 89: We've built category-leading products to help the SOC
We’ve built category-leading products to help the SOC for the past 5 years FY19 FY20 FY21 FY22 FY23 Recognized Leadership Cortex XDR A Leader in Forrester Collect, stitch & analyze Endpoint Security Software XDR 1.0 Threat XDR Cloud MDR ITDR data in real time Hunting As A Service Wave 1 Cortex XSOAR
Slide 91: Detecting attacks with siloed tools and data is impossible
Detecting attacks with siloed tools and data is impossible Unusual user login Happens 50 times per day New application Happens connection 600 times per day Events in isolation can be suspicious… …but they are common, and © 2023 Palo Alto Networks, Inc. All rights reserved. 91
Slide 92: Detecting attacks with siloed tools and data is impossible
Detecting attacks with siloed tools and data is impossible Unusual user login Active directory access from new computer Happens 300 times per day New application connection Happens 600 times per day can be suspicious… …but they are common, and overwhelm the SOC. © 2023 Palo Alto Networks, Inc. All r
Slide 93: Detecting attacks with siloed tools and data is impossible
Detecting attacks with siloed tools and data is impossible Privilege escalation Unusual user login Happens 100 times per day Active directory access from new computer Happens 300 times per day New application connection can be suspicious… This means attacks are missed… Happens 50 times per day © 202
Slide 94: Detecting attacks with siloed tools and data is impossible
Detecting attacks with siloed tools and data is impossible Unusual user login Active directory access Privilege escalation from new computer Happens 300 times per day Happens 100 times per day New application connection n can be suspicious… …because of a low confidence to act on any one alert. Happe
Slide 95: Cortex XSIAM collects complete context and uses AI to detect attacks
Cortex XSIAM collects complete context and uses the power of AI to detect attacks that siloed tools miss Network Endpoint Unusual user login Privilege escalation Identity Cloud Attack Surface Active directory access New application from new computer connection Other Stitching and normalizing alerts,
Slide 96: Cortex XSIAM collects complete context and uses AI to detect attacks
Cortex XSIAM collects complete context and uses the power of AI to detect attacks that siloed tools miss Network Endpoint Unusual user login Privilege escalation Identity Cloud Attack Surface Active directory access New application from new computer connection Other Stitching and normalizing alerts,
Slide 98: XSIAM is driving incredible outcomes for the SOC at Palo Alto Networks
XSIAM is driving incredible outcomes for the SOC at Palo Alto Networks A day in the life of the Palo Alto Networks internal SOC Ingested Data per day 75 TB Incidents flagged per day* 133 Incidents resolved with automation* 100% Incidents close out rate 100% Mean Time to Respond* 1 MIN (HIGH SEVERITY
Slide 99: And XSIAM is already driving amazing outcomes for our customers
And XSIAM is already driving amazing outcomes for our customers Before XSIAM Early XSIAM (Average across initial implemented customers) (Average across initial implemented customers) Analyzing more data … ~230 GB per day ~1400 GB per day (In prior SIEM) (In XSIAM) with fewer false positives… ~290 ~8
Slide 100: The opportunity ahead
The opportunity ahead XSIAM Modules Over next 3-5 years (both from Palo Alto Networks and our partners) 10,000+ 10+ additional >$200M XSIAM bookings in FY23 XSIAM modules >5,100 ARR Expansion when EDR NTA >3x existing Cortex customers EDR NTA >2,600 move to XSIAM ITDR TIP ITDR TIP Customers booking
Slide 103: Customers have tried to solve cybersecurity challenges by buying point solutions
Customers have tried to solve cybersecurity challenges by buying point solutions Security in customers’ estates is fragmented… ~75 Complexity Customers are burdened with stitching together disparate products and data Average number of Duplication cybersecurity solutions Multiple vendors’ products ov
Slide 104: As an industry, we need to get better at helping our customers
As an industry, we need to get better at helping our customers FROM TO Transactional vendor Strategic partner helping customers on their transformation journey Selling products Architecting outcomes jointly with ecosystem solution providers Reactive help “In it together” mindset - driving success fo
Slide 105: We are well on our journey to becoming a strategic partner
We are well on our journey to becoming a strategic partner Historical Motion Evolving Motion across ~3,000 Sellers Engaged by technical domain experts Engaged by CxOs looking to transform Pre-defined product requirements Strategic discussions focused on security outcomes Focus on price negotiation ‘
Slide 106: We will accelerate solution selling in partnership with the broader ecosystem
We will accelerate solution selling in partnership with the broader ecosystem Five Years Ago Today Future Sold a single product as part of a Co-lead sales motions with our Architect integrated offerings with larger partner- delivered motion partners and deliver joint solutions partners to improve cl
Slide 107: We are 'in it together' with our customers
We are ‘in it together’ with our customers Rapid AI-Driven Issue Resolution In-product support, empowered by AI Targeting 65%+ reduction in Mean Time to Resolution (MTTR) Our customers have 90%+ CSAT today… Accelerated Deployment Scale global network of fully-certified delivery partners Starting fro
Slide 108: The opportunity in front of us is extensive
The opportunity in front of us is extensive… We have ample potential to expand the Palo Alto Networks G2K Customers 1 breadth & depth of our platforms… All 3 Platforms $4.1M per customer 2 Breadth Land every platform across Platform Breadth our installed base 2 Platforms Untapped $418K per customer
Slide 109: Our model is ready to scale and deliver real-time security outcomes
Our model is ready to scale and deliver real-time security outcomes for every customer through the power of our platforms © 2023 Palo Alto Networks, Inc. All rights reserved. 109
Slide 112: We have shown we can capitalize on an expanding TAM
We have shown we can capitalize on an expanding TAM Expanding Market share leaders 2 Platform TAMs 1 in other IT categories $163B Our ~7% share of TAM $104B ITOM 36% remains well below Sales CRM 34% that of leaders in $38B Database other markets Mgmt 25% Systems ERP SW 17% 2018 TAM 2023 TAM 2026 TAM
Slide 113: Our platform leadership and innovation will fuel our growth and key metrics
Our platform leadership and innovation will fuel our growth and key metrics Zero Trust Code-to-Cloud Autonomous SecOps FWaaP Market Credit New Module Growth in Growth in growth share gains consumption Adoption customers large deals © 2023 Palo Alto Networks, Inc. All rights reserved. 113
Slide 114: Our go-to-market evolution enables us to execute on the larger opportunity
Our go-to-market evolution enables us to execute on the larger opportunity Become our customers’ Deliver security Integrate into the ‘In it together’ with strategic partner outcomes ecosystems our customers Large deal momentum over time Increasing core productivity and driving (>$10M+ deals) growth
Slide 115: Growing revenue ahead of our markets through FY26
Growing revenue ahead of our markets through FY26 while increasing predictability FY26 Revenue Profile 3-yr revenue and 17-19% billings CAGR FY23-26 ~2/3rds >55% 25% Growth in RPO through FY26 ~10% NGS ARR exiting $6.5B FY26 % of revenue Year end NGS Proportion of from Hardware ARR as % of total rev
Slide 116: We can deliver steady gross margin while investing in cloud
We can deliver steady gross margin while investing in cloud FY’23 FY’24 - FY’26 Drivers Net new drivers Platform drivers Higher software mix Public cloud scale Cross-company and platform Global Customer Support Cost / Efficiency Supply chain normalizing initiatives Broad procurement efficiency Incre
Slide 117: Platform and efficiency opportunities driving operating leverage
Platform and efficiency opportunities driving operating leverage FY’23 FY’24 - FY’26 Drivers Net new drivers Platform drivers Core sellers always have more to sell and becoming more productive Shared R&D platform and innovation spend Increasing leverage in overhead functions Efficiency Broad procure
Slide 118: Significant operating margin expansion through FY26
Significant operating margin expansion through FY26 28-29% FY26 non-GAAP operating margin Steady Gross 20%+ non-GAAP EPS Margin LOW TO MID CAGR FY23-26 30s Long-term non- GAAP operating margin potential A reconciliation of forward-looking non-GAAP financial measures to the corresponding GAAP measure
Slide 119: Steady free cash flow margin with flexibility to navigate the environment
Steady free cash flow margin with flexibility to navigate the environment FY’23 FY’24 - FY’26 Drivers Net new drivers Leverage drivers Strong top-line Operating margin leverage Driving to best in class working capital management Low CAPEX requirements Higher interest rates on cash Accounting for Inc
Slide 120: We have already delivered strong cash flow while managing deferred payments
We have already delivered strong cash flow while managing through an increase in deferred payments Increased deals with Robust Free Cash Deferred Payments Flow Margins Deferred payments 39% will contribute ~$1B 33% 33% in FY24 free cash flow 28% (2x vs. FY23) FY‘20 FY‘21 FY‘22 FY‘23 FY‘20 FY‘21 FY‘2
Slide 121: Aspiring to the 'rule of 60'
Aspiring to the ‘rule of 60’ 17%-19% 37%+ 3-yr revenue and billings Adjusted non-GAAP FCF CAGR (FY23-26) margin sustained FY24-26 Peer group-leading combination of growth and cash flow while having the flexibility to navigate the current environment A reconciliation of forward-looking non-GAAP finan
Slide 122: Driving optimal balance of capital allocation
Driving optimal balance of capital allocation $2.5B $1.7B $3.9B In cash used for M&A FY23 convertible note repaid In cash used for share over last 5 years repurchase over last 5 years Planning to settle $2.0B FY25 convertible note with cash Continue focus on acquiring Maintain capital structure that
Slide 123: Bringing it all together into an attractive financial profile
Bringing it all together into an attractive financial profile Top Line 17%-19% revenue CAGR, from FY23-FY26 17%-19% billings CAGR, from FY23-FY26 $6.5B in NGS ARR, exiting FY26 25% RPO CAGR, from FY23-FY26 ~10% of revenue from hardware, by FY26 Adjusted Non-GAAP Non-GAAP operating income Non-GAAP EP
Slide 127: Calculation of Billings
Calculation of Billings $ In millions Billings: Q422 Q123 Q223 Q323 Q423 FY'22 FY'23 Total revenue $1,550.5 $1,563.4 $1,655.1 $1,720.9 $1,953.3 $5,501.5 $6,892.7 Add: change in total deferred revenue, net of acquired deferred 1,134.6 185.6 374.0 535.3 1,206.8 1,970.0 2,301.7 revenue Total billings $
Slide 128: GAAP to Non-GAAP Reconciliations: Gross Margin
GAAP to Non-GAAP Reconciliations Gross Margin $ In millions Non-GAAP gross profit and gross margin: Q422 Q423 $ % $ % GAAP gross profit and gross margin $1,058.2 68.2% $1,446.5 74.1% Share-based compensation-related charges 36.0 2.3% 41.8 2.1% Amortization expense of acquired intangible assets 25.8
Slide 129: GAAP to Non-GAAP Reconciliations: Operating Margin
GAAP to Non-GAAP Reconciliations Operating Margin $ In millions Non-GAAP operating income and operating margin: Q422 Q423 $ % $ % GAAP operating income and operating margin $15.4 1.0% $253.5 13.0% Share-based compensation-related charges 251.3 16.1% 274.1 14.0% Acquisition-related costs ¹ 2.4 0.2% -
Slide 130: GAAP to Non-GAAP Reconciliations: Operating Margin
GAAP to Non-GAAP Reconciliations Operating Margin $ In millions Non-GAAP operating income and operating margin: FY'20 FY'21 FY'22 FY'23 $ % $ % $ % $ % GAAP operating income (loss) and operating margin ($179.0) -5.3% ($304.1) -7.1% ($188.8) -3.4% $387.3 5.6% Share-based compensation-related charges
Slide 131: GAAP to Non-GAAP Reconciliations: EPS
GAAP to Non-GAAP Reconciliations EPS Non-GAAP net income per share, diluted: Q422 Q123 Q223 Q323 Q423 FY'22 FY'23 GAAP net income (loss) per share, diluted $0.01 $0.06 $0.25 $0.31 $0.64 ($0.90) $1.28 Share-based compensation-related charges 0.78 0.87 0.94 0.91 0.86 3.42 3.59 Acquisition-related cost
Slide 132: GAAP to Non-GAAP Reconciliations: Adjusted Free Cash Flow
GAAP to Non-GAAP Reconciliations Adjusted Free Cash Flow $ In millions Free cash flow and adjusted free cash flow (non-GAAP): Q423 Net cash provided by operating activities $414.1 Less: purchases of property, equipment, and other assets 37.2 Free cash flow (non-GAAP) $376.9 Add: cash payment related
Slide 133: GAAP to Non-GAAP Reconciliations: Adjusted Free Cash Flow
GAAP to Non-GAAP Reconciliations Adjusted Free Cash Flow $ In millions Free cash flow and adjusted free cash flow (non-GAAP): FY'20 FY'21 FY'22 FY'23 Net cash provided by operating activities $1,035.7 $1,503.0 $1,984.7 $2,777.5 Less: purchases of property, equipment, and other assets 214.4 116.0 192
Slide 134: Reports
Reports Third-party data from the reports listed below was used as a basis for the estimates and figures in this presentation related to total addressable markets, market or segment sizes or similar data (“TAM Data”). All TAM Data is for calendar years. For the purposes of this presentation, we some

Palo Alto Networks — Q4 2023 Earnings Presentation on 6ix

Palo Alto Networks — Q4 2023 Earnings Presentation

Slide 1: Earnings Call & Medium Term Update

Slide 2: Q4 Fiscal Year 2023 Earnings Call

Slide 3: Safe Harbor

Slide 4: Nikesh Arora, CEO & Chairman

Slide 5: Q4 capped a strong year of execution

Slide 6: Continued strong demand for cybersecurity drove our NGS business

Slide 7: Platformization continues to drive large deal momentum

Slide 8: XSIAM traction amplifying Cortex trajectory

Slide 9: SASE continues to display strong performance

Slide 10: SASE continues to display strong performance

Slide 11: Sustained credit consumption propels Prisma Cloud through $500M in ARR

Slide 12: FY23: Successful execution through a tough macro environment

Slide 13: Dipak Golechha, Chief Financial Officer

Slide 14: Strong top-line growth at industry leading scale

Slide 15: Managing through the impact of the rising cost of money

Slide 16: Industry hardware growth trend is returning to expected baseline level

Slide 17: Software transition and NGS growth is driving more recurring revenue

Slide 18: Profitability supporting a higher free cash flow baseline

Slide 19: Q4 Results Summary

Slide 20: Fiscal Year 2024 Guidance

Slide 21: Q1 Fiscal 2024 Guidance

Slide 22: Modeling Points

Slide 23: Q&A

Slide 24: Nikesh Arora, CEO & Chairman

Slide 25: Over the last 5 years, the cybersecurity market has evolved significantly

Slide 26: Looking back, we envisioned three transformations

Slide 27: These transformations ended up driving rapid growth in cybersecurity

Slide 28: These transformations ended up driving rapid growth in cybersecurity

Slide 29: What we have achieved in the last 5 years / Looking ahead

Slide 30: Looking ahead: Shift to more real-time and autonomous security

Slide 31: Our addressable market continues to expand

Slide 32: Our strategy to win

Slide 33: Our strategy to win

Slide 34: To stay ahead of relentless adversaries, we must be an innovation-led company

Slide 35: We are enhancing our platforms to deliver real-time security outcomes

Slide 36: We will leverage AI across our entire portfolio

Slide 37: Continued evolution of our Go-To-Market model

Slide 38: Delivering on our strategy is only possible with the best team

Slide 39: The continued business transformation of Palo Alto Networks

Slide 40: Innovating our way to three leading platforms

Slide 41: Lee Klarich, Chief Product Officer

Slide 42: The threat landscape is intensifying

Slide 43: Attacks are happening faster than organizations can respond

Slide 44: AI will transform the threat landscape

Slide 45: Threat trends demand a high-powered innovation engine

Slide 46: We will continue to be leading innovators

Slide 47: Data, architecture, expertise key to being an AI-first company

Slide 48: The industry approach leads to point product proliferation

Slide 49: The industry approach leads to point product proliferation

Slide 50: Only a platform approach will work

Slide 51: Not all platforms are created equal

Slide 52: Zero Trust Platform

Slide 53: Network Security: Increased integration for real-time security

Slide 54: Network security has become increasingly complex

Slide 55: What if we could take a radically new approach?

Slide 56: Zero Trust Platform with best-in-class products

Slide 57: Best-in-class form factors — Hardware, Software and SASE

Slide 58: Best-in-class security services — Infused with AI

Slide 59: Best-in-class security services — Extended to AI-powered operations

Slide 60: The next transformation in network security

Slide 61: © 2023 Palo Alto Networks, Inc. All rights reserved.

Slide 62: © 2023 Palo Alto Networks, Inc. All rights reserved.

Slide 63: Is my environment impacted by CVE-2022-31706?

Slide 64: Guided remediation to secure against threats with one click

Slide 65: © 2023 Palo Alto Networks, Inc. All rights reserved.

Slide 66: Network Security Copilot

Slide 67: © 2023 Palo Alto Networks, Inc. All rights reserved.

Slide 68: Why are 10k users having degraded experience?

Slide 69: © 2023 Palo Alto Networks, Inc. All rights reserved.

Slide 70: Are users accessing any risky applications?

Slide 71: How can I block access to above risky applications?

Slide 72: © 2023 Palo Alto Networks, Inc. All rights reserved.

Slide 73: © 2023 Palo Alto Networks, Inc. All rights reserved.

Slide 74: © 2023 Palo Alto Networks, Inc. All rights reserved.

Slide 75: The opportunity ahead

Slide 76: Code-to-Cloud Platform

Slide 77: Cloud Security: Only an integrated platform can secure from code to cloud

Slide 78: Cloud applications are assembled in multiple stages

Slide 79: Security risks multiply across the application lifecycle