Why did GAAP net income swing to a loss in Q4 when non-GAAP net income grew?

The GAAP loss was driven primarily by a $524 million non-cash charge from the change in fair value of convertible senior notes and capped calls assumed in the CyberArk acquisition, recorded in other expense. Non-GAAP results exclude this charge, along with $487 million of share-based compensation, $281 million of acquired-intangible amortization, and $68 million of acquisition-related costs. Because the convertible-note charge depends on the stock price, it can vary materially from quarter to quarter.

Why is FY2027 NGS ARR growth guided to 22% to 23% when Q4 grew 63%?

The release does not explicitly explain the deceleration. The most likely reason is that Q4 and Q1 FY2027 growth rates include the inorganic contribution from the CyberArk acquisition, which will be lapped as the year progresses. Investors should confirm this with management, since the gap between the Q1 guide of 63% growth and the full-year guide of 22% to 23% is large.

Is the company on track for its profitability targets?

Management reaffirmed a 40% adjusted free cash flow margin target for FY2028 and guided to a 38.0% adjusted free cash flow margin and a 29.5% non-GAAP operating margin for FY2027. FY2026 non-GAAP operating income was $3.36 billion, roughly a 29% margin, so the FY2027 guide implies modest margin progress. Adjusted free cash flow margin is guided slightly below FY2026's 38.4%.

How much dilution did the acquisitions create?

Basic weighted-average shares rose to 817 million in Q4 from 669 million a year earlier, and FY2027 guidance assumes 844 million to 847 million diluted shares, compared with 764 million for FY2026. Common stock and APIC increased to $24.8 billion from $5.3 billion, and long-term convertible senior notes stand at $1.77 billion. Per-share growth therefore depends on whether acquired revenue and cash flow outpace the increase in share count.

Are these results final, and should they be treated as audited?

No. The financial statements in the exhibit are labeled preliminary and unaudited, and the 8-K furnishes the press release under Item 2.02 rather than filing it, so it is not subject to Section 18 liability unless specifically incorporated by reference. Investors should rely on the Form 10-K, expected later, for audited figures and full GAAP disclosure, including risk factors and MD&A.

PANW 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed September 1, 2026. Cited figures are marked; the original filing is the authoritative source.

Palo Alto Networks reported fiscal fourth quarter and full-year 2026 results (quarter ended July 31, 2026) alongside FY2027 guidance.

Q4 revenue rose 34% year over year to $3.41 billion^a, and Next-Generation Security (NGS) ARR grew 63% to $9.10 billion, with management citing nearly $1 billion of net new NGS ARR in the quarter. Remaining performance obligations (RPO) grew 34% to $21.2 billion. Non-GAAP operating income reached $1.0 billion, up from $768 million, and adjusted free cash flow was $1.29 billion, up from $954 million.

FY2026 revenue was $11.48 billion^b (about 24% growth) with an adjusted free cash flow margin of 38.4%. GAAP results were weak in the quarter. GAAP operating income fell to $172 million from $497 million, and GAAP net loss was $282 million, or $0.35 per diluted share, versus net income of $254 million a year earlier.

The main driver below the operating line was a $524 million^c non-cash charge from the change in fair value of convertible senior notes and capped calls assumed in the CyberArk acquisition, which sits in other expense. Amortization of acquired intangibles rose to $281 million in the quarter. The balance sheet reflects the scale of recent M&A: goodwill increased to $22.0 billion from $4.6 billion, intangible assets to $7.0 billion from $0.8 billion, and common stock and APIC to $24.8 billion from $5.3 billion, while basic weighted shares rose to 817 million from 669 million.

FY2027 guidance calls for revenue of $14.10 to $14.20 billion^d (23% to 24% growth), NGS ARR of $11.075 to $11.175 billion (22% to 23% growth), a 29.5% non-GAAP operating margin, and non-GAAP diluted EPS of $4.16 to $4.19, compared with $3.84 in FY2026. Management reiterated a 40% adjusted free cash flow margin target for FY2028. Guidance implies a sharp deceleration from Q4's 63% NGS ARR growth, which likely reflects the lapping of the CyberArk acquisition.

Q1 FY2027 revenue guidance of $3.30 to $3.31 billion is also below Q4's $3.41 billion. Investors should weigh strong operating momentum against elevated GAAP volatility, acquisition-driven share dilution, and the deceleration embedded in the outlook. The press release states that the figures are preliminary and unaudited.

02—Key points

Key Highlights

Q4 FY2026 revenue grew 34% year over year to $3.41 billion; FY2026 revenue was $11.48 billion, up about 24%.
NGS ARR reached $9.10 billion, up 63% year over year, with management citing nearly $1 billion of net new NGS ARR in Q4; RPO grew 34% to $21.2 billion.
GAAP net loss of $282 million ($0.35 per diluted share) in Q4 was driven by a $524 million non-cash charge tied to convertible notes and capped calls from the CyberArk acquisition; non-GAAP net income was $853 million ($1.02 per share).
GAAP operating income fell to $172 million from $497 million, pressured by $487 million of share-based compensation and $281 million of acquired-intangible amortization; non-GAAP operating income rose to $1.0 billion.
Adjusted free cash flow was $1.29 billion in Q4 (37.8% margin) and $4.41 billion for FY2026 (38.4% margin); operating cash flow was $1.36 billion in Q4.
FY2027 guidance: revenue of $14.10 to $14.20 billion (23% to 24% growth), NGS ARR of $11.075 to $11.175 billion (22% to 23% growth), non-GAAP EPS of $4.16 to $4.19, and a 29.5% non-GAAP operating margin.
Q1 FY2027 revenue guidance of $3.30 to $3.31 billion is below Q4's $3.41 billion, and FY2027 NGS ARR growth decelerates to 22% to 23%; the company also acquired Console, an AI-native agentic workflow platform, to expand Cortex.

03—Questions

Frequently Asked Questions

Why did GAAP net income swing to a loss in Q4 when non-GAAP net income grew?
The GAAP loss was driven primarily by a $524 million non-cash charge from the change in fair value of convertible senior notes and capped calls assumed in the CyberArk acquisition, recorded in other expense. Non-GAAP results exclude this charge, along with $487 million of share-based compensation, $281 million of acquired-intangible amortization, and $68 million of acquisition-related costs. Because the convertible-note charge depends on the stock price, it can vary materially from quarter to quarter.
Why is FY2027 NGS ARR growth guided to 22% to 23% when Q4 grew 63%?
The release does not explicitly explain the deceleration. The most likely reason is that Q4 and Q1 FY2027 growth rates include the inorganic contribution from the CyberArk acquisition, which will be lapped as the year progresses. Investors should confirm this with management, since the gap between the Q1 guide of 63% growth and the full-year guide of 22% to 23% is large.
Is the company on track for its profitability targets?
Management reaffirmed a 40% adjusted free cash flow margin target for FY2028 and guided to a 38.0% adjusted free cash flow margin and a 29.5% non-GAAP operating margin for FY2027. FY2026 non-GAAP operating income was $3.36 billion, roughly a 29% margin, so the FY2027 guide implies modest margin progress. Adjusted free cash flow margin is guided slightly below FY2026's 38.4%.
How much dilution did the acquisitions create?
Basic weighted-average shares rose to 817 million in Q4 from 669 million a year earlier, and FY2027 guidance assumes 844 million to 847 million diluted shares, compared with 764 million for FY2026. Common stock and APIC increased to $24.8 billion from $5.3 billion, and long-term convertible senior notes stand at $1.77 billion. Per-share growth therefore depends on whether acquired revenue and cash flow outpace the increase in share count.
Are these results final, and should they be treated as audited?
No. The financial statements in the exhibit are labeled preliminary and unaudited, and the 8-K furnishes the press release under Item 2.02 rather than filing it, so it is not subject to Section 18 liability unless specifically incorporated by reference. Investors should rely on the Form 10-K, expected later, for audited figures and full GAAP disclosure, including risk factors and MD&A.

04—Continue

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