v3.26.1
Acquisitions
 12 Months Ended
Jul. 31, 2026
Business Combination [Abstract]  
Acquisitions Acquisitions
Fiscal 2026
Chronosphere, Inc.
On January 29, 2026, we completed our acquisition of Chronosphere, a privately-held observability technology company. The acquisition resulted in forming our next-generation observability platform. The total purchase consideration for the acquisition of Chronosphere was $3.0 billion, which consisted of the following (in millions):
Amount
Cash$2,842 
Fair value of replacement awards109 
Total$2,951 
As part of the acquisition, we issued $525 million of replacement equity awards, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration. The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation. The replacement equity awards included 2 million shares of our restricted common stock. These shares of restricted common stock vest over a period of two to three years from the date of issuance.
We have accounted for this transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on preliminary estimated fair values, as presented in the following table (in millions):
Amount
Goodwill$2,364 
Identified intangible assets565 
Cash57 
Net liabilities assumed(35)
Total$2,951 
Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating the Chronosphere observability platform into our business. The goodwill is not deductible for U.S. income tax purposes.
The following table presents details of the identified intangible assets acquired (in millions, except years):
Fair ValueEstimated Useful Life
Developed technology$300 5 years
Customer relationships255 
6 years - 10 years
Trade name and trademarks10 1 year
Total$565 
CyberArk Software Ltd.
On February 11, 2026, we completed our acquisition of CyberArk, an identity security company, forming our next-generation identity security platform. CyberArk shareholders received $45.00 in cash and 2.2005 shares of our common stock for each CyberArk share. The total purchase consideration for the acquisition of CyberArk was $21.1 billion, which consisted of the following (in millions):
Amount
Cash$2,308 
Common stock (112 million shares)
18,488 
Fair value of replacement awards265 
Total$21,061 
As part of the acquisition, we issued $945 million of replacement equity awards, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration. The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.
We have accounted for this transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on preliminary estimated fair values, as presented in the following table (in millions):
Amount
Goodwill$14,800 
Identified intangible assets6,279 
Cash and cash equivalents743 
Accounts receivable, net of allowance for credit losses312 
Short-term and long-term investments1,217 
Net assets acquired60 
Convertible senior notes(1,303)
Deferred revenue(776)
Deferred tax liabilities(271)
Total$21,061 
Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from incorporating the CyberArk next-generation identity security platform into our business. Substantially all of the goodwill is deductible for U.S. income tax purposes.
The following table presents details of the identified intangible assets acquired (in millions, except years):
Fair ValueEstimated Useful Life
Developed technology$2,537 
5 years - 7 years
Platform renewals3,500 
12 years - 14 years
Customer contracts219 2 years
Trade name23 1 year
Total$6,279 
For the year ended July 31, 2026, transaction costs related to CyberArk acquisition were $56 million, which were primarily included in general and administrative expense on our consolidated statements of operations.
In connection with our acquisition integration strategy, we initiated a plan to optimize the combined entity’s workforce for a total estimated cost of $60 million. The activities associated with this plan are expected to be substantially completed by the end of fiscal 2027. Employee severance costs are recognized upon notification. If service is required beyond the minimum retention period, expense is recognized ratably over the future service period. During the year ended July 31, 2026, we made cash payments of $18 million under the plan. As of July 31, 2026, a liability of $14 million related to employee severance was included in accrued compensation on our consolidated balance sheets.
The following table summarizes employee severance charges related to the CyberArk acquisition (in millions):
Year Ended July 31, 2026
Cash Compensation
Share-based Compensation
Total
Cost of subscription and support revenue $2 $— $2 
Research and development1 — 1 
Sales and marketing16 16 32 
General and administrative13 1 14 
Total$32 $17 $49 
Koi Security Ltd.
On April 14, 2026, we completed our acquisition of Koi Security Ltd. (“Koi”), a privately-held endpoint posture management company. The acquisition adds agentic endpoint security capabilities to our security operations platform and enhances Prisma AIRS™. The total purchase consideration for the acquisition of Koi was $231 million, substantially all of which is comprised of cash.
As part of the acquisition, we issued $61 million of replacement equity awards, which were allocated to future services and will be expensed over the remaining service periods as share-based compensation. The replacement equity awards included 0.3 million shares of our restricted common stock. These shares of restricted common stock vest over a period of three years from the date of issuance.
We have accounted for this transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on preliminary estimated fair values, as presented in the following table (in millions):
Amount
Goodwill
$169 
Identified intangible asset35 
Cash and restricted cash
20 
Net assets acquired
7 
Total$231 
Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Koi’s technology into our platforms. The goodwill is deductible for U.S. income tax purposes.
The following table presents details of the identified intangible asset acquired (in millions, except years):
Fair ValueEstimated Useful Life
Developed technology$35 5 years
Portkey, Inc.
On May 29, 2026, we completed our acquisition of Portkey, Inc. (“Portkey”), a privately-held AI Gateway company. The acquisition enhances the capabilities of Prisma AIRS™. The total purchase consideration for the acquisition of Portkey was $117 million, substantially all of which is comprised of cash.
As part of the acquisition, we issued $2 million of replacement equity awards, which were allocated to future services and will be expensed over the remaining service periods as share-based compensation.
We have accounted for this transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on preliminary estimated fair values, as presented in the following table (in millions):
Amount
Goodwill
$110 
Identified intangible assets15 
Cash and cash equivalents17 
Net liabilities assumed(25)
Total$117 
Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Portkey ’s technology into our platforms. The goodwill is not deductible for U.S. income tax purposes.
The following table presents details of the identified intangible asset acquired (in millions, except years):
Fair ValueEstimated Useful Life
Developed technology$15 
5 years
Embrace Mobile, Inc.
On July 20, 2026, we entered into a definitive agreement to acquire Embrace Mobile, Inc. (“Embrace”), a privately-held user-focused observability company, in exchange for total consideration of $325 million in cash, subject to adjustments. We expect the acquisition to add high-fidelity Real User Monitoring (“RUM”) capabilities to our next-generation observability platform. Refer to Note 20. Subsequent Events for additional information.
Console Systems, Inc.
On July 29, 2026, we entered into a definitive agreement to acquire Console Systems, Inc. (“Console”), a privately-held company providing an AI-native platform that enables agentic workflows across enterprise operations, in exchange for total consideration of $500 million in cash, subject to adjustments. We expect the acquisition to deepen our agentic capabilities in Cortex. Refer to Note 20. Subsequent Events for additional information.
Additional Acquisition-Related Information
Since the date of acquisitions, the combined net impact of the Chronosphere and CyberArk acquisitions on our consolidated statements of operations was revenue of $930 million and operating loss of $797 million for the year ended July 31, 2026.
The following unaudited pro forma financial information summarizes the combined results of operations for Palo Alto Networks, Chronosphere, and CyberArk, as though the companies were combined as of the beginning of our fiscal 2025 (in millions):
Year Ended July 31,
20262025
Total revenue
$12,312 $10,486 
Net loss$(114)$(37)
The unaudited pro forma financial information for the years ended July 31, 2026 and 2025 combines the historical results of Palo Alto Networks and Chronosphere for these periods with the historical results of CyberArk for the years ended June 30, 2026 and 2025, respectively. The unaudited pro forma financial information include adjustments attributable to our acquisition of Chronosphere and CyberArk, including amortization of acquired intangible assets, share-based compensation expense from assumed replacement equity awards, acquisition-related transaction costs, employee severance costs under the workforce optimization plan, and income tax impact. We elected the fair value option to account for the convertible senior notes acquired from CyberArk. During the post-acquisition period presented, we recognized approximately $562 million of net losses related to changes in fair value of the convertible senior notes and Capped Calls. Such amounts are reflected in our historical post-acquisition results but are not included as adjustments to the historical periods presented in the unaudited pro forma financial information. The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of our fiscal 2025 or of the results of our future operations of the combined business.
Additional information related to our fiscal 2026 acquisitions, such as that related to income tax and other contingencies existing as of the acquisition date, may become known during the remainder of the measurement period, not to exceed 12 months from the acquisition date, which may result in changes to the amounts and allocations recorded.
Fiscal 2025
IBM QRadar Assets
On August 31, 2024, we completed the acquisition of certain IBM QRadar assets, including certain intellectual property rights, customer relationships, and software as a service customer contracts. The total purchase consideration for the acquisition was $1.1 billion, which consisted of the following (in millions):
Amount
Cash$500 
Fair value of contingent consideration liability on the acquisition date649 
Return of purchase consideration(6)
Total$1,143 
As part of the acquisition, we agreed to make post-closing payments to IBM contingent upon customers entering into qualified new transactions through June 30, 2028. We also expect to receive a return of purchase consideration of $6 million due to timing of transition of certain underlying customer contracts, of which $2 million and $3 million were received during the years ended July 31, 2026 and 2025, respectively. In addition, we have entered into a transition services arrangement with IBM, under which IBM will perform certain services supporting the acquired assets and customers for a period of time that ends in the fiscal quarter ending October 31, 2026.
Payments related to the contingent consideration liability commenced in the fiscal quarter ended October 31, 2025 and are expected to continue through the fiscal quarter ending October 31, 2028. The estimated range of undiscounted contingent consideration is between $0.3 billion and $0.5 billion. Refer to Note 3. Fair Value Measurements, for more information on the fair value of our contingent consideration liability.
We have accounted for this transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on estimated fair values, as presented in the following table (in millions):
Amount
Goodwill$701 
Identified intangible assets476 
Net liabilities assumed$(34)
Total$1,143 
Goodwill generated from this business combination is primarily attributable to the expected post-acquisition synergies from increased market penetration to support the growth of our Cortex Security Operations business. The goodwill is deductible for U.S. income tax purposes.
The following table presents details of the identified intangible assets acquired (in millions, except years):
Fair ValueEstimated Useful Life
Customer relationships$464 12 years
Developed technology12 2 years
Total$476 
Protect AI, Inc.
On July 22, 2025, we completed our acquisition of Protect AI, Inc. (“Protect AI”), a privately-held cyber security company focused on AI security. The total purchase consideration for the acquisition of Protect AI was $635 million, which consisted of the following (in millions):
Amount
Cash$608 
Fair value of replacement awards27 
Total$635 
As part of the acquisition, we issued $107 million of replacement equity awards, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration. The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.
We have accounted for this transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on estimated fair values, as presented in the following table (in millions):
Amount
Goodwill$516 
Identified intangible assets
70 
Cash51 
Net liabilities assumed(2)
Total$635 
Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Protect AI technology into our platforms. The goodwill is not deductible for U.S. income tax purposes.
The following table presents details of the identified intangible asset acquired (in millions, except years):
Fair ValueEstimated Useful Life
Developed technology$70 5 years
Fiscal 2024
Dig Security Solutions Ltd.
On December 5, 2023, we completed our acquisition of Dig Security Solutions Ltd. (“Dig”), a privately-held cyber security company providing a data security posture management solution for multi-cloud environments. The total purchase consideration for the acquisition of Dig was $255 million, which consisted of the following (in millions):
Amount
Cash$248 
Fair value of replacement awards7 
Total$255 
As part of the acquisition, we issued replacement equity awards, which included 0.4 million shares of our restricted common stock. The total fair value of the replacement equity awards was $72 million, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration. The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.
We have accounted for this transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on estimated fair values, as presented in the following table (in millions):
Amount
Goodwill$186 
Identified intangible assets
45 
Cash and restricted cash22 
Net assets acquired2 
Total$255 
Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Dig technology into our platforms. The goodwill is deductible for U.S. income tax purposes.
The following table presents details of the identified intangible asset acquired (in millions, except years):
Fair ValueEstimated Useful Life
Developed technology$45 5 years
Talon Cyber Security Ltd.
On December 28, 2023, we completed our acquisition of Talon Cyber Security Ltd. (“Talon”), a privately-held cyber security company providing a secure enterprise browser solution. The total purchase consideration for the acquisition of Talon was $459 million, which consisted of the following (in millions):
Amount
Cash$439 
Fair value of replacement awards20 
Total$459 
As part of the acquisition, we issued replacement equity awards, which included 0.6 million shares of our restricted common stock. The total fair value of the replacement equity awards was $110 million, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration. The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.
We have accounted for this transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on estimated fair values, as presented in the following table (in millions):
Amount
Goodwill$237 
Identified intangible assets132 
Cash and restricted cash54 
Net assets acquired36 
Total$459 
Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Talon technology into our platforms. The goodwill is deductible for U.S. income tax purposes.
The following table presents details of the identified intangible asset acquired (in millions, except years):
Fair ValueEstimated Useful Life
Developed technology$132 5 years