PANW · 10-K · 2026A · Full report

Income Tax Rate Changes

Palo Alto Networks Inc · 2026-09-10 · Importance 60 · Surprise 74

Fiscal 2026 effective tax rate increased to 42.7% from 28.9% in fiscal 2025. The higher rate was primarily caused by nondeductible fair-value changes in the 2030 Notes and capped calls and nondeductible share-based compensation. Intercompany legal-entity restructuring in fiscal 2026 partially offset the increase, while fiscal 2025 benefited from adoption of the One Big Beautiful Bill Act. The fiscal 2026 provision for income taxes was approximately $317 million based on the reported 42.7% effective rate and approximately $743 million of pretax income.

Key facts

• Palo Alto Networks stated its effective tax rate increased for fiscal 2026 compared to fiscal 2025 primarily due to non-deductible changes in fair value of the 2030 Notes and Capped Calls and share-based compensation, partially offset by intercompany legal entity restructuring and the prior adoption impact of the One Big Beautiful Bill Act. source
• Provision for (benefit from) income taxes for fiscal 2026 was an expense reflected as an effective tax rate of 42.7% for the most recent period shown. source
• From time to time, we may incur additional tax liability in connection with certain corporate structuring decisions. source
• Deferred tax assets are recorded for all future benefits including, but not limited to, net operating losses, research and development credit carryforwards, and basis differences relating to our global intangible low-taxed income. source
• Valuation allowances are provided when necessary to reduce deferred tax assets to the amount more likely than not to be realized. source
• We recognize liabilities for uncertain tax positions based on a two-step process which includes evaluating if a tax position is more likely than not to be sustained on audit and then measuring the tax benefit as the largest amount that is more likely than not to be realized upon ultimate settlement. source