Palo Alto Networks IncPANW
Palo Alto Networks Inc Debt Disclosure
Debt
Convertible Senior Notes
In July 2018, we issued $1.7 billion aggregate principal amount of 0.75% Convertible Senior Notes due 2023 (the “2023 Notes”) and in June 2020, we issued $2.0 billion aggregate principal amount of 0.375% Convertible Senior Notes due 2025 (the “2025 Notes,” and together with the 2023 Notes, the “Notes”). The 2023 Notes bear interest at a fixed rate of 0.75% per year, payable semi-annually in arrears on January 1 and July 1 of each year, beginning on January 1, 2019. The 2023 Notes were converted prior to or settled on the maturity date of July 1, 2023 in accordance with their terms. The 2025 Notes bear interest at a fixed rate of 0.375% per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020. The 2025 Notes were converted prior to or settled on the maturity date of June 1, 2025 in accordance with their terms.
The following table presents details of our Notes (number of shares in millions):
| Conversion Rate per $1,000 Principal | Initial Conversion Price | Convertible Date | Initial Number of Shares | ||||||||||||||||||||
2023 Notes | 22.5270 | $ | 44.39 | April 1, 2023 | 38.1 | ||||||||||||||||||
| 2025 Notes | 20.1612 | $ | 49.60 | March 1, 2025 | 40.3 | ||||||||||||||||||
Holders of the 2023 Notes were able to early convert their 2023 Notes in fiscal 2023 up to April 1, 2023 and conversion requests received on or after April 1, 2023 were settled upon maturity of the 2023 Notes. Holders of the 2025 Notes were able to early convert their 2025 Notes in fiscal 2023, fiscal 2024, and fiscal 2025 up to March 1, 2025 and conversion requests received on or after March 1, 2025 were settled upon maturity of the 2025 Notes. During the years ended July 31, 2025, 2024, and 2023, we repaid in cash $965.6 million, $1.0 billion, and $1.7 billion, respectively, in aggregate principal amount of the Notes. We also issued 14.0 million, 14.0 million, and 22.9 million shares of our common stock to the holders of the Notes during the years ended July 31, 2025, 2024, and 2023, respectively, for the conversion value in excess of the principal amount. These shares were fully offset by shares we received from the corresponding exercise of the associated note hedges.
The following table sets forth the net carrying amount of our 2025 Notes (in millions):
| July 31, 2025 | July 31, 2024 | ||||||||||
| Principal | $ | — | $ | 965.6 | |||||||
| Less: debt issuance costs, net of amortization | — | (1.7) | |||||||||
| Net carrying amount | $ | — | $ | 963.9 | |||||||
The total estimated fair value of the 2025 Notes was $3.2 billion as of July 31, 2024. The fair value was determined based on the closing trading price per $100 of the 2025 Notes as of the last day of trading for the period. We consider the fair value of the 2025 Notes at July 31, 2024 to be a Level 2 measurement. The fair value of the 2025 Notes is primarily affected by the trading price of our common stock and market interest rates.
The following table sets forth interest expense recognized related to the Notes (dollars in millions):
| Year Ended July 31, 2025 | Year Ended July 31, 2024 | Year Ended July 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 Notes | 2025 Notes | Total | 2023 Notes | 2025 Notes | Total | 2023 Notes | 2025 Notes | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Contractual interest expense | $ | — | $ | 1.9 | $ | 1.9 | $ | — | $ | 4.8 | $ | 4.8 | $ | 11.6 | $ | 7.5 | $ | 19.1 | |||||||||||||||||||||||||||||||||||
| Amortization of debt issuance costs | — | 1.1 | 1.1 | — | 3.5 | 3.5 | 2.6 | 4.1 | 6.7 | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest expense recognized | $ | — | $ | 3.0 | $ | 3.0 | $ | — | $ | 8.3 | $ | 8.3 | $ | 14.2 | $ | 11.6 | $ | 25.8 | |||||||||||||||||||||||||||||||||||
| Effective interest rate of the liability component | — | % | 0.6 | % | — | % | 0.6 | % | 0.9 | % | 0.6 | % | |||||||||||||||||||||||||||||||||||||||||
Note Hedges
To minimize the impact of potential economic dilution upon conversion of our convertible senior notes, we entered into separate convertible note hedge transactions (the “2023 Note Hedges,” with respect to the 2023 Notes, the “2025 Note Hedges,” with respect to the 2025 Notes, and the 2023 Note Hedges together with 2025 Note Hedges, the “Note Hedges”) with respect to our common stock concurrent with the issuance of each series of the Notes.
The following table presents details of our Note Hedges (in millions):
| Initial Number of Shares | Aggregate Purchase | ||||||||||
2023 Note Hedges | 38.1 | $ | 332.0 | ||||||||
| 2025 Note Hedges | 40.3 | $ | 370.8 | ||||||||
The Note Hedges covered shares of our common stock at a strike price per share that corresponded to the initial applicable conversion price of the applicable series of the Notes and were exercisable upon conversion of the applicable series of the Notes. The Note Hedges expired upon maturity of the applicable series of the Notes. The Note Hedges are separate transactions and are not part of the terms of the applicable series of the Notes. Holders of the Notes of either series do not have any rights with respect to the Note Hedges. Any shares of our common stock receivable by us under the Note Hedges are excluded from the calculation of diluted earnings per share as they are antidilutive.
As a result of the conversions of the Notes during the years ended July 31, 2025, 2024, and 2023, we exercised the corresponding portion of our Note Hedges and received 14.0 million, 14.0 million, and 22.9 million shares of our common stock during the respective periods.
Warrants
Separately, but concurrently with the issuance of each series of our convertible senior notes, we entered into transactions whereby we sold warrants (the “2023 Warrants,” with respect to the 2023 Notes, the “2025 Warrants,” with respect to the 2025 Notes, and the 2023 Warrants together with the 2025 Warrants, the “Warrants”) to acquire shares of our common stock, subject to anti-dilution adjustments. The 2023 Warrants were, and the 2025 Warrants are, exercisable over 60 scheduled trading days beginning October 2023 and September 2025, respectively.
The following table presents details of our Warrants (in millions, except per share data):
| Initial Number of Shares | Strike Price per Share | Aggregate Proceeds | |||||||||||||||
| 2023 Warrants | 38.1 | $ | 69.63 | $ | 145.4 | ||||||||||||
| 2025 Warrants | 40.3 | $ | 68.08 | $ | 202.8 | ||||||||||||
The shares issuable under the Warrants are included in the calculation of diluted earnings per share when the average market value per share of our common stock for the reporting period exceeds the applicable strike price for such series of Warrants. The Warrants are separate transactions and are not part of either series of Notes or Note Hedges and are not remeasured through earnings each reporting period. Holders of the Notes of either series do not have any rights with respect to the Warrants.
During the year ended July 31, 2024, we net settled all of the 2023 Warrants with 18.0 million shares of our common stock with a fair value of $2.4 billion. The number of net shares issued was determined based on the number of 2023 Warrants exercised multiplied by the difference between the strike price of the 2023 Warrants and their daily volume-weighted-average stock price.
Revolving Credit Facility
On April 13, 2023, we entered into a credit agreement (the “Credit Agreement”) with certain institutional lenders that provides for a $400.0 million unsecured revolving credit facility (the “Credit Facility”), with an option to increase the amount of the Credit Facility by up to an additional $350.0 million, subject to certain conditions. The Credit Facility matures on April 13, 2028.
The borrowings under the Credit Facility bear interest, at our option, at a base rate plus a spread of 0.000% to 0.375%, or an adjusted term Secured Overnight Financing Rate plus a spread of 1.000% to 1.375%, in each case with such spread being determined based on our leverage ratio. We are obligated to pay an ongoing commitment fee on undrawn amounts at a rate of 0.090% to 0.150%, depending on our leverage ratio. The interest rates and commitment fees are also subject to upward and downward adjustments based on our progress towards the achievement of certain sustainability goals.
As of July 31, 2025, there were no amounts outstanding and we were in compliance with all covenants under the Credit Agreement.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 29, 2025 | Showing above |
| 2024 | Sep 6, 2024 | |
| 2023 | Sep 1, 2023 | |
| 2022 | Sep 6, 2022 | |
| 2021 | Sep 3, 2021 | |
| 2020 | Sep 4, 2020 | |
| 2019 | Sep 9, 2019 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.