Palo Alto Networks IncPANW
Palo Alto Networks Inc Fair Value Disclosure
Fair Value Measurements
The following table presents our financial assets and liabilities measured at fair value on a recurring basis as of July 31, 2025 and 2024 (in millions):
| July 31, 2025 | July 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Money market funds | $ | 1,206.1 | $ | — | $ | — | $ | 1,206.1 | $ | 494.0 | $ | — | $ | — | $ | 494.0 | ||||||||||||||||||||||||||||||||||
| Commercial paper | — | 168.5 | — | 168.5 | — | 299.6 | — | 299.6 | ||||||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | — | — | — | — | — | 18.2 | — | 18.2 | ||||||||||||||||||||||||||||||||||||||||||
| U.S. government and agency securities | — | — | — | — | — | 149.6 | — | 149.6 | ||||||||||||||||||||||||||||||||||||||||||
| Total cash equivalents | 1,206.1 | 168.5 | — | 1,374.6 | 494.0 | 467.4 | — | 961.4 | ||||||||||||||||||||||||||||||||||||||||||
| Short-term investments: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Certificates of deposit | — | — | — | — | — | 20.6 | — | 20.6 | ||||||||||||||||||||||||||||||||||||||||||
| Commercial paper | — | 14.8 | — | 14.8 | — | 79.9 | — | 79.9 | ||||||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | — | 584.0 | — | 584.0 | — | 935.9 | — | 935.9 | ||||||||||||||||||||||||||||||||||||||||||
| U.S. government and agency securities | — | 5.9 | — | 5.9 | — | 2.7 | — | 2.7 | ||||||||||||||||||||||||||||||||||||||||||
| Non-U.S. government and agency securities | — | 3.1 | — | 3.1 | — | 4.2 | — | 4.2 | ||||||||||||||||||||||||||||||||||||||||||
| Asset-backed securities | — | 22.2 | — | 22.2 | — | 0.3 | — | 0.3 | ||||||||||||||||||||||||||||||||||||||||||
| Total short-term investments | — | 630.0 | — | 630.0 | — | 1,043.6 | — | 1,043.6 | ||||||||||||||||||||||||||||||||||||||||||
| Long-term investments: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | — | 4,049.8 | — | 4,049.8 | — | 3,151.3 | — | 3,151.3 | ||||||||||||||||||||||||||||||||||||||||||
| U.S. government and agency securities | — | 164.5 | — | 164.5 | — | 19.0 | — | 19.0 | ||||||||||||||||||||||||||||||||||||||||||
| Non-U.S. government and agency securities | — | 26.2 | — | 26.2 | — | 54.4 | — | 54.4 | ||||||||||||||||||||||||||||||||||||||||||
| Asset-backed securities | — | 1,315.1 | — | 1,315.1 | — | 948.5 | — | 948.5 | ||||||||||||||||||||||||||||||||||||||||||
| Total long-term investments | — | 5,555.6 | — | 5,555.6 | — | 4,173.2 | — | 4,173.2 | ||||||||||||||||||||||||||||||||||||||||||
| July 31, 2025 | July 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||||||
| Prepaid expenses and other current assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency forward contracts | — | 57.9 | — | 57.9 | — | 4.1 | — | 4.1 | ||||||||||||||||||||||||||||||||||||||||||
| Total prepaid expenses and other current assets | — | 57.9 | — | 57.9 | — | 4.1 | — | 4.1 | ||||||||||||||||||||||||||||||||||||||||||
| Other assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| — | 3.4 | — | 3.4 | — | 0.1 | — | 0.1 | |||||||||||||||||||||||||||||||||||||||||||
| Total other assets | — | 3.4 | — | 3.4 | — | 0.1 | — | 0.1 | ||||||||||||||||||||||||||||||||||||||||||
| Total assets measured at fair value | $ | 1,206.1 | $ | 6,415.4 | $ | — | $ | 7,621.5 | $ | 494.0 | $ | 5,688.4 | $ | — | $ | 6,182.4 | ||||||||||||||||||||||||||||||||||
| Accrued and other liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | — | $ | 3.6 | $ | — | $ | 3.6 | $ | — | $ | 15.3 | $ | — | $ | 15.3 | |||||||||||||||||||||||||||||||||||
Contingent consideration | — | — | 276.0 | 276.0 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Total accrued and other liabilities | — | 3.6 | 276.0 | 279.6 | — | 15.3 | — | 15.3 | ||||||||||||||||||||||||||||||||||||||||||
| Other long-term liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| — | 0.1 | — | 0.1 | — | 0.9 | — | 0.9 | |||||||||||||||||||||||||||||||||||||||||||
Contingent consideration | — | — | 237.6 | 237.6 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Total other long-term liabilities | — | 0.1 | 237.6 | 237.7 | — | 0.9 | — | 0.9 | ||||||||||||||||||||||||||||||||||||||||||
| Total liabilities measured at fair value | $ | — | $ | 3.7 | $ | 513.6 | $ | 517.3 | $ | — | $ | 16.2 | $ | — | $ | 16.2 | ||||||||||||||||||||||||||||||||||
The fair value of our contingent consideration liability is estimated using a discounted cash flow valuation technique. We consider the fair value of our contingent consideration liability to be a Level 3 measurement as we use unobservable inputs in determining discounted cash flows to estimate the fair value. The significant unobservable inputs include an estimate of future cash payments related to customers entering into qualified new transactions as well as a risk-adjusted discount rate used to present value the expected cash flows. A significant change in any of these assumptions could have a material impact to the fair value of our contingent consideration liability.
In June 2025, we amended the terms of our contingent consideration arrangement with International Business Machines Corporation (“IBM”). During the three months ended July 31, 2025, we reduced our estimate of future cash payments based on the amended terms and our quarterly assessment of assumptions, including the magnitude and likelihood of customers entering into qualified new transactions, the competitive industry environment, and current market conditions.
The following table presents a reconciliation of our contingent consideration liability (in millions):
| Year Ended July 31, 2025 | |||||
Contingent consideration liability at the beginning of the period | $ | — | |||
Initial valuation on the acquisition date | 648.9 | ||||
Change in fair value | (135.3) | ||||
Contingent consideration liability at the end of the period | $ | 513.6 | |||
The total estimated fair value of our financing receivables approximates their carrying amounts as of July 31, 2025 and 2024. We consider the fair value of our financing receivables to be a Level 3 measurement as we use unobservable inputs in determining discounted cash flows to estimate the fair value.
Refer to Note 11. Debt, for the carrying amount and estimated fair value of our convertible senior notes as of July 31, 2024.
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 | |
| 2018 | Sep 13, 2018 | |
| 2017 | Sep 7, 2017 | |
| 2016 | Sep 8, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.