Palo Alto Networks (PANW) risk factors, FY2025 10-K

Risks Related to Global Economic and Geopolitical Conditions

1. 01Our operating results may be adversely affected by unfavorable economic and market conditions and the uncertain geopolitical environment

RISKS RELATED TO OUR GROWTH

1. 02Our business and operations have experienced growth in recent periods, and if we do not effectively manage any future growth or are unable to improve our systems, processes, and controls, our operating results could be adversely affected
2. 03Our revenue growth rate in recent periods may not be indicative of our future performance, and we may not be able to maintain profitability, which could cause our business, financial condition, and operating results to suffer
3. 04Our operating results may vary significantly from period to period, which makes our results difficult to predict and could cause our results to fall short of expectations, and such results may not be indicative of future performance
4. 05Seasonality may cause fluctuations in our revenue

RISKS RELATED TO OUR PRODUCTS AND TECHNOLOGY

1. 06If we are unable to sell new and additional product, subscription, and support offerings to our end-customers, especially to large enterprise customers, our future revenue and operating results will be harmed
2. 07If we are unable to attract new customers, our future results of operations could be harmed
3. 08We rely on revenue from subscription and support offerings, and because we recognize revenue from subscription and support over the term of the relevant service period, downturns or upturns in sales or renewals of these subscription and support offerings are not immediately reflected in full in our operating results
4. 09The sales prices of our products, subscriptions, and support offerings may decrease, which may reduce our revenue and gross profits and adversely impact our financial results
5. 10We rely on our channel partners to sell substantially all of our products, including subscriptions and support, and if these channel partners fail to perform, our ability to sell and distribute our products and subscriptions will be limited and our operating results will be harmed
6. 11We are exposed to the credit and liquidity risk of our customers, and to credit exposure in weakened markets, which could result in material losses
7. 12A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks
8. 13We face intense competition in our market and we may lack sufficient financial or other resources to maintain or improve our competitive position
9. 14We may not complete the acquisition of CyberArk within the timeframe we anticipate or at all, which could negatively impact our future business and financial results
10. 15As a result of the CyberArk acquisition, we anticipate that the scope and size of our business will substantially change and result in certain incremental risks, including increased competition
11. 16The occurrence of any of these risks could harm our business, operating results, and financial condition
12. 17Issues in the development and deployment of AI may result in reputational harm and legal liability and could adversely affect our results of operations
13. 18A network or data security incident may allow unauthorized access to our network or data, harm our reputation, create additional liability, and adversely impact our financial results

RISKS RELATED TO INTELLECTUAL PROPERTY AND TECHNOLOGY LICENSING

1. 19Claims by others that we infringe their intellectual property rights could harm our business
2. 20Our proprietary rights may be difficult to enforce or protect, which could enable others to copy or use aspects of our products or subscriptions without compensating us
3. 21Our use of open source software in our products and subscriptions could negatively affect our ability to sell our products and subscriptions and subject us to possible litigation
4. 22We license technology from third parties, and our inability to maintain those licenses could harm our business

RISKS RELATED TO OPERATIONS

1. 23Managing the supply of our hardware products and product components is complex. Insufficient supply and inventory would result in lost sales opportunities or delayed revenue, while excess inventory would harm our gross margins
2. 24If we are unable to attract, retain, and motivate our key technical, sales, and management personnel, our business could suffer
3. 25We generate a significant amount of revenue from sales to distributors, resellers, and end-customers outside of the United States, and we are therefore subject to a number of risks associated with international sales and operations
4. 26We are exposed to fluctuations in foreign currency exchange rates, which could negatively affect our financial condition and operating results
5. 27We face risks associated with having operations and employees located in Israel
6. 28We are subject to international trade regulations and governmental export and import controls that could subject us to liability or impair our ability to compete in international markets

RISKS RELATED TO PRIVACY AND DATA PROTECTION

1. 29We may incur increased costs to comply with privacy and data protection laws and, if we fail to comply, we could be subject to government enforcement actions, private litigation and adverse publicity

Tax, Accounting, Compliance, and Regulatory Risks

1. 30We may have exposure to tax liabilities that are greater than anticipated
2. 31Our reputation and/or business could be negatively impacted by corporate responsibility matters and/or our reporting of such matters
3. 32Failure to comply with governmental laws and regulations could harm our business

Risks Related to Our Common Stock

1. 33The market price of our common stock historically has been volatile, and the value of an investment in our common stock could decline
2. 34The warrant transactions may affect the value of our common stock
3. 35The issuance of additional stock in connection with financings, acquisitions, investments, our stock incentive plans, exercise of the 2025 Warrants, or otherwise will dilute stock held by all other stockholders
4. 36We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance shareholder value, and share repurchases could affect the price of our common stock
5. 37We do not intend to pay dividends for the foreseeable future
6. 38Our charter documents and Delaware law could discourage takeover attempts and lead to management entrenchment, which could also reduce the market price of our common stock
7. 39Our business is subject to the risks of earthquakes, fire, power outages, floods, health risks, and other catastrophic events, and to interruption by man-made problems, such as terrorism
8. 40Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new products and subscriptions could reduce our ability to compete and could harm our business