[Audio Gap] August 18 at 1:30 p.m. Pacific Time. With me on today's call to discuss fourth quarter results, are Nikesh Arora, our Chairman and Chief Executive Officer; and Dipak Golechha, our Chief Financial Officer. Following our prepared remarks, Lee Klarich, our Chief Product Officer, will join us for the question-and-answer portion. You can find the press release and other information to supplement today's discussion on our website at investors.paloaltonetworks.com. While there, please click on the link for quarterly results to find the Q4 '25 supplemental information and Q4 '25 earnings presentation. During the course of today's call, we will be making forward-looking statements and projections regarding the company's business operations and financial performance as well as the company's proposed acquisition of CyberArk. These statements made today are subject to a number of risks and uncertainties that could cause our actual results to differ from these forward-looking statements. Please review our press release and recent SEC filings for a description of these risks and uncertainties. We assume no obligation to update any forward-looking statements made in the presentation today. This presentation contains non-GAAP financial measures and key metrics relating to the company's past and expected future performance. Non-GAAP financial measures should not be considered a substitute for financial measures prepared in accordance with GAAP. The most directly comparable GAAP financial measures and reconciliations are in the press release and the appendix of the investor presentation. Unless specifically know otherwise, all results and comparisons are on a fiscal year-over-year basis. We also note that management is scheduled to participate in the Citi Global TMT Conference this quarter. I will now turn the call over to Nikesh.

Thank you, Hamza. Good afternoon. Thank you, everyone, for joining us today for our earnings call. As you can see, we had a strong finish to the fiscal year. We've just closed the landmark quarter, capping a year of disciplined execution and strategic acceleration. Our results this quarter are a direct reflection of a strategy we have been architecting for years, anticipating where the market is going and building the future of cybersecurity before it arrives. This is a moment of conviction, both for us and for our customers. We're proud to be the first dedicated cybersecurity company to surpass a $10 billion revenue run rate. While this milestone is significant, it is not the ultimate goal. Our focus has already shifted to sorry, excuse me, yes, our focus has already shifted to leveraging the scale to define the next decade of cybersecurity. The very fabric of technology is being rewoven by AI, creating a vast, new and complex attack surface. In this new era, security is no longer a bolt-on. It is a foundational enabler of transformational success. The record-breaking number of platformization deals this quarter demonstrates that customers are not just buying products, they are buying into a strategic partnership. We believe that integrated best-of-breed platforms deliver superior security outcomes and our customers are validating this conviction by making larger, more strategic commitment with us than ever before. During Q4, many of the deals our teams had been working on during our fiscal year came to fruition. We saw robust activity across the board. In Q4, our bookings growth turned a corner and was the highest we've seen in 2.5 years. This growth is driven by deals across our platforms and also as a result of strong renewals and upsells across our existing portfolio. The robust booking growth…

Thank you, Nikesh, and good afternoon, everyone. To maximize our time spent on Q&A, I will provide you with financial highlights of Q4. You can review the detailed results in our press release and in the supplemental financial information on our website. In Q4 '25, total revenue was $2.54 billion and grew 16%, above the high end of our guided range. Within total revenue, product revenue grew 19%, driven by growth in software form factors, while total services revenue grew 15%. Within total services, subscription revenue grew 17% and support revenue rose 11%. In the fourth quarter, 56% of product revenue was from software form factors, a significant driver of product revenue growth year-over-year. On a trailing 12-month basis, the proportion of our product revenue from software surpassed 40%, driven by growth in our software firewall form factors and PAN-OS SD-WAN. We continue to see firewall appliance growth in line with the ranges that we have described in past periods, namely 0% to 5%. Moving on to geographies. We saw double-digit growth across all theaters with the Americas growing 15%, EMEA up 19% and JPAC growing 13%. We saw strength across our major verticals and saw a year-over-year bookings growth improvement in our Public Sector business. Remaining performance obligation, or RPO, grew 24% to $15.8 billion. This was our highest RPO growth in 7 quarters at a significantly larger scale. Our current RPO was $7.0 billion, growing 17% year-over-year. As Nikesh noted, we saw customers making significant commitments to our platforms in Q4 as reflected by a large deal volume, net new platformization and RPO growth. Contract duration in the quarter increased slightly on both the year-over-year and the quarter- over-quarter basis but remains within our historical range at approximately 3 years. Turning to next-generation security ARR, where we continue…

[Operator Instructions] The first question will be from Rob Owens from Piper Sandler, followed by Brad Zelnick from Deutsche Bank.

I was hoping to get a more strategic view on security consolidation, both from your perspective, where we're at now as well as any anecdotes you can share from customers. As you well know, security is one of the most fragmented IT markets of scale with Palo as the independent leader but still only kind of a mid-single-digit share relative to spend right now. While platformization, your SecOps strategy was clearly aimed at playing to this convergence. Can you speak to the rise of Agentic right now and how it's catalyzing this market need?

Rob, thanks for your question. I guess we should be more strategic in our answers. So the consolidation is 99% perspiration, and you see that. That's why we've set ourselves on this plan of platformization. And I think the reason we highlighted a $50 million ARR deal, that's a big number in technology, whether it's cybersecurity or anything else. That tells you the art the possible. If one was able to consolidate the entire security spend of a large customer, you can get up to $50 million in ARR. I think if you look around our landscape, many companies are still reporting million dollar customers, right? If the art of the possible is $10 million, $20 million, $50 million in ARR, that shows you that's where consolidation is headed. Now historically, whether it's CRM, whether it's ERP, whether it's HR, workflow, it's ITSM. All these markets have started as fragmented markets. They've just been around 25 years longer than we have. So if you play this movie 10, 15 years out, there's no reason why our installed base of platform customers should not continue to rise at the pace we're trying to predict it's going to rise. So can I see us going from 6% to 8% market share to 15%, 20%? Yes, I can. Is it going to happen in 1 quarter? Unfortunately not, it's going to take us this sort of deft art of convincing our customers to platformize with us, giving them good experiences on 1 platform, evolving them to the next one. And I'll tell you the benefit of AI is we're down to a 25-minute attack, right? So it's no longer how much money are you spending to protect ourselves. The question is how quickly you're going to find it and how quickly you're going…

Next question will be Brad Zelnick from Deutsche Bank, followed by Saket Kalia from Barclays.

Great. Congrats on a monster near $5 billion bookings this quarter. Nikesh, if you reflect back on the underlying drivers, how much of this is strong execution versus maybe improved macro since April versus seeing the fruits of platformization play out? Or is the platformization benefit still very much ahead of us?

Well, first of all, thank you, Brad, for your positive note on our stock most recently. You found a low point to reestablish your credibility with us. So thank you. That notwithstanding. Look, I want to say it's the platformization story. I think it takes a while to take our thousands of sellers out there, get them to understand that the value is in platformization and being able to multiply and deploy all of our products in a consistent fashion. I don't think the macro is bad. I think macro is fine. I think the challenge that you've been seeing is something that Rob just talked about. We still have fragmented players in the industry. You get trapped in a hardware-only business. If you only have a hardware business, you don't have a software firewall, where you have 50% market share, you're not going to have double-digit product growth on a consistent basis. If you're not taking share in SASE and you only have SASE to deal with, then you're stuck in a side situation where you're losing share in SASE and you're still fighting 3 vendors at every SASE sort of POC or SASE deal. If you're not innovating, you're not out in the browser game, then you got to watch out because the world is moving towards browser. I think it's a combination of the innovation road map, the conviction of the customer that we have now demonstrated over the last 5 years that we will rush to deploy and embrace a technology that's out of the market. Two years ago, we didn't have a browser. A year ago, we didn't have an AI firewall. Our customers see that said, look, I know that if I commit to your platform, I will see a path to the next technology out there. So I think it's partly us building conviction with our customers that we will provide them an evergreen path. I think it's partly the fact that people feel that there is a need to consolidate to get a better security outcome. I think macro is still what it is. I think the Fed is finally coming out of its machinations of a new administration trying to figure out how to keep business as usual going and how to make sure that we continue to protect the nation. So I think from all those perspectives, macro is fine. I think there's no big step up or step down in macro and we'll see what happens going forward, but I don't see anything different in the market going forward. I think we continue to see the benefits of consolidation. And as always, look, there's always the Q4 magic, as you all know. There is no magic to July 31, but there is magic to Q4. So I think part of what you're seeing is our team saw that they were executing really well and they put their foot in the accelerator.

Our next question is from Saket Kalia from Barclays followed by Gabriela Borges from Goldman Sachs.

Nice finish to the year and congrats to Lee and Nir on their respective next steps. Nikesh, maybe for you. I'd love to dig into the network security ARR a little bit more, particularly the form factor shift in firewall. You've talked about sort of more of a move to software there driven by cloud transformation. Maybe the question is why do you think Palo is taking share in the software part of the firewall market? And how do you think about lifetime value there versus appliances, if that makes sense?

Well, let me have our new Board member first answer the form factor shift from a technological perspective. You have to deliver a visionary stuff as Chief Technology Officer. Then I'll talk to you about the numbers.

Thank you very much. Look, the -- if you think about the hardware space, it started in 1994, 1995, just to give you a sense of like how long that space has been around. Whereas the software network security market is much more recent. And the -- as customers made their shift toward the cloud, a lot of the sort of incumbent vendors sort of treated it as a secondary market, possibly defeatured something that is hardware-based, put a little spit and shine on it. The reality though is the cloud environments require a lot more focus on that. It's not just someone else's network and you put a software firewall into it. There's a lot of unique innovation that has to be driven. And you saw this over the last few years from us. We launched cloud NGFWs, which are designed to be sort of native -- cloud native firewalls. So they're not just a virtual appliance. They're actually designed to fit seamlessly in the cloud. With the PAN-OS Orion launch from last week, we talked about cloud networking and building out a whole cloud networking fabric that connects into that, not only for cloud NGFWs, but also for our AI firewalls that run the cloud as well. And so I believe our traction and success in software firewalls is the amount of dedicated attention we put on them to drive unique innovation specific to their deployment needs. And we see it. We see it in the numbers, and we see it in the customer traction we get.

Look, I think part of what you're seeing from a why now is originally, the view was that people will go to one cloud service provider, make that the mainstay of their cloud migration, and that's where you're going to get some of this network security capability. But today, I'd say if you look at the Fortune 500, I'd say 80%, 90% of customers are multi-cloud. It's hard to find a single cloud customer out of the market, unless you are the cloud provider yourself. Even they have sometimes too because they make an acquisition with somebody else is using a different cloud providers. So the moment you start having multiple cloud providers, then if you want a single pane of glass, you need to go off funnel them and come to something like Palo Alto. We're the only player in the market which had native embedded software firewalls in all of the cloud providers. So on 1 pane of glass as a native firewall, all cloud providers, you come to us, kind of that's one reason. Two, is what you've noticed now more and more production applications are in the public cloud. And when they get there, there is no excuse not to have a firewall protecting that instance. So I think from both those vantage points, that software firewall has come now. And the good news is, as you'd appreciate, hardware, we ship a firewall, customer sandbox it, test it, deploy it, takes 6 months. Software firewalls can get turned out overnight. You can provision them in under 24 hours. You can scale them as soon as you want. There's no lag. You can upgrade them from a software perspective instantaneously as and when we deploy an upgrade, it gets deployed to all of our customers. I think from all those reasons, it's a much more efficient security appliance in a way, software appliance, then you could ever get your hardware. So you're seeing that. I think from a lifetime value perspective, it's kind of interesting. We announced a $60 million deal with 1 company for software firewalls TCV this quarter. It's been a long time since we did a $60 million hardware firewall deal from a TCV perspective, because that will require you to buy at least 3,000 firewalls. And nobody is buying 3,000 firewalls.

Just to build on that Saket, like we've said multiple quarters ago that the transition from a hardware firewall to software firewall was roughly the same in terms of revenue, and Nikesh talked about how it's much easier to deploy. On SASE, actually, the lifetime value ends up being about 2.5x larger than it typically is on a hardware firewall.

Up next is Gabriela Borges from Goldman Sachs, followed by Matt Hedberg from RBC.

Dipak, I wanted to follow up on some of the mix commentary within NGS ARR from last quarter. Give us a little bit of a sense as we look through this year and how you're thinking about the advanced attached subscription versus the emerging portfolio mix in NGS ARR? And to Saket's question on virtual firewalls do you think we can see similar step-ups in growth in virtual firewalls such that they contribute similar amounts to the growth algorithm for NGS ARR, how durable is that as a growth driver?

Yes. So I think, Gabriela, maybe just the meta point is we're pretty much over a lot of the transitions of our advanced subscriptions. At this stage, like we alter the definition really based on feedback from you to make sure that it's easier what's excluded at this stage, which is really just hardware firewalls and legacy subscriptions and support. We will continue to see step up from those things at a legacy that we can transition over. But the reality is we're now -- more and more of the growth is coming from fast, durable next-generation products, whether it be software firewall, whether it be SASE, whether it be XSIAM and some of the newer products that we're launching like Prisma AIRS that will also be significant contributors to growth.

Next question is from Shaul Eyal at Cowen, followed by Joe Gallo from Jefferies. I am sorry, Matt, please go ahead and then Shaul Eyal from Cowen.

Well, Thanks, Hamza. The top line results are super impressive. I have a question for Dipak. The 40% free cash flow margins by '28 is also equally impressive. Maybe a question for you or even Lee from a product integration perspective. Can you talk about some of the underlying components of how you get there and sort of your confidence level on that because that is obviously, I think, well above what a lot of us thought post integration.

Well, let me start. I mean, like we wouldn't be guiding to it if we didn't have confidence in it, Matt. But I think, look, it's really underpinned by the operating margins. You've seen a lot of operating margin expansion occur over the last 3 years. We feel very confident that we have a business model that scales at every single line item of the P&L. I've talked through that before. We're a low capital like business model, which always helps from a free cash flow point of view. So I'd say pretty high degree of confidence. I think the meta point is when the strategy is to platformize and customers are buying into it and we're cross correlating the data, that really helps us scale well as a company. And then that helps scale very well from a cash point of view as well. That's effectively what we're seeing as we guide into the future.

To add to what Dipak just said. I think he's also -- he showed you a beautiful slide about how we feel like some of our free cash flow has been sat upon because of the transition from effectively and towards annual billings. So now given that a majority of our business has shifted towards annual billings, we know that the rest is still going to be upfront cash. So given that we get a sense that we will get some relief on the free cash flow margin in the next 24 months. So I think putting all those together in a box and mixing it, we believe, we definitely can achieve more than 40% margin. Of course, it will require some degree of work with our CyberArk colleagues and partners when we get this deal done. But we feel confident that they're equally aligned in terms of what we want to achieve.

Up next is Shaul Eyal, and we'll wrap it up with Joe Gallo from Jefferies.

Congrats to everybody. Nikesh, enterprise browser momentum and also browser wars. These wars, are these with privates? Are these with some other players out there? What's the thinking along these lines? Clearly...

Look, if you look at what's going on, it's kind of sometimes better be lucky than good, right? So we bought the browser because we felt there were certain use cases like VDI or third-party contractors or mobile devices, which are not covered by SASE. So we literally bought the browser business, thinking we were going to cover these edge use cases and life will go on as normal for regular employees of VPNs or SASE clients. And we built that strategy, and we see a lot of adoption from a third-party contractor as well as VDI perspective, and we continue to make progress in. Now what happened about 6 to 8 months ago, you started hearing that the only way to deploy agents successfully for many consumer use cases is a browser. If you want to make a reservation on Booking.com and pick an open table reservation or you want to so suddenly, to run Agentic tasks, you need to control the browser. That's what Anthropic is figuring out, that's what OpenAI is figuring out, that's what Perplexity is figuring out. That's what Google is figuring out. Suddenly, you're beginning to see these let's call it, consumer browser wars that are beginning to start. Microsoft is going to come back with more Agentic features of browsers. Effectively, you deploy a browser in your device, which is going to start doing an Agentic task for you. Now what's great for the consumer is dangerous for the enterprise, right? No enterprise is going to love a do as you please browser, which can run agents without control. How do you control agents in a browser for enterprise employee or you need to secure browser. You literally will come to a point where companies will say, you cannot use a consumer version of this product. And think about it, happens in enterprise all the time. You're not allowed to use a consumer origin of DocuSign, you're not a lot to use the consumer version a Dropbox. You're not allowed to use a consumer version of a SaaS app in enterprise because it's missing the enterprise controls. So if you believe that Agentic's true future is coming through browsers in the future for the desktop, then you have to believe that the case for secure browser just became a mainstream case in the enterprise use case. So that's what I meant by the browser wars and consumer are going to drive the acknowledgment that we need to solve the browser problem in enterprise, then it's going to become a critical part of your SASE stack.

And our last question will come from Joe Gallo from Jefferies.

Saw the blended Cortex and Cloud numbers. But can you just talk more about security specifically in detail, how is that doing? Are customers gravitating towards that runtime agent architecture and then any changes in the competitive landscape post the Wiz acquisition?

Look, I think the thesis we had with cloud security when we decided to make the change and launched Cortex Cloud was that the different elements of cloud security are all interconnected. From application security to cloud posture security to runtime security and cloud SOC. And I would say 6 months since the Cortex Cloud launch, our belief and conviction in that thesis is even stronger. It is very clear that attacks are happening faster. We know that as more and more enterprises move enterprise-critical applications to cloud, that means cloud runtime protection becomes even more important than ever before. And from that, and Nikesh made the comment of sort of both shift left and shift right. There's the shift left aspect, which is how do we shift left all the way to the beginnings of code writing and application security. You saw us a couple of weeks ago launch application security posture management, which is our approach to making sure that everything developed for the cloud is done in a secure way. Such that what is deployed in production is as secure as it can be. With exposure management, we can then tie that across not only cloud but enterprise, runtime, et cetera. So the -- our conviction of that is still very, very strong. And we're seeing the response from our customers of being aligned with that strategy. And now it's a question of a lot of execution to take our customers through that transformational journey over to Cortex Cloud.

Okay. With that, we'll conclude the Q&A portion of the call, and I'll turn it back to Nikesh for his closing remarks.

Well, actually, thank you again, everyone, for joining us today. I also want to once again say thank you to Nir for all his visionary leadership at Palo Alto Networks. And congratulations to Lee Klarich, our newest Board member, who will continue our technological vision going forward. And we look forward to seeing many of you at future conferences. I also, once again, want to thank our customers, employees and partners for helping us deliver a wonderful quarter and the end of the year, and we look forward to FY '26. Have a great day.