PANWPalo Alto Networks
Is the business good?
The checks split: margins widening, but 3 of 9 health tests passed.
Weak, deteriorating fundamentals. Nine pass/fail tests of year-over-year health from the filings.
Operating profit is falling even as sales grow, costs are outrunning the top line.
A balanced mix of margins, efficiency, and leverage. ROE 8% = margin × turnover × leverage.
Unless marked, from derived.
Where this answer is blind. The F-score rewards improvement, so an already-elite company can score mid-pack.
How good a business is PANW?
Palo Alto Networks earns 2.3% on the capital it employs against a 9.0% cost of capital, so growth costs more than it returns.
Return on invested capital · cost of capital 9.0% · 6.8 points below what the capital costs: growth destroys value
- Operating margin
- 6.0%
Operating margin · Software - Infrastructure median 5.8% · 12 months to Q4 2026
- R&D as % of revenue
- 22%
R&D as % of revenue
- Gross margin
- 70%
Gross margin
| Year | Operating margin |
|---|---|
| FY2021 | −7.1% |
| FY2022 | −3.4% |
| FY2023 | 5.6% |
| FY2024 | 8.5% |
| FY2025 | 13% |
| FY2026 | 6.0% |
Details›
- Gross margin12 months to Q4 2026
- 70%
- Operating margin12 months to Q4 2026
- 6.0%
- Net margin12 months to Q4 2026
- 2.7%
- Free cash flow margin
- 36%
- R&D as % of revenue
- 22%
- Revenue, trailing twelve months
- $11.5B
- Free cash flow, trailing twelve months
- $4.11B
- Net income, trailing twelve months
- $307M
- Return on invested capitaloperating profit after tax ÷ debt + equity − cash
- 2.3%
Margins, capital and share counts from the statements as filed with the SEC; cash conversion is operating cash flow over operating profit after tax.
Software, Infrastructure
The closest names by size in the same industry