“Since fiscal '22, we've expanded our operating margins by almost 1,000 basis points, and we expect to continue to deliver expanded operating efficiencies in fiscal year '26 and beyond.”

In context

“Dipak Golechha (CFO): 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 a 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 to see very healthy growth. We ended the quarter at $5.58 billion in NGS ARR, which grew 32%. Q4 NGS ARR included approximately $17.5 million in support where customers also purchased Strata Cloud Manager. For context, this AI-powered unified management platform, which utilizes rich telemetry to deliver deeper insights into threats, a significantly improved user experience and much faster mean time to resolve issues for our customers. We expect this to be a growing contributor going forward but remain immaterial to total NGS ARR. We added approximately $490 million in net new NGS ARR in Q4, up 12% from a year ago. Our momentum was broad-based this quarter. Notable growth drivers included software firewalls, SASE, and XSIAM. AI ARR is now approximately $545 million in Q4, up over 2.5 times year-over-year. Moving down the income statement, total gross margin was 75.8%. Product gross margin was 76.8%, and as we close fiscal '25, we undertook a comprehensive review of our inventory, leading to Palo Alto Networks taking a reserve for excess and obsolete inventory and spares. This was a deliberate and prudent step taking a disciplined and conservative view of our product lifecycle. This action solidifies our balance sheet and ensures we're well positioned into fiscal '26 and beyond. That being said, we expect product gross margins of fiscal year '26 to increase relative to '25 and be in the high 70s or low 80s. As I have mentioned in prior quarters, we've been transitioning our primary manufacturing and fulfillment center to a contract manufacturing facility in Texas to provide us with the benefit from scale and innovation, as well as to take advantage of a foreign trade zone that can help us mitigate the impact of any potential tariffs on products we ship to international customers and destinations. We continue to believe that we differentiate ourselves in the industry by being the only pure-play cybersecurity firm to assemble all of our hardware in the U.S.A. at scale. As a result, the impact of tariffs on our business has been immaterial. Total services gross margin was 75.5%, a slight sequential increase from Q3. We are pleased by the sustained growth in our SaaS offerings and are executing on cloud cost efficiencies, including engaging with our cloud service providers to negotiate favorable procurement arrangements as the scale of our cloud-hosted products continues to grow. We continue to deliver profitable growth through the expansion of operating margins, which encompasses the gross margins that I just discussed. In Q4, we expanded operating margins by 340 basis points and delivered operating margins above 30% for the first time in the company's history. On an annual basis, operating margins of 28.8% came in above the high end of our guided range as we drove scale and efficiencies across sales and marketing, R&D, and G&A. Diluted non-GAAP EPS was $0.95 and also came in ahead of the high end of our guided range. Turning to the balance sheet, you will see that our debt balance came down by $383 million as our 2025 convertible notes reached maturity in June of this year. These notes were settled in cash and equity in Q4. We did not repurchase any shares in Q4, and our buyback strategy remains opportunistic. We have $1 billion in authorization remaining through December 2025. As many of you have heard from me in the past, we are focused on delivering profitable growth. And every decision we make is made within the context of maximizing long-term total shareholder return. For that reason, I'm extremely proud that Palo Alto Networks has delivered results that were above the rule of 50 for the last 5 years. We are unique in our ability to deliver top line growth with leading free cash flow margins at a level that is best-in-class among scaled enterprise software companies. As you will see shortly, we expect to once again be above the Rule of 50 in fiscal year '26. As Nikesh discussed, our ability to deliver sustained growth can be attributed to both our continued focus on innovation and our platformization strategy, which is driving bigger deals for us and better outcomes for our customers. On the free cash flow side of the equation, we've been able to expand our operating margins, providing a higher floor for our free cash flow while improving our visibility to said cash flows. Critical to our ability to be a continued Rule of 50 company has been the scalability of our business across every line item of the P&L. Since fiscal '22, we've expanded our operating margins by almost 1,000 basis points, and we expect to continue to deliver expanded operating efficiencies in fiscal year '26 and beyond. Our ability to expand operating margins has enabled us to deliver sustained high free cash flow margins while steadily managing an increase in demand for deferred payments. We've been moving through this transition since fiscal '21. And as we lap deals with deferred payments from the prior period, we have increased visibility into our future free cash flows. As I mentioned earlier, we delivered $3.5 billion of free cash flow at a 38% margin in fiscal year '25. We had visibility to approximately 40% of that free cash flow from deferred payments on deals signed prior to the fiscal year. We are continuing through this transition to deferred payments in fiscal '25, and we expect about half of our fiscal '26 free cash flow to come from deferred payment deals signed in fiscal '25 or earlier. Looking forward, we continue to see future free cash flow supported by ongoing operating margin expansion and a continued smooth transition to deferred payments. Specific to that topic, we continue to see increasing demand for annual payments, particularly on larger deals, we're absorbing this transition while maintaining our best-in-class adjusted free cash flow margins and guiding for a 26% adjusted free cash flow margin, at 38% to 39%. With that, let me turn to guidance. The Q1 '26 and fiscal year '26 guidance I will provide is for Palo Alto on a stand-alone basis and does not include any anticipated impact on the proposed acquisition of CyberArk announced on July 30, 2025. For fiscal year 2026, we expect NGS ARR to be in the range of $7.0 billion to $7.1 billion, an increase of 26% to 27%. Remaining performance obligation of $8.6 billion to $8.7 billion, an increase of 17% to 18%. Revenue to be in the range of $10.47 billion to $10.525 billion, an increase of 14%; operating margins to be in the range of 29.2% to 29.7%; diluted non-GAAP EPS to be in the range of $3.75 to $3.85, an increase of 12% to 15%; and adjusted free cash flow margin in the range of 38% to 39%. For the first fiscal quarter of 2026, we expect NGS to be in the range of $5.82 billion to $5.84 billion, an increase of 29%; remaining performance obligation of $15.4 billion to $15.5 billion, an increase of 23%; revenue to be in the range of $2.45 billion to $2.47 billion, an increase of 15%; and diluted non-GAAP EPS to be in the range of $0.88 to $0.90, an increase of 13% to 15%. We've included our modeling points in the presentation for your review, but I would like to highlight 2 areas: Firstly, we expect Q1 '26 product revenue growth to be approximately 20%, and we expect fiscal year '26 product revenue growth to be in the low teens. This is largely driven by strength in our software form factors within product revenue. Furthermore, we expect our top line seasonality to continue to be second half and Q4 weighted as we continue to platformize with our customers. Finally, I'd like to give an update around our financial expectations for the combined Palo Alto Networks and CyberArk. As you can see, we are pursuing this acquisition from a position of strength and are excited about our integration efforts post close. Based on our continued operating margin expansion and visibility of free cash flow and our continued smooth transition to deferred payments, we're targeting adjusted free cash flow of over 40% for the combined company in fiscal '28, the first full year post integration. This target assumes the impact of M&A-related synergies we intend to provide more details on the full scope of synergies post the closing of the transaction, which we continue to expect will happen in the second half of fiscal year '26. We're excited about the outcomes of the combined Palo Alto Networks and CyberArk businesses will deliver from a security perspective as well as from a total shareholder return perspective for the shareholders of both companies. With that, I will turn over to Hamza for Q&A.”