Palo Alto Networks, Inc. has addressed the comments from the Securities and Exchange Commission (SEC) regarding its Form 10-Q for the fiscal quarter ended January 31, 2024. The SEC's Division of Corporation Finance had issued a Comment Letter on April 11, 2024, seeking clarifications on the company's income tax disclosures. In response, Palo Alto Networks plans to expand its Income Tax footnote disclosure in the upcoming Form 10-Q, to be filed around May 20, 2024. The company has recognized a net tax benefit of $1.5 billion for the quarter, resulting from a deferred tax benefit of $3.2 billion and a deferred tax expense of $1.7 billion. This financial move was based on the analysis of all positive and negative evidence, which led to the conclusion that it...Show More

Palo Alto Networks, Inc. has addressed the comments from the Securities and Exchange Commission (SEC) regarding its Form 10-Q for the fiscal quarter ended January 31, 2024. The SEC's Division of Corporation Finance had issued a Comment Letter on April 11, 2024, seeking clarifications on the company's income tax disclosures. In response, Palo Alto Networks plans to expand its Income Tax footnote disclosure in the upcoming Form 10-Q, to be filed around May 20, 2024. The company has recognized a net tax benefit of $1.5 billion for the quarter, resulting from a deferred tax benefit of $3.2 billion and a deferred tax expense of $1.7 billion. This financial move was based on the analysis of all positive and negative evidence, which led to the conclusion that it was more likely than not that deferred tax assets would be realized, reflecting recent profitability and continued forecasted income. The company has also detailed its rationale for the timing of recognizing the deferred tax expense related to the U.S. federal indirect tax effect of foreign deferred taxes. Palo Alto Networks has considered its historical results, including a three-year cumulative loss before tax of $106 million up to the fiscal year 2023, and forecasted income for fiscal years 2022, 2023, and 2024. The company remains confident in its business plans and expects continued income before tax, which has led to the release of the valuation allowance in the fiscal quarter ended January 31, 2024. The valuation allowance release pertains to U.S. federal, U.S. states other than California, and the U.K. deferred tax assets. A full valuation allowance remains for California as the realization criterion has not been met. The company will enhance its disclosure in the next Form 10-Q as per the SEC's request.