Welcome to the Palo Alto Networks Inc. 2025 Annual Meeting of Shareholders. I now turn the meeting over to Nikesh Arora, Chair and Chief Executive Officer of Palo Alto Networks.
Good morning, and thank you everyone for joining us today for our 2025 Annual Meeting of Shareholders. I would like to welcome the members of our Board of Directors and Management Team for attending today's meeting, as well as representatives from Ernst & Young, our independent registered public accounting firm. I will be presiding as Chair of the meeting.
Before we proceed, I would like to say a few words about our company and fiscal 2025 performance. Fiscal 2025 was yet another year of strong financial achievement for Palo Alto Networks. Our revenue grew 15% year over year to $9.22 billion. Our Next- Generation Security ARR grew 32% year over year to $5.58 billion, and our ARR grew 24% year over year to $15.8 billion. This performance underscores that our platformization strategy continues to resonate with our customers, translating into sustained and increasing demand for our comprehensive cybersecurity solutions.
At the core of this exceptional performance is our unwavering commitment to innovation across all our security platforms. In Network Security, we observed particularly strong growth fueled by an increasing adoption of our software firewalls and SASE solutions. This contributed to Network Security NGS ARR reaching $3.9 billion, a 35% year over year increase. In addition, our Security Operations Platform experienced broad-based momentum, with NGS ARR reaching $1.7 billion, an approximately 25% year over year increase.
A key highlight in Cortex was the expansion of our XSIAM customer base, which experienced an over twofold increase year over year, showcasing the strong adoption of our Next- Generation Security operating capabilities. The cybersecurity landscape is undergoing a monumental shift, propelled by the emergence of generative and agentic AI.
In response to this transformative era, the focus of ours over fiscal 2025 was evolving our product offerings to safeguard our customers' adoption of AI tools and the valuable AI assets they generate. This commitment culminated in the launch of Prisma Cloud AI Runtime Security, the most comprehensive AI security platform available today.
At the same time, AI is creating new security categories and reshaping the way identity security is delivered. Having extensively observed and analyzed the identity security landscape for years, we're convinced that the time is opportune to reshape this category and lead from the front. This conviction led to the announcement of our intent to acquire CyberArk, the global leader in identity.
We expect that this combination will establish the preeminent platform for end-to-end AI security, with identity security as the next major pillar in our multi-platform strategy, and further propelling our mission to be the cybersecurity partner of choice.
None of these accomplishments are possible without the dedication and engagement of our more than 16,000 employees located around the world. Our employees are the driving force behind our industry, our leadership, us consistently delivering and developing cutting-edge technologies and services.
Their unwavering commitment to innovation enables us to help protect our customers from the increased frequency and sophistication of cyberattacks. The agenda and rules of our conduct for today's meeting are posted on the web portal. To ensure that the business of the meeting proceeds efficiently, we ask that you observe those rules, and I will turn this meeting over to Bruce Byrd, our General Counsel and Corporate Secretary, who will conduct the formal business of the meeting.
Thank you. The meeting is now called to order. I have an affidavit certifying the mailing of the proxy materials, commencing on November 7, 2025, to shareholders of record at the close of business on October 15, 2025. As authorized by our Board of Directors, Kathy Blackwell is appointed as the Inspector of Election for this annual meeting.
The Inspector of Election has signed an oath of election to execute the duties of the Inspector of Election with strict impartiality and according to the best of her ability. The affidavit of distribution and the oath of the Inspector of Election will be filed with the minutes of this meeting. The Inspector of Election has advised me that we have present, virtually and by proxy, a sufficient number of shares to constitute a quorum such that the meeting is duly constituted.
If you have previously sent in your proxy or voted via telephone or internet, and you do not intend to change your vote, it is not necessary that you take any further action. Your vote will be counted. If you are eligible to vote and have not done so, or if you want to change your vote, you may vote by clicking on the voting button on the web portal and following the instructions available there.
The first item of formal business is the election of Class II directors. The nominees for reelection are John M. Donovan, James J. Goetz, and Helle Thorning-Schmidt. The second item of formal business is to ratify the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending July 31, 2026.
The third item of formal business is to approve, on an advisory basis, the compensation of the company's named executive officers. The fourth item of formal business is to approve an amendment to the company's 2021 Equity Incentive Plan to increase the number of planned shares reserved for issuance. The Board of Directors recommends that shareholders vote in favor of proposals one, two, three, and four.
The proxies received by the company will be voted in accordance with the board's recommendations unless otherwise instructed by the shareholder. The fifth item of formal business, if properly presented, is to consider and vote upon a shareholder proposal regarding electing each of our directors annually. The shareholder proponent has prepared a prerecorded statement to present this proposal at today's meeting. The remarks in the statement are the shareholders' own and have not been viewed for accuracy, edited, or endorsed by the company.
We will now play the prerecorded statement from the shareholder proponent.
Good morning, members of the board and fellow shareholders. My name is Maureen O'Brien, and I'm here on behalf of the Vermont Pension Investment Commission. Our company spent $567 million on share buybacks in 2024, and performance goals tied to executive pay include total shareholder return, a financial ratio that can be inflated by stock buybacks.
Shareholders urge the Board of Directors to adopt a policy that financial performance metrics shall be adjusted to the extent practical to exclude the impact of share repurchases when determining the amount or vesting of any senior executive incentive compensation grant or award. Senior executive pay should be aligned with operational results and the individual contributions of senior executives, not financial engineering.
In our view, senior executives are responsible for improving our company's operational performance, whereas the board is responsible for determining when stock buybacks are appropriate.
Academic research has shown that stock buybacks that increase earnings per share are more likely when a firm would have just missed analysts' earnings per share target. Given this potential for manipulation, we believe that senior executives should not receive larger pay packages simply for reducing the number of shares outstanding. Academic research has shown that stock buybacks can decrease capital expenditures and R&D spending, resulting in lower market-to-book ratios, profitability, innovation, and growth in the long run. For these reasons, we urge you to vote for this proposal. Thank you.
Now we will play Mr. McRitchie's prerecorded remarks.
Our company argues that classified boards promote stability and protect against hostile takeovers. Yet, by making three recent director appointments outside the annual meeting cycle, our board has been sidestepping regular shareholder elections altogether. That practice highlights a broken system that allows the board to avoid proper oversight.
Yes, a classified structure could help fend off coercive takeovers. However, entrenching directors at the expense of shareholder rights is an ineffective defense strategy. The economic benefits of declassifying the board are well supported by research. Strong company fundamentals, a well-performing management team, and a vigilant, engaged board, those are the fundamental protections against opportunistic or coercive takeovers, not staggered elections.
Vanguard and BlackRock, our largest shareholders, as well as proxy advisory firms ISS and Glass Lewis, strongly support declassifying boards, recognizing it as a best practice.
Shareholder resolutions to declassify boards have received an average of 74% support over the past few years, reflecting a growing consensus in favor of annual elections. Declassifying our board will improve accountability and align Palo Alto Networks with the governance practices of 90% of S&P 500 companies. Good directors who represent shareholders' interests will continue to be reelected. Unfocused and poorly performing directors will be replaced more swiftly as they should be. That balance, stability with accountability, is what good corporate governance demands. Vote for proposal number six to increase the value of Palo Alto Networks. Thank you.
Thank you for your remarks. For the reasons stated in the company's proxy statement for this meeting, the Board of Directors recommends that shareholders vote against both shareholder proposals, which are proposals five and six. As mentioned, the proxies received by the company will be voted in accordance with the board's recommendations unless otherwise instructed by the shareholder.
We will now proceed to vote. The time is 11:12 A.M. Pacific Time, and the polls are now open for voting. If you are eligible to vote and have not done so, or if you want to change your vote, you may vote by clicking on the voting button on the web portal and following the instructions there. If you are voting, please ensure you have submitted your vote. The time is now 11:13 A.M., and the polls are now closed. The Inspector of Election will count the votes.
I would like the Inspector of Election to report on the preliminary results of the voting.
Thank you. The nominees for election as Class II directors of the board have been duly elected. The ratification of Ernst & Young as the company's independent registered public accounting firm has been approved. The advisory resolution to approve the compensation of the company's named executive officers has not been approved. The amendment to the 2021 Equity Incentive Plan has been approved.
The shareholder proposal regarding a policy addressing the impact of share repurchases on financial performance metrics has not been approved. The shareholder proposal regarding electing each of our directors annually has been approved.
The Inspector of Election will conduct a final count of all votes on these matters, and the final results will be included in the minutes of this meeting and in our current report on Form 8-K announcing the results of this meeting.
Thank you, Bruce and Kathy. This concludes the formal business of the meeting, and I now declare the meeting adjourned. I want to thank all of you for attending today's virtual meeting and for the interest you have shown in the affairs of our company. We appreciate your attendance, and as always, thank you for your support.
The meeting has now concluded. Thank you for joining, and have a pleasant day.