DEF 14A of Palo Alto Networks Inc

Filed Nov 7, 2025 · FY20250001308179-25-000624

Open on EDGAR

SHAREHOLDER ENGAGEMENT AND EXECUTIVE COMPENSATION
From your feedback, we distilled a number of important changes to our executive compensation programs. During the course of my engagement with you during fiscal 2025, I was heartened by the overwhelming support we received for making these changes, many of which we previewed in our 2024 Proxy Statement. And we didn’t stop there. For fiscal 2026, we introduced meaningful changes to incorporate your feedback, consistent with our commitment to our shareholders to continually evolve our executive compensation best practices and benefit from their important insights. The changes include: •Reducing the maximum payout of our executive performance-based restricted stock units (“PSUs”) by 33.3%, from 600% to 400% of the target number of PSUs, for fiscal 2025, fiscal 2024, and fiscal 2023 PSUs, and maintaining the 400% maximum payout for fiscal 2026 PSUs. •Updating the financial measures used in our PSUs, including for all remaining performance periods in our fiscal 2023 and fiscal 2024 PSUs, to NGS ARR and annual non-GAAP earnings per diluted share, further aligning executive compensation to the success of our platformization strategy and focus on profitability. •Defining clear threshold performance levels for each performance metric in our fiscal 2025 cash incentive plan such that if either metric’s performance is more than 10% below its respective target, then there is no funding or payout. •Increasing the relative total shareholder return (“TSR”) modifier performance target needed to achieve a 1.0x modifier in our fiscal 2026 PSUs to be attaining a 55th percentile rank from the 50th percentile rank. •Requiring exceeding the target for NGS ARR by at least $400 million for the particular fiscal year—an increase of 33.3%—in order to attain the maximum achievement of 300% for the NGS ARR performance measure in our fiscal 2026 PSUs, while the threshold for no payout has similarly been lowered to missing the target by at least $400 million. We encourage you to read the letter from our Compensation and People Committee, as well as our entire Compensation Discussion and Analysis. We believe that you will conclude that your Board has taken to heart the feedback we have received from our shareholders and designed an executive compensation program deserving of your support. On behalf of our Board, I thank you for your investment in Palo Alto Networks and your continued trust. I look forward to the Annual Meeting on December 9, 2025. Thank you, John M. Donovan Lead Independent Director
Voting Items
| Fiscal 2025 Executive Compensation Program Changes | | | Maximum payout of performance-based restricted stock units (“PSUs”) has been lowered by 33.3% from 600% to 400% of the target number of PSUs for outstanding PSUs Updated the financial measures in our PSUs, including the remaining performance periods for outstanding PSUs, to tightly align with our strategies and pay for performance philosophy—using NGS ARR to focus on platformization, and adding annual Non-GAAP EPS as an equally-weighted second financial measure to focus on profitability | Clearly identified the threshold performance levels for each financial measure that is required for funding and payout of the cash incentive plan as achieving a level of at least 10% below target for each financial performance measure Added a new commitment to not grant Mr. Arora, our Chief Executive Officer, additional one-time equity awards with vesting or performance metrics that would overlap with the one-time PSU retention award granted to him in June 2023 | | New for Fiscal 2026 Performance-Based Equity Program | | | Relative total shareholder return modifier target for a 1.0x modifier achievement has been increased to the 55th percentile rank from the 50th percentile rank | For the NGS ARR performance measure, the maximum achievement of 300% now requires exceeding the target by at least $400 million instead of $300 million—an increase of 33.3%—while the threshold for no payout has similarly been lowered to being below target by at least $400 million |
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| | | PROPOSAL 4 Approve Amendment to Palo Alto Networks, Inc. 2021 Equity Incentive Plan | | | | | We are asking shareholders to approve an amendment to our 2021 Equity Incentive Plan to increase the number of shares of our common stock reserved for issuance under the 2021 Equity Incentive Plan. The ability to grant equity awards is crucial to recruiting and retaining the best personnel. If shareholders do not approve the amendment to our 2021 Equity Incentive Plan at the Annual Meeting, we may be unable to continue to grant equity awards as needed, which could prevent us from successfully attracting and retaining the highly skilled talent we need. | | | | | | See Page 128 | | | | | The Board recommends a vote “FOR” the approval of an amendment to our 2021 Equity Incentive Plan to increase the number of plan shares reserved for issuance. |
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| | | PROPOSAL 5 Shareholder Proposal – Impact of Share Repurchases on Performance Metrics | | | | | We are asking shareholders to vote against a non-binding shareholder proposal, if properly presented at the Annual Meeting, for the adoption of a policy that financial performance metrics be adjusted, to the extent practicable, to exclude the impact of share repurchases when determining the amount or vesting of executive incentive compensation grants or awards. The Board believes that our current executive compensation policies and practices are appropriate and effective, serve the best interests of our shareholders, and advance the objectives of our executive compensation program by driving performance to create long-term shareholder value. | | | | | | See Page 140 | | | | | The Board recommends a vote “AGAINST” the approval of a shareholder proposal for the adoption of a policy that financial performance metrics be adjusted, to the extent practicable, to exclude the impact of share repurchases when determining the amount or vesting of executive incentive compensation grants or awards. |
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* Mr. Hamers is not standing for reelection at our 2025 Annual Meeting.
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| | | John M. Donovan | 64 | | | | | | | LEAD INDEPENDENT DIRECTOR | | | Skills and Experience: | | | | Director Since: 2012 Committee Memberships: | Other Current Public Company Boards: Lockheed Martin Corporation | | | | | | •Compensation and People Committee •Governance and Sustainability Committee (Co-Chair) •Security Committee •Corporate Development Committee (Chair) | | | | | | BACKGROUND John M. Donovan has served as a member of our Board since September 2012. Since May 2019, Mr. Donovan has served as Chair of The President’s National Security Telecommunications Advisory Committee. Mr. Donovan worked at AT&T Inc., a provider of telecommunication services, since April 2008, first as Chief Technology Officer and subsequently as Chief Executive Officer—AT&T Communications until his resignation, effective October 1, 2019. From November 2006 to April 2008, Mr. Donovan was Executive Vice President of Product, Sales, Marketing and Operations at Verisign. From November 2000 to November 2006, Mr. Donovan served as Chair and CEO of inCode Telecom Group Inc., a provider of strategy and consulting services to the telecommunications industry. Prior to joining inCode, Mr. Donovan was a Partner with Deloitte Consulting where he was the Americas industry practice director for telecommunications. Mr. Donovan serves on the board of directors of Lockheed Martin Corporation, an aerospace, defense and technology company. Mr. Donovan holds a B.S. in Electrical Engineering from the University of Notre Dame and an M.B.A. from the University of Minnesota. | | | QUALIFICATIONS AND EXPERIENCE Mr. Donovan was selected to serve on our Board because of his technical knowledge and extensive business leadership, management, operations and risk management oversight experience, as a result of serving as the Chief Technology Officer and later the Chief Executive Officer of AT&T Communications. He is skilled in overseeing global information, software development, supply chain, network operations and big data organizations and has expertise in cybersecurity, artificial intelligence and machine learning. | |
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| | | James J. Goetz | 59 | | | | | | | INDEPENDENT | | | Skills and Experience: | | | | Director Since: 2005 Committee Memberships: •Audit Committee •Corporate Development Committee •Security Committee | Other Current Public Company Boards: Intel Corporation | | | | | BACKGROUND James J. Goetz has served as a member of our Board since April 2005. Mr. Goetz has been a Partner of Sequoia Capital Operations, LLC, a venture capital firm, since June 2004, where he focuses on cloud, mobile, and enterprise companies. Mr. Goetz currently serves on the board of directors of Intel Corporation and several privately held companies. Mr. Goetz has previously served on the boards of directors of Barracuda Networks, Inc., a data security and storage company from 2009 to 2017, Nimble Storage, Inc., a data storage company, from 2007 to 2017, Jive Software, Inc., a provider of social business software, from 2007 until 2015, and Ruckus Wireless, Inc., a manufacturer of wireless (Wi-Fi) networking equipment, from 2012 until 2015. Mr. Goetz holds an M.S. in Electrical Engineering with a concentration in Computer Networking from Stanford University and a B.S. in Electrical Engineering with a concentration in Computer Engineering from the University of Cincinnati. | | | QUALIFICATIONS AND EXPERIENCE Mr. Goetz was selected to serve on our Board because of his senior leadership, technology, information technology (IT), business development and cybersecurity experience, and knowledge of emerging technologies, arising from his experience as a partner of a venture capital firm, where he focuses on cloud mobile, and enterprise technology investments, as well as providing guidance and counsel to a wide variety of technology companies. He also brings his experience as a senior management leader in network, data security and storage, software, and manufacturing companies, through various senior roles and other board experiences. Mr. Goetz also has extensive public company board experience. | |
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| | | Helle Thorning-Schmidt | 58 | | | | | | | INDEPENDENT | | | Skills and Experience: | | | | Director Since: 2025 Committee Memberships: •Governance and Sustainability Committee •Security Committee | Other Current Public Company Boards: None | | | | | BACKGROUND Helle Thorning-Schmidt has served as a member of our Board since February 2025. Our Governance and Sustainability Committee, with input from our Chair and independent directors, identified Ms. Thorning-Schmidt as a potential director candidate and recommended her to our Board. Ms. Thorning-Schmidt served as the Chief Executive of Save the Children International from April 2016 to June 2019. She previously served as a Member of Danish Parliament and the leader of the Social Democratic Party in Denmark from 2005 to 2015 and as the Prime Minister of Denmark from 2011 to 2015. She currently serves as a board member of a number of companies, including Vestas Wind Systems A/S, a Danish wind turbine manufacturer and leader in sustainable energy, since 2019, and Neurons Inc. ApS, a Danish consumer neuroscience company, since 2023. Ms. Thorning-Schmidt has also served as Co-Chair of The Oversight Board, a precedent-setting content moderation body established by Meta Platforms, Inc., since 2020, and the advisory board of Vista Equity Partners Management, LLC, an American investment firm, since January 2022. Ms. Thorning-Schmidt holds a Master’s Degree in Political Science from the University of Copenhagen and a Master’s Degree in European Studies from the College of Europe in Bruges. | | | QUALIFICATIONS AND EXPERIENCE Ms. Thorning-Schmidt was selected to serve on our Board due to her senior leadership experience and her background in international policy-making functions. She brings extensive experience and unique insights regarding international risk management, human capital management, and corporate governance from her varied experiences as a former prime minister, serving as chief executive of a charitable organization, and serving on various boards. | |
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| | | Nikesh Arora | 57 | | | | | | | Director Since: 2018 Committee Memberships: •Corporate Development Committee | Other Current Public Company Boards: •Compagnie Financière Richemont •Uber Technologies, Inc. | | Skills and Experience: | | | BACKGROUND Nikesh Arora has served as the Chair of our Board and Chief Executive Officer since June 2018. Prior to joining us, from 2016 through 2018 Mr. Arora was an angel investor and from June 2016 through December 2017, Mr. Arora served as an advisor to SoftBank Group Corp., a multinational conglomerate company (“SoftBank”). From July 2015 through June 2016, Mr. Arora served as president and chief operating officer of SoftBank and from July 2014 through June 2015, Mr. Arora served as vice chair and chief executive officer of SoftBank Internet and Media, a subsidiary of SoftBank. Prior to SoftBank, from December 2004 through July 2014, Mr. Arora held multiple senior leadership operating roles at Google, Inc., including serving as senior vice president and chief business officer, from January 2011 to June 2014. Mr. Arora also serves on the board of Uber Technologies, Inc., a global transportation and delivery technology company, and as a non-executive director of Compagnie Financiere Richemont S.A., a public Switzerland-based luxury goods holding company. Mr. Arora previously served on the boards of Sprint Corp., a communications services company, from November 2014 to June 2016, Colgate-Palmolive Company, a worldwide consumer products company focused on the production, distribution and provision of household, health care and personal care products, from March 2012 to September 2014, SoftBank from 2014 to 2016, and Yahoo! Japan, an internet company, from 2015 to 2016. Mr. Arora holds an M.S. in Business Administration from Northeastern University, an M.S. in Finance from Boston College, and a B.Tech in electrical engineering from the Institute of Technology at Banaras Hindu University. | | | QUALIFICATIONS AND EXPERIENCE Mr. Arora was chosen to serve on our Board due to his leadership skills and experience as the chief architect of the Company’s strategic vision, as well as his thorough knowledge of all aspects of our business. Through his extensive career in executive leadership, he brings expertise in leading and scaling technology businesses, risk management oversight, and in-depth knowledge of the cybersecurity and technology sectors. | |
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| | | Aparna Bawa | 47 | | | | | | | INDEPENDENT | | | Skills and Experience: | | | | Director Since: 2021 Committee Memberships: •Audit Committee •Compensation and People Committee •Security Committee •Corporate Development Committee | Other Current Public Company Boards: None | | | | | BACKGROUND Aparna Bawa has served as a member of our Board since May 2021. Ms. Bawa has served as the Chief Operating Officer of Zoom Video Communications, Inc., a video communications company, since May 2020 and its Secretary since February 2024. Ms. Bawa served as Zoom’s Chief Legal Officer from August 2019 to May 2020, its General Counsel from September 2018 to May 2020 and its Secretary from December 2018 to November 2020. Prior to Zoom Video Communications, Ms. Bawa served as Senior Vice President and General Counsel of Magento, Inc., an e-commerce platform company, from June 2017 until its acquisition by Adobe Inc. in June 2018. From November 2012 to May 2017, Ms. Bawa served as Vice President, General Counsel and Secretary of Nimble Storage, Inc., an enterprise flash storage company, which was acquired by Hewlett Packard Enterprise in April 2017. Ms. Bawa holds a B.Sc. in Accounting from Marquette University and a J.D. from Harvard Law School. | | | QUALIFICATIONS AND EXPERIENCE Ms. Bawa was selected to serve on our Board due to her senior leadership and management experience at public technology companies, risk management oversight expertise, and legal and business operations expertise. She has extensive experience in technology companies. | |
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| | | Carl Eschenbach | 58 | | | | | | | INDEPENDENT | | | Skills and Experience: | | | | Director Since: 2013 Committee Memberships: •Security Committee | Other Current Public Company Boards: Workday, Inc. | | | | | BACKGROUND Carl Eschenbach has served as a member of our Board since May 2013. Mr. Eschenbach is CEO of Workday, Inc., an on-demand financial management and human capital management software vendor, a position he has held since December 2022. Prior to Workday, Mr. Eschenbach was a general partner at Sequoia Capital Operations, LLC, a venture capital firm, since April 2016. Prior to joining Sequoia Capital Operations, LLC, Mr. Eschenbach served as Chief Operating Officer and President of VMware, Inc., a provider of cloud and virtualization software and services, a role he held from December 2012 to February 2016. Mr. Eschenbach previously served as VMware’s President and Chief Operating Officer from April 2012 to December 2012, as VMware’s Co-President, Customer Operations from January 2011 to April 2012 and as VMware’s Executive Vice President of Worldwide Field Operations from May 2005 to January 2011. Prior to joining VMware in 2002, he was Vice President of North America Sales at Inktomi from 2000 to 2002. Mr. Eschenbach also held various sales management positions with 3Com Corporation, Lucent Technologies Inc. and EMC. Mr. Eschenbach currently serves on the board of Workday, Inc. Mr. Eschenbach received an electronics technician diploma from DeVry University. | | | QUALIFICATIONS AND EXPERIENCE Mr. Eschenbach was selected to serve on our Board because of his extensive experience in the technology industry and his public company management experience as an executive. He brings to our Board over 30 years of operational and sales experience in the technology industry, and has extensive experience in risk management oversight and scaling large organizations, as well as a deep knowledge of high-growth companies. Mr. Eschenbach also has extensive public company board experience. | |
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| | | Right Honorable Sir John Key | 64 | | | | | | | INDEPENDENT | | | Skills and Experience: | | | | Director Since: 2019 Committee Memberships: •Audit Committee •Compensation and People Committee (Chair) •Security Committee | Other Current Public Company Boards: None | | | | | BACKGROUND Right Honorable Sir John Key has served as a member of our Board since April 2019. Sir John was a Member of Parliament for Helensville in New Zealand until April 2017. Sir John served as Prime Minister of New Zealand from November 2008 to December 2016 having commenced his political career as a Member of Parliament for Helensville in July 2002. Prior to his political career, he had a nearly twenty-year career in international finance, primarily for Bankers Trust of New Zealand and Merrill Lynch in Singapore, London and Sydney. Sir John serves on the board of directors of several privately held companies. He previously served on the board of directors of Air New Zealand Limited, a public airline, from 2017 to 2020 and ANZ Bank New Zealand Ltd and was also a member of the board of directors of the parent Australia & New Zealand Banking Group Ltd, a public bank that provides various banking and financial products and services, from 2018 to 2024. Sir John has a Bachelor of Commerce in Accounting from the University of Canterbury. | | | QUALIFICATIONS AND EXPERIENCE Sir John was selected to serve on our Board due to his global business leadership and extensive financial, capital markets, and management expertise as former Prime Minister of New Zealand, his extensive background in foreign affairs, and his career in investment banking and finance. He brings extensive experience in policy-making and a global business perspective from his experience and service on other boards, which is especially valuable to us as we grow internationally. | |
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| | | Lee Klarich | 50 | | | | | | | | | | Skills and Experience: | | | | Director Since: 2025 Committee Memberships: •Security Committee | Other Current Public Company Boards: None | | | | | BACKGROUND Lee Klarich has served as our Chief Product and Technology Officer and a member of our Board since August 2025. Since early product inception in 2006, Lee Klarich has served as the head of product management at Palo Alto Networks, overseeing the product strategy and roadmap and playing a key role in delivering our Next-Generation Security Platform. In August 2025, he became Chief Product and Technology Officer with responsibility for driving our technology vision and leading both the engineering and product organizations. Prior to that appointment, he served as our Chief Product Officer since August 2017, as our Executive Vice President of Product Management from November 2015 to August 2017, as our Senior Vice President, Product Management from November 2012 to November 2015, and as our Vice President, Product Management from May 2006 to November 2012 Prior to Palo Alto Networks, he was the director of product management for Juniper Networks, where he was responsible for firewall/VPN platforms and software. He joined Juniper Networks through the NetScreen Technologies acquisition, where he managed the same product line. Previously, he held various positions at Excite@Home and Packard Bell-NEC. He holds a bachelor's degree in engineering from Cornell University. | | | QUALIFICATIONS AND EXPERIENCE Mr. Klarich has been a senior leader at Palo Alto Networks since 2006. Mr. Klarich was selected to serve on our Board due to his deep technical expertise, intimate knowledge of our products, and industry experience. He has an in-depth knowledge of the technology and cybersecurity industries and our product development vision, having been instrumental in driving our Company’s product strategy and innovation. He brings senior leadership experience, operational experience, risk management oversight experience, and emerging technologies experience. | |
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| | | Mary Pat McCarthy | 70 | | | | | | | INDEPENDENT | | | Skills and Experience: | | | | Director Since: 2016 Committee Memberships: •Audit Committee (Chair) •Security Committee •Corporate Development Committee | Other Current Public Company Boards: Micron Technology, Inc. | | | | | BACKGROUND Mary Pat McCarthy has served as a member of our Board since October 2016. Ms. McCarthy, now retired, served as Vice Chair of KPMG LLP, the U.S. member firm of the global audit, tax and advisory services firm, until 2011 after attaining such position in 1998. She joined KPMG LLP in 1977 and became a partner in 1987. She held numerous senior leadership positions in the firm, including Executive Director of the KPMG Audit Committee Institute from 2008 to 2011, Leader of the KPMG Client Care program from 2007 to 2008, U.S. Leader, Industries and Markets from 2005 to 2006, and Global Leader, Information, Communication and Entertainment Practice from 1998 to 2004. Ms. McCarthy also served on KPMG’s Management and Operations Committees. Ms. McCarthy earned a Bachelor of Science degree in Business Administration from Creighton University and completed the University of Pennsylvania Wharton School’s KPMG International Development Program. Ms. McCarthy serves as a director of Micron Technology, Inc., a producer of semiconductor devices and previously served on the board of directors of Mutual of Omaha, an insurance company, from 2012 to 2018 and Andeavor Corporation (formerly Tesoro Corporation), a global energy corporation from 2012 to 2018. | | | QUALIFICATIONS AND EXPERIENCE Ms. McCarthy was selected to serve on our Board because of her deep technical expertise in financial and accounting matters from her experience as the Vice Chair of KPMG LLP, advising numerous companies on financial and accounting matters, as well as her leadership experience as a member of management at KPMG. She is an “audit committee financial expert” with over 40 years of experience in finance, operations and risk management oversight of technology companies, particularly publicly traded companies with knowledge of complex global financial and business matters. In addition, she brings a global business perspective and contributes valuable insights and perspectives to our business and operations from her service on other boards. | |
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| | | Lorraine Twohill | 54 | | | | | | | INDEPENDENT | | | Skills and Experience: | | | | Director Since: 2019 Committee Membership: •Governance and Sustainability Committee (Co-Chair) •Security Committee | Other Current Public Company Boards: None | | | | | BACKGROUND Lorraine Twohill has served as a member of our Board of directors since April 2019. Ms. Twohill currently serves as Google LLC’s (formerly Google, Inc.) Chief Marketing Officer, a position she has held since June 2009. From July 2003 until June 2009, Ms. Twohill served as Google’s Head of Marketing Europe, Middle East and Africa. Ms. Twohill previously served on the board of directors of Williams-Sonoma, Inc., a consumer retail company that sells kitchenwares and home furnishings, from January 2012 until May 2017. Ms. Twohill holds joint honours degrees in International Marketing and Languages from Dublin City University. | | | QUALIFICATIONS AND EXPERIENCE Ms. Twohill was selected to serve on our Board due to her leadership skills and extensive marketing knowledge, with over 25 years of experience. She has deep management and business operations experience, as well as risk management oversight experience. She provides the Board with valuable insights into brand management and the global issues facing technology companies today. | |
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| | | Ralph Hamers | 59 | | | | | | | INDEPENDENT | | | Skills and Experience: | | | | Director Since: 2025 Committee Memberships: •Audit Committee •Security Committee | Other Current Public Company Boards: None | | | | | BACKGROUND Ralph Hamers has served as a member of our Board since February 2025. Our Governance and Sustainability Committee, with input from our Chair and independent directors, identified Mr. Hamers as a potential director candidate and recommended him to our Board. Mr. Hamers served as Chief Executive Officer of Swiss bank UBS Group AG from September 2020 to April 2023 and subsequently as a Senior Advisor to the CEO from April 2023 to September 2023. He previously served as Chief Executive Officer of Dutch bank ING Group from October 2013 to June 2020. Mr. Hamers served as a board member for the Institute of International Finance, a trade group for the global financial services industry, from 2013 to 2023. Mr. Hamers holds a Master’s of Science Degree in Business Econometrics & Operations Research from Tilburg University. | | | QUALIFICATIONS AND EXPERIENCE Mr. Hamers was selected to serve on our Board due to his senior leadership experience as Chief Executive Officer at two separate large multi-national bank and financial services companies. He has extensive financial knowledge and expertise as well as risk management, international, and corporate governance experience. | |
FISCAL 2025 PROGRAM DESIGN
FISCAL 2025 PROGRAM DESIGN We believe that our fiscal 2025 compensation programs helped contribute to our outstanding financial performance, achieving record totals for revenue, NGS ARR and EPS. Our executive compensation program for fiscal 2025 was designed in a structured and objective manner to ensure that compensation structures reflect our pay-for-performance philosophy, align compensation with our shareholders’ interests, motivate our executives, are competitive, and reflect our shareholders’ input and compensation best practices. This framework served as the basis upon which we structured, and made, fiscal 2025 compensation decisions: •Financial Performance. Our fiscal financial and operation results measured against the Company’s plan and consensus estimates on key financial measures. •Shareholder Returns. Our one-, two- and three-year total shareholder return (“TSR”) performance relative to our compensation peer group. •Strategic Objectives. Our performance is measured against our strategic objectives. •Individual Performance Assessment. A performance assessment by the Board for our Chief Executive Officer, and by our Chief Executive Officer for our other executive officers, including our other named executive officers (“NEOs”). Consistent with this framework and our pay-for-performance philosophy, we designed our fiscal 2025 executive compensation program to provide strong rewards for strong performance, drive shareholder value creation, and require significant sustained performance to realize their full value. Our fiscal 2025 compensation program stayed true to our commitments in our 2024 Proxy Statement, and reflects the following principles: •Pay-for-Performance. We once again set aggressive performance targets for the financial performance metric achievement levels required for performance stock unit awards, demonstrating our commitment to a pay-for-performance philosophy. •Multiple Year Measurement Period. Fiscal 2025 NEO equity awards are 100% performance based, require sustained performance over three years, and include a relative TSR multiplier in addition to financial performance metrics, which aligns a significant portion of our executive compensation to long-term financial performance. •Performance Measures Aligned to Company Strategy and Shareholder Value Creation. We carefully evaluate the measures that we believed will most impact long-term value for our shareholders and other stakeholders. For the executive cash incentive target, we used annual revenue and annual organic operating margin. For the fiscal 2025 executive equity awards, we used NGS ARR and Non-GAAP EPS and set aggressive targets for each. In addition, we tied achievement to a comparative analysis of our TSR performance against the S&P 500 to ensure that payout amounts are aligned with our stock price performance relative to that of the reference group. •Best Practices. We have continued several compensation best practices, including: having in place an SEC and Nasdaq-compliant compensation recovery policy, as well as, maintain a clawback policy for executives not covered by the required compensation recovery policy; executive officer stock ownership guidelines; a minimum one year post-vesting holding period for grants to NEOs; no duplicative performance measures between our annual and long-term incentive plans; and a Corporate Responsibility modifier to our executive’s cash incentive plan to ensure linkage between compensation and our Corporate Responsibility goals.
SHAREHOLDER ENGAGEMENT AND PROGRAM DESIGN CHANGES
shareholders representing 35% of our outstanding shares. The vast majority of these conversations focused on our executive compensation program and the changes the Compensation and People Committee made to the program, as highlighted to you in last year’s Proxy Statement. The feedback from our shareholders has been positive regarding the changes we made in fiscal 2025 to our executive compensation program that we disclosed in our 2024 Proxy Statement. As we continue to look ahead, we have also made further refinements to our executive compensation program in fiscal 2026 to address your feedback and continue to set aggressive performance targets. The changes made in fiscal 2025 include: •Commitment Regarding One-Time Equity Awards to our CEO. We have committed not to grant Mr. Arora, our Chief Executive Officer, additional one-time equity awards of any variety with vesting or performance metrics that would overlap with the one-time performance-based restricted stock unit (“PSUs”) retention award granted to him in June 2023. •Reduced Total Potential Payout. We have redesigned the PSU awards to lower the maximum payout by 33.3%, from 600% to 400% of the target amount of PSUs, for all outstanding PSUs. •Updated Performance Stock Unit Design. We updated the financial measures to align with our platformization strategy, and introduced a second financial measure to drive balanced focus on platformization and profitability. The two financial measures are NGS ARR to focus on platformization and annual Non-GAAP EPS to focus on profitability. In addition, to ensure a disciplined focus on the company’s strategies and that we reward our executives for achievement of our financial and operational goals, we updated the remaining performance periods for outstanding PSUs to utilize the new financial measures. •Clearly Defined Cash Incentive Plan Performance Thresholds. We clearly identified the threshold performance levels for each metric required for the funding and payout of the cash incentive plan, such that if either metric—annual revenue and organic operating margin—is more than 10% below its respective target for fiscal 2025, then there would have been no funding or payout of the cash incentive plan. The changes for fiscal 2026 focused on aggressive target setting for our PSU performance metrics and include: •Increased Midpoint for Target TSR modifier Achievement. For our fiscal 2026 executive PSU program, the relative TSR modifier performance target for a 1.0x modifier achievement has been increased to the 55th percentile rank from the 50th percentile rank. •Increased NGS ARR Performance Targets. For our fiscal 2026 executive PSU program, the maximum of achievement of 300% for the NGS ARR performance measure now requires exceeding the target for the particular fiscal year by at least $400 million–an increase of 33.3%–while the threshold for no payout has similarly been lowered to missing the target by at least $400 million. We continue to be aggressive in our pay-for-performance philosophy because we believe in our executive team, and our executive team has performed and delivered strong financial results and equity returns for our shareholders. We are asking for your support of our executive compensation program and trust that you will agree that we have been responsive to your concerns. We believe that we have implemented a sustainable, best-in-class program that is aligned with best practices and responsive to the extensive feedback we received from you, while continuing to be competitive and incentivize our proven and successful executive team. Thank you for your continued support and investment in Palo Alto Networks. Sincerely, The Compensation and People Committee Right Honorable Sir John Key, Chair John M. Donovan
Fiscal 2025 Executive Compensation Program Changes
| WHAT WE HEARD AND LEARNED | | WHAT WE DID IN FISCAL 2025 | | Our shareholders appreciated the changes made to our executive compensation program in fiscal 2025, as previewed in our 2024 Proxy Statement | | •We once again undertook extensive shareholder engagement efforts on executive compensation matters, which led to meaningful changes in fiscal 2026 to further align our program to reflect shareholder insights (discussed below) | | Shareholders offered mixed feedback on the maximum payout of the CEO annual equity compensation: •Active portfolio managers were generally supportive of our compensation philosophy, expressing their view that we compensate our CEO in a manner sufficient to ensure we retain him in a highly competitive talent market •Passive investors expressed their view that our CEO’s compensation remains high, given the one-time five-year retention grant made in June 2023, but they did not offer any quantitative input or other specific feedback | | •Balanced the views of our shareholders and determined to maintain aggressive performance targets, directly tied to company strategic and financial goals, that only provide above target payouts for meaningful outperformance. •We believe this addresses the views of active portfolio managers by enabling compensation for our CEO in a manner that ensures and incentivizes his retention, and the views of passive investors by ensuring our compensation payouts are directly linked with performance that will drive meaningful shareholder returns through aggressive performance target setting. | | Follow through on our 2024 proxy statement commitment to reduce the PSU maximum payout, and consider whether TSR modifier is disproportionately upside weighted | | •Reduced maximum payout of outstanding PSUs by 33%, from 600% to 400% of target payout, which we previewed in our fiscal 2024 proxy statement, but are now reflected in our fiscal 2025 equity awards | | Follow through on our 2024 proxy statement commitment to align performance measures for long-term incentive equity awards, and clearly show a pay-for-performance connection | | •Followed through on our 2024 proxy statement commitment by aligning financial performance measures to our long-term strategy for all PSUs and remaining PSU performance periods by using NGS ARR and annual Non-GAAP EPS given our strategy shift to platformization in fiscal 2024, which helped contribute to a year of strong financial achievement and resulted in the prior PSU financial metric, billings, no longer being a key Company financial metric | | Follow through on our 2024 proxy statement commitment to refine the structure of the annual incentive plan to clarify whether payouts occur if a relevant financial metric is not achieved | | •Followed through on our 2024 proxy statement commitment by clearly defining and disclosing threshold performance levels for each financial metric so that there is no payout if achievement is more than 10% below either target performance measure | | Follow through on our commitment to not make one-time equity awards to our CEO with vesting or performance metrics that overlap with the June 2023 retention grant | | •Followed through on our commitment, and awarded no one-time equity awards granted to our CEO (or any other NEO) in fiscal 2025 | | | | LOOKING AHEAD TO WHAT WE DID FOR FISCAL 2026 | | Our shareholders asked us to consider whether the TSR modifier in the executive PSUs is disproportionately weighted toward upside opportunity | | For fiscal 2026, we increased the target relative TSR for a 1.0x achievement in the relative TSR modifier increased the target relative TSR for a 1.0x achievement in the relative TSR modifier to be the 55th percentile rank from the 50th percentile rank | | Continued discussion around maintaining our commitment to a rigorous and clear linkage between pay and performance | | For fiscal 2026, the maximum and threshold achievement for the NGS ARR performance measure has be the maximum and threshold achievement for the NGS ARR performance measure has been increased 33.3% to required outperforming or underperforming the NGS ARR target by at least $400 million, instead of $300 million |
Fiscal 2025 Executive Compensation Program Changes
| ROBUST AND INDEPENDENT COMPENSATION DECISION-MAKING, ALIGNED WITH OUR CORPORATE VALUES | | | | | 100% Independent Compensation and People Committee Independent compensation consultant | | Annual review of compensation strategy Consideration of annual Say-on-Pay vote and other shareholder feedback Maintain our commitments to our shareholders in our 2024 Proxy Statement | | | COMPENSATION BEST PRACTICES | | | | | Pay for Performance | Compensation Policies | | What We Don’t Do | | Significant majority of compensation is performance-based and at-risk 100% of short-term incentive cash compensation is performance-based and at-risk Inclusion of Corporate Responsibility modifier to cash incentive plan Use of multiple different performance measures in both cash incentive plan and long-term equity incentive program 100% of equity awards granted to our NEOs in fiscal 2025 were performance-based and use different performance metrics than the cash incentive plan | Robust stock ownership guidelines for NEOs One-year post-vesting holding period for all NEOs, including our Chief Executive Officer, subject to limited exceptions Meaningful compensation recovery and clawback policies Limited perquisites and personal benefits Assessing and implementing the advice of independent compensation consultant, including a decision-making framework to further ensure alignment of executive compensation decision with our pay-for-performance philosophy | | No single trigger vesting of equity awards on occurrence of a change in control No dividends paid on unvested equity No hedging or pledging, except limited pledging permitted with the prior approval of the Governance and Sustainability Committee No defined benefit plans or special executive retirement plans |
Fiscal 2025 Executive Compensation Program Changes
| | OUR COMMITMENTS FOR FISCAL 2025 | | OUR FOLLOW-THROUGH | | Maintain a robust shareholder outreach program | | | | | Provide more transparency in our executive compensation disclosures, as well as more robust CD&A disclosures | | | | | Disclose the target value of equity grants to our NEOs for the completed fiscal year in the CD&A | | | | | Maintain robust stock ownership guidelines | | | | | Make any one-time awards to NEOs outside of the normal grant cycle (other than new hire awards) a majority performance-based, and only make such grants in exceptional circumstances | | | | | Not grant our CEO additional one-time equity awards of any variety with vesting or performance metrics that would overlap with the one-time performance-based restricted stock unit retention award granted to him in June 2023 | | | | | Make annual equity grants to our NEOs at least 75% performance-based | | | | | Require a one year minimum vesting period for all grants to our Chief Executive Officer and other NEOs going forward, and implement a policy to require our Chief Executive Officer and other NEOs to hold all net shares for one year after vesting, subject to a limited exception | | | | | Use a performance-based restricted stock unit (“PSU”) award design that requires sustained performance over multiple years for any payout | | | | | Include a relative TSR modifier to our executive PSU awards | | | | | Ensure that ongoing incentive goals are considered challenging with targets set at or above management guidance | | | | | For completed performance periods, disclose performance targets compared to actual results and corresponding payout scale | | | | | Avoid duplicate performance metrics in our cash incentive plan and PSU awards | | | | | Do not make upward discretionary adjustments except for extraordinary circumstances | | | | | Include a Corporate Responsibility metric in cash incentive plan to ensure linkage between compensation and our Corporate Responsibility goals | | | |
Fiscal 2025 Executive Compensation Program Changes
| | Compensation and People Committee | Management | Independent Compensation Consultant | | | •Review, evaluate and approve the compensation arrangements, plans, policies, and practices for our executives •Oversee and administer cash-based and equity-based compensation plans •Review our executive compensation program, from time to time, to determine whether they are appropriate, properly coordinated, achieve their intended purposes and to make any modifications to existing plans and arrangements or to adopt new plans or arrangements •Retain the services of external advisors, including compensation consultants, legal counsel and other advisors, from time to time, as it sees fit, in connection with carrying out its duties | •Together with our independent compensation consultant, the Chief Executive Officer, and the Chief People Officer, assist the Compensation and People Committee in the execution of its responsibilities by providing information on corporate and individual performance, market data with respect to compensation and management’s perspective and recommendations on compensation matters •Chief Executive Officer makes recommendations to the Compensation and People Committee regarding compensation matters, including the compensation of executive officers (other than himself) •Chief Executive Officer participates in meetings of the Compensation and People Committee (other than portions of meetings that involve discussions of his own compensation and executive sessions) •While our Compensation and People Committee solicits the recommendations and proposals of our Chief Executive Officer with respect to compensation-related matters, they are only one factor in our Compensation and People Committee’s decision-making process | •Assist the Compensation and People Committee in executing the executive compensation strategy and guiding principles, assessing the current target total direct compensation opportunities of our executive officers, including comparing them against competitive market practices, developing a compensation peer group and advising on executive compensation decisions •Meridian Compensation Partners, a national compensation consulting firm, was retained by the Compensation and People Committee for fiscal 2025 •Our Compensation and People Committee assessed the independence of Meridian Compensation Partners taking into account, among other things, the factors set forth in Exchange Act Rule 10C-1 and the listing standards of Nasdaq and has concluded that no conflict of interest exists with respect to the work that Meridian Compensation Partners performs for our Compensation and People Committee •Meridian Compensation Partners did not provide any services to the Company other than the services provided to our Compensation and People Committee |
Fiscal 2025 Executive Compensation Program Changes
Use of Competitive Data To assess the competitiveness of our executive compensation program and to assist in setting compensation levels, at the Compensation and People Committee’s request, Meridian Compensation Partners, the committee’s independent compensation consultant, compiled market data from a compensation peer group approved by our Compensation and People Committee, and industry surveys, including the Radford Global Technology Executive Compensation Survey. The Compensation and People Committee, with the assistance of Meridian Compensation Partners, then analyzed the market and survey data when making fiscal 2025 compensation decisions. Competitive Positioning For fiscal 2025, our Compensation and People Committee continued to compare and analyze our executive compensation program and each component of executive compensation against data from a formal compensation peer group of companies. In the context of our annual executive compensation review, with assistance from Meridian Compensation Partners and input from management, in February 2024, our Compensation and People Committee reviewed the peer group of publicly-traded technology companies used to provide information regarding compensation practices for fiscal 2024 to determine if any changes were appropriate for use in considering fiscal 2025 pay decisions. In determining which companies to include in the peer group, our Compensation and People Committee considered companies that met some or all of the following criteria: •had (i) revenue between 0.33 to 3.0 times our revenue, (ii) a market capitalization between 0.33 to 3.0 times our market capitalization, (iii) a market capitalization to revenue ratio greater than 5.0, and (iv) a number of employees between 0.5 to 2.0 times the number of our employees; •had revenue growth greater than 10% in at least two of the last three years and TSR growth greater than 10% in at least two of the last three years; •was headquartered on the west coast of the United States, operated in the software industry, and was selected by Institutional Shareholder Services as one of our peer companies; and •whether we were included in the company’s peer group, whether the company provided some cybersecurity services, whether the company’s chief executive officer was a founder with an atypical compensation structure, and the company’s relevant acquisition activity. Based on this review, and taking into account Meridian Compensation Partners’ review and recommendation, the following changes were made to our peer group for fiscal 2025, with the resulting peer group placing us at the 81st percentile of the peer group on both revenue and market capitalization as of December 31, 2023: –Removed: Gen Digital Inc., VMWare, Inc., Splunk Inc., and Juniper Networks, Inc. +Added: Adobe Inc. and Synopsys, Inc. Accordingly, the following publicly-traded companies made up our compensation peer group for fiscal 2025:
LEADERSHIP THAT DRIVES OUR STRATEGIC VISION AND GROWTH
LEADERSHIP THAT DRIVES OUR STRATEGIC VISION AND GROWTH Our NEOs have been instrumental in driving our strategic vision, culture, and business trajectory. Since Mr. Arora joined, we have evolved from a single product next-generation firewall company, to a cybersecurity leader across firewall, SASE, cloud security, and security operations, with AI integrated into each of our platforms. As the following shows, our TSR since Mr. Arora become CEO in 2018 significantly outperformed our 2025 compensation peer group and the S&P 500. See “—Compensation-Setting Process—Competitive Positioning” for a list of the companies in our 2025 compensation peer group. Source: S&P Capital IQ, based on the latest closing price as of the beginning of the period and as of July 31, 2025. The compensation peer group TSR for our 2025 compensation peer group is the weighted-average TSR, based on the respective market capitalization of each peer at the beginning of each fiscal year, over the time period, and includes only publicly-traded companies as of such date. Led by Mr. Arora, we focused on three strategic priorities that proved critical to our success to date: transforming network security, delivering comprehensive cloud native security, and revolutionizing security operations, in each case driving our platformization strategy. Now, when faced with the technological advancements presented by generative and agentic AI, our leadership has again made strategic decisions during fiscal 2025 that the Compensation and People Committee believes position us well for the long-term. Our leadership’s successful execution of our strategies has led to the following notable highlights: •A $66 billion increase in market capitalization since our fiscal year end 2022—an increase of 133%. •Compound annual growth rates of 19% in revenue and 38% in Non-GAAP EPS, from fiscal year end 2022 through fiscal year end 2025, resulting in impressive totals in revenue of $9.22 billion and in Non-GAAP EPS of $3.34 for fiscal 2025 (please see Appendix A for a reconciliation of GAAP to non-GAAP measures). •Compound annual growth rates of approximately 43% in NGS ARR and 25% in RPO, from fiscal year end 2022 through fiscal year end 2025, resulting in NGS ARR of $5.58 billion and $15.8 billion of RPO for fiscal 2025. •Continued to drive innovation with the introduction of many new offerings, including Prisma Access Browser 2.0, new capabilities in SASE and OT security, Prisma AIRS, and Cortex XSIAM 3.0, while supplementing our organic efforts with strategic transactions, such as our Protect AI acquisition to accelerate our AI security offerings, and our proposed acquisition of CyberArk to establish identity security as another major pillar of our platform strategy.
LEADERSHIP THAT DRIVES OUR STRATEGIC VISION AND GROWTH
| Delivering Shareholder Value Creation | | | 1-Year TSR Palo Alto Networks vs. Percentiles of Peer Group | 3-Year TSR Palo Alto Networks vs. Percentiles of Peer Group |
Pay-for-Performance Designed to Drive Long-Term Growth
Pay-for-Performance Designed to Drive Long-Term Growth
Strategic Alignment with Board-Approved Strategies
Strategic Alignment with Board-Approved Strategies Our Compensation and People Committee firmly believe that executive compensation should be closely aligned with our key financial metrics approved by the Board and communicated to investors, and the strategies approved by the Board to drive our long-term growth and deliver value to our shareholders. Mid-way through fiscal 2024, our Board adopted our accelerated platformization strategy to be a driving force for our long-term success in order to attain our goal of $15 billion in NGS ARR on a standalone basis by our fiscal 2030. As a result, a year ago, our Compensation and People Committee made a number of meaningful changes to our executive compensation programs to align with our business strategies and address shareholder feedback, particularly with regard to the design of our PSUs: •Reduced Total Potential Payout. The maximum realizable pay for all our outstanding executive PSUs was reduced by 33.3%, to 400% of the target payout. •Strategically Aligned New Performance Measures. The financial measures for all remaining performance periods in outstanding executive PSUs were changed to be an equal weighting of NGS ARR and Non-GAAP EPS. ◦NGS ARR for Growth. NGS ARR was chosen because it is our key top-line guidance metric in addition to revenue, and represents the return on the investment in next-generation security that will disproportionately drive our growth. We use NGS ARR to assess the strength and trajectory of our business and believe our platformization strategy fuels our NGS ARR growth. ◦Non-GAAP EPS for Profitability. Non-GAAP EPS was also chosen and given equal weighing to incentivize a balanced focus on ensuring our growth is sustainable and profitable. We believe the decision to make these structural enhancements to deeply link pay to the Company’s performance has been affirmed by our fiscal 2025 results. Our executives not only delivered robust financial results to outperform and exceed all the Company’s full year published guidance metrics, but also remained steadfast in their commitment to innovation across our security platforms, delivering the release of several next-generation security offerings.
Strategic Alignment with Board-Approved Strategies
(1)Peer data represents the weighted average measure of our 2025 compensation peer group members, based on size of the relevant measure, that were publicly traded as of July 31, 2025, with a comparable measure reported for the peer's last fiscal year end. Synopsys, Inc. has been excluded from the results shown for our compensation peer group because its divestiture of its Software Integrity business that occurred during the measurement periods reflected would lead to results not being comparable. (2)Represents the compound annual growth rates over each company's last three fiscal years for the relevant measure if reported throughout the measurement period, and based on a weighted average basis, based on the size of the relevant measure. (3)Please refer to Appendix A for a reconciliation of GAAP to non-GAAP measures for the Company.
Rigorous Performance Targets to Ensure Shareholder Value Creation Drives Executive Compensation
| PSU TOTAL PAYOUTS FOR RECENT COMPLETED PSU PERFORMANCE PERIODS(1) | PSU CURRENT TRACKING FOR COMPLETED FINANCIAL PERFORMANCE PERIODS(2) | | | |
Rigorous Performance Targets to Ensure Shareholder Value Creation Drives Executive Compensation
(1)“FY22 PSUs” represents the actual payout percentage relative to the target amount of PSUs based on the three-year average achievement of 102.7% for the financial performance measure, which was year-over-year revenue growth for each year, and a 1.5x relative Total Shareholder Return (“rTSR”) modifier, as a result of a TSR percentile rank at the 98th percentile relative to the S&P 500. The maximum possible payout for the fiscal 2022 PSUs was 300%. “FY23 PSUs” represents the actual payout percentage relative to the target amount of PSUs based on the three-year average achievement of approximately 136% for the financial performance measures, and a 2.0x rTSR modifier, as a result of a TSR percentile rank at approximately the 93rd percentile relative to the S&P 500. See “—Long-Term Equity Compensation—Fiscal 2023 PSUs Financial Performance Results” for more information regarding the fiscal 2023 PSUs. (2)“FY24 PSUs” and “FY25 PSUs” each represent the results of the financial performance measures through fiscal year end 2025, which is an average of 108% for two completed fiscal years of the fiscal 2024 PSUs, and an average of 216% for one completed fiscal year of the fiscal 2025 PSUs, respectively, relative to the 300% maximum potential achievement for the financial performance measures. The maximum payout potential under the terms of the fiscal 2024 and fiscal 2025 PSUs is 400%; however, we have not provided or incorporated an estimate for the rTSR modifier because it is measured over the full three-year performance period. See “—Long-Term Equity Compensation—Fiscal 2024 PSU Performance Through Fiscal 2025,” for more information on the fiscal 2024 PSUs, and “—Long-Term Equity Compensation—Fiscal 2025 Equity Compensation” for more information on the terms of the fiscal 2025 PSUs. As reflected above for the fiscal 2022 PSUs and fiscal 2023 PSUs, even with an average financial measure achievement above 100% over the three-year performance period and attaining a maximum rTSR modifier for each PSU as a result of the Company outperforming over 90% of the S&P 500 over each three-year period, the fiscal 2022 PSUs only attained approximately 51% of its maximum potential payout and the fiscal 2023 PSUs only attained approximately 68% of its maximum potential payout. Further, the completed fiscal years in the fiscal 2024 PSUs and the fiscal 2025 PSUs are trending at approximately 36% and 72%, respectively, of the maximum potential achievement for the financial performance measures, primarily driven by our outperformance in fiscal 2025. Over this same period of time, we have delivered approximately $77 billion of shareholder value (an increase of approximately 198%), as measured by increase in market capitalization from the end of our fiscal 2021 through the end of our fiscal 2025.
Rigorous Performance Targets to Ensure Shareholder Value Creation Drives Executive Compensation
| | | | | FISCAL 2025 PROGRAM HIGHLIGHTS •No base salary or target annual incentive opportunity increases in fiscal 2025 for our NEOs •Equity compensation granted in fiscal 2025 was 100% performance-based PSUs •Reduced maximum potential payout of PSU awards by 33.3% to 400% of the target payout •Updated PSU design to add a second financial measure and align the financial measures with our business strategy, combined with aggressive performance target setting •Clearly defined cash incentive plan performance thresholds so that if the performance of either financial performance measure is more than 10% below its respective target for fiscal 2025, then there will be no funding our payout of the cash incentive plan •CEO target compensation at the 87th percentile of our compensation peer group in fiscal 2025, down from the 91st percentile in fiscal 2024, while maintaining rigorous performance requirements for target payout •Outperformance resulted in: (i) 120% achievement for our NEOs under the cash incentive plan; and (ii) with respect to the PSUs granted to our NEOs in fiscal 2023, fiscal 2024, and fiscal 2025, a 216% achievement relative to the fiscal 2025 targets for the financial measures NGS ARR and non-GAAP EPS |
Elements of Compensation
| | Pay Element | Purpose | Performance Period | Performance Metric | | | Base Salary | Designed to be market-competitive and attract and retain talent | N/A | N/A | | | Annual Cash Incentive Opportunity | Incentivize achievement of near-term financial and operational objectives, consistent with longer-term goals | Annual | •Revenue for fiscal 2025 •Organic operating margin for fiscal 2025 •Corporate responsibility modifier | | | Performance-Based Restricted Stock Units (PSU) | Reward long-term profitability and superior long-term performance relative to peers Create alignment with shareholders Facilitate executive retention | Three years | •Average of NGS ARR and Non-GAAP EPS for fiscal 2025, 2026, and 2027 •TSR of the Company relative to the S&P 500 (the “relative TSR” or “rTSR”) for fiscal 2025 through 2027 |
Annual Cash Incentive Compensation
Annual Cash Incentive Compensation We use annual cash incentive compensation to motivate our NEOs to achieve our annual financial and operational objectives, while making progress towards our longer-term strategic and growth goals. Generally, we establish the target annual cash incentive compensation opportunities of our executive officers through arm’s-length negotiation at the time of hire taking into account his or her position, qualifications, experience, prior target annual cash incentive compensation opportunity, and the target annual cash incentive compensation opportunities of our other executive officers. Thereafter, our Compensation and People Committee reviews the target annual cash incentive compensation opportunities of each NEO annually and makes adjustments, if any, as it determines to be reasonable and necessary in line with the factors described above under “—Compensation-Setting Process—Compensation Timeline and Process” and “—Compensation Decision Making Framework.”
Fiscal 2025 Cash Incentive Plan
Fiscal 2025 Cash Incentive Plan Our Compensation and People Committee adopted a cash incentive plan for fiscal 2025 to cover all employees that are not paid sales incentive payments, including our NEOs, and approved the target levels for the annual financial objectives that were challenging and required substantial skill and effort on the part of senior management to achieve. As illustrated in the graphic below, payouts under the cash incentive plan for our NEOs are based on a target award multiplied by a factor based on the achievement of two financial performance measures—annual revenue and annual organic operating margin—which are defined further below. Payouts of up to 100% of the target cash incentive compensation opportunities are made on a semi-annual basis. The total potential payouts under the cash incentive plan to all participants were capped at 150% of the target annual amounts for the entire year, before application of the Corporate Responsibility modifier. The payout can be increased or decreased by up to ten percent, based on measured progress toward certain Corporate Responsibility goals set by the Compensation and People Committee at the beginning of the fiscal year. A key change made for the fiscal 2025 cash incentive plan is clearly defining the performance thresholds so that if the performance of either financial performance measure is more than 10% below its respective target for fiscal 2025, then there will be no funding our payout of the cash incentive plan.
Fiscal 2025 Cash Incentive Plan
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Fiscal 2025 Cash Incentive Plan
Depending on achievement of the factors, annual cash incentive payouts for our NEOs can range from 0% to 165% of the target amount after application of the Corporate Responsibility modifier.
Fiscal 2025 Cash Incentive Plan
| Target Awardx | Financial Performance Measures Achievement vs. Target | x | Corporate Responsibility Modifier | | | = | Payment Amount | | | | | | | | | | | | | | | | Annual Revenue | Annual Organic Operating Margin | -10% | 0% | +10% | | 0% | Payout Range | 165% |
Financial Performance Measures
Financial Performance Measures For fiscal 2025, our Compensation and People Committee selected annual revenue and annual organic operating margin as the corporate performance measures.
Financial Performance Measures
| | | What It Is | Why It’s Important | | | | Fiscal 2025 revenue as reported in our Annual Report on Form 10-K | Revenue is an important growth metric and a key topline metric that is directly tied to shareholder value creation | | | | Fiscal 2025 non-GAAP operating margin, excluding the effects of acquisitions and dispositions in fiscal 2025 and bonus payout in excess of 100% of the target cash incentive under our cash incentive plan | This profitability measure is tied to management performance and profit we generate for shareholders |
Financial Performance Measures
•Design. To provide an incentive to management to make appropriate trade off decisions between balancing investments in growth and profitability. •Pay and Performance Relationship. Potential payouts under the incentive cash compensation plan were based on a set of curves representing different performance levels for organic operating margin and revenue. The curves were designed with hurdles for each achievement level, rather than linear interpolation, to require significant outperformance above each curve to move to the next payout performance level. Our Compensation and People Committee believes that this ensures that a payout at any level above target requires meaningful outperformance of our goals. Performance below the threshold performance goal for either performance metric, which is a missing a target by more than 10%, results in 0% of target payout, and performance above the maximum curve results in a formulaic payment maximum of 150% (before application of the Corporate Responsibility modifier) regardless of the level of outperformance. •Target Setting. Our fiscal 2025 operating plan approved in August 2024, which was used to set the incentive plan targets, provided revenue and organic operating margin targets. Performance at the high end of the targets was required for an above 100% payout. •Difficulty of Achieving Targets. The fiscal 2025 target for revenue represented growth of approximately 13.5% above the prior year revenue, which we believe is set at an appropriate level of stretch performance based on our internal financial projections, the macroeconomic environment, and our full year guidance published for fiscal 2025 revenue in August 2024.
Financial Performance Measures
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Financial Performance Measures
The graph below contains the curves used to determine payouts in the fiscal 2025 cash incentive plan. Fiscal 2025 Cash Incentive Plan Measures, Curves and Payout
Financial Performance Measures
| | FY25 Thresholds | FY25 Targets* | FY25 Actual** | FY25 Payout | | Revenue | $8,201M | $9,112M | $9,222M | 120% of Target | | Organic Operating Margin1 | 25% | 27.8% | 29.1% | |
Financial Performance Measures
(1) The calculation of organic operating margin is provided in Appendix A to this Proxy Statement.
Corporate Responsibility Modifier
Corporate Responsibility Modifier To ensure a link between executive compensation and our Corporate Responsibility goals, we included a Corporate Responsibility modifier for our NEOs in the fiscal 2025 cash incentive plan, which could adjust the payout level resulting from the financial performance measures described in the prior section up or down by up to 10% based on the Company’s results measured against a scorecard with climate, human capital, and compliance measures. When adopted in August 2024, the Corporate Responsibility modifier included a scorecard measure for inclusion and diversity. In May 2025, we reevaluated our Corporate Responsibility strategies and, as a result, the Compensation and People Committee decided to remove the inclusion and diversity scorecard measure. For fiscal 2025, no adjustments to our NEOs’ calculated payouts under the cash incentive plan were made as a result of the Corporate Responsibility modifier, and our Compensation and People Committee made no discretionary changes to cash incentive plan payouts. The following table sets forth the fiscal 2025 scorecard measures and results related to the Corporate Responsibility modifier to our fiscal 2025 cash incentive plan.
Corporate Responsibility Modifier
| | | FY25 Corporate Responsibility Scorecard Measures | FY25 Results | | Corporate Responsibility Modifier (90% to 110%) | Climate | 1.FY25 progress towards our climate commitments | On Target •Maintained 100% renewable energy procurement for HQ (largest real estate footprint for Scope 2 emissions) •Maintained CDP "Supplier Engagement Assessment A-List" and MSCI Environment category score of ten (out of ten) | | | Human Capital Practices | 2.Employee engagement | On Target •Recognition of our human capital practices via 45 public accolades •Maintained 91% CEO Approval rating on Glassdoor •eNPS score of 24, +9 points above industry benchmarks, highlighting relative strength compared to other companies | | | Compliance | 3.Corporate Sustainability Reporting Directive (CSRD) readiness | On Target •Entity scoping and value chain mapping complete •Double materiality assessment (financial and impact) complete •Preliminary material topics identified | | | •Compensation and People Committee assessment is objectively based on the totality of fiscal 2025 results on the scorecard •After careful consideration of our Corporate Responsibility strategies, the Compensation and People Committee decided to remove an inclusion and diversity scorecard measure in May 2025 •Compensation and People Committee determined there would be no adjustment to the fiscal 2025 cash incentive plan based on fiscal 2025 results for the Corporate Responsibility modifier | | |
Target Annual Incentive Compensation Opportunities
Target Annual Incentive Compensation Opportunities As in prior years, the target annual cash incentive compensation opportunities for our NEOs were expressed as a percentage of their respective base salaries. In August 2024, our Compensation and People Committee reviewed the target annual cash incentive compensation percentages for our NEOs, taking into consideration a competitive market analysis performed by its compensation consultant and the elements of its decision making framework, and determined to not make any adjustments for fiscal 2025.
Target Annual Incentive Compensation Opportunities
| NO INCREASE IN TARGET ANNUAL CASH INCENTIVE COMPENSATION FOR ANY NEO IN FISCAL 2025 |
Target Annual Incentive Compensation Opportunities
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Target Annual Incentive Compensation Opportunities
The following table shows the target annual cash incentive compensation percentage for fiscal 2025 and the corresponding target and maximum dollar values. No changes were made from fiscal 2024.
Target Annual Incentive Compensation Opportunities
| Name | Target Annual Incentive Compensation Opportunity (as a % of base salary) at end of Fiscal 2025 | Fiscal 2025 Target Annual Incentive Compensation Opportunity | Fiscal 2025 Maximum Annual Incentive Compensation Opportunity | | Mr. Arora | 100% | $1,000,000 | $1,650,000 | | Mr. Golechha | 100% | $600,000 | $990,000 | | Mr. Jenkins | 100% | $750,000 | $1,237,500 | | Mr. Klarich | 100% | $550,000 | $907,500 | | Mr. Zuk(1) | 100% | $430,000 | $709,500 |
Target Annual Incentive Compensation Opportunities
(1)The amounts reflected for Mr. Zuk reflect those in effect as of the end of fiscal 2025. Mr. Zuk did not receive any increase to his target annual cash incentive compensation opportunity in fiscal 2025. For fiscal 2024, Mr. Zuk was a resident of Israel and compensated in Israeli New Shekels with a base salary of ₪1,482,000 and a target annual cash incentive opportunity of 100% of his base salary. This remained unchanged for fiscal 2025 while he was a resident of Israel during the fiscal year. When Mr. Zuk permanently relocated to the United States in July 2025, he was provided the same target base salary in U.S. dollars that was his last base salary in the United States before relocating to Israel in August 2020, which is reflected in the section “—Base Salary”, and the same target annual cash incentive compensation opportunity of 100% of his base salary, which is reflected in the table above.
LONG-TERM EQUITY COMPENSATION
LONG-TERM EQUITY COMPENSATION Our long-term equity compensation is designed on the basis of our pay-for-performance philosophy, directly tying Company strategic and financial goals to compensation, rewarding strong performance and motivating outperformance with aggressive targets, to drive robust long-term performance for our Company and value creation for shareholders.
LONG-TERM EQUITY COMPENSATION
| Over the past five years, 100% of the long-term equity compensation granted to our NEOs was performance-based (aside from Mr. Jenkins's new hire RSU award). | |
LONG-TERM EQUITY COMPENSATION
To ensure our executive compensation program continues to align with the Company’s long-term performance objectives and strategies and incorporating shareholder feedback, our Compensation and People Committee implemented key changes to our long-term equity compensation program in fiscal 2025: •Decreased Maximum Payout. Maximum payout opportunity for the fiscal 2025 PSUs was set at 400% of target payout, and the maximum payout opportunity for the fiscal 2023 and fiscal 2024 PSUs was reduced by 33%, from 600% to 400% of target payout. •New Performance Measures. Adopted an equal weighting of NGS ARR and Non-GAAP EPS as the new financial performance measures, in place of annual billings growth, and aligned all remaining performance periods for the fiscal 2023 and fiscal 2024 PSUs to utilize the new financial measures. NGS ARR was adopted because it is one of the Company’s key performance metrics, our key top line metric in addition to revenue, and is aligned to our platformization strategy, which will be a key driver toward our long-term strategic goals. Non-GAAP EPS was adopted to ensure that our growth is balanced, not overly weighted to the top-line, and profitable. Given the Company’s shift in strategy during fiscal 2024, billings ceased to be a key indicator of the Company’s long-term performance and growth. In addition, there were inherent limitations in using billings to evaluate our operating results as the variability in payment terms may cause fluctuation in billings. Accordingly, beginning in the first fiscal quarter of 2025, billings ceased being a key financial metric for the Company and is no longer reported by the Company. •Rigorous Performance Goals. Remained rigorous in setting ambitious performance goals to achieve target payout in long-term equity awards each year. Only meaningful and sustained outperformance can result in above target payouts, ensuring that compensation is paid only when significant shareholder value creation occurs.
LONG-TERM EQUITY COMPENSATION
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FISCAL 2025 EQUITY COMPENSATION
FISCAL 2025 EQUITY COMPENSATION
FISCAL 2025 EQUITY COMPENSATION
| 100% OF EQUITY GRANTED TO NEOs IN FISCAL 2025 WAS PERFORMANCE-BASED |
FISCAL 2025 EQUITY COMPENSATION
In fiscal 2025, 100% of the annual equity awards granted to our NEOs are PSUs, resulting in all such compensation being at risk and performance-based. The Compensation and People Committee determined the size of the awards based on the sustained strong performance, leadership skills and valuable contributions to the Company of our NEOs over their tenure and, particularly, fiscal 2024. To determine the size of the fiscal 2025 PSU awards, the Compensation and People Committee utilized the framework developed in partnership with its independent compensation consultant to identify objective factors that should be considered in determining the size of any compensation. In addition, the Compensation and People Committee considered the performance of each NEO, including the CEO’s recommendation with respect to NEOs other than himself, to determine the appropriate fiscal 2025 target compensation levels. More information about this process and the framework utilized can be found under “—Compensation-Setting Process” and “—Compensation Decision Making Framework” above. The following table shows the target value of PSU grants made to our NEOs in fiscal 2024 and fiscal 2025. The actual target number of shares subject to the fiscal 2025 PSUs was determined based on the trailing 14-calendar day average closing price of our common stock as of, and inclusive of, the date of grant, rounded down to the nearest whole share.
FISCAL 2025 EQUITY COMPENSATION
| Name | Targeted Value for PSUs Granted for fiscal 2024 ($) | Targeted Value for PSUs Granted in fiscal 20251 ($) | Percentage change (%) | | Mr. Arora | 40,000,000 | 44,000,000 | 10 | | Mr. Golechha | 10,000,000 | 13,000,000 | 30 | | Mr. Jenkins | 10,000,000 | 13,000,000 | 30 | | Mr. Klarich | 7,500,000 | 5,000,000 | -33 | | Mr. Zuk2 | 8,000,000 | — | -100 |
FISCAL 2025 EQUITY COMPENSATION
(1)The target value for PSUs granted in fiscal 2025 does not align with amounts reflected for 2025 in the Stock Awards column of the Summary Compensation Table due to accounting valuation methodologies. For more information, see “—Variation Between Fiscal 2025 Equity Award Values and Equity Compensation Reported in Summary Compensation Table” below. (2)Mr. Zuk did not receive an equity grant for fiscal 2025.
FISCAL 2025 PSU DESIGN
FISCAL 2025 PSU DESIGN The fiscal 2025 PSUs have a three-year performance period spanning the Company’s fiscal years 2025, 2026, and 2027. Performance targets for the financial performance measures are established by the Compensation and People Committee at the beginning of each fiscal year, and the relative TSR modifier is measured over all three years of the performance period. The Compensation and People Committee determined that continuing our design of a three-year measurement period for the relative TSR modifier and three one-year measurement periods for the financial performance measures is best aligned with our pay-for-performance philosophy. The Compensation and People Committee believes that setting the financial targets annually is the best means to ensure a sustained high level of performance through setting appropriately aggressive performance targets each year, informed by the Company’s annual financial plan and strategic vision. In this manner, it can set appropriate stretch goals each year that only provide above target payouts for meaningful outperformance, as opposed to setting an inflexible three-year measurement period for the financial performance measures. Such a three-year measurement period for the financial performance measures may not be able to account for changes in business strategies and Board priorities, which may change on a year-to-year basis, particularly in times where our industry may be experiencing a significant inflection point (such as the present climate driven by the rapid adoption of generative and agentic AI). Subject to a maximum of 400% of the target PSUs, the number of PSUs that become eligible to vest (the “Eligible PSUs”) is based on the product of the following (with the result rounded down to the nearest whole share): (i) the target number of PSUs; (ii) the average of achievement percentages for the two financial measures—NGS ARR and annual Non-GAAP EPS—for each year within the performance period; and (iii) the rTSR modifier over the full three-year performance period. The
FISCAL 2025 PSU DESIGN
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FISCAL 2025 PSU DESIGN
following chart illustrates how the two financial performance measures and rTSR modifier contribute to the PSU achievement level for the fiscal 2025 PSUs. Linear interpolation is used to determine the final achievement percentages and rTSR modifier between any of the levels represented below.
FISCAL 2025 PSU DESIGN
| X | Annual NGS ARR | Achievement Percentage | Average of achievement percentages | Annual Non- GAAP EPS | Achievement PercentageX | rTSR percentile rank within S&P 500 TSRs over the three-year performance period1 | rTSR modifier | = | PSU Achievement Level | PSU Achievement Level (as a Percentage of Target Award) | | | ≥ $300 million above target | 300% | | ≥ 110% of target | 300% | ≥ 90th percentile | 2.0x | | Maximum | 400% | | | = $150 million above target | 200% | | = 105% of target | 200% | = 75th percentile | 1.5x | | High | 300% | | | = target | 100% | | = target | 100% | = 50th percentile | 1.0x | | Target | 100% | | | = $150 million below target | 50% | | = 95% of target | 50% | ≤ 25th percentile | 0.75x | | Low | 37.5% | | | ≤ $300 million below target | 0% | | ≤ 90% of target | 0% | | | | <Threshold | 0% |
FISCAL 2025 PSU DESIGN
(1)If the Company’s TSR for a period is at least 0%, then the rTSR modifier will be equal to the actual resulting rTSR modifier. However, if the Company’s TSR is less than 0%, then the rTSR modifier will be the lower of the resulting rTSR modifier and 100% of target.
•Financial Performance Measures
•Financial Performance Measures ◦NGS ARR is the Company’s annual recurring revenue for its Next-Generation Security business, as of the last day of the relevant fiscal year. Palo Alto Networks defines ARR associated with Next-Generation Security as the annualized allocated revenue of all active contracts as of the final day of the reporting period related to all product, subscription, and support offerings, excluding revenue from hardware products, and legacy attached subscriptions, support offerings and professional services. ◦Annual Non-GAAP EPS is the Company’s non-GAAP net income per diluted share, calculated in a manner consistent with the calculation of the target Non-GAAP EPS for such fiscal year, as adjusted to exclude the impact of merger and acquisition transactions consummated in the relevant fiscal year (except to the extent such a transaction is taken into account by the Compensation and People Committee when establishing the target Non-GAAP EPS for the relevant fiscal year). • rTSR Modifier is calculated based on the TSR of the Company over the three-year performance period relative to the TSRs of the indexed companies over the same period. The indexed companies are those that are a component of the S&P 500 Index on both the last day of the performance period and the first day of the performance period. The beginning and ending stock prices used to determine TSRs over the performance period is calculated based on the average of the closing trading prices of the relevant company for the thirty consecutive trading days ending with the last trading day before the beginning of the performance period (for the beginning price) and the last trading day of the performance period (for the ending price). •Linear Interpolation is used to determine the achievement percentage for each financial performance measure and the rTSR modifier to the extent the actual resulting NGS ARR, Non-GAAP EPS, or rTSR percentile rank for a performance period is between any of the thresholds shown above.
•Financial Performance Measures
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FISCAL 2025 ACHIEVEMENT FOR FISCAL 2025 PSUs
FISCAL 2025 ACHIEVEMENT FOR FISCAL 2025 PSUs The following table shows both the achievement percentage of 216% for the fiscal 2025 performance period of the fiscal 2025 PSUs, as determined by our Compensation and People Committee, based on our actual NGS ARR and Non-GAAP EPS in fiscal 2025, and the structure of the fiscal 2025 PSUs over the three-year performance period.
FISCAL 2025 ACHIEVEMENT FOR FISCAL 2025 PSUs
| Executive PSU Program | Fiscal 2025 PSU Award | | | | | | | Measure Type | FY25 | FY26 | FY27 | | FY25 PSU Grant (Made August 2024) | Financial Metrics | NGS ARR ($B) Target: $5.34 Actual: $5.58 Non-GAAP EPS* Target: $3.16 Actual: $3.34 Achievement: 216% | Average of NGS ARR vs. Target and Non-GAAP EPS vs. Target | Average of NGS ARR vs. Target and Non-GAAP EPS vs. Target | | | Relative TSR | Three-Year Relative TSR vs S&P 500 | | | | | | Final Payout = Average of Annual Financial Measure Achievements X Relative TSR Modifier (with final payout capped at a maximum of 400% of target PSUs) | | | | | | | | | | | | *See Appendix A for a reconciliation of GAAP to non-GAAP metrics and other information | | |
FISCAL 2024 PSU PERFORMANCE THROUGH FISCAL 2025
FISCAL 2024 PSU PERFORMANCE THROUGH FISCAL 2025 The fiscal 2024 PSUs have a three-year performance period spanning the Company’s fiscal years 2024, 2025, and 2026. Performance targets for the financial performance measures are established by the Compensation and People Committee at the beginning of each fiscal year, and the relative TSR modifier is measured over all three years of the performance period. As described in the introduction to this section titled “—Long-Term Equity Compensation”, at the beginning of fiscal 2025, certain changes were implemented to the fiscal 2024 PSUs: •The maximum target payout for the fiscal 2024 PSUs was reduced to 400%, a reduction of 33.3%, consistent with the design for the fiscal 2025 PSUs. •The financial performance measures for the remaining performance periods under the fiscal 2024 PSUs were aligned to the design for the fiscal 2025 PSUs. Accordingly, the financial performance measure for fiscal 2024 remained year-over-year billings growth, while the financial performance measures for fiscal 2025 and fiscal 2026 are an average of the achievement of our NGS ARR and annual Non-GAAP EPS. The calculation for each of NGS ARR, Non-GAAP EPS, and the rTSR modifier for the fiscal 2024 PSUs is determined in the same manner as described in the section above titled "—Fiscal 2025 PSU Design." The number of PSUs that ultimately vest will be equal to the product of (i) the target number of PSUs, (ii) the average of the achievement percentages for the financial measures for each fiscal year in the performance period, and (iii) the rTSR modifier as measured over the three-year performance period, as shown below.
FISCAL 2024 PSU PERFORMANCE THROUGH FISCAL 2025
| Target Number of PSUs GrantedX | Average of Annual Financial Measure Achievements | | X | FY24-FY26 rTSR Modifier | = | Number of PSUs Vested | | | FY24 | FY25 | FY26 | | | | | | Year-over-Year Billings Growth vs. Target | Average of NGS ARR vs. Target and Non-GAAP EPS vs. Target | Average of NGS ARR vs. Target and Non-GAAP EPS vs. Target | | | |
FISCAL 2024 PSU PERFORMANCE THROUGH FISCAL 2025
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FISCAL 2024 PSU PERFORMANCE THROUGH FISCAL 2025
The following table shows the full fiscal 2024 PSU structure as well as the achievement percentage for the financial measures, as determined by our Compensation and People Committee, based on the achievement of those financial measures relative to their respective targets in fiscal 2024 and fiscal 2025.
FISCAL 2024 PSU PERFORMANCE THROUGH FISCAL 2025
| Executive PSU Program | Fiscal 2024 PSU Award | | | | | | | Measure Type | FY24 | FY25 | FY26 | | FY24 Grant (Made August 2023) | Financial Measures | Billings Growth* Target: 17.9% Actual: 11.0% Achievement: 0% | NGS ARR ($B) Target: $5.34 Actual: $5.58 Non-GAAP EPS* Target: $3.16 Actual: $3.34 Achievement: 216% | Average of NGS ARR vs. Target and Non-GAAP EPS vs. Target | | | Relative TSR | Three-Year Relative TSR vs S&P 500 | | | | | | Final Payout = Average of Annual Financial Metric Payouts X Relative TSR Modifier (with final payout capped at a maximum of 400% of target PSUs) | | | | | | | | | | | | *See Appendix A for a reconciliation of GAAP to non-GAAP metrics and other information | | |
FISCAL 2023 PSUs FINAL PERFORMANCE RESULTS
FISCAL 2023 PSUs FINAL PERFORMANCE RESULTS The fiscal 2023 PSUs have a three-year performance period spanning the Company’s fiscal years 2023, 2024, and 2025. Performance targets for the financial performance measures were established by the Compensation and People Committee at the beginning of each fiscal year, and the relative TSR modifier was measured over all three years of the performance period. In fiscal 2025, the same changes that were made to the fiscal 2024 PSUs regarding the maximum payout potential and the financial performance measures utilized for the remaining performance periods were also adopted with respect to the fiscal 2023 PSUs. For more information please see the sections titled “—Long-Term Equity Compensation” and “—Fiscal 2024 PSU Performance Through Fiscal 2025.” The calculation for each of NGS ARR, Non-GAAP EPS, and the rTSR modifier for the fiscal 2024 PSUs is determined in the same manner as described in the section above titled "—Fiscal 2025 PSU Design." The number of PSUs that ultimately vest for the fiscal 2023 PSUs is equal to the product of (i) the target number of PSUs, (ii) the average of the achievement percentages for the financial measures for each fiscal year in the performance period, and (iii) the rTSR modifier as measured over the three-year performance period, as shown below.
FISCAL 2023 PSUs FINAL PERFORMANCE RESULTS
| Target Number of PSUs GrantedX | Average of Annual Financial Measure Achievements | | X | FY23-FY25 rTSR Modifier | = | Number of PSUs Vested | | | FY23 | FY24 | FY25 | | | | | | Year-over-Year Billings Growth vs. Target | Year-over-Year Billings Growth vs. Target | Average of NGS ARR vs. Target and Non-GAAP EPS vs. Target | | | |
FISCAL 2023 PSUs FINAL PERFORMANCE RESULTS
The following charts show the final achievement of our fiscal 2023 PSUs granted to our NEOs as determined by our Compensation and People Committee, based on the following: •Financial Performance Measures: An approximate 136% average achievement for the financial measures, with each year’s determined as follows:
FISCAL 2023 PSUs FINAL PERFORMANCE RESULTS
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FISCAL 2023 PSUs FINAL PERFORMANCE RESULTS
◦Fiscal 2023: 193% achievement based on year-over-year billings growth of 23.1% relative to a target of 20%; ◦Fiscal 2024: 0% achievement based on year-over-year billings growth of 11% relative to a target of 17.9%; and ◦Fiscal 2025: 216% achievement based on an average of the achievements of actual NGS ARR of $5.58 billion relative to a target of $5.34 billion, and actual Non-GAAP EPS of $3.34 relative to a target of $3.16. ◦See Appendix A for a reconciliation of GAAP to non-GAAP metrics and other information. •rTSR: A rTSR modifier of 2.0x was determined based on our relative TSR over the three-year performance period ending on July 31, 2025 measured against the S&P 500 being at the 93rd percentile. •Total Final Payout: Approximately 273% of target PSUs granted. Average of the Three-Year Performance Achievements for Financial Measures rTSR Modifier
FISCAL 2023 CEO RETENTION AWARD
Under his tenure, our financial performance and product innovation has accelerated, and our market capitalization increased from $19.1 billion, as of May 31, 2018, to $66 billion, as of June 2, 2023, and it continued to increase substantially. Since the date the fiscal 2023 retention award was granted to Mr. Arora through July 31, 2025, our market capitalization has grown an additional 75% to approximately $116 billion. The Board firmly believes Mr. Arora’s vision, strategic acumen, and operational excellence are critical for achieving our next phase of growth and delivering extraordinary value for shareholders. Now more than ever, we rely on our executive team, led by Mr. Arora, to face head on the challenges presented by entering the AI era, and execute on our strategies for long-term growth and value creation for our shareholders. Prior to this grant, during fiscal 2022 and 2023, John M. Donovan, our Lead Independent Director, and Sir John Key, the Chair of our Compensation and People Committee, engaged extensively with shareholders, soliciting input on Mr. Arora’s compensation and long-term retention. Our shareholders expressed strong satisfaction with his performance and a desire for his long-term retention, emphasizing that any compensation, especially retention awards, should align with a pay-for-performance philosophy and deliver significant value creation. Consequently, the award was structured with the following features: •A five-year cliff, which enhances retention benefits of the award, and only pays out based on sustained performance. Mr. Arora must remain in the employ of the Company throughout the entire duration of the five-year performance period. Failure to do so will result in Mr. Arora receiving no value or compensation from the award. •A minimum level of required performance, where the award can result in as few as zero shares, if the Company’s performance is less than the 40th percentile of the S&P 500 over the five-year performance period. •A median performance level that is tied to performance at the 55th percentile of the S&P 500 index. •A graduated payout curve, where Mr. Arora will only receive the maximum level of compensation if the Company delivers exceptional stock price performance, as measured against the S&P 500 index. Our Compensation and People Committee has committed not to grant Mr. Arora, our Chief Executive Officer, additional one-time equity awards of any variety with vesting or performance metrics that would overlap with the one-time performance-based restricted stock unit retention award granted to him in June 2023.
FISCAL 2023 CEO RETENTION AWARD
Fiscal 2026 Compensation Decisions As part of the continuing evolution of our compensation programs in response to the results of our shareholder “Say-on-Pay” advisory vote at the 2024 annual meeting of shareholders, shareholder feedback, and the advice received from its independent compensation consultant, the Compensation and People Committee implemented important changes to our compensation programs for fiscal 2026 focused on pay-for-performance. •Adjusted PSU rTSR Payout Curve. In response to feedback regarding concerns that the rTSR modifier may be disproportionately weighted toward upside opportunity, we adjusted the rTSR modifier payout curve for our fiscal 2026 PSU awards to increase the target for a 1.0x modifier to be the 55th percentile as compared to the 50th percentile for the prior years’ PSUs. •Increased NGS ARR Performance Targets. For our fiscal 2026 PSU awards for NEOs, we increased the performance targets for NGS ARR required for each achievement level.
One-Year Hold Policy
One-Year Hold Policy In addition to our ownership guidelines, we maintain a one-year post-vesting holding period for all of our NEOs, which was adopted in our fiscal 2022. The purpose of the policy is to further ensure that the interests of our NEOs are closely aligned with those of our shareholders. Under the policy all NEOs are required to hold, for one full calendar year from the date of vesting or acquisition any shares of our common stock acquired by such NEO upon the vesting of an equity award granted by the Company. There are limited exceptions to the holding requirement for shares withheld or sold for tax purposes and for equity awards granted upon the initial hiring or appointment of an NEO as an executive officer. Risk Assessment and Compensation Practices Our management assesses and discusses with our Compensation and People Committee our compensation policies and practices as they relate to our risk management. Based upon this assessment, the Compensation and People Committee believes that any risks arising from such policies and practices are not reasonably likely to have a material adverse effect on the Company, in consideration of the following factors, among others: •our cash incentive plan reflects a “pay for performance philosophy” that rewards our NEOs and other eligible employees for achievement of performance targets; •discretionary bonuses are reserved for extraordinary performance and achievement; •total compensation features a balanced pay mix of short- and long-term incentives (“LTI”), with the significant majority of pay for senior executives delivered in LTI, which is performance based; •our equity awards include multi-year vesting schedules requiring long-term employee commitment; •our performance expectations reward long-term value creation, profitability and excellence; •our use of multiple performance measures in incentive plans; •our regular monitoring of short-term and long-term compensation practices to determine whether management’s objectives are satisfied, as well as effective oversight and approval process of the performance measures and goals; •performance goals require sufficient “stretch,” yet are achievable;
One-Year Hold Policy
•both the short-term and long-term incentive programs have caps for significant upside performance and clearly defined performance metrics; and •our independent compensation consultant evaluated and assessed our compensation policies and practices and confirmed that our practices do not encourage excessive risk taking. Compensation Recovery Policies In December 2023, we adopted a new Compensation Recovery Policy in accordance with the SEC requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Nasdaq’s listing standards. The new Compensation Recovery Policy supplements our existing Clawback Policy that was first adopted in August 2017 (the “2017 Clawback Policy”), and provides for the non-discretionary recovery on a pre-tax basis of excess incentive-based compensation received on or after October 2, 2023 (“Erroneously Awarded Compensation”) by current and former executive officers (as defined in Rule 10D-1(d) under the Securities and Exchange Act of 1934, as amended) (“Covered Officers”) in the event of an accounting restatement to correct the Company’s material noncompliance with any financial reporting requirement under securities laws, whether or not the Covered Officer was at fault for the restatement. Recovery of such excess compensation is required unless it is determined that recovery is impractical in certain limited circumstances or the excess compensation was received prior to the beginning of the Company’s three fiscal years most recently completed before the date on which it is determined an accounting restatement is required. The manner of recovery of any Erroneously Awarded Compensation is (i) first, an offset against other compensation payable to the Covered Officer, including through reduction or cancellation of incentive-based compensation or outstanding equity awards of such person; (ii) second, reduction or cancellation of interests in any deferred compensation plan maintained by the Company; and (iii) third, taking any other remedial and recovery action permitted by applicable law, including direct cash reimbursement to the Company. In connection with the adoption of the Compensation Recovery Policy, we amended the 2017 Clawback Policy through which we may seek the recovery of performance-based incentive compensation paid by us under certain circumstances. The amendment clarified that the 2017 Clawback Policy would no longer apply to excess incentive-based compensation covered by our new Compensation Recovery Policy received on or after October 2, 2023 by Covered Officers. The Compensation and People Committee determined that removing the overlap that would have otherwise existed would not affect the Company’s rights because there would not be a scenario in which there is compensation recoverable under the 2017 Clawback Policy that would not be recoverable under the new Compensation Recovery Policy after October 2, 2023. Other than the change described above, the 2017 Clawback Policy remains unchanged otherwise and continues to apply to our Chief Executive Officer and to all our officers who report directly to our Chief Executive Officer. The 2017 Clawback Policy provides that if we restate our financial statements as a result of a material error, a covered executive received excess compensation as a result, no more than two years have elapsed since the original filing date of the relevant financial statements and the Compensation and People Committee unanimously concludes that fraud or intentional misconduct by the covered executive caused the material error and it would be in our best interests to seek from such covered executive recovery of the excess compensation, then our Compensation and People Committee may, in its sole discretion, seek repayment from such covered executive. Insider Trading Policy We have adopted an insider trading policy governing the purchase, sale, and/or other disposition of securities by our directors, officers, employees, and other covered persons. We believe this policy is reasonably designed to promote compliance with insider trading laws, rules, and regulations, as well as the exchange listing standards applicable to us. A copy of our insider trading policy is filed as an exhibit to our Annual Report on Form 10-K for our fiscal year ended July 31, 2025. Further, we periodically engage in transactions in our own securities. With regard to trading in our own securities, it is our practice to comply with the federal securities laws and the applicable exchange listing requirements. Hedging and Pledging Policies Our insider trading policy prohibits our executive officers and members of our board of directors from engaging in derivative securities transactions, including hedging or other transactions that offset, or are designed to hedge or offset, any decrease in the market value of our equity securities and from pledging Company securities as collateral or holding Company securities in a margin account, except, in the case of pledging, with the prior approval of the Governance and Sustainability Committee. This policy does not restrict ownership of, or transactions related to, Company-granted awards,
One-Year Hold Policy
such as PSUs, RSUs, employee stock options, and other securities issued by the Company or the deferral of equity awards pursuant to our non-qualified deferred compensation plan. Our executive officers have significant holdings of our stock to align their interests to those of our shareholders. Establishing a conservative pledging policy enables our executive officers to continue to hold those shares, while providing them flexibility in financial planning and allowing them to achieve financial diversification. By enabling our executives to maintain their stock ownership in the Company, our conservative pledging program helps ensure that they continue to have a meaningful financial interest in the success of the Company under their leadership. For these reasons, in fiscal 2022, the Board adopted a conservative policy that allows limited pledging of our stock by our executive officers. Our pledging policy establishes the parameters of pledging arrangements, and provides that any pledging arrangement must be approved in advance by our Governance and Sustainability Committee, as well as sets an overall limit of $100 million on the total value of shares pledged by our executive officers (as a group). Under this policy, all pledges of shares of Company stock by our executives must comply with the following requirements: •any proposed pledge of shares must be approved in advance by the Governance and Sustainability Committee; •the loan amount against which shares are pledged must not exceed 30% of the aggregate fair market value of the individual’s total stock ownership at the time the arrangement is executed; •only outstanding shares held by an individual may be pledged (i.e., no shares subject to options or unvested RSUs, PSUs or other unvested equity awards may be pledged); •no shares may be pledged that would cause the total value of all pledged shares of our executive officers in the aggregate (as a group) to exceed $100 million; •pledged shares cannot consist of any shares that remain subject to the holding requirement under our One-Year Hold Policy described above under “—Executive Officer Stock Ownership Guidelines--One-Year Hold Policy”; and •the stock ownership requirements applicable to our executives are in addition to, and cannot include, pledged shares. When approving a pledging arrangement, in addition to the requirements above, the Governance and Sustainability Committee will consider any other factors deemed relevant by the Committee from time to time, including, without limitation, the total number of shares of Company stock beneficially owned by the applicable executive, the pledged shares as a percentage of the executive’s aggregate beneficially owned shares, the pledged shares as a percentage of the Company’s total outstanding shares, whether the pledged shares were purchased by the executive, and whether the executive has entered into any other pledging arrangement. Tax and Accounting Considerations Deductibility of Executive Compensation. Section 162(m) of the Code generally disallows public companies a tax deduction for federal income tax purposes of remuneration in excess of $1 million paid to the chief executive officer and certain other highly compensated executive officers in any taxable year. While our Compensation and People Committee is mindful of the benefit of being able to fully deduct the compensation paid to our NEOs, our Compensation and People Committee believes that we should retain the flexibility to provide compensation to our NEOs that is not fully tax deductible when it believes that such payments are appropriate to attract and retain executive talent or meet other business objectives. Our Compensation and People Committee intends to continue to compensate our NEOs in a manner consistent with the best interests of our Company and our shareholders even if any portion of such compensation is not deductible. Taxation of “Parachute” Payments. Sections 280G and 4999 of the Code provide that executive officers and directors who hold significant equity interests and certain other service providers may be subject to significant additional taxes if they receive payments or benefits in connection with a change in control that exceeds certain prescribed limits and that we (or a successor) may forfeit a deduction on the amounts subject to this additional tax. We did not provide any of our NEOs with a “gross-up” or other reimbursement payment for any tax liability that the NEO might owe as a result of the application of Sections 280G or 4999 during fiscal 2025, and we have not agreed and are not otherwise obligated to provide any NEO with such a “gross-up” or other reimbursement in the future. Accounting for Share-Based Compensation. We follow ASC Topic 718 for our share-based compensation awards. ASC Topic 718 requires companies to measure the compensation expense for all share-based compensation awards made to employees and directors, including stock options and other stock-based awards, based on the grant date “fair value” of
One-Year Hold Policy
these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our NEOs may never realize any value from their awards. ASC Topic 718 also requires companies to recognize the compensation cost of their share-based compensation awards in their income statements over the period that an executive officer is required to render service in exchange for the option or other award. Variation Between Fiscal 2025 Equity Award Values and Equity Compensation Reported in Summary Compensation Table. The amounts shown for fiscal 2025 in the “Stock Awards” column of our Summary Compensation Table reflect an outsized year-over-year percentage increase in equity award grant value relative to the percentage increase in target equity compensation for our NEOs. A significant portion of that increase is driven by accounting complexities in valuing our PSUs, rather than a simple year-over-year increase in the actual number of shares granted. Several key factors shaped this year’s reported amounts. •Recognition of tranches from prior year awards: Our PSU program includes financial performance goals with the targets for such performance goals are determined by our Compensation and People Committee by the end of the first month of each fiscal year of the relevant performance period. Applicable accounting rules provide that performance targets must be approved to establish a measurement date to determine the grant date fair market value, and the accounting value of the portion of the fiscal 2023 PSUs and fiscal 2024 PSUs associated with the performance period occurring in fiscal 2025 must be calculated in our fiscal 2025 and reflected in the Summary Compensation Table for that year. Given our significant stock price appreciation since the fiscal 2023 PSUs and fiscal 2024 PSUs were first granted (our closing trading price was $94.92 on August 23, 2022, which is the date of grant for the fiscal 2023 PSUs, and $120.41 on August 21, 2023, which is the date of grant for the fiscal 2024 PSUs), the accounting value of the fiscal 2025 portion of such awards ($284.54 and $250.20, for the fiscal 2023 and fiscal 2024 PSUs, respectively) is more than two times the value of the equity awards on their respective dates of grant. •Accounting valuation method: As our PSU awards include an rTSR modifier, we are required to use a specific accounting valuation method, which results in an accounting premium that is reflected in the values attributed to our PSU awards in the Summary Compensation Table. •Stock price volatility at grant: For accounting purposes, the fair value of equity awards must be determined based on the closing price of our common stock on the actual grant date. We have historically determined the number of shares subject to an equity award granted to all employees, including our NEOs, based on a value-to-share conversion methodology that relies on the trailing 14-day average closing price. As a result of higher than typical stock price volatility in August 2024 leading up to our August 20, 2024 grant date for the fiscal 2025 PSUs, there was a 9.5% increase in equity compensation expense (August 2024 trading average: $168.00; August 20, 2024 grant price: $184.01). To summarize, while the underlying number of shares granted did rise for fiscal 2025, the increase in reported equity values largely reflects share price appreciation and fair value methodologies rather than a substantial shift in our overall equity compensation philosophy. Perquisites and Other Personal Benefits Retirement Plans. We have established a U.S. tax-qualified Section 401(k) retirement plan for all employees who satisfy certain eligibility requirements. We currently match contributions made to the plan by our employees up to $1,000, including for our NEOs. In fiscal 2025, Messrs. Golechha, Jenkins, and Klarich participated in our Section 401(k) retirement plan and each received a matching contribution of $1,000. We intend for the plan to qualify under Section 401(a) of the Internal Revenue Code, or the Code, so that contributions by employees to the plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the plan. We made payments for Mr. Zuk to certain Israeli social security and pension benefits and severance funds available to employees of our Israel subsidiaries under Israeli government schemes on the same basis as the Company provides to other Israel-based employees. Health and Welfare Plans. In addition, we provide other benefits to our NEOs on the same basis as all of our full-time employees in the country in which they reside. These benefits include medical, dental, and vision benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance, and basic life insurance coverage. We design our employee benefits programs to be affordable and competitive in relation to the market, as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market. We made payments for Mr. Zuk to certain Israeli health insurance plans available to employees of our Israel subsidiaries, which are available on the same basis as the Company provides to other Israel-based employees.
One-Year Hold Policy
Deferred Compensation Plan. We provide a deferred compensation plan, which is a non-qualified deferred compensation plan established in compliance with Section 409A of the Code. Participation in the deferred compensation plan is voluntary and limited to U.S. employees of the Company and affiliates that are at the Vice President level or above, as determined by the Compensation and People Committee. Participation is available for our U.S.-based executive officers. For a summary of the deferred compensation plan, see the section titled “—Executive Compensation Tables.” CEO Security Program. Our Compensation and People Committee determined that if any harm occurred to our Chief Executive Officer, our business operations, investor confidence and employee productivity would be severely impacted. Accordingly, the Board continued to take reasonable steps to ensure the safety and security of Mr. Arora, considering the nature of the position and its criticality to the operation of the Company. We previously retained a leading global risk management and security consulting firm to analyze and determine if there was a bona-fide business related security concern for Mr. Arora. Based on the results of its investigation (which included investigation of a prior personal security incident involving Mr. Arora), this firm determined that there was a bona-fide, business related security concern for Mr. Arora and credible threat actors existed with both the willingness and resources necessary for conducting an attack on Mr. Arora. Accordingly, the firm recommended that the Company take various steps to ensure the safety of Mr. Arora. Our chartered aircraft policy requires the use of chartered aircraft for both business and personal-related air travel by Mr. Arora. To further ensure Mr. Arora’s safety during vehicular travel, as part of the overall security program, Mr. Arora is driven by a member of his security protection detail in a Company-leased automobile (including during his commute, which is considered a personal benefit under the relevant disclosure rules). Our Compensation and People Committee regularly reviews the nature and cost of this program in relation to his security profile. Even though the security program was put in place for business reasons, the component of the program that includes security at Mr. Arora’s residence and during personal travel is required to be disclosed as a perquisite under the relevant SEC rules and is included in the “All Other Compensation” column in the Summary Compensation Table. The total amount of benefits to Mr. Arora under the SEC rules in fiscal 2025 was approximately $2,678,498. The value of Mr. Arora’s personal use of chartered aircraft and the Company-leased automobile resulting from our overall security program in fiscal 2025 was $870,276 and $89,298, respectively, and the Company paid an aggregate of $315,801 of Mr. Arora’s taxes on the imputed income recognized by Mr. Arora related to the use of such aircraft and automobile. On occasion, guests of Mr. Arora may accompany him at de minimis incremental cost to the Company. The costs of Mr. Arora's security program can vary from year to year depending on the requisite security measures and his travel schedule. Our Compensation and People Committee believes that amounts paid by the Company for this security program have been reasonable, necessary and for our benefit, including in light of the current climate and security risks profile for Mr. Arora. We require these security measures for the Company’s benefit because of the importance of Mr. Arora to the Company, and we believe that the scope and costs of these security programs are appropriate and necessary. Other Personal Benefits. We paid a filing fee of $105,000 for each of Mr. Klarich and Mr. Zuk related to a regulatory filing they were each required to make related to their acquisition and ownership of our common stock. The filing requirement arose as a result of the vesting of equity awards previously granted to them as executive officers of the Company. In the future, we may provide perquisites or other personal benefits in limited circumstances, such as where we believe it is appropriate to assist an individual NEO in the performance of his or her duties, to make our NEOs more efficient and effective, and for recruitment, motivation, or retention purposes. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by our Compensation and People Committee. Report of the Compensation and People Committee Our Compensation and People Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussion, our Compensation and People Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement. Respectfully submitted by the members of the Compensation and People Committee of our Board: Right Honorable Sir John Key, Chair John M. Donovan
One-Year Hold Policy
| Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | | Nikesh Arora Chief Executive Officer | 2025 | 1,000,000 | 94,857,838 | 1,200,000 | 2,678,498(2) | 99,736,336 | | | 2024 | 1,000,000 | 54,150,353 | 1,200,000 | 1,686,522 | 58,036,875 | | | 2023 | 750,000(3) | 145,374,318 | 1,500,000 | 3,800,885 | 151,425,203 | | Dipak Golechha Chief Financial Officer | 2025 | 600,000 | 24,205,961 | 720,000 | 1,720(4) | 25,527,681 | | | 2024 | 600,000 | 13,301,233 | 720,000 | 2,924 | 14,624,157 | | | 2023 | 600,000 | 7,879,645 | 900,000 | 2,023 | 9,381,668 | | William “BJ” Jenkins President | 2025 | 750,000 | 25,291,747 | 900,000 | 17,655(5) | 26,959,402 | | | 2024 | 750,000 | 16,365,230 | 900,000 | 15,285 | 18,030,515 | | | 2023 | 750,000 | 12,116,568 | 1,125,000 | 31,836 | 14,023,404 | | Lee Klarich Chief Product and Technology Officer | 2025 | 550,000 | 24,654,517 | 660,000 | 106,720(6) | 25,971,237 | | | 2024 | 550,000 | 19,126,156 | 660,000 | 2,162 | 20,338,318 | | | 2023 | 550,000 | 15,685,347 | 825,000 | 32,023 | 17,092,370 | | Nir Zuk(7) Founder Emeritus and Former Chief Technology Officer | 2025 | 408,026 | 14,852,714 | 203,014 | 243,844(8) | 15,707,598 | | | 2024 | 400,140 | 11,349,785 | 480,168 | 72,086 | 12,302,179 | | | 2023 | 419,515 | 6,961,334 | 629,272 | 76,091 | 8,086,212 |
CEO Pay Ratio
CEO Pay Ratio Under SEC rules, we are required to provide information regarding the relationship between the annual total compensation of our Chief Executive Officer and the annual total compensation of our median employee. As permitted by SEC rules, we used the same median employee for fiscal 2025 that we identified for fiscal 2023, and used for fiscal 2024, because there have been no significant changes to our workforce or pay design for fiscal 2025 that we believe would significantly change our Chief Executive Officer pay ratio results. For our last completed fiscal year, which ended July 31, 2025: •The median of the annual total compensation of all employees of our Company and our consolidated subsidiaries in fiscal 2025 was approximately $225,828, excluding our Chief Executive Officer. This annual total compensation was calculated in accordance with Item 402(c)(2)(x) of Regulation S-K, and reflects, among other things, salary, all bonuses earned, other cash payments (such as from our cash incentive plan), 401(k) contribution matches, life insurance premiums paid by the Company, and the aggregate “grant date fair value” of equity awards granted during fiscal 2025. •Mr. Arora’s annual total compensation, as reported in the Fiscal 2025 Summary Compensation Table included in this Proxy Statement, was $99,736,336. •Accordingly, for fiscal 2025, the ratio of Mr. Arora’s annual total compensation to the median of the annual total compensation of all employees was approximately 442 to 1. This pay ratio is a reasonable estimate, calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”), and based upon our reasonable judgment and assumptions. The SEC rules do not specify a single methodology for identification of the median employee or calculation of the pay ratio, and other companies may use assumptions and methodologies that are different from those used by us in calculating their pay ratio. Accordingly, the pay ratio disclosed by other companies may not be comparable to our pay ratio as disclosed above.
CEO Pay Ratio
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Fiscal 2025 Grants of Plan-Based Awards
Fiscal 2025 Grants of Plan-Based Awards The following table presents information regarding the amount of equity awards granted to our NEOs during our fiscal year ended July 31, 2025.
Fiscal 2025 Grants of Plan-Based Awards
| Name | Grant Date(1) | Date of Board or Committee Action to Grant the Award(1) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(3) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock Awards ($)(4) | | | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Mr. Arora | — | — | 450,000 | 1,000,000 | 1,650,000 | — | — | — | — | — | | | 8/15/24 | 8/18/22 | — | — | — | 1 | 145,008 | 580,032 | — | 41,259,851 | | | 8/15/24 | 8/17/23 | — | — | — | 1 | 123,228 | 492,912 | — | 30,831,646 | | | 8/20/24 | 8/15/24 | — | — | — | 1 | 87,664 | 350,656 | — | 22,766,341 | | Mr. Golechha | — | — | 270,000 | 600,000 | 990,000 | — | — | — | — | — | | | 8/15/24 | 8/18/22 | — | — | — | 1 | 34,344 | 137,376 | — | 9,772,070 | | | 8/15/24 | 8/17/23 | — | — | — | 1 | 30,806 | 123,224 | — | 7,707,661 | | | 8/20/24 | 8/15/24 | — | — | — | 1 | 25,900 | 103,600 | | 6,726,230 | | Mr. Jenkins | — | — | 337,500 | 750,000 | 1,237,500 | — | — | — | — | — | | | 8/15/24 | 8/18/22 | — | — | — | 1 | 38,160 | 152,640 | — | 10,857,856 | | | 8/15/24 | 8/17/23 | — | — | — | 1 | 30,806 | 123,224 | — | 7,707,661 | | | 8/20/24 | 8/15/24 | — | — | — | 1 | 25,900 | 103,600 | — | 6,726,230 | | Mr. Klarich | — | — | 247,500 | 550,000 | 907,500 | — | — | — | — | — | | | 8/15/24 | 8/18/22 | — | — | — | 1 | 57,240 | 228,960 | — | 16,286,784 | | | 8/15/24 | 8/17/23 | — | — | — | 1 | 23,106 | 92,424 | — | 5,781,121 | | | 8/20/24 | 8/15/24 | — | — | — | 1 | 9,960 | 39,840 | — | 2,586,612 | | Mr. Zuk(5) | — | — | 183,612 | 408,026 | 673,243 | — | — | — | — | — | | | 8/15/24 | 8/18/22 | — | — | — | 1 | 30,528 | 122,112 | — | 8,686,285 | | | 8/15/24 | 8/17/23 | — | — | — | 1 | 24,646 | 98,584 | — | 6,166,429 |
Fiscal 2025 Grants of Plan-Based Awards
(1)Represents the grant date determined under ASC Topic 718, for the portion of the awards that were considered, under ASC Topic 718, to have been granted in fiscal 2025. The legal grant date for the awards with Board or Committee Action to grant the award occurring on (i) August 18, 2022, was August 23, 2022, (ii) August 17, 2023, was August 21, 2023, and (iii) August 15, 2024 was August 20, 2024. (2)Amounts in these columns relate to incentive compensation opportunities under the fiscal 2025 cash incentive plan and the target column assumes achievement at target levels for our corporate performance measures. For achievement in excess of target, outperformance could be rewarded with a payout of up to a maximum 165% of the target amount for each NEO. The actual amounts paid to our NEOs are set forth in the “Fiscal 2025 Summary Compensation Table” above and the calculation of the actual amounts paid is discussed more fully in the section titled “Compensation Discussion and Analysis—Fiscal 2025 Executive Compensation Program—Fiscal 2025 Executive Compensation Program Components—Annual Cash Incentive Compensation.” (3)Represents PSUs that were considered, under ASC Topic 718, to have been granted in fiscal 2025. The threshold is calculated as if the threshold of the financial performance targets was reached and the lowest relative TSR modifier was reached. The maximum is calculated assuming all maximum financial performance targets were met and the maximum relative TSR modifier was reached. The amounts included under the maximum column for the PSUs legally granted in our fiscal 2023 (which have a legal grant date in August 2022) and our fiscal 2024 (which have a legal grant date in August 2023) reflect the current terms of the PSUs, including the maximum payout of 400% that was implemented as a change in fiscal 2025. For more information, see the section titled “Compensation Discussion and Analysis—Fiscal 2025 Executive Compensation Program—Fiscal 2025 Executive Compensation Program Components—Long Term Equity Compensation.
Fiscal 2025 Grants of Plan-Based Awards
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Fiscal 2025 Grants of Plan-Based Awards
(4)The amounts reported in the Grant Date Fair Value of Stock Awards column represent the grant date fair value of the portions of the PSU awards that were considered to have been granted in fiscal 2025 under ASC Topic 718, assuming that the target level of performance conditions is achieved. The assumptions used in calculating the grant date fair value of the PSUs reported in this column are set forth in the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K for our fiscal year ended July 31, 2025. The value of the PSUs is calculated using a Monte-Carlo simulation valuation performed as of the date of grant by an independent third party. Because the grant date for a PSU under ASC Topic 718 occurs when performance targets are approved, and we approved only the fiscal 2025 performance targets for these PSUs in fiscal 2025, PSU values in this column include one-third of the PSUs granted with respect to PSUs granted in each of August 2022, August 2023, and August 2024. Note that the amounts reported in this column do not correspond to the actual economic value that may be received by our NEOs from their PSU awards. (5)The amounts set forth in the table for Mr. Zuk in the column Estimated Future Payouts Under Non-Equity Incentive Plan Awards reflect the conversion from Israeli currency to U.S. dollars using an average exchange rate of approximately 0.27 U.S. dollars for one Israeli new shekel for fiscal 2025 to the extent those amounts would include compensation for Mr. Zuk during the period from August 1, 2024 through June 30, 2025. For fiscal 2025, Mr. Zuk’s cash compensation was paid in Israeli New Shekels from August 1, 2024 through June 30, 2025.
Fiscal 2025 Outstanding Equity Awards at Fiscal Year-End
Fiscal 2025 Outstanding Equity Awards at Fiscal Year-End The following table presents information regarding outstanding stock options and other equity awards held by our NEOs as of July 31, 2025.
Fiscal 2025 Outstanding Equity Awards at Fiscal Year-End
| Named Executive Officer | Grant Date(1) | Option Awards— Number of Securities Underlying Unexercised Options (#) Exercisable | Option Awards— Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Awards— Option Exercise Price ($) | Option Awards— Option Expiration Date | Stock Awards— Number of Shares or Units of Stock That Have Not Vested (#) | Stock Awards— Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | | Mr. Arora | 8/20/24(3) | — | — | — | — | — | — | 1,051,968 | 182,621,645 | | | 8/21/23(4) | — | — | — | — | — | — | 1,478,736 | 256,708,570 | | | 6/2/23(5) | — | — | — | — | — | — | 1,500,000 | 260,400,000 | | | 8/23/22(6) | — | — | — | — | 1,185,721 | 205,841,166 | — | — | | | 6/7/18(7) | 846,408 | — | 33.08 | 12/6/25 | — | — | — | — | | Mr. Golechha | 8/20/24(3) | — | — | — | — | — | — | 310,808 | 53,956,269 | | | 8/21/23(4) | — | — | — | — | — | — | 369,680 | 64,176,448 | | | 8/23/22(6) | — | — | — | — | 280,820 | 48,750,352 | — | — | | Mr. Jenkins | 8/20/24(3) | — | — | — | — | — | — | 310,808 | 53,956,268 | | | 8/21/23(4) | — | — | — | — | — | — | 369,680 | 64,176,448 | | | 8/23/22(6) | — | — | — | — | 312,025 | 54,167,540 | — | — | | | 8/20/21(8) | — | — | — | — | 3,828 | 664,541 | — | — | | Mr. Klarich | 8/20/24(3) | — | — | — | — | — | — | 119,536 | 20,751,450 | | | 8/21/23(4) | — | — | — | — | — | — | 277,264 | 48,133,030 | | | 8/23/22(6) | — | — | — | — | 468,038 | 81,251,397 | — | — | | | 10/20/18(7) | 552,060 | — | 32.25 | 4/19/26 | — | — | — | — | | Mr. Zuk | 8/21/23(4) | — | — | — | — | — | — | 295,744 | 51,341,158 | | | 8/23/22(6) | — | — | — | — | 249,620 | 43,334,032 | — | — |
Fiscal 2025 Outstanding Equity Awards at Fiscal Year-End
(1)The grant date reflected is the legal grant date of the applicable award. (2)The market value of unvested or unearned shares is calculated by multiplying the number of unvested or unearned shares held by the applicable NEO by the closing market price of our common stock on Nasdaq on July 31, 2025 (the last trading day of our 2025 fiscal year), which was $173.60 per share. (3)Represents PSUs that were granted under our 2021 Equity Incentive Plan (“2021 Plan”), which have a three-year performance period and will vest after the end of the performance period based on the achievement of performance targets for the Company’s 2025, 2026 and 2027 fiscal years and a relative TSR measured over the full three-year performance period. Values included in the applicable columns reflect the maximum values for number of shares under the PSU terms and the associated market value. For more
Fiscal 2025 Outstanding Equity Awards at Fiscal Year-End
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Fiscal 2025 Outstanding Equity Awards at Fiscal Year-End
information, see the section titled “Fiscal 2025 Executive Compensation Program—Fiscal 2025 Executive Compensation Program Components—Long-Term Equity Compensation—Fiscal 2025 Equity Compensation.” (4)Represents PSUs that were granted under our 2021 Plan, which have a three-year performance period and will vest after the end of the performance period based on the achievement of performance targets for the Company’s 2024, 2025 and 2026 fiscal years and a relative TSR measured over the full three-year performance period. Values included in the applicable columns include the maximum values for number of shares under the PSU terms and the associated market value. For more information, see the section titled “Fiscal 2025 Executive Compensation Program—Fiscal 2025 Executive Compensation Program Components—Long-Term Equity Compensation—Fiscal 2024 PSU Performance Through Fiscal 2025. (5)Represents PSUs that were granted under our 2021 Plan, which have a five-year performance period. Following the completion of the five-year performance period, the Compensation and People Committee will make the final determination of performance for the PSUs under the terms of the PSUs, including the number of PSUs eligible to vest at such time, if any. Values included in the applicable columns reflect the maximum values for number of shares under the PSU terms and the associated market value. (6)Represents PSUs that were granted under our 2021 Plan, which have a three-year performance period and will vest after the end of the performance period based on the achievement of the performance targets for the Company’s 2023, 2024 and 2025 fiscal years and a relative TSR over the full three-year performance period. The three-year performance period for the PSUs ended July 31, 2025, and the PSUs that became eligible to vest will vest upon the effectiveness of the Compensation and People Committee’s final determination of the performance achievements under the terms of the award and the relevant NEO’s continued service through the applicable November 1, 2025 vest date. Values included in the applicable columns reflect the amount of PSUs, as of July 31, 2025, that will be eligible to vest based upon achievement of the specified performance measures and subject to the effectiveness of the Compensation and People Committee’s final determination of performance for the PSUs in October 2025 and the applicable NEO’s continued service through the applicable November 1, 2025 vest date. For more information, see the section titled Fiscal 2025 Executive Compensation Program—Fiscal 2025 Executive Compensation Program Components—Long-Term Equity Compensation—Fiscal 2023 PSUs Final Performance Results. (7)Represents a performance-based stock option (“PSO”) granted under our 2012 Equity Incentive Plan. All shares subject to this PSO have vested due to the achievement of certain stock price targets and continued service. As of September 23, 2025, Mr. Arora has no PSOs outstanding and exercisable. (8)Vests over a four-year period, with forty percent (40%) of the restricted stock units (“RSUs”) having vested on the one-year anniversary of the grant date; thirty percent (30%) of the RSUs vesting in equal quarterly increments during the second year; twenty percent (20%) of the RSUs vesting in equal quarterly increments during the third year; and ten percent (10%) of the RSUs vesting in equal quarterly increments during the fourth year, in each case subject to the executive’s continued service through the applicable vesting date.
Fiscal 2025 Option Exercises and Stock Vested
Fiscal 2025 Option Exercises and Stock Vested The following table presents information regarding the exercise of stock options and the vesting of stock awards by our NEOs during our fiscal year ended July 31, 2025.
Fiscal 2025 Option Exercises and Stock Vested
| Named Executive Officer | Option Awards— Number of Shares Acquired on Exercise (#) | Option Awards—Value Realized on Exercise ($) | Stock Awards— Number of Shares Acquired on Vesting (#) | Stock Awards— Value Realized on Vesting ($)(1) | | Mr. Arora | 3,909,776 | 571,435,374 | 465,850(2) | 87,380,903 | | Mr. Golechha | — | — | 84,924 | 15,647,445 | | Mr. Jenkins | — | — | 131,348(2) | 24,695,656 | | Mr. Klarich | 1,272,098 | 186,284,276 | 155,150 | 29,077,437 | | Mr. Zuk | 3,018,114 | 481,172,935 | 58,256 | 10,918,048 |
Fiscal 2025 Option Exercises and Stock Vested
(1)Based on the market price of our common stock as of the relevant vesting date, multiplied by the number of shares vested. (2)Settlement and release of these shares, which are issuable under equity awards that vested during fiscal 2025, has been deferred by the applicable NEO under our deferred compensation plan, which is described in the section “—Nonqualified Deferred Compensation” section below. We did not sponsor any defined benefit pension or other actuarial plan for our NEOs during our fiscal year ended July 31, 2025.
Fiscal 2025 Option Exercises and Stock Vested
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Nonqualified Deferred Compensation
Nonqualified Deferred Compensation Our Compensation and People Committee has adopted a deferred compensation plan, which is a non-qualified deferred compensation plan established in compliance with Section 409A of the Internal Revenue Code. Participation in the deferred compensation plan is voluntary and limited to U.S. employees of the Company and affiliates that are at the Vice President level or above, as determined by the administrator of the deferred compensation plan. The Company’s executive officers are eligible to participate, except Mr. Zuk who was not a U.S.-based employee during any enrollment period in fiscal 2025 and is not eligible following his resignation in August 2025. The plan allows eligible participants to defer certain cash and equity compensation approved by the administrator, excluding any compensation that has already been deferred and cash compensation that is not paid through U.S. payroll. The administrator may permit different deferral amounts for each component of compensation and may establish a minimum or maximum deferral amount for each component. Unless otherwise specified by the administrator, participants may defer (i) from 5% to 50% of their annual base salary, (ii) from 5% to 100% of their annual cash incentive bonuses and sales incentive payments, and (iii) from 5% to 100% of certain RSUs and PSUs or, to the extent a participant is permitted to defer the unvested tranche(s) of an equity award, the applicable unvested tranche(s). Participants’ deferrals will be credited to their accounts on the date that deferred compensation would have otherwise been paid. Participants are 100% vested in their deferred cash compensation. Each participant may allocate his or her deferrals to accounts under the deferred compensation plan that provide for payment of deferred amounts upon specified events, such as the participant’s separation from service or a date specified by the participant. Participants may elect to receive payment of their account balances in a single lump-sum distribution or in a limited number of annual installments (as elected by the participant in accordance with the deferred compensation plan), except in certain limited circumstances and provided that payments upon a participant’s death will be provided in a single lump sum no later than the end of the following year. In addition, the administrator has the discretion to accelerate or delay the payment of account balances, as long as such changes are permitted under applicable tax rules and requirements. The Company may make discretionary matching, profit sharing, or other contributions to any participant account under the deferred compensation plan, and these contributions will vest according to the schedule specified by the administrator on or before the time the contributions are made. Each account under the deferred compensation plan will be credited with earnings on each business day, unless another period is specified by the administrator with respect to a particular investment option, based upon the participant’s investment allocation, with respect to each deferral, among a menu of investment options selected in advance by the administrator. If a participant fails to make an investment allocation with respect to a deferral of an equity award (or if the participant is a Section 16 officer under the Securities and Exchange Act of 1934, as amended), the deferral will be initially invested in notional shares of our common stock. If a participant fails to make an investment allocation with respect to a deferral of any other compensation, the deferral will be invested in a notional mutual fund specified by the administrator. All accounts will be paid in fully vested RSUs settled in shares of the Company’s common stock issued under the Company’s equity plan, except that an account will be paid in cash to the extent there are not enough shares available under the Company’s equity plan to make such payment in shares. The following table summarizes the activity under the deferred compensation plan in fiscal 2025.
Nonqualified Deferred Compensation
| Named Executive Officer | Executive contributions in last fiscal year ($)(1) | Aggregate earnings or loss in last fiscal year ($)(2) | Aggregate balance at last fiscal year end ($)(3) | | Mr. Arora | 87,380,903 | 8,173,544 | 307,747,317 | | Mr. Golechha | — | — | — | | Mr. Jenkins | 24,695,656 | 5,071,245 | 76,549,453 | | Mr. Klarich | — | — | — |
Nonqualified Deferred Compensation
(1)Represents the value of the RSUs and/or PSUs that vested and were deferred by our NEOs in fiscal 2025. The value of each vested deferred award is based on the closing price of the Company’s common stock on the relevant vest date. No portion of the amount for any NEO is included as compensation for fiscal 2025 in the Fiscal 2025 Summary Compensation Table.
Nonqualified Deferred Compensation
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Nonqualified Deferred Compensation
For Mr. Arora, (i) $31,977,656 of this amount represents the value of 170,232 RSUs legally granted to him in fiscal 2018, which were included in the amount reported in the Stock Award column of the Summary Compensation Table for fiscal 2018, (ii) $20,328,530 of this amount represents the value of 108,468 PSUs legally granted to Mr. Arora in fiscal 2021, which were included in the amount reported in the Stock Award column of the Summary Compensation Table for fiscal 2021 and (iii) $35,074,717 of this amount represents the value of 187,150 PSUs legally granted to him in fiscal 2022, a portion of which was included in the amounts reported in the Stock Award column of the Summary Compensation Table for each of fiscal 2022, fiscal 2023, and fiscal 2024. For Mr. Jenkins, (i) $3,665,069 of this amount represents the value of 19,134 RSUs granted to him in fiscal 2022, which were included in the amount reported in the Stock Award column of the Summary Compensation Table for fiscal 2022; and (ii) $21,030,587 of this amount represents the value of 112,214 PSUs granted to him in fiscal 2022, as portion of which was included in the Stock Award column of the Summary Compensation Table for each of fiscal 2022, fiscal 2023, and fiscal 2024. (2)Represents the net increase in the value of the shares underlying our NEOs’ vested deferred RSUs and/or PSUs during our fiscal 2025. No portion of the amount for any NEO is included as compensation for fiscal 2025 in the Fiscal 2025 Summary Compensation Table. (3)Represents the aggregate value of the vested deferred RSUs and/or PSUs held by our NEOs as of July 31, 2025. The value of each vested deferred RSU and PSU is based on the closing market price of our common stock on Nasdaq on July 31, 2025 (which was $173.60). Executive Employment Agreements We have entered into employment offer letters with each of our NEOs in connection with his or her commencement of employment with us. In December 2011, we entered into confirmatory new employment letters with Messrs. Klarich and Zuk to achieve consistency in the employment terms and conditions of our then-serving executive officers. Effective August 2020, in connection with Mr. Zuk’s relocation to Israel, Mr. Zuk entered into an employment agreement with one of our Israel subsidiaries. Effective July 2025, in connection with Mr. Zuk’s relocation to the United States, Mr. Zuk entered into an amended and restated employment letter, and in connection with his resignation in August 2025, Mr. Zuk entered into a continued services agreement with the Company governing his advisory relationship with the Company. Mr. Zuk’s advisory relationship with the Company is expected to continue through November 2, 2026. In February 2022, we entered into addendums to the offer letters of Messrs. Jenkins and Golechha to achieve consistency in the employment terms and conditions of our then-serving executive officers. Each of our NEOs, other than Mr. Zuk due to his retirement, is eligible to receive certain severance payments and/or benefits in connection with his or her termination of employment under various circumstances, including following a change in control, pursuant to written severance and change in control arrangements. For a summary of the material terms and conditions of these arrangements, as well as an estimate of the potential payments and benefits payable under these arrangements, see the descriptions below, including under the sections titled “—Termination of Employment and Potential Payments Unrelated to a Change in Control” and “—Termination of Employment and Potential Payments in Connection with a Change in Control.” The actual amounts that would be paid or distributed to our NEOs as a result of one of the termination events occurring in the future may be different than those presented below as many factors will affect the amount of any payments and/or benefits upon a termination of employment. For example, some of the factors that may affect the amounts payable include the NEO’s base salary and the market price of our common stock. Although we have entered into written arrangements to provide severance payments and/or benefits to our NEOs in connection with a termination of employment under particular circumstances, we or an acquirer may mutually agree with the NEOs on severance terms that vary from those provided in these pre-existing arrangements. Finally, in addition to the amounts presented below, each NEO would also be able to exercise any previously-vested stock options that he or she held to the extent they have not expired. For more information about the NEOs outstanding equity awards as of July 31, 2025, see the section above titled “—Fiscal 2025 Outstanding Equity Awards at Fiscal Year-End.” Along with the severance payments and/or benefits described in an NEO’s individual severance and change in control arrangement, they are eligible to receive any benefits accrued under our broad-based benefit plans, such as accrued vacation pay, in accordance with those plans and policies.
Nonqualified Deferred Compensation
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Termination of Employment and Potential Payments Unrelated to a Change in Control
Termination of Employment and Potential Payments Unrelated to a Change in Control
POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT UNRELATED TO A CHANGE IN CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT UNRELATED TO A CHANGE IN CONTROL The following table summarizes the potential payments to Mr. Arora upon a termination of employment unrelated to a change in control.
POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT UNRELATED TO A CHANGE IN CONTROL
| Named Executive Officer | Salary Continuation ($) | Target Annual Cash Bonus ($) | Value of Accelerated Equity Awards ($) | | Value of Continued Health Care Coverage Premiums ($) | Total ($) | | | | | Restricted Stock and Restricted Stock Units | Options | | | | Mr. Arora | 1,000,000 | — | — | — | 36,012 | 1,036,012 |
POTENTIAL PAYMENTS IN CONNECTION WITH TERMINATION OF EMPLOYMENT DUE TO DEATH
POTENTIAL PAYMENTS IN CONNECTION WITH TERMINATION OF EMPLOYMENT DUE TO DEATH In August 2023, we adopted the Survivor Benefit Policy, which provides that if an individual’s death occurs while the individual is providing services as an employee to the Company or any subsidiary of the Company, all of the equity awards (other than equity awards issued in accordance with or subject to the provisions of the Israel Income Tax Ordinance and its applicable rules, regulations, orders or procedures (the “ITO”)) that the individual holds as of the date of death will be accelerated in accordance with the terms of the Survivor Benefit Policy. With respect to performance-based vesting terms that accelerate under the terms of the policy (unless otherwise specified in an award agreement, a Company policy that applies to the employee, a determination made by the Company, our Board, or our Compensation and People Committee before the employee’s death, or a written agreement with the employee), all performance goals or other vesting criteria are assumed achieved at 100% of target levels and any relative TSR modifier (or similar modifiers) are deemed not to impact the relevant award. The terms of the Survivor Benefit Policy were extended to our Israel-based employees beginning for new equity awards made to such employees (in accordance with or subject to the ITO) from and after April 2024. Accordingly, the terms of the Survivor Benefit Policy now applies to all our employees, including our NEOs. The cash incentive plan adopted by our Compensation and People Committee for all employees not paid commissions, including NEOs (collectively, “eligible employees”), also provides that, if an employee (i) did not elect to defer any portion of their cash incentive plan payouts under our deferred compensation plan (described in the section “—Nonqualified Deferred Compensation”) and (ii) at the time of the employee’s death, was an eligible employee, then the eligible employee’s estate or beneficiary(ies) would be entitled to receive a prorated portion of the cash incentive plan payout. The amount payable is the amount that the eligible employee would have otherwise been entitled to receive for
POTENTIAL PAYMENTS IN CONNECTION WITH TERMINATION OF EMPLOYMENT DUE TO DEATH
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POTENTIAL PAYMENTS IN CONNECTION WITH TERMINATION OF EMPLOYMENT DUE TO DEATH
the fiscal half in which the eligible employee’s death occurred based on the eligible compensation earned while such eligible employee was alive and an eligible employee, assuming the employee’s individual performance results in a cash incentive plan payout at target levels and, to the extent the funding of the cash incentive plan for that fiscal half had not yet been determined at the time of the employee’s death, assuming the cash incentive plan was funded at 100% of the target funding amount for that fiscal half. The amount payable is prorated based on the number of days the relevant employee was alive and an eligible employee during the semi-annual period. If an employee’s death occurs during a fiscal half but before the cash incentive payout has been made for the prior fiscal half, then the deceased employee’s estate or beneficiary(ies) would be entitled to receive both the fully earned payment for such prior fiscal half and the pro rated payment for the fiscal half in which the eligible employee’s death occurred. For more information regarding our cash incentive plan, please see the section above titled “—Compensation Discussion and Analysis—Fiscal 2025 Executive Compensation Program—Fiscal 2025 Executive Compensation Program Components—Annual Cash Incentive Compensation.” The following table summarizes the potential value of payments to our NEOs upon their death.
POTENTIAL PAYMENTS IN CONNECTION WITH TERMINATION OF EMPLOYMENT DUE TO DEATH
| | | Value of Accelerated Equity Awards ($) | | Total ($) | | Named Executive Officer | Bonus ($)(1) | Restricted Stock and Restricted Stock Units(2) | Options | | | Mr. Arora | 500,000 | 358,953,762 | — | 359,453,762 | | Mr. Golechha | 300,000 | 47,419,534 | — | 47,719,534 | | Mr. Jenkins | 375,000 | 50,071,448 | — | 50,446,448 | | Mr. Klarich | 275,000 | 47,031,712 | — | 47,306,712 | | Mr. Zuk(3) | — | — | — | — |
POTENTIAL PAYMENTS IN CONNECTION WITH TERMINATION OF EMPLOYMENT DUE TO DEATH
(1)The amounts reported in this column assume the relevant NEO’s date of death is the last day of our fiscal 2025. (2)The amounts reported in this column reflect the aggregate market value of the unvested shares of our common stock underlying eligible outstanding RSUs and PSUs (in the case of PSUs, with all performance goals or other vesting criteria deemed achieved at 100% of target levels but any multipliers based on total shareholder return or otherwise deemed to not impact the PSUs). The aggregate market value is computed by multiplying (i) the number of unvested shares of our common stock subject to outstanding RSUs and PSUs that would become vested by (ii) $173.60 (the closing market price of our common stock on Nasdaq on July 31, 2025). (3)Mr. Zuk retired from the Company in August 2025, and ceased to be eligible for the potential payments describe in this section.
Termination of Employment and Potential Payments in Connection with a Change in Control
Termination of Employment and Potential Payments in Connection with a Change in Control
POTENTIAL PAYMENTS UPON TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL
POTENTIAL PAYMENTS UPON TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL The following table summarizes the potential payments to our NEOs upon a termination of employment in connection with a change in control.
POTENTIAL PAYMENTS UPON TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL
| | | | Value of Accelerated Equity Awards ($) | | Value of Continued Health Care Coverage Premiums ($) | | | Named Executive Officer | Salary Continuation ($) | Target Annual Cash Bonus ($) | Restricted Stock and Restricted Stock Units(1) | Options | | Total ($) | | Mr. Arora | 1,000,000 | 1,000,000 | — | — | 36,012 | 2,036,012 | | Mr. Golechha | 600,000 | 600,000 | — | — | 36,269 | 1,236,269 | | Mr. Jenkins | 750,000 | 750,000 | 664,541 | — | 36,452 | 2,200,993 | | Mr. Klarich | 550,000 | 550,000 | — | — | 36,012 | 1,136,012 | | Mr. Zuk(2) | — | — | — | — | — | — |
POTENTIAL PAYMENTS UPON TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL
(1)The amounts reported in this column reflect the aggregate market value of the unvested shares of our common stock underlying outstanding RSUs which remain subject to time-based vesting. The aggregate market value is computed by multiplying (i) the number of unvested shares of our common stock subject to outstanding RSUs which remain subject to time-based vesting only on July 31, 2025, that would become vested by (ii) $173.60 (the closing market price of our common stock on Nasdaq on July 31, 2025). (2)Mr. Zuk retired in August 2025 and is not eligible to receive payments upon termination in connection with a change in control. Pay vs. Performance As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation and certain financial performance measures of the Company. For further information concerning the Company’s pay-for-performance philosophy and how executive compensation aligns with the Company’s performance, please see the “Executive Compensation—Compensation Discussion and Analysis” section of this Proxy Statement.
Pay vs. Performance Table
Pay vs. Performance Table
Pay vs. Performance Table
| | Summary Comp Table Total for PEO(2) | Compensation Actually Paid to PEO(3) | Average Summary Comp Table Total for Non- PEO NEOs(2) | Average Compensation Actually Paid to Non- PEO NEOs(4) | Value of $100 initial investment based on | | PANW Net Income (Loss) (in millions)(7) | | Annual NGS ARR (in billions)(8) | | Year(1) | | | | | PANW TSR(5) | Peer Group TSR(6) | | | | | 2025 | $99,736,336 | $267,474,290 | $23,541,480 | $61,685,286 | $407.00 | $280.58 | | $1,133.9 | 5.6 | | 2024 | $58,036,875 | $105,275,811 | $16,323,792 | $14,485,907 | $380.66 | $226.91 | | $2,577.6 | 4.2 | | 2023 | $151,425,203 | $266,368,755 | $12,145,914 | $31,768,696 | $293.01 | $167.84 | | $439.7 | 3.0 | | 2022 | $10,410,477 | $208,514,831 | $8,058,186 | $56,805,285 | $195.02 | $132.31 | | -$267.0 | 1.9 | | 2021 | $23,283,858 | $219,731,970 | $10,279,163 | $54,811,159 | $155.93 | $140.03 | | -$498.9 | 1.2 |
Pay vs. Performance Table
(1)During each of the years presented, our PEO was Nikesh Arora. During fiscal 2025, fiscal 2024, fiscal 2023 and fiscal 2022, our non-PEO NEOs were Dipak Golechha, William “BJ” Jenkins, Lee Klarich and Nir Zuk. During fiscal 2021, our non-PEO NEOs were Dipak Golechha, Lee Klarich, Amit Singh, Luis Felipe Visoso and Nir Zuk. (2)Amounts reported in this column represent (i) the total compensation, as reported in the Summary Compensation Table in our annual Proxy Statement (“SCT”), for the applicable year for Mr. Arora and (ii) the average of the total compensation, as reported in the SCT in our annual Proxy Statement, for the applicable year for our non-PEO NEOs. (3)“Compensation actually paid” is calculated in accordance with Item 402(v) of Regulation S-K. The table below sets forth the adjustments made during our fiscal 2025 presented in the table to calculate the “Compensation Actually Paid” to our PEO, Mr. Arora, for fiscal 2025.
Pay vs. Performance Table
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Relationship Between “Compensation Actually Paid” and Performance Measures
Relationship Between “Compensation Actually Paid” and Performance Measures In accordance with SEC rules, the charts below illustrate how “compensation actually paid” (CAP) to our NEOs aligns with our Company’s financial performance as measured by our total shareholder return, our peer group total shareholder return, our net income, and NGS ARR.
Relationship Between “Compensation Actually Paid” and Performance Measures
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Relationship Between “Compensation Actually Paid” and Performance Measures
CAP vs. TSR CAP vs. Net Income (Loss)
Relationship Between “Compensation Actually Paid” and Performance Measures
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Relationship Between “Compensation Actually Paid” and Performance Measures
CAP vs NGS ARR
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Relationship Between “Compensation Actually Paid” and Performance Measures
Executive Officers The following table identifies certain information about our executive officers as of October 15, 2025, other than with respect to Mr. Zuk who ceased being an executive officer on August 14, 2025. As Mr. Zuk was an executive officer for our fiscal 2025, we have included him in this section for completeness. Officers are appointed by our board of directors to hold office until their successors are elected and qualified.
Relationship Between “Compensation Actually Paid” and Performance Measures
| Name | Age | Position(s) | | Nikesh Arora | 57 | Chief Executive Officer and Chairman | | Dipak Golechha | 51 | Executive Vice President and Chief Financial Officer | | William “BJ” Jenkins | 59 | President | | Lee Klarich | 50 | Chief Product and Technology Officer and Director | | Nir Zuk | 54 | Founder Emeritus; Former Chief Technology Officer and Former Director |
Relationship Between “Compensation Actually Paid” and Performance Measures
Nikesh Arora. For a brief biography of Mr. Arora, please see “Proposal No. 1—Election of Directors—Directors—Continuing Directors.” Dipak Golechha has served as our Chief Financial Officer since March 2021. Mr. Golechha joined the Company in December 2020 as Senior Vice President, Finance. Prior to joining the Company, from August 2020 until December 2020, Mr. Golechha served as senior advisor at Boston Consulting Group, a management consulting firm. From December 2016 to April 2020, Mr. Golechha was President and Chief Executive Officer of Excelligence Learning Corporation, a tech-enabled platform company in early childhood education. From August 2014 through July 2016, Mr. Golechha served as the chief financial officer of NBTY Inc., also known as The Nature’s Bounty Company, a manufacturer of vitamins, minerals and health supplements. During 2014, Mr. Golechha served as the chief financial officer of Chobani, a yogurt company. Prior to Chobani, Mr. Golechha worked at The Procter & Gamble Company, an American multinational consumer goods corporation, for 18 years, most recently serving as chief financial officer / chief operating officer of the Global Feminine Care / Adult Care Division from August 2012 to December 2013. Mr. Golechha holds a bachelor’s degree and a master’s degree from St. John’s College, Cambridge University in Economics. William “BJ” Jenkins has served as our President since August 2021. Prior to joining the Company, Mr. Jenkins served as President and CEO of Barracuda Networks, Inc., a computer security and data storage company, from November 2012 through July 2021. Prior to this position, Mr. Jenkins held multiple business unit and sales and marketing leadership roles at EMC Corporation, a provider of enterprise storage systems, software, and networks. Mr. Jenkins holds an engineering degree from the University of Illinois and an M.B.A. from Harvard Business School. Lee Klarich For a brief biography of Mr. Klarich, please see “Proposal No. 1—Election of Directors—Directors—Continuing Directors.” Nir Zuk is our Founder Emeritus. He served as our Chief Technology Officer and as a member of our Board from March 2005 to August 2025. From April 2004 to March 2005, Mr. Zuk was Chief Security Technologist at Juniper Networks, Inc., a supplier of network infrastructure products and services. From September 2002 until its acquisition by Juniper in April 2004, Mr. Zuk was Chief Technology Officer at NetScreen Technologies, Inc., a provider of ASIC-based Internet security systems. In December 1999, Mr. Zuk co-founded OneSecure, Inc., a provider of prevention and detection appliances, and was Chief Technical Officer until its acquisition by NetScreen in September 2002. From 1994 to 1999, Mr. Zuk served in several technical roles, including Principal Engineer at Check Point Software Technologies Ltd., an enterprise software security company. Mr. Zuk attended Tel Aviv University where he studied Mathematics.
Relationship Between “Compensation Actually Paid” and Performance Measures
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Relationship Between “Compensation Actually Paid” and Performance Measures
Equity Compensation Plan Information The following table provides information as of July 31, 2025, with respect to the shares of our common stock that may be issued under our existing equity compensation plans.
Relationship Between “Compensation Actually Paid” and Performance Measures
| Plan Category | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights ($)(2) | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | | | Equity compensation plans approved by shareholders(1) | 26,534,690 | $32.76 | | 70,767,781 | | Equity compensation plans not approved by shareholders | 9,499 | — | | — | | Total | 26,544,189 | | | 70,767,781 |
Relationship Between “Compensation Actually Paid” and Performance Measures
(1)Includes the following plans: the 2012 Equity Incentive Plan, 2021 Equity Incentive Plan and 2012 Employee Stock Purchase Plan (“2012 ESPP”). Our 2012 ESPP provides that on the first day of each fiscal year beginning with fiscal 2014 the number of shares authorized for issuance under the 2012 ESPP is automatically increased by a number equal to the lesser of (i) 12,000,000 shares of common stock, (ii) one percent (1.0%) of the number of shares of common stock outstanding on such date, or (iii) an amount determined by our board of directors or a duly authorized committee of our board of directors. (2)The weighted average exercise price does not take into account outstanding restricted stock, PSUs or time-based RSUs, which have no exercise price.
Relationship Between “Compensation Actually Paid” and Performance Measures
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Relationship Between “Compensation Actually Paid” and Performance Measures
| | PROPOSAL NO. 4 Amendment to Our 2021 Equity Incentive Plan | | | We are asking our shareholders to approve an amendment to our 2021 Equity Incentive Plan (“2021 Plan”) to increase the number of shares of our common stock (“Shares”) reserved for issuance under the 2021 Plan by 10,000,000 Shares. Other than this increase, no changes are proposed to be made to the 2021 Plan. Why Should Shareholders Vote to Approve the Amendment to the 2021 Plan? The Amendment to the 2021 Plan Will Allow Us to Continue Attracting and Retaining the Best Talent Our Board believes that our success depends on the ability to attract and retain the best available personnel for positions of substantial responsibility and that the ability to grant equity awards is crucial to recruiting and retaining the services of these individuals. In addition, our Board believes that equity awards provide additional incentive to our employees, directors and consultants and promote our success. Without a motivated and dedicated workforce, we could not deliver the strong financial performance we experienced in fiscal 2025 (as described elsewhere in this Proxy Statement). If shareholders do not approve the amendment to the 2021 Plan at the Annual Meeting, we may be unable to continue granting equity awards as needed, which could prevent us from successfully attracting and retaining the highly skilled talent we need. A Principled and Disciplined Approach The Compensation and People Committee has adopted a principled and disciplined approach to increasing the shares reserved for issuance under our 2021 Plan, which we believe aligns with best practices. This approach consists of the following principles: •Share requests should align with our commitments to reduce stock-based compensation expense as a percentage of revenue. Our stock-based compensation expense as a percentage of revenue was 14.1% in fiscal 2025. •Share reserves should be sufficient to cover one and a half to two years of grants, which the Committee believes is aligned with best practices and provides the Company with a reasonable buffer in case of extraordinary circumstances (e.g., stock price volatility, changes in hiring, acquisitions of other companies, etc.). •Share requests should be subject to shareholder approval on an annual basis, which the Committee believes provides transparency to our shareholders and more flexibility to manage our needs. A Reasonable Number of Shares Will Be Added to the 2021 Plan If our shareholders approve the amendment to the 2021 Plan, 10,000,000 Shares will be added to the maximum number of Shares that may be issued under the 2021 Plan. We anticipate these Shares will be enough to meet our expected needs for the next one to two years. •Number of Shares Remaining under the 2021 Plan. As of October 15, 2025, 25,718,111 Shares remained available for grant under the 2021 Plan. •Overhang. As of October 15, 2025, outstanding equity awards under our 2012 Plan and the 2021 Plan covered 27,208,517 Shares which represented approximately 4.0% of our outstanding Shares as of that date. •Historical Grant Practices. In fiscal 2023, 2024 and 2025, we granted equity awards (excluding equity awards we have assumed in acquisitions) covering 18.5 million, 12.6 million, and 9.6 million Shares, respectively, for equity awards covering a total of 40.7 million Shares over that three-year period. |
Relationship Between “Compensation Actually Paid” and Performance Measures
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Relationship Between “Compensation Actually Paid” and Performance Measures
| | •Forecasted Grants. To determine how long the Shares to be added to the 2021 Plan will enable us to make grants of equity awards, our Compensation and People Committee and our Board reviewed a forecast that considered these factors: (i) the remaining number of Shares available for future grants under the 2021 Plan and (ii) forecasted future grants, with the future grant amounts determined based on assumptions regarding our stock price and the competitive dollar value to be delivered to the grant recipient. ◦Because we generally determine the size of equity awards to be granted based on the value of the award, if the stock price used to determine the number of Shares subject to an award differs significantly from the stock price assumed in the forecast (which was $187.50 per share to $212.50 per share), our actual Share usage will deviate significantly from our forecasted Share usage. For example, if our stock price used to determine the number of Shares subject to an award is lower than the stock prices assumed in the forecast, we would need a larger number of Shares than anticipated to deliver the same intended value to participants. We Have Used Our Equity Plans Responsibly In response to the feedback that we have received from our shareholders over the past several years, the Compensation and People Committee has undertaken a concerted program of reducing our annual stock-based compensation expense as a percentage of revenue. The graph below illustrates our stock-based compensation expense for fiscal years 2021 through 2025, including as a percentage of revenue. | | | |
Relationship Between “Compensation Actually Paid” and Performance Measures
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Relationship Between “Compensation Actually Paid” and Performance Measures
| | We recognize the dilutive impact of our equity compensation on our shareholders and continuously strive to balance this concern with the competition for talent. In the process it used to determine the number of Shares to be added to the 2021 Plan, our Compensation and People Committee and Board reviewed analyses prepared by Meridian Compensation Partners, our independent compensation consultant, which included analysis of the burn rate and overhang metrics discussed below. If approved, the Shares added to the 2021 Plan would represent approximately 1.5% of our 683,982,694 outstanding Shares as of October 15, 2025. Our Board believes the potential dilution to shareholders is reasonable and sustainable to meet our business goals. Gross burn rate can be used by some to assess a company’s use of equity compensation. Gross burn rate is defined as the number of shares underlying equity awards granted in a given fiscal year (excluding any equity awards we have assumed in connection with our merger and acquisition activity) divided by the number of shares of weighted average common stock outstanding (“CSO”). Potential actual dilution to shareholders is often measured by analyzing the net burn rate. Net burn rate is defined as (i) the number of shares underlying equity awards granted in a given fiscal year (excluding any equity awards we have assumed in connection with our merger and acquisition activity) minus shares subject to outstanding equity awards forfeited during the year and returned to the plan divided by (ii) CSO. This measure indicates the rate at which we actually create potential future shareholder dilution. We have managed our net burn rate to 2.4% in fiscal 2023, 1.4% in fiscal 2024, and 0.6% in fiscal 2025, which represents an average of 1.5% over that three-year period. The following table shows our gross and net burn rate over the past three fiscal years and the average CSO of those three years. | | | | | | | in millions | Fiscal 2023 | Fiscal 2024 | Fiscal 2025 | Average | | | Performance-based stock options (“PSOs”) granted | — | — | — | — | | | PSOs earned | 2.2 | — | — | 0.7 | | | RSUs granted(1) | 11.4 | 8.3 | 5.8 | 8.5 | | | PSUs granted(2) | 7.1 | 4.3 | 3.8 | 5.1 | | | PSUs earned | 2.6 | 3.2 | 1.2 | 2.4 | | | Total awards granted(3) | 18.5 | 12.6 | 9.6 | 13.6 | | | Weighted average common stock outstanding | 606.4 | 638.5 | 662.5 | 635.8 | | | Gross Burn Rate | 3.1% | 2.0% | 1.5% | 2.1% | | | Forfeitures of Options | — | — | — | — | | | Forfeitures of PSOs | — | — | — | — | | | Forfeitures of PSUs and time-based RSUs | 3.8 | 3.8 | 5.4 | 4.4 | | | Net Burn Rate | 2.4% | 1.4% | 0.6% | 1.5% | | | (1)Excludes approximately 0.1 million, 0.2 million, and 0.2 million equity awards assumed in acquisitions in each of fiscal 2023, fiscal 2024, and fiscal 2025, respectively. (2)For PSUs, shares granted represent the aggregate maximum number of shares that may be earned and issued with respect to these awards over their full terms. (3)Includes time-based RSUs and PSUs granted. | | | | |
Relationship Between “Compensation Actually Paid” and Performance Measures
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Relationship Between “Compensation Actually Paid” and Performance Measures
| | | The 2021 Plan Includes Compensation and Governance Best Practices The 2021 Plan includes provisions considered best practices for compensation and corporate governance purposes. These provisions protect our shareholders’ interests: •Administration. The 2021 Plan is administered by our Compensation and People Committee, which consists entirely of independent non-employee directors. •Repricing is Not Allowed without Shareholder Approval. The 2021 Plan does not permit awards to be repriced or exchanged for other awards unless shareholders approve the repricing or exchange. •No Single-Trigger Vesting Acceleration upon a Change in Control for Employees and Consultants. Awards under the 2021 Plan will be treated in a change in control (as defined in the 2021 Plan) in the manner determined by the administrator, and except for awards granted to our non-employee directors for their service as non-employee directors, the terms of the 2021 Plan provide for no automatic vesting of awards upon a change in control unless the award is not assumed or substituted. •Limited transferability. Awards under the 2021 Plan generally may not be sold, assigned, hypothecated, transferred, or disposed of in any manner, unless otherwise approved by the administrator (on such terms as the administrator deems appropriate) or required by applicable laws. •No Tax Gross-ups. The 2021 Plan does not provide for any tax gross-ups. •Forfeiture Events. Each award under the 2021 Plan and any other incentive compensation paid to a participant is subject to our clawback policy that was in effect when the 2021 Plan was originally adopted and any clawback policy that we establish or amend to comply with applicable laws, and the administrator may require a participant to forfeit, return, or reimburse all or a portion of the award or other compensation and any amounts paid under the award or other compensation to comply with such clawback policy or applicable laws. •Reasonable Annual Limits on Non-Employee Director Compensation. The 2021 Plan sets limits as to the total compensation that non-employee directors may receive (for service as a non-employee director) during each fiscal year. •No Dividends on Unvested Awards. No dividends or other distributions may be paid with respect to any Shares underlying the unvested portion of an award. •Limited share recycling from the 2012 Plan. Our Board amended the 2021 Plan in August 2025 to eliminate the ability to recycle shares from the 2012 Equity Incentive Plan (“2012 Plan”) that are tendered to, or withheld by, the Company for payment of an exercise price or for tax withholding obligations, such that going forward recycling is only permitted for awards previously granted under the 2012 Plan that have expired or terminated without being exercised in full or are forfeited to or repurchased by the Company due to failure to vest. Our executive officers and directors have an interest in the approval of the amendment to the 2021 Plan because they are eligible to receive equity awards under the 2021 Plan. REQUIRED VOTE The approval of the amendment to our 2021 Plan requires the affirmative vote of a majority of the shares of our common stock present virtually or by proxy at the Annual Meeting and entitled to vote thereon to be approved. You may vote “for,” “against,” or “abstain” with respect to this proposal. Abstentions are considered votes present and entitled to vote on this proposal, and thus will have the same effect as votes “against” this proposal. Broker non-votes will have no effect on the outcome of this proposal. | | | | | | Recommendation of the Board The Board recommends that you vote “FOR” the approval of the amendment to the 2021 Equity Incentive Plan and the increase to the number of Shares reserved for issuance under the 2021 Equity Incentive Plan. |
Relationship Between “Compensation Actually Paid” and Performance Measures
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Relationship Between “Compensation Actually Paid” and Performance Measures
Summary of the 2021 Plan The following paragraphs summarize the principal features of the 2021 Plan, as amended, and its operation. However, this summary is not a complete description of the provisions of the 2021 Plan and is qualified in its entirety by the specific language of the 2021 Plan. A copy of the 2021 Plan is provided as Appendix B to this Proxy Statement. Purpose of the 2021 Plan The purpose of the 2021 Plan is to attract and retain the best available personnel for positions of substantial responsibility, provide additional incentive to employees, directors, and consultants, and promote the success of our business. These incentives can be provided through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and performance shares. Shares Available for Issuance Subject to the adjustment provisions in the 2021 Plan, the number of Shares reserved for issuance under the 2021 Plan is equal to (i) 64,370,000 Shares plus (ii) any Shares subject to awards previously granted under the 2012 Plan that, (A) on or after the date our shareholders initially approve the 2021 Plan through August 14, 2025, expired or otherwise terminated without having been exercised or issued in full, were tendered to or withheld by us for payment of an exercise price or for tax withholding obligations, or that were forfeited to or repurchased by us due to failure to vest; and (B) after August 14, 2025, expire or otherwise terminate without having been exercised or issued in full, or are forfeited to or repurchased by the us due to failure to vest, with the maximum number of shares to be added under the foregoing clause equal to 63,480,126 Shares. If we substitute equity awards for equity awards of acquired entities in connection with mergers, reorganizations, separations, or other transactions as described in the 2021 Plan, the grant of such substituted awards will not decrease the number of Shares available for issuance under the 2021 Plan. Shares may be authorized, but unissued, or reacquired common stock. If an award granted under the 2021 Plan expires or becomes unexercisable without having been exercised in full or is forfeited to or repurchased by us due to failure to vest, then the expired, unexercised, forfeited, or repurchased Shares subject to that award will become available for future grant or sale under the 2021 Plan. If an award of stock appreciation rights is exercised, the gross number of Shares underlying the portion of a stock appreciation right that is exercised will cease to be available under the 2021 Plan. Shares actually issued under the 2021 Plan under any award will not be returned to the 2021 Plan and will not become available for future grant or sale under the 2021 Plan; provided, however, that if Shares issued under awards of restricted stock, restricted stock units, performance shares or performance units are repurchased by us or are forfeited to us due to failure to vest, such Shares will become available for future grant under the 2021 Plan. Shares used to pay the exercise price of an award or to satisfy tax withholding obligations related to an award will not become available for future grant or sale under the 2021 Plan. If an award is paid in cash rather than Shares, such payment will not reduce the number of Shares available for issuance under the 2021 Plan. In the event of certain dividends or other distributions (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities or other change in the corporate structure affecting our Shares, the 2021 Plan administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the 2021 Plan, will adjust the number and class of shares that may be delivered under the 2021 Plan, and/or the number, class and price of shares of stock subject to outstanding awards, and the award grant limitations discussed above. During the term of the 2021 Plan, we will at all times reserve and keep available a number of Shares sufficient to satisfy the requirements of the 2021 Plan. Limitations The 2021 Plan also provides that no non-employee director may be paid compensation for service as a non-employee director that, in the aggregate, exceeds $2,000,000 for any fiscal year of ours, increased to $4,000,000 for the non-employee director for our fiscal year in which he or she joins our Board as a non-employee director. For these purposes, compensation includes equity awards (including any awards issued under the 2021 Plan), with the value of such equity awards measured based on their grant date fair value (determined under U.S. generally accepted accounting principles), and any other compensation (such as cash retainers or fees) for director service. Any award granted to a participant while he or she was an employee or a consultant (other than a non-employee director) will not count for this limitation.
Relationship Between “Compensation Actually Paid” and Performance Measures
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Relationship Between “Compensation Actually Paid” and Performance Measures
Administration Our Board, any committee of individuals satisfying applicable laws appointed by our Board, or any duly authorized committee of our Board acts as the “administrator” of the 2021 Plan. Different administrators may administer the 2021 Plan with respect to different groups of service providers. Our Board has designated our Compensation and People Committee as an administrator of the 2021 Plan. To make grants to certain officers and key employees, the members of the committee must qualify as “non-employee directors” under Rule 16b-3 of the Exchange Act. Subject to the terms of the 2021 Plan, the administrator has the authority to make any determinations and perform any actions that it deems necessary or advisable to administer the 2021 Plan, such as the authority to: determine the fair market value of a Share, select the service providers who will receive awards; determine the number of Shares covered by each award and the terms of each award; approve forms of award agreements for use with the 2021 Plan; interpret, modify or amend each award (subject to the repricing restrictions of the 2021 Plan), including to accelerate vesting or waive forfeiture restrictions; interpret the 2021 Plan; and delegate ministerial duties to any of our employees. The administrator may allow a participant to defer the receipt of payment of cash or delivery of Shares otherwise due to such participant. The administrator may make rules and regulations relating to the 2021 Plan, including rules, regulations, and sub-plans to facilitate compliance with applicable non-U.S. laws, easing the administration of the 2021 Plan, and/or take advantage of tax-favorable treatment of awards granted to service providers outside the U.S., and may make all other determinations deemed necessary or advisable for administering the 2021 Plan. Eligibility All types of awards, other than incentive stock options, may be granted to our non-employee directors and to employees and individual consultants of ours or any parent or subsidiary corporation of ours. Incentive stock options may be granted only to employees of ours or any parent or subsidiary corporation of ours. As of July 31, 2025, we and our subsidiary entities had approximately 16,068 employees (inclusive of our two employee directors during fiscal 2025), approximately 13 individual consultants who received awards, and nine non-employee directors. Stock Options An option gives a participant the right to purchase a specified number of Shares for a fixed exercise price during a specified period. Each option granted under the 2021 Plan will be evidenced by an award agreement specifying the number of Shares subject to the option and the other terms of the option, consistent with the 2021 Plan. The exercise price per Share of each option may not be less than the fair market value of a Share on the date of grant (except, in the case of a nonstatutory stock option, as otherwise required by applicable laws). However, any incentive stock option granted to a person who at the time of grant owns stock representing more than 10% of the total combined voting power of all classes of our stock or any parent or subsidiary corporation of ours (a “ten percent shareholder”) must have an exercise price per Share equal to at least 110% of the fair market value of a Share on the date of grant. The aggregate fair market value of the Shares (determined on the grant date) covered by incentive stock options which first become exercisable by any participant during any calendar year also may not exceed $100,000. For this purpose, the fair market value of a Share is generally the closing sales price of our stock, as reported on the primary stock exchange on which it is traded. On October 15, 2025, the closing price of a Share on Nasdaq was $206.70. Options will be exercisable at such times or under such conditions as determined by the administrator and set forth in the award agreement. When a participant’s service ends, the unvested portion of the participant’s option generally expires. The vested portion of the option will remain exercisable for the period following the end of the participant’s service that was determined by the administrator and specified in the participant’s award agreement, and if no such period was specified in the award agreement, the vested portion of the option will remain exercisable for: (i) three months following the end of the participant’s service provider status for reasons other than death or disability or (ii) 12 months following the end of the participant’s service provider status due to death or disability. In addition, a participant’s award agreement may provide for an extension of the post-service exercise period if the participant’s service ends for reasons other than his or her death or disability and the exercise of the option following the termination of service would result in liability under Section 16(b) of the Exchange Act or would violate the registration requirements under the Securities Act.
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Relationship Between “Compensation Actually Paid” and Performance Measures
The term of an option will be specified in the award agreement, but the term of an incentive stock option may not be more than ten years (or five years for an incentive stock option granted to a ten percent shareholder). The administrator will determine the acceptable form(s) of consideration for exercising an option. An option will be deemed exercised when we receive the notice of exercise and full payment for the Shares to be exercised, together with any amounts necessary to satisfy withholding obligations for tax-related items. At any time after the grant of an option, the administrator has the discretion to accelerate the time at which the option will vest or become exercisable. Stock Appreciation Rights A stock appreciation right gives a participant the right to receive the appreciation in the value of a Share between the date an award is granted and the date it is exercised. Upon exercise of a stock appreciation right, the holder of the award will be entitled to receive an amount determined as the product of: (i) the difference between the fair market value of a Share on the date of exercise and the exercise price per Share and (ii) the number of Shares covered by the exercised portion of the stock appreciation right. We may pay that amount in cash, Shares, or a combination of both. Each stock appreciation right granted under the 2021 Plan will be evidenced by an award agreement specifying the exercise price and the other terms of the award. The exercise price per Share of each stock appreciation right may not be less than the fair market value of a Share on the date of grant, unless otherwise required by applicable laws. Stock appreciation rights will be exercisable at such times or under such conditions as determined by the administrator and set forth in the award agreement. The terms relating to the period of exercise of stock appreciation rights following the termination of a participant’s service are similar to those for options described above. At any time after the grant of a stock appreciation right, the administrator has the discretion to accelerate the time at which the stock appreciation right will vest or become exercisable. Restricted Stock Awards Awards of restricted stock are rights to acquire or purchase Shares that vest under the terms established by the administrator in its sole discretion. Unless the administrator provides otherwise, participants holding Shares of restricted stock will have voting rights with respect to such Shares without regard to vesting. After an award of restricted stock has been granted, the administrator has the discretion to reduce or waive any restrictions and to accelerate the time at which any restrictions will lapse or be removed. Restricted Stock Units A restricted stock unit represent a right to receive cash or Shares if the performance goals or other vesting criteria set by the administrator are achieved or the restricted stock unit otherwise vests. Each award of restricted stock units granted under the 2021 Plan will be evidenced by an award agreement specifying the number of Shares subject to the award and other terms of the award. The administrator may set vesting conditions based upon the achievement of Company-wide, divisional, business unit or individual goals (such as continued employment or service), applicable U.S. or non-U.S. federal or state securities laws, or any other basis determined by the administrator, in its discretion. After an award of restricted stock units has been granted, the administrator has the discretion to reduce or waive any restrictions or vesting criteria that must be met to receive a payout or to accelerate the time at which any restrictions will lapse or be removed. A participant will forfeit any unearned restricted stock units on the date specified in the participant’s award agreement. The administrator in its sole discretion may pay earned restricted stock units in cash, Shares, or a combination of both.
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Performance Units and Performance Shares Performance units and performance shares are awards that will result in a payment to a participant only if performance goals established by the administrator are achieved or the awards otherwise vest. Performance units will have an initial value established by the administrator on or before the date of grant. Each performance share will have an initial value equal to the fair market value of a Share on the grant date. Performance units and performance shares will result in a payment to a participant only if the performance goals or other vesting criteria set by the administrator are achieved or the awards otherwise vest. Each award of performance units or performance shares granted under the 2021 Plan will be evidenced by an award agreement specifying the performance period and other terms of the award. The administrator may set vesting criteria based upon the achievement of Company-wide, divisional, business unit or individual goals (such as continued employment or service), applicable U.S. or non-U.S. federal or state securities laws, or any other basis determined by the administrator, in its discretion. After an award of performance units or performance shares has been granted, the administrator has the discretion to accelerate, reduce or waive any performance objectives or other vesting provisions for such performance units or performance shares. The administrator has the discretion to pay earned performance units or performance shares in the form of cash, Shares (which will have an aggregate fair market value equal to the earned performance units or performance shares at the close of the performance period), or a combination of both. A participant will forfeit any performance units or performance shares not earned and not vested as of the date specified in the participant’s award agreement. Transferability of Awards Unless otherwise specified by the administrator or required by applicable laws, awards are not transferable other than by will or by the laws of descent or distribution. The administrator may permit an award to be transferred (i) under a domestic relations order, official marital settlement agreement, or other divorce or separation agreement, or (ii) to the extent permitted by Form S-8 under the Securities Act and any other applicable laws. Any individual or entity to whom an award is transferred will be subject to all of the terms and conditions applicable to the participant who transferred the award, including the terms and conditions in the 2021 Plan and the award agreement. If an award is unvested, then the service of the participant will continue to determine whether the award will vest and when it will terminate. Dissolution or Liquidation In the event of our proposed dissolution or liquidation, the administrator will notify each participant as soon as practicable prior to the effective date of such proposed transaction. An award will terminate immediately prior to consummation of such proposed action to the extent the award has not been previously exercised. Merger or Change in Control The 2021 Plan provides that, in the event of a merger or change in control, each award will be treated as the administrator determines without a participant’s consent. The administrator will not be required to treat all awards, all awards held by a participant, all awards of the same type, or all portions of awards the same in the transaction. If the successor corporation does not assume or substitute for the award (or portion thereof), the participant will vest in and may exercise all of the participant’s outstanding options and stock appreciation rights (or portion thereof) that is not assumed or substituted for, all restrictions on restricted stock and restricted stock units will lapse. With respect to awards with performance-based vesting that are not assumed or substituted for, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels, and all other terms met, in each case, unless specifically provided otherwise under the applicable award agreement. In addition, if an option or stock appreciation right (or its applicable portion) is not assumed or substituted for, the administrator will notify the participant in writing or electronically that the option or stock appreciation right will be exercisable for a period of time determined by the administrator, in its sole discretion, and the option or stock appreciation right (or its applicable portion) will terminate upon the expiration of such period.
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Relationship Between “Compensation Actually Paid” and Performance Measures
For awards granted to each of our non-employee directors, in the event of a change in control, (i) the non-employee director will fully vest in and have the right to exercise all of his or her outstanding options and stock appreciation rights, (ii) all restrictions on the non-employee director’s restricted stock and restricted stock units will lapse, and (iii) with respect to the non-employee director’s awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions will be deemed met, unless specifically provided otherwise under the applicable award agreement. Forfeiture Events Each award under the 2021 Plan and any other compensation paid or payable to a participant (including, but not limited to, equity awards issued outside of the 2021 Plan) will be subject to any clawback policy of ours, and the administrator also may specify in an award agreement that the participant’s rights, payments, and benefits regarding an award will be subject to reduction, cancellation, forfeiture, recoupment, reimbursement, or reacquisition upon the occurrence of certain specified events. An award will be subject to the Company’s clawback policy in effect when the award is granted and any other clawback policy of ours as established and/or amended from time to time (including without limitation pursuant to the listing standards of any national securities exchange or association on which our securities are listed or as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act). The administrator may require a participant to forfeit, return, or reimburse all or a portion of the award and any amounts paid under the award to comply with such clawback policy or applicable laws. No recovery of compensation under a clawback policy or otherwise will constitute an event that triggers or contributes to any right of a participant to resign for “good reason” or “constructive termination” (or similar term) under any agreement with us or any of our parent or subsidiary corporations, unless the 2021 Plan provisions described in the prior paragraph specifically are mentioned and waived in an award agreement or other document. Termination or Amendment The administrator may amend, alter, suspend, or terminate the 2021 Plan at any time, provided that no amendment may be made without shareholder approval to the extent approval is necessary to comply with any applicable laws. No amendment, alteration, suspension, or termination may materially impair the rights of any participant with respect to his or her outstanding awards unless mutually agreed otherwise between the participant and the administrator. The 2021 Plan will continue until terminated by the administrator, but no incentive stock option may be granted after the tenth anniversary of the date the 2021 Plan was originally adopted by our Board. Notwithstanding the prior paragraph, the Administrator may amend the terms of any one or more awards without an affected participant’s consent even if it does materially impair the participant’s rights, subject to the limitations of applicable laws, if any, if such amendment is done (i) in a manner expressly permitted under the 2021 Plan; (ii) to maintain the qualified status of the award as an incentive stock option under Section 422 of the Code; (iii) to change the terms of an incentive stock option, if such change results in impairment of the award only because it impairs the qualified status of the award as an incentive stock option under Section 422 of the Code; (iv) to clarify the manner of exemption from, or to bring the award into compliance with, Section 409A of the Code; or (v) to comply with other applicable laws. Summary of U.S. Federal Income Tax Consequences The following summary is intended only as a general guide to the U.S. federal income tax consequences of participation in the 2021 Plan. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those laws and regulations will not change. The summary is not complete and does not discuss the tax consequences upon a participant’s death, or the income tax laws of any municipality, state, or non-U.S. country in which a participant may reside. Tax consequences for any particular participant may vary based on individual circumstances.
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Relationship Between “Compensation Actually Paid” and Performance Measures
Incentive Stock Options A participant recognizes no taxable income for regular income tax purposes because of the grant or exercise of an option that qualifies as incentive stock option under Section 422 of the Code. If a participant exercises the option and then later sells or otherwise disposes of the Shares acquired through the exercise the option after both the two-year anniversary of the date the option was granted and the one-year anniversary of the exercise, the participant will recognize a capital gain or loss equal to the difference between the sale price of the Shares and the exercise price. However, if the participant disposes of such Shares either on or before the two-year anniversary of the date of grant or on or before the one-year anniversary of the date of exercise (a “disqualifying disposition”), any gain up to the excess of the fair market value of the Shares on the date of exercise over the exercise price generally will be taxed as ordinary income, unless the Shares are disposed of in a transaction in which the participant would not recognize a loss (such as a gift). Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. For purposes of the alternative minimum tax, the difference between the option exercise price and the fair market value of the Shares on the exercise date is treated as an adjustment item in computing the participant’s alternative minimum taxable income in the year of exercise. In addition, special alternative minimum tax rules may apply to certain subsequent disqualifying dispositions of the Shares or provide certain basis adjustments or tax credits. Nonstatutory Stock Options A participant generally recognizes no taxable income as the result of the grant of a nonstatutory stock option. However, upon exercising the option with respect to any Shares, the participant normally recognizes ordinary income equal to the amount that the fair market value of such Shares on such date exceeds the exercise price for such Shares. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of the Shares acquired by exercising a nonstatutory stock option, any gain or loss (based on the difference between the sale price and the fair market value on the exercise date) will be taxed as capital gain or loss. Stock Appreciation Rights A participant generally recognizes no taxable income as the result of the grant of a stock appreciation right. However, upon exercising the stock appreciation right with respect to any Shares, the participant normally recognizes ordinary income equal to the amount that the fair market value of such Shares on such date exceeds the exercise price for such Shares. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of the Shares acquired by exercising a stock appreciation right, any gain or loss (based on the difference between the sale price and the fair market value on the exercise date) will be taxed as capital gain or loss. Restricted Stock Awards A participant acquiring Shares of restricted stock generally will recognize ordinary income equal to the amount that the fair market value of the Shares on the vesting date exceeds the purchase price paid by the participant for such Shares (if any). If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The participant may elect, under Section 83(b) of the Code, to accelerate the ordinary income tax event to the date of acquisition by filing an election with the Internal Revenue Service no later than 30 days after the date the Shares are acquired. Upon the sale of Shares acquired under a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax event occurs, will be taxed as capital gain or loss.
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Relationship Between “Compensation Actually Paid” and Performance Measures
Restricted Stock Unit Awards There are no immediate tax consequences of receiving an award of restricted stock units. A participant who is awarded restricted stock units generally will have to recognize ordinary income equal to the fair market value of Shares issued to such participant at the end of the applicable vesting period or, if later, the settlement date elected by the administrator or a participant. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Any additional gain or loss recognized upon any later disposition of any Shares received would be capital gain or loss. Performance Shares and Performance Unit Awards A participant generally will recognize no income upon the grant of a performance share or a performance unit award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year of receipt in an amount equal to the cash received and the fair market value of any cash or unrestricted Shares received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of any Shares received, any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax event occurs, will be taxed as capital gain or loss. Section 409A Section 409A provides certain requirements for non-qualified deferred compensation arrangements with respect to an individual’s deferral and distribution elections and permissible distribution events. Awards granted under the 2021 Plan with a deferral feature will be subject to the requirements of Section 409A. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, when vested, which may be before the compensation is actually or constructively received. Also, if an award subject to Section 409A violates Section 409A’s provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income and potentially penalties and interest on such deferred compensation. Tax Effect for Us We generally will be entitled to a tax deduction in connection with an award under the 2021 Plan equal to the ordinary income realized by a participant when the participant recognizes such income (for example, the exercise of a nonstatutory stock option or the disqualifying disposition of Shares acquired through the exercise of an incentive stock option) except to the extent such deduction is limited by applicable provisions of the Code. Special rules limit the deductibility of compensation paid to our chief executive officer and other “covered employees” as determined under Section 162(m) and applicable guidance. Under Section 162(m), the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. THE SUMMARY ABOVE IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME TAXATION ON PARTICIPANTS AND US WITH RESPECT TO AWARDS UNDER THE 2021 PLAN. IT IS NOT INTENDED TO BE COMPLETE AND MAY NOT DISCUSS THE IMPACT OF EMPLOYMENT OR OTHER TAX REQUIREMENTS, THE TAX CONSEQUENCES OF A PARTICIPANT’S DEATH, OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR NON-U.S. COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
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Relationship Between “Compensation Actually Paid” and Performance Measures
New Plan Benefits The number of awards that an employee, director, or consultant may receive under the 2021 Plan is in the discretion of the administrator and therefore cannot be determined in advance. The following table sets forth: (i) time-based restricted stock units (“RSUs”), and performance-based restricted stock units (“PSUs”) granted under the 2012 Plan and the 2021 Plan during fiscal 2025 to each of our NEOs assuming, for purposes of PSUs, maximum achievement; our executive officers, as a group (which constitutes our NEOs as of the end of fiscal 2025); our directors who are not executive officers, as a group; and all of our employees who are not executive officers, as a group; and (ii) the aggregate grant date fair value of such RSUs and PSUs assuming, for purposes of the PSUs, the maximum level of achievement.
Relationship Between “Compensation Actually Paid” and Performance Measures
| Name of Individual or Group | Number of Shares Subject to RSUs and PSUs Granted(1) | Dollar Value of Shares Subject to RSUs and PSUs Granted(1) | | Nikesh Arora Chief Executive Officer and Chair of the Board | 1,423,600(2) | $268,674,816 | | Dipak Golechha Executive Vice President, Chief Financial Officer | 364,200(2) | $67,920,673 | | William “BJ” Jenkins President | 379,464(2) | $71,178,030 | | Lee Klarich Chief Product Officer and Director | 361,224(2) | $72,157,209 | | Nir Zuk (4) Founder Emeritus; Former Chief Technology Officer and Former Director | 220,696(2) | $44,558,141 | | All executive officers, as a group | 2,749,184 | $524,488,869 | | All directors who are not executive officers, as a group | 23,906(3) | $4,493,846 | | All employees who are not executive officers, as a group | 7,047,815 | $1,338,780,023 |
Relationship Between “Compensation Actually Paid” and Performance Measures
(1)The amounts reported represent the grant date fair value of the PSUs and the RSUs granted in fiscal 2025, calculated in accordance with ASC Topic 718, assuming maximum achievement for PSUs. The assumptions used in calculating the grant date fair value of the PSUs and the RSUs reported in this column are set forth in the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K for our fiscal year ended July 31, 2025. The value of the PSUs is calculated using a Monte-Carlo simulation valuation performed as of the date of grant by an independent third party. With respect to the fiscal 2025, fiscal 2024, and fiscal 2023 executives PSUs that contain a three-year performance period in which the financial performance measure targets are set at the beginning of each fiscal year, we approved only the fiscal 2025 performance targets for those PSUs in fiscal 2025. As a result, only those portions of those PSUs (covering one-third of the PSUs) have a reportable grant date fair value under ASC Topic 718 and are included in this table. The remaining portions of the fiscal 2025 PSUs and fiscal 2024 PSUs do not have a reportable grant date fair value under ASC Topic 718 for fiscal 2025 and are not included in this table. Values included in the applicable columns reflect the maximum values for number of shares under the PSU terms and the associated market value. (2)Consists of PSUs only. (3)Consists of RSUs only. (4)Mr. Zuk ceased being an executive officer in August 2025. Additional Equity Plan Information The following table provides certain additional information regarding our equity compensation plans, excluding the Employee Stock Purchase Plan:
Relationship Between “Compensation Actually Paid” and Performance Measures
| | As of 10/15/2025 | | Total Stock Options (including PSOs) Outstanding | 276,030 | | Weighted-Average Exercise Price of Stock Options Outstanding | $32.25 per share | | Weighted-Average Remaining Duration of Stock Options Outstanding | 0.51 years | | Total Restricted Stock Units (including PSUs) Outstanding | 26,932,487 | | Total Shares Available for Issuance under the 2021 Equity Incentive Plan | 25,718,111 |
Relationship Between “Compensation Actually Paid” and Performance Measures
For more information regarding our equity compensation plans, including the Employee Stock Purchase Plan, please see “Equity Compensation Plan Information.”
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| | PROPOSAL NO. 5 Shareholder Proposal – Impact of Share Repurchases on Performance Metrics | | | The Vermont Pension Investment Commission (“VPIC”), a beneficial owner of shares of our common stock worth at least $25,000 (based on information provided to us by VPIC), has notified us that they intend to present the following proposal for consideration at the Annual Meeting. VPIC’s address is 6 Baldwin Street, Montpelier, Vermont 05633-7970. In accordance with Rule 14a-8(h) of the Exchange Act, the shareholder proposal is required to be voted on at the Annual Meeting only if properly presented by the proponent or their qualified representative at the meeting. The text of the shareholder’s resolution and the statement that the proponent furnished to us in support thereof appear below, exactly as submitted, and we are not responsible for any inaccuracies or omissions therein. For the reasons set forth following the proponent’s statement, the Board recommends that you vote “AGAINST” this proposal. Shareholder’s Proposal and Supporting Statement RESOLVED: Shareholders urge the Board of Directors to adopt a policy that financial performance metrics shall be adjusted, to the extent practicable, to exclude the impact of share repurchases when determining the amount or vesting of any senior executive incentive compensation grant or award. Compliance with this policy shall be excused if it would cause the company to violate any existing contractual obligations or the terms of any compensation plan, but shall apply to future employment agreements and plans. SUPPORTING STATEMENT Senior executive pay should be aligned with operational results and the individual contributions of senior executives, not financial engineering. Stock buybacks directly affect many of the financial ratios used as performance metrics for incentive pay of senior executives. For example, stock buybacks can increase earnings per share, return on assets, and return on equity. While stock buybacks may also boost stock prices in the short term, we are concerned that they can deprive companies of capital necessary for creating long term growth. In our view, senior executives are responsible for improving our company’s operational performance, whereas the Board of Directors 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.1 Given this potential for manipulation, we believe that senior executives should not receive larger pay packages simply for reducing the number of shares outstanding. In 2023, S&P 500 Index companies spent a combined total of $795 billion on stock repurchases and another $588 billion on dividends, totaling more than 85 percent of their reported earnings.2 This is a concern because retained earnings are a primary source of new investment. Academic research has shown that stock buybacks decrease capital expenditures and R&D spending, resulting in lower market-to-book ratios, profitability, innovation, and growth in the long run.3 Our company spent $567 million on share buybacks in 2024. Our company’s CEO Nikesh Arora received $151 million in total compensation in 2023, including $145 million in stock awards. The performance goal for these awards includes total shareholder return, a financial ratio that can be inflated by stock buybacks. For these reasons, we urge you to vote FOR this proposal. |
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1Heitor Almeida et. al., “The Real Effects of Share Repurchases,” Journal of Financial Economics, January 2016, https://doi.org/10.1016/j.jfineco.2015.08.008. 2S&P Dow Jones Indexes, “S&P 500 Q1 2024 Buybacks Increase 8.1% From Q4 2023,” June 17, 2024, https://www.spglobal.com/spdji/en/documents/index-news-and-announcements/20240617-sp-500-buyback-q1-2024.pdf. 3Zigan Wang et. al., “Real Effects of Share Repurchases Legalization on Corporate Behaviors,” Journal of Financial Economics, April 2021, https://doi.org/10.1016/j.jfineco.2020.10.008.
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Proposal No. 5 Shareholder Proposal – Impact of Share Repurchases on Performance Metrics
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| | Company Opposing Statement The Board believes that our current executive compensation policies and practices are appropriate and effective, serve the best interests of our shareholders, and advance the objectives of our executive compensation program by driving performance to create long-term shareholder value. The Board has carefully considered the proposal and, for the reasons described below, believes that the proposal would not support these objectives and is not in our best interests or the best interests of our shareholders. The Board recommends a vote “AGAINST” this proposal. Our Compensation and People Committee is Committed to Pay-for-Performance and is Best Positioned to Align Executive Compensation with Our Strategy and Shareholders’ Best Interests The Compensation and People Committee (which is composed entirely of independent directors) is committed to ensuring that we retain and attract individuals of outstanding character and ability, who are champions of our company culture and mission. To do so, the Compensation and People Committee designs programs that fairly compensate our employees and allow us to attract and retain a world-class leadership team, who can meet the challenges of a dynamic enterprise cybersecurity industry, characterized by constant change and innovation. The Compensation and People Committee strongly believes in, and is committed to, executing a pay-for-performance compensation philosophy that closely aligns executive compensation to our financial and operational performance. Our compensation programs reflect recognized best practices and principles that align the compensation of our executive officers with the long-term interests of our shareholders and are supported by market practices. As described more fully elsewhere in this Proxy Statement, our shareholder engagement efforts are robust, and the Compensation and People Committee values and carefully considers the feedback it receives from shareholders. The Compensation and People Committee also retains an independent compensation consultant to provide input, analysis, and guidance on our executive compensation, peer groups, compensation design, and equity usage and allocation. Each year, the Compensation and People Committee considers our shareholders’ feedback, market competitiveness, and our strategy to confirm that our executive compensation program remains appropriately aligned with current market practices and the long-term interests of our shareholders. The Compensation and People Committee is in the best position to align our compensation programs with the long-term interests of our shareholders and our strategic, operational and financial goals, including returning capital to our shareholders. As part of its process, the Compensation and People Committee considers key drivers of company performance and holds executives accountable for delivering on such performance targets. If the Company were to implement the proposal, it would mean deviating from comparable metrics used by our peers and put us at a competitive disadvantage. The Board is Best Positioned to Allocate Capital in a Manner that Serves Shareholders’ Best Interests Our financial performance has led to strong financial returns, a one-year TSR at the 49th percentile, and three-year TSR at the 96th percentile, of our compensation peer group.1 The Board regularly reviews our capital needs and guides our long-term capital structure to ensure we have sufficient capital to invest for future growth. After determining we have sufficient liquidity for short-term and long-term planning, we have from time-to-time repurchased shares under a stock repurchase program to return value to our shareholders. In addition, we repurchase shares to offset the dilutive effect of the issuance of shares pursuant to our equity compensation plans. This proposal would limit our ability to align our executive compensation arrangements with our overall capital allocation strategy and would unduly restrict our ability to use all tools at our disposal to maximize alignment with long-term interests of our shareholders. |
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(1)Source: S&P Capital IQ. The beginning and ending stock prices used for calculating TSRs was based on the average of the closing trading prices of each company for the thirty consecutive trading days ending with the last trading day before the beginning of the measurement period and the last trading day of the measurement period, which is July 31, 2025.
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Proposal No. 5 Shareholder Proposal – Impact of Share Repurchases on Performance Metrics
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| | | It is also important to note that we do not deploy significant amounts of capital for share repurchases. In fact, we have not conducted a share repurchase since the third quarter of our fiscal 2024 which ended on April 30, 2024 (which is before the Non-GAAP EPS performance measure for our PSUs was introduced). It is Unclear How to Fully Implement This Proposal We use a performance-based restricted stock unit (“PSU”) award design in which the number of PSUs that ultimately vest is equal to the product of (i) the target number of PSUs, (ii) the average of the achievement percentages for next-generation security annualized recurring revenue (“NGS ARR”) and non-GAAP net income per diluted share (“Non-GAAP EPS”) for each fiscal year in a three-year performance period, and (iii) a relative total shareholder return (“rTSR” or “relative TSR”) modifier as measured over the three-year performance period. With respect to the NGS ARR performance measure, there is no “per share” concept that would be directly impacted by the Company’s share count. We believe NGS ARR represents the return on the investments we make in next-generation security that will drive our growth. To balance our executive’s focus, the Compensation and People Committee includes Non-GAAP EPS as an equally weighted performance measure to ensure our growth is not overly weighted toward the top-line and is profitable. Our Non-GAAP EPS performance targets are typically linked to our published financial guidance provided at the beginning of the fiscal year, which generally takes into consideration any forecasted share repurchase volume at such time, and, accordingly, share repurchases have a minimal impact. With respect to the rTSR modifier, the number of PSUs that will ultimately vest, if any, may be based in part on the Company’s TSR relative to the TSRs of the indexed companies (which are the companies that are a component of the S&P 500 Index or any successor index on the last day of the performance period and were also a component of such index on the first day of the performance period) over the applicable performance period. The proposal specifically references TSR as an example of a measure that should be adjusted to exclude the impact of share repurchases, but it is unclear how TSR could be adjusted in such a manner given the various factors that may impact share price. How should the company reasonably quantify the impact of stock buybacks on its stock price over a multi-year period? This is further complicated as similar adjustments would presumably need to be made for TSR of the S&P 500 given other companies’ stock repurchases and would presumably apply to dividends adding further complication and uncertainty. The Board believes that the Compensation and People Committee should retain its flexibility in determining what particular performance measures to use and the manner in which performance targets are set, in order to best increase shareholder value. The Compensation and People Committee is committed to a pay-for-performance compensation philosophy and adjusts its assessments as necessary to stay competitive and attract, retain, and motivate highly-qualified executive officers. REQUIRED VOTE The approval of this proposal requires the affirmative vote of a majority of the shares of our common stock present virtually or by proxy at the Annual Meeting and entitled to vote thereon to be approved. You may vote “for,” “against,” or “abstain” with respect to this proposal. Abstentions are considered votes present and entitled to vote on this proposal, and thus will have the same effect as votes “against” this proposal. Broker non-votes will have no effect on the outcome of this proposal. | | | | | | Recommendation of the Board The Board recommends that you vote “AGAINST” this shareholder proposal. |
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| | PROPOSAL NO. 6 Shareholder Proposal – Elect Each Director Annually | | | James McRitchie and Myra K. Young, who beneficially own 36 shares of our common stock (based on information provided to us by them), have notified us that they intend to present the following proposal for consideration at the Annual Meeting. Mr. McRitchie’s and Ms. Young’s address is 9295 Yorkship Court, Elk Grove, CA 95758. In accordance with Rule 14a-8(h) of the Exchange Act, the shareholder proposal is required to be voted on at the Annual Meeting only if properly presented by the proponent or their qualified representative at the meeting. The text of the shareholder’s resolution and the statement that the proponent furnished to us in support thereof appear below, exactly as submitted, and we are not responsible for any inaccuracies or omissions therein. For the reasons set forth following the proponent’s statement, the Board recommends that you vote “AGAINST” this proposal. Shareholder’s Proposal and Supporting Statement Elect Each Director Annually – Proposal 6 RESOLVED: Palo Alto Networks, Inc. ("Company") shareholders, including James McRitchie of CorpGov.net, ask that our Company take all steps necessary to reorganize the Board of Directors into one class with each director subject to election each year for a one-year term so that all directors are elected annually. Although our management can adopt this proposal topic in one year, and one-year implementation is a best practice, this proposal allows the option to be phased in. Supporting Statement: Fully 90% of S&P 500 companies have declassified boards. Annual elections are widely viewed as a best practice. Annual election of each director makes directors more accountable, improving performance and increasing company value. According to “What Matters in Corporate Governance” by Lucien Bebchuk, Alma Cohen, and Allen Ferrell of the Harvard Law School, classified boards like ours are one of six entrenching mechanisms negatively related to company performance. Diligent’s Market Intelligence database includes the voting record of 24 shareholder resolutions to declassify boards during the period 2020 – 11/1/2024. They averaged 74% support. Only one proposal on this topic out of seven is reported to have received less than 50% of the vote in 2024. BlackRock states, "Directors should be elected annually to discourage entrenchment and allow shareholders sufficient opportunity to exercise their oversight of the board." Vanguard generally votes for proposals to declassify an existing board and votes against management or shareholder proposals to create a classified board. According to Equilar, a trusted leader for corporate leadership data: A classified board creates concern among shareholders because poorly performing directors may benefit from an electoral reprieve. Moreover, a fraternal atmosphere may form from a staggered board that favors the interests of management above those of shareholders. Since directors in a declassified board are elected and evaluated each year, declassification promotes responsiveness to shareholder demands and pressures directors to perform to retain their seat. Notably, proxy advisory firms ISS and Glass Lewis both support declassified structures. |
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Proposal No. 6 Shareholder Proposal – Elect Each Director Annually
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| | The annual election of each director gives shareholders more leverage if management performs poorly. For instance, if the Board approves excessive or poorly incentivized executive pay, shareholders can soon vote against the Chair of the Compensation and People Committee, rather than waiting three years under the current setup. Consider our Company's overall corporate governance: Directors can only be removed “for cause,” we cannot call special meetings or act by written consent. Changing specific bylaw provisions requires a 66 2/3% vote. Freefloat Analytics estimates two of the nine directors hold more than half of “board influence” and categorizes the board type as an “oligarchy.” Enhance Shareholder Value, Vote FOR Elect Each Director Annually – Proposal 6 | | | Company Opposing Statement We are committed to strong corporate governance, and the Board regularly reviews our governance structure, including our classified board. The Board is divided into three classes, with each class consisting, as nearly as possible, of one-third of the total number of directors, and each class is elected to serve a three-year term. The Board, together with the Governance and Sustainability Committee, has carefully considered the proposal, taking into account the history and purpose of the classified board structure, our governance practices and current Board composition. For the reasons described below, the Board continues to believe that retention of our classified structure is in our best interests and the best interests of our shareholders at this time. The Board recommends a vote “AGAINST” this proposal. A Classified Board Encourages Long-Term Focus and Enhances Board Quality and Independence The Board believes that annual elections of all directors can, in some cases, lead to short-term focus or an over-concentration on immediate results. A classified board encourages directors to consider the long-term, best interests of the Company and our shareholders, fosters long-term planning, strengthens the independence of non-employee directors, and reduces the potential influence of certain investors and special interest groups with short-term agendas that may be harmful to the Company and our shareholders over the long term. The Board also believes that our classified board structure assists in recruiting highly qualified directors willing to commit to the Company and our strategic growth over the long term and to developing a deep understanding of our business. We believe it is particularly important that directors make the commitment to serve for a three-year term given the considerable time required to properly understand our business and long-term growth strategy. A Classified Board Provides Continuity, Stability and Institutional Knowledge and is Critical to the Company’s Current Strategic Priorities The Board is structured into classes to provide stability and ensure that, at any given time, a majority of the directors serving on the Board have substantial knowledge of the Company, our business, our history, our culture, and our strategic goals. Directors who possess this institutional knowledge are a valuable resource and well-positioned to make decisions in our best interests and the best interests of our shareholders. A declassified board could be replaced in a single year with directors unfamiliar with our business, culture, and goals, but a classified structure allows for orderly change alongside continuity as new directors with fresh perspectives interact and work with experienced directors with deep institutional knowledge. This is clearly demonstrated with our Board’s mix of tenures across its eleven members with three new directors joining the board since February 2025, an average total director tenure of 7.2 years, and an average independent director tenure of 8 years.1 |
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1The Board tenure statistics are inclusive of Mr. Hamers who is not standing for reelection at the 2025 Annual Meeting.
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Proposal No. 6 Shareholder Proposal – Elect Each Director Annually
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| | | Furthermore, while the Board acknowledges that declassification may be appropriate at some point in the future, today is not the time. The unprecedented acceleration of generative and agentic AI, coupled with our recent agreement to acquire CyberArk—a significant strategic move to enter the identity security space and capitalize on an industry inflection point—demands unwavering focus and stability at the Board level. The next few years will define whether we maintain our position as the cybersecurity leader, or fall behind the competition. Introducing potential disruption to our Board by declassifying it now would be counterproductive. Consistent and expert leadership is critical in the face of the industry inflection point created by generative and agentic AI and to ensure we fully capitalize on the opportunity posed by the CyberArk acquisition. A Classified Board Protects Shareholder Value The Board believes that a classified board enhances our ability to achieve long-term value for our shareholders by safeguarding us against unsolicited efforts of a hostile third party to take control of us, especially without paying fair value for the Company or its assets. A hostile bidder could cause a majority of the Board to be replaced at a single annual meeting with directors aligned with the bidder’s own interests. Our classified board allows the Board the flexibility, time, and leverage it needs to evaluate the fairness of any takeover proposal at arm’s length, negotiate on behalf of and for the benefit of all our shareholders, and weigh alternatives in order to provide maximum value for shareholders. Accountability to Shareholders All of our directors, regardless of the length of their term, have a fiduciary duty under Delaware law to act in a manner they believe to be in the best interests of the Company and our shareholders. Accountability does not depend on the length of the term but on the selection of experienced and committed individuals to serve as directors. At each annual meeting, our shareholders have the opportunity to evaluate and elect approximately one-third of the Board, and our entire Board is evaluated annually during its annual self-assessment. The Governance and Sustainability Committee also considers the performance of each current director when determining whether or not to recommend the nomination of such director for an additional term. Contrary to the statements made by the proponent, our classified board structure has not operated as an entrenching mechanism nor has it resulted in an unaccountable board unresponsive to stockholders. The average tenure for independent directors on our Board is 8 years (compared to an average tenure of 7.8 years at S&P 500 companies in 2024), and the Board has had seven new directors join since the beginning of calendar year 2019 (six of whom are currently serving). Of those new directors, six have been independent directors (five of whom are currently serving). The Board believes that the benefits of a classified board structure do not come at the expense of accountability and that the continuity, stability, independence, and takeover protection provided by a staggered board structure all contribute to the Company’s success. REQUIRED VOTE The approval of this proposal requires the affirmative vote of a majority of the shares of our common stock present virtually or by proxy at the Annual Meeting and entitled to vote thereon to be approved. You may vote “for,” “against,” or “abstain” with respect to this proposal. Abstentions are considered votes present and entitled to vote on this proposal, and thus will have the same effect as votes “against” this proposal. Broker non-votes will have no effect on the outcome of this proposal. | | | | | | Recommendation of the Board The Board recommends that you vote “AGAINST” this shareholder proposal. |
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Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information with respect to the beneficial ownership of our common stock as of September 15, 2025 for: •each of our directors and nominees for director; •each of our NEOs; •all of our current directors and executive officers as a group; and •each person or group, who beneficially owned more than 5% of our common stock. We have determined beneficial ownership in accordance with the rules and regulations of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares of common stock that they beneficially owned, subject to applicable community property laws. Applicable percentage ownership is based on 673,720,207 shares of our common stock outstanding at September 15, 2025. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of such person listed in the table below, we deemed to be outstanding all shares of common stock subject to options held by the person that are currently exercisable or exercisable (or issuable upon vesting of restricted stock units or performance stock unit awards) within 60 days of September 15, 2025. However, we did not deem such shares outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Palo Alto Networks, Inc., 3000 Tannery Way, Santa Clara, California 95054. The information provided in the table below is based on our records, information filed with the SEC and information provided to us, except where otherwise noted.
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| | Number of Shares | Percent of Shares Outstanding | | 5% Shareholders: | | | | The Vanguard Group(1) | 55,137,000 | 8.2% | | BlackRock, Inc.(2) | 49,244,010 | 7.3% | | Named Executive Officers and Directors: | | | | Nikesh Arora(3) | 3,065,694 | * | | William “BJ” Jenkins(4) | 319,558 | * | | Dipak Golechha(5) | 381,955 | * | | Lee Klarich(6) | 1,754,032 | * | | Nir Zuk(7) | 3,293,136 | * | | Aparna Bawa(8) | 8,142 | * | | John M. Donovan(9) | 37,976 | * | | Carl Eschenbach(8) | 19,796 | * | | James J. Goetz(10) | 402,264 | * | | Ralph Hamers | 0 | | | Rt Hon Sir John Key(8) | 18,782 | * | | Mary Pat McCarthy(8) | 52,500 | * | | Helle Thorning-Schmidt | 0 | | | Lorraine Twohill(8) | 41,882 | * | | All current directors and executive officers as a group (14 persons)(11) | 9,395,717 | 1.4% |
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* Represents beneficial ownership of less than one percent (1%).
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Security Ownership of Certain Beneficial Owners and Management (1)According to a Schedule 13G/A filed with the SEC on February 13, 2024, The Vanguard Group, Inc. (“Vanguard”), as investment advisor, has sole voting power with respect to none of the reported shares, shared voting power with respect to 824,520 of the reported shares, sole dispositive power with respect to 52,471,738 of the reported shares and shared dispositive power with respect to 2,665,262 of the reported shares. The address of Vanguard is 100 Vanguard Blvd., Malvern, PA 19355. (2)According to a Schedule 13G/A filed with the SEC on January 26, 2024, BlackRock, Inc. (“BlackRock”) has sole voting power with respect to 44,819,022 of the reported shares, and sole dispositive power with respect to 49,244,010 of the reported shares. The address of BlackRock is 50 Hudson Yards, New York, NY 10001. (3)Consists of (i) 275,013 shares held of record by Mr. Arora, (ii) 32,010 shares held of record by Bacchey Investments L.P., of which Bacchey Management LLC (the “LLC”) is the General Partner, Mr. Arora is the manager of the LLC and the sole member of the LLC is the Aurora Trust, for which Mr. Arora serves as a trustee, (iii) 726,542 shares held by the Nikesh Arora 2025 Annuity Trust, for which Mr. Arora serves as trustee, (iv) 1,185,721 shares issuable upon the vesting of PSUs within 60 days of September 15, 2025, subject to Mr. Arora’s elections under our deferred compensation plan, and (v) 846,408 PSOs exercisable within 60 days of September 15, 2025 (all of which were fully exercised and sold by Mr. Arora on September 23, 2025 under a Rule 10b5-1 trading plan). Does not include 1,772,738 shares associated with RSUs and PSUs that vested and are currently deferred under our deferred compensation plan. (4)Consists of (i) 7,533 shares held of record by Mr. Jenkins and (ii) 312,025 shares issuable upon the vesting of PSUs within 60 days of September 15, 2025. Does not include 423,308 shares associated with RSUs and PSUs that vested and are currently deferred under our deferred compensation plan. (5)Consists of (i) 101,135 shares held of record by Mr. Golechha and (ii) 280,820 shares that are issuable upon the vesting of PSUs within 60 days of September 15, 2025, subject to Mr. Golechha's elections under our deferred compensation plan. (6)Consists of (i) 177,954 shares held of record by Mr. Klarich, (ii) 740,000 shares held of record by the Lee and Susan Klarich 2005 Trust, for which Mr. Klarich and his spouse serve as trustees (iii) 468,038 shares that are issuable upon the vesting of PSUs within 60 days of September 15, 2025, and (iii) 368,040 PSOs exercisable within 60 days of September 15, 2025. (7)Consists of (i) 1,854,448 shares held of record by Mr. Zuk, (ii) 1,188,936 shares held of record by the Hawk Family Trust, for which Mr. Zuk serves as co-trustee, (iv) 249,620 shares that are issuable upon the vesting of PSUs within 60 days of September 15, 2025. (8)Consists of shares held of record by the respective director. (9)Consists of (i) 11,672 shares held of record by Mr. Donovan, (ii) 24,924 shares held of record by The Donovan Family Living Trust U/A DTD 09/28/2012, for which Mr. Donovan serves as co-trustee and (iii) 1,926 shares held of record by SRJ Norway Partners LP, for which Mr. Donovan serves as the general partner. (10)Consists of (i) 314,580 shares held of record by Mr. Goetz and (ii) 87,684 shares held of record by the Goetz Children’s Trust 4/24/1998. (11)Consists of (i) 5,685,045 shares beneficially owned by the current directors and executive officers, (ii) 2,492,931 shares issuable upon the vesting of RSUs and PSUs within 60 days of September 15, 2025, and (iii) 1,214,448 PSOs exercisable within 60 days of September 15, 2025.
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Related Person Transactions The Audit Committee of the Board of Directors has adopted a written policy and procedures for the review, approval and ratification, if necessary, of the transactions among the Company and its directors, executive officers and their related interests. We have entered into employment arrangements with our executive officers. See also the section titled “Discussion of our Fiscal 2025 Executive Compensation Program—Executive Employment Agreements.” We have also entered into indemnification agreements with our directors and executive officers. The indemnification agreements and our amended and restated certificate of incorporation and amended and restated bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.
BOARD OF DIRECTORS
BOARD OF DIRECTORS Nikesh Arora Chief Executive Officer and Chair of the Board of Directors Lee Klarich Chief Product and Technology Officer and Director Aparna Bawa Chief Operating Officer Zoom Video Communications, Inc. John M. Donovan Former Chief Executive Officer AT&T Communications Carl Eschenbach Chief Executive Officer, Workday, Inc. James J. Goetz Partner, Sequoia Capital Ralph Hamers Former Chief Executive Officer of UBS Group AB Rt Hon Sir John Key Former Prime Minister of New Zealand Mary Pat McCarthy Former Vice Chair, KPMG LLP Helle Thorning-Schmidt Former Prime Minister of Denmark Lorraine Twohill Chief Marketing Officer, Google

DEF 14A of Palo Alto Networks Inc

SHAREHOLDER ENGAGEMENT AND EXECUTIVE COMPENSATION

Voting Items

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FISCAL 2025 PROGRAM DESIGN

SHAREHOLDER ENGAGEMENT AND PROGRAM DESIGN CHANGES

Fiscal 2025 Executive Compensation Program Changes

Fiscal 2025 Executive Compensation Program Changes

Fiscal 2025 Executive Compensation Program Changes

Fiscal 2025 Executive Compensation Program Changes

Fiscal 2025 Executive Compensation Program Changes

LEADERSHIP THAT DRIVES OUR STRATEGIC VISION AND GROWTH

LEADERSHIP THAT DRIVES OUR STRATEGIC VISION AND GROWTH

Pay-for-Performance Designed to Drive Long-Term Growth

Strategic Alignment with Board-Approved Strategies

Strategic Alignment with Board-Approved Strategies

Rigorous Performance Targets to Ensure Shareholder Value Creation Drives Executive Compensation

Rigorous Performance Targets to Ensure Shareholder Value Creation Drives Executive Compensation

Rigorous Performance Targets to Ensure Shareholder Value Creation Drives Executive Compensation

Elements of Compensation

Annual Cash Incentive Compensation

Fiscal 2025 Cash Incentive Plan

Fiscal 2025 Cash Incentive Plan

Fiscal 2025 Cash Incentive Plan

Fiscal 2025 Cash Incentive Plan

Financial Performance Measures

Financial Performance Measures

Financial Performance Measures

Financial Performance Measures

Financial Performance Measures

Financial Performance Measures

Financial Performance Measures

Corporate Responsibility Modifier

Corporate Responsibility Modifier

Target Annual Incentive Compensation Opportunities

Target Annual Incentive Compensation Opportunities

Target Annual Incentive Compensation Opportunities

Target Annual Incentive Compensation Opportunities

Target Annual Incentive Compensation Opportunities

Target Annual Incentive Compensation Opportunities

LONG-TERM EQUITY COMPENSATION

LONG-TERM EQUITY COMPENSATION

LONG-TERM EQUITY COMPENSATION

LONG-TERM EQUITY COMPENSATION

FISCAL 2025 EQUITY COMPENSATION

FISCAL 2025 EQUITY COMPENSATION

FISCAL 2025 EQUITY COMPENSATION

FISCAL 2025 EQUITY COMPENSATION

FISCAL 2025 EQUITY COMPENSATION

FISCAL 2025 PSU DESIGN

FISCAL 2025 PSU DESIGN

FISCAL 2025 PSU DESIGN

FISCAL 2025 PSU DESIGN

FISCAL 2025 PSU DESIGN

•Financial Performance Measures

•Financial Performance Measures

FISCAL 2025 ACHIEVEMENT FOR FISCAL 2025 PSUs

FISCAL 2025 ACHIEVEMENT FOR FISCAL 2025 PSUs

FISCAL 2024 PSU PERFORMANCE THROUGH FISCAL 2025

FISCAL 2024 PSU PERFORMANCE THROUGH FISCAL 2025

FISCAL 2024 PSU PERFORMANCE THROUGH FISCAL 2025

FISCAL 2024 PSU PERFORMANCE THROUGH FISCAL 2025

FISCAL 2024 PSU PERFORMANCE THROUGH FISCAL 2025

FISCAL 2023 PSUs FINAL PERFORMANCE RESULTS

FISCAL 2023 PSUs FINAL PERFORMANCE RESULTS

FISCAL 2023 PSUs FINAL PERFORMANCE RESULTS

FISCAL 2023 PSUs FINAL PERFORMANCE RESULTS