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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________ 
FORM 10-Q
 _____________________
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2021
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number 001-35594
PALO ALTO NETWORKS, INC.
(Exact name of registrant as specified in its charter)  
 
Delaware20-2530195
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3000 Tannery Way
Santa Clara, California 95054
(Address of principal executive office, including zip code)
(408753-4000
(Registrant’s telephone number, including area code)
NA
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.0001 par value per sharePANWThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerEmerging growth company
Non-accelerated filerSmaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes     No  
The number of shares outstanding of the registrant’s common stock as of November 12, 2021 was 98,666,401.


Table of Contents
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II - OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 6.

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PART I
ITEM 1.    FINANCIAL STATEMENTS
PALO ALTO NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
October 31, 2021July 31, 2021
(unaudited)
Assets
Current assets:
Cash and cash equivalents$2,272.9 $1,874.2 
Short-term investments1,188.5 1,026.9 
Accounts receivable, net of allowance for credit losses of $13.5 and $11.2 at October 31, 2021 and July 31, 2021, respectively
812.1 1,240.4 
Short-term deferred contract costs272.9 276.5 
Prepaid expenses and other current assets292.7 229.3 
Total current assets4,839.1 4,647.3 
Property and equipment, net324.3 318.4 
Operating lease right-of-use assets251.8 262.9 
Long-term investments898.8 888.3 
Long-term deferred contract costs476.1 494.6 
Goodwill2,732.3 2,710.1 
Intangible assets, net471.3 498.6 
Other assets432.7 421.4 
Total assets$10,426.4 $10,241.6 
Liabilities, temporary equity and stockholders’ equity
Current liabilities:
Accounts payable$95.3 $56.9 
Accrued compensation250.8 430.6 
Accrued and other liabilities324.6 329.4 
Deferred revenue2,801.6 2,741.9 
Convertible senior notes, net3,672.1 1,557.9 
Total current liabilities7,144.4 5,116.7 
Convertible senior notes, net 1,668.1 
Long-term deferred revenue2,356.6 2,282.1 
Long-term operating lease liabilities299.5 313.4 
Other long-term liabilities107.0 97.7 
Commitments and contingencies (Note 10)
Temporary equity 129.1 
Stockholders’ equity:
Preferred stock; $0.0001 par value; 100.0 shares authorized; none issued and outstanding at October 31, 2021 and July 31, 2021
  
Common stock and additional paid-in capital; $0.0001 par value; 1,000.0 shares authorized; 98.7 and 97.3 shares issued and outstanding at October 31, 2021 and July 31, 2021, respectively
2,033.9 2,311.2 
Accumulated other comprehensive loss(11.3)(9.9)
Accumulated deficit(1,503.7)(1,666.8)
Total stockholders’ equity518.9 634.5 
Total liabilities, temporary equity and stockholders’ equity$10,426.4 $10,241.6 
See notes to condensed consolidated financial statements.
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PALO ALTO NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except per share data)
Three Months Ended
October 31,
20212020
Revenue:
Product$295.5 $237.3 
Subscription and support951.9 708.7 
Total revenue1,247.4 946.0 
Cost of revenue:
Product88.9 62.2 
Subscription and support291.7 215.6 
Total cost of revenue380.6 277.8 
Total gross profit866.8 668.2 
Operating expenses:
Research and development339.5 237.4 
Sales and marketing505.9 388.6 
General and administrative104.1 86.7 
Total operating expenses949.5 712.7 
Operating loss(82.7)(44.5)
Interest expense(6.9)(40.2)
Other income (expense), net(1.6)2.4 
Loss before income taxes(91.2)(82.3)
Provision for income taxes12.4 9.9 
Net loss$(103.6)$(92.2)
Net loss per share, basic and diluted$(1.06)$(0.97)
Weighted-average shares used to compute net loss per share, basic and diluted97.6 95.5 

See notes to condensed consolidated financial statements.
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PALO ALTO NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in millions)
Three Months Ended
October 31,
20212020
Net loss$(103.6)$(92.2)
Other comprehensive income (loss), net of tax:
Change in unrealized gains (losses) on investments(2.2)(1.3)
Change in unrealized gains (losses) on cash flow hedges0.8 (6.0)
Other comprehensive loss(1.4)(7.3)
Comprehensive loss$(105.0)$(99.5)

See notes to condensed consolidated financial statements.
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PALO ALTO NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in millions)
Three Months Ended October 31, 2021
 Common Stock
and
Additional Paid-In Capital
Accumulated
Other
Comprehensive Income (Loss)
Accumulated
Deficit
Total 
Stockholders’
Equity
 SharesAmount
Balance as of July 31, 202197.3 $2,311.2 $(9.9)$(1,666.8)$634.5 
Cumulative-effect adjustment from adoption of new accounting pronouncement— (581.9)— 266.7 (315.2)
Net loss— — — (103.6)(103.6)
Other comprehensive loss— — (1.4)— (1.4)
Issuance of common stock in connection with employee equity incentive plans1.4 58.9 — — 58.9 
Taxes paid related to net share settlement of equity awards— (20.0)— — (20.0)
Share-based compensation for equity-based awards— 265.7 — — 265.7 
Balance as of October 31, 202198.7 $2,033.9 $(11.3)$(1,503.7)$518.9 
Three Months Ended October 31, 2020
 Common Stock
and
Additional Paid-In Capital
Accumulated
Other
Comprehensive Income (Loss)
Accumulated
Deficit
Total 
Stockholders’
Equity
 SharesAmount
Balance as of July 31, 202096.3 $2,259.2 $10.5 $(1,167.9)$1,101.8 
Net loss— — — (92.2)(92.2)
Other comprehensive loss— — (7.3)— (7.3)
Issuance of common stock in connection with employee equity incentive plans1.0 45.6 — — 45.6 
Taxes paid related to net share settlement of equity awards— (9.7)— — (9.7)
Share-based compensation for equity-based awards— 208.8 — — 208.8 
Repurchase and retirement of common stock(2.1)(500.0)— — (500.0)
Balance as of October 31, 202095.2 $2,003.9 $3.2 $(1,260.1)$747.0 

See notes to condensed consolidated financial statements.
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PALO ALTO NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
Three Months Ended
October 31,
20212020
Cash flows from operating activities
Net loss
$(103.6)$(92.2)
Adjustments to reconcile net loss to net cash provided by operating activities:
Share-based compensation259.1 205.8 
Depreciation and amortization69.0 58.0 
Amortization of deferred contract costs85.9 65.8 
Amortization of debt discount and debt issuance costs1.8 35.1 
Amortization of operating lease right-of-use assets12.7 10.0 
Amortization of investment premiums, net of accretion of purchase discounts3.6 2.7 
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net
428.4 382.3 
Deferred contract costs(63.8)(59.3)
Prepaid expenses and other assets
(72.8)(37.6)
Accounts payable
37.6 (17.7)
Accrued compensation
(179.8)(134.8)
Accrued and other liabilities
(23.4)(20.0)
Deferred revenue
134.2 136.8 
Net cash provided by operating activities588.9 534.9 
Cash flows from investing activities
Purchases of investments(439.1)(829.7)
Proceeds from sales of investments36.1  
Proceeds from maturities of investments225.1 198.2 
Business acquisitions, net of cash acquired(17.4)(225.1)
 Purchases of property, equipment, and other assets
(34.6)(29.6)
Net cash used in investing activities(229.9)(886.2)
Cash flows from financing activities
Repurchases of common stock
 (500.0)
Proceeds from sales of shares through employee equity incentive plans
58.7 45.4 
Payments for taxes related to net settlement of equity awards
(20.0)(9.7)
Payments for debt issuance costs
 (0.2)
Net cash provided by (used in) financing activities38.7 (464.5)
Net increase (decrease) in cash, cash equivalents, and restricted cash397.7 (815.8)
Cash, cash equivalents, and restricted cash - beginning of period1,880.1 2,961.7 
Cash, cash equivalents, and restricted cash - end of period $2,277.8 $2,145.9 
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents$2,272.9 $2,142.0 
Restricted cash included in prepaid expenses and other current assets4.4 2.9 
Restricted cash included in other assets0.5 1.0 
Total cash, cash equivalents, and restricted cash$2,277.8 $2,145.9 
See notes to condensed consolidated financial statements.

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 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
Palo Alto Networks, Inc. (the “Company,” “we,” “us,” or “our”), headquartered in Santa Clara, California, was incorporated in March 2005 under the laws of the State of Delaware and commenced operations in April 2005. We empower enterprises, service providers, and government entities to secure all users, applications, data, networks, clouds and devices with comprehensive visibility and context continuously across all locations.
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), consistent in all material respects with those applied in our Annual Report on Form 10-K for the fiscal year ended July 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on September 3, 2021. Our condensed consolidated financial statements include our accounts and our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Our condensed consolidated financial statements are unaudited but include all adjustments of a normal recurring nature necessary for a fair presentation of our quarterly results. Certain prior period amounts have been reclassified to conform to our current period presentation. Our condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the fiscal year ended July 31, 2021.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and also on assumptions that we believe are reasonable. Actual results could differ materially from those estimates due to risks and uncertainties, including uncertainty in the economic environment due to the global impact of the coronavirus disease discovered in 2019 (“COVID-19”).
Summary of Significant Accounting Policies
There have been no material changes to our significant accounting policies as of and for the three months ended October 31, 2021, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 31, 2021, except for the change in our accounting policies due to our adoption of recently issued guidance. Refer to “Recently Adopted Accounting Pronouncements” below.
Recently Adopted Accounting Pronouncements
Acquired Contract Assets and Contract Liabilities
In October 2021, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that requires companies to apply revenue guidance to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination on the acquisition date, instead of measuring them at fair value. We early adopted this guidance in our first quarter of fiscal 2022 on a prospective basis. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.
Debt with Conversion Options
In August 2020, the FASB issued authoritative guidance that simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instrument. The standard reduces the number of models used to account for convertible instruments and simplifies the classification of debt on the balance sheet.
We adopted this standard in our first quarter of fiscal 2022 using the modified-retrospective approach, under which, financial results reported in periods prior to fiscal 2022 were not adjusted. The adoption of this standard resulted in an increase to convertible senior notes, net of $444.3 million, a decrease to accumulated deficit of $266.7 million, and a decrease to additional paid-in capital and temporary equity of $711.0 million upon adoption.
Below is the update to our Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the fiscal year ended July 31, 2021 as a result of the adoption of the above guidance.
Business Combinations
We include the results of operations of the businesses that we acquire as of the respective dates of acquisition. We generally allocate the fair value of the purchase price of our acquisitions to the assets acquired and liabilities assumed based on their estimated
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fair values. The excess of the purchase price over the values of these identifiable assets and liabilities is recorded as goodwill. Additional information existing as of the acquisition date but unknown to us may become known during the remainder of the measurement period, not to exceed 12 months from the acquisition date, which may result in changes to the amounts and allocations recorded.
Convertible Senior Notes
Prior to August 1, 2021, our convertible senior notes were separated into a liability and an equity component. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that did not have an associated convertible feature, using a discounted cash flow model with a risk adjusted yield. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the notes as a whole. This difference represented a debt discount that was amortized to interest expense using the effective interest method over the term of the notes. The equity component was not remeasured as it continued to meet the conditions for equity classification. Transaction costs related to the issuance of the notes were allocated to the liability and equity components using the same proportions as the proceeds from the notes. Transaction costs attributable to the liability component were netted with the liability component and amortized to interest expense using the effective interest method over the term of the notes. Transaction costs attributable to the equity component were netted with the equity component of the notes in additional paid-in capital. Upon the notes becoming convertible, the net carrying amount of the liability component was classified as a current liability and a portion of the equity component representing the conversion option was reclassified to temporary equity. The portion of the equity component classified as temporary equity was measured as the difference between the principal and net carrying amount of the notes, excluding debt issuance costs.
Upon adoption of the new debt guidance on August 1, 2021, our convertible senior notes are accounted for entirely as a liability and measured at their amortized cost. Transaction costs related to the issuance of the notes are netted with the liability and are amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the term of the notes. Refer to Note 9. Debt for additional information.
2. Revenue
Disaggregation of Revenue
The following table presents revenue by geographic theater (in millions):
Three Months Ended October 31,
20212020
Revenue:
Americas
United States$811.7 $624.4 
Other Americas55.0 42.1 
Total Americas866.7 666.5 
Europe, the Middle East, and Africa (“EMEA”)233.8 173.4 
Asia Pacific and Japan (“APAC”)146.9 106.1 
Total revenue$1,247.4 $946.0 
The following table presents revenue for groups of similar products and services (in millions):
Three Months Ended October 31,
20212020
Revenue:
Product$295.5 $237.3 
Subscription and support
Subscription578.8 428.0 
Support373.1 280.7 
Total subscription and support951.9 708.7 
Total revenue$1,247.4 $946.0 
Deferred Revenue
During the three months ended October 31, 2021 and 2020, we recognized approximately $840.0 million and $630.0 million of revenue pertaining to amounts that were deferred as of July 31, 2021 and 2020, respectively.
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Remaining Performance Obligations
Revenue expected to be recognized from remaining performance obligations was $6.0 billion as of October 31, 2021, of which we expect to recognize approximately $3.2 billion over the next 12 months and the remainder thereafter.
3. Fair Value Measurements
We categorize assets and liabilities recorded or disclosed at fair value on our condensed consolidated balance sheets based upon the level of judgment associated with inputs used to measure their fair value. The categories are as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.
Level 3—Inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.
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The following table presents the fair value of our financial assets and liabilities measured at fair value on a recurring basis as of October 31, 2021 and July 31, 2021 (in millions):
October 31, 2021July 31, 2021
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Cash equivalents:
Money market funds$161.8 $ $ $161.8 $124.2 $ $ $124.2 
Certificates of deposit  150.5  150.5  150.4  150.4 
Corporate debt securities 26.1  26.1  1.0  1.0 
U.S. government and agency securities 70.0  70.0  116.3  116.3 
Total cash equivalents161.8 246.6  408.4 124.2 267.7  391.9 
Short-term investments:
Certificates of deposit 151.5  151.5  12.4  12.4 
Corporate debt securities 200.0  200.0  208.9  208.9 
U.S. government and agency securities 804.7  804.7  762.1  762.1 
Non-U.S. government and agency securities32.3 32.3 43.5 43.5 
Total short-term investments 1,188.5  1,188.5  1,026.9  1,026.9 
Long-term investments:
Certificates of deposit 5.0  5.0  5.0  5.0 
Corporate debt securities 227.8  227.8  180.7  180.7 
U.S. government and agency securities 637.6  637.6  674.1  674.1 
Non-U.S. government and agency securities 28.4  28.4  28.5  28.5 
Total long-term investments 898.8  898.8  888.3  888.3 
Prepaid expenses and other current assets:
Foreign currency forward contracts 4.7  4.7  4.1  4.1 
Total prepaid expenses and other current assets 4.7  4.7  4.1  4.1 
Other assets:
Foreign currency forward contracts     0.1  0.1 
Total other assets:     0.1  0.1 
Total assets measured at fair value$161.8 $2,338.6 $ $2,500.4 $124.2 $2,187.1 $ $2,311.3 
Accrued and other liabilities:
Foreign currency forward contracts$ $8.8 $ $8.8 $ $6.4 $ $6.4 
Total accrued and other liabilities 8.8  8.8  6.4  6.4 
Other long-term liabilities:
Foreign currency forward contracts     0.5  0.5 
Total other long-term liabilities     0.5  0.5 
Total liabilities measured at fair value$ $8.8 $ $8.8 $ $6.9 $ $6.9 
Refer to Note 9. Debt for the carrying amount and estimated fair value of our convertible senior notes as of October 31, 2021 and July 31, 2021.
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4. Cash Equivalents and Investments
Available-for-sale Debt Securities
The following tables summarize the amortized cost, unrealized gains and losses, and fair value of our available-for-sale debt securities as of October 31, 2021 and July 31, 2021 (in millions):
October 31, 2021
Amortized Cost Unrealized GainsUnrealized LossesFair Value
Cash equivalents:
Certificates of deposit$150.5 $ $ $150.5 
Corporate debt securities26.1   26.1 
U.S. government and agency securities70.0   70.0 
Total available-for-sale cash equivalents$246.6 $ $ $246.6 
Investments:
Certificates of deposit$156.5 $ $ $156.5 
Corporate debt securities428.2 0.1 (0.5)427.8 
U.S. government and agency securities1,442.6 0.6 (0.9)1,442.3 
Non-U.S. government and agency securities60.7   60.7 
Total available-for-sale investments$2,088.0 $0.7 $(1.4)$2,087.3 
July 31, 2021
Amortized Cost Unrealized GainsUnrealized LossesFair Value
Cash equivalents:
Certificates of deposit $150.4 $ $ $150.4 
Corporate debt securities1.0   1.0 
U.S. government and agency securities116.3   116.3 
Total available-for-sale cash equivalents$267.7 $ $ $267.7 
Investments:
Certificates of deposit$17.4 $ $ $17.4 
Corporate debt securities389.2 0.5 (0.1)389.6 
U.S. government and agency securities1,435.1 1.1  1,436.2 
Non-U.S. government and agency securities72.0   72.0 
Total available-for-sale investments$1,913.7 $1.6 $(0.1)$1,915.2 
We do not intend to sell any of the securities in an unrealized loss position and it is not likely that we would be required to sell these securities before recovery of their amortized cost basis, which may be at maturity. We did not recognize any credit losses related to our available-for-sale debt securities during the three months ended October 31, 2021 and 2020.
The following table summarizes the amortized cost and fair value of our available-for-sale debt securities as of October 31, 2021, by contractual years-to-maturity (in millions):
Amortized CostFair Value
Due within one year$1,434.5 $1,435.1 
Due between one and three years900.1 898.8 
Total$2,334.6 $2,333.9 
Marketable Equity Securities
Marketable equity securities consist of money market funds and are included in cash and cash equivalents on our condensed consolidated balance sheets. As of October 31, 2021 and July 31, 2021, the carrying values of our marketable equity securities were $161.8 million and $124.2 million, respectively. There were no unrealized gains or losses recognized for these securities during the three months ended October 31, 2021 and 2020.
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5. Financing Receivables
We provide financing arrangements, primarily loans, for qualified end-user customers to purchase our products and services. The following table summarizes our short-term and long-term financing receivables as of October 31, 2021 and July 31, 2021 (in millions):
October 31, 2021July 31, 2021
Short-term financing receivables, gross
$104.9 $80.0 
Allowance for credit losses(1.0)(1.0)
Short-term financing receivables, net
$103.9 $79.0 
Long-term financing receivables, gross
$201.0 $198.6 
Allowance for credit losses(3.2)(4.3)
Long-term financing receivables, net
$197.8 $194.3 
There was no significant activity in allowance for credit losses during the three months ended October 31, 2021 and 2020. Past due amounts on financing receivables were immaterial as of October 31, 2021 and July 31, 2021.
6. Derivative Instruments
As a global business, we are exposed to currency exchange rate risk. Substantially all of our revenue is transacted in U.S. dollars, however, a portion of our operating expenditures are incurred outside of the United States and are denominated in foreign currencies, making them subject to fluctuations in foreign currency exchange rates. We enter into foreign currency derivative contracts with maturities of 16 months or less, which we designate as cash flow hedges, to manage the foreign currency exchange rate risk associated with these expenditures.
As of October 31, 2021 and July 31, 2021, the total notional amount of our outstanding foreign currency forward contracts including designated and non-designated derivative instruments was $564.0 million and $531.9 million, respectively. Refer to Note 3. Fair Value Measurements for the fair value of our foreign currency derivative instruments as reported on our condensed consolidated balance sheets as of October 31, 2021 and July 31, 2021.
During the three months ended October 31, 2021 and 2020, both unrealized gains and losses recognized in AOCI related to our cash flow hedges and amounts reclassified into earnings were not material. Unrealized gains and losses in AOCI related to our cash flow hedges as of October 31, 2021 and July 31, 2021 were not material.
7. Acquisition
On August 11, 2021, we completed our acquisition of Gamma Networks, Inc. (“Gamma”), a privately-held AI powered company, for total consideration of $20.4 million, primarily in cash. We expect the acquisition will enhance and expand our data loss prevention offerings. We have accounted for this transaction as a business combination. We allocated the purchase consideration to the assets acquired and liabilities assumed, with the remainder of $22.2 million recorded as goodwill. The goodwill is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Gamma technology into our platforms. The goodwill is not deductible for income tax purposes.
8. Goodwill and Intangible Assets
Goodwill
The following table presents details of our goodwill during the three months ended October 31, 2021 (in millions):
Amount
Balance as of July 31, 2021$2,710.1 
Goodwill acquired22.2 
Balance as of October 31, 2021$2,732.3 
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Purchased Intangible Assets
The following table presents details of our purchased intangible assets as of October 31, 2021 and July 31, 2021 (in millions):
October 31, 2021July 31, 2021
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Intangible assets subject to amortization:
Developed technology$600.7 $(270.1)$330.6 $596.2 $(243.8)$352.4 
Customer relationships172.7 (36.0)136.7 172.7 (30.6)142.1 
Acquired intellectual property7.9 (3.9)4.0 7.9 (3.8)4.1 
Trade name and trademarks9.4 (9.4) 9.4 (9.4) 
Other   1.8 (1.8) 
Total purchased intangible assets$790.7 $(319.4)$471.3 $788.0 $(289.4)$498.6 
We recognized amortization expense of $31.8 million and $23.6 million for the three months ended October 31, 2021 and 2020, respectively.
The following table summarizes estimated future amortization expense of our intangible assets as of October 31, 2021 (in millions):
Fiscal years ending July 31,
Total Remaining 202220232024202520262027 and thereafter
Future amortization expense$471.3 $94.6 $100.3 $90.4 $76.7 $55.1 $54.2 
9. Debt
Convertible Senior Notes
In July 2018, we issued $1.7 billion aggregate principal amount of 0.75% Convertible Senior Notes due 2023 (the “2023 Notes”) and in June 2020, we issued $2.0 billion aggregate principal amount of 0.375% Convertible Senior Notes due 2025 (the “2025 Notes,” and together with the 2023 Notes, the “Notes”). The 2023 Notes bear interest at a fixed rate of 0.75% per year, payable semi-annually in arrears on January 1 and July 1 of each year, beginning on January 1, 2019. The 2025 Notes bear interest at a fixed rate of 0.375% per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020. Each series of the convertible notes is governed by an indenture between us, as the issuer, and U.S. Bank National Association, as Trustee (individually, each an “Indenture,” and together, the “Indentures”). The Notes of each series are unsecured, unsubordinated obligations and the applicable Indenture governing each series of Notes does not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness, or the issuance or repurchase of securities by us or any of our subsidiaries. The 2023 Notes and the 2025 Notes mature on July 1, 2023 and June 1, 2025, respectively. We cannot redeem the 2023 Notes prior to maturity. We may redeem for cash all or any portion of the 2025 Notes, at our option, on or after June 5, 2023, and prior to the 31st scheduled trading day immediately preceding the maturity date if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on and including the trading day preceding the date on which we provide notice of redemption. The redemption will be at a price equal to 100% of the principal amount of the 2025 Notes and adjusted for interest. If we call any or all of the 2025 Notes for redemption, holders may convert such 2025 Notes called for redemption at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date.
The following table presents details of our Notes (number of shares in millions):
 Conversion Rate per $1,000 PrincipalInitial Conversion PriceConvertible DateInitial Number of Shares
2023 Notes3.7545 $266.35 April 1, 20236.4 
2025 Notes3.3602 $297.60 March 1, 20256.7 
Holders of the Notes may surrender their Notes for conversion at their option at any time prior to the close of business on the business day immediately preceding their respective convertible dates only under the following circumstances:
during any fiscal quarter commencing after the fiscal quarters ending on October 31, 2018 and October 31, 2020 for the 2023 Notes and the 2025 Notes, respectively (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price for the respective Notes on each applicable trading day (the “sale price condition”);