VEEVA SYSTEMS INC

Operating expenses include research and development, sales and marketing, and general and administrative expenses. We expect operating expenses to increase in the future, primarily due to employee compensation-related costs.

Research and Development

Research and development expenses for the three months ended October 31, 2025 increased $19 million, primarily due to an increase of $15 million in employee compensation-related costs, which was driven by increases in salaries and benefits, as well as headcount. The expansion of our headcount in research and development was to support development work for the products that we offer or may offer in the future.

Research and development expenses for the nine months ended October 31, 2025 increased $57 million, primarily due to an increase of $50 million in employee compensation-related costs, which was driven by increases in salaries and benefits, as well as headcount. The expansion of our headcount in research and development was to support development work for the products that we offer or may offer in the future.

We expect research and development expenses to increase in the future, primarily due to employee compensation-related costs and hosting fees as we continue to invest in our product offerings.

Sales and Marketing

Sales and marketing expenses for the three months ended October 31, 2025 increased $12 million, primarily due to an increase of $9 million in employee compensation-related costs, which was driven by increases in salaries and benefits, as well as headcount. The expansion of our headcount was to support our sales and marketing efforts associated with our product offerings.

Sales and marketing expenses for the nine months ended October 31, 2025 increased $21 million, primarily due to an increase of $18 million in employee compensation-related costs, which was driven by increases in salaries and benefits, as well as headcount. The expansion of our headcount was to support our sales and marketing efforts associated with our product offerings.

We expect sales and marketing expenses to increase in the future, primarily due to employee compensation-related costs and the increase in marketing program costs related to events.

General and Administrative

General and administrative expenses for the three months ended October 31, 2025 decreased $4 million, primarily due to the 2018 equity grant to our Chief Executive Officer that was fully recognized in the prior year.

General and administrative expenses for the nine months ended October 31, 2025 increased $38 million, primarily due to a net increase of $26 million in litigation settlement-related charges and $10 million in employee compensation-related costs. The increase in employee compensation-related costs was primarily driven by stock-based compensation related to the equity grant to our Chief Executive Officer in the quarter ended July 31, 2024.

Other Income, Net

Other income, net, for the three and nine months ended October 31, 2025 increased $11 million and $35 million, respectively, primarily due to an increase in interest income from higher investment asset and cash balances.

Provision for Income Taxes

The provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate primarily due to state taxes, tax credits, equity compensation, and foreign-derived intangible income (“FDII”) deduction. Future tax rates could be affected by changes in tax laws and regulations or by rulings in tax related litigation, as may be applicable.

During the three and nine months ended October 31, 2025, as compared to the same periods in the prior fiscal year, our effective tax rate increased primarily due to the indirect effects of the One Big Beautiful Bill Act (“OBBBA”), offset by increased excess tax benefits related to equity compensation. In addition, the OBBBA restored the immediate expensing of certain domestic R&D expenditures and included an election to accelerate the unamortized capitalized R&D over a two-year period, which decreased our taxable income resulting in a decrease in our FDII benefit.