Pure Storage, Inc.

Note 1. Business Overview

Organization and Description of Business

Pure Storage, Inc. (the Company, we, us, or other similar pronouns) was originally incorporated in the state of Delaware in October 2009 under the name OS76, Inc. In January 2010, we changed our name to Pure Storage, Inc. We are headquartered in Santa Clara, California and have wholly owned subsidiaries throughout the world.

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

We operate using a 52/53 week fiscal year ending on the first Sunday after January 30, which for fiscal 2025 was February 2, 2025 and for fiscal 2026 will be February 1, 2026. The third quarter of fiscal 2025 and 2026 ended on November 3, 2024 and November 2, 2025. Unless otherwise stated, all dates refer to our fiscal year and fiscal quarters.

The condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Unaudited Interim Consolidated Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for fiscal 2025.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive income and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year 2026 or any future period.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ from these estimates and assumptions due to risks and uncertainties. Such estimates include, but are not limited to, the determination of standalone selling price for revenue arrangements with multiple performance obligations when the price at which the performance obligation sold separately or observable past transactions are not available, useful lives of intangible assets and property and equipment, the period of benefit for deferred contract costs for commissions, fair value for certain stock-based awards, provision for income taxes including related reserves, fair value of leases and impairment of related right-of-use (ROU) assets. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Restricted Cash

Restricted cash is associated with our letters of credit for leases and certain employee-related benefits. At the end of fiscal 2025 and the third quarter of fiscal 2026, we had restricted cash of $14.2 million and $21.3 million. Included in these amounts are $1.6 million and $2.1 million classified as prepaid expenses and other current assets in our condensed consolidated balance sheets.

Revenue Recognition

We generate revenue from two sources: (1) product revenue which includes the sale of our integrated storage hardware products and embedded licensed operating system software, royalties from hyperscaler shipments, and the sale of Portworx term software licenses, and (2) subscription services revenue which includes primarily our portfolio of Evergreen and Portworx offerings as well as our professional services offerings such as installation and implementation consulting services.

We typically recognize product revenue for our integrated storage hardware products upon transfer of control to our customers and the satisfaction of our performance obligations. Royalties from hyperscaler shipments of third party hardware that provide the hyperscaler customer a perpetual license to use our functional intellectual property (IP) are recognized when the revenue is earned based upon shipments by our supply chain partners. Revenue from Portworx term software licenses, which grant customers the right to use for our functional IP for a specified period, is recognized at the point in time the software activation keys are made available to the customer for download at commencement of the initial or renewal term. For Evergreen//Flex, product revenue is recognized upon the commencement of the underlying subscription services. Products are typically shipped directly by us to customers.

We recognize subscription services revenue from Evergreen//Forever and Evergreen//Flex ratably over the contractual term, which generally ranges from one to six years. The majority of our product solutions are sold with either a Evergreen//Forever or Evergreen//Flex subscription service agreement, which begins upon either transfer of control of the corresponding products or commencement of the subscription services to our customers. In addition, the subscription service agreement provides our customers with a new controller based upon certain contractual terms. The controller refresh represents a separate performance obligation that is included within the subscription service agreement and the allocated revenue is recognized upon shipment of the controller. Costs associated with Evergreen//Forever and Evergreen//Flex subscription services are expensed when incurred.

Our Evergreen//Forever and Evergreen//Flex subscription services also include the right to receive unspecified software updates and upgrades on a when-and-if-available basis, software bug fixes, replacement parts and other services related to the underlying infrastructure, as well as access to our cloud-based management and support platform.

For Evergreen//One, subscription services revenue is recognized over the contractual term on a consumption basis, beginning on the commencement date of the underlying subscription services to our customers. Our Evergreen//One subscription services agreement generally includes a minimum usage commitment amount as well as fees for usage in excess of such amount.

We also sell professional services such as installation and implementation consulting services and the related revenue is recognized as services are performed.

We recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services. This is achieved through applying the following five-step approach:

•Identification of the contract, or contracts with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, we satisfy a performance obligation

When applying this five-step approach, we apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience and/or published credit and financial information pertaining to the customer. To the extent a customer contract includes multiple promised goods or services, we determine whether promised goods or services should be accounted for as a separate performance obligation. The transaction price is determined based on the consideration which we will be entitled to in exchange for transferring goods or services to the customer. For contracts that contain multiple performance obligations, we allocate the transaction price to each performance obligation based on a relative standalone selling price (SSP). The SSP is determined based on the price at which the performance obligation is sold separately, or if not observable through past transactions, is estimated taking into account available information such as market conditions and internally approved pricing guidelines related to performance obligations.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires greater disaggregation of tax information in rate reconciliation and income taxes paid by jurisdiction. We plan to adopt the standard on a prospective basis in the fourth quarter of fiscal 2026, and expect the adoption to result in expanded income tax disclosures, but no impact to our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosures of specific expense categories included within each expense caption presented on the Statements of Operations. The new standard can be applied on either a fully retrospective or prospective basis. ASU 2024-03 will be effective for our fiscal year beginning February 1, 2027, and interim periods within our fiscal year beginning February 7, 2028, with early adoption permitted. We are currently evaluating the impact of this new standard on our financial statement disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use-Software, which amends the cost capitalization criteria for internal-use software development costs by removing all references to software project development stages and providing new guidance on how to evaluate whether the probable-to-complete recognition threshold has been met. The new standard can be applied on either a fully retrospective, modified transition, or prospective basis. ASU 2025-06 will be effective for our fiscal years beginning after fiscal 2028 and interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of this standard on our consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies that the interim reporting requirements in Topic 270 apply to all entities that issue interim financial statements prepared in accordance with U.S. GAAP and consolidates such requirements within Topic 270. The amendments provide a comprehensive list within Topic 270 of required interim disclosures, establish a principle requiring disclosure of events or changes occurring after the end of the most recent annual reporting period that have a material impact on interim results. and clarifies the form and content requirements applicable to interim financial statements. ASU 2025-11 will be effective for our fiscal year beginning February 7, 2028, with early adoption permitted. We are currently evaluating the impact of this standard on our consolidated financial statements.

Note 3. Financial Instruments

Fair Value Measurements

We define fair value as the exchange price that would be received from sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We measure our financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Three levels of inputs may be used to measure fair value:

•Level 1 - Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities;

•Level 2 - Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments; and

•Level 3- Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs are based on our own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.

We measure our cash equivalents, marketable securities, and restricted cash at fair value on a recurring basis. We classify these assets within Level 1 or Level 2 because they are valued using either quoted market prices or inputs other than quoted prices which are directly or indirectly observable in the market, including readily-available pricing sources for the identical underlying security which may not be actively traded. Our fixed income available-for-sale securities consist of high quality, investment grade securities from diverse issuers. The valuation techniques used to measure the fair value of our marketable securities were derived from non-binding market consensus prices that are corroborated by observable market data or quoted market prices for similar instruments.

The following tables summarize our assets that were measured at fair value on a recurring basis by significant investment categories and their classification within the fair value hierarchy and in our condensed consolidated balance sheets at the end of fiscal 2025 and the third quarter of fiscal 2026 (in thousands):

The amortized cost and estimated fair value of our marketable securities are shown below by contractual maturity (in thousands):

Unrealized losses on our marketable securities have not been recorded into income because we do not intend to sell nor is it more likely than not that we will be required to sell these investments prior to recovery of their amortized cost basis. The fair value of our marketable securities is impacted by the interest rate environment and related credit spreads. The credit ratings associated with our marketable securities are highly rated and the issuers continue to make timely principal and interest payments. As a result, there wereno credit or non-credit impairment charges recorded in the third quarter and the first three quarters of fiscal 2025 and 2026. The following table presents the fair values and gross unrealized losses for those investments that were in a continuous unrealized loss position at the end of fiscal 2025 and the third quarter of fiscal 2026, aggregated by investment category (in thousands):

Realized gains or losses on sale of marketable securities were not significant for all periods presented.

Strategic Investments

Strategic investments primarily include equity investments in privately-held companies without readily determinable fair values in which we do not own a controlling interest or exercise significant influence. At the end of fiscal 2025 and the third quarter of 2026, the carrying amount of these investments was $36.7 million and $11.7 million and included primarily in other assets, non-current in our condensed consolidated balance sheets. During the first quarter of fiscal 2026, one of the privately-held companies completed its initial public offering. In August 2025, we sold this equity security for $52.5 million realizing a gain of $27.5 million.

Strategic investments that are remeasured due to an observable event or impairment are classified as Level 3 in the fair value hierarchy as nonrecurring fair value measurements may include observable and unobservable inputs. No remeasurements occurred during the third quarter and first three quarters of fiscal 2025 and 2026.

Other Financial Instruments

The investments held in our nonqualified deferred compensation plan trust are considered trading securities that are measured at fair value using Level 1 inputs. The fair value of these investments was $8.4 million and $14.7 million at the end of fiscal 2025 and the third quarter of fiscal 2026.

Note 4. Balance Sheet Components

Inventory

Inventory consists of the following (in thousands):

Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):

(1) Includes finance lease right-of-use assets. Refer to Note 8.

Depreciation and amortization expense related to property and equipment was $24.9 million and $35.3 million for the third quarter of fiscal 2025 and 2026, and $89.1 million and $98.2 million for the first three quarters of fiscal 2025 and 2026.

Intangible Assets, Net

Intangible assets, net consist of the following (in thousands):

Intangible assets amortization expense was $3.9 million and $3.0 million for the third quarter of fiscal 2025 and 2026, and $11.7 million and $11.0 million for the first three quarters of fiscal 2025 and 2026. At the end of the third quarter of fiscal 2026, the weighted-average remaining amortization period was 0.5 year for technology patents,0.4 year for developed technology, and 1.9 years for customer relationships. We record amortization of technology patents in general and administrative expenses due to their defensive nature, developed technology in cost of product revenue, and customer relationships in sales and marketing expenses in the condensed consolidated statements of operations.

At the end of the third quarter of fiscal 2026, future expected amortization expense for intangible assets is as follows (in thousands):

Goodwill

The change in the carrying amount of goodwill is as follows (in thousands):

There wereno impairments to goodwill for the third quarter and first three quarters of fiscal 2025 and 2026.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following (in thousands):

(1)Primarily consists of subscription cloud services and outside services costs.

(2)Primarily consists of accruals related to our inventory and inventory purchase commitments with our contract manufacturers.

Note 5. Deferred Revenue and Commissions

Deferred Commissions

Deferred commissions consist of incremental costs paid to our sales force to obtain customer contracts.

Changes in total deferred commissions during the periods presented are as follows (in thousands):

Of the $349.5 million total deferred commissions balance at the end of the third quarter of fiscal 2026, we expect to recognize approximately 31% as sales commission expense over the next 12 months and the remainder thereafter.

There wasno impairment related to capitalized commissions for the third quarter and first three quarters of fiscal 2025 and 2026.

Deferred Revenue

Deferred revenue primarily consists of amounts that have been invoiced but have not yet been recognized as revenue including performance obligations pertaining to subscription services.

Changes in total deferred revenue during the periods presented are as follows (in thousands):

Revenue recognized during the third quarter of fiscal 2025 and 2026 from deferred revenue at the beginning of each respective period was $310.6 million and $366.1 million. Revenue recognized during the first three quarters of fiscal 2025 and 2026 from deferred revenue at the beginning of each respective period was $703.5 million and $789.7 million.

Remaining Performance Obligations

Total remaining performance obligations (RPO) which is contracted but not recognized revenue was $2.9 billion at the end of the third quarter of fiscal 2026. Total RPO includes $80.0 million in remaining non-cancelable product orders, of which $28.7 million relates to a lessor arrangement. RPO consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods. Product orders are generally cancelable until delivery has occurred, and as such, unfulfilled product orders that are cancelable are excluded from RPO. Of the $2.9 billion RPO at the end of the third quarter of fiscal 2026, we expect to recognize approximately 46% over the next 12 months, and the remainder thereafter.

Note 6. Debt

Revolving Credit Facility

In June 2025, we entered into a Credit Agreement with a consortium of financial institutions and lenders that provides for afive-year, senior unsecured revolving credit facility of $500.0 million (Credit Facility) that expires on June 10, 2030, unless otherwise extended. Proceeds from borrowings under the Credit Facility may be used for general corporate purposes and working capital. The Credit Facility replaced our prior $300.0 million revolving credit facility in which the outstanding borrowings of $100.0 million was repaid in full and terminated effective June 10, 2025.

U.S. Dollar denominated borrowings under the Credit Facility will bear interest, at our option, at a base rate, subject to a floor of 0%, plus a margin ranging from 0% to 0.50%, or the term Secured Overnight Financing Rate (SOFR) rate (based on one, three or six-month interest periods), subject to a floor of 0%, plus a margin ranging from 0.875% to 1.50%. Interest is payable quarterly in arrears with respect to base rate borrowings and at the end of the interest period with respect to term SOFR borrowing. We are also obligated to pay an ongoing commitment fee on undrawn amounts at a rate ranging from 0.075% to 0.20% per annum, payable quarterly in arrears. The respective margins will fluctuate based on the then-applicable Consolidated Net Leverage Ratio (as defined in the Credit Agreement) and, if available, our debt rating.

We are subject to certain affirmative and negative covenants, including a Consolidated Net Leverage Ratio not to exceed 3.5:1 (which may be increased to 4:1 for the first six consecutive fiscal quarters after a qualified acquisition, as defined in the Credit Agreement) measured as of the last day of each fiscal quarter. As of the end of the third quarter of fiscal 2026, there wereno outstanding borrowings and we were in compliance with all covenants under the Credit Facility.

Note 7. Commitments and Contingencies

Leases

At the end of the third quarter of fiscal 2026, we had various non-cancelable operating and finance lease commitments for office and data center facilities. Refer to Note 8—Leases for additional information regarding lease commitments.

Letters of Credit

At the end of fiscal 2025 and the third quarter of fiscal 2026, we had outstanding letters of credit in the aggregate amount of $7.2 million and $13.5 million in connection with our facility leases and a certain employee-related benefit. The letters of credit associated with our facility leases are collateralized by either restricted cash or the Credit Facility and mature on various dates through December 2031. The letter of credit associated with the certain employee-related benefit is collateralized by restricted cash.

Legal Matters

From time to time, we have become involved in claims and other legal matters arising in the normal course of business. We investigate these claims as they arise. Although claims are inherently unpredictable, we currently are not aware of any matters that we expect to have a material adverse effect on our business, financial position, results of operations or cash flows. Accordingly, no material loss contingency has been recorded in our condensed consolidated balance sheet as of the end of the third quarter of fiscal 2026.

Indemnification

Our arrangements generally include certain provisions for indemnifying customers against liabilities if our products or services infringe a third party’s intellectual property rights. Other guarantees or indemnification arrangements include guarantees of product and service performance and standby letters of credit for lease facilities. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, we have not incurred any material costs as a result of such obligations and have not accrued any liabilities related to such obligations in the condensed consolidated financial statements. In addition, we indemnify our officers, directors and certain key employees while they are serving in good faith in their respective capacities. To date, there have been no claims under any indemnification provisions.

Note 8. Leases

We lease office and data center facilities under non-cancelable operating lease agreements expiring through July 2032. Our lease agreements do not contain any material residual value guarantees or restrictive covenants.

We also lease certain engineering test equipment under financing agreements. These finance leases have a lease term ofthree tofive years and contain a bargain purchase option that we have exercised or expect to exercise at the end of the respective lease terms.

The components of lease costs during the periods presented were as follows (in thousands):

(1)Variable lease cost predominantly included common area maintenance charges.

Supplemental information related to leases is as follows (in thousands):

(1)Included in the condensed consolidated balance sheets within property and equipment, net.

(2)Included in the condensed consolidated balance sheets within accrued expenses and other liabilities.

(3)Included in the condensed consolidated balance sheets within other liabilities, non-current.

Supplemental cash flow information related to leases is as follows (in thousands):

Future lease payments under our non-cancelable leases at the end of the third quarter of fiscal 2026 are as follows (in thousands):

Lessor Arrangement

We, as a lessor, have entered into non-cancelable arrangements to lease our data management and storage solutions and subscription services. The arrangements include multiple seven-year leases that either commenced during fiscal 2025 or in the third quarter of fiscal 2026 with total net consideration of $258.6 million. The arrangements provide an end-of-term option to purchase the leased assets for a pre-determined price.

We determined, at inception of the respective arrangements, that each of the leases include sales-type leases, an operating lease, and non-lease components. The non-lease components are comprised primarily of subscription support services and professional services. The total net consideration for each lease was allocated to these components based on relative standalone selling price. The amounts allocated to the lease and non-lease components are accounted for in accordance with ASC 842 and ASC 606, respectively.

We recognized $15.2 million in product revenue related to the sales-type lease components during the first three quarters of fiscal 2025. The associated profit was $11.4 million, based on the product revenue recognized less certain costs, during the first three quarters of fiscal 2025. No product revenue was recognized during the third quarter of fiscal 2025. We recognized $27.9 million in product revenue related to the sales-type lease components during both the third quarter and first three quarters of fiscal 2026. The associated profit was $23.6 million, based on the product revenue recognized less certain costs, during both the third quarter and first three quarters of fiscal 2026. Subscription services revenue related to the operating lease and non-lease components recognized was $2.7 million and $7.5 million during the third quarter of fiscal 2025 and 2026 and $4.8 million and $19.5 million during the first three quarters of fiscal 2025 and 2026.

Future minimum gross lease payments allocated to the sales-type leases and operating lease components are as follows (in thousands). The remaining lease payments of $154.6 million allocated to the non-lease components are excluded from the table below.

Note 9. Restructuring and Impairment

Workforce Realignment

In February 2024, we initiated a workforce realignment plan (the Plan) to better align our resources with our business strategy that reduced our headcount by nearly 250 employees globally. We recognized total restructuring costs of $27.9 million associated with one-time severance and other termination benefits, of which $9.9 million was recognized in the first quarter of 2025. Of the restructuring costs recognized in the first quarter of 2025, $0.4 million is presented in cost of revenue in our condensed consolidated statement of operations for the first three quarters of fiscal 2025. The Plan was completed by the third quarter of fiscal 2025.

Facilities Abandonment and Impairment

During the first quarter of 2025, we recognized $6.4 million in incremental abandonment and impairment charges related to certain leases associated with our former corporate headquarters that we ceased use during the second quarter of fiscal 2024. The incremental impairment charge represents the amount that the carrying value of the underlying asset exceeded its estimated fair value, which was determined by utilizing a discounted cash flow approach that incorporated revised sublease assumptions.

Note 10. Stockholders’ Equity

Preferred Stock

We have 20.0 million authorized shares of undesignated preferred stock, the rights, preferences and privileges of which may be designated from time to time by our Board of Directors. At the end of the third quarter of fiscal 2026, there wereno shares of preferred stock issued or outstanding.

Class A and Class B Common Stock

We havetwo classes of authorized common stock, Class A common stock, which we refer to as our “common stock”, and Class B common stock. At the end of the third quarter of fiscal 2026, we had 2.0 billion authorized shares of Class A common stock and 250.0 million authorized shares of Class B common stock, with each class having a par value of $0.0001 per share. At the end of the third quarter of fiscal 2026,330.5 million shares of Class A common stock were issued and outstanding.

Share Repurchase Program

In February 2025, our Board of Directors authorized a $250.0 million increase to the share repurchase program, bringing the total remaining authorization for future share repurchases to $271.5 million. During the third quarter of fiscal 2026, we repurchased and retired approximately 0.6 million shares of our common stock at an average purchase price of $87.23 per share for an aggregate repurchase price of $53.3 million. During the first three quarters of fiscal 2026, we repurchased and retired approximately 3.9 million shares of our common stock at an average purchase price of $55.58 per share for an aggregate repurchase price of $215.4 million. At the end of the third quarter of fiscal 2026, $56.2 million remained available for future share repurchases under our current repurchase authorization.

Note 11. Equity Incentive Plans

Equity Incentive Plans

We maintaintwo equity incentive plans: the 2009 Equity Incentive Plan (the 2009 Plan) and the 2015 Equity Incentive Plan (the 2015 Plan). The 2015 Plan serves as the successor to our 2009 Plan and provides for grants of incentive stock options to our employees and non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based stock and cash awards, market-based stock awards, and other forms of stock awards to our employees, directors and consultants. Our equity awards generally vest over atwo tofour year period and expire no later thanten years from the date of grant.

Upon vesting of equity awards,1.1 million and 1.0 million shares were withheld during the third quarter of fiscal 2025 and 2026 to cover $55.3 million and $87.7 million in tax withholding obligations, and 2.5 million shares and 3.3 million shares were withheld to cover $144.0 million and $205.6 million in tax withholding obligations during the first three quarters of fiscal 2025 and 2026. The shares withheld to satisfy employee tax withholding obligations are returned to our 2015 Plan and will be available for future issuance. Payments for employees’ tax obligations to the tax authorities are recognized as a reduction to additional paid-in capital and reflected as a financing activity in our condensed consolidated statements of cash flows.

2015 Amended and Restated Employee Stock Purchase Plan

Under our Amended and Restated 2015 Employee Stock Purchase Plan (2015 ESPP), our Board of Directors (or a committee thereof) has the authority to establish the length and terms of the offering periods and purchase periods and the purchase price of the shares of common stock which may be purchased under the plan. The current offering terms allow eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 30% of their eligible compensation, subject to a cap of 3,000 shares on any purchase date, a dollar cap of $7,500 per purchase period, or $25,000 in any calendar year (as determined under applicable tax rules). The current terms also allow for a 24-month offering period beginning March 16th and September 16th of each year, with each offering period consisting offour 6-month purchase periods, subject to a reset provision. Further, currently, on each purchase date, eligible employees may purchase our common stock at a price per share equal to 85% of the lesser of the fair market value of our common stock (1) on the first trading day of the applicable offering period or (2) the purchase date.

Under the reset provision currently authorized, if the closing stock price on the offering date of a new offering falls below the closing stock price on the offering date of an ongoing offering, the ongoing offering would terminate immediately following the purchase of ESPP shares on the purchase date immediately preceding the new offering and participants in the terminated offering would automatically be enrolled in the new offering (ESPP reset), resulting in a modification charge to be recognized over the new offering period. No ESPP reset occurred during the third quarter and first three quarters of fiscal 2025 and 2026.

Stock-based compensation expense related to our 2015 ESPP was $8.9 million and $7.1 million during the third quarter of fiscal 2025 and 2026, and $25.2 million and $21.3 million during the first three quarters of fiscal 2025 and 2026. At the end of the third quarter of fiscal 2026, total unrecognized stock-based compensation cost related to our 2015 ESPP was $41.8 million, which is expected to be recognized over a weighted-average period of 1.4 years.

Stock Options

A summary of the stock option activity under our equity incentive plans and related information is as follows:

The aggregate intrinsic value of options vested and exercisable at the end of the third quarter of fiscal 2026 is calculated based on the difference between the exercise price and the closing price of $98.70 of our common stock on the last day of the third quarter of fiscal 2026.

Stock-based compensation expense related to stock options was fully recognized in fiscal 2025 and was not material during the third quarter and first three quarters of fiscal 2025.

Restricted Stock Units (RSUs)

A summary of the RSU activity under our 2015 Plan and related information is as follows:

(1) Represents the number of shares granted under the RSU awards that were forfeited due to termination of employment or canceled.

Stock-based compensation expense related to RSUs was $80.2 million and $89.2 million during the third quarter of fiscal 2025 and 2026, and $227.6 million and $255.5 million during the first three quarters of fiscal 2025 and 2026. At the end of the third quarter of fiscal 2026, total unrecognized stock-based compensation cost related to unvested RSUs was $779.4 million, which is expected to be recognized over a weighted-average period of 2.8 years.

Performance-based Restricted Stock Units (PRSUs)

The number of shares that could be earned under our PRSU grants ranges from 0% to 200% of the target number granted depending on the achievement of certain performance conditions with any unearned shares canceled. Generally, the number of earned shares vest over three years from the date of grant subject to continuous service.

A summary of the PRSU activity under our 2015 Plan and related information is as follows:

(1) Represents the number of shares that may be earned at the target percentage of 100% depending on the achievement of fiscal 2026 performance conditions.

(2) Represents the number of shares earned in which the service condition has also been satisfied.

(3) Represents the number of shares canceled as a result of not fully achieving the fiscal 2025 performance conditions.

(4) Represents the number of shares granted under the PRSU awards that were forfeited due to termination of employment or canceled.

Stock-based compensation expense related to PRSUs was $8.6 million and $34.7 million during the third quarter of fiscal 2025 and 2026, and $55.2 million and $63.0 million during the first three quarters of fiscal 2025 and 2026. During the first quarter of fiscal 2025, our Board of Directors approved a discretionary adjustment, increasing the earned number of shares for the PRSUs granted in fiscal 2024. This modification resulted in additional stock-based compensation expense of $40.7 million, of which substantially all has been recognized as of the end of the third quarter of fiscal 2026. At the end of the third quarter of fiscal 2026, total unrecognized stock-based compensation cost related to unvested PRSUs was $87.1 million, which is expected to be recognized over a weighted-average period of 2.3 years.

Long-Term Performance Incentive RSUs (LTP Awards)

In June 2023 and the second quarter of fiscal 2026, we granted 4.2 million and 1.1 million shares of market-based LTP Awards, each contingent upon our market capitalization meeting or exceeding a certain threshold. The market condition will be measured over an approximate three tofive year period, at the end of our fiscal years ending in 2026, 2027 and 2028 for the grants in June 2023, and at the end of our fiscal years ending in 2028, 2029 and 2030 for the grants during the second quarter of fiscal 2026. The number of shares earned, if any, will vest on March 20, 2028 for the grants in June 2023, and March 20, 2030 for the grants during the second quarter of fiscal 2026, subject to continued service, and thereafter, subject to aone-year post-vest holding period.

The grant date fair value per share for the grants during the second quarter of fiscal 2026 ranged from $24.43 to $25.10, determined using a Monte Carlo simulation model that considered the following assumptions: (i) expected volatility of 47.2% to 47.3%, (ii) risk-free interest rate of 3.77% to 3.87%, (iii) total performance period of nearly five years, and (iv) a post-vesting holding period discount of 6.8%.

The stock-based compensation expense for these awards is being recognized over the respective requisite service periods of nearly five years using the accelerated attribution method and is not reversed if the market condition is not ultimately met.

A summary of LTP Awards activity under our 2015 Plan is as follows:

(1) Represents the maximum number of shares that could be earned.

(2) Represents the number of shares granted that were forfeited due to termination of employment.

Stock-based compensation expense related to LTP Awards was $3.4 million and $3.5 million during the third quarter of fiscal 2025 and 2026, and $10.7 million and $8.4 million during the first three quarters of fiscal 2025 and 2026. At the end of the third quarter of fiscal 2026, total unrecognized stock-based compensation cost related to unvested LTP Awards was $53.9 million, which is expected to be recognized over a weighted-average period of 3.3 years.

Stock-Based Compensation Expense

The following table summarizes the components of stock-based compensation expense recognized in the condensed consolidated statements of operations (in thousands):

(1)Stock-based compensation expense capitalized was $2.2 million and $2.1 million during the third quarter of fiscal 2025 and 2026, and $5.8 million and $6.1 million during the first three quarters of fiscal 2025 and 2026.

The tax benefit related to stock-based compensation expense for all periods presented was not material.

Note 12. Net Income per Share Attributable to Common Stockholders

Basic and diluted net income per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities. Basic net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share attributable to common stockholders is computed by giving effect to all potentially dilutive common stock equivalents, including our outstanding stock options, common stock related to unvested RSUs, PRSUs, and LTP Awards, and common stock issuable pursuant to the ESPP.

The following table sets forth the computation of basic and diluted net income per share attributable to common stockholders (in thousands, except per share data):

The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net income per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive (in thousands):

Note 13. Other Income (Expense), Net

Other income (expense), net consists of the following (in thousands):

(1)Includes interest income related to our cash, cash equivalents and marketable securities and non-cash interest income (expense) related to accretion (amortization) of the discount (premium) on marketable securities.

(2) Includes non-cash interest expense related to amortization of debt issuance costs, contractual interest expense related to our debt and accretion of our finance lease liabilities.

(3) Includes realized gain of $27.5 million from sale of an equity security in the first three quarters of fiscal 2026.

Note 14. Income Taxes

Our provision for income tax primarily reflects taxes on international operations and U.S. income taxes. The difference between the income tax provision that would be derived by applying the statutory rate to our income before provision for income taxes and the income tax provision recorded was primarily attributable to our valuation allowance on U.S. deferred tax assets, research and development credits, U.S. taxes on foreign income, and stock-based compensation expense.

At the end of the third quarter of fiscal 2026, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for fiscal 2025.

In July 2025, the One Big Beautiful Bill Act (OBBBA) was enacted in the United States. The OBBBA makes permanent certain provisions of the Tax Cuts and Jobs Act and includes modifications to the international tax framework. Among other changes, OBBBA eliminates the requirement to capitalize domestic research and development expenses under Internal Revenue Code Section 174, which lowered our U.S. taxable income and provision for income taxes for the third quarter of fiscal 2026. We continue to evaluate the potential future effects on our effective tax rate, cash tax liabilities, and deferred tax balances.

Note 15. Segment Information and Geographic Areas

Segment Information

Our chief operating decision maker (CODM), the Chief Executive Officer, manages business activities as a single operating and reportable segment at the consolidated level. The CODM reviews and utilizes consolidated financial information, including revenue, gross profit, operating income and net income as reported on the condensed consolidated statements of operations, to assess performance and allocate resources to support strategic priorities. Condensed consolidated net income is our segment’s primary measure of profit or loss. The measure of segment assets is reported on the condensed consolidated balance sheets as total consolidated assets.

Our CODM reviews the following significant segment expenses, which are each separately disclosed and presented in the condensed consolidated statements of operations: cost of revenue for product, cost of revenue for subscription services, research and development expenses, sales and marketing expenses, and general and administrative expenses. Other segment items within condensed consolidated net income include restructuring and impairment expenses, other income (expense), net and income tax provision. Other significant noncash segment expenses include stock-based compensation and depreciation and amortization.

Disaggregation of Revenue

The following table depicts the disaggregation of revenue by geographic area based on the billing address of our customers and is consistent with how we evaluate our financial performance (in thousands):

Long-Lived Assets by Geographic Area

Long-lived assets, which are comprised of property and equipment, net, by geographic area are summarized as follows (in thousands):

Note 16. Subsequent Event

On December 10, 2025, the Audit Committee of our Board of Directors authorized an additional $400.0 million to repurchase shares of our common stock, increasing the total remaining authorization amount to approximately $420.0 million. Repurchases may be made at management’s discretion from time to time on the open market, through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing. The share repurchase program does not obligate us to acquire any of our common stock, has no end date, and may be suspended or discontinued by us at any time without prior notice.