Cloudflare, Inc.

Previous wording

◦International reach. Our global network, with a presence in more than 330 cities and over 125 countries worldwide, has helped to foster our strong international growth. International markets represented 51% and 48% of our revenue in the three months ended March 31, 2025 and 2024, respectively, and we intend to continue to invest in our international growth as a strategy to expand our customer base around the world.

Current wording

◦International reach. Our global network, with a presence in more than 330 cities and over 125 countries worldwide, has helped to foster our strong international growth. International markets represented 51% and 49% of our revenue in the three months ended June 30, 2025 and 2024, respectively, and we intend to continue to invest in our international growth as a strategy to expand our customer base around the world.

Previous wording

The United States government has implemented, or threatened to implement, tariffs on some or all of the goods imported into the United States from a number of other countries around the world, including China, Canada, Mexico, Taiwan, Japan, and member states of the European Union. We purchase a portion of the equipment that we use to operate our network from suppliers located outside the United States and we also purchase this equipment from United States suppliers that themselves purchase components from suppliers located outside the United States. As a result of these actual and potential U.S. tariffs, we are working with our suppliers to assess the potential impact of tariffs on our equipment purchases and taking actions when practical to adjust where we source the equipment we use to operate our network in the United States and in locations outside of the United States. At the time of the filing of this Quarterly Report on Form 10-Q, we are continuing to assess the expected financial impact of the U.S. tariffs on our capital expenditures related to the operation of our global network.

Current wording

The United States government has implemented, or threatened to implement, tariffs on some or all of the goods imported into the United States from a number of other countries around the world. We purchase a portion of the equipment that we use to operate our network from suppliers located outside the United States and we also purchase this equipment from United States suppliers that themselves purchase components from suppliers located outside the United States. As a result of these actual and potential U.S. tariffs, we are working with our suppliers to assess the potential impact of tariffs on our equipment purchases and taking actions when practical to adjust where we source the equipment we use to operate our network in the United States and in locations outside of the United States. At the time of the filing of this Quarterly Report on Form 10-Q, we are continuing to assess the expected financial impact of the U.S. tariffs on our capital expenditures related to the operation of our global network.

Previous wording

We are closely monitoring macroeconomic developments and global events, such as the tariffs described above and conflicts in the Middle East and Ukraine and the potential worsening or expansion of those conflicts and other areas of geopolitical tension around the world, and other geopolitical events such as elections and other governmental changes, and, in each case, how they may adversely impact our and our customers’ businesses. Weak economic conditions or uncertainty regarding the stability of financial markets related to stock market volatility, inflation, recession, threats of tariffs and other impediments to cross-border trade, trade agreements or governmental fiscal, monetary and tax policies, among others, also could adversely impact our and our customers’ business, financial condition and operating results. In addition, general tightening in the credit market, lower levels of liquidity, increases in rates of default and bankruptcy, and significant volatility in equity and fixed-income markets could all negatively impact our customers’ purchasing decisions. Potentially as a result of these various macroeconomic impacts on our customers, we periodically have experienced lengthening of the average sales cycle for certain types of customers and sales (including sales to new customers and expansion sales to existing customers), slowdowns in our pipeline of potential new customers and in the rate of converting sales pipeline opportunities into new sales, increases in average days sales outstanding, higher levels of churn in our paying customer base (which is when any of our paying customers cease to be a paying customer for any reason, including any pay-as-you-go customer converting to a free subscription plan), and lengthening of the timing of payment from some of our customers, all of which may have contributed to a slowdown in our revenue growth from prior periods

Current wording

We are closely monitoring macroeconomic developments and global events, such as the tariffs described above and conflicts in the Middle East and Ukraine and the potential worsening or expansion of those conflicts and other areas of geopolitical tension around the world, and other geopolitical events such as elections and other governmental changes, and, in each case, how they may adversely impact our and our customers’ businesses. Weak economic conditions or uncertainty regarding the stability of financial markets related to stock market volatility, inflation, recession, threats of tariffs and other impediments to cross-border trade, trade agreements or governmental fiscal, monetary and tax policies, among others, also could adversely impact our and our customers’ business, financial condition and operating results. In addition, general tightening in the credit market, lower levels of liquidity, increases in rates of default and bankruptcy, and significant volatility in equity and fixed-income markets could all negatively impact our customers’ purchasing decisions. Potentially as a result of these various macroeconomic impacts on our customers, we periodically have experienced lengthening of the average sales cycle for certain types of customers and sales (including sales to new customers and expansion sales to existing customers), slowdowns in our pipeline of potential new customers and in the rate of converting sales pipeline opportunities into new sales, increases in average days sales outstanding, higher levels of churn in our paying customer base (which is when any of our paying customers cease to be a paying customer for any reason, including any pay-as-you-go customer converting to a free subscription plan), and lengthening of the timing of payment from some of our customers, all of which may have contributed to a slowdown in our revenue growth from prior periods (including with respect to new customers). We believe macroeconomic uncertainty could persist during 2025. As a result, we expect that some or all of the negative trends described in this paragraph may emerge or recur during future quarters.

Previous wording

We define non-GAAP income from operations and non-GAAP operating margin as U.S. GAAP loss from operations and U.S. GAAP operating margin, respectively, excluding stock-based compensation expense and its related employer payroll taxes, amortization of acquired intangible assets, acquisition-related and other expenses. We exclude stock-based compensation expense, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance. We exclude employer payroll tax expenses related to stock-based compensation, which is a cash expense, from certain of our non-GAAP financial measures, because such expenses are dependent upon the price of our Class A common stock and other factors that are beyond our control and do not correlate to the operation of our business. We exclude amortization of acquired intangible assets, which is a non-cash expense, related to business combinations from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. We exclude acquisition-related and other expenses from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. Acquisition-related and other expenses can be cash or non-cash expenses incurred in connection with the acquisition, and include third-party transaction costs and compensation expense for key acquired personnel. We also excluded the one-time cash compensation charge incurred during the three months ended March 31, 2024 from certain of our non-GAAP financial measures because it was not attributable to services provided and did not correlate to the ongoing operation of our business.

Current wording

We define non-GAAP income from operations and non-GAAP operating margin as U.S. GAAP loss from operations and U.S. GAAP operating margin, respectively, excluding stock-based compensation expense and its related employer payroll taxes, amortization of acquired intangible assets, acquisition-related and other expenses, and lease impairment charges. We exclude stock-based compensation expense, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance. We exclude employer payroll tax expenses related to stock-based compensation, which is a cash expense, from certain of our non-GAAP financial measures, because such expenses are dependent upon the price of our Class A common stock and other factors that are beyond our control and do not correlate to the operation of our business. We exclude amortization of acquired intangible assets, which is a non-cash expense, related to business combinations from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. We exclude acquisition-related and other expenses from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. Acquisition-related and other expenses can be cash or non-cash expenses incurred in connection with the acquisition, and include third-party transaction costs and compensation expense for key acquired personnel. We exclude lease impairment charges related to real estate leases, which is a non-cash expense, from certain of our non-GAAP financial measures because they are not indicative of the Company’s ongoing cost structure and core business performance. We also excluded the one-time cash compensation charge incurred during the three months ended March 31, 2024 from certain of our non-GAAP financial measures because it was not attributable to services provided and did not correlate to the ongoing operation of our business.

Previous wording

We believe our ability to grow the number of paying customers on our network provides a key indicator of growth of our business and our future business opportunities. We define a paying customer at the end of the quarter as a person or entity who has generated revenue and has an active contract with us or one of our partners during such quarter, excluding (i) customers that were not acquired through ordinary sales channels, (ii) customers using only our registrar product, and (iii) customers using our consumer applications, such as 1.1.1.1 and WARP, which agreements and customers together represent an insignificant amount of our revenue. An entity is defined as a company, a government institution, a non-profit organization, or a distinct business unit of a large company. An active contract is defined as a customer relationship for which we have provided services during the quarter. The number of paying customers was 250,819 and 197,138 as of March 31, 2025 and March 31, 2024, respectively.

Current wording

We believe our ability to grow the number of paying customers on our network provides a key indicator of growth of our business and our future business opportunities. We define a paying customer at the end of the quarter as a person or entity who has generated revenue and has an active contract with us or one of our partners during such quarter, excluding (i) customers that were not acquired through ordinary sales channels, (ii) customers using only our registrar product, and (iii) customers using our consumer applications, such as 1.1.1.1 and WARP, which agreements and customers together represent an insignificant amount of our revenue. An entity is defined as a company, a government institution, a non-profit organization, or a distinct business unit of a large company. An active contract is defined as a customer relationship for which we have provided services during the quarter. The number of paying customers was 265,929 and 210,166 as of June 30, 2025 and June 30, 2024, respectively.

Previous wording

While we continue to grow customers across all sizes, over time, our large customers have contributed an increasing share of our revenue. We view the number of customers with Annualized Revenue greater than $100,000 as indicative of our penetration within large enterprise accounts. To measure Annualized Revenue at the end of a quarter, we take the sum of revenue for each customer in the quarter and multiply that amount by four. For example, if we signed a new customer that generated $1,800 of revenue in a quarter, that customer would account for $7,200 of Annualized Revenue for that year. Our Annualized Revenue calculation excludes (i) agreements that were not entered into through ordinary sales channels, (ii) revenue generated from customers using only our registrar product, and (iii) customers using our consumer applications, such as 1.1.1.1 and WARP, which agreements and customers together represent an insignificant amount of our revenue. Our Annualized Revenue metric also includes any usage charges by a customer during a period, which represents a small portion of our total revenue and may not be recurring. As a result, Annualized Revenue may be higher than actual revenue over the course of the year. The number of paying customers with Annualized Revenue greater than $100,000 was 3,527 and 2,878 as of March 31, 2025 and March 31, 2024, respectively.

Current wording

While we continue to grow customers across all sizes, over time, our large customers have contributed an increasing share of our revenue. We view the number of customers with Annualized Revenue greater than $100,000 as indicative of our penetration within large enterprise accounts. To measure Annualized Revenue at the end of a quarter, we take the sum of revenue for each customer in the quarter and multiply that amount by four. For example, if we signed a new customer that generated $1,800 of revenue in a quarter, that customer would account for $7,200 of Annualized Revenue for that year. Our Annualized Revenue calculation excludes (i) agreements that were not entered into through ordinary sales channels, (ii) revenue generated from customers using only our registrar product, and (iii) customers using our consumer applications, such as 1.1.1.1 and WARP, which agreements and customers together represent an insignificant amount of our revenue. Our Annualized Revenue metric also includes any usage charges by a customer during a period, which represents a small portion of our total revenue and may not be recurring. As a result, Annualized Revenue may be higher than actual revenue over the course of the year. The number of paying customers with Annualized Revenue greater than $100,000 was 3,712 and 3,046 as of June 30, 2025 and June 30, 2024, respectively.

Previous wording

Our ability to maintain long-term revenue growth and achieve profitability is dependent on our ability to retain and grow revenue generated from our existing paying customers. We believe that we will achieve these objectives by continuing to focus on customer loyalty and adding additional products and functionality to our network. Our dollar-based net retention rate is a key way we measure our performance in these areas. Dollar-based net retention measures our ability to retain and expand recurring revenue from existing customers. To calculate dollar-based net retention for a quarter, we compare the Annualized Revenue from paying customers four quarters prior to the Annualized Revenue from the same set of customers in the most recent quarter. Our dollar-based net retention includes expansion and is net of contraction and attrition, but excludes Annualized Revenue from new customers in the current period. Our dollar-based net retention excludes the benefit of free customers that upgrade to a paid subscription between the prior and current periods, even though this is an important source of incremental growth. We believe this provides a more meaningful representation of our ability to add incremental business from existing paying customers as they renew and expand their contracts. Our dollar-based net retention rates were 111% and 115% for the three months ended March 31, 2025 and March 31, 2024, respectively.

Current wording

Our ability to maintain long-term revenue growth and achieve profitability is dependent on our ability to retain and grow revenue generated from our existing paying customers. We believe that we will achieve these objectives by continuing to focus on customer loyalty and adding additional products and functionality to our network. Our dollar-based net retention rate is a key way we measure our performance in these areas. Dollar-based net retention measures our ability to retain and expand recurring revenue from existing customers. To calculate dollar-based net retention for a quarter, we compare the Annualized Revenue from paying customers four quarters prior to the Annualized Revenue from the same set of customers in the most recent quarter. Our dollar-based net retention includes expansion and is net of contraction and attrition, but excludes Annualized Revenue from new customers in the current period. Our dollar-based net retention excludes the benefit of free customers that upgrade to a paid subscription between the prior and current periods, even though this is an important source of incremental growth. We believe this provides a more meaningful representation of our ability to add incremental business from existing paying customers as they renew and expand their contracts. Our dollar-based net retention rates were 114% and 112% for the three months ended June 30, 2025 and June 30, 2024, respectively.

Previous wording

General and administrative expenses consist primarily of employee-related costs, including salaries, benefits, and stock-based compensation expense for our finance, legal, human resources, and other administrative personnel, professional fees for external legal services, accounting, and other consulting services, bad debt expense, and allocated overhead costs. We expect our general and administrative expenses to continue to increase in absolute dollars for the foreseeable future to support our growth as well as due to additional costs associated with legal, accounting, compliance, insurance, investor relations, and other costs as a result of operating as a public company. However, we expect our general and administrative expenses to decrease as a percentage of our revenue over the long term, although our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.

Current wording

General and administrative expenses consist primarily of employee-related costs, including salaries, benefits, and stock-based compensation expense for our finance, legal, human resources, and other administrative personnel, professional fees for external legal services, accounting, and other consulting services, bad debt expense, allocated overhead costs, and lease impairment charges. We expect our general and administrative expenses to continue to increase in absolute dollars for the foreseeable future to support our growth as well as due to additional costs associated with legal, accounting, compliance, insurance, investor relations, and other costs as a result of operating as a public company. However, we expect our general and administrative expenses to decrease as a percentage of our revenue over the long term, although our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.

Previous wording

Interest expense consists primarily of contractual interest expense and amortization of the debt issuance costs on our 0% Convertible Senior Notes due 2026 (the 2026 Notes).

Current wording

Interest expense consists primarily of contractual interest expense and amortization of the debt issuance costs on our 0% Convertible Senior Notes due 2026 (the 2026 Notes) and our 0% Convertible Senior Notes due 2030 (the 2030 Notes, and together with the 2026 Notes, the Notes).

Previous wording

Comparison of Three Months Ended March 31, 2025 and 2024

Current wording

Comparison of Three and Six Months Ended June 30, 2025 and 2024

Previous wording

Revenue increased by $100.5 million, or 27%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase in revenue was primarily due to the addition of new paying customers, as our number of paying customers increased by 27% as of March 31, 2025 compared to the prior period ended March 31, 2024, as well as the expansion within our existing paying customers, which was reflected by our dollar-based net retention rate of 111% for the three months ended March 31, 2025.

Current wording

Revenue increased by $111.3 million and $211.8 million, or 28% and 27%, for the three and six months ended June 30, 2025, compared to the three and six months ended June 30, 2024. The increase in revenue was primarily due to the addition of new paying customers, as our number of paying customers increased by 27% as of June 30, 2025 compared to the prior period ended June 30, 2024, as well as the expansion within our existing paying customers, which was reflected by our dollar-based net retention rate of 114% for the three months ended June 30, 2025.

Previous wording

Cost of revenue increased by $30.5 million, or 36%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The increase in the cost of revenue was primarily due to an increase of $10.4 million in expenses related to operating in co-location facilities and network and bandwidth costs for operating our global network for our expanded customer base, as well as increased capacity to support our growth, an increase of $10.1 million of third-party technology services costs, and an increase of $9.2 million in depreciation expense due to increase in server acquisitions and deployments.

Current wording

Cost of revenue increased by $39.7 million, or 45%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase in the cost of revenue was primarily due to an increase of $12.0 million in expenses related to operating in co-location facilities and network and bandwidth costs for operating our global network for our expanded customer base, as well as increased capacity to support our growth, an increase of $11.7 million of third-party technology services costs, and an increase of $10.5 million in depreciation expense due to an increase in server acquisitions and deployments.

Previous wording

Sales and marketing expenses increased by $19.9 million, or 10%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The increase was primarily driven by $8.1 million in increased employee-related costs due to an 18% increase in headcount in our sales and marketing organization, including an increase of $7.2 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $3.6 million in travel related expenses and an increase of $2.5 million in expenses for marketing programs due to acquisitions, investments in brand awareness advertising, third-party industry events, and digital performance marketing.

Current wording

Sales and marketing expenses increased by $64.8 million, or 18%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase was primarily driven by $41.9 million in increased employee-related costs due to an 24% increase in headcount in our sales and marketing organization, including an increase of $17.8 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $4.7 million in colocation and bandwidth expenses for free customers, an increase of $4.3 million in consulting expenses, an increase of $4.2 million in travel-related expenses, and an increase of $2.4 million in expenses for marketing programs due to acquisitions, investments in brand awareness advertising, third-party industry events, and digital performance marketing.

Previous wording

Research and development expenses increased by $27.4 million, or 31%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The increase was primarily driven by $25.0 million in increased employee-related costs due to a 26% increase in headcount in our research and development organization, including an increase of $6.9 million in stock-based compensation expense, partially offset by increased capitalized internal-use software development costs of $1.4 million.

Current wording

Research and development expenses increased by $59.4 million, or 31%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase was primarily driven by $55.4 million in increased employee-related costs due to a 17% increase in headcount in our research and development organization, including an increase of $17.5 million in stock-based compensation expense, partially offset by increased capitalized internal-use software development costs of $1.5 million.

Previous wording

General and administrative expenses increased by $21.3 million, or 32%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The increase was primarily driven by $16.6 million in increased employee-related costs due to a 16% increase in headcount in our general and administrative organization, including an increase of $12.2 million in stock-based compensation expense. This increase was partially offset by $1.9 million of decreased allocated overhead costs.

Current wording

General and administrative expenses increased by $27.4 million, or 39%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase was primarily driven by $22.2 million in increased employee-related costs due to a 15% increase in headcount in our general and administrative organization, including an increase of $15.8 million in stock-based compensation expense. This increase was partially offset by $2.4 million of decreased allocated overhead costs.

Previous wording

Interest income did not significantly fluctuate during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024.

Current wording

Interest income did not significantly fluctuate during the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024.

Previous wording

Interest expense did not significantly fluctuate during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024.

Current wording

Interest expense did not significantly fluctuate during the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024.

Previous wording

The net change in income taxes for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 is $0.6 million. The income tax expense of $1.7 million and $2.3 million for the three months ended March 31, 2025 and March 31, 2024, respectively, was primarily related to withholding taxes in the United States and income tax expense from profitable foreign jurisdictions.

Current wording

The net change in income taxes for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 is $2.0 million. The income tax expense of $3.2 million for the three months ended June 30, 2025 was primarily related to withholding taxes in the United States and income tax expense from profitable foreign jurisdictions. The income tax expense of $1.1 million for the three months ended June 30, 2024 was primarily related to withholding taxes in the United States and income tax expense from profitable foreign jurisdictions, offset by the partial release of the U.S. and U.K. valuation allowances in connection with acquisitions.

Previous wording

Since our inception, we have financed our operations primarily through net proceeds from the sale of our equity and debt securities, as well as cash flow from our operating activities, and we expect to continue to finance our operations using the same sources for the foreseeable future. In May 2020, we issued $575.0 million aggregate principal amount of the 0.75% Convertible Senior Notes due 2025 (the 2025 Notes), which are no longer outstanding as of March 31, 2025 due to subsequent repurchases and conversions. In August 2021, we issued $1,293.8 million aggregate principal amount of the 0% Convertible Senior Notes due 2026 (the 2026 Notes), from which we received net proceeds of $1,274.0 million. In May 2024, we entered into a credit agreement with a syndicated group of lenders, which provides for a senior secured $400.0 million revolving credit facility (the Revolving Credit Facility), with a sublimit of $30.0 million available for the issuance of letters of credit and $30.0 million available for swingline borrowings. The credit agreement permits us to increase the commitments under the Revolving Credit Facility by an aggregate principal amount of up to $150.0 million, subject to the satisfaction of certain conditions. The proceeds of the loans under the Revolving Credit Facility may be used for working capital and general corporate purposes. As of March 31, 2025, no loans were outstanding under the Revolving Credit Facility. Letters of credit issued under the credit agreement were not material as of March 31, 2025. In connection with the offering of the 2025 Notes, we entered into privately-negotiated capped call option transactions (the 2025 Capped Calls) with certain financial institution counterparties. During the three months ended March 31, 2025, we elected cash settlement for the 2025 Capped Calls, which resulted in recognition of the derivative asset for $308.3 million as of March 31, 2025. We expect the 2025 Capped Calls to settle in May 2025.

Current wording

Since our inception, we have financed our operations primarily through net proceeds from the sale of our equity and debt securities, as well as cash flow from our operating activities, and we expect to continue to finance our operations using the same sources for the foreseeable future. In May 2020, we issued $575.0 million aggregate principal amount of the 0.75% Convertible Senior Notes due 2025 (the 2025 Notes), which are no longer outstanding as of June 30, 2025 due to subsequent repurchases and conversions. In August 2021, we issued $1,293.8 million aggregate principal amount of the 2026 Notes, from which we received net proceeds of $1,274.0 million. In May 2024, we entered into a credit agreement with a syndicated group of lenders, which provides for a senior secured $400.0 million revolving credit facility (the Revolving Credit Facility), with a sublimit of $30.0 million available for the issuance of letters of credit and $30.0 million available for swingline borrowings. The credit agreement permits us to increase the commitments under the Revolving Credit Facility by an aggregate principal amount of up to $150.0 million, subject to the satisfaction of certain conditions. The proceeds of the loans under the Revolving Credit Facility may be used for working capital and general corporate purposes. As of June 30, 2025, no loans were outstanding under the Revolving Credit Facility. Letters of credit issued under the credit agreement were not material as of June 30, 2025. In connection with the offering of the 2025 Notes, we entered into privately-negotiated capped call option transactions (the 2025 Capped Calls) with certain financial institution counterparties. In March 2025, we elected cash settlement for the 2025 Capped Calls, which resulted in recognition of the derivative asset for $308.3 million. In May 2025, the Company received $309.6 million in cash in connection with the 2025 Capped Calls settlement, and recognized a gain of $1.3 million in other income (expense), net on the Company's condensed consolidated statement of operations. In June 2025, we issued $2,000.0 million aggregate principal amount of the 2030 Notes, from which we received net proceeds of$1,971.0 million.

Previous wording

As of March 31, 2025, we had cash and cash equivalents of $204.5 million, including $16.8 million held by our foreign subsidiaries. Our cash and cash equivalents consist of cash, highly liquid money market funds, corporate bonds, U.S. treasury securities, and commercial paper. We also had available-for-sale securities of $1,710.4 million consisting of corporate bonds, U.S. treasury securities, U.S. government agency securities, and commercial paper. As of March 31, 2025, our investment portfolio consisted of investment grade securities with an average credit rating of AA. We have generated significant operating losses from our operations as reflected in our accumulated deficit of $1,141.1 million as of March 31, 2025. We expect to continue to incur operating losses and cash flow that may fluctuate between positive and negative for the foreseeable future due to the investments we intend to make in our business, and as a result we may require additional capital resources to execute on our strategic initiatives to grow our business.

Current wording

As of June 30, 2025, we had cash and cash equivalents of $1,518.6 million, including $21.7 million held by our foreign subsidiaries. Our cash and cash equivalents consist of cash, highly liquid money market funds, U.S. treasury securities, and commercial paper. We also had available-for-sale securities of $2,441.1 million consisting of corporate bonds, U.S. treasury securities, U.S. government agency securities, and commercial paper. As of June 30, 2025, our investment portfolio consisted of investment grade securities with an average credit rating of AA. We have generated significant operating losses from our operations as reflected in our accumulated deficit of $1,191.5 million as of June 30, 2025. We expect to continue to incur operating losses and cash flow that may fluctuate between positive and negative for the foreseeable future due to the investments we intend to make in our business, and as a result we may require additional capital resources to execute on our strategic initiatives to grow our business.

Previous wording

As of March 31, 2025, our material cash requirements include contractual obligations from the 2026 Notes, purchase commitments and lease obligations. Refer to Notes 6, 7, and 8 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding these material cash requirements.

Current wording

As of June 30, 2025, our material cash requirements include contractual obligations from the Notes, purchase commitments and lease obligations. Refer to Notes 6, 7, and 8 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding these material cash requirements.

Previous wording

In addition to the contractual obligations described above, as of March 31, 2025, we had $6.6 million recognized as total restricted cash on our condensed consolidated balance sheets mainly related to indemnity holdback consideration associated with asset acquisitions and business combinations.

Current wording

In addition to the contractual obligations described above, as of June 30, 2025, we had $6.8 million recognized as total restricted cash on our condensed consolidated balance sheets mainly related to indemnity holdback consideration associated with asset acquisitions and business combinations.

Previous wording

Net cash provided by operating activities during the three months ended March 31, 2025 was $145.8 million, which resulted from a net loss of $38.5 million, adjusted for non-cash charges of $173.8 million and net cash inflow of $10.5 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $95.5 million for stock-based compensation expense, $42.2 million for depreciation and amortization expense, $23.1 million for amortization of deferred contract acquisition costs, $14.7 million for non-cash operating lease costs, $3.3 million for provision of bad debt, and $1.0 million for amortization of convertible note issuance costs, which were partially offset by $6.4 million for net accretion of discounts. The net cash inflow from changes in operating assets and liabilities were primarily the result of a $35.8 million increase in deferred revenue, $27.2 million increase in accounts receivable, net, related to operating activities, which increased due to our growing customer base and timing of collections from our customers, a $12.2 million increase in accrued expenses and other current liabilities, and a $5.1 million decrease in other noncurrent assets related to operating activities, which were partially offset by a $27.3 million increase in prepaid expenses and other current assets, a $25.5 million increase in deferred contract acquisition costs due to increased headcount of commission eligible employees, $12.7 million in payments related to operating lease liabilities, and a $4.4 million decrease in accrued compensation related to operating activities.

Current wording

Net cash provided by operating activities during the six months ended June 30, 2025 was $245.6 million, which resulted from a net loss of $88.9 million, adjusted for non-cash charges of $383.5 million and net cash outflow of $49.1 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $217.9 million for stock-based compensation expense, $87.7 million for depreciation and amortization expense, $47.3 million for amortization of deferred contract acquisition costs, $29.9 million for non-cash operating lease costs, and $7.8 million for provision of bad debt, which were partially offset by $12.0 million for net accretion of discounts. The net cash outflow from changes in operating assets and liabilities were primarily the result of a $59.0 million increase in deferred contract acquisition costs due to increased headcount of commission eligible employees, a $46.3 million increase in prepaid expenses and other current assets, $25.0 million in payments related to operating lease liabilities, and a $4.7 million increase in contract assets, and a $2.9 million decrease in accrued compensation, which were partially offset by a $82.6 million increase in deferred revenue and a $4.3 million decrease in other noncurrent assets related to operating activities.

Previous wording

Net cash provided by operating activities during the three months ended March 31, 2024 was $73.6 million, which resulted from a net loss of $35.5 million, adjusted for non-cash charges of $121.1 million and net cash outflow of $12.0 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $69.7 million for stock-based compensation expense, $30.1 million for depreciation and amortization expense, $18.1 million for amortization of deferred contract acquisition costs, $11.9 million for non-cash operating lease costs, $3.2 million for provision of bad debt, and $1.0 million for amortization of convertible note issuance costs, which were partially offset by $12.7 million for net accretion of discounts. The net cash outflow from changes in operating assets and liabilities were primarily the result of a $23.0 million increase in prepaid expenses and other current assets related to operating activities, a $22.4 million increase in deferred contract acquisition costs due to the addition of new customers, $14.7 million in payments related to operating lease liabilities, and a $1.5 million decrease in accrued compensation, which were partially offset by a $31.9 million decrease in accounts receivable, net, which decreased due to strong cash collection from our customers, a $9.0 million increase in deferred revenue, a $5.3 million increase in accrued expenses and other current liabilities related to operating activities, and a $3.1 million increase in accounts payable related to operating activities.

Current wording

Net cash provided by operating activities during the six months ended June 30, 2024 was $148.4 million, which resulted from a net loss of $50.6 million, adjusted for non-cash charges of $257.3 million and net cash outflow of $58.3 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $155.7 million for stock-based compensation expense, $59.8 million for depreciation and amortization expense, $37.0 million for amortization of deferred contract acquisition costs, $23.1 million for non-cash operating lease costs, $4.8 million for provision of bad debt, and $2.0 million for amortization of convertible note issuance costs, which were partially offset by $24.0 million for net accretion of discounts. The net cash outflow from changes in operating assets and liabilities were primarily the result of a $48.1 million increase in deferred contract acquisition costs due to the addition of new customers, $25.0 million in payments related to operating lease liabilities, a $24.7 million increase in prepaid expenses and other current assets related to operating activities, a $6.7 million increase in accounts receivable, net, which increased due to lower cash collection from our customers, a $4.3 million decrease in accrued compensation related to operating activities, a $1.9 million increase in other noncurrent assets, and a $1.9 million increase in contract assets, which were partially offset by a $29.7 million increase in deferred revenue and a $16.0 million increase in accounts payable related to operating activities.

Previous wording

Net cash used in investing activities during the three months ended March 31, 2025 of $92.4 million resulted primarily from the purchases of available-for-sale securities of $403.7 million, capital expenditures of $85.9 million, capitalization of internal-use software development costs of $7.0 million, and cash paid for asset acquisitions and business combinations, net of cash acquired of $4.9 million, which were partially offset by the maturities of available-for-sale securities of $408.8 million.

Current wording

Net cash used in investing activities during the six months ended June 30, 2025 of $885.5 million resulted primarily from the purchases of available-for-sale securities of $1,530.8 million, capital expenditures of $145.8 million, capitalization of internal-use software development costs of $13.6 million, and cash paid for asset acquisitions and business combinations, net of cash acquired of $6.5 million, which were partially offset by the maturities of available-for-sale securities of $810.8 million.

Previous wording

Net cash provided by investing activities during the three months ended March 31, 2024 of $97.0 million resulted primarily from the maturities of available-for-sale securities of $433.9 million, which were partially offset by the purchases of available-for-sale securities of $299.0 million, capital expenditures of $32.1 million, and capitalization of internal-use software development costs of $5.9 million.

Current wording

Net cash used in investing activities during the six months ended June 30, 2024 of $86.8 million resulted primarily from the purchases of available-for-sale securities of $790.7 million, capital expenditures of $61.7 million, cash paid for asset acquisitions and business combinations, net of cash acquired of $14.0 million, and capitalization of internal-use software development costs of $12.8 million, which were partially offset by the maturities of available-for-sale securities of $792.4 million.

Previous wording

Net cash provided by financing activities of $3.5 million during the three months ended March 31, 2025 was primarily due to $11.2 million of proceeds from the exercise of vested stock options, which were partially offset by $7.7 million of payments of tax withholding on RSU settlements.

Current wording

Net cash provided by financing activities of $7.2 million during the six months ended June 30, 2024 was primarily due to $10.5 million proceeds from the issuance of Class A common stock under the ESPP and $7.6 million of proceeds from the exercise of vested stock options, which were partially offset by $8.8 million of payments of tax withholding on RSU settlements and $2.1 million cash paid for issuance costs on revolving credit facility.

Previous wording

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. Such estimates include, but are not limited to, allowance for doubtful accounts, deferred contract acquisitions costs, the period of benefit generated from the deferred contract acquisition costs, the capitalization and estimated useful life of internal-use software, valuation of acquired intangible assets, the assessment of recoverability of intangible assets and their estimated useful lives, valuation of derivative assets, useful lives of property and equipment, the determination of the incremental borrowing rate used for operating lease liabilities, the valuation and recognition of stock-based compensation awards, the assessment of uncertain tax positions, and the recognition and measurement of current and deferred income tax assets and liabilities. None of these estimates are critical accounting estimates for the preparation of our consolidated financial statements. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, and we evaluate our estimates and assumptions on an ongoing basis. Due in part to the conflicts in the Middle East and Ukraine, and the potential worsening and expansion of such conflicts, and other geopolitical and macroeconomic conditions, there is ongoing uncertainty and significant disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require an update to our estimates or assumptions or a revision of the carrying value of assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates and assumptions may change in the future, however, as new events occur and additional information is obtained. Our actual results could differ from these estimates.

Current wording

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. Such estimates include, but are not limited to, allowance for doubtful accounts, deferred contract acquisitions costs, the period of benefit generated from the deferred contract acquisition costs, the capitalization and estimated useful life of internal-use software, valuation of acquired intangible assets, the assessment of recoverability of intangible assets and their estimated useful lives, useful lives of property and equipment, the determination of the incremental borrowing rate used for operating lease liabilities, the valuation and recognition of stock-based compensation awards, the assessment of uncertain tax positions, and the recognition and measurement of current and deferred income tax assets and liabilities. None of these estimates are critical accounting estimates for the preparation of our consolidated financial statements. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, and we evaluate our estimates and assumptions on an ongoing basis. Due in part to the conflicts in the Middle East and Ukraine, and the potential worsening and expansion of such conflicts, and other geopolitical and macroeconomic conditions, there is ongoing uncertainty and significant disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require an update to our estimates or assumptions or a revision of the carrying value of assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates and assumptions may change in the future, however, as new events occur and additional information is obtained. Our actual results could differ from these estimates.

Previous wording

Our significant accounting policies are discussed in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. There have been no changes to these policies for the three months ended March 31, 2025.

Current wording

Our significant accounting policies are discussed in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. There have been no changes to these policies for the six months ended June 30, 2025.