Cloudflare, Inc.

Previous wording

◦International reach. Our global network, with a presence in more than 335 cities and over 125 countries worldwide, has helped to foster our strong international growth. International markets represented 51% and 51% of our revenue in the three months ended March 31, 2026 and 2025, 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 335 cities and over 125 countries worldwide, has helped to foster our strong international growth. International markets represented 49% and 51% of our revenue in the three months ended June 30, 2026 and 2025, 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

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, lease impairment charges, and legal reserve and settlements. 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, 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 our ongoing cost structure and core business performance. We exclude legal reserve and settlements, which can be cash or non-cash expenses, from certain of our non-GAAP financial measures because they are not indicative of our ongoing cost structure and core business performance.

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, lease impairment charges, legal reserve and settlements, and restructuring and other 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, 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 our ongoing cost structure and core business performance. We exclude legal reserve and settlements, which can be cash or non-cash expenses, from certain of our non-GAAP financial measures because they are not indicative of our ongoing cost structure and core business performance. We exclude restructuring and other charges, which can be cash or non-cash expenses, from certain of our non-GAAP financial measures because they are not indicative of our ongoing cost structure and core business performance.

Previous wording

We believe our ability to grow the number of large customers on our network provides a key indicator of growth of our business and our future business opportunities. 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 our paying customers with Annualized Revenue greater than $100,000 as indicative of our penetration within large enterprise accounts.

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. 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 our paying customers with Annualized Revenue greater than $100,000 as indicative of our penetration within large enterprise accounts.

Previous wording

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.

Current wording

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 DNS and 1.1.1.1 with 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.

Previous wording

To measure Annualized Revenue at the end of a quarter, we take the sum of revenue for each paying customer in the quarter and multiply that amount by four. For example, if we signed a new paying 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. As a result, Annualized Revenue may be higher than actual revenue over the course of the year.

Current wording

To measure Annualized Revenue at the end of a quarter, we take the sum of revenue for each paying customer in the quarter and multiply that amount by four. For example, if we signed a new paying 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 DNS and 1.1.1.1 with 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. As a result, Annualized Revenue may be higher than actual revenue over the course of the year.

Previous wording

The number of paying customers with Annualized Revenue greater than $100,000 was 4,416 and 3,527 for the three months ended March 31, 2026 and March 31, 2025, respectively.

Current wording

The number of paying customers with Annualized Revenue greater than $100,000 was 4,698 and 3,712 for the three months ended June 30, 2026 and June 30, 2025, 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 rate measures our ability to retain and expand recurring revenue from existing customers. To calculate dollar-based net retention rate 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 rate 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 rate excludes professional services and 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 118% and 111% for the three months ended March 31, 2026 and March 31, 2025, 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 rate measures our ability to retain and expand recurring revenue from existing customers. To calculate dollar-based net retention rate 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 rate 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 rate excludes professional services and 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 120% and 114% for the three months ended June 30, 2026 and June 30, 2025, respectively.

Previous wording

Comparison of Three Months Ended March 31, 2026 and 2025

Current wording

Comparison of Three and Six Months Ended June 30, 2026 and 2025

Previous wording

Revenue increased by $160.7 million, or 34%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase in revenue was primarily due to the addition of new paying customers, including growth in paying customers with greater than $100,000 in annualized revenue, which increased to 4,416 as of March 31, 2026 from 3,527 as of March 31, 2025, as well as the expansion within our existing paying customers, which was reflected by our dollar-based net retention rate of 118% for the three months ended March 31, 2026.

Current wording

Revenue increased by $183.7 million and $344.4 million, or 36% and 35%, for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025. The increase in revenue was primarily due to the addition of new paying customers, including growth in paying customers with greater than $100,000 in annualized revenue, which increased to 4,698 as of June 30, 2026 from 3,712 as of June 30, 2025, as well as the expansion within our existing paying customers, which was reflected by our dollar-based net retention rate of 120% for the three months ended June 30, 2026.

Previous wording

Cost of revenue increased by $68.6 million, or 59%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase in the cost of revenue was primarily due to an increase of $30.9 million in third-party technology services costs, an increase of $15.7 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 $11.6 million in depreciation expense due to an increase in server acquisitions and deployments, and an increase of $7.1 million in employee-related costs.

Current wording

Cost of revenue increased by $136.4 million, or 56%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase in the cost of revenue was primarily due to an increase of $61.0 million in third-party technology services costs, an increase of $36.5 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 $21.7 million in depreciation expense due to an increase in server acquisitions and deployments and an increase of $10.8 million in employee-related costs.

Previous wording

Gross margin decreased to 71% from 76%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The decrease in gross margin was primarily due to the increases in costs mentioned above.

Current wording

Gross margin decreased to 72% from 75%, for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025. The decrease in gross margin was primarily due to the increases in costs mentioned above.

Previous wording

Sales and marketing expenses increased by $57.6 million, or 27%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was primarily driven by $52.0 million in increased employee-related costs due to a 29% increase in headcount in our sales and marketing organization, including an increase of $10.9 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $7.2 million in expenses for marketing programs, investments in brand awareness advertising, third-party industry events, and digital performance marketing. These increases were partially offset by a $10.3 million decrease in co-location and bandwidth expenses for free customers.

Current wording

Sales and marketing expenses increased by $56.8 million, or 26%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was primarily driven by $40.6 million in increased employee-related costs due to a 4% increase in headcount in our sales and marketing organization, including an increase of $3.4 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $7.5 million in expenses for marketing programs, investments in brand awareness advertising, third-party industry events, and digital performance marketing, an increase of $6.9 million in subscription expenses and an increase of $6.7 million in depreciation expense. These increases were partially offset by a $9.4 million decrease in co-location and bandwidth expenses for free customers.

Previous wording

Research and development expenses increased by $35.9 million, or 31%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was primarily driven by $35.7 million in increased employee-related costs due to a 23% increase in headcount in our research and development organization, including an increase of $10.9 million in stock-based compensation expense.

Current wording

Research and development expenses increased by $24.9 million, or 19%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was primarily driven by $19.6 million in increased employee-related costs due to a 5% increase in headcount in our research and development organization, including an increase of $5.9 million in stock-based compensation expense, partially offset by increased capitalized internal-use software development costs of $4.5 million.

Previous wording

Interest income increased by $18.8 million, or 88%, respectively, during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase in interest income was primarily driven by the increase in investment balance.

Current wording

Interest income increased by $14.5 million and $33.3 million, or 57% and 71%, respectively, during the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025. The increase in interest income was primarily driven by larger investment balance and shorter turnover of investment portfolio during the current fiscal year.

Previous wording

Interest expense did not significantly fluctuate during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.

Current wording

Interest expense did not significantly fluctuate during the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025.

Previous wording

The net change in income taxes for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 is $0.2 million. The income tax expense of $1.5 million and $1.7 million for the three months ended March 31, 2026 and 2025, respectively, was primarily related to income tax expense from profitable foreign jurisdictions and withholding taxes.

Current wording

The net change in income taxes for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 is $1.1 million. The income tax expense of $2.0 million for the three months ended June 30, 2026 was primarily related to income tax expense from profitable foreign jurisdictions and withholding taxes, offset by the partial release of the U.S. valuation allowance in connection with acquisitions. The income tax expense of $3.2 million for the three months ended June 30, 2025 was primarily related to income tax expense from profitable foreign jurisdictions and withholding taxes.

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 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 March 31, 2026, no loans were outstanding under the Revolving Credit Facility. Letters of credit issued under the credit agreement were not material as of March 31, 2026. In March 2025, we settled the capped call option transactions (the 2025 Capped Calls) associated with the 0.75% Convertible Senior Notes due 2025 and received $309.6 million in cash. 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. In connection with the offering of the 2030 Notes, we entered into additional privately-negotiated capped call option transactions with certain financial institution counterparties.

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 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, 2026, no loans were outstanding under the Revolving Credit Facility. Letters of credit issued under the credit agreement were not material as of June 30, 2026. In March 2025, we settled the capped call option transactions (the 2025 Capped Calls) associated with the 0.75% Convertible Senior Notes due 2025 and received $309.6 million in cash. 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. In connection with the offering of the 2030 Notes, we entered into additional privately-negotiated capped call option transactions with certain financial institution counterparties (the 2030 Capped Calls). On May 15, 2026, the Company provided irrevocable notice to the holders of the 2026 Notes of its election to settle all conversion obligations with respect to any 2026 Notes that are converted on or after May 15, 2026 by paying the aggregate principal amount of the 2026 Notes converted in cash and issuing shares of the Company's Class A common stock for the remainder of the conversion value in excess of such principal amount in respect of the August 15, 2026 maturity date. If any such excess would result in the issuance of fractional shares, the Company will pay cash in lieu of such fractional shares. Additionally, the Company provided irrevocable notice to certain financial institution counterparties of its election that the counterparties are to settle the 2026 Capped Calls by Net Share Settlement, as defined in the 2026 Capped Calls. Concurrently with its issuance of shares to the holders of the 2026 Notes to settle the amount owed above the principal amount on August 15, 2026, the Company expects to receive shares under the 2026 Capped Calls to offset, in whole or in part, the shares issued.

Previous wording

As of March 31, 2026, we had cash and cash equivalents of $932.2 million, including $26.6 million held by our foreign subsidiaries. Our cash and cash equivalents consist of cash, highly liquid money market funds, time deposits, U.S. treasury bills, and commercial paper. We also had available-for-sale securities of $3,231.7 million consisting of corporate bonds, U.S. treasury securities, U.S. government agency securities, and commercial paper. As of March 31, 2026, 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 $1,227.8 million as of March 31, 2026. 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, 2026, we had cash and cash equivalents of $1,663.8 million, including $40.1 million held by our foreign subsidiaries. Our cash and cash equivalents consist of cash, highly liquid money market funds, U.S. treasury bills, and commercial paper. We also had available-for-sale securities of $2,499.0 million consisting of corporate bonds, U.S. treasury securities, and U.S. government agency securities. As of June 30, 2026, 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 $1,397.8 million as of June 30, 2026. 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

In addition to the contractual obligations described above, as of March 31, 2026, we had $12.2 million recognized as total restricted cash on our condensed consolidated balance sheets mainly related to holdback consideration associated with asset acquisitions and business combinations.

Current wording

In addition to the contractual obligations described above, as of June 30, 2026, we had $12.2 million recognized as total restricted cash on our condensed consolidated balance sheets related to holdback consideration associated with asset acquisitions and business combinations.

Previous wording

Net cash provided by operating activities during the three months ended March 31, 2026 was $158.3 million, which resulted from a net loss of $22.9 million, adjusted for non-cash charges of $214.6 million and net cash outflow of $33.3 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $114.2 million for stock-based compensation expense, $57.8 million for depreciation and amortization expense, $31.0 million for amortization of deferred contract acquisition costs, $20.3 million for non-cash operating lease costs, $2.4 million for amortization of debt issuance costs, and $1.5 million for provision of bad debt, which were partially offset by $7.4 million for net accretion of discounts. The net cash outflows from changes in operating assets and liabilities were primarily the result of a $37.0 million increase in deferred contract acquisition costs due to the addition of new customers, a $34.5 million increase in prepaid expenses and other current assets, an increase of $23.0 million in payments related to operating lease liabilities, a $17.3 million decrease in accounts payable, and a $7.6 million decrease in accrued compensation, which were partially offset by a $69.7 million increase in deferred revenue, a $9.5 million increase in accrued expenses and other current liabilities, and a $6.4 million decrease in other noncurrent assets related to operating activities.

Current wording

Net cash provided by operating activities during the six months ended June 30, 2026 was $275.9 million, which resulted from a net loss of $192.9 million, adjusted for non-cash charges of $485.4 million and net cash outflow of $16.6 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $274.1 million for stock-based compensation expense, $123.2 million for depreciation and amortization expense, $63.5 million for amortization of deferred contract acquisition costs, $41.7 million for non-cash operating lease costs, and $5.2 million for provision of bad debt, which were partially offset by $13.2 million for net accretion of discounts, and $7.0 million for deferred income taxes. The net cash outflows from changes in operating assets and liabilities were primarily the result of an $84.5 million increase in deferred contract acquisition costs due to the addition of new customers, a $60.6 million increase in prepaid expenses and other current assets, a $45.6 million increase in accounts receivable, net, which increased due to our growing customer base and timing of collections from our customers, an increase of $45.6 million in payments related to operating lease liabilities, and a $3.7 million increase in contract assets, which were partially offset by a $127.1 million increase in deferred revenue, a $48.7 million increase in accrued expenses and other current liabilities, a $40.5 million increase in accrued compensation, and a $7.1 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, 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 inflows from changes in operating assets and liabilities were primarily the result of a $35.8 million increase in deferred revenue, $27.2 million decrease in accounts receivable, net, related to operating activities, which decreased due to 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, 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 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 provided by investing activities during the six months ended June 30, 2026 of $449.4 million resulted primarily from the maturities of available-for-sale securities of $1,442.2 million, which were partially offset by the purchases of available-for-sale securities of $783.9 million, capital expenditures of $115.2 million, cash paid for asset acquisitions and business combinations, net of cash acquired of $75.1 million, and capitalization of internal-use software development costs of $20.2 million.

Previous wording

Net cash used in investing activities during the three months ended March 31, 2026 of $158.8 million resulted primarily from the purchases of available-for-sale securities of $769.1 million, capital expenditures of $65.2 million, cash paid for asset acquisitions and business combinations, net of cash acquired of $9.1 million, and capitalization of internal-use software development costs of $9.0 million, which were partially offset by the maturities of available-for-sale securities of $693.2 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 used in financing activities of $9.5 million during the three months ended March 31, 2026 was primarily due to $15.1 million of payments of tax withholding on restricted stock units (RSUs) and performance stock units, which were partially offset by $5.7 million of proceeds from the exercise of vested stock options.

Current wording

Net cash used in financing activities of $3.7 million during the six months ended June 30, 2026 was primarily due to $29.5 million of payments of tax withholding on restricted stock units (RSUs) and performance stock units, which were partially offset by $16.1 million proceeds from the issuance of Class A common stock pursuant to the 2019 Employee Stock Purchase Plan (the ESPP) and $9.8 million of proceeds from the exercise of vested stock options.

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 RSUs settlements.

Current wording

Net cash provided by financing activities of $2,011.1 million during the six months ended June 30, 2025 was primarily due to $2,000.0 million gross proceeds from the issuance of the 2030 Notes, $309.6 million proceeds from the settlement of the 2025 Capped Calls, $17.9 million of proceeds from the exercise of vested stock options, and $13.1 million proceeds from the issuance of Class A common stock pursuant to the ESPP, which were partially offset by $283.4 million from the purchases of the 2030 Capped Calls, $27.9 million cash paid for issuance costs related to the 2030 Notes, and $18.2 million of payments of tax withholding on RSU settlements.

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, 2025. There have been no changes to these policies for the three months ended March 31, 2026.

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, 2025. There have been no changes to these policies for the six months ended June 30, 2026.

Previous wording

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. The ASU requires a public business entity to disclose additional information about specific expense categories in the notes to the financial statements for interim and annual reporting periods. The ASU does not change or remove current expense disclosure requirements. The ASU is effective for annual reporting periods beginning after December 15,

Current wording

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. The ASU requires a public business entity to disclose additional information about specific expense categories in the notes to the financial statements for interim and annual reporting periods. The ASU does not change or remove current expense disclosure requirements. The ASU is effective for annual reporting periods beginning after December 15, 2026, and for interim reporting periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of the new standard.