C3.ai, Inc.

1. Summary of Business and Significant Accounting Policies

Business

C3.ai, Inc. (including its subsidiaries, “C3 AI” or “the Company”) is an enterprise artificial intelligence (“AI”) software provider. The Company delivers a family of fully integrated products including the C3 Agentic AI Platform, an end-to-end platform for developing, deploying, and operating enterprise AI applications, C3 AI Applications, a portfolio of industry-specific SaaS enterprise AI applications that enable the digital transformation of organizations globally, and C3 Generative AI, a suite of domain-specific generative AI offerings for the enterprise. The Company supports customers in the United States, Europe, and other parts of the world. The Company was initially formed as a limited liability company in Delaware on January 8, 2009 and converted to a Delaware corporation in June 2012.

Basis of Presentation and Principles of Consolidation

The Company prepares its unaudited condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with U.S. GAAP. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2026, which was filed with the SEC on June 24, 2026.

In management’s opinion, these unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of July 31, 2026, the results of operations for the three months ended July 31, 2026, and cash flows for the three months ended July 31, 2026. The results of operations for the three months ended July 31, 2026 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.

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

Use of Estimates

The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results and outcomes could differ significantly from the Company’s estimates, judgments, and assumptions. Such estimates include, but are not limited to, determining standalone selling price for performance obligations in contracts with customers and estimating variable consideration, the estimated expected benefit period for deferred contract acquisition costs, the useful lives of long-lived assets, the incremental borrowing rate for operating leases, assumptions used to measure stock-based compensation, and the valuation of deferred income tax assets and uncertain tax positions. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. As future events and their effects cannot be determined with precision, actual results could materially differ from those estimates and assumptions.

Fiscal Year

The Company’s fiscal year ends on April 30.

Segment Information

The Company has identified its Chief Executive Officer (“CEO”) as the chief operating decision maker (“CODM”), who manages the Company’s business activities as a single operating and reportable segment at the consolidated level. The CODM utilizes consolidated GAAP and non-GAAP measures of profit and loss to evaluate the Company’s financial performance, allocate resources and make key operating decisions. Further, the CODM reviews and utilizes functional expenses (GAAP and non-GAAP cost of revenue, sales and marketing, research and development, and general and administrative) at the consolidated level to manage the Company’s operations. Other items included in GAAP and non-GAAP consolidated net income (loss) are interest income, other (expense) income, net and the provision for income taxes, which are reflected in the consolidated statements of operations.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in Note 1. Summary of Business and Significant Accounting Policies in the Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for the fiscal year ended April 30, 2026, which was filed with the SEC on June 24, 2026. There have been no significant changes to these policies during the three months ended July 31, 2026.

Accounting Standards Recently Adopted

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”) to introduce a practical expedient for the application of the current expected credit loss model to current accounts receivable and contract assets. The amendment is effective beginning in the first quarter of fiscal 2027 on a prospective basis, with early adoption permitted. The Company adopted this guidance in its consolidated financial statements in the first quarter of fiscal year 2027 on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income (Topic 220) Disaggregation of Income Statement Expenses (“ASU 2024-03”), to enhance the transparency and decision usefulness of financial information presented in the income statement by requiring disaggregated information about certain income statement expense line items. The Company is required to adopt the guidance in the fourth quarter of fiscal 2028, though early adoption is permitted. The Company is currently evaluating the impact of this amendment on its consolidated financial statements.

In September 2025, the FASB issued Accounting Standards Update No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). The amendment in this ASU modernizes the accounting for internal-use software costs by increasing the operability of the recognition guidance considering different methods of software development. The amendment is effective beginning in the first quarter of fiscal 2029 on a prospective, retrospective or modified transition basis, with early adoption permitted. The Company is currently evaluating the impact of this amendment on its consolidated financial statements.

In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”), which clarifies interim disclosure requirements and the applicability of Topic 270. The amendment is effective beginning in the fourth quarter of fiscal 2028 on a prospective or retrospective basis, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

2. Revenue

Disaggregation of Revenue

The following table presents revenue by geographical region (in thousands):

(1)The United States comprised 80% and 91% of the Company’s revenue for the three months ended July 31, 2026 and 2025, respectively. No other country comprised 10% or greater of the Company’s revenue for the three months ended July 31, 2026 or 2025.

Revenue is recognized at the time the related performance obligation is satisfied with the transfer of a promised good or service to a customer over time. For the significant majority of the Company’s offerings, software and maintenance and support services are highly interdependent and interrelated and represent a single performance obligation within the context of the contract and are generally satisfied over time. Revenue from software licenses that do not require maintenance and support services is recognized when the control of the software is transferred to the customer. Revenue from such software licenses was $5.9 million and $17.9 million during the three months ended July 31, 2026 and 2025, respectively.

Total professional services revenue comprised of (in thousands):

Deferred Revenue

As of July 31, 2026 and April 30, 2026, the Company’s deferred revenue balances were $53.7 million and $36.4 million, respectively. Revenue of $19.2 million and $23.6 million was recognized during the three months ended July 31, 2026 and 2025, respectively, that was included in the deferred revenue balances as of April 30, 2026 and 2025, respectively.

Remaining Performance Obligation

Remaining performance obligations represent contracted revenue that has not yet been recognized and will be recognized as revenue in future periods. Some contracts allow customers to cancel the contracts without a substantive termination penalty, and the cancellable amount of such contracts is not included in the remaining performance obligations.

The Company excludes amounts related to performance obligations and usage-based royalties that are billed and recognized as they are delivered or billed and recognized in the same period. This primarily consists of monthly usage-based runtime and hosting charges in the duration of some revenue contracts.

Revenue expected to be recognized from remaining performance obligations was approximately $200.0 million as of July 31, 2026, which includes $50.0 million of non-cancellable commitments where actual product selection and quantities of specific products or services will be determined at a later date. Approximately $133.0 million is expected to be recognized over the next 12 months and a majority of the remaining amount is expected to be recognized over the next 13 to 48 months.

Customer Concentration and Accounts Receivable

A majority of the Company’s Customer-Entities consist of corporate and governmental entities. A Customer-Entity is defined as each entity that is the ultimate parent of a party contracting with the Company. A limited number of Customer-Entities have accounted for a large part of the Company’s revenue and accounts receivable to date. For the purpose of determining customer concentration and accounts receivable, unbilled receivables have been excluded from the accounts receivable balance. One Customer-Entity accounted for 15% of revenue for the three months ended July 31, 2026. Three separate Customer-Entities accounted for 14%,13%, and 11%, respectively, of revenue for the three months ended July 31, 2025. As of July 31, 2026, one Customer-Entity accounted for 10% of accounts receivable at July 31, 2026. Two separate Customer-Entities accounted for 25%, and 11%, respectively, of accounts receivable at April 30, 2026,

Accounts receivable includes billed and unbilled receivables, net of allowance of doubtful accounts. Trade accounts receivable are recorded at invoiced amounts and do not bear interest. The allowance for credit losses is based on the Company’s assessment of the collectability of accounts receivable by considering various factors, including the age of each outstanding invoice, customer type, the collection history of each customer, historical write-off experience, current and near-term macroeconomic conditions and uncertainties. The expectation of collectability is based on a review of credit profiles of customers, contractual terms and conditions, current economic trends, and historical payment experience. Accounts receivable included unbilled receivables as of July 31, 2026 and April 30, 2026 of $44.5 million and $42.8 million, respectively.

3. Fair Value Measurements

The Company’s financial instruments consist primarily of cash equivalents, restricted cash, available-for-sale marketable securities, accounts receivable, and accounts payable. Cash equivalents and available-for-sale marketable securities are reported at their respective fair values on the condensed consolidated balance sheets. The remaining financial instruments are reported on the condensed consolidated balance sheets at amounts that approximate current fair values.

The following table summarizes the types of assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

The estimated fair value of securities classified as Level 2 financial instruments was determined based on third-party pricing services. The pricing services utilize industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. Inputs used for fair value measurement categorized as Level 2 include benchmark yields, reported trades, broker or dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications.

4. Cash Equivalents and Marketable Securities

The following table summarizes the Company’s cash equivalents and available-for-sale marketable securities (in thousands):

The following table summarizes the Company’s available-for-sale marketable securities by contractual maturity (in thousands):

The following table summarizes the fair values and unrealized losses of the Company’s available-for-sale marketable securities classified by length of time that the securities have been in a continuous unrealized loss position but were not deemed to be other-than-temporarily impaired (in thousands):

As of July 31, 2026, the Company had 228 marketable securities in an unrealized loss position. As of April 30, 2026, the Company had 125 marketable securities that were in an unrealized loss position. The Company considers factors such as the duration, the magnitude and the reason for the decline in value, the potential recovery period, creditworthiness of the issuers of the securities and its intent to sell. For marketable securities, it also considers whether (i) it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses. No significant facts or circumstances have arisen to indicate that there has been any significant deterioration in the creditworthiness of the issuers of the securities held by the Company. The decline in fair value below amortized cost basis was not considered other-than-temporary as it is more likely than not that the Company will hold the securities until maturity or a recovery of the cost basis, and no significant credit-related impairment losses were recorded as of July 31, 2026 and April 30, 2026.

5. Balance Sheet Details

Property and Equipment, Net

Property and equipment consisted of the following at July 31, 2026 and April 30, 2026 (in thousands):

*Leasehold improvements are amortized over the shorter of the estimated useful lives of the improvements or the remaining lease term.

Depreciation and amortization expense related to property and equipment was $3.3 million and $3.4 million for the three months ended July 31, 2026 and 2025, respectively.

Accrued Compensation and Employee Benefits

Accrued compensation and employee benefits consisted of the following at July 31, 2026 and April 30, 2026 (in thousands):

Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following at July 31, 2026 and April 30, 2026 (in thousands):

6. Commitments and Contingencies

Non-cancellable Purchase Commitments

In the normal course of business, the Company enters into non-cancellable purchase commitments with various parties. As of July 31, 2026, the Company had remaining purchase commitments of $371.8 million related to cloud hosting and associated services and $54.4 million related to professional services due over the nextone tofour years. The Company incurred costs totaling $14.9 million and $39.0 million during the three months ended July 31, 2026 and 2025, respectively, under these arrangements.

Leases

On August 25, 2021, the Company entered into a new lease to acquire approximately 283,015 square feet of office space in several phases in Redwood City, California. The lease commencement date was determined as the date when the landlord delivered the leased space to the Company. All phases of the lease had commenced, with the seventh and final phase of the lease commenced in the quarter ended July 31, 2024.

Legal Proceedings

Securities Litigation

On March 4, 2022, a putative securities class action complaint (captioned The Reckstin Family Trust v. C3.ai, Inc. et al., No. 4:22-cv-01413-HSG) was filed in the U.S. District Court for the Northern District of California against the Company, and certain current and former officers and directors. On December 12, 2022, the court appointed a lead plaintiff and lead counsel. On February 15, 2023, the lead plaintiff andthree additional named plaintiffs filed an amended complaint. The amended complaint named as defendants the Company, four current and former officers and directors, the underwriters in the Company’s initial public offering (“IPO”), and Baker Hughes Company (“Baker Hughes”). The amended complaint alleged that defendants made misstatements or omissions in connection with the Company’s IPO in violation of Sections 11 and 15 of the Securities Act of 1933 and between December 9, 2020 and December 2, 2021, inclusive, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The amended complaint further alleged that certain defendants engaged in insider trading in violation of Section 20A of the Securities Exchange Act of 1934. All defendants moved to dismiss Plaintiffs’ amended complaint on May 1, 2023. On June 30, 2023, Plaintiffs voluntarily dismissed the underwriter defendants. On February 22, 2024, the court granted the motion to dismiss on all claims except for portions of the alleged violations of Section 11 and Section 15. Plaintiffs filed a second amended complaint on April 4, 2024. Defendants filed motions to dismiss on May 17, 2024. While the motions were pending, Plaintiffs filed a motion to amend their second amended complaint on September 27, 2024 to add new factual allegations. On February 13, 2025, the Court granted Plaintiffs’ motion to amend, and the Plaintiffs filed their third amended complaint on February 14, 2025. Plaintiffs seek unspecified damages, interest, fees and costs. On March 25, 2025, defendants filed motions to dismiss the third amended complaint. On March 12, 2026, the court granted defendants’ motions to dismiss, without further leave to amend, of all claims except for claims against the Company and Thomas Siebel, Lorenzo Simonelli and David Barter, that the Company’s registration statement issued in connection with its December 2020 IPO contained a misleading statement regarding one of its resellers.

Six putative shareholder derivative actions have been filed based on allegations similar to those in the Reckstin case: (1)Suri v. Siebel et al. (No. 4:22-cv-03031) filed on May 23, 2022 in the U.S. District Court for the Northern District of California; (2)Rabasca v. Siebel et al. (No.4: 23-cv-01566) filed on April 3, 2023 in the U.S. District Court for the Northern District of California; (3)Vo v. Siebel et al. (No.1:23-cv-00428) filed on April 19, 2023 in the U.S. District Court for the District of Delaware, and transferred on August 3, 2023, to the U.S. District Court for the Northern District of California (No.3:23-cv-03895); (4)Lanfair v. Siebel et al. (No.3:24-cv-01869) filed on March 26, 2024 in the U.S. District Court for the Northern District of California; (5)Pankow v. Siebel et al. (No.2024-0520-NAC) on May 15, 2024 in the Chancery Court of Delaware; and (6)Rosenfeld v. Siebel et al. (No.2024-0698-NAC) on June 28, 2024 in the Chancery Court of Delaware. In these cases, the plaintiffs assert claims on the Company’s behalf against certain of the Company’s current and former officers and directors for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, gross mismanagement, corporate waste, abuse of control, unjust enrichment, and violations of the Securities Exchange Act of 1934. In all six cases, the Company is named as a nominal defendant. The derivative complaints seek unspecified damages, disgorgement of profits from board member stock sales, an award of costs and expenses, including reasonable attorneys’ fees, and corporate governance reforms. On September 7, 2022, Suri was stayed pending resolution of the Reckstin case. On August 3, 2023, Vo was transferred to the U.S. District Court for the Northern District of California (No. 3:23-cv-03895). On August 30, 2023, the Vo action was stayed on the same terms as the Suri action. On December 21, 2023, Rabasca was stayed on the same terms as Suri, and both Rabasca and Vo were consolidated with Suri. On July 1, 2024, Lanfair was consolidated with Suri and stayed on the same terms. The Pankow and Rosenfeld actions have not been consolidated with the Suri action but were stayed on November 13, 2024 and January 15, 2025 respectively. The Company has not yet been required to answer the complaints in any of the derivative actions.

On August 22, 2025, a putative securities class action complaint (captioned John Liggett Sr. v. C3.ai, Inc. et al., No. 3:25-cv-07129) (“the Liggett case”) was filed in the U.S. District Court for the Northern District of California against the Company, Mr. Siebel, our Chief Executive Officer and Chairman, and our chief financial officer. The court appointed a lead plaintiff on January 7, 2026. The lead plaintiff filed an amended complaint on January 28, 2026. The amended complaint alleges that the defendants made false and materially misleading statements during February to July 2025, regarding the status of the health of Mr. Siebel and its impact on the Company’s business operations. It asserts causes of action for violations of (i) Sections 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5, (ii) Section 20(a) of the Exchange Act, and (iii) Section 20A of the Exchange Act. The plaintiff seeks to represent a class of investors who acquired C3.ai securities from February 18, 2025 through August 8, 2025. The amended complaint requests unspecified damages and other relief. On April 28, 2026, all defendants moved to dismiss plaintiff’s amended complaint. On July 14, 2026, the court granted the motion to dismiss the amended complaint in its entirety, finding that the lead plaintiff failed to adequately allege that any of the defendants’ challenged statements or omissions were false or misleading when made. Because the lead plaintiff did not plead an actionable misstatement, the Court dismissed all causes of action. On August 7, 2026, the lead plaintiff filed a second amended complaint that asserted the same causes of action as contained in the first amended complaint. On September 8, 2026, the Company filed a motion to dismiss the second amended complaint.

Three putative shareholder derivative actions have been filed based on allegations similar to those in the Liggett case: (1)Jaffee v. Siebel et al. (No.3:25-cv-07334) filed on August 29, 2025 in the U.S. District Court for the Northern District of California; (2)Steffens v. Siebel et al. (No. 3:25-cv-07669) filed on September 9, 2025 in the U.S. District Court for the Northern District of California; and (3)Fernicola v. Siebel et al. (No. 3:25-cv-07750) filed on September 11, 2025 in the U.S. District Court for the District of California. In these cases, the plaintiffs assert claims on the Company’s behalf against Mr. Siebel, our chief executive officer, our chief financial officer, and members of our board of directors. Allthree complaints name the Company as a nominal defendant. Allthree of the complaints seek unspecified damages to the Company, recovery of attorneys’ fees and other costs and expenses, corporate governance reforms, and other relief. On October 3, 2025, thethree derivative cases were consolidated. On November 7, 2025, thethree derivative cases were stayed pending resolution of the Liggett case.

As of the date of this report, the Company does not believe it is probable that these cases will result in an unfavorable outcome; however, if an unfavorable outcome were to occur in these cases, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable. Due to the early stages of these legal proceedings, neither the likelihood that a loss, if any, will be realized, nor an estimate of the possible loss or range of loss, if any, can be determined.

On February 27, 2024, the Company filed a lawsuit in the Court of Rome, Italy against Enel Global Services S.r.l. and any involved corporate affiliates (“Enel”). The claims in the suit against Enel include misappropriation of trade secrets under Articles 98 and 99 of the Italian Industrial Property Code and breach of contract. In this action, the Company seeks compensatory damages in the amount of €2.1 billion equitable and other relief, as well as fees and costs. The Company has also filed a report of criminal misconduct with Italian law enforcement under Article 623 of the Italian Criminal Code.

On December 23, 2024, Enel initiatedtwo lawsuits against the Company in Rome, claiming ownership oftwo of C3’s patent applications filed in the European Patent Office. Motions to stay prosecution of the applications were granted. Because any legal action is unpredictable, it is difficult to quantify the potential recoveries, associated potential costs, and timeline associated with resolution of this matter. Any gain on this matter is considered a gain contingency and will be recognized in the period in which the award is realized or realizable.

In addition, from time to time, the Company is involved in various other legal proceedings arising in the ordinary course of business. Apart from the foregoing, the Company is not presently a party to any other such litigation the outcome of which, the Company believes, if determined adversely to the Company, would individually, or taken together, have a material adverse effect on the Company’s business, operating results, cash flows, or financial condition.

7. Stockholders’ Equity

Preferred Stock

The Company has authorized 200,000,000 shares of undesignated preferred stock with a par value of $0.001 per share with rights and preferences, including voting rights, designated from time to time by the board of directors. As of July 31, 2026, there wereno shares of Preferred Stock issued or outstanding.

Common Stock

The Company has authorized 1,000,000,000 shares of Class A common stock and 3,500,000 shares of Class B common stock. The shares of Class A common stock and Class B common stock are identical, except with respect to voting, conversion, and transfer rights. Each share of Class A common stock is entitled toone vote. Each share of Class B common stock is entitled to 50 votes. Class A and Class B common stock have a par value of $0.001 per share and are referred to as common stock throughout the notes to the unaudited condensed consolidated financial statements, unless otherwise noted. Holders of common stock are entitled to receive any dividends as may be declared from time to time by the board of directors.

Shares of Class B common stock may be converted to Class A common stock at any time at the option of the stockholder. Each share of Class B common stock will be automatically converted intoone share of Class A common stock upon the earliest of the following: (i) the date that issix months following the death or incapacity of Mr. Siebel; (ii) the date that issix months following the date that Mr. Siebel is no longer providing services to the Company as an officer, employee, director, or consultant; (iii) December 11, 2040, which is the twentieth anniversary of the completion of the IPO; or (iv) the date specified by the holders of a majority of the then outstanding shares of Class B common stock, voting as a separate class. Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock.

8. Stock-Based Compensation

On November 27, 2020, the Company’s board of directors adopted, and its stockholders approved, the 2020 Incentive Plan, which became effective in connection with the IPO. The 2020 Incentive Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit (“RSU”) awards, performance awards and other equity awards. The number of shares of Class A common stock reserved for issuance under the 2020 Incentive Plan is subject to automatic evergreen increases annually through (and including) May 1, 2030 pursuant to the terms of the 2020 Incentive Plan. There was an automatic annual increase on May 1, 2026 in the number of shares reserved for future issuance pursuant to the 2020 Incentive Plan in an amount equal to seven percent (7%) of the total number of shares of the Company’s Class A common stock and Class B common stock outstanding on April 30, 2026.

In September 2025, the Company’s board of directors adopted the C3.ai, Inc. 2025 Inducement Plan (the “Inducement Plan”). The Inducement Plan provides for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, RSU awards, performance awards and other stock-based awards as permitted by the Inducement Plan. The Board has reserved 5,000,000 shares of the Company’s Class A Common Stock for issuance pursuant to awards granted under the Inducement Plan. Awards under the Inducement Plan may be granted only to persons who satisfy the standards for “employment inducement awards” under Section 303A.08 of the New York Stock Exchange Listed Company Manual.

Stock Options

Stock options generally expire 10 years from the date of grant, or earlier if services are terminated. Generally, each stock option is subject to a vesting schedule such that one fifth of the award vests after the first-year anniversary and one-sixtieth of the award vests each month thereafter over the remaining four years, subject to continuous service.

A summary of the Company’s option activity during the three months ended July 31, 2026 is as follows:

As of July 31, 2026, there was $59.2 million of unrecognized compensation cost related to stock options which is expected to be recognized over an estimated weighted-average period of 2.5 years.

No stock options were granted during the three months ended July 31, 2026. The grant-date fair value of options granted during the three months ended July 31, 2025 was estimated on the date of grant using the Black-Scholes-Merton option pricing model. The assumptions underlying the fair value estimation are provided in the following table:

Restricted Stock Units

The Company’s RSUs include time-based RSUs and performance-based RSUs with market conditions (“PRSUs”).

Time-based RSUs

The time-based RSUs are typically subject to service-based vesting conditions satisfied over five years with one-fifth of the award vesting after the first-year anniversary and one-twentieth of the award vesting quarterly thereafter. The related stock-based compensation is recognized on a straight-line basis over the requisite service period.

PRSUs

In July 2022, the compensation committee of the board of directors (the “Compensation Committee”) approved the grant of a maximum of 1,700,000 performance-based restricted stock units (the “PRSU Award”) to the CEO pursuant to the 2020 Incentive Plan, subject to and conditioned upon the subsequent determination by the board of directors of performance metrics upon the achievement of which the PRSU Award would vest. In August 2022, the board of directors approved performance metrics in concept, subject to further action by the Compensation Committee. In December 2022, the Compensation Committee: (a) determined and approved the performance metrics, which are based on the achievement of certain total shareholder return results, as measured against certain stock price hurdles (the “Market Condition”); and (b) extended the vesting period of the PRSU Award through December 31, 2027. As an additional condition to vesting of each tranche of the PRSU Award, Mr. Siebel must remain in continuous service to the Company through a minimum service date that applies to such tranche or, if later, the date the applicable performance metric is achieved (the “Service Condition”). The grant date of the PRSU Award was established in December 2022.

Stock-based compensation expense associated with the PRSU Award will be recognized over the longer of the expected achievement period for the Market Condition or the Service Condition. For the three months ended July 31, 2026, the Company recorded stock-based compensation expense of $0.3 million related to the PRSU Award.

The Company determined the grant date fair value of the PRSU Award using a Monte Carlo simulation model with the following assumptions: stock price of $12.90, risk-free interest rate of 3.7%, dividend yield of 0% and expected volatility of 51.4%.

A summary of the Company’s RSU activity during the three months ended July 31, 2026 is as follows:

As of July 31, 2026, there was $355.2 million of unrecognized stock-based compensation expense related to outstanding RSUs granted to employees that is expected to be recognized over a weighted-average period of 2.9 years.

In fiscal year 2026 and 2025, the Compensation Committee approved the payment of fiscal year 2026 and 2025 bonuses, respectively, under the Company’s annual bonus program in the form of fully vested RSUs covering shares of Class A common stock to employees. The Company issued 1,877,140 and 909,764 shares of Class A common stock pursuant to this program in the three months ended July 31, 2026 and 2025, respectively.

Shares issued in settlement of fully vested RSUs granted under this bonus program were issued from the 2020 Incentive Plan and reduced the shares available for issuance under the 2020 Incentive Plan.

Employee Stock Purchase Plan

During the three months ended July 31, 2026 and 2025, the Company recognized $0.4 million and $2.0 million, respectively, of stock-based compensation expense related to the 2020 ESPP. As of July 31, 2026, there was $4.1 million of unrecognized stock-based compensation expense that is expected to be recognized over the remaining term of the respective offering periods.

Stock-based Compensation Expense

The following table summarizes the effects of stock-based compensation on the Company’s condensed consolidated statements of operations (in thousands):

The Company records stock-based compensation associated with the Company’s annual bonus program and retention bonus program for certain employees, which may be paid out in fully vested RSUs that are settled in shares of Class A common stock. During the three months ended July 31, 2026, the Company recognized $16.8 million of stock-based compensation expense associated with these programs. As of July 31, 2026, $31.6 million was reflected under accrued compensation and employee benefits in the consolidated balance sheets. Upon settlement, this amount will be reflected under common stock and additional paid-in capital in the condensed consolidated statements of stockholders’ equity.

9. Income Taxes

Accounting for income taxes for interim periods generally requires the provision for income taxes to be determined by applying an estimate of the annual effective tax rate for the full fiscal year to income or loss before income taxes, adjusted for discrete items, if any, for the reporting period. The Company updates its estimate of the annual effective tax rate each quarter and makes a cumulative adjustment in such period.

The Company recorded income tax expense of $0.2 million and $0.3 million for the three months ended July 31, 2026 and 2025, respectively. Income tax expense consists primarily of income taxes in foreign jurisdictions in which the Company conducts business. Due to the Company’s history of losses in the United States, a full valuation allowance on substantially all of the Company’s deferred tax assets, including net operating loss carryforwards, research and development tax credits, and other book versus tax differences, was maintained.

10. Net Loss Per Share Attributable to Common Stockholders

Basic net loss per share was the same as diluted net loss per share for the periods presented because the Company was in a loss position for the three months ended July 31, 2026 and 2025. For purposes of this calculation, stock options, RSUs, Class A common stock issuable in connection with the 2020 ESPP and early exercised stock options subject to repurchase are considered to be potential common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is anti-dilutive.

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

The potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have had an antidilutive effect were as follows (in thousands):

11. Related Party Transactions

Sublease Arrangement

On February 21, 2023, the Company entered into a sublease agreement (the “Sublease”) with First Virtual Group, Inc. (the “Subtenant”), whereby the Company agreed to sublease to the Subtenant approximately 3,130 square feet of space located in Redwood City, California (the “Subleased Space”). The Company previously entered into a lease (the “Original Lease”) with DWF IV 1400-1500 Seaport Blvd, LLC dated August 25, 2021 for approximately 283,015 square feet of office space split betweentwo office towers, including the Subleased Space. Thomas M. Siebel, Chief Executive Officer and Chairman of the Company, serves as Chairman of the Subtenant. The term of the Sublease commenced on February 1, 2023. The Sublease was automatically renewed on October 1, 2023 and will be automatically renewed for successiveone year periods thereafter unless the Subtenant notifies the Company of its election to terminate the Sublease, up to the expiration date of the Original Lease. The monthly base rent for the Sublease is equal to the rate per square foot paid by the Company as stated in the Original Lease. The monthly base rent the Subtenant pays was approximately $8,608 through September 30, 2023, increasing annually thereafter. In addition to base rent, the Subtenant is responsible for its allocated share of costs incurred and expenditures made by the Company in the operation and management of the Subleased Space.

12. Restructuring

On February 24, 2026, the Company's Board of Directors approved a restructuring plan (the “Plan”) intended to improve operating efficiency and reposition the Company for long-term success. The Plan includes (i) a target reduction in the Company's global workforce, which was completed during the first quarter of fiscal year 2027, and (ii) a target reduction in annualized vendor-related costs through contract termination and rationalization actions, which is expected to be completed by the second quarter of fiscal year 2027. The Company recognized restructuring charges of $0.7 million during the fiscal quarter ended July 31, 2026, primarily consisting of vendor consolidation costs.