SentinelOne, Inc.

Previous wording

Our Singularity Platform is used globally by organizations of all sizes across a broad range of industries. We had 1,459 customers with annualized recurring revenue (ARR) of $100,000 or more as of April 30, 2025, up from 1,193 as of April 30, 2024. We define ARR as the annualized revenue run rate of our subscription and consumption and usage-based agreements at the end of a reporting period, assuming contracts are renewed on their existing terms for customers that are under contracts with us. As of April 30, 2025, no single end customer accounted for more than 3% of our ARR. Our revenue outside of the U.S. represented 38% and 37% for the three months ended April 30, 2025 and 2024, respectively, illustrating the global nature of our solutions.

Current wording

Our Singularity Platform is used globally by organizations of all sizes across a broad range of industries. We had 1,513 customers with annualized recurring revenue (ARR) of $100,000 or more as of July 31, 2025, up from 1,233 as of July 31, 2024. We define ARR as the annualized revenue run rate of our subscription and consumption and usage-based agreements at the end of a reporting period, assuming contracts are renewed on their existing terms for customers that are under contracts with us. As of July 31, 2025, no single end customer accounted for more than 3% of our ARR. Our revenue outside of the U.S. represented 38% and 37% for the three months ended July 31, 2025 and 2024, respectively, and 38% and 37% for the six months ended July 31, 2025 and 2024, respectively, illustrating the global nature of our solutions.

Previous wording

We have grown rapidly since our inception. Our revenue was $229.0 million and $186.4 million for the three months ended April 30, 2025 and 2024, respectively, representing year-over-year growth of 23%. During this period, we continued to invest in growing our business to capitalize on our market opportunity. As a result, our net loss for the three months ended April 30, 2025 and 2024 was $208.2 million and $70.1 million, respectively.

Current wording

We have grown rapidly since our inception. Our revenue was $242.2 million and $198.9 million for the three months ended July 31, 2025 and 2024, respectively, representing year-over-year growth of 22%. Our revenue was $471.2 million and $385.3 million for the six months ended July 31, 2025 and 2024, respectively, representing year-over-year growth of 22%. During this period, we continued to invest in growing our business to capitalize on our market opportunity. As a result, our net loss for the three months ended July 31, 2025 and 2024 was $72.0 million and $69.2 million, respectively, and our net loss for the six months ended July 31, 2025 and 2024 was $280.2 million and $139.3 million, respectively.

Previous wording

In addition to our results determined in accordance with U.S. generally accepted accounting principles (GAAP), we use non-GAAP operating loss as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial performance. We believe that non-GAAP operating loss provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this measure excludes, among other expenses, expenses that we do not consider to be indicative of our overall operating performance. Non-GAAP operating loss is calculated as GAAP operating loss adjusted to exclude amortization of acquired intangible assets, acquisition-related compensation, stock-based compensation expense, payroll tax on employee stock transactions, and restructuring charges.

Current wording

In addition to our results determined in accordance with U.S. generally accepted accounting principles (GAAP), we use non-GAAP operating income (loss) as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial performance. We believe that non-GAAP operating income (loss) provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this measure excludes, among other expenses, expenses that we do not consider to be indicative of our overall operating performance. Non-GAAP operating income (loss) is calculated as GAAP operating loss adjusted to exclude amortization of acquired intangible assets, acquisition-related compensation, stock-based compensation expense, payroll tax on employee stock transactions, and restructuring charges.

Previous wording

Non-GAAP operating loss has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP, including GAAP operating loss. Other companies, including companies in our industry, may calculate similarly titled non-GAAP measures, including non-GAAP operating loss, differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As a result, our non-GAAP operating loss is presented for supplemental informational purposes only.

Current wording

Non-GAAP operating income (loss) has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP, including GAAP operating loss. Other companies, including companies in our industry, may calculate similarly titled non-GAAP measures, including non-GAAP operating income (loss), differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As a result, our non-GAAP operating income (loss) is presented for supplemental informational purposes only.

Previous wording

A reconciliation of non-GAAP operating loss to GAAP operating loss, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, is provided below:

Current wording

A reconciliation of non-GAAP operating income (loss) to GAAP operating loss, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, is provided below:

Previous wording

ARR grew 24% year-over-year to $948.1 million as of April 30, 2025, primarily driven by a combination of new customer additions and adoption of adjacent platform solutions by existing customers.

Current wording

ARR grew 24% year-over-year to $1.0 billion as of July 31, 2025, primarily driven by a combination of new customer additions and adoption of adjacent platform solutions by existing customers.

Previous wording

Customers with ARR of $100,000 or more grew 22% year-over-year to 1,459 as of April 30, 2025, primarily due to the growth in the ARR of existing customers from additional purchases and the growth in the average size of purchases by new customers.

Current wording

Customers with ARR of $100,000 or more grew 23% year-over-year to 1,513 as of July 31, 2025, primarily due to the growth in the ARR of existing customers from additional purchases and the growth in the average size of purchases by new customers.

Previous wording

Restructuring charges related to the restructuring plan executed in March 2025 (Plan) consist primarily of charges related to severance payments, employee benefits, stock-based compensation, and asset impairment charges related to facilities. The actions associated with the Plan are expected to be fully completed by the second quarter of fiscal 2026.

Current wording

Restructuring charges related to the restructuring plans executed in March 2025 (March Plan) and July 2025 (July Plan), consist primarily of charges related to contract terminations, severance payments, employee benefits, stock-based compensation, and asset impairment charges related to facilities. The March Plan has been completed as of July 31, 2025, and actions associated with the July Plan are expected to be completed by the end of fiscal 2026.

Previous wording

Additionally, as discussed in more detail in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q, since 2022, we have been negotiating a bilateral Advance Pricing Agreement (APA) with the Internal Revenue Service (IRS) and the Israel Tax Authority (ITA) covering various transfer pricing matters for intercompany transactions relating to the intergroup ownership and utilization of our intellectual property (the APA matter). As of April 30, 2025, we have recorded an unrecognized tax benefit of $136.0 million related to the APA matter, and negotiations remain ongoing with no finalized resolution or agreement reached at this time. If we agree to an APA or a negotiated settlement, we may, as part of that agreement, be required to make significant payments to the Israeli government. The unrecognized tax benefit recorded during the three months ended April 30, 2025 could increase or decrease based on further developments relating to this matter. For more information, see Note 9, Income Taxes to our unaudited condensed consolidated financial statements.

Current wording

Additionally, as discussed in more detail in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q, since 2022, we have been negotiating a bilateral Advance Pricing Agreement (APA) with the Internal Revenue Service (IRS) and the Israel Tax Authority (ITA) covering various transfer pricing matters for intercompany transactions relating to the intergroup ownership and utilization of our intellectual property (the APA matter). As of July 31, 2025, we have recorded an unrecognized tax benefit of $136.0 million related to the APA matter, and negotiations remain ongoing with no finalized resolution or agreement reached at this time. If we agree to an APA or a negotiated settlement, we may, as part of that agreement, be required to make significant payments to the Israeli government. The unrecognized tax benefit recorded during the six months ended July 31, 2025 could increase or decrease based on further developments relating to this matter. For more information, see Note 9, Income Taxes to our unaudited condensed consolidated financial statements.

Previous wording

Revenue increased by $42.7 million primarily due to a combination of sales to new customers and sales of additional licenses and platform solutions to existing customers.

Current wording

Revenue increased by $43.2 million primarily due to a combination of sales to new customers and sales of additional licenses and platform solutions to existing customers.

Previous wording

Cost of revenue increased by $6.4 million primarily due to a $4.6 million increase in cloud hosting usage charges to support our expanding business, and a $1.5 million increase in amortization of capitalized internal use-software due to the continued investment in our platform. Gross margin increased to 75%, primarily due to revenue growth from existing and new customers outpacing growth in cost of revenue.

Current wording

Cost of revenue increased by $9.8 million primarily due to a $5.4 million increase in cloud hosting usage charges to support our expanding business, a $2.3 million increase in customer support costs which were mostly personnel-related expenses, and a $1.8 million increase in amortization of capitalized internal use-software due to the continued investment in our platform. Gross margin increased to 75%, primarily due to revenue growth from existing and new customers outpacing growth in cost of revenue.

Previous wording

Research and development expenses increased by $13.9 million primarily due to an increase in personnel-related expenses of $9.8 million, including an increase of $3.5 million related to stock-based compensation expense as a result of increased headcount, an increase of $1.6 million in cloud hosting expenses driven by expanded research and development activities, and a $1.6 million increase in allocated overhead costs.

Current wording

Research and development expenses increased by $15.5 million primarily due to an increase in personnel-related expenses of $12.2 million, including an increase of $3.5 million related to stock-based compensation expense as a result of increased headcount, an increase of $1.5 million in cloud hosting expenses driven by expanded research and development activities, and a $1.0 million increase in allocated overhead costs.

Previous wording

Sales and marketing expenses increased by $18.1 million primarily due to an increase in personnel-related expenses of $15.9 million, including an increase of $4.8 million in stock-based compensation expense due to higher headcount and increased stock-based compensation modification expenses, and an increase in travel and entertainment expenses of $1.5 million.

Current wording

Sales and marketing expenses increased by $8.3 million primarily due to an increase in personnel-related expenses of $11.1 million, including an increase of $2.5 million in stock-based compensation expense due to higher headcount, and an increase in sales-related expenses of $1.3 million, primarily attributable to external commissions. The increase was partially offset by a decrease in $3.8 million in marketing-related expenses, largely due to lower corporate marketing and branding costs.

Previous wording

General and administrative expenses increased by $6.0 million primarily due to an increase in personnel-related expenses of $5.2 million, including an increase of $2.0 million in stock-based compensation expense as a result of increased headcount, and a $2.2 million increase in consulting expenses. The increase was partially offset by a decrease in $1.3 million overhead expenses due to higher overhead cost being allocated out.

Current wording

General and administrative expenses increased by $7.1 million primarily due to an increase in personnel-related expenses of $6.2 million, including an increase of $3.4 million in stock-based compensation expense as a result of increased headcount, and a $1.7 million increase in consulting expenses.

Previous wording

Interest income, net increased $0.2 million driven by higher income earned from investments in marketable securities during the three months ended April 30, 2025. The change in other income (expense), net is primarily due to net foreign currency exchange fluctuations.

Current wording

Interest income, net decreased $0.6 million driven by lower income earned from investments in marketable securities during the three months ended July 31, 2025. The change in other income (expense), net is primarily due to net foreign currency exchange fluctuations, partially offset by a gain on strategic investment.

Previous wording

We compute our tax provision for interim periods by applying the estimated annual effective tax rate to year-to-date income from recurring operations and adjusting for discrete items arising in that quarter.

Current wording

We compute our tax provision for interim periods by applying the estimated annual effective tax rate to year-to-date income from recurring operations and adjusting for discrete items arising in those periods.

Previous wording

Restructuring charges increased by $5.2 million due to activities undertaken pursuant to the Plan. This included severance and employee benefit charges of $3.0 million and asset impairment charges related to facilities of $2.2 million.

Current wording

Restructuring charges increased by $9.1 million due to activities undertaken pursuant to the March Plan and July Plan during the six months ended July 31, 2025. This included $3.9 million contract termination charges, severance and employee benefit charges of $3.0 million, and asset impairment charges related to facilities of $2.2 million. Under the July Plan, we expect to incur additional restructuring charges of approximately $3.1 million in August 2025, primarily related to severance and employee benefits.

Previous wording

The provision for income taxes increased due to an accrual of $136.0 million for an unrecognized tax benefit related to our APA matter, offset by a discrete benefit of $4.7 million from the release of valuation allowance upon recognition of Israel deferred tax assets, also in connection with the APA matter.

Current wording

The provision for income taxes increased by $133.1 million for the six months ended July 31, 2025, compared to the six months ended July 31, 2024, primarily due to the increase in foreign taxes related to operations in international subsidiaries and an accrual of $136.0 million for an unrecognized tax benefit related to our APA matter, partially offset by a discrete benefit of $4.7 million from the release of valuation allowance upon recognition of Israel deferred tax assets, also in connection with the APA matter.

Previous wording

We have financed operations primarily through proceeds received from sales of equity securities and payments received from our customers, and we have generated operating losses, as reflected in our accumulated deficit of $1.8 billion and $1.6 billion as of April 30, 2025 and January 31, 2025, respectively. We expect these and other operating losses to continue for the foreseeable future. We also expect to incur significant research and development, sales and marketing, and general and administrative expenses over the next several years in connection with the continued development and expansion of our business. Additionally, if we agree to an APA, we may, as part of that agreement, be required to make significant payments to the Israeli government which may adversely affect our cash flows over the next several years. As more fully described in the section titled “Risk Factors—Our corporate structure and intercompany arrangements are subject to the tax laws of various jurisdictions, and we could be obligated to pay additional taxes, which would harm our operating results and financial condition” during the three months ended April 30, 2025, in the context of the APA negotiations, we discussed a framework for a final settlement and resolution of this matter with the ITA. As a result of such discussions, we reassessed our uncertain tax position in respect of the APA matter, and based on this reassessment, recorded a tax expense of $136.0 million in the three months ended April 30, 2025. If we agree to an APA or other negotiated settlement, we may, as part of that agreement, be required to make significant payments to the Israeli government. We currently expect that any payments pursuant to an APA (if an APA is concluded) would be made over a number of years and subject to other terms and conditions. However, no agreements between us and the IRS and ITA have been reached at this time. As of April 30, 2025 and January 31, 2025, our principal source of liquidity was cash, cash equivalents, and investments of $1.2 billion and $1.1 billion, respectively.

Current wording

We have financed operations primarily through proceeds received from sales of equity securities and payments received from our customers, and we have generated operating losses, as reflected in our accumulated deficit of $1.9 billion and $1.6 billion as of July 31, 2025 and January 31, 2025, respectively. We expect these and other operating losses to continue for the foreseeable future. We also expect to incur significant research and development, sales and marketing, and general and administrative expenses over the next several years in connection with the continued development and expansion of our business. Additionally, if we agree to an APA, we may, as part of that agreement, be required to make significant payments to the Israeli government which may adversely affect our cash flows over the next several years. As more fully described in the section titled “Risk Factors—Our corporate structure and intercompany arrangements are subject to the tax laws of various jurisdictions, and we could be obligated to pay additional taxes, which would harm our operating results and financial condition” during the six months ended July 31, 2025, in the context of the APA negotiations, we discussed a framework for a final settlement and resolution of this matter with the ITA. As a result of such discussions, we reassessed our uncertain tax position in respect of the APA matter, and based on this reassessment, recorded a tax expense of $136.0 million in the six months ended July 31, 2025. If we agree to an APA or other negotiated settlement, we may, as part of that agreement, be required to make significant payments to the Israeli government. We currently expect that any payments pursuant to an APA (if an APA is concluded) would be made over a number of years and subject to other terms and conditions. However, no agreements between us and the IRS and ITA have been reached at this time. As of July 31, 2025 and January 31, 2025, our principal source of liquidity was cash, cash equivalents, and investments of $1.2 billion and $1.1 billion, respectively.

Previous wording

In the short term, we believe that our existing cash, cash equivalents, and investments will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. In the long term beyond the next 12 months, our future capital requirements will depend on many factors, including macroeconomic conditions, our revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support research and development efforts, the price at which we are able to purchase third-party cloud infrastructure, expenses associated with our international expansion, the introduction of platform enhancements, and the continuing market adoption of our platform. We have, and in the future, we may enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operating results, and financial condition.

Current wording

In the short term, we believe that our existing cash, cash equivalents, and investments will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Subsequent to July 31, 2025, we expect to incur approximately additional $3.1 million of cash outflows related to restructuring charges under the July Plan and approximately $144.0 million of cash outflow in connection with the acquisition of Prompt Security. We believe our available liquidity, together with expected cash flows from operations, will be sufficient to fund these requirements in addition to our other operating needs over the next 12 months. In the long term beyond the next 12 months, our future capital requirements will depend on many factors, including macroeconomic conditions, our revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support research and development efforts, the price at which we are able to purchase third-party cloud infrastructure, expenses associated with our international expansion, the introduction of platform enhancements, and the continuing market adoption of our platform. We have, and in the future, we may enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operating results, and financial condition.

Previous wording

On May 22, 2025, our board of directors authorized the 2025 Share Repurchase Program, under which we may purchase up to $200.0 million of our outstanding shares of Class A common stock. We may repurchase shares of Class A common stock from time to time through open market purchases, in privately negotiated transactions or by other means. The timing and total amount of stock repurchases will be at the discretion of management and will depend upon business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The 2025 Share Repurchase Program has no expiration date but may be modified, suspended or discontinued at any time, and does not obligate us to acquire any amount of Class A common stock. We expect to retire any repurchased shares of Class A common stock.

Current wording

In May 2025, our board of directors authorized the 2025 Share Repurchase Program, under which we may purchase up to $200.0 million of our outstanding shares of Class A common stock. During the three and six months ended July 31, 2025, we repurchased 3.0 million shares of Class A common stock under the 2025 Share Repurchase Program for an aggregate purchase price of $52.7 million, including transaction costs, at an average price of $17.78 per share. As of July 31, 2025, $147.3 million remained available for future share repurchases under the 2025 Share Repurchase Program. Refer to Note 7. Stockholders’ Equity to our unaudited condensed consolidated financial statements.

Previous wording

Cash provided by operating activities during the three months ended April 30, 2025 was $52.3 million, primarily consisting of $161.3 million provided by net changes to our operating assets and liabilities and adjustments for non-cash items of $99.1 million, partially offset by our net loss of $208.2 million. The main drivers of the changes in operating assets and liabilities were an increase of accrued liabilities and other liabilities of $130.7 million, of which $136.0 million is related to an accrual for an unrecognized tax benefit related to our APA matter, a $80.6 million decrease in accounts receivable, and a $13.4 million increase in accounts payable due to timing of invoices received from vendors. These amounts were partially offset by a $26.8 million decrease in deferred revenue, a $16.4 million decrease in accrued payroll and benefits, a $14.7 million increase in deferred contract acquisition costs, and a $4.2 million increase in prepaid expenses and other assets.

Current wording

Cash provided by operating activities during the six months ended July 31, 2025 was $51.2 million, primarily consisting of adjustments for non-cash items of $202.9 million, and $128.6 million provided by net changes to our operating assets and liabilities, partially offset by our net loss of $280.2 million. The main drivers of the changes in operating assets and liabilities were an increase of accrued and other liabilities of $144.0 million, of which $136.0 million is related to an accrual for an unrecognized tax benefit related to our APA matter, a $56.4 million decrease in accounts receivable, a $3.2 million decrease in prepaid expenses and other assets, and a $1.5 million increase in accounts payable due to timing of invoices received from vendors. These amounts were partially offset by a $36.1 million increase in deferred contract acquisition costs, a $25.3 million decrease in deferred revenue, a $13.1 million decrease in accrued payroll and benefits, and a $2.1 million decrease in operating lease liabilities.

Previous wording

Cash provided by operating activities during the three months ended April 30, 2024 was $42.0 million, primarily consisting of our net loss of $70.1 million, offset by adjustments for non-cash items of $83.4 million and $28.7 million provided by net changes to our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were a$80.9 million decrease in accounts receivable due to timing of cash received from customers, a$3.9 million decrease in prepaid expenses and other assets, and a $2.4 million increase in accounts payable due to timing of invoices received from vendors. These amounts were partially offset by a$22.1 million decrease in deferred revenue, a $18.9 million decrease in accrued payroll and benefits, and a$15.2 million decrease in deferred contract acquisition costs.

Current wording

Cash provided by operating activities during the six months ended July 31, 2024 was $44.3 million, primarily consisting of our net loss of $139.3 million, offset by adjustments for non-cash items of $171.7 million and $11.9 million provided by net changes to our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were a$59.3 million decrease in accounts receivable due to timing of cash received from customers, a$8.9 million decrease in prepaid expenses and other assets and an increase of accrued liabilities of $5.4 million. These amounts were partially offset by a $34.9 million increase in deferred contract acquisition costs, a $12.6 million decrease in deferred revenue, a $10.6 million decrease in accrued payroll and benefits and a $2.8 million decrease in operating lease liabilities.

Previous wording

Cash used in investing activities during the three months ended April 30, 2025 was $65.6 million, primarily consisting of $167.3 million of investment purchases, and $6.7 million of capitalized internal-use software costs. These amounts were partially offset by $108.5 million of investment sales and maturities.

Current wording

Cash provided by investing activities during the six months ended July 31, 2025 was $65.6 million, primarily consisting of $286.8 million of proceeds from sales, maturities and return of capital of investments. These amounts were partially offset by $208.1 million of investment purchases, and $12.5 million of capitalized internal-use software costs.

Previous wording

Cash used in investing activities during the three months ended April 30, 2024 was$106.3 million, consisting of$247.0 million of investment purchases, $61.6 million of net cash paid for the acquisitions of PingSafe and Stride, and$7.4 million of capitalized internal-use software costs. These amounts were partially offset by$210.6 million of investment sales and maturities.

Current wording

Cash used in investing activities during the six months ended July 31, 2024 was$115.6 million, consisting of$442.6 million of investment purchases, $61.6 million of net cash paid for the acquisitions of PingSafe and Stride, and a$14.5 million of capitalized internal-use software costs. These amounts were partially offset by$404.7 million of investment sales and maturities.

Previous wording

Cash provided by financing activities during the three months ended April 30, 2024 was $6.5 million, primarily consisting of $6.6 million of proceeds from the exercise of employee stock options.

Current wording

Cash provided by financing activities during the six months ended July 31, 2024 was $21.6 million, primarily consisting of $12.8 million of proceeds from the exercise of employee stock options and $8.8 million of proceeds from the issuance of common stock under our ESPP.

Previous wording

There have been no material changes to our critical accounting policies and estimates as compared to those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Annual Report for the three months ended April 30, 2025, except for the following:

Current wording

There have been no material changes to our critical accounting policies and estimates as compared to those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Annual Report for the six months ended July 31, 2025, except for the following:

Previous wording

We evaluate uncertain tax positions in accordance with ASC 740. We recognize a tax benefit when it is more likely than not that our tax position will be sustained upon examination based on the technical merits. The amount recognized is based on the largest benefit that is cumulatively greater than 50% likely to be realized upon settlement. The evaluation of uncertain tax positions involves significant judgment, including interpretation of tax law, legal precedent, expected outcomes of negotiations with taxing authorities and changes in facts and circumstances. When new information becomes available, such as discussions in settlement negotiations, this could constitute a change in facts and circumstances that may require remeasurement of the associated liability. During the three months ended April 30, 2025, we discussed a framework for final settlement and resolution of a bilateral APA matter with the ITA. Based on these discussions, we assessed probable outcomes and adjusted our measurement of the related uncertain tax position which resulted in $136.0 million of income tax expense.

Current wording

We evaluate uncertain tax positions in accordance with ASC 740. We recognize a tax benefit when it is more likely than not that our tax position will be sustained upon examination based on the technical merits. The amount recognized is based on the largest benefit that is cumulatively greater than 50% likely to be realized upon settlement. The evaluation of uncertain tax positions involves significant judgment, including interpretation of tax law, legal precedent, expected outcomes of negotiations with taxing authorities and changes in facts and circumstances. When new information becomes available, such as discussions in settlement negotiations, this could constitute a change in facts and circumstances that may require remeasurement of the associated liability. During the six months ended July 31, 2025, we discussed a framework for final settlement and resolution of a bilateral APA matter with the ITA. Based on these discussions, we assessed probable outcomes and adjusted our measurement of the related uncertain tax position which resulted in $136.0 million of income tax expense.

Previous wording

We released valuation allowance of $4.7 million against Israeli deferred tax assets, in connection with a bilateral APA matter, during the three months ended April 30, 2025. We will continue to assess the need for a valuation allowance against our deferred tax assets at each reporting date. See Note 9, Income Taxes to our unaudited condensed consolidated financial statements.

Current wording

We released valuation allowance of $4.7 million against Israeli deferred tax assets, in connection with a bilateral APA matter, during the six months ended July 31, 2025. We will continue to assess the need for a valuation allowance against our deferred tax assets at each reporting date. See Note 9, Income Taxes to our unaudited condensed consolidated financial statements.