Zoom Communications Inc

Previous wording

Our mission is to provide one platform that delivers limitless human connection. Our culture of delivering happiness drives our mission and values and is fundamental to everything we do at Zoom.

Current wording

Our mission is to provide an AI-first work platform for human connection. Our culture of delivering happiness drives our mission and values and is fundamental to everything we do at Zoom.

Previous wording

Zoom’s Business Services for sales, marketing, and customer care teams, including Zoom Contact Center, strengthen customer relationships throughout the customer lifecycle. Trust is a cornerstone of the Zoom platform. We equip users with a comprehensive set of tools to make their interactions safe, secure, and private. We believe that strong security should never compromise a great user experience.

Current wording

Zoom Workplace with AI Companion, which includes collaboration solutions such as meetings, team chat, phone, scheduler, docs, whiteboard, spaces, Workvivo, and more, empowers teams to work happy. Together with Zoom Workplace, Zoom’s Business Services for sales, marketing, and customer care teams, including Zoom Contact Center, strengthen customer relationships throughout the customer lifecycle. Trust is a cornerstone of the Zoom platform. We equip users with a comprehensive set of tools to make their interactions safe, secure, and private. We believe that strong security should never compromise a great user experience.

Previous wording

AI has been core to Zoom’s product DNA for many years, grounded in our conviction that AI can make work more human by strengthening collaboration, productivity, and inclusivity. We continue to invest in AI and focus on three key areas regarding AI innovation: supporting individual productivity, powering better collaboration, and helping customer-facing teams delight their customers. We launched Zoom AI Companion, our generative AI assistant that is designed to empower workers to increase productivity, improve team effectiveness, and enhance skills. Additionally, we introduced our federated approach to AI, which enables us to make Zoom’s AI capabilities accessible and affordable so that more people can incorporate them into their day-to-day workflows. In line with our commitment to responsible AI, Zoom does not use customer audio, video, chat, screen sharing, attachments, or other communications (such as poll results, whiteboard, and reactions) to train Zoom’s or third-party AI models.

Current wording

AI has been core to Zoom’s product DNA for many years, grounded in our conviction that AI can strengthen collaboration, productivity, and inclusivity. We continue to invest in AI and focus on three key areas regarding AI innovation: supporting individual productivity, powering better collaboration, and helping customer-facing teams delight their customers. We launched Zoom AI Companion, our generative AI assistant that is designed to empower workers to increase productivity, improve team effectiveness, and enhance skills. Additionally, we introduced our federated approach to AI, which enables us to make Zoom’s AI capabilities accessible and affordable so that more people can incorporate them into their day-to-day workflows. In line with our commitment to responsible AI, Zoom does not use customer audio, video, chat, screen sharing, attachments, or other communications (such as poll results, whiteboard, and reactions) to train Zoom’s or third-party AI models.

Previous wording

We generate revenue from the sale of subscriptions to Zoom Workplace and Zoom Business Services. Subscription revenue is driven primarily by the number of customers, as well as purchases of additional products, including Zoom Phone, Zoom Spaces, Zoom Events, Zoom Contact Center, and Zoom Revenue Accelerator. We define a customer as a separate and distinct buying entity, which can be a single paid user or an organization of any size (including a distinct unit of an organization) that has multiple users. Our Zoom Workplace Basic offering is free and gives users access to Zoom Meetings with core features but with the limitation that meetings time-out at 40 minutes. Our core paid offerings are available with our Zoom Workplace bundles: Zoom Workplace Pro, Business, Business Plus, Enterprise, Enterprise Plus, and Enterprise Premier. The Zoom Workplace bundles are designed for different business needs and are composed of Zoom Meetings, Zoom Team Chat, Zoom Whiteboard and Mail and Calendar, Zoom Clips, as well as Zoom Phone, Zoom Webinars and Zoom Rooms for our Enterprise plans. We also offer vertical-specific plans for Education, Healthcare, and Government which provide incremental features and functionality, such as different participant limits, administrative controls, and reporting.

Current wording

We generate revenue from the sale of subscriptions to Zoom Workplace and Zoom Business Services. Subscription revenue is driven primarily by the number of customers, as well as purchases of additional products, including Zoom Phone, Zoom Spaces, Zoom Scheduler, Zoom Events, Zoom Sessions, Zoom Webinars, Zoom Contact Center, and Zoom Revenue Accelerator. We define a customer as a separate and distinct buying entity, which can be a single paid user or an organization of any size (including a distinct unit of an organization) that has multiple users. Our Zoom Workplace Basic offering is free and gives users access to Zoom Meetings with core features but with the limitation that meetings time-out at 40 minutes. Our core paid offerings are available with our Zoom Workplace bundles: Zoom Workplace Pro, Business, Business Plus, Enterprise, Enterprise Plus, and Enterprise Premier. The Zoom Workplace bundles are designed for different business needs and are composed of Zoom Meetings, Zoom Team Chat, Zoom Whiteboard, Zoom Mail and Calendar, Zoom Clips, Workflow Automation, Zoom Docs, and soon Zoom Tasks, as well as Zoom Phone, Zoom Webinars and Zoom Rooms for our Enterprise plans. We also offer vertical-specific plans for Education, Healthcare, Government, and Frontline Workers which provide incremental features and functionality, such as different participant limits, administrative controls, and reporting.

Previous wording

For Zoom Phone, plans include Zoom Phone Pro, which provides extension-to-extension calling or which can be used with the Bring Your Own Carrier model, wherein the customer connects Zoom Phone to an existing carrier. We also offer Regional Unlimited and Regional Metered calling plans in four specific markets (Australia/New Zealand, Japan, United Kingdom/Ireland, and United States/Canada). In addition, we offer a Global Select plan that allows customers to select from local numbers and domestic calling in more than 45 countries and territories where Zoom has local public switched telephone network (“PSTN”) coverage.

Current wording

For Zoom Phone, plans include Zoom Phone Pro, which provides extension-to-extension calling or can be used with the Bring Your Own Carrier model, wherein the customer connects Zoom Phone to an existing carrier. We also offer Regional Unlimited and Regional Metered calling plans in five specific markets (Australia/New Zealand, Japan, United Kingdom/Ireland, and United States/Canada and recently announced Zoom Phone service with native India phone numbers in the Maharashtra Telecom Circle). In addition, we offer a Global Select plan that allows customers to select from local numbers and domestic calling in more than 45 countries and territories where Zoom has local public switched telephone network (“PSTN”) coverage.

Previous wording

Our revenue was $1,162.5 million and $1,138.7 million for the three months ended July 31, 2024 and 2023, respectively, representing period-over-period growth of 2.1%. We had net income of $219.0 million and $182.0 million for the three months ended July 31, 2024 and 2023, respectively. Our revenue was $2,303.8 million and $2,244.0 million for the six months ended July 31, 2024 and 2023, respectively, representing period-over-period growth of 2.7%. We had net income of $435.3 million and $197.4 million for the six months ended July 31, 2024 and 2023, respectively. Net cash provided by operating activities was $1,037.5 million and $754.5 million for the six months ended July 31, 2024 and 2023, respectively.

Current wording

Our revenue was $1,177.5 million and $1,136.7 million for the three months ended October 31, 2024 and 2023, respectively, representing period-over-period growth of 3.6%. We had net income of $207.1 million and $141.2 million for the three months ended October 31, 2024 and 2023, respectively. Our revenue was $3,481.3 million and $3,380.8 million for the nine months ended October 31, 2024 and 2023, respectively, representing period-over-period growth of 3.0%. We had net income of $642.4 million and $338.6 million for the nine months ended October 31, 2024 and 2023, respectively. Net cash provided by operating activities was $1,520.7 million and $1,247.6 million for the nine months ended October 31, 2024 and 2023, respectively.

Previous wording

Macroeconomic factors, including geopolitical conflicts, global economic slowdown, high inflation, high interest rates, and the responses by central banking authorities, and fluctuations in foreign currency exchange rates, have introduced uncertainty to our business. For the three and six months ended July 31, 2024, compared to the three and six months ended July 31, 2023, we continued to experience growth in total revenue and revenue from Enterprise customers. However, macroeconomic conditions have impacted and may continue to impact the future demand for subscriptions to our unified communications and collaboration platform. For example, we have been experiencing elongated sales cycles as well as a decrease in customers’ overall corporate spending and increased scrutiny on IT spending, in particular, from existing and potential customers. Many factors may contribute to declines in our growth rate as compared to prior fiscal years, including, among other things, higher market penetration, increased competition, slowing demand for our platform, a slower than anticipated capitalization on growth opportunities, and the maturation of our business.

Current wording

Macroeconomic factors, including geopolitical conflicts, global economic slowdown, high inflation, high interest rates, and the responses by central banking authorities, and fluctuations in foreign currency exchange rates, have introduced uncertainty to our business. For the three and nine months ended October 31, 2024, compared to the three and nine months ended October 31, 2023, we continued to experience growth in total revenue and revenue from Enterprise customers. However, macroeconomic conditions have impacted and may continue to impact the future demand for subscriptions to our unified communications and collaboration platform. For example, we have been experiencing elongated sales cycles as well as a decrease in customers’ overall corporate spending and increased scrutiny on IT spending, in particular, from existing and potential customers. Many factors have and may contribute to declines in our growth rate as compared to prior fiscal years, including, among other things, higher market penetration, increased competition, slowing demand for our platform, a slower than anticipated capitalization on growth opportunities, and the maturation of our business.

Previous wording

We believe that there is a large opportunity for growth with many of our existing customers. Historically, customers have increased the size of their subscriptions as they have expanded their use of our platform across their operations. Despite recent macroeconomic headwinds that have impacted the rate of expansion and caused it to drop below one hundred percent, we believe there are still opportunities for future growth with our existing customers as we innovate our platform with additional product offerings and the use of AI. This expansion in the use of our platform also provides us with opportunities to market and sell additional products to our customers, such as Zoom Phone, Spaces, Contact Center, Revenue Accelerator, Events, and our Developer Platform Solutions. In order for us to address this opportunity and expand the use of our products with our existing customers, we will need to maintain the reliability of our platform and produce new features and functionality that are responsive to our customers’ requirements for enterprise-grade solutions.

Current wording

We believe that there is a large opportunity for growth with many of our existing customers. Historically, customers have increased the size of their subscriptions as they have expanded their use of our platform across their operations. Despite recent macroeconomic headwinds that have impacted the rate of expansion and have caused our net dollar expansion rate for Enterprise customers to drop below one hundred percent, we believe there are still opportunities for future growth with our existing customers as we innovate our platform with additional product offerings and the use of AI. This expansion in the use of our platform also provides us with opportunities to market and sell additional products to our customers, such as Zoom Phone, Spaces, Scheduler, Contact Center, Revenue Accelerator, Events, Sessions, Webinars, and our Developer Platform Solutions. In order for us to address this opportunity and expand the use of our products with our existing customers, we will need to maintain the reliability of our platform and produce new features and functionality that are responsive to our customers’ requirements for enterprise-grade solutions.

Previous wording

We quantify our expansion across existing Enterprise customers through our net dollar expansion rate. We define Enterprise customers as distinct business units who have been engaged by either our direct sales team, resellers, or strategic partners. Revenue from Enterprise customers represented 58.7% and 57.9% of total revenue for the three months ended July 31, 2024 and 2023, respectively, and 58.5% and 57.6% of total revenue for the six months ended July 31, 2024 and 2023, respectively. Our net dollar expansion rate includes the increase in user adoption within our Enterprise customers, as our subscription revenue is primarily driven by the number of paid users within a customer and the purchase of additional products, and compares our subscription revenue from the same set of Enterprise customers across comparable periods. We calculate net dollar expansion rate as of a period end by starting with the annual recurring revenue (“ARR”) from all Enterprise customers as of 12 months prior (“Prior Period ARR”). We define ARR as the annualized revenue run rate of subscription agreements from all customers at a point in time. We calculate ARR by taking the monthly recurring revenue (“MRR”) and multiplying it by 12. MRR is defined as the recurring revenue run-rate of subscription agreements from all Enterprise customers for the last month of the period, including revenue from monthly subscribers who have not provided any indication that they intend to cancel their subscriptions. We then calculate the ARR from these Enterprise customers as of the current period end (“Current Period ARR”), which includes any upsells, contraction, and attrition. We divide the Current Period ARR by the Prior Period ARR to arrive at the net dollar expansion rate. For the trailing 12-months calculation, we take an average of the net dollar expansion rate over the trailing 12 months. Our net dollar expansion rate may fluctuate as a result of a number of factors, including the level of penetration within our customer base, expansion of products and features, and our ability to retain our Enterprise customers. Our trailing 12-month net dollar expansion rate for Enterprise customers as of July 31, 2024 and 2023 was 98% and 109%, respectively.

Current wording

We quantify our expansion across existing Enterprise customers through our net dollar expansion rate. We define Enterprise customers as distinct business units who have been engaged by either our direct sales team, resellers, or strategic partners. Revenue from Enterprise customers represented 59.4% and 58.1% of total revenue for the three months ended October 31, 2024 and 2023, respectively, and 58.8% and 57.7% of total revenue for the nine months ended October 31, 2024 and 2023, respectively. Our net dollar expansion rate includes the increase in user adoption within our Enterprise customers, as our subscription revenue is primarily driven by the number of paid users within a customer and the purchase of additional products, and compares our subscription revenue from the same set of Enterprise customers across comparable periods. We calculate net dollar expansion rate as of a period end by starting with the annual recurring revenue (“ARR”) from all Enterprise customers as of 12 months prior (“Prior Period ARR”). We define ARR as the annualized revenue run rate of subscription agreements from all customers at a point in time. We calculate ARR by taking the monthly recurring revenue (“MRR”) and multiplying it by 12. MRR is defined as the recurring revenue run-rate of subscription agreements from all Enterprise customers for the last month of the period, including revenue from monthly subscribers who have not provided any indication that they intend to cancel their subscriptions. We then calculate the ARR from these Enterprise customers as of the current period end (“Current Period ARR”), which includes any upsells, contraction, and attrition. We divide the Current Period ARR by the Prior Period ARR to arrive at the net dollar expansion rate. For the trailing 12-months calculation, we take an average of the net dollar expansion rate over the trailing 12 months. Our net dollar expansion rate may fluctuate as a result of a number of factors, including the level of penetration within our customer base, expansion of products and features, and our ability to retain our Enterprise customers. Our trailing 12-month net dollar expansion rate for Enterprise customers as of October 31, 2024 and 2023 was 98% and 105%, respectively.

Previous wording

In addition to Enterprise customers, we also have a significant number of customers that subscribe to our services directly through our website (“Online customers” or “Online business”). Online customers represent a diverse customer base, ranging from individual users to small and medium size businesses. We continue to focus on acquisition and retention of our Online customers through various strategies to improve the features and functionalities of our products and services. Revenue from Online customers represented 41.3% and 42.1% of total revenue for the three months ended July 31, 2024 and 2023, respectively, and 41.5% and 42.4% of total revenue for the six months ended July 31, 2024 and 2023, respectively. Our ability to retain these Online customers will have an impact on our future revenue. The online monthly average churn for our Online customers was 2.9% and 3.2% per month for the three months ended July 31, 2024 and 2023, respectively, and 3.1% and 3.2% of total revenue for the six months ended July 31, 2024 and 2023, respectively. One of the dynamics in the Online business is the MRR contribution from customers that have retained Zoom services for a certain portion of time as these customers tend to maintain their subscriptions and contribute meaningfully to the Online business. As of July 31, 2024 and 2023, the percentage of total Online MRR from Online customers with a continual term of service of at least 16 months was 74.4% and 72.8%, respectively.

Current wording

In addition to Enterprise customers, we also have a significant number of customers that subscribe to our services directly through our website (“Online customers” or “Online business”). Online customers represent a diverse customer base, ranging from individual users to small and medium size businesses. We continue to focus on acquisition and retention of our Online customers through various strategies to improve the features and functionalities of our products and services. Revenue from Online customers represented 40.6% and 41.9% of total revenue for the three months ended October 31, 2024 and 2023, respectively, and 41.2% and 42.3% of total revenue for the nine months ended October 31, 2024 and 2023, respectively. Our ability to retain these Online customers will have an impact on our future revenue. The online monthly average churn for our Online customers was 2.7% and 3.0% per month for the three months ended October 31, 2024 and 2023, respectively, and 3.0% and 3.1% of total revenue for the nine months ended October 31, 2024 and 2023, respectively. One of the dynamics in the Online business is the MRR contribution from customers that have retained Zoom services for a certain portion of time as these customers tend to maintain their subscriptions and contribute meaningfully to the Online business. As of October 31, 2024 and 2023, the percentage of total Online MRR from Online customers with a continual term of service of at least 16 months was 74.1% and 73.2%, respectively.

Previous wording

We continue to invest resources to enhance the capabilities of Zoom Workplace and Zoom Business Services. For example, we have introduced a number of new products and enhancements, including Zoom AI Companion, Zoom Docs, new features for Zoom Contact Center, Zoom Notes, the integration of Workvivo into the Zoom desktop client, and ongoing enhancements for Zoom Phone, Meetings, Zoom Rooms, Huddles, Webinars, and Zoom Events. We also deliver Zoom Phone calling plans in more than 45 countries and territories as of July 31, 2024.

Current wording

We continue to invest resources to enhance the capabilities of Zoom Workplace and Zoom Business Services. For example, we have introduced a number of new products and enhancements, including Zoom AI Companion, Zoom Docs, new features for Zoom Contact Center, Zoom Notes, the integration of Workvivo into the Zoom desktop client, and ongoing enhancements for Zoom Phone, Meetings, Zoom Rooms, Sessions, Webinars, and Events. We also deliver Zoom Phone calling plans in more than 45 countries and territories as of October 31, 2024.

Previous wording

We recently announced several upcoming products including an enhanced version of AI Companion designed to handle complex tasks across our platform using information from multiple sources, including third-party applications. These products are expected to be generally available in 2024.

Current wording

We recently announced several upcoming products, including the launch of an enhanced version of AI Companion designed to handle complex tasks across our platform using information from multiple sources, including third-party applications.

Previous wording

Our platform addresses the communications and collaboration needs of users worldwide, and we see international expansion as a major opportunity. Our revenue from the rest of the world (APAC and EMEA) represented 28.1% and 29.0% of our total revenue for the three months ended July 31, 2024 and 2023, respectively, and 28.2% and 29.0% of our total revenue for the six months ended July 31, 2024 and 2023, respectively. We plan to add local sales support in further select international markets over time. We use strategic partners and resellers to sell in certain international markets where we have limited or no direct sales presence. While we believe global demand for our platform will continue to increase as international market awareness of Zoom grows, our ability to conduct our operations internationally will require considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal and regulatory systems, alternative dispute systems, and commercial markets.

Current wording

Our platform addresses the communications and collaboration needs of users worldwide, and we see international expansion as a major opportunity. Our revenue from the rest of the world (APAC and EMEA) represented 28.1% and 28.4% of our total revenue for the three months ended October 31, 2024 and 2023, respectively, and 28.2% and 28.8% of our total revenue for the nine months ended October 31, 2024 and 2023, respectively. We plan to add local sales support in further select international markets over time. We use strategic partners and resellers to sell in certain international markets where we have limited or no direct sales presence. While we believe global demand for our platform will continue to increase as international market awareness of Zoom grows, our ability to conduct our operations internationally will require considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal and regulatory systems, alternative dispute systems, and commercial markets.

Previous wording

We believe that our ability to increase the number of Enterprise customers is an indicator of our potential future business opportunities, the growth of our business, and an indicator of our market penetration. Increasing awareness of our platform and capabilities, coupled with the mainstream adoption of our technology, has expanded the diversity of our customer base to include organizations of all sizes across all industries. Over time, we expect revenue from Enterprise customers to represent a larger share of our business. As of July 31, 2024 and 2023, we had approximately 191,600 and 218,100 Enterprise customers, respectively. During the three months ended April 30, 2024, in order to enhance customer experience and improve efficiency, we transitioned approximately 26,800 Enterprise customers with lower MRR away from working with direct sales teams, resellers, or strategic partners. These customers are now considered Online customers and no longer included in our Enterprise customer total as of July 31, 2024. The impact of this transition did not have a material impact on the percent of revenue from Enterprise and Online customers, net dollar expansion rate, or Online average monthly churn.

Current wording

We believe that our ability to increase the number of Enterprise customers is an indicator of our potential future business opportunities, the growth of our business, and an indicator of our market penetration. Increasing awareness of our platform and capabilities, coupled with the mainstream adoption of our technology, has expanded the diversity of our customer base to include organizations of all sizes across all industries. Over time, we expect revenue from Enterprise customers to represent a larger share of our business. As of October 31, 2024 and 2023, we had approximately 192,400 and 219,700 Enterprise customers, respectively. During the three months ended April 30, 2024, in order to enhance customer experience and improve efficiency, we transitioned approximately 26,800 Enterprise customers with lower MRR away from working with direct sales teams, resellers, or strategic partners. These customers are now considered Online customers and no longer included in our Enterprise customer total as of October 31, 2024. The impact of this transition did not have a material impact on the percent of revenue from Enterprise and Online customers, net dollar expansion rate, or Online average monthly churn.

Previous wording

We focus on growing the number of customers that contribute more than $100,000 of trailing 12 months revenue as it is a measure of our ability to scale with our customers and attract larger organizations to Zoom. Revenue from these customers represented 30.5% and 29.0% of total revenue for the three months ended July 31, 2024 and 2023, respectively, and 30.4% and 28.9% of total revenue for the six months ended July 31, 2024 and 2023, respectively. As of July 31, 2024 and 2023, we had 3,933 and 3,672 customers, respectively, that contributed more than $100,000 of trailing 12 months revenue, demonstrating our increasing penetration of larger organizations, including enterprises. These customers are a subset of Enterprise customers.

Current wording

We focus on growing the number of customers that contribute more than $100,000 of trailing 12 months revenue as it is a measure of our ability to scale with our customers and attract larger organizations to Zoom. Revenue from these customers represented 30.8% and 29.0% of total revenue for the three months ended October 31, 2024 and 2023, respectively, and 30.7% and 29.0% of total revenue for the nine months ended October 31, 2024 and 2023, respectively. As of October 31, 2024 and 2023, we had 3,995 and 3,731 customers, respectively, that contributed more than $100,000 of trailing 12 months revenue, demonstrating our increasing penetration of larger organizations, including enterprises. These customers are a subset of Enterprise customers.

Previous wording

Gains on strategic investments, net consist primarily of remeasurement gains on our equity investments.

Current wording

Gains (losses) on strategic investments, net consist primarily of remeasurement gains on our equity investments.

Previous wording

Revenue for the three months ended July 31, 2024, increased by $23.8 million, or 2.1%, compared to the three months ended July 31, 2023. The increase was driven by a 3.5% increase in revenue from Enterprise customers, of which 24.8% and 75.2% were from existing and new customers, respectively. Revenue from Online customers remained flat year over year.

Current wording

Revenue for the three months ended October 31, 2024, increased by $40.8 million, or 3.6%, compared to the three months ended October 31, 2023. The increase was driven by a 5.8% increase in revenue from Enterprise customers, of which 46.7% and 53.3% were from existing and new customers, respectively. Revenue from Online customers remained flat year over year.

Previous wording

Cost of revenue for the three months ended July 31, 2024, increased by $18.5 million, or 7.0%, compared to the three months ended July 31, 2023. Theincrease was primarily due to a $23.4 million increase in hosting and infrastructure costs, partially offset by a $6.2 million decreasein stock-based compensation. The increase in hosting costs was due to the increased use of AI functionality along with investments to upgrade our data center backbone.

Current wording

Cost of revenue for the three months ended October 31, 2024, increased by $12.9 million, or 4.8%, compared to the three months ended October 31, 2023. Theincrease was primarily due to a $17.5 million increase in hosting and infrastructure costs, partially offset by a $5.1 million decreasein stock-based compensation. The increase in hosting costs was due to the increased use of AI functionality along with investments to upgrade our data center backbone.

Previous wording

Gross margin decreased to 75.5% for the three months ended July 31, 2024, from 76.6% for the three months ended July 31, 2023. The decrease in gross margin was mainly due to costs associated with the increased use of AI functionality along with investments to upgrade our data center backbone.

Current wording

Gross margin decreased to 75.9% for the three months ended October 31, 2024, from 76.2% for the three months ended October 31, 2023. The decrease in gross margin was mainly due to costs associated with the increased use of AI functionality along with investments to upgrade our data center backbone.

Previous wording

Research and development expense for the three months ended July 31, 2024 increased by $15.0 million, or 7.8%, compared to the three months ended July 31, 2023. The increase was primarily driven by our continued investments in AI-first innovation, which consisted of a $10.4 million increase in salaries, payroll taxes and benefits as a result of increased headcount. The remaining increase is due to costs from AI-related software and facilities used in development.

Current wording

Research and development expense for the three months ended October 31, 2024 increased by $26.1 million, or 13.3%, compared to the three months ended October 31, 2023. The increase was primarily driven by our continued investments in AI-first innovation, which includes a $16.5 million increase in personnel-related expenses as a result of increased headcount. The remaining increase was due to costs from AI-related software and facilities used in development.

Previous wording

General and administrative expense for the three months ended July 31, 2024, decreased by $19.8 million, or 15.3%, compared to the three months ended July 31, 2023. The decrease was primarily due to a $8.3 million decrease in personnel-related expenses, including a $7.2 million decrease in stock-based compe nsation expense; and a$7.1 million decrease in legal expenses, including litigation settlements.

Current wording

General and administrative expense for the three months ended October 31, 2024, increased by $1.0 million, or 0.8%, compared to the three months ended October 31, 2023. The increase was primarily due toa$18.3 million increase in litigation settlements, partially offset bya $13.4 million decrease in personnel-related expenses, including a $10.2 million decrease in stock-based compe nsation expense.

Previous wording

Gains on strategic investments, net for the three months ended July 31, 2024, decreased by $28.6 million, or 90.2%, compared to the three months ended July 31, 2023. The decrease was mainly due to changes in the valuations of our publicly held securities.

Current wording

Gains on strategic investments, net for the three months ended October 31, 2024 was driven by changes in the valuations of our publicly and privately held securities, while losses on strategic investments, net, for the three months ended October 31, 2023 was mainly driven by unrealized losses recognized on our publicly held securities.

Previous wording

Other income, net for the three months ended July 31, 2024, increased by $46.3 million, or 112.8%, compared to the three months ended July 31, 2023. The increase was mainly due to a $44.8 million increase in investment yield from cash and marketable securities.

Current wording

Other income, net for the three months ended October 31, 2024, increased by $49.3 million, or 117.7%, compared to the three months ended October 31, 2023. The increase was due to a $29.3 million increase in investment yield from cash and marketable securities and a $20.3 million increase from changes in foreign currency exchange rates.

Previous wording

Provision for income taxes for the three months ended July 31, 2024 increased by $5.5 million, or 8.0%, compared to the three months ended July 31, 2023. The year-over-year change was primarily due to the increase in income before taxes.

Current wording

Provision for income taxes for the three months ended October 31, 2024 increased by $28.7 million, or 64.4%, compared to the three months ended October 31, 2023. The year-over-year change was primarily due to the increase in income before taxes.

Previous wording

Revenue for the six months ended July 31, 2024, increased by $59.7 million, or 2.7%, compared to the six months ended July 31, 2023. The increase in revenue was due to a 4.4% increase in revenue from subscription services provided to Enterprise customers, of which 47.0% and 53.0% were from existing and new customers, respectively. Revenue from Online customers remained flat year over year.

Current wording

Revenue for the nine months ended October 31, 2024, increased by $100.5 million, or 3.0%, compared to the nine months ended October 31, 2023. The increase in revenue was due to a 5.0% increase in revenue from subscription services provided to Enterprise customers, of which 58.4% and 41.6% were from existing and new customers, respectively. Revenue from Online customers remained flat year over year.

Previous wording

Cost of revenue for the six months ended July 31, 2024, increased by $27.9 million, or 5.3%, compared to the six months ended July 31, 2023. Theincrease was primarily due to a $45.9 million increase in hosting and infrastructure costs partially offset by a$10.9 million decrease in stock-based compensation and$7.1 million decrease in restructuring costs as a result of the prior year restructuring plan. The increase in hosting costs was due to the increased use of AI functionality along with investments to upgrade our data center backbone.

Current wording

Cost of revenue for the nine months ended October 31, 2024, increased by $40.8 million, or 5.1%, compared to the nine months ended October 31, 2023. Theincrease was primarily due to a $63.4 million increase in hosting and infrastructure costs partially offset by a$16.0 million decrease in stock-based compensation and$7.1 million decrease in restructuring costs as a result of the prior year restructuring plan. The increase in hosting costs was due to the increased use of AI functionality along with investments to upgrade our data center backbone.

Previous wording

Gross margin decreased to 75.8% for the six months ended July 31, 2024, from 76.4% for the six months ended July 31, 2023. The decrease in gross margin was mainly due to increased costs associated with the use of AI functionality along with investments to upgrade our data center backbone.

Current wording

Gross margin decreased to 75.8% for the nine months ended October 31, 2024, from 76.3% for the nine months ended October 31, 2023. The decrease in gross margin was mainly due to increased costs associated with the use of AI functionality along with investments to upgrade our data center backbone.

Previous wording

Research and development expense for the six months ended July 31, 2024, increased by $11.2 million, or 2.8%, compared to the six months ended July 31, 2023. The increase wasdriven by our continued investments in AI-first innovation, which consisted of a $21.2 million increase in personnel related expenses, including a$16.3 million increase in salaries, payroll taxes and benefits and a $4.9 million increase in stock-based compensation as a result of increased headcount, partially offset by $19.6 million decrease in restructuring costs as a result of the prior year restructuring plan. The remaining increase is due to costs from AI-related software and facilities used in development.

Current wording

Research and development expense for the nine months ended October 31, 2024, increased by $37.4 million, or 6.3%, compared to the nine months ended October 31, 2023. The increase wasdriven by our continued investments in AI-first innovation, which consisted of a$18.1 million increase in personnel related expenses, including a$29.6 million increase in salaries, payroll taxes and benefits and a $8.1 million increase in stock-based compensation as a result of increased headcount, partially offset by $19.6 million decrease in restructuring costs as a result of the prior year restructuring plan. The remaining increase is due to costs from AI-related software and facilities used in development.

Previous wording

Sales and marketing expense for the six months ended July 31, 2024, decreased by $89.1 million, or 11.2%, compared to the six months ended July 31, 2023. The decrease in sales and marketing expense was primarily due to a $68.7 million decrease in personnel-related expenses, which includes a $36.9 million decrease in stock-based compensation expense, and a $32.9 million decrease in restructuring costs as a result of the prior year restructuring plan; and a $9.8 million decrease in marketing spend and a $8.4 million decrease in commissions expense, which includes both internal and external costs.

Current wording

Sales and marketing expense for the nine months ended October 31, 2024, decreased by $101.8 million, or 8.7%, compared to the nine months ended October 31, 2023. The decrease in sales and marketing expense was primarily due to a $68.9 million decrease in personnel-related expenses, which includes a $42.7 million decrease in stock-based compensation expense and a $32.9 million decrease in restructuring costs as a result of the prior year restructuring plan; a $23.1 million decrease in marketing spend; and a $4.1 million decrease in commissions expense, which includes both internal and external costs.

Previous wording

General and administrative expense for the six months ended July 31, 2024 decreased by $108.3 million, or 32.9%, compared to the six months ended July 31, 2023. The decrease in general and administrative expenses was primarily due toa$58.9 million decrease in legal expenses, including litigation settlements; and a$26.1 million decrease in personnel-related expenses, which includes a $16.4 million decrease in stock-based compensation expense and$13.3 million decrease in restructuring costs as a result of the prior restructuring plan; and a$9.7 million decrease in bad debt expense.

Current wording

General and administrative expense for the nine months ended October 31, 2024 decreased by $107.3 million, or 23.6%, compared to the nine months ended October 31, 2023. The decrease in general and administrative expenses was primarily due toa$35.3 million decrease in litigation settlements; a$39.5 million decrease in personnel-related expenses, which includes a $26.5 million decrease in stock-based compensation expense and$13.3 million decrease in restructuring costs as a result of the prior restructuring plan; a$12.0 million decrease in bad debt expense; and a$6.7 million decrease in other legal related expenses.

Previous wording

Gains on strategic investments, net for the six months ended July 31, 2024, decreased by$13.5 million, or 39.7%, compared to thesix months ended July 31, 2023. The decrease was mainly due to changes in the valuations of our publicly and privately held securities.

Current wording

Gains on strategic investments, net for the nine months ended October 31, 2024, increased by$18.3 million, or 216.1%, compared to thenine months ended October 31, 2023. The increase was mainly due to changes in the valuations of our publicly and privately held securities.

Previous wording

Other income, net for the six months ended July 31, 2024, increased by $86.7 million, or 119.9%, compared to the six months ended July 31, 2023. The increase was mainly due to a $88.5 million increase in investment yield from cash and marketable securities.

Current wording

Other income, net for the nine months ended October 31, 2024, increased by $136.0 million, or 119.1%, compared to the nine months ended October 31, 2023. The increase was due to a $117.7 million increase in investment yield from cash and marketable securities and a $19.0 million increase from changes in foreign currency exchange rates.

Previous wording

Provision for income taxes for the six months ended July 31, 2024 increased by $53.3 million, or 55.5%, compared to the six months ended July 31, 2023. The year-over-year change was dueprimarily to the increase in income before taxes offset by a decrease in tax shortfalls on stock-based compensation and increases in the foreign-derived intangible income deduction.

Current wording

Provision for income taxes for the nine months ended October 31, 2024 increased by $82.1 million, or 58.3%, compared to the nine months ended October 31, 2023. The year-over-year change was dueprimarily to the increase in income before taxes offset by a decrease in tax shortfalls on stock-based compensation.

Previous wording

As of July 31, 2024, our principal sources of liquidity were cash, cash equivalents, and marketable securities of $7.5 billion, which were held for working capital purposes and for investment in growth opportunities. Our marketable securities generally consist of high-grade commercial paper, corporate bonds, agency bonds, corporate and other debt securities, U.S. government agency securities, and treasury bills.

Current wording

As of October 31, 2024, our principal sources of liquidity were cash, cash equivalents, and marketable securities of $7.7 billion, which were held for working capital purposes and for investment in growth opportunities. Our marketable securities generally consist of high-grade commercial paper, corporate bonds, agency bonds, corporate and other debt securities, U.S. government agency securities, and treasury bills.

Previous wording

We have financed our operations primarily through income from operations and sales of equity securities. Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, the recent macroeconomic shifts, such as high inflation, elevated interest rates, and the responses by central banking authorities, potential recessionary environments, and the fluctuations in foreign currency exchange rates, could impact the timing of cash collections from our customers and other risks detailed in the section titled “Risk Factors.” However, based on our current business plan and revenue prospects, we believe our existing cash, cash equivalents, and marketable securities, together with net cash provided by operations, will be sufficient to meet our needs for at least the next 12 months and allow us to capitalize on growth opportunities. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities and available cash balances. Our future capital requirements will depend on many factors, including our revenue growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support further sales and marketing and research and development efforts, as well as expenses associated with our international expansion, and the timing and extent of additional capital expenditures to invest in existing and new office spaces as well as data center infrastructure. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may choose or be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be materially and adversely affected.

Current wording

We have financed our operations primarily through income from operations and sales of equity securities. Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, the recent macroeconomic shifts, such as high inflation, elevated interest rates, and the responses by central banking authorities, potential recessionary environments, and the fluctuations in foreign currency exchange rates. These factors and other risks detailed in the section titled “Risk Factors” could impact the timing of cash collections from our customers. However, based on our current business plan and revenue prospects, we believe our existing cash, cash equivalents, and marketable securities, together with net cash provided by operations, will be sufficient to meet our needs for at least the next 12 months and allow us to capitalize on growth opportunities. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities and available cash balances. Our future capital requirements will depend on many factors, including our revenue growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support further sales and marketing and research and development efforts, as well as expenses associated with our international expansion, and the timing and extent of additional capital expenditures to invest in existing and new office spaces as well as data center infrastructure. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may choose or be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be materially and adversely affected.

Previous wording

Net cash provided by operating activities was $1,037.5 million for the six months ended July 31, 2024, compared to $754.5 million for the six months ended July 31, 2023. The increase in operating cash flow was primarily due to higher net income.

Current wording

Net cash provided by operating activities was $1,520.7 million for the nine months ended October 31, 2024, compared to $1,247.6 million for the nine months ended October 31, 2023. The increase in operating cash flow was primarily due to higher net income.

Previous wording

Net cash used in investing activities of $648.7 million for the six months ended July 31, 2024 was due to net purchases of marketable securities of $537.1 million, purchases of property and equipment of $102.7 million, and purchases of strategic investments of $13.5 million, partially offset by proceeds from strategic investments of $4.7 million.

Current wording

Net cash used in investing activities of $1,101.1 million for the nine months ended October 31, 2024 was due to net purchases of marketable securities of $964.3 million, purchases of property and equipment of $128.2 million, and purchases of strategic investments of $13.5 million, partially offset by proceeds from strategic investments of $4.9 million.

Previous wording

Net cash used in investing activities of $500.1 million for the six months ended July 31, 2023 was due to net purchases of marketable securities of $283.0 million, cash paid for acquisition, net of cash acquired, of $204.9 million, purchases of property and equipment of $68.4 million, and purchases of strategic investments of $51.0 million, partially offset by proceeds from strategic investments of $107.2 million.

Current wording

Net cash used in investing activities of $864.4 million for the nine months ended October 31, 2023 was due to net purchases of marketable securities of $605.5 million, cash paid for acquisition, net of cash acquired, of $204.9 million, purchases of property and equipment of $108.4 million, and purchases of strategic investments of $52.8 million, partially offset by proceeds from strategic investments of $107.2 million.

Previous wording

Net cash used in financing activities of $398.7 million for the six months ended July 31, 2024 was due to cash paid for repurchases of common stock of $437.7 million, partially offset by proceeds from issuance of common stock under our ESPP of $34.3 million, proceeds from employee equity transactions to be remitted to employees and tax authorities, net, of $2.9 million and proceeds from the exercise of stock options of $1.9 million.

Current wording

Net cash used in financing activities of $699.1 million for the nine months ended October 31, 2024 was due to cash paid for repurchases of common stock of $739.3 million, partially offset by proceeds from issuance of common stock under our ESPP of $34.3 million, proceeds from the exercise of stock options of $3.8 million, and proceeds from employee equity transactions to be remitted to employees and tax authorities, net, of $2.2 million.

Previous wording

Net cash used in financing activities of $41.5 million for the six months ended July 31, 2023 was primarily due to proceeds from issuance of common stock under our ESPP of $32.5 million and proceeds from the exercise of stock options of $7.7 million.

Current wording

Net cash used in financing activities of $36.0 million for the nine months ended October 31, 2023 was primarily due to proceeds from issuance of common stock under our ESPP of $32.5 million and proceeds from the exercise of stock options of $8.3 million.