Pure Storage Inc

Note 1. Business Overview

Pure Storage, Inc. (the Company, we, us, or other similar pronouns) was originally incorporated in the state of Delaware in October 2009 under the name OS76, Inc. In January 2010, we changed our name to Pure Storage, Inc. We are headquartered in Santa Clara, California and have wholly owned subsidiaries throughout the world.

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

We operate using a 52/53 week fiscal year ending on the first Sunday after January 30, which for fiscal 2024 was February 4, 2024 and for fiscal 2025 will be February 2, 2025. The third quarter of fiscal 2024 and 2025 ended on November 5, 2023 and November 3, 2024. Unless otherwise stated, all dates refer to our fiscal year and fiscal quarters.

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

Unaudited Interim Consolidated Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for fiscal 2024.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year 2025 or any future period.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ from these estimates and assumptions due to risks and uncertainties. Such estimates include, but are not limited to, the determination of standalone selling price for revenue arrangements with multiple performance obligations when the price at which the performance obligation sold separately or observable past transactions are not available, useful lives of intangible assets and property and equipment, the period of benefit for deferred contract costs for commissions, stock-based compensation, provision for income taxes including related reserves, fair value of leases and impairment of related right-of-use (ROU) assets, fair value of equity assumed, intangible and tangible assets acquired and liabilities assumed for business combinations. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

In accordance with our accounting practices, we review the estimated useful lives of our property and equipment on an ongoing basis. In the third quarter of fiscal 2025, management determined that the estimated useful lives of certain property and equipment had changed. The estimated useful lives of test and infrastructure equipment and assets for our Evergreen//One offering were revised from 4 years to a range of 5 to 7 years. The change in estimated useful lives will be recognized on a prospective basis effective at the beginning of the third quarter of fiscal 2025. The effect of this change in estimate resulted in an aggregate reduction to depreciation expense and corresponding increase in net income of $9.6 million, or $0.03 per basic and diluted share, during the third quarter and first three quarters of fiscal 2025.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. ASU 2023-07 will be effective for our fiscal year beginning February 5, 2024, and interim periods within our fiscal year beginning February 3, 2025, with early adoption permitted and requires application on a fully retrospective basis. We are currently evaluating the impact of this standard on our financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires greater disaggregation of tax information in rate reconciliation and income taxes paid by jurisdiction. ASU 2023-09 will be effective for our fiscal year beginning February 3, 2025, with early adoption permitted. We are currently evaluating the impact of this standard on our financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosures of specific expense categories included within each expense caption presented on the Statements of Operations. The new standard can be applied on either a fully retrospective or prospective basis. ASU 2024-03 will be effective for our fiscal year beginning February 1, 2027, and interim periods within our fiscal year beginning February 7, 2028, with early adoption permitted. We are currently evaluating the impact of this new standard on our financial statement disclosures.

Note 3. Financial Instruments

Fair Value Measurements

We define fair value as the exchange price that would be received from sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We measure our financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Three levels of inputs may be used to measure fair value:

•Level 1 - Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities;

•Level 2 - Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments; and

•Level 3- Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs are based on our own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.

Cash Equivalents, Marketable Securities and Restricted Cash

We measure our cash equivalents, marketable securities, and restricted cash at fair value on a recurring basis. We classify our cash equivalents, marketable securities and restricted cash within Level 1 or Level 2 because they are valued using either quoted market prices or inputs other than quoted prices which are directly or indirectly observable in the market, including readily-available pricing sources for the identical underlying security which may not be actively traded. Our fixed income available-for-sale securities consist of high quality, investment grade securities from diverse issuers. The valuation techniques used to measure the fair value of our marketable securities were derived from non-binding market consensus prices that are corroborated by observable market data or quoted market prices for similar instruments. The following tables summarize our cash equivalents, marketable securities and restricted cash by significant investment categories and their classification within the fair value hierarchy at the end of fiscal 2024 and the third quarter of fiscal 2025 (in thousands):

The amortized cost and estimated fair value of our marketable securities are shown below by contractual maturity (in thousands):

Unrealized losses on our marketable securities have not been recorded into income because we do not intend to sell nor is it more likely than not that we will be required to sell these investments prior to recovery of their amortized cost basis. The fair value of our marketable securities is impacted by the interest rate environment and related credit spreads. The credit ratings associated with our marketable securities are highly rated and the issuers continue to make timely principal and interest payments. As a result, there wereno credit or non-credit impairment charges recorded in the third quarter and the first three quarters of fiscal 2024 and 2025.

The following table presents gross unrealized losses and fair values for those investments that were in a continuous unrealized loss position at the end of fiscal 2024 and the third quarter of fiscal 2025, aggregated by investment category (in thousands):

Realized gains or losses on sale of marketable securities were not significant for all periods presented.

Other Financial Instruments

The investments held in our nonqualified deferred compensation plan trust are considered trading securities that are measured at fair value using Level 1 inputs. The fair value of these investments was $3.2 million and $7.4 million at the end of fiscal 2024 and the third quarter of fiscal 2025.

Note 4. Balance Sheet Components

Inventory

Inventory consists of the following (in thousands):

Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):

Depreciation and amortization expense related to property and equipment was $28.7 million and $24.9 million for the third quarter of fiscal 2024 and 2025, and $82.5 million and $89.1 million for the first three quarters of fiscal 2024 and 2025.

Intangible Assets, Net

Intangible assets, net consist of the following (in thousands):

Intangible assets amortization expense was $4.0 million and $3.9 million for the third quarter of fiscal 2024 and 2025, and $12.3 million and $11.7 million for the first three quarters of fiscal 2024 and 2025. At the end of the third quarter of fiscal 2025, the weighted-average remaining amortization period was 1.0 years for technology patents,1.3 years for developed technology, and 2.9 years for customer relationships. We record amortization of technology patents in general and administrative expenses due to their defensive nature, developed technology in cost of product revenue, and customer relationships in sales and marketing expenses in the condensed consolidated statements of operations.

At the end of the third quarter of fiscal 2025, future expected amortization expense for intangible assets is as follows (in thousands):

Goodwill

As of the end of fiscal 2024 and the third quarter of fiscal 2025, goodwill was $361.4 million. There wereno impairments to goodwill for the third and first three quarters of fiscal 2024 and 2025.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following (in thousands):

(1)Primarily consists of subscription cloud services and outside services costs.

(2)Primarily consists of warranty reserves and accruals related to inventory and inventory purchase commitments with our contract manufacturers.

Note 5. Deferred Revenue and Commissions

Deferred Commissions

Deferred commissions consist of incremental costs paid to our sales force to obtain customer contracts.

Changes in total deferred commissions during the periods presented are as follows (in thousands):

Of the $297.5 million total deferred commissions balance at the end of the third quarter of fiscal 2025, we expect to recognize approximately 29% as commission expense over the next 12 months and the remainder thereafter.

There wasno impairment related to capitalized commissions for the third quarter and first three quarters of fiscal 2024 and 2025.

Deferred Revenue

Deferred revenue primarily consists of amounts that have been invoiced but have not yet been recognized as revenue including performance obligations pertaining to subscription services.

Changes in total deferred revenue during the periods presented are as follows (in thousands):

Revenue recognized during the third quarter of fiscal 2024 and 2025 from deferred revenue at the beginning of each respective period was $280.4 million and $310.6 million. Revenue recognized during the first three quarters of fiscal 2024 and 2025 from deferred revenue at the beginning of each respective period was $589.1 million and $703.5 million.

Remaining Performance Obligations

Total remaining performance obligations (RPO) which is contracted but not recognized revenue was $2.4 billion at the end of the third quarter of fiscal 2025. Total RPO includes $35.7 million in remaining non-cancelable product orders, of which $13.5 million relates to a lessor arrangement that is further discussed in Note 8. RPO consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods. Product orders are generally cancelable until delivery has occurred, and as such, unfulfilled product orders that are cancelable are excluded from RPO. Of the $2.4 billion RPO at the end of the third quarter of fiscal 2025, we expect to recognize approximately 47% over the next 12 months, and the remainder thereafter.

Note 6. Debt

Revolving Credit Facility

In August 2020, we entered into a Credit Agreement with a consortium of financial institutions and lenders that provides for afive-year, senior secured revolving credit facility of $300.0 million (Credit Facility). Proceeds from the Credit Facility may be used for general corporate purposes and working capital. The Credit Facility expires, absent default or termination by us, on August 24, 2025.

Effective April 1, 2023, the Credit Facility was amended to transition LIBOR to the Secured Overnight Financing Rate (SOFR). The annual interest rates applicable to loans under the Credit Facility are, at our option, equal to either a base rate plus a margin ranging from 0.50% to 1.25% or term SOFR (based on one, three or six-month interest periods), subject to a floor of 0%, plus a margin ranging from 1.50% to 2.25%. Interest on revolving loans is payable quarterly in arrears with respect to loans based on the base rate and at the end of an interest period in the case of loans based on term SOFR (or at each three-month interval if the interest period is longer than three months). We are also required to pay a commitment fee on the unused portion of the commitments ranging from 0.25% to 0.40% per annum, payable quarterly in arrears.

In April 2023, we borrowed $100.0 million under the Credit Facility which remained outstanding at the end of the third quarter of fiscal 2025. The outstanding loan bore weighted-average interest at an annual rate of 6.81% and 6.62% during the third quarter of fiscal 2024 and 2025 and 6.62% and 6.76% during the first three quarters of fiscal 2024 and 2025 based on a one-month term SOFR period. Interest expense was not material for the third quarter and first three quarters of fiscal 2024 and 2025.

Borrowings under the Credit Facility are collateralized by substantially all of our assets and subject to certain restrictions andtwo financial ratios measured as of the last day of each fiscal quarter: a consolidated leverage ratio not to exceed 4.5:1 and an interest coverage ratio not to be less than 3:1. We were in compliance with all covenants under the Credit Facility at the end of the third quarter of fiscal 2025.

Note 7. Commitments and Contingencies

Letters of Credit

At the end of fiscal 2024 and the third quarter of fiscal 2025, we had outstanding letters of credit in the aggregate amount of $7.7 million and $7.2 million in connection with our facility leases. The letters of credit are collateralized by either restricted cash or the Credit Facility and mature on various dates through September 2030.

Legal Matters

From time to time, we have become involved in claims and other legal matters arising in the normal course of business. We investigate these claims as they arise. Although claims are inherently unpredictable, we currently are not aware of any matters that we expect to have a material adverse effect on our business, financial position, results of operations or cash flows. Accordingly, no material loss contingency has been recorded on our condensed consolidated balance sheet as of the end of the third quarter of fiscal 2025.

Indemnification

Our arrangements generally include certain provisions for indemnifying customers against liabilities if our products or services infringe a third party’s intellectual property rights. Other guarantees or indemnification arrangements include guarantees of product and service performance and standby letters of credit for lease facilities. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, we have not incurred any material costs as a result of such obligations and have not accrued any liabilities related to such obligations in the condensed consolidated financial statements. In addition, we indemnify our officers, directors and certain key employees while they are serving in good faith in their respective capacities. To date, there have been no claims under any indemnification provisions.

Note 8. Leases

We lease office and data center facilities under non-cancelable operating lease agreements expiring through July 2032. Our lease agreements do not contain any material residual value guarantees or restrictive covenants.

We also lease certain engineering test equipment under financing agreements. These finance leases have a lease term ofthree years and contain a bargain purchase option that we expect to exercise at the end of the respective lease term.

The components of lease costs during the periods presented were as follows (in thousands):

(1)Variable lease cost predominantly included common area maintenance charges.

Supplemental information related to leases is as follows (in thousands):

(1)Included in the condensed consolidated balance sheets within property and equipment, net.

(2)Included in the condensed consolidated balance sheets within accrued expenses and other liabilities.

(3)Included in the condensed consolidated balance sheets within other liabilities, non-current.

Supplemental cash flow information related to leases is as follows (in thousands):

Future lease payments under our non-cancelable leases at the end of the third quarter of fiscal 2025 were as follows (in thousands):

Lessor Arrangement

During the fourth quarter of fiscal 2024, we, as a lessor, entered into a non-cancelable arrangement with a customer (lessee) to lease our data storage solutions and subscription services. The arrangement includes three seven-year leases that commence in the first, second and fourth quarters of fiscal 2025 with total net consideration of $76.6 million, and provides the lessee with an end-of-term option to purchase the leased assets for a pre-determined price.

We determined, at inception of the arrangement, that each of thethree seven-year leases included multiple components. These components include sales-type leases, an operating lease, and non-lease components. The total net consideration for each lease was allocated to these components based on relative standalone selling price. The amounts allocated to the lease and non-lease components are accounted for in accordance with ASC 842 and ASC 606, respectively. Lease income associated with sales-type leases are classified as product revenue and lease income associated with operating leases and non-lease components are classified primarily as subscription services revenue on our condensed consolidated statements of operations.

The total net consideration fortwo of theseven-year leases that commenced in the first and second quarters of fiscal 2025 (First Two Leases) was $50.6 million. We recognized $15.2 million in product revenue related to the sales-type lease components during the first three quarters of fiscal 2025. The associated profit was $11.4 million, based on the product revenue recognized less certain costs, during the first three quarters of fiscal 2025. Subscription services revenue related to the operating lease and non-lease components recognized during the third quarter and first three quarters of fiscal 2025 were $2.7 million and $4.8 million.

Future minimum gross lease payments for the two seven-year leases allocated to the sales-type leases and operating lease components were as follows (in thousands). The remaining lease payments of $35.9 million allocated to the non-lease components, are excluded from the table below.

Note 9. Restructuring and Impairment

Workforce Realignment

In February 2024, we initiated a workforce realignment plan (the Plan) that impacted nearly 250 employees globally, resulting in total restructuring costs of $27.9 million associated with one-time severance and other termination benefits. We recognized $18.0 million in restructuring costs in the fourth quarter of fiscal 2024 and the remaining $9.9 million was recognized in the first quarter of fiscal 2025. Of the restructuring costs recognized in the first quarter of fiscal 2025, $9.5 million is presented in restructuring and impairment and $0.4 million is presented in cost of revenue in our condensed consolidated statement of operations for the first three quarters of fiscal 2025. The execution of the Plan and related payments was completed by the end of the third quarter of fiscal 2025.

Facilities Abandonment and Impairment

During the first three quarters of fiscal 2024, we recognized $16.8 million in abandonment and impairment charges related to leases associated with our former corporate headquarters that we ceased use during the second quarter of fiscal 2024. The impairment charge represents the amount that the carrying value of the underlying operating lease right-of-use assets exceeded their estimated fair values, which were determined by utilizing a discounted cash flow approach that incorporated a sublease assumption. During the first three quarters of fiscal 2025, we recognized $6.4 million in incremental abandonment and impairment charges related to these leases. The incremental impairment charge was due to a revision to the underlying sublease assumptions during the first quarter of fiscal 2025.

Note 10. Stockholders’ Equity

Preferred Stock

We have 20.0 million authorized shares of undesignated preferred stock, the rights, preferences and privileges of which may be designated from time to time by our Board of Directors. At the end of the third quarter of fiscal 2025, there wereno shares of preferred stock issued or outstanding.

Class A and Class B Common Stock

We havetwo classes of authorized common stock, Class A common stock, which we refer to as our “common stock”, and Class B common stock. At the end of the third quarter of fiscal 2025, we had 2.0 billion authorized shares of Class A common stock and 250.0 million authorized shares of Class B common stock, with each class having a par value of $0.0001 per share. At the end of the third quarter of fiscal 2025,327.1 million shares of Class A common stock were issued and outstanding.

Share Repurchase Program

In February 2024, our Board of Directors authorized an additional $250.0 million to repurchase shares of our common stock, increasing the total remaining authorization amount to $395.4 million. During the third quarter and first three quarters of fiscal 2025, we repurchased and retired approximately 3.6 million shares of our common stock at an average purchase price of $50.53 per share for an aggregate repurchase price of $182.0 million. At the end of the third quarter of fiscal 2025, $213.4 million remained available for future share repurchases under our current repurchase authorization.

Note 11. Equity Incentive Plans

Equity Incentive Plans

We maintaintwo equity incentive plans: the 2009 Equity Incentive Plan (the 2009 Plan) and the 2015 Equity Incentive Plan (the 2015 Plan). The 2015 Plan serves as the successor to our 2009 Plan and provides for grants of incentive stock options to our employees and non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based stock and cash awards, market-based stock awards, and other forms of stock awards to our employees, directors and consultants. Our equity awards generally vest over atwo tofour year period and expire no later thanten years from the date of grant.

In June 2024, we extended the net-share settlement of equity awards to the majority of our employees by withholding shares upon vesting to satisfy tax withholding obligations whereas previously, shares were sold to cover such tax withholding obligations. Approximately 1.1 million shares and 2.5 million shares were withheld to cover $55.3 million and $144.0 million in tax withholding obligations during the third quarter and first three quarters of fiscal 2025. The shares withheld to satisfy employee tax withholding obligations are returned to our 2015 Plan and will be available for future issuance. Payments for employees’ tax obligations to the tax authorities are recognized as a reduction to additional paid-in capital and reflected as a financing activity in our condensed consolidated statements of cash flows.

2015 Amended and Restated Employee Stock Purchase Plan

Under our Amended and Restated 2015 Employee Stock Purchase Plan (2015 ESPP), our Board of Directors (or a committee thereof) has the authority to establish the length and terms of the offering periods and purchase periods and the purchase price of the shares of common stock which may be purchased under the plan. The current offering terms allow eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 30% of their eligible compensation, subject to a cap of 3,000 shares on any purchase date, a dollar cap of $7,500 per purchase period, or $25,000 in any calendar year (as determined under applicable tax rules). The current terms also allow for a 24-month offering period beginning March 16th and September 16th of each year, with each offering period consisting offour 6-month purchase periods, subject to a reset provision. Further, currently, on each purchase date, eligible employees may purchase our common stock at a price per share equal to 85% of the lesser of the fair market value of our common stock (1) on the first trading day of the applicable offering period or (2) the purchase date.

Under the reset provision currently authorized, if the closing stock price on the offering date of a new offering falls below the closing stock price on the offering date of an ongoing offering, the ongoing offering would terminate immediately following the purchase of ESPP shares on the purchase date immediately preceding the new offering and participants in the terminated offering would automatically be enrolled in the new offering (ESPP reset), resulting in a modification charge to be recognized over the new offering period. An ESPP reset occurred during the first quarter of fiscal 2024 that resulted in a modification charge of $16.7 million, which is being recognized over an offering period ending March 15, 2025.

Stock-based compensation expense related to our 2015 ESPP was $7.1 million and $8.9 million during the third quarter of fiscal 2024 and 2025, and $19.7 million and $25.2 million during the first three quarters of fiscal 2024 and 2025. At the end of the third quarter of fiscal 2025, total unrecognized stock-based compensation cost related to our 2015 ESPP was $22.5 million, which is expected to be recognized over a weighted-average period of 1.0 year.

Stock Options

A summary of the stock option activity under our equity incentive plans and related information is as follows:

The aggregate intrinsic value of options vested and exercisable at the end of the third quarter of fiscal 2025 is calculated based on the difference between the exercise price and the closing price of $50.95 of our common stock on the last day of the third quarter of fiscal 2025.

Stock-based compensation expense related to stock options has been fully recognized and was not material for the third quarter of fiscal 2024 and the first three quarters of fiscal 2024 and 2025.

Restricted Stock Units (RSUs)

A summary of the RSU activity under our equity incentive plans and related information is as follows:

Stock-based compensation expense related to RSUs was $68.9 million and $80.2 million during the third quarter of fiscal 2024 and 2025, and $199.0 million and $227.6 million during the first three quarters of fiscal 2024 and 2025. At the end of the third quarter of fiscal 2025, total unrecognized stock-based compensation cost related to unvested RSUs was $719.6 million, which is expected to be recognized over a weighted-average period of 2.7 years.

Performance-based Restricted Stock Units (PRSUs)

The number of shares that could be earned under our PRSU grants ranges from 0% to 200% of the target number granted depending on the achievement of certain performance conditions with any unearned shares canceled. Generally, the number of earned shares vest over three years from the date of grant subject to continuous service.

A summary of the PRSU activity under our equity incentive plans and related information is as follows:

(1) Represents the number of shares that may be earned at the target percentage of 100% depending on the achievement of fiscal 2025 or certain other performance conditions.

(2) Represents the number of shares earned in which the service condition has also been satisfied.

(3) Represents the number of shares canceled as a result of not fully achieving the fiscal 2024 performance conditions.

Stock-based compensation expense related to PRSUs was $7.6 million and $8.6 million during the third quarter of fiscal 2024 and 2025, and $28.5 million and $55.2 million during the first three quarters of fiscal 2024 and 2025. At the end of the third quarter of fiscal 2025, total unrecognized stock-based compensation cost related to unvested PRSUs was $32.5 million, which is expected to be recognized over a weighted-average period of 2.2 years.

During the first quarter of fiscal 2025, our Board of Directors approved a discretionary adjustment, increasing the earned number of shares to 80 percent of the target for the PRSUs granted in fiscal 2024. Our Board of Directors’ consideration included that fiscal 2024 total revenue growth was impacted by Total Contract Value (TCV) sales growth of our consumption based Evergreen//One and Evergreen//Flex offerings, which far exceeded expectations. This modification resulted in additional stock-based compensation expense of approximately $40.7 million, of which $2.6 million and $34.5 million were recognized during the third quarter and first three quarters of fiscal 2025 with the remaining amount to be recognized over the remaining vesting period.

Long-Term Performance Incentive RSUs (LTP Awards)

In June 2023, we granted market-based LTP Awards to certain executives with an aggregate maximum number of shares of common stock of approximately 4.2 million.

•The total number of shares earned are subject to continuous service through March 20, 2028 and upon vesting, the number of shares vested will be subject to aone-year post-vest holding period.

•The number of shares earned are contingent upon our market capitalization meeting or exceeding $21.0 billion that will be measured over an approximate three tofive year period, at the end of our fiscal years ending in 2026, 2027 and 2028.

Total stock-based compensation expense of $73.9 million for these awards is being recognized over the requisite service period of nearly five years using the accelerated attribution method and is not reversed if the market condition is not ultimately met. There were approximately 4.0 million in remaining unvested and outstanding LTP Awards with an aggregate intrinsic value of $204.1 million at the end of the third quarter of fiscal 2025. Stock-based compensation expense related to LTP Awards was $3.9 million and $3.4 million during the third quarter of fiscal 2024 and 2025, and $6.3 million and $10.7 million during the first three quarters of fiscal 2024 and 2025. At the end of the third quarter of fiscal 2025, total unrecognized stock-based compensation cost related to unvested LTP Awards was $49.0 million, which is expected to be recognized over a weighted-average period of 3.4 years.

Stock-Based Compensation Expense

The following table summarizes the components of stock-based compensation expense recognized in the condensed consolidated statements of operations (in thousands):

(1) Stock-based compensation expense capitalized was $1.5 million and $2.2 million during the third quarter of fiscal 2024 and 2025, and $3.9 million and $5.8 million for the first three quarters of fiscal 2024 and 2025 .

The tax benefit related to stock-based compensation expense for all periods presented was not material.

Note 12. Net Income (Loss) per Share Attributable to Common Stockholders

Basic and diluted net income (loss) per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities. Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase. Diluted net income (loss) per share attributable to common stockholders is computed by giving effect to all potentially dilutive common stock equivalents, including our outstanding stock options, common stock related to unvested RSUs, PRSUs, and LTP Awards, the shares underlying the conversion option in our Notes (prior to the Notes being repaid in April 2023) to the extent dilutive, and common stock issuable pursuant to the ESPP. We used the if-converted method to calculate the impact of our Notes, prior to the Notes being repaid, on diluted EPS. In periods of net loss, all potentially dilutive common stock equivalents 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 income (loss) per share attributable to common stockholders (in thousands, except per share data):

The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net income (loss) per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive (in thousands):

Note 13. Other Income (Expense), Net

Other income (expense), net consists of the following (in thousands):

(1)Interest income includes interest income related to our cash, cash equivalents and marketable securities and non-cash interest income (expense) related to accretion (amortization) of the discount (premium) on marketable securities.

(2) Interest expense includes non-cash interest expense related to amortization of debt issuance costs, contractual interest expense related to our debt and accretion of our finance lease liabilities.

Note 14. Income Taxes

Our provision for income tax primarily reflects taxes on international operations and U.S. income taxes. The difference between the income tax provision that would be derived by applying the statutory rate to our loss before provision for income taxes and the income tax provision recorded was primarily attributable to our valuation allowance on U.S. deferred tax assets, research and development credits, U.S. taxes on foreign income, stock-based compensation expense and state taxes driven by Internal Revenue Code Section 174.

At the end of the third quarter of fiscal 2025, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for fiscal 2024.

Note 15. Segment Information

Our chief operating decision maker is our Chief Executive Officer. Our chief operating decision maker reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, we have a single reportable segment.

Disaggregation of Revenue

The following table depicts the disaggregation of revenue by geographic area based on the billing address of our customers and is consistent with how we evaluate our financial performance (in thousands):

Long-Lived Assets by Geographic Area

Long-lived assets, which are comprised of property and equipment, net, by geographic area are summarized as follows (in thousands):