Everpure, Inc.

Note 1. Business Overview

Organization and Description of Business

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. Fiscal 2023, 2024, and 2025 were 52-week years that ended on February 5, 2023, February 4, 2024 and February 2, 2025, respectively. Unless otherwise stated, all dates refer to our fiscal years.

The consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States (U.S. GAAP). All intercompany balances and transactions have been eliminated in consolidation.

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, fair value for certain stock-based awards, provision for income taxes including related reserves, fair value of leases and impairment of related right-of-use (ROU) assets. 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.

Foreign Currency

The functional currency of our foreign subsidiaries is the U.S. dollar. Transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the average exchange rate in effect during the period. At the end of each reporting period, monetary assets and liabilities are remeasured using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Foreign currency transaction gains and losses are recorded in other income (expense), net in the consolidated statements of operations.

Concentration Risk

Financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents, marketable securities, and accounts receivable. At the end of fiscal 2024 and 2025, the majority of our cash and cash equivalents are primarily invested withtwo global financial institutions and our deposits exceed federally insured limits. Thesetwo global financial institutions were identified by the Financial Stability Board in 2024 as being global systemically important banks and are allocated to buckets 3 or higher. Our investments are intended to facilitate liquidity and capital preservation and consist predominantly of highly-rated fixed income securities. Our investment policy also requires diversification of investment type and credit exposures, and includes certain limits on portfolio duration. Management believes that the financial institutions that hold our cash, cash equivalents and marketable securities are financially sound and, accordingly, are subject to minimal credit risk.

We define a customer as an entity that purchases our products and services from one of our channel partners or from us directly. A substantial amount of our revenue and accounts receivable are derived from the United States across a multitude of industries. We perform ongoing evaluations to determine partner and customer credit.

No customer or channel partner represented more than 10 percent of revenue for fiscal 2023 and 2025. One customer represented more than 10 percent of total accounts receivable at the end of fiscal 2024 and 2025 and more than 10 percent of revenue for fiscal 2024.

We rely on a limited number of contract manufacturers and suppliers of components for our products. In instances where contract manufacturers and suppliers fail to perform their obligations, we may be unable to find alternative contract manufacturers and suppliers or satisfactorily deliver our products to our customers on time.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash in banks and highly liquid investments, primarily money market accounts and U.S. government treasury notes, purchased with an original maturity of three months or less.

Marketable Securities

We classify our marketable securities as available-for-sale (AFS) at the time of purchase and reevaluate such classification at each balance sheet date. We may sell these securities at any time for use in current operations even if they have not yet reached maturity. As a result, we classify our securities, including those with maturities beyond twelve months, as current assets in the consolidated balance sheets. We carry these securities at estimated fair value and record unrealized gains and losses in accumulated other comprehensive income (loss), which is reflected as a component of stockholders’ equity. We evaluate our AFS debt securities with an unamortized cost basis in excess of estimated fair value to determine what amount of that difference, if any, is caused by expected credit losses. Credit-related impairment losses, not to exceed the amount that fair value is less than the amortized cost basis, are recognized through an allowance for credit losses with changes in the allowance for credit losses recognized as a charge to other income (expense), net, in the consolidated statements of operations. Any remaining impairment is included in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Realized gains and losses from the sale of marketable securities are determined based on the specific identification method and are reported in other income (expense), net in the consolidated statements of operations.

Strategic Investments

Our strategic investments consist primarily of equity investments in privately-held companies without readily determinable fair values in which we do not own a controlling interest or exercise significant influence. These investments are recorded at cost using the fair value measurement alternative and are adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer or impairment events. Additionally, we assess these investments quarterly for impairment. Adjustments and impairments, if any, are recorded in other income (expense), net on the consolidated statements of operations.

Nonqualified Deferred Compensation Plan (NQDC)

Deferred compensation payments are held in investment accounts within a consolidated NQDC trust. The trust is classified in other assets, non-current on the consolidated balance sheets as the funds in the trust are not available for use in our operations. The value of the trust is adjusted each quarter based on the fair value of the underlying investments which are considered trading securities, with unrealized gains and losses classified as other income (expense), net in the consolidated statements of operations.

Our obligation with respect to the NQDC trust is recorded in other liabilities, non-current on the consolidated balance sheets. Increases or decreases in the fair value of the NQDC trust liability are recognized as compensation expense in the consolidated statements of operations. There is no net impact to our net income from the fair value adjustments as changes in the fair value of the investment accounts held in the NQDC trust and the NQDC trust liability offset.

Fair Value of Financial Instruments

The carrying value of our financial instruments, including cash equivalents, accounts receivable, accounts payable, accrued liabilities, and debt, approximates fair value.

Accounts Receivable and Allowance

Accounts receivable are recorded at the invoiced amount, and stated at realizable value, net of an allowance for doubtful accounts. Credit is extended to partners and customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations and maintain an allowance for doubtful accounts.

We assess the collectability of the accounts by taking into consideration the aging of our trade receivables, historical experience, and management judgment. We write off trade receivables against the allowance when management determines a balance is uncollectible and no longer actively pursues collection of the receivable.

Changes to the allowance for doubtful accounts balance during fiscal 2023, 2024 and 2025 were not material.

Restricted Cash

Restricted cash is associated with our letters of credit for leases and certain employee-related benefits. At the end of fiscal 2024 and 2025, we had restricted cash of $9.6 million and $14.2 million. Our restricted cash balance at the end of fiscal 2025 includes $1.6 million in prepaid expenses and other current assets on our consolidated balance sheets.

Inventory

Inventory consists of finished goods and component parts, which are purchased from contract manufacturers. Product demonstration units, which we regularly sell, are the primary component of our inventories. Inventories are stated at the lower of cost or net realizable value. Cost is determined using the specific identification method for finished goods and weighted-average method for component parts. We account for excess and obsolete inventory by reducing the carrying value to the estimated net realizable value of the inventory based upon management’s assumptions about future demand and market conditions.

In addition, we record a liability for firm, non-cancelable and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of future demand forecasts consistent with excess and obsolete inventory valuations. The liabilities for these purchase commitments amounted to $23.6 million and $13.6 million at the end of fiscal 2024 and 2025 and are reported in accrued expenses and other liabilities on the consolidated balance sheets.

Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the respective assets (test and infrastructure equipment—5 to 7 years, computer equipment and software—4 to 7 years, furniture and fixtures—7 years). Leasehold improvements are amortized over the shorter of their estimated useful lives or the remaining lease term. Depreciation commences once the asset is placed in service.

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 our test and infrastructure equipment and assets supporting our Evergreen//One offerings should be revised from 4 years to a range of 5 to 7 years. The change in estimated useful lives was 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 $20.1 million, or $0.06 per basic and diluted share, during fiscal 2025.

Goodwill

Goodwill represents the excess of the purchase price consideration over the estimated fair value of the tangible and intangible assets acquired and liabilities assumed in a business combination. Goodwill is evaluated for impairment annually in the fourth quarter of our fiscal year as a single reporting unit, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. We may elect to qualitatively assess whether it is more likely than not that the fair value of our reporting unit is less than its carrying value. If we opt not to qualitatively assess, a quantitative goodwill impairment test is performed. The quantitative test compares our reporting unit’s carrying amount, including goodwill, to its fair value calculated based on our enterprise value. If the carrying amount exceeds its fair value, an impairment loss is recognized for the excess.

Purchased Intangible Assets

Purchased intangible assets with finite lives are stated at cost, net of accumulated amortization. We amortize our intangible assets on a straight-line basis over an estimated useful life ofthree toseven years.

Impairment of Long-Lived Assets

We review our long-lived assets, including property and equipment, finite-lived intangible assets and ROU assets associated with leased facilities, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. We measure the recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If the total of the future undiscounted cash flows is less than the carrying amount of an asset, we record an impairment charge for the amount by which the carrying amount of the asset exceeds its fair value.

Deferred Commissions

Deferred commissions consist of variable sales costs paid to our sales force to obtain customer contracts. Deferred commissions related to product revenue are recognized upon transfer of control to customers. As the deferred commissions paid for initial contracts are not commensurate with the amounts paid for renewal contracts, such amounts are amortized over an expected benefit period ofsix years. We determine the expected benefit period by evaluating our technology development life cycle, expected customer relationship period and other factors. Deferred commissions paid for renewal contracts are amortized over the related contractual period. We classify deferred commissions as current and non-current in our consolidated balance sheets based on the timing of when we expect to recognize the expense. Amortization of deferred commissions is included in sales and marketing expense in the consolidated statements of operations.

Lessee Leases

We assess whether an arrangement contains a lease at inception and, if so, we evaluate the classification of the lease as operating or finance. Lease liabilities are recognized at the present value of the future lease payments at commencement date. The interest rate implicit in our operating and finance leases is not readily determinable, and therefore an incremental borrowing rate is estimated to determine the present value of future payments. The estimated incremental borrowing rate factors in a hypothetical interest rate on a collateralized basis with similar terms, payments, and economic environments. The lease ROU asset is determined based on the lease liability initially established and reduced for any prepaid lease payments and any lease incentives. We account for the lease and non-lease components of operating and finance lease contract consideration as a single lease component.

Certain of the operating lease agreements contain rent concession, rent escalation, and option to renew provisions. Rent concession and rent escalation provisions are considered in determining the lease cost. Lease cost under our operating leases is recognized on a straight-line basis over the lease term commencing on the date we have the right to use the leased property. We generally use the base, non-cancelable, lease term when recognizing the lease assets and liabilities, unless it is reasonably certain that an extension or termination option will be exercised. In addition, certain of our operating lease agreements contain tenant improvement allowances from our landlords. These allowances are accounted for as lease incentives and reduce our ROU asset and lease cost over the lease term.

For short-term leases (defined as leases that, at the commencement date, have a lease term of twelve months or less, and do not include an option to purchase the underlying asset that we are reasonably certain to exercise), we recognize rent expense in our consolidated statements of operations on a straight-line basis over the lease term and record variable lease payments as incurred.

Our finance leases contain a purchase option at the end of the lease term that we are reasonably certain to exercise. As such, we include the purchase option in the measurement of the finance lease liability and utilize the useful life of the underlying assets as the period to amortize the finance lease ROU assets over on a straight-line basis. We record interest expense for finance lease liabilities based on the incremental borrowing rate. Assets recognized are included in property and equipment, net, and the short and long-term lease liabilities are included in accrued expenses and other liabilities, non-current, in the consolidated balance sheets.

Lessor Lease

We will at times lease our data storage solutions and subscription services. Total net consideration is allocated to each component 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.

For sales-type leases, we recognize the selling profit or loss upfront and a lease receivable equal to the present value of the future lease payments is included in prepaid expenses and other current assets and other assets, non-current in our consolidated balance sheets. The future lease payments are discounted using the interest rate implicit in the lease or our incremental borrowing rate if the implicit interest rate cannot be reasonably determined. Lease income associated with sales-type leases are classified as product revenue on our consolidated statements of operations.

For operating leases, we recognize the lease income over the lease term as subscription services revenue on our consolidated statements of operations.

Revenue associated with non-lease components are classified as subscription services revenue on our consolidated statements of operations.

Initial direct costs are incremental costs directly related to negotiating and executing the lease are allocated to the lease and non-lease components based on relative standalone selling price. Initial direct costs allocated to sales-type leases are expensed immediately and included in the selling profit or loss while initial direct costs allocated to operating leases are deferred and amortized on a straight line basis over the lease term as an operating expense.

Deferred Revenue

Deferred revenue primarily consists of amounts that have been invoiced but have not yet been recognized as revenue and performance obligations pertaining to subscription services. The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the consolidated balance sheet dates.

Revenue Recognition

We generate revenue fromtwo sources: (1) product revenue which includes the sale of integrated storage hardware and embedded licensed operating system software and (2) subscription services revenue which includes primarily our portfolio of Evergreen offerings. Subscription services revenue also include our professional services offerings such as installation and implementation consulting services.

We typically recognize product revenue upon transfer of control to our customers and the satisfaction of our performance obligations. For Evergreen//Flex, product revenue is recognized upon the commencement of the underlying subscription services. Products are typically shipped directly by us to customers.

We recognize subscription services revenue from Evergreen//Forever and Evergreen//Flex ratably over the contractual term, which generally ranges fromone tosix years. The majority of our product solutions are sold with either a Evergreen//Forever or Evergreen//Flex subscription service agreement, which begins upon either transfer of control of the corresponding products or commencement of the subscription services to our customers. In addition, the subscription service agreement provides our customers with a new controller based upon certain contractual terms. The controller refresh represents a separate performance obligation that is included within the subscription service agreement and the allocated revenue is recognized upon shipment of the controller. Costs associated with Evergreen//Forever and Evergreen//Flex subscription services are expensed when incurred.

Our Evergreen//Foreverand Evergreen//Flex subscription services also include the right to receive unspecified software updates and upgrades on a when-and-if-available basis, software bug fixes, replacement parts and other services related to the underlying infrastructure, as well as access to our cloud-based management and support platform.

For Evergreen//One, subscription services revenue is recognized over the contractual term on a consumption basis, beginning on the commencement date of the underlying subscription services to our customers. Our Evergreen//One subscription services agreement generally includes a minimum usage commitment amount as well as fees for usage in excess of such amount.

We also sell professional services such as installation and implementation consulting services and the related revenue is recognized as services are performed.

We recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services. This is achieved through applying the following five-step approach:

•Identification of the contract, or contracts, with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, we satisfy a performance obligation

When applying this five-step approach, we apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience and/or published credit and financial information pertaining to the customer. To the extent a customer contract includes multiple promised goods or services, we determine whether promised goods or services should be accounted for as a separate performance obligation. The transaction price is determined based on the consideration which we will be entitled to in exchange for transferring goods or services to the customer. For contracts that contain multiple performance obligations, we allocate the transaction price to each performance obligation based on a relative standalone selling price (SSP). The SSP is determined based on the price at which the performance obligation is sold separately, or if not observable through past transactions, is estimated taking into account available information such as market conditions and internally approved pricing guidelines related to performance obligations.

Warranty

We generally provide athree-year warranty on hardware and a 90-day warranty on our software embedded in the hardware that commences upon shipment. Our hardware warranty provides for parts replacement for defective components and our software warranty provides for bug fixes. Our Evergreen subscription agreement provides for the same parts replacement that customers are entitled to under our warranty program, except that replacement parts are delivered according to targeted response times to minimize disruption to our customers’ critical business applications. Substantially all customers purchase Evergreen subscription agreements. We will establish a warranty reserve for specifically identified products if and when we determine we have systemic product failure. Our estimate for future estimated costs related to warranty activities is based upon historical product failure rates and historical costs incurred in correcting product failures. Warranty reserves at the end of fiscal 2024 and 2025 were not material.

Research and development costs are expensed as incurred. Research and development costs consist primarily of employee compensation and related expenses, prototype expenses, to the extent there is no alternative use for that equipment, depreciation of equipment used in research and development, third-party engineering and contractor support costs, data center and cloud services costs as well as allocated overhead costs.

Capitalized Internal-Use Software Costs

We expense costs to develop software that is externally marketed before technological feasibility is reached. We have determined that technological feasibility is reached shortly before the release of our products and as a result, the development costs incurred after the establishment of technological feasibility and before the release of those products have not been significant and accordingly, have been expensed as incurred.

We capitalize (i) costs incurred to develop or modify software solely for our internal use, including hosted applications used to deliver our support services, and (ii) certain implementation costs incurred in a hosting arrangement that is a service contract when the preliminary project stage is complete, management with the relevant authority authorizes and commits to the funding of the software project, and it is probable the project will be completed and used to perform the intended function. Costs related to preliminary project activities and post implementation activities are expensed as incurred.

Software development costs are capitalized to property, plant and equipment and amortized using the straight-line method over an estimated useful life offour years. Software development costs capitalized to property and equipment were $20.7 million and $29.4 million for fiscal 2024 and 2025. Amortization expense for software development costs was $2.2 million, $3.5 million and $4.1 million during fiscal 2023, 2024 and 2025.

Software implementation costs are capitalized to either prepaid and other current assets or other assets, non-current in our consolidated balance sheets and amortized over the terms of the associated hosting arrangements. Software implementation costs capitalized were $4.3 million and $0.6 million for fiscal 2024 and 2025. Amortization expense for software implementation costs was $1.5 million, $2.4 million and $4.0 million during fiscal 2023, 2024 and 2025.

Advertising Expenses

Advertising costs are expensed as incurred. Advertising expenses were $11.1 million, $11.3 million and $6.2 million for fiscal 2023, 2024 and 2025.

Stock-Based Compensation

Stock-based compensation includes expenses related to restricted stock units (RSUs), performance-based restricted stock units (PRSUs), market-based long-term performance incentive restricted stock units (LTP Awards), and restricted stock, stock options and purchase rights issued to employees under our employee stock purchase plan (ESPP).

The fair value of RSUs, PRSUs and restricted stock are measured at the fair market value of the underlying stock at the grant date. The fair value of LTP Awards on the grant date is calculated using a Monte Carlo simulation model that takes into account similar input assumptions as the Black-Scholes option pricing model as well as the possibility that the market condition may not be satisfied and a post-vest holding period discount. We determine the fair value of ESPP purchase rights and stock options on the date of grant utilizing the Black-Scholes option pricing model, which is impacted by the fair value of our common stock, as well as changes in assumptions regarding a number of subjective variables. These variables include the expected common stock price volatility over the term of the purchase rights or options, the expected term of the purchase rights or options, risk-free interest rates and expected dividend yield.

We recognize stock-based compensation expense for stock-based awards with only service conditions on a straight-line basis over the period during which an employee is required to provide services in exchange for the award (generally the vesting period of the award).

For stock-based awards granted to employees that include a performance condition, we recognize stock-based compensation expense for these awards under the accelerated attribution method over the requisite service period when management determines it is probable that the performance condition will be satisfied.

For stock-based awards granted to employees that include a market condition, we recognize stock-based compensation expense under the accelerated attribution method over the requisite service period. Stock-based compensation expense that was previously recognized is not reversed if the market condition is ultimately not met.

We account for forfeitures as they occur for all stock-based awards.

Restructuring

Personnel-related restructuring charges include severance and other separation costs associated with workforce realignment action plans. We accrue for these costs when it is probable that the benefits will be paid and the amount is reasonably estimable if the costs are associated with a substantive ongoing benefit arrangement, including amounts that are mandated pursuant to a contract or law. We evaluate and adjust the liabilities based on actual costs incurred or changes in estimates. We generally recognize a liability for one-time termination benefit costs based on its fair value at the communication date when management has committed to a termination plan and notified the affected employees.

Income Taxes

We account for income taxes using the asset and liability method. Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance to amounts that are more likely than not to be realized.

We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

Recently Adopted Accounting Pronouncement

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. We adopted this standard for our annual period beginning fiscal year 2025 on a retrospective basis to all periods presented. The adoption of this standard did not result in a significant change to our consolidated financial statement disclosures. Refer to Note 15—Segment Information and Geographic Areas for further information.

Recent Accounting Pronouncement Not Yet Adopted

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 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 fiscal 2023, 2024, and 2025. The following table presents the fair values and gross unrealized losses for those investments that were in a continuous unrealized loss position at the end of fiscal 2024 and 2025, aggregated by investment category (in thousands):

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

Strategic Investments

Strategic investments primarily include equity investments in privately-held companies, which do not have a readily determinable fair value. We deem our strategic investments as Level 3 in the fair value hierarchy as nonrecurring fair value measurements may include observable and unobservable inputs. At the end of fiscal 2024 and 2025, the carrying amount of our strategic investments was $5.0 million and $36.7 million that is included in other assets, non-current in our consolidated balance sheets. Adjustments made under the fair value measurement alternative were either none or not material during fiscal 2023, 2024 and 2025.

Other Financial Instruments

The investments held in our NQDC 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 $8.4 million at the end of fiscal 2024 and 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):

(1) Includes finance lease right-of-use assets. Refer to Note 8.

Depreciation and amortization expense related to property and equipment was $87.0 million, $112.6 million and $114.5 million for fiscal 2023, 2024 and 2025, respectively.

Intangible Assets, Net

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

Intangible assets amortization expense was $16.5 million, $16.2 million and $15.7 million for fiscal 2023, 2024 and 2025, respectively. At the end of fiscal 2025, the weighted-average remaining amortization period was 0.9 year for technology patents,1.0 year for developed technology, and 2.7 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 consolidated statements of operations.

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

Goodwill

Goodwill was $361.4 million at the end of fiscal 2024 and 2025. There wereno impairments to goodwill during fiscal 2023, 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 accruals related to our inventory and inventory purchase commitments with our contract manufacturers.

Note 5. Deferred Revenue and Commissions

Deferred Commissions

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

During fiscal 2023, 2024 and 2025, we recognized sales commission expenses of $170.0 million, $172.7 million, and $179.7 million, respectively. Of the $328.6 million total deferred commissions balance at the end of fiscal 2025, we expect to recognize approximately 30% as sales commission expense over the next 12 months and the remainder thereafter.

There wasno impairment related to capitalized commissions during fiscal 2023, 2024 or 2025.

Deferred Revenue

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

During fiscal 2024 and 2025, we recognized approximately $721.0 million and $852.2 million, respectively, in revenue pertaining to deferred revenue as of the beginning of each period.

Remaining Performance Obligations

Total remaining performance obligations (RPO) which is contracted but not recognized revenue was $2.6 billion at the end of fiscal 2025. Total RPO includes $41.1 million in remaining non-cancelable product orders, of which $25.4 million relates to a lessor arrangement. 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 $2.6 billion RPO at the end of fiscal 2025, we expect to recognize approximately 48% 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.

We had $100.0 million outstanding under the Credit Facility at the end of fiscal 2024 and 2025. The outstanding borrowings bore weighted-average interest at an annual rate of approximately 1.61%,6.73%, and 6.59% based on a one-month term LIBOR (or SOFR) period resulting in interest expense of $0.3 million, $5.5 million and $6.6 million during fiscal 2023, 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 fiscal 2025.

Convertible Senior Notes

In April 2023, we repaid the entire $575.0 million principal balance of our 0.125% convertible senior, unsecured notes (the Notes) that were issued in a private placement to qualified institutional buyers in April 2018.

Note 7. Commitments and Contingencies

Leases

At the end of fiscal 2025, we had various non-cancelable operating and finance lease commitments for office and data center facilities. Refer to Note 8—Leases for additional information regarding lease commitments.

Contractual Purchase Obligations

At the end of fiscal 2025, we had $540.1 million of non-cancelable contractual purchase obligations primarily related to inventory purchase commitments, software service contracts, and hosting arrangements. In order to manage future demand for our products, we enter into agreements with manufacturers and suppliers to procure inventory based upon our demand forecasts.

Letters of Credit

At the end of fiscal 2024 and 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 in our consolidated balance sheet as of the end 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 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.

During the second quarter of fiscal 2024, we ceased use of our former corporate headquarters that resulted in certain impairment and abandonment charges during fiscal 2024 and 2025. Refer to Note 9—Restructuring and Impairment for further information.

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 have exercised or expect to exercise at the end of the respective lease terms.

The components of lease costs 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 consolidated balance sheets within property and equipment, net.

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

(3)Included in the 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 fiscal 2025 are as follows (in thousands):

Lessor Arrangement

During fiscal 2024 and 2025, we, as a lessor, entered into non-cancelable arrangements to lease our data storage solutions and subscription services. The arrangements include multiple seven-year leases that both commenced during fiscal 2025 and will commence in fiscal 2026 with total net consideration of $174.8 million. The arrangements provide an end-of-term option to purchase the leased assets for a pre-determined price.

We determined, at inception of the respective arrangements, that each of the leases include sales-type leases, an operating lease, and non-lease components. The non-lease components are comprised of subscription support services and professional services. The total net consideration for each lease was allocated to these components based on relative standalone selling price.

Total net consideration for the leases that commenced during fiscal 2025 was $134.8 million. We recognized $47.4 million in product revenue related to the sales-type lease components during fiscal 2025. The associated profit was $36.1 million, based on the product revenue recognized less certain costs, during fiscal 2025. Subscription services revenue related to the operating lease and non-lease components recognized during fiscal 2025 was $7.2 million.

Future minimum gross lease payments for the leases that commenced during fiscal 2025 allocated to the sales-type leases and operating lease components were as follows (in thousands). The remaining lease payments of $100.0 million allocated to the non-lease components, are excluded from the table below.

Note 9. Restructuring and Impairment

The following table summarizes our restructuring and impairment charges during fiscal 2024 and 2025 (in thousands):

Workforce Realignment Plan

In February 2024, we approved a workforce realignment plan (the Plan) to better align our resources with our business strategy that reduced our headcount by nearly 250 employees globally. We recognized total restructuring costs of $27.9 million associated with one-time severance and other termination benefits, of which $18.0 million and $9.9 million was recognized in fiscal 2024 and 2025. The restructuring costs recognized included $1.2 million and $0.4 million in cost of revenue in our consolidated statement of operations for fiscal 2024 and 2025. The Plan was completed by the third quarter of fiscal 2025.

The following table summarizes the activity related to our liability associated with the Plan that is included within accrued compensation and benefits in our consolidated balance sheets (in thousands):

Facilities Abandonment and Impairment

During the second quarter of fiscal 2024, we ceased use of our former corporate headquarters that resulted in the recognition of $16.8 million and $6.4 million in lease impairment and abandonment charges during fiscal 2024 and 2025. The impairment charges represent 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. The incremental impairment charge recognized during fiscal 2025 resulted from a revision to the underlying sublease assumptions.

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 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 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 fiscal 2025,326.1 million shares of Class A common stock were issued and outstanding.

Common Stock Reserved for Issuance

At the end of fiscal 2025, we had reserved shares of common stock for future issuance as follows:

(1)Includes performance-based and market-based awards.

Share Repurchase Program

In August 2019, our Board of Directors approved a share repurchase program to repurchase shares of our common stock. As of the end of fiscal 2025, our Board of Directors has authorized to repurchase up to $1.1 billion under our share repurchase program, of which $21.5 million remained available. Shares repurchases are funded from available working capital.

In February 2025, our Board of Directors authorized a $250.0 million increase to the share repurchase program, bringing the total remaining authorization for future share repurchases to $271.5 million. Repurchases may be made at management’s discretion from time to time on the open market, through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing. The share repurchase program does not obligate us to acquire any of our common stock, has no end date, and may be suspended or discontinued by us at any time without prior notice.

We record the difference between cash paid for stock repurchases and underlying par value as a reduction to additional paid-in capital, to the extent the repurchases do not cause this balance to be reduced below zero, at which point the difference would be recorded as a reduction to accumulated deficit.

The following table summarizes the stock repurchase activity for fiscal 2023, 2024 and 2025 (in thousands except for per share amounts):

(1)Excludes transaction costs that are included in the repurchases of common stock on the consolidated statements of cash flows.

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, RSUs, 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.

We initially reserved 27.0 million shares of our common stock for issuance under our 2015 Plan. The number of shares reserved for issuance under our 2015 Plan increases automatically on the first day of each fiscal year, for a period of not more thanten years, commencing on February 1, 2016, in an amount equal to 5% of the total number of shares of our capital stock outstanding as of the immediately preceding January 31 (the Evergreen Increase). In March 2022, our Board of Directors approved an amendment and restatement of the 2015 Plan to clarify the effect of our change to a 52/53 week fiscal year in September 2019 on the Evergreen Increase. The last Evergreen Increase occurred on February 3, 2025.

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 0.6 million,0.9 million, and 3.5 million shares were withheld to cover $19.6 million, $30.0 million, and $208.8 million, respectively, in tax withholding obligations during fiscal 2023, 2024 and 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 consolidated statements of cash flows.

2015 Amended and Restated Employee Stock Purchase Plan

Our 2015 Employee Stock Purchase Plan was amended and restated in fiscal 2020 (2015 ESPP). A total of 3.5 million shares of common stock was initially reserved for issuance under the 2015 ESPP and an additional 5.0 million shares of common stock were added in connection with the amendment and restatement. The number of shares reserved for issuance under our 2015 ESPP increased automatically on the first day of February of each of 2016 through 2025, in an amount equal to the lesser of (i)1% of the total number of shares of our capital stock outstanding as of the immediately preceding January 31, and (ii)3.5 million shares of common stock.

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. During fiscal 2023, 2024 and 2025, ESPP resets resulted in total modification charges of $10.4 million, $16.7 million and $1.2 million, respectively, to be recognized over their new offering periods.

During fiscal 2023, 2024 and 2025, we recognized $22.9 million, $27.4 million and $34.1 million, of stock-based compensation expense related to our 2015 ESPP. At the end of fiscal 2025, total unrecognized stock-based compensation cost related to our 2015 ESPP was $12.3 million, which is expected to be recognized over a weighted-average period of approximately 1.1 years.

Determination of Fair Value

The fair value of employees’ purchase rights under ESPP is estimated on the grant date using the Black-Scholes option pricing model. This valuation model for stock-based compensation expense requires us to make assumptions and judgments about the variables used in the calculation including the fair value of the underlying common stock, expected term, the expected volatility of the common stock, a risk-free interest rate and expected dividend yield. The assumptions used for the periods presented are as follows:

The assumptions used in the Black-Scholes option pricing model were determined as follows.

Fair Value of Common Stock—We use the market closing price of our common stock as reported on the New York Stock Exchange to determine the fair value of our employees’ purchase rights at each grant date.

Expected Term—The expected term represents the term from the first day of an offering period to each of the four purchase dates within each offering period.

Expected Volatility—The expected volatility is based on the historical volatility of our common stock for a period equivalent to the expected term described above.

Risk-Free Interest Rate—The risk-free interest rate is based on the implied yield available for zero-coupon U.S. Treasury notes with maturities that approximate the expected term described above.

Dividend Rate—We have never declared or paid any cash dividends and do not plan to pay cash dividends in the foreseeable future, and, therefore, use an expected dividend yield of zero.

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 fiscal 2025 is calculated based on the difference between the exercise price and the closing price of $67.79 of our common stock on the last day of fiscal 2025. The aggregate intrinsic value of options exercised during fiscal 2023, 2024 and 2025 was $63.5 million, $124.0 million and $91.4 million.

The total grant date fair value of options vested during fiscal 2023, 2024 and 2025 was $7.0 million, $2.3 million and $0.3 million.

Stock-based compensation expense related to stock options has been fully recognized and was not material for any of the periods presented.

Restricted Stock Units (RSUs)

A summary of the RSU activity under our 2015 Plan and related information is as follows:

The aggregate fair value, as of the respective vesting dates, of RSUs that vested during fiscal 2023, 2024 and 2025 was $358.0 million, $415.4 million and $639.3 million.

During fiscal 2023, 2024 and 2025, we recognized $248.1 million, $268.2 million and $305.3 million in stock-based compensation expense related to RSUs. At the end of fiscal 2025, total unrecognized employee compensation cost related to unvested RSUs was $667.7 million, which is expected to be recognized over a weighted-average period of 2.6 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 2015 Plan 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.

The aggregate fair value, as of the respective vesting dates, of PRSUs vested and earned during fiscal 2023, 2024 and 2025 was $44.7 million, $54.6 million and $75.5 million.

During fiscal 2023, 2024 and 2025, we recognized $51.6 million, $23.9 million and $67.3 million in stock-based compensation expense related to PRSUs. At the end of fiscal 2025, total unrecognized employee compensation cost related to unvested PRSUs was $24.6 million, which is expected to be recognized over a weighted-average period of 2.0 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 Director's 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 $36.6 million was recognized during 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.

A summary of LTP Awards activity under our 2015 Plan is as follows:

(1) Represents the number of shares granted under the LTP Awards that were forfeited due to termination of employment.

The grant date fair value per share of $17.56 was determined using a Monte Carlo simulation model that considered the following assumptions: (i) expected volatility of 51.8%, (ii) risk-free interest rate of 3.86%, (iii) total performance period of nearly five years, and (iv) a post-vest holding period discount of 14.9%. Total stock-based compensation expense 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. During fiscal 2024 and 2025, we recognized $9.6 million and $14.3 million in stock-based compensation expense related to LTP Awards. At the end of fiscal 2025, total unrecognized stock-based compensation cost related to unvested LTP Awards was $45.3 million, which is expected to be recognized over a weighted-average period of 3.1 years.

Stock-Based Compensation Expense

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

(1) Stock-based compensation expense capitalized was $2.1 million, $5.7 million, and $7.8 million during fiscal 2023, 2024 and 2025.

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

Note 12. Net Income per Share Attributable to Common Stockholders

Basic and diluted net income per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities. Basic net income per share attributable to common stockholders is computed by dividing the net income 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 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, unvested restricted stock, 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.

The following table sets forth the computation of basic and diluted net income 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 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 discount and debt issuance costs, contractual interest expense related to our debt and accretion of our finance lease liabilities.

Note 14. Income Taxes

The geographical breakdown of income before provision for income taxes is as follows (in thousands):

The components of the provision for income taxes are as follows (in thousands):

The reconciliation of income taxes at the federal statutory income tax rate to the provision for income taxes is as follows (in thousands):

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of our deferred tax assets and liabilities were as follows (in thousands):

At the end of fiscal 2025, the undistributed earnings of $336.0 million from non-U.S. operations held by our foreign subsidiaries are designated as permanently reinvested outside the U.S. Accordingly, no additional U.S. income taxes or additional foreign withholding taxes have been provided thereon. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

At the end of fiscal 2025, we had net operating loss carryforwards for state income tax purposes of approximately $522.0 million that begin to expire in fiscal 2026.

We had federal and state research and development tax credit carryforwards of approximately $200.3 million and $166.8 million at the end of fiscal 2025. The federal research and development tax credit carryforwards will expire commencing in 2028, while the state research and development tax credit carryforwards have no expiration date.

Realization of deferred tax assets is dependent on future taxable income, the existence and timing of which is uncertain. Based on our history of losses, management has determined that it is more likely than not that the U.S. deferred tax assets will not be realized, and accordingly has placed a full valuation allowance on the net U.S. deferred tax assets. The valuation allowance increased by $62.8 million and $93.7 million, respectively, during fiscal 2024 and 2025.

Utilization of the net operating loss carryforwards and credits may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. In March 2025, we completed an analysis through the end of fiscal 2025 to evaluate whether there are any limitations of our net operating loss carryforwards and concluded that there was not a limitation that would result in the permanent expiration of carryforwards before they are utilized.

Uncertain Tax Positions

The activity related to the unrecognized tax benefits is as follows (in thousands):

At the end of fiscal 2025, our gross unrecognized tax benefit was approximately $101.4 million, $7.0 million of which if recognized, would have an impact on the effective tax rate.

At the end of fiscal 2025, we hadno current or cumulative interest and penalties related to uncertain tax positions.

It is difficult to predict the final timing and resolution of any particular uncertain tax position. Based on our assessment, including experience and complex judgments about future events, we do not expect that changes in the liability for unrecognized tax benefits during the next twelve months will have a significant impact on our consolidated financial position or results of operations.

We file income tax returns in the U.S. federal jurisdiction as well as many U.S. states and foreign jurisdictions. The tax returns for fiscal years 2009 and forward remain open to examination by the major jurisdictions in which we are subject to tax. The tax returns for fiscal years outside the normal statutes of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized.

Note 15. Segment Information and Geographic Areas

Segment Information

Our chief operating decision maker (CODM), the Chief Executive Officer, manages business activities as a single operating and reportable segment at the consolidated level. The CODM reviews and utilizes consolidated financial information, including revenue, gross profit, operating income and net income as reported on the consolidated statements of operations, to assess performance and allocate resources to support strategic priorities. Consolidated net income is our segment's primary measure of profit or loss. The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets.

Our CODM reviews the following significant segment expenses, which are each separately disclosed and presented in the consolidated statements of operations: cost of revenue for product, cost of revenue for subscription services, research and development expenses, sales and marketing expenses, and general and administrative expenses. Other segment items within consolidated net income include restructuring and impairment expenses, other income (expense), net and income tax provision. Other significant noncash segment expenses include stock-based compensation and depreciation and amortization.

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):

Note 16. Employee Benefits and Deferred Compensation

We have a 401(k) savings plan (the 401(k) plan) which qualifies as a deferred salary arrangement under section 401(k) of the Internal Revenue Code. Under the 401(k) plan, participating employees may elect to contribute up to 85% of their eligible compensation, subject to certain limitations. We currently match 50% of employees’ contributions up to a maximum of $4,000 annually. Matching contributions immediately vest. Our contributions to the plan were $12.2 million, $13.5 million and $14.1 million during fiscal 2023, 2024 and 2025.

In fiscal 2023, we adopted a NQDC whereby executive officers, senior management and members of our Board of Directors may elect to defer compensation payable to them in excess of the IRS limits imposed on 401(k) plans. Deferred compensation payments are held in investment accounts that reside in a trust. The fair value of the deferred compensation plan assets and liabilities under the NQDC was $3.2 million and $8.4 million at the end of fiscal 2024 and 2025.