Elastic N.V.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Management’s Discussion and Analysis of Financial Condition and Results of Operations and audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2025 filed with the SEC on June 10, 2025 (the “Company’s Annual Report on Form 10-K”). As discussed in the section titled “Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such difference include, but are not limited to, those identified below and those discussed in our risk factors disclosed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K and in “Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Management’s Discussion and Analysis of Financial Condition and Results of Operations and audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2026 filed with the SEC on June 8, 2026 (the “Company’s Annual Report on Form 10-K”). As discussed in the section titled “Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such difference include, but are not limited to, those identified below and those discussed in our risk factors disclosed in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K and in “Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.

Previous wording

We offer three Search AI-powered solutions—Elasticsearch, Elastic Observability, and Elastic Security—that are built on our platform. We help organizations, their employees, and their customers find what they need faster, while keeping mission-critical applications and infrastructure running smoothly and protecting against cyber threats.

Current wording

We offer three Elasticsearch-powered solutions—Search & AI, Elastic Observability, and Elastic Security—that are built on our platform. We help organizations, their employees, and their customers find what they need faster, while keeping mission-critical applications and infrastructure running smoothly and protecting against cyber threats.

Previous wording

Our platform is able to ingest data from any source, in any format, and perform search, analysis, and visualization of that data. With Elasticsearch at its core, our platform is a highly scalable document store and search engine and is the unified data store for all of our solutions and use cases. Featuring a common, solution-agnostic user interface with powerful drag-and-drop visual analytics and centralized management capabilities, our platform gives developers a full suite of sophisticated retrieval algorithms and the ability to integrate with large language models. It delivers the comprehensive set of capabilities developers need to build, maintain, and secure next-generation applications and services. Our platform can be used by developers and IT decision makers to power a variety of use cases.

Current wording

Our platform is able to ingest data from any source, in any format, and perform search, analysis, and visualization of that data. With Elasticsearch at its core, our platform is a highly scalable document store, columnar database, and search engine and is the unified data store for all of our solutions and use cases. Featuring a common, solution-agnostic user interface with an embedded AI agent and support for third-party AI agents, our platform offers powerful drag-and-drop visual analytics, centralized management capabilities, and the world's most downloaded open source vector database, which gives developers a full suite of sophisticated retrieval algorithms and the ability to integrate with large language models. It delivers the comprehensive set of capabilities developers need to build, maintain, and secure next-generation applications and services. Our platform can be used by developers and IT decision makers to power a variety of use cases.

Previous wording

We make our platform available as a service across major cloud providers. Customers can also deploy our platform across hybrid clouds, public or private clouds, and multi-cloud environments. As digital transformation continues to drive mission-critical business functions to the cloud, we believe that every company must incorporate search AI capabilities across IT and line-of-business organizations to find the answers that matter from all of its data in real time and at scale.

Current wording

We make our platform available as a service across major cloud providers. Customers can also deploy our platform across hybrid clouds, public or private clouds, and multi-cloud environments. As digital transformation continues to drive mission-critical business functions towards increasingly complex data landscapes, we believe that every company must incorporate search AI capabilities across IT and line-of-business organizations to find the answers that matter from all of its data in real time and at scale.

Previous wording

We generate revenue primarily from sales of subscriptions to our platform. We offer various paid subscription tiers that provide different levels of rights to use proprietary features and access to support. We do not sell support separately. Our subscription agreements typically range from one to three years and are usually billed annually in advance. Our subscription agreements are both term-based and consumption-based, with the vast majority of Elastic Cloud subscriptions being consumption-based. We sell subscriptions in various currencies, with the majority of our subscriptions contracted in U.S. dollars, and a smaller portion contracted in Euro, British Pound Sterling, and other currencies. Elastic Cloud customers may also purchase subscriptions on a month-to-month basis without a commitment, with usage billed at the end of each month. Subscriptions accounted for 94% and 93% of total revenue for the nine months ended January 31, 2026 and 2025, respectively. We also generate revenue from consulting and training services.

Current wording

We generate revenue primarily from sales of subscriptions to our platform. We offer various paid subscription tiers that provide different levels of rights to use proprietary features and access to support. We do not sell support independently. Our subscription agreements typically range from one to three years and are usually billed annually in advance. Our subscription agreements are either term-based or consumption-based, with the vast majority of Elastic Cloud subscriptions being consumption-based. We sell subscriptions in various currencies, with the majority of our subscriptions contracted in U.S. dollars, and a smaller portion contracted in Euro, British Pound Sterling, and other currencies. Elastic Cloud customers may also purchase subscriptions on a month-to-month basis without a commitment, with usage billed at the end of each month. Subscriptions accounted for 94% of total revenue for the three months ended July 31, 2026 and 2025. We also generate revenue from consulting and training services.

Previous wording

Many of these customers start with limited initial spending on our products but can significantly increase their spending over time. We drive high-touch engagement with qualified prospects and customers to drive further awareness, adoption, and expansion of our products with paid subscriptions. Expansion includes increasing the number of developers and practitioners using our products, increasing the utilization of our products for a particular use case, and utilizing our products to address new use cases. The number of customers who represented greater than $100,000 in annual contract value (“ACV”) was over 1,660 and over 1,460 as of January 31, 2026 and 2025, respectively. The ACV of a customer’s commitments is calculated based on the terms of that customer’s subscriptions, and represents the total committed annual subscription amount as of the measurement date. Month-to-month subscriptions are not included in the calculation of ACV.

Current wording

Many of these customers start with limited initial spending on our products but can significantly increase their spending over time. We drive high-touch engagement with qualified prospects and customers to drive further awareness, adoption, and expansion of our products with paid subscriptions. Expansion includes increasing the number of developers and practitioners using our products, increasing the utilization of our products for a particular use case, and utilizing our products to address new use cases. The number of customers who represented greater than $100,000 in annual contract value (“ACV”) was over 1,800 and over 1,550 as of July 31, 2026 and 2025, respectively. The ACV of a customer’s commitments is calculated based on the terms of that customer’s subscriptions and represents the total committed annual subscription amount as of the measurement date. Month-to-month subscriptions are not included in the calculation of ACV.

Previous wording

We continue to make substantial investments in developing our platform and expanding our global sales and marketing footprint. With a distributed team spanning over 40 countries, we are able to recruit, hire, and retain high-quality, experienced technical and sales personnel and operate at a rapid pace to drive product releases, fix bugs, and create and market new products. We had 3,921 employees as of January 31, 2026.

Current wording

We continue to make substantial investments in developing our platform and expanding our global sales and marketing footprint. With a distributed team spanning over 40 countries, we are able to recruit, hire, and retain high-quality, experienced technical and sales personnel and operate at a rapid pace to drive product releases, fix bugs, and create and market new products. We had 3,834 employees as of July 31, 2026.

Previous wording

Macroeconomic events, including a possible resurgence in inflation, fluctuations in economic growth, changes in and uncertainty of international trade policies, and political unrest, continue to evolve and impact worldwide economic activity. Governmental and corporate responses to these factors, including changing interest rates and unpredictable and decreased spending, will continue to affect the macroeconomic conditions. We have experienced and, if economic conditions remain uncertain or deteriorate, may continue to experience longer and more unpredictable sales cycles, increased scrutiny of prospective sales, slowing consumption and overall customer expenditures, and the impacts of changing foreign exchange rates with a strengthening or weakening U.S. dollar. We continue to closely monitor the macroeconomic environment and its effects on our business and on global economic activity, including customer spending behavior. See “Item 1A. Risk Factors” of the Company's Annual Report on Form 10-K.

Current wording

Macroeconomic events, including a resurgence of inflation, fluctuations in economic growth, changes in and uncertainty of international trade policies, and geopolitical turmoil, continue to evolve and impact worldwide economic activity. Governmental and corporate responses to these factors, including changing interest rates and unpredictable and decreased spending, will continue to affect the macroeconomic conditions. We have experienced and, if economic conditions remain uncertain or deteriorate, may continue to experience longer and more unpredictable sales cycles, increased scrutiny of prospective sales, slowing consumption and overall customer expenditures, and the impacts of changing foreign exchange rates with a strengthening or weakening U.S. dollar. We continue to closely monitor the macroeconomic environment and its effects on our business and on global economic activity, including customer spending behavior. See “Item 1A. Risk Factors” of the Company's Annual Report on Form 10-K.

Previous wording

We believe that the growth and future success of our business depend on many factors, including those described below. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations.

Current wording

We believe that the growth and future success of our business depend on many factors, including those described below. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address to sustain our growth and improve our results of operations.

Previous wording

Developing new features for the Elastic Search AI Platform. Our platform is applied to various use cases by customers, including through the solutions we offer. Our revenue is derived primarily from subscriptions of Search, Observability and Security built into our platform. We believe that releasing additional features of our platform, including our solutions, drives usage of our products and ultimately drives our growth. To that end, we plan to continue to invest in building new features and solutions that expand the capabilities of our platform. These investments may adversely affect our operating results prior to generating benefits, to the extent that they ultimately generate benefits at all.

Current wording

Developing new features for the Elasticsearch Platform. Our platform is applied to various use cases by customers, including through the solutions we offer. Our revenue is derived primarily from subscriptions of Search & AI, Elastic Observability, and Elastic Security built into our platform. We believe that releasing additional features of our platform, including our solutions, drives usage of our products and ultimately drives our growth. To that end, we plan to continue to invest in building new features and solutions that expand the capabilities of our platform, specifically including investments in context engineering, AI models, and agentic workflows. We also intend to continue to pursue acquisitions selectively to enhance the technology in our platform and our solutions. These investments may adversely affect our operating results prior to generating benefits, to the extent that they ultimately generate benefits at all.

Previous wording

Growing our customer base by converting users of our software to paid subscribers. Our financial performance depends on growing our paid customer base by converting free users of our software into paid subscribers. Our distribution model has resulted in rapid adoption by developers around the world. We have invested, and expect to continue to invest, heavily in sales and marketing efforts to convert additional free users to paid subscribers. Our investment in sales and marketing is significant given our large and diverse user base. These investments are likely to occur before we realize the anticipated benefits of such investments, such that they may adversely affect our operating results in the near term.

Current wording

Growing our customer base by acquiring new customers. Our financial performance depends on growing our paid customer base by acquiring new customers. We have invested, and expect to continue to invest, heavily in sales and marketing efforts and leverage our network of partners to target new customers and drive further awareness and adoption within our user community. Our investment in sales and marketing is significant given our large and diverse user base and our efforts to engage prospects in executive-level conversations. Because these investments are likely to occur before we realize the anticipated benefits of such investments, they may adversely affect our operating results in the near term.

Previous wording

We believe that a useful indication of how our customer relationships have expanded over time is through our Net Expansion Rate, which is based upon trends in the rate at which customers increase their spend with us. To calculate an expansion rate as of the end of a given month, we start with the annualized spend from all such customers as of twelve months prior to that month end, which we refer to as Prior Period Value. A customer’s annualized spend is measured as its ACV, or in the case of customers charged on usage-based arrangements, by annualizing the usage for that month. We then calculate the annualized spend from these same customers as of the given month end, which we refer to as Current Period Value, which includes any growth in the value of their subscriptions or usage and is net of contraction or attrition over the prior twelve months. We then divide the Current Period Value by the Prior Period Value to arrive at an expansion rate. The Net Expansion Rate at the end of any period is the weighted average of the expansion rates as of the end of each of the trailing twelve months. The Net Expansion Rate includes the dollar-weighted value of our subscriptions or usage that expand, renew, contract, or experience attrition. For instance, if each customer had a one-year subscription and renewed its subscription for the same amount, the Net Expansion Rate would be 100%. Customers who reduced their annual subscription dollar value (contraction) or did not renew their annual subscription (attrition) would adversely affect the Net Expansion Rate. Our Net Expansion Rate was approximately 112% as of January 31, 2026.

Current wording

We believe that a useful indication of how our customer relationships have expanded over time is through our Net Expansion Rate, which is based upon trends in the rate at which customers increase their spend with us. To calculate an expansion rate as of the end of a given month, we start with the annualized spend from all such customers as of twelve months prior to that month end, which we refer to as Prior Period Value. A customer’s annualized spend is measured as its ACV, or in the case of customers charged on usage-based arrangements, by annualizing the usage for that month. We then calculate the annualized spend from these same customers as of the given month end, which we refer to as Current Period Value, which includes any growth in the value of their subscriptions or usage and is net of contraction or attrition over the prior twelve months. We then divide the Current Period Value by the Prior Period Value to arrive at an expansion rate. The Net Expansion Rate at the end of any period is the weighted average of the expansion rates as of the end of each of the trailing twelve months. The Net Expansion Rate includes the dollar-weighted value of our subscriptions or usage that expand, renew, contract, or experience attrition. For instance, if each customer had a one-year subscription and renewed its subscription for the same amount, the Net Expansion Rate would be 100%. Customers who reduced their annual subscription dollar value (contraction) or did not renew their annual subscription (attrition) would adversely affect the Net Expansion Rate. Our Net Expansion Rate was approximately 111% as of July 31, 2026.

Previous wording

As large organizations expand their use of our platform across multiple use cases, projects, divisions, and users, they often begin to require centralized provisioning, management and monitoring across multiple deployments. To satisfy these requirements, our Enterprise subscription tier provides access to key orchestration and deployment management capabilities. We will continue to focus some of our direct sales efforts on driving adoption of our paid offerings.

Current wording

As large organizations expand their use of our platform across multiple use cases, projects, divisions, and users, they often begin to require centralized provisioning, management and monitoring across multiple deployments. To satisfy these requirements, our Enterprise subscription tier provides access to key orchestration and deployment management capabilities. We will continue to focus a significant portion of our direct sales efforts on driving adoption of our paid offerings.

Previous wording

Subscription. Cost of subscription consists primarily of personnel and related costs for employees associated with supporting our subscription arrangements, certain third-party expenses, and amortization of certain intangible and other assets. Personnel and related costs comprise cash compensation, benefits and stock-based compensation to employees, costs of third-party contractors, and allocated overhead costs. Third-party expenses consist of cloud hosting costs and other expenses directly associated with our customer support. We expect our cost of subscription to increase in absolute dollars as our subscription revenue increases.

Current wording

Subscription. Cost of subscription consists primarily of cloud hosting costs, personnel and related costs for employees associated with supporting our subscription arrangements, certain third-party expenses associated with our customer support, and amortization of certain intangible and other assets. Personnel and related costs comprise cash compensation, benefits and stock-based compensation to employees, costs of third-party contractors, and allocated overhead costs. We expect our cost of subscription to increase in absolute dollars as our subscription revenue increases.

Previous wording

Gross profit and gross margin. Gross profit represents revenue less cost of revenue. Gross margin, or gross profit as a percentage of revenue, has been and will continue to be affected by a variety of factors, including the timing of our acquisition of new customers and our renewals with existing customers, the average sales price of our subscriptions and services, the amount of our revenue represented by hosted services, the mix of subscriptions sold, the mix of revenue between subscriptions and services, the mix of services between consulting and training, transaction volume growth and support case volume growth. We expect our gross margin to fluctuate over time depending on the factors described above. We expect our revenue from Elastic Cloud to continue to increase as a percentage of total revenue, which we expect will continue to have a modest unfavorable impact on our gross margin as a result of the associated third-party hosting costs.

Current wording

Gross profit and gross margin. Gross profit represents revenue less cost of revenue. Gross margin, or gross profit as a percentage of revenue, has been and will continue to be affected by a variety of factors, including the timing of our acquisition of new customers and our renewals with existing customers, the average sales price of our subscriptions and services, the amount of our revenue represented by hosted services, the mix of subscriptions sold, the mix of revenue between subscriptions and services, the mix of services between consulting and training, transaction volume growth, and support case volume growth. We expect our gross margin to fluctuate over time depending on the factors described above. We expect our revenue from Elastic Cloud to continue to increase as a percentage of total revenue, which we expect will continue to have a modestly unfavorable impact on our gross margin as a result of the associated third-party cloud hosting costs.

Previous wording

Research and development. Research and development expense primarily consists of personnel and related costs and allocated overhead costs. We expect our research and development expense to increase in absolute dollars for the foreseeable future as we continue to develop new technology and invest further in our existing products.

Current wording

Research and development. Research and development expense primarily consists of personnel and related costs, cloud hosting costs, and allocated overhead costs. We expect our research and development expense to increase in absolute dollars for the foreseeable future as we continue to develop new technology and invest further in our existing products.

Previous wording

Restructuring and other related charges. Restructuring and other related charges primarily consist of employee-related severance and other termination benefits as well as lease impairment and other facilities-related charges.

Current wording

Restructuring and other related charges. Restructuring and other related charges primarily consist of employee-related severance and other termination benefits.

Previous wording

(Benefit from) provision for income taxes consists primarily of income taxes related to the Netherlands, U.S. federal and state, and foreign jurisdictions in which we conduct business. Our effective tax rate is affected by recurring items, such as tax rates in jurisdictions outside the Netherlands and the relative amounts of income we earn in those jurisdictions, non-deductible stock-based compensation, one-time tax benefits, and BEAT legislation in the United States.

Current wording

(Benefit from) provision for income taxes consists primarily of income taxes related to the Netherlands, U.S. federal and state jurisdictions, and foreign jurisdictions in which we conduct business. Our effective tax rate is affected by recurring items, such as tax rates in jurisdictions both within and outside the Netherlands and the relative amounts of income that is earned in those jurisdictions, non-deductible stock-based compensation, one-time tax benefits or charges, and BEAT legislation in the United States.

Previous wording

Subscription revenue increased by $189.2 million, or 19%, for the nine months ended January 31, 2026 compared to the same period of the prior year. This increase was primarily driven by continued adoption of both Elastic Cloud and Other subscriptions, which grew 22% and 15%, respectively, over the prior year. The increase in Elastic Cloud revenue was primarily attributable to an increase in revenue from Annual Elastic Cloud by 28% over the prior year.

Current wording

Subscription revenue increased by $60.2 million, or 15%, for the three months ended July 31, 2026 compared to the same period of the prior year. This increase was primarily driven by continued adoption of both Elastic Cloud and Other subscriptions, which grew 20% and 11%, respectively, over the prior year. The increase in Elastic Cloud revenue was primarily attributable to an increase in revenue from Annual Elastic Cloud, which grew by 27% over the prior year.

Previous wording

Services revenue increased by $0.3 million, or 1%, for the three months ended January 31, 2026 compared to the same period of the prior year. The increase in services revenue was attributable to increased adoption of our services offerings.

Current wording

Services revenue increased by $2.7 million, or 10%, for the three months ended July 31, 2026 compared to the same period of the prior year. The increase in services revenue was attributable to increased adoption of our services offerings.

Previous wording

Cost of subscription revenue increased by $9.1 million, or 13%, for the three months ended January 31, 2026 compared to the same period of the prior year. The increase was primarily due to an increase of $6.6 million in cloud infrastructure costs, $1.0 million in intangible assets amortization, $1.0 million in personnel and related costs, and $0.5 million in third-party costs. Subscription gross margin increased to 81% for the three months ended January 31, 2026 compared to 80% for the same period of the prior year primarily due to efficiencies realized in managing our cloud infrastructure costs relative to revenue growth.

Current wording

Cost of subscription revenue increased by $22.5 million, or 32%, for the three months ended July 31, 2026 compared to the same period of the prior year. This increase was primarily due to an increase of $16.0 million in cloud hosting costs, $3.9 million in partner reseller expense, $1.0 million in intangible assets amortization, and $1.0 million in personnel and related costs. Subscription gross margin decreased to 80% for the three months ended July 31, 2026 compared to 82% for the same period of the prior year primarily due to a higher increase in our cloud hosting costs relative to revenue growth.

Previous wording

Cost of services revenue increased by $6.3 million, or 9%, for the nine months ended January 31, 2026 compared to the same period of the prior year. This increase was primarily due to increases of $4.0 million in personnel and related costs, $1.5 million in travel expenses, and $0.8 million in miscellaneous other expenses. Gross margin for services revenue was (2)% for the nine months ended January 31, 2026 compared to 1% for the same period of the prior year. The decrease in gross margin was primarily attributable to increases in travel expenses and personnel and related costs. We continue to make investments in our services organization that we believe will be needed to support our continued growth. Our gross margin for services may fluctuate or decline in the near term as we seek to expand our services business.

Current wording

Cost of services revenue increased by $2.7 million, or 10%, for the three months ended July 31, 2026 compared to the same period of the prior year. This increase was primarily due to increases of $2.0 million in personnel and related costs and $1.2 million in subcontractor costs, partially offset by a decrease of $0.5 million in travel expenses. Gross margin for services revenue remained flat at (2)% compared to the same period of the prior year. We continue to make investments in our services organization that we believe will be needed to support our continued growth. Our gross margin for services may fluctuate or decline in the near term as we seek to expand our services business.

Previous wording

Research and development expense increased by $60.6 million, or 22%, for the nine months ended January 31, 2026 compared to the same period of the prior year as we continued to invest in the development of new and existing offerings. The increase was primarily due to increases of $45.2 million in personnel and related costs, $5.7 million in cloud infrastructure costs, $5.4 million in travel expenses, and $3.1 million in software and equipment costs. The increase in personnel and related costs included increases of $29.0 million in salaries and related taxes, $10.4 million in stock-based compensation, and $5.3 million in employee benefits expense.

Current wording

Research and development expense increased by $3.4 million, or 3%, for the three months ended July 31, 2026 compared to the same period of the prior year as we continued to invest in the development of new and existing offerings. The increase was primarily due to increases of $3.0 million in cloud hosting costs, $0.7 million in travel expenses, and $0.5 million in software and equipment costs, partially offset by a decrease of $0.8 million in personnel and related costs.

Previous wording

Sales and marketing expense increased by $23.0 million, or 15%, for the three months ended January 31, 2026 compared to the same period of the prior year. The increase was primarily due to an increase of $19.4 million in personnel and related costs, $2.1 million in travel expenses, and $1.1 million in marketing expenses. The increase in personnel and related costs included increases of $10.6 million in salaries and related taxes, $4.5 million in commission expense, $2.1 million in employee benefits expense, and $2.0 million in stock-based compensation.

Current wording

Sales and marketing expense increased by $24.9 million, or 14%, for the three months ended July 31, 2026 compared to the same period of the prior year. The increase was primarily due to increases of $19.7 million in personnel and related costs, $2.1 million in travel expenses, $1.5 million in marketing expenses, and $1.4 million in software and equipment costs. The increase in personnel and related costs included increases of $11.6 million in salaries and related taxes, $6.0 million in commission expense, and $2.1 million in stock-based compensation.

Previous wording

Restructuring and other related charges decreased by $0.2 million for the nine months ended January 31, 2026 compared to the same period of the prior year, as there were no employee-related severance and termination benefit charges pursuant to any restructuring plan for the nine months ended January 31, 2026.

Current wording

For the three months ended July 31, 2026, we recorded restructuring and other related charges consisting of employee-related severance and termination benefit charges of $19.9 million. We had no such charges in the same period of the prior year.

Previous wording

Interest expense remained relatively flat for the three months ended January 31, 2026 compared to the same period of the prior year.

Current wording

Interest, primarily related to our Senior Notes, expense remained relatively flat for the three months ended July 31, 2026 compared to the same period of the prior year.

Previous wording

Other income, net decreased by $3.4 million, or (22)%, for the three months ended January 31, 2026 compared to the same period of the prior year. The decrease was primarily due to an increase of $2.0 million in net foreign currency exchange losses and a decrease of $1.2 million in interest and other investment income primarily from our marketable securities.

Current wording

Other income, net decreased by $3.2 million, or 20%, for the three months ended July 31, 2026 compared to the same period of the prior year. The decrease was due to a decrease of $2.9 million in interest and other investment income, primarily from our marketable securities, and an increase of $0.3 million in other expense, net.

Previous wording

The benefit from income taxes was $1.6 million for the three months ended January 31, 2026 compared to a provision for income taxes of $21.1 million for the same period of the prior year. Our effective tax rate was (26)% and 519% of our income before income taxes for the three months ended January 31, 2026 and 2025, respectively. Our interim tax provision excludes pre-tax losses in jurisdictions where a valuation allowance is maintained, which causes the provision to reflect only tax provisions in jurisdictions with profitable operations and results in a disproportionate effective tax rate. Our effective tax rate is affected by recurring items, such as tax rates in jurisdictions both within and outside the Netherlands and the relative amounts of income that is earned in those jurisdictions, non-deductible stock-based compensation, one-time tax benefits or charges, and BEAT legislation in the United States.

Current wording

The benefit from income taxes was $0.5 million for the three months ended July 31, 2026 compared to a provision for income taxes of $24.6 million for the same period of the prior year. Our effective tax rate for the three months ended July 31, 2026 was 3%. Our effective tax rate for the three months ended July 31, 2025 was not meaningful as our interim tax provision excluded pre-tax losses in jurisdictions where a valuation allowance was maintained, which caused the provision to reflect only tax provisions in jurisdictions with profitable operations and resulted in a disproportionate effective tax rate.

Previous wording

As of January 31, 2026, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $1.248 billion. Our cash, cash equivalents, and marketable securities consist of highly liquid investment-grade fixed-income securities. We believe that the credit quality of the securities portfolio is strong and diversified among industries and individual issuers.

Current wording

As of July 31, 2026, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $1.461 billion. Our cash, cash equivalents, and marketable securities consist of highly liquid investment-grade fixed-income securities. We believe that the credit quality of the securities portfolio, which is diversified among industries and individual issuers, is strong.

Previous wording

We have generated significant operating losses from our operations as reflected in our accumulated deficit of $1.168 billion as of January 31, 2026. We have historically incurred, and expect to continue to incur, operating losses and may generate negative cash flows from operations in the future due to the investments we intend to make. As a result, we may require additional capital resources to execute our strategic initiatives to grow our business.

Current wording

We have generated significant operating losses from our operations as reflected in our accumulated deficit of $748.7 million as of July 31, 2026. We have historically incurred, and may continue to incur, operating losses and may generate negative cash flows from operations in the future due to the investments we intend to make. As a result, we may require additional capital resources to execute our strategic initiatives to grow our business.

Previous wording

We believe that our existing cash, cash equivalents, and marketable securities and cash from our future operations will be sufficient to fund our operating and capital needs for at least the next 12 months, despite the uncertainty in the changing market and macroeconomic conditions. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary as a result of, and our future capital requirements, both near-term and long-term, will depend on many factors, including our growth rate, the timing and extent of spending to support our research and development efforts, the expansion of sales and marketing activities, the timing of new introductions of solutions or product features, and the continuing market acceptance of our solutions and services.

Current wording

We believe that our existing cash, cash equivalents, and marketable securities and cash from our future operations will be sufficient to fund our operating and capital needs for at least the next 12 months, despite the uncertainty in the changing market and macroeconomic conditions. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary as a result of, and our future both near-term and long-term capital requirements will depend on, many factors, including our growth rate, the timing and extent of spending to support our research and development efforts, the expansion of sales and marketing activities, the timing of new introductions of solutions or product features, and the continuing market acceptance of our solutions and services.

Previous wording

We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based our estimate of the adequacy of our financial resources on assumptions that may prove to be wrong, and we could use our available resources sooner than we currently expect.

Current wording

We may enter into arrangements in the future to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based our estimate of the adequacy of our financial resources on assumptions that may prove to be wrong, and we could use our available resources sooner than we currently expect.

Previous wording

In July 2021, we issued long-term debt of $575.0 million, represented by our Senior Notes, and we may be required to seek additional equity or debt financing. As market conditions warrant, we may from time to time seek to purchase our outstanding debt securities or loans, including the Senior Notes, in privately negotiated or open market transactions, by tender offer or otherwise.

Current wording

In July 2021, we issued long-term debt of $575.0 million, represented by our Senior Notes, and we may be required to seek additional equity or debt financing. As market conditions warrant, we may from time to time seek to purchase our outstanding debt securities, including the Senior Notes, in privately negotiated or open market transactions, by tender offer or otherwise.

Previous wording

In October 2025, our board of directors authorized the Share Repurchase Program for up to $500.0 million of our outstanding ordinary shares. Repurchases may be effected, from time to time, through open market purchases, block trades, accelerated or other structured share repurchase programs, or through other transactions in accordance with applicable securities laws. The timing and amount of any repurchases will be determined by management based on the share price, business and market conditions, and other factors. The Share Repurchase Program does not obligate us to acquire any particular amount of ordinary shares, and the Share Repurchase Program may be modified, suspended, or terminated at any time at our discretion.

Current wording

In October 2025, our board of directors authorized the Share Repurchase Program for up to $500.0 million of our outstanding ordinary shares. Repurchases may be effected, from time to time, through open market purchases, block trades, accelerated or other structured share repurchase programs, or through other transactions in accordance with applicable securities laws. The timing and amount of any repurchases will be determined by management based on the share price, business and market conditions, and other factors. The Share Repurchase Program does not obligate us to acquire any particular amount of ordinary shares, and the program may be modified, suspended, or terminated at any time at our discretion.

Previous wording

During the nine months ended January 31, 2026, we repurchased 3.8 million of our outstanding ordinary shares for an aggregate purchase price of $300.0 million, excluding transaction costs associated with the repurchases, at a weighted-average price of $79.62 per share. All repurchases were made in open market transactions. As of January 31, 2026, $200.0 million remained available for future repurchases under the Share Repurchase Program. See Note 10, “Ordinary Shares,” to our accompanying Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional details.

Current wording

During the three months ended July 31, 2026, we repurchased 0.8 million of our outstanding ordinary shares for an aggregate purchase price of $40.0 million, excluding transaction costs associated with the repurchases, at a weighted-average price of $49.71 per share. All repurchases were made in open market transactions. As of July 31, 2026, $120.0 million remained available for future repurchases under the Share Repurchase Program. See Note 10, “Ordinary Shares,” to our accompanying Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional details.

Previous wording

Net cash provided by operating activities during the nine months ended January 31, 2025 was $179.2 million, which resulted from adjustments for non-cash charges of $334.0 million, partially offset by a net loss of $91.7 million and a net cash outflow of $63.1 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $192.2 million for stock-based compensation expense, $71.5 million for amortization of deferred contract acquisition costs, $56.2 million in deferred income taxes, and $10.0 million of depreciation and intangible asset amortization expense. The net cash outflow from changes in operating assets and liabilities resulted from a $67.0 million increase in deferred contract acquisition costs as our sales commissions increased due to increased business volume, a $39.7 million decrease in accounts payable, accrued expenses, and accrued compensation and benefits, a $15.6 million increase in prepaid expenses and other assets, and a $9.5 million decrease in operating lease liabilities. These outflows were partially offset by inflows from a $51.5 million decrease in accounts receivable, net and a $17.2 million increase in deferred revenue.

Current wording

Net cash provided by operating activities during the three months ended July 31, 2026 was $132.0 million, which resulted from adjustments for non-cash charges of $113.9 million and a net cash inflow of $34.8 million from changes in operating assets and liabilities, partially offset by a net loss of $16.7 million. Non-cash charges primarily consisted of $74.8 million for stock-based compensation expense, $32.5 million for amortization of deferred contract acquisition costs, and $3.4 million for depreciation and intangible asset amortization expense. The net cash inflow from changes in operating assets and liabilities resulted from a $227.0 million decrease in accounts receivable, net and a $6.6 million decrease in prepaid expenses and other assets. These inflows were partially offset by outflows from a $139.2 million decrease in deferred revenue, a $32.7 million net decrease in accounts payable, accrued expenses, and accrued compensation and benefits, a $24.9 million increase in deferred contract acquisition costs, and a $2.1 million decrease in operating lease liabilities.

Previous wording

Net cash provided by operating activities during the nine months ended January 31, 2026 was $174.2 million, which resulted from adjustments for non-cash charges of $378.0 million, partially offset by a net loss of $68.1 million and a net cash outflow of $135.7 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $221.0 million for stock-based compensation expense, $81.3 million for amortization of deferred contract acquisition costs, and $61.1 million for deferred income taxes. The net cash outflow from changes in operating assets and liabilities resulted from a $97.2 million increase in deferred contract acquisition costs, a $51.0 million decrease in deferred revenue, a $14.2 million net increase in prepaid expenses and other assets, and a $8.3 million decrease in operating lease liabilities. These outflows were partially offset by inflows from a $20.6 million decrease in accounts receivable, net and a $14.4 million net increase in accounts payable, accrued expenses, and accrued compensation and benefits.

Current wording

Net cash provided by operating activities during the three months ended July 31, 2025 was $104.8 million, which resulted from adjustments for non-cash charges of $120.8 million and a net cash inflow of $8.6 million from changes in operating assets and liabilities, partially offset by a net loss of $24.6 million. Non-cash charges primarily consisted of $69.9 million for stock-based compensation expense, $26.2 million for amortization of deferred contract acquisition costs, and $21.6 million in deferred income taxes. The net cash inflow from changes in operating assets and liabilities resulted from a $154.0 million decrease in accounts receivable, net, which was partially offset by outflows from a $97.9 million decrease in deferred revenue, a $22.3 million increase in deferred contract acquisition costs, a $16.3 million net decrease in accounts payable, accrued expenses, and accrued compensation and benefits, a $6.1 million increase in prepaid expenses and other assets, and a $2.7 million decrease in operating lease liabilities.

Previous wording

Net cash provided by investing activities of $121.7 million during the nine months ended January 31, 2026 was primarily due to sales, maturities, and redemptions of marketable securities of $523.7 million, partially offset by purchases of marketable securities of $362.4 million and cash paid for business acquisitions, net of cash acquired, of $36.8 million.

Current wording

Net cash provided by investing activities of $18.1 million during the three months ended July 31, 2026 was primarily due to sales, maturities, and redemptions of marketable securities of $133.5 million, partially offset by purchases of marketable securities of $114.8 million, and purchases of property and equipment of $0.6 million.

Previous wording

Net cash used in investing activities of $148.0 million during the nine months ended January 31, 2025 was primarily due to purchases of marketable securities of $388.8 million, partially offset by sales, maturities, and redemptions of marketable securities of $243.0 million.

Current wording

Net cash used in investing activities of $170.4 million during the three months ended July 31, 2025 was primarily due to purchases of marketable securities of $248.6 million, business acquisitions, net of cash acquired, of $8.5 million, and purchases of property and equipment of $0.7 million, partially offset by sales, maturities, and redemptions of marketable securities of $87.4 million.

Previous wording

Net cash used in financing activities of $287.1 million during the nine months ended January 31, 2026 wasdue to repurchases of ordinary shares of$300.1 million, partially offset by proceeds from stock option exercises and ESPP purchases of $13.0 million.

Current wording

Net cash used in financing activities of $36.7 million during the three months ended July 31, 2026 wasdue to repurchases of ordinary shares of$40.0 million, partially offset by proceeds from stock option exercises of $3.3 million.