Zscaler Inc

Previous wording

We operate our business as one reportable segment. Our revenue has experienced significant growth in recent periods. For the six months ended January 31, 2025 and 2024, our revenue was $1,275.9 million and$1,021.7 million, respectively. We have incurred net losses in all annual periods since our inception. For the six months ended January 31, 2025 and 2024, ournet loss was $19.8 million and $62.0 million, respectively. We expect we will continue to incur net losses for the foreseeable future, as we continue to invest in our sales and marketing organization to maximize our market opportunity, to invest in research and development efforts to enhance the functionality of our cloud platform, and to address any legal matters and related accruals, as further described in Note 10, Commitments and Contingencies, of the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

We operate our business as one reportable segment. Our revenue has experienced significant growth in recent periods. For the nine months ended April 30, 2025 and 2024, our revenue was $1,953.9 million and$1,574.9 million, respectively. We have incurred net losses in all annual periods since our inception. For the nine months ended April 30, 2025 and 2024, ournet loss was $23.9 million and $42.8 million, respectively. We expect we will continue to incur net losses for the foreseeable future, as we continue to invest in our sales and marketing organization to maximize our market opportunity, to invest in research and development efforts to enhance the functionality of our cloud platform, and to address any legal matters and related accruals, as further described in Note 11, Commitments and Contingencies, of the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

Changes in macroeconomic and geopolitical conditions can cause uncertainty in our business. We continue to see customer scrutiny of and elongated approval processes for transactions, particularly larger deals, as customers continue to scrutinize purchasing decisions and are requiring multiple approvals for large expenditures in response to the uncertain economic environment. Macroeconomic conditions may impact the future demand for subscriptions of our cloud platform.

Current wording

Changes in macroeconomic and geopolitical conditions can cause uncertainty in our business. We continue to see customer scrutiny of and elongated approval processes for transactions, particularly larger deals, as customers continue to carefully consider purchasing decisions and are requiring multiple approvals for large expenditures in response to the uncertain economic environment. Macroeconomic conditions may impact the future demand for subscriptions of our cloud platform.

Previous wording

We believe that dollar-based net retention rate is an indicator to measure the long-term value of our customer relationships because it is driven by our ability to retain and expand the recurring revenue generated from our existing customers. Our dollar-based net retention rate compares the recurring revenue from a set of customers against the same metric for the prior 12-month period on a trailing basis. Because our customers have repeat buying patterns and the average term of our contracts is more than 12 months, we measure this metric over a set of customers who were with us as of the last day of the same reporting period in the prior fiscal year. For the trailing 12 months ended January 31, 2025 and 2024, the dollar-based net retention rate was 115% and 117%, respectively.

Current wording

We believe that dollar-based net retention rate is an indicator to measure the long-term value of our customer relationships because it is driven by our ability to retain and expand the recurring revenue generated from our existing customers. Our dollar-based net retention rate compares the recurring revenue from a set of customers against the same metric for the prior 12-month period on a trailing basis. Because our customers have repeat buying patterns and the average term of our contracts is more than 12 months, we measure this metric over a set of customers who were with us as of the last day of the same reporting period in the prior fiscal year. For the trailing 12 months ended April 30, 2025 and 2024, the dollar-based net retention rate was 114% and 116%, respectively.

Previous wording

Calculated billings is a non-GAAP financial measure that we believe is a key metric to measure our periodic performance. Calculated billings represents our total revenue plus the change in deferred revenue in a period. Calculated billings in any particular period aims to reflect amounts invoiced for subscriptions to access our cloud platform, together with related support services for our new and existing customers. We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. Calculated billings increased $115.1 million, or 18%, for the three months ended January 31, 2025 over the three months ended January 31, 2024 and $175.2 million, or 16%, for the six months ended January 31, 2025 over the six months ended January 31, 2024. As calculated billings continues to grow in absolute terms, we expect our calculated billings growth rate to trend down over time. We also expect that calculated billings will be affected by seasonality in terms of when we enter into agreements with customers and the mix of billings, in particular the mix of multi-year in advance billings. We strategically enter into agreements for multi-year in advance billings with our customers to achieve our and/or our customers' business objectives. Multi-year in advance billings increase our calculated billings in the period where such billings are invoiced and reduce the amount that could be invoiced and thus count toward calculated billings in future periods.

Current wording

Calculated billings is a non-GAAP financial measure that we believe is a key metric to measure our periodic performance. Calculated billings represents our total revenue plus the change in deferred revenue in a period. Calculated billings in any particular period aims to reflect amounts invoiced for subscriptions to access our cloud platform, together with related support services for our new and existing customers. We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. Calculated billings increased $156.5 million, or 25%, for the three months ended April 30, 2025 over the three months ended April 30, 2024 and $331.7 million, or 19%, for the nine months ended April 30, 2025 over the nine months ended April 30, 2024. As calculated billings continues to grow in absolute terms, we expect our calculated billings growth rate to trend down over time. We also expect that calculated billings will be affected by seasonality in terms of when we enter into agreements with customers and the mix of billings, in particular the mix of multi-year in advance billings. We strategically enter into agreements for multi-year in advance billings with our customers to achieve our and/or our customers' business objectives. Multi-year in advance billings increase our calculated billings in the period where such billings are invoiced and reduce the amount that could be invoiced and thus count toward calculated billings in future periods.

Previous wording

We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services. Subscription and related support services accounted for approximately 98% and 97% of our revenue for the three and six months ended January 31, 2025, respectively, and 97% for each of the three and six months ended January 31, 2024, respectively. Our contracts with our customers do not at any time provide the customer with the right to take possession of the software that runs our cloud platform. Our customers may also purchase professional services, such as mapping, implementation, network design and training. Professional services account for an immaterial portion of our revenue.

Current wording

We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services. Subscription and related support services accounted for approximately 98% of our revenue for each of the three and nine months ended April 30, 2025, and 98% and 97% for the three and nine months ended April 30, 2024, respectively. Our contracts with our customers do not at any time provide the customer with the right to take possession of the software that runs our cloud platform. Our customers may also purchase professional services, such as mapping, implementation, network design and training. Professional services account for an immaterial portion of our revenue.

Previous wording

Provision for (benefit from) income taxes consists of state income taxes in the United States ("U.S."), foreign income taxes, and withholding taxes related to customer payments in certain foreign jurisdictions in which we conduct business. We weigh all available positive and negative evidence, including but not limited to our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies and the nature of each deferred tax assets in assessing the extent to which a valuation allowance should be applied against our U.S. and foreign deferred tax assets.

Current wording

Provision for income taxes consists of state income taxes in the United States ("U.S."), foreign income taxes and withholding taxes related to customer payments in certain foreign jurisdictions in which we conduct business. We weigh all available positive and negative evidence, including but not limited to our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies and the nature of each deferred tax assets in assessing the extent to which a valuation allowance should be applied against our U.S. and foreign deferred tax assets.

Previous wording

(*) During the three months ended January 31, 2025, we recognized a tax benefit of $17.2 million attributable to the release of the valuation allowance on U.K. deferred tax assets.

Current wording

During the three and nine months ended April 30, 2025, we recognized a tax benefit of$0.2 million and$17.4 million, respectively, attributable to the release of the valuation allowance on U.K. deferred tax assets.

Previous wording

Revenue increased by $122.9 million, or 23%, for the three months ended January 31, 2025, compared to the three months ended January 31, 2024. The change in revenue was driven primarily by an increase in users and sales of additional subscriptions to existing customers, which contributed $88.3 million in additional revenue. The remainder of the increase was primarily attributable to the addition of new customers, as we increased our customer base by 11%from January 31, 2024 to January 31, 2025.

Current wording

Revenue increased by $124.8 million, or 23%, for the three months ended April 30, 2025, compared to the three months ended April 30, 2024. The change in revenue was driven primarily by an increase in users and sales of additional subscriptions to existing customers, which contributed $83.5 million in additional revenue. The remainder of the increase was primarily attributable to the addition of new customers, as we increased our customer base by 10%from April 30, 2024 to April 30, 2025.

Previous wording

Cost of revenue increased by $31.3 million, or 27%, for the three months ended January 31, 2025, compared to the three months ended January 31, 2024. The change was driven primarily by the expanded use of our cloud platform by existing and new customers, which led to an increase of $18.1 million for data center and equipment related costs for hosting and operating our cloud platform. Additionally, our employee-related expenses increased by $10.7 million, inclusive of an increase of $4.2 million in stock-based compensation expense, driven primarily by an increase in headcount in our customer support and cloud operations organizations.

Current wording

Cost of revenue increased by $37.6 million, or 32%, for the three months ended April 30, 2025, compared to the three months ended April 30, 2024. The change was driven primarily by the expanded use of our cloud platform by existing and new customers, which led to an increase of $18.9 million for data center and equipment-related costs for hosting and operating our cloud platform. Additionally, our employee-related expenses increased by $16.1 million, inclusive of an increase of $5.7 million in stock-based compensation expense, driven primarily by an increase in headcount in our customer support and cloud operations organizations.

Previous wording

Gross margin decreased from 78% for the three months ended January 31, 2024 to 77% for the three months ended January 31, 2025. The decrease was primarily due to an increase in data center operating costs as we expanded our capacity and footprint to support our expanding customer base.

Current wording

Gross margin decreased from 79% for the three months ended April 30, 2024 to 77% for the three months ended April 30, 2025. The decrease in gross margin is primarily due to an increase in employee-related expenses, including stock-based compensation expense, as a result of an increase in headcount and an increase in data center operating costs as we expanded our capacity and footprint to support our expanding customer base.

Previous wording

Sales and marketing expenses increased by $31.4 million, or 11%, for the three months ended January 31, 2025, compared to the three months ended January 31, 2024. The change was driven primarily by an increase of$18.7 million in employee-related expenses, inclusive of an increase of $7.6 million in sales commissions expense and an increase of $4.9 million instock-based compensation expense. The increase in employee-related expenses was primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $4.1 million in marketing and advertising expenses, $2.6 million in professional services and $2.0 million in travel expenses.

Current wording

Sales and marketing expenses increased by $52.2 million, or 20%, for the three months ended April 30, 2025, compared to the three months ended April 30, 2024. The change was driven primarily by an increase of$42.3 million in employee-related expenses, inclusive of an increase of $19.2 million instock-based compensation expense and$7.4 million in sales commissions expense. The increase in employee-related expenses was primarily due to an increase in headcount. The remainder of the increase was primarily attributable to $4.6 million in travel expenses.

Previous wording

Research and development expenses increased by $48.7 million, or 40%, for the three months ended January 31, 2025, compared to the three months ended January 31, 2024, as we continue to develop and enhance the functionality of our cloud platform and integrate technologies acquired through our business acquisitions. The change was driven primarily by an increase of $49.5 million in employee-related expenses, inclusive of an increase of $21.6 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $8.3 million in facility, cloud hosting, software and equipment related expenses to support our growth. The increase was offset by higher capitalized internal-use software development costs of $10.6 million to support the enhancement and growth of our cloud platform.

Current wording

Research and development expenses increased by $44.8 million, or 36%, for the three months ended April 30, 2025, compared to the three months ended April 30, 2024, as we continue to develop and enhance the functionality of our cloud platform and integrate technologies acquired through our business acquisitions. The change was driven primarily by an increase of $44.4 million in employee-related expenses, inclusive of an increase of $16.6 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $2.7 million in facility, cloud hosting, software and equipment-related expenses to support our growth. The increase was partially offset by higher capitalized internal-use software development costs of $4.8 million to support the enhancement and growth of our cloud platform.

Previous wording

Interest income increased by $2.5 million, or 9%, for the three months ended January 31, 2025, compared to the three months ended January 31, 2024. The change was driven primarily by our increased balance of cash equivalents and short-term investments.

Current wording

Interest income increased by $3.7 million, or 13%, for the three months ended April 30, 2025, compared to the three months ended April 30, 2024. The change was driven primarily by our increased balance of cash equivalents and short-term investments.

Previous wording

Interest expense decreased by $1.3 million for the three months ended January 31, 2025, compared to the three months ended January 31, 2024. The change was driven primarily by fair value hedge adjustments related to our Notes.

Current wording

Interest expense decreased by $0.8 million for the three months ended April 30, 2025, compared to the three months ended April 30, 2024. The change was driven primarily by fair value hedge adjustments related to our Notes.

Previous wording

Other income (expense), net increased by $5.1 million for the three months ended January 31, 2025 compared to the three months ended January 31, 2024. The change was driven primarily by fluctuations in foreign currency transactions gains and losses.

Current wording

Other income (expense), net increased by $1.6 million for the three months ended April 30, 2025 compared to the three months ended April 30, 2024. The change was driven primarily by fluctuations in foreign currency transactions gains and losses.

Previous wording

Our provision for (benefit from) income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each fiscal quarter, we update our estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, we make a cumulative adjustment in such period.

Current wording

Our provision for income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each fiscal quarter, we update our estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, we make a cumulative adjustment in such period.

Previous wording

Our quarterly tax provision, and estimate of our annual effective tax rate, is subject to variation due to several factors, including variability in pre-tax income or loss, the mix of jurisdictions to which such income relates, changes in how we do business and tax law developments. Our estimated annual effective tax rate for the year differs from the U.S. statutory rate of 21% primarily due to the benefit of a portion of our earnings being taxed at rates lower than the U.S. statutory rate.

Current wording

Our quarterly tax provision, and estimate of our annual effective tax rate, is subject to variation due to several factors, including variability in pre-tax income or loss, the mix of jurisdictions to which such income relates, changes in our business operations and changes in tax laws. Our estimated annual effective tax rate for the year differs from the U.S. statutory rate of 21% primarily due to the benefit of a portion of our earnings being taxed at rates lower than the U.S. statutory rate.

Previous wording

The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. We assess our ability to realize the deferred tax assets on a quarterly basis and we establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. We weigh all available positive and negative evidence, including our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies. Due to the weight of objectively verifiable negative evidence, including our history of losses in certain jurisdictions, we believe that it is more likely than not that our U.S. federal, state and foreign jurisdictions deferred tax assets will not be realized. Accordingly, we have maintained a valuation allowance on our U.S. federal, state and certain foreign jurisdiction deferred tax assets.

Current wording

The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. We assess our ability to realize the deferred tax assets on a quarterly basis and we establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. We weigh all available positive and negative evidence, including our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies. Due to the weight of objectively verifiable negative evidence, including our history of losses in certain jurisdictions, we believe that it is more likely than not that our U.S. federal, state and certain foreign jurisdictions deferred tax assets will not be realized. Accordingly, we have maintained a valuation allowance on our U.S. federal, state and certain foreign jurisdiction deferred tax assets.

Previous wording

Many non-U.S. countries are beginning to implement legislation and other guidance to align their international tax rules with the Organization for Economic Cooperation and Development’s (“OECD”) Base Erosion and Profit Shifting recommendations, an action plan that aims to standardize and modernize global corporate tax policy, including changes to cross-border tax, transfer pricing documentation rules and nexus-based tax incentive practices. The OECD is also continuing discussions surrounding fundamental changes in allocation of profits among tax jurisdictions in which companies do business, as well as the implementation of a global minimum tax. We have analyzed the global minimum tax ("Pillar Two") regulations, as well as the OECD Model Rules, and have assessed no material Pillar Two impact on the income tax provision for the three months ended January 31, 2025.

Current wording

Many non-U.S. countries are beginning to implement legislation and other guidance to align their international tax rules with the Organization for Economic Cooperation and Development’s (“OECD”) Base Erosion and Profit Shifting recommendations, an action plan that aims to standardize and modernize global corporate tax policy, including changes to cross-border tax, transfer pricing documentation rules and nexus-based tax incentive practices. The OECD is also continuing discussions surrounding fundamental changes in allocation of profits among tax jurisdictions in which companies do business, as well as the implementation of “Pillar Two” a global minimum tax. We have analyzed the impact of the enacted tax laws regarding Pillar Two and have determined there is no material impact on the income tax provision for the three months ended April 30, 2025.

Previous wording

Revenue increased by $254.2 million, or 25%, for the six months ended January 31, 2025, compared to the six months ended January 31, 2024. The change in revenue was driven primarily by an increase in users and sales of additional subscriptions to existing customers, which contributed $193.7 million in additional revenue. The remainder of the increase was primarily attributable to the addition of new customers, as we increased our customer base by 11%from January 31, 2024 to January 31, 2025.

Current wording

Revenue increased by $379.0 million, or 24%, for the nine months ended April 30, 2025, compared to the nine months ended April 30, 2024. The change in revenue was driven primarily by an increase in users and sales of additional subscriptions to existing customers, which contributed $294.8 million in additional revenue. The remainder of the increase was primarily attributable to the addition of new customers, as we increased our customer base by 10%from April 30, 2024 to April 30, 2025.

Previous wording

Cost of revenue increased by$61.4 million, or 27%, for thesix months ended January 31, 2025, compared to thesix months ended January 31, 2024. The overall increase in cost of revenue was driven primarily by the expanded use of our cloud platform by existing and new customers, which led to an increase of$37.3 millionfor data center and equipment related costs for hosting and operating our cloud platform. Additionally, our employee-related expenses increased by$20.9 million, inclusive of an increase of$6.8 million in stock-based compensation expense, driven primarily by an increase in headcount in our customer support and cloud operations organizations. The remainder of the increase was primarily attributable to increased expenses of$3.1 million for facility and IT services.

Current wording

Cost of revenue increased by$99.0 million, or 29%, for thenine months ended April 30, 2025, compared to thenine months ended April 30, 2024. The overall increase in cost of revenue was driven primarily by the expanded use of our cloud platform by existing and new customers, which led to an increase of$56.2 millionfor data center and equipment-related costs for hosting and operating our cloud platform. Additionally, our employee-related expenses increased by$37.0 million, inclusive of an increase of$12.5 million in stock-based compensation expense, driven primarily by an increase in headcount in our customer support and cloud operations organizations. The remainder of the increase was primarily attributable to increased expenses of$3.8 million for facility and IT services.

Previous wording

Gross margin decreased from 78% for the six months ended January 31, 2024 to 77% for thesix months ended January 31, 2025. Thedecrease was primarily due to an increase in data center operating costs as we expanded our capacity and footprint to support our expanding customer base.

Current wording

Gross margin decreased from 78% for the nine months ended April 30, 2024 to 77% for thenine months ended April 30, 2025. The decrease in gross margin is primarily due to an increase in employee-related expenses, including stock-based compensation expense, as a result of an increase in headcount and an increase in data center operating costs as we expanded our capacity and footprint to support our expanding customer base.

Previous wording

Sales and marketing expenses increased by$70.4 million, or 13%, for thesix months ended January 31, 2025, compared to thesix months ended January 31, 2024. The change was primarily driven by an increase of $47.5 million in employee-related expenses, inclusive of an increase of $11.5 million in stock-based compensation expense and an increase of $16.3 million in sales commissions expense. The increase in employee-related expenses was primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $10.4 million in marketing and advertising expenses, $4.0 million in travel expenses, $2.9 million for professional services and $2.3 million for facility and IT services.

Current wording

Sales and marketing expenses increased by$122.5 million, or 15%, for thenine months ended April 30, 2025, compared to thenine months ended April 30, 2024. The change was primarily driven by an increase of $89.7 million in employee-related expenses, inclusive of an increase of $30.7 million in stock-based compensation expense, and an increase of $23.7 million in sales commissions expense. The increase in employee-related expenses was primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $12.2 million in marketing and advertising expenses, $8.6 million in travel expenses, $3.6 million for professional services and $2.3 million for facility and IT services.

Previous wording

Research and development expenses increased by$89.4 million, or 38%, for thesix months ended January 31, 2025, compared to thesix months ended January 31, 2024, as we continued to develop and enhance the functionality of our cloud platform and integrate technologies acquired through our business combinations. Theincrease was primarily driven by an increase of $95.2 million in employee-related expenses, inclusive of an increase of $39.5 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase in research and development expenses was primarily attributable to increased expenses of $17.1 million in facility, software and equipment related expenses to support our growth. The increase was further offset by higher capitalized internal-use software development costs of $25.7 million to support the enhancement and growth of our cloud platform.

Current wording

Research and development expenses increased by$134.2 million, or 37%, for thenine months ended April 30, 2025, compared to thenine months ended April 30, 2024, as we continued to develop and enhance the functionality of our cloud platform and integrate technologies acquired through our business acquisitions. Theincrease was primarily driven by an increase of $139.6 million in employee-related expenses, inclusive of an increase of $56.1 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase in research and development expenses was primarily attributable to increased expenses of $19.8 million in facility, software and equipment-related expenses to support our growth. The increase was partially offset by higher capitalized internal-use software development costs of $30.5 million to support the enhancement and growth of our cloud platform.

Previous wording

General and administrative expenses increased by$12.3 million, or 12%, for the six months ended January 31, 2025, compared to the six months ended January 31, 2024. The overall increase was primarily due to an increase of$7.8 million in employee-related expenses, inclusive of an increase of$2.0 million instock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to$2.3 million for facility related expenses and the rise of miscellaneous expenses to support the growth of our business.

Current wording

General and administrative expenses increased by$24.9 million, or 16%, for the nine months ended April 30, 2025, compared to the nine months ended April 30, 2024. The overall increase was primarily due to an increase of$18.6 million in employee-related expenses, inclusive of an increase of$6.6 million instock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to$3.0 million for facility-related expenses and the rise of miscellaneous expenses to support the growth of our business.

Previous wording

Interest income increased by$6.6 million, or 12%, for the six months ended January 31, 2025, compared to the six months ended January 31, 2024. The change was driven primarily by our increased balance of cash equivalents and short-term investments.

Current wording

Interest income increased by$10.3 million, or 13%, for the nine months ended April 30, 2025, compared to the nine months ended April 30, 2024. The change was driven primarily by our increased balance of cash equivalents and short-term investments.

Previous wording

Interest expense decreased by$1.3 million for the six months ended January 31, 2025, compared to the six months ended January 31, 2024. The change was driven primarily by fair value hedge adjustments related to our Notes.

Current wording

Interest expense decreased by$2.1 million for the nine months ended April 30, 2025, compared to the nine months ended April 30, 2024. The change was driven primarily by fair value hedge adjustments related to our Notes.

Previous wording

Other expense, net decreased by$4.5 million for the six months ended January 31, 2025 compared to the six months ended January 31, 2024. The change was driven primarily by fluctuations in foreign currency transactions gains and losses.

Current wording

Other expense, net increased by$2.9 million for the nine months ended April 30, 2025 compared to the nine months ended April 30, 2024. The change was driven primarily by fluctuations in foreign currency transactions gains and losses.

Previous wording

Our provision for income taxes decreased by $16.8 million for the three months ended January 31, 2025, compared to the three months ended January 31, 2024. The change was primarily attributable to the release of the valuation allowance on U.K. deferred tax assets.

Current wording

Our provision for income taxes decreased by $11.2 million for thenine months ended April 30, 2025, compared to thenine months ended April 30, 2024. The change was primarily attributable to the release of the valuation allowance on U.K. deferred tax assets of $17.4 million during the nine months ended April 30, 2025, partially offset by the increase in our pre-tax income in both foreign and U.S. jurisdictions in which we conduct business.

Previous wording

Our provision for (benefit from) income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each fiscal quarter, we update our estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, we make a cumulative adjustment in such period.

Current wording

Our provision for income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each fiscal quarter, we update our estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, we make a cumulative adjustment in such period.

Previous wording

Our quarterly tax provision, and estimate of our annual effective tax rate, is subject to variation due to several factors, including variability in pre-tax income or loss, the mix of jurisdictions to which such income relates, changes in how we do business and tax law developments. Our estimated annual effective tax rate for the year differs from the U.S. statutory rate of 21% primarily due to the benefit of a portion of our earnings being taxed at rates lower than the U.S. statutory rate.

Current wording

Our quarterly tax provision, and estimate of our annual effective tax rate, is subject to variation due to several factors, including variability in pre-tax income or loss, the mix of jurisdictions to which such income relates, changes in our business operations and changes in tax laws. Our estimated annual effective tax rate for the year differs from the U.S. statutory rate of 21% primarily due to the benefit of a portion of our earnings being taxed at rates lower than the U.S. statutory rate.

Previous wording

The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. We assess our ability to realize the deferred tax assets on a quarterly basis and we establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. We weigh all available positive and negative evidence, including our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies. Due to the weight of objectively verifiable negative evidence, including our history of losses in certain jurisdictions, we believe that it is more likely than not that our U.S. federal, state and foreign jurisdictions deferred tax assets will not be realized. Accordingly, we have maintained a valuation allowance on our U.S. federal, state and certain foreign jurisdiction deferred tax assets.

Current wording

The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. We assess our ability to realize the deferred tax assets on a quarterly basis and we establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. We weigh all available positive and negative evidence, including our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies. Due to the weight of objectively verifiable negative evidence, including our history of losses in certain jurisdictions, we believe that it is more likely than not that our U.S. federal, state and certain foreign jurisdictions deferred tax assets will not be realized. Accordingly, we have maintained a valuation allowance on our U.S. federal, state and certain foreign jurisdiction deferred tax assets.

Previous wording

We have analyzed the Pillar Two regulations, as well as the OECD Model Rules, and have assessed no material Pillar Two impact on the income tax provision for thesix months ended January 31, 2025.

Current wording

We have analyzed the impact of the enacted tax laws regarding Pillar Two and have determined there is no material impact on the income tax provision for thenine months ended April 30, 2025.

Previous wording

As of January 31, 2025, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $2,880.2 million, which were held for working capital and general corporate purposes. Our cash equivalents and investments consist of highly liquid investments in money market funds, U.S. treasury securities, U.S. government agency securities, certificates of deposit and corporate debt securities.

Current wording

As of April 30, 2025, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $3,005.6 million, which were held for working capital and general corporate purposes. Our cash equivalents and investments consist of highly liquid investments in money market funds, U.S. treasury securities, U.S. government agency securities, certificates of deposit and corporate debt securities.

Previous wording

In June 2020, we completed the private offering of the Notes with an aggregate principal amount of $1,150.0 million. The total net proceeds from the offering, after deducting initial purchase discount and issuance costs, was $1,130.5 million. In connection with the Notes, we entered into the Capped Call transactions which are expected to reduce the potential dilution of our common stock upon any conversion of the Notes and/or offset any cash payments we could be required to make in excess of the principal amount of converted Notes. We used an aggregate amount of $145.2 million of the net proceeds of the Notes to purchase the Capped Calls.

Current wording

In June 2020, we completed the private offering of the Notes with an aggregate principal amount of $1,150.0 million. The Notes mature on July 1, 2025. Pursuant to the terms of the Notes, on April 1, 2025, we made the election to satisfy any conversion obligations by paying cash equal to the principal amount of any Notes converted and delivering shares of our common stock with respect to any conversion obligation in excess of the principal amount. In connection with the Notes, we entered into the Capped Calls which are expected to reduce the potential dilution of our common stock upon any conversion of the Notes and/or offset any cash payments we could be required to make in excess of the principal amount of converted Notes. We used an aggregate amount of $145.2 million of the net proceeds of the Notes to purchase the Capped Calls. For further information refer to Note 9, Convertible Senior Notes, of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

We have generated significant losses from operations, as reflected in our accumulated deficit of $1,167.9 million as of January 31, 2025. We expect to continue to incur operating losses and have in the past and may in the future generate negative cash flows due to expected investments to grow our business, including potential business acquisitions and other strategic transactions.

Current wording

We have generated significant losses from operations, as reflected in our accumulated deficit of $1,172.0 million as of April 30, 2025. We expect to continue to incur operating losses and have in the past and may in the future generate negative cash flows due to expected investments to grow our business, including potential business acquisitions and other strategic transactions.

Previous wording

We believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our working capital, capital expenditure and convertible senior notes repayment requirements for at least the next 12 months from the issuance of our financial statements. Our foreseeable cash needs, in addition to our recurring operating costs, include our expected capital expenditures to support expansion of our infrastructure and workforce, lease obligations, purchase commitments, potential business acquisitions, convertible senior notes repayment requirements and other strategic transactions. 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 and international operating activities, the timing of new introductions of solutions or features, and the continuing market acceptance of our services, the impact of macroeconomic and geopolitical conditions to our and our customers', vendors' and partners' businesses. We have and may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Additionally, some of the factors that may influence our operations are not within our control, such as general economic conditions, geopolitical developments and the impact of global crises. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected.

Current wording

We believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our working capital, capital expenditure and convertible senior notes repayment requirements for at least the next 12 months from the date of issuance of our financial statements. Our foreseeable cash needs, in addition to our recurring operating costs, include our expected capital expenditures to support expansion of our infrastructure and workforce, lease obligations, purchase commitments, potential business acquisitions, convertible senior notes repayment requirements and other strategic transactions. 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 and international operating activities, the timing of new introductions of solutions or features, and the continuing market acceptance of our services, the impact of macroeconomic and geopolitical conditions to our and our customers', vendors' and partners' businesses. We have and may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Additionally, some of the factors that may influence our operations are not within our control, such as general economic conditions, geopolitical developments and the impact of global crises. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected.

Previous wording

We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. Therefore, a substantial source of our cash is from such prepayments, which are included on our consolidated balance sheets as a contract liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is subsequently recognized as revenue in accordance with our revenue recognition policy. As of January 31, 2025, we had deferred revenue of $1,878.5 million, of which $1,595.8 million was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met. Subscriptions that are invoiced annually in advance or multi-year in advance contribute significantly to our short-term and long-term deferred revenue in comparison to our invoices issued quarterly in advance or monthly in advance. We strategically enter into agreements for multi-year in advance billings with our customers to achieve our and/or our customers’ business objectives. Multi-year in advance billings increase our calculated billings in the period where such billings are invoiced and reduce the amount that could be invoiced and thus count toward calculated billings in future periods. We cannot predict the mix of invoicing schedules in any given period.

Current wording

We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. Therefore, a substantial source of our cash is from such prepayments, which are included on our consolidated balance sheets as a contract liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is subsequently recognized as revenue in accordance with our revenue recognition policy. As of April 30, 2025, we had deferred revenue of $1,985.0 million, of which $1,677.9 million was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met. Subscriptions that are invoiced annually in advance or multi-year in advance contribute significantly to our short-term and long-term deferred revenue in comparison to our invoices issued quarterly in advance or monthly in advance. We strategically enter into agreements for multi-year in advance billings with our customers to achieve our and/or our customers’ business objectives. Multi-year in advance billings increase our calculated billings in the period where such billings are invoiced and reduce the amount that could be invoiced and thus count toward calculated billings in future periods. We cannot predict the mix of invoicing schedules in any given period.

Previous wording

Net cash provided by operating activities during the six months ended January 31, 2024 was $402.9 million, which resulted from a net loss of $62.0 million, adjusted for non-cash charges of$383.4 million and net cash inflows of$81.5 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $269.6 million for stock-based compensation expense, $61.5 million for amortization of deferred contract acquisition costs, $29.4 million for depreciation and amortization expense, $21.6 million for non-cash operating lease costs, $6.1 million for amortization expense of acquired intangible assets and unrealized losses on hedging transactions of $2.8 million. Non-cash charges were partially offset by accretion of investments purchased at a discount of $9.6 million. Net cash inflows from changes in operating assets and liabilities were primarily the result of $102.4 million in accounts receivable, primarily due to timing of billings and collections, an increase of $62.5 million in deferred revenue, an increase of $6.0 million in accrued expenses, other current and noncurrent liabilities and a decrease of $2.7 million in prepaid expenses, other current and noncurrent assets. Net cash inflows were partially offset by cash outflows resulting from an increase of $67.7 million in deferred contract acquisition costs and a decrease of $22.5 million in operating lease liabilities, and a decrease of $2.4 million in accounts payable.

Current wording

Net cash provided by operating activities during the nine months ended April 30, 2025 was $721.8 million, which resulted from a net loss of $23.9 million, adjusted for non-cash charges of $716.4 million and net cash inflows of $29.4 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $488.7 million for stock-based compensation expense, $121.5 million for amortization of deferred contract acquisition costs, $74.1 million for depreciation and amortization expense, $47.9 million for non-cash operating lease costs and $12.7 million for amortization expense of acquired intangible assets. Non-cash charges were partially offset by deferred income taxes of $17.8 million and an accretion of investments purchased at a discount of $13.9 million. Net cash inflows from changes in operating assets and liabilities were primarily the result of a decrease of $120.5 million in accounts receivable, primarily due to timing of billings and collections, an increase of $90.0 million in deferred revenue, and an increase of $28.9 million in accounts payable. Net cash inflows were partially offset by cash outflows resulting from an increase of $140.0 million in deferred contract acquisition costs, a decrease of $45.2 million in operating lease liabilities, an increase of $12.2 million in prepaid expenses, other current and noncurrent assets, a decrease of $7.0 million in accrued expenses, other current and noncurrent liabilities and $5.7 million decrease in accrued compensation.

Previous wording

Net cash provided by operating activities during the six months ended January 31, 2025 was $510.8 million, which resulted from a net loss of $19.8 million, adjusted for non-cash charges of $473.3 million and net cash inflows of $57.3 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $329.3 million for stock-based compensation expense, $79.2 million for amortization of deferred contract acquisition costs, $45.9 million for depreciation and amortization expense, $31.6 million for non-cash operating lease costs and $8.5 million for amortization expense of acquired intangible assets and unrealized losses on hedging transactions of $3.0 million. Non-cash charges were partially offset by deferred income taxes of $17.4 million and an accretion of investments purchased at a discount of $10.1 million. Net cash inflows from changes in operating assets and liabilities were primarily the result of $222.0 million in accounts receivable. Net cash inflows were partially offset by cash outflows resulting from an increase of $74.2 million in deferred contract acquisition costs, a decrease of $30.2 million in operating lease liabilities, a decrease of $20.4 million in accrued compensation, a decrease of $16.5 million in deferred revenue, an increase of $12.1 million in prepaid expenses, other current and noncurrent assets and a decrease of $11.5 million in accrued expenses.

Current wording

Net cash provided by operating activities during the nine months ended April 30, 2024 was $576.3 million, which resulted from a net loss of $42.8 million, adjusted for non-cash charges of$554.8 million and net cash inflows of$64.3 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $382.8 million for stock-based compensation expense, $94.7 million for amortization of deferred contract acquisition costs, $47.0 million for depreciation and amortization expense, $34.9 million for non-cash operating lease costs and $9.5 million for amortization expense of acquired intangible assets. Non-cash charges were partially offset by accretion of investments purchased at a discount of $14.6 million and deferred income taxes of $5.8 million. Net cash inflows from changes in operating assets and liabilities were primarily the result of an increase of $132.4 million in deferred revenue, a decrease of $78.4 million in accounts receivable, primarily due to timing of billings and collections, an increase of $14.6 million in accrued expenses, other current and noncurrent liabilities and an increase of $7.5 million in accounts payable. Net cash inflows were partially offset by cash outflows resulting from an increase of $122.7 million in deferred contract acquisition costs, a decrease of $35.4 million in operating lease liabilities and an increase of $23.5 million in prepaid expenses, other current and noncurrent assets.