Zscaler, Inc.

Note 1. Business and Summary of Significant Accounting Policies

Description of the Business

Zscaler, Inc. ("Zscaler," the "Company," "we," "us," or "our") is a cloud security company that developed a platform incorporating core security functionalities needed to enable fast and secure access to cloud resources based on identity, context and an organization’s policies. Our solution is a purpose-built, multi-tenant, distributed cloud platform that implements Zero Trust principles to securely connect users, devices, applications, workloads and AI agents without relying on traditional network-based security. We deliver our solutions using a software-as-a-service ("SaaS") business model and sell subscriptions to customers to access our cloud platform, together with related support services. Our ever-evolving platform provides our customers with a flexible and scalable approach to better secure their operations, optimize user experience, eliminate complexity, reduce costs and respond to the challenges and opportunities of AI and future new technologies. We were incorporated in Delaware in September 2007 and conduct business worldwide, with presence in North America, South America, Europe and Asia. Our headquarters are in San Jose, California.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP") and applicable regulations of the SEC regarding interim financial reporting and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the applicable required disclosures and regulations of the SEC. Therefore, these unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company's audited consolidated financial statements and related notes in its Annual Report on Form 10-K for the fiscal year ended July 31, 2025 (the "Fiscal 2025 Form 10-K"), as filed with the SEC on September 11, 2025.

Interim Unaudited Condensed Consolidated Financial Statements

The accompanying condensed consolidated balance sheet as of July 31, 2025 was derived from the audited consolidated financial statements as of that date. The accompanying interim unaudited condensed consolidated financial statements, including the condensed consolidated balance sheet as of April 30, 2026, the condensed consolidated statements of operations for the three and nine months ended April 30, 2026 and 2025, the condensed consolidated statements of comprehensive income (loss) for the three and nine months ended April 30, 2026 and 2025, the condensed consolidated statements of stockholders’ equity for the three and nine months ended April 30, 2026 and 2025 and the condensed consolidated statements of cash flows for the nine months ended April 30, 2026 and 2025 are unaudited. The related financial data and the other financial information disclosed in the accompanying notes to these interim unaudited condensed consolidated financial statements are also unaudited. These interim unaudited condensed consolidated financial statements have been prepared on a basis consistent with our annual consolidated financial statements and, in our opinion, include all normal recurring adjustments necessary to state fairly our quarterly results. The results of operations for the three and nine months ended April 30, 2026 are not necessarily indicative of the results to be expected for our fiscal year ending July 31, 2026 or for any other future fiscal year or interim period.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Such estimates include, but are not limited to, the determination of revenue recognition, deferred revenue, deferred contract acquisition costs, capitalized internal-use software, valuation of acquired intangible assets, period of benefit generated from our deferred contract acquisition costs, allowance for doubtful accounts, valuation of common stock options and stock-based awards, useful lives of property and equipment, useful lives of acquired intangible assets, recoverability of goodwill, valuation of deferred tax assets and liabilities, loss contingencies related to litigation, fair value of convertible senior notes and the discount rate used for operating leases. Management determines these estimates and assumptions based on historical experience and on various other assumptions that are believed to be reasonable. Actual results could differ significantly from these estimates, and such differences may be material to the condensed consolidated financial statements.

Due to uncertainty in the macroeconomic and geopolitical environment, there is ongoing disruption in the global economy and financial markets. We are not aware of any specific event or circumstances that would require an update to our estimates, judgments or assumptions or a revision to the carrying value of our assets or liabilities as of the date of issuance of these condensed consolidated financial statements. These estimates, judgments and assumptions may change in the future, as new events occur or additional information is obtained.

Fiscal Year

Our fiscal year ends on July 31. References to fiscal 2026, for example, refer to our fiscal year ending July 31, 2026.

Significant Accounting Policies

Our significant accounting policies are described in the Fiscal 2025 Form 10-K. There have been no significant changes to these policies that have had a material impact on the condensed consolidated financial statements and related notes for the three and nine months ended April 30, 2026.

Recently Issued Accounting Pronouncements

In September 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This standard is intended to make targeted improvements to the accounting and application of guidance related to costs incurred to develop software for internal use. This standard is effective for us in the annual and interim periods beginning in the first quarter of fiscal 2029. We are currently evaluating the potential impact of this standard on our consolidated financial statement disclosures.

In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This standard amends guidance on measuring expected credit losses for current accounts receivable and contract assets arising from revenue contracts. The amended guidance requires estimation of credit losses for these short-term assets based on the economic conditions that exist as of the balance sheet date, without forecasting future economic conditions. This standard is effective for us in the annual and interim periods beginning in the first quarter of fiscal 2027. We are currently evaluating the potential impact of this standard on our consolidated financial statement disclosures.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses. This standard requires disclosures of additional information about specific expense categories in the notes to the financial statements for interim and annual reporting periods. This standard is effective for us in the annual periods beginning in fiscal 2028 and interim periods beginning in the first quarter of fiscal 2029. We are currently evaluating the potential impact of this standard on our consolidated financial statement disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances disclosure requirements primarily related to the effective tax rate reconciliation and income taxes paid. This standard is effective for us in annual periods beginning in fiscal 2026. We intend to adopt this standard on a prospective basis and have determined that while it will result in additional disclosure, the adoption will have no impact on our consolidated financial statements.

Note 2. Revenue Recognition

Disaggregation of Revenue

Subscription and support revenue is recognized over time and accounted for approximately 98% of our revenue for each of the three and nine months ended April 30, 2026 and 2025, respectively.

The following table summarizes the revenue by region based on the shipping address of customers who have contracted to use our cloud platform:

The following table summarizes the revenue from contracts by type of customer:

Significant Customers

No single customer accounted for 10% or more of the total revenue during the periods presented. The following table summarizes the concentration of 10% or more of the total balance of accounts receivable, net:

Contract Balances

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are recognized as revenue over the contractual period. Deferred revenue, including current and noncurrent balances as of April 30, 2026 and July 31, 2025 was $2,477.2 million and $2,468.0 million, respectively. In the nine months ended April 30, 2026 and 2025, we recognized revenue of $1,776.5 million and $1,432.1 million, respectively, that was included in the corresponding contract liability balance at the beginning of these periods.

Remaining Performance Obligations

The typical subscription and support term isone tothree years. Most of our subscription and support contracts are non-cancelable over the contractual term. However, customers typically have the right to terminate their contracts for cause, if we fail to perform. As of April 30, 2026, the aggregate amount of the transaction price allocated to remaining performance obligations was $6,459.3 million. We expect to recognize 46% of the transaction price over the next 12 months and 91% of the transaction price over the next three years, with the remainder recognized thereafter.

Costs to Obtain and Fulfill a Contract

We capitalize sales commission and associated payroll taxes paid to sales personnel that are incremental to the acquisition of customer contracts. These costs are recorded as deferred contract acquisition costs in the condensed consolidated balance sheets.

The activity of the deferred contract acquisition costs consisted of the following:

The outstanding balance of the deferred contract acquisition costs consisted of the following:

Note 3. Cash Equivalents and Short-Term Investments

Cash equivalents and short-term investments consisted of the following as of April 30, 2026:

Cash equivalents and short-term investments consisted of the following as of July 31, 2025:

The amortized cost and fair value of our short-term investments based on their stated maturities consisted of the following as of April 30, 2026:

Short-term investments that were in continuous unrealized loss position as of April 30, 2026 consisted of the following:

Short-term investments that were in continuous unrealized loss position as of July 31, 2025 consisted of the following:

We review the individual securities that have unrealized losses in our short-term investment portfolio on a regular basis. We evaluate, among other criteria, whether we have the intention to sell any of these investments and whether it is more likely than not that we will be required to sell any of them before recovery of the amortized cost basis. Neither of these criteria were met in any period presented. We additionally evaluate whether the decline in fair value of the corporate debt securities below their amortized cost basis is related to credit losses or other factors. Based on this evaluation, we determined that unrealized losses of the above securities were primarily attributable to changes in interest rates and non-credit related factors. Accordingly, we determined that an allowance for credit losses was unnecessary for our short-term investments as of April 30, 2026 and July 31, 2025.

As of April 30, 2026 and July 31, 2025, we recorded $26.6 million and $17.9 million, respectively, of accrued interest receivable within prepaid expenses and other current assets in the condensed consolidated balance sheets.

Strategic Investments

Our strategic investments consist primarily of non-marketable equity securities of privately held companies, which do not have a readily determinable fair value. As of April 30, 2026 and July 31, 2025, the carrying amount of our strategic investments was $14.2 million and $10.6 million, respectively, and is included within other noncurrent assets in the condensed consolidated balance sheets. There were no material events or circumstances impacting their carrying amounts during the periods presented.

Note 4. Fair Value Measurements

We measure our financial assets and liabilities at fair value at each reporting period using a fair value hierarchy, which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Our money market funds are classified within Level I due to the highly liquid nature of these assets and have quoted prices in active markets. Our investments in U.S. treasury securities, U.S. government agency securities, Non-U.S. government securities, certificates of deposit, corporate debt securities, asset-backed securities, as well as assets and liabilities arising from our foreign currency forward contracts and interest rate swap contracts, are classified within Level II. The fair value of our Level II financial assets and liabilities is determined by using inputs based on non-binding market consensus prices that are primarily corroborated by observable market data or quoted market prices for similar instruments, for substantially the full term of the financial assets and liabilities.

Assets and liabilities that are measured at fair value on a recurring basis consisted of the following as of April 30, 2026:

(1)Included within prepaid expenses and other current assets in the condensed consolidated balance sheets.

(2)Included within other noncurrent assets in the condensed consolidated balance sheets.

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

(4)Included within other noncurrent liabilities in the condensed consolidated balance sheets.

Assets that are measured at fair value on a recurring basis consisted of the following as of July 31, 2025:

(1)Included within prepaid expenses and other current assets in the consolidated balance sheets.

(2)Included within other noncurrent assets in the consolidated balance sheets.

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

(4)Included within other noncurrent liabilities in the consolidated balance sheets.

We did not have transfers between levels of the fair value hierarchy of assets measured at fair value during the periods presented.

Refer to Note 10, Convertible Senior Notes, for the carrying amount and estimated fair value of our convertible senior notes as of April 30, 2026 and July 31, 2025.

Note 5. Balance Sheet Components

Property and Equipment

Property and equipment consisted of the following:

(1)Includes purchased equipment that had not been placed in service, totaling $105.4 million and $163.5 million as of April 30, 2026 and July 31, 2025, respectively.

We recognized depreciation and amortization expense on property and equipment of $37.5 million and $27.7 million for the three months ended April 30, 2026 and 2025, respectively, and $103.9 million and $72.8 million for the nine months ended April 30, 2026 and 2025, respectively. Additionally, we recognized stock-based compensation expense on the amortization of capitalized stock-based compensation associated with capitalized internal-use software of $8.1 million and $5.9 million for the three months ended April 30, 2026 and 2025, respectively, and $22.5 million and $15.1 million for the nine months ended April 30, 2026 and 2025, respectively.

Purchased Intangible Assets

Purchased intangible assets are amortized on a straight-line basis over an estimated useful life of 10 years. These assets are included within other noncurrent assets in the condensed consolidated balance sheets.

Purchased intangible assets consisted of the following:

We recognized amortization expense on purchased intangible assets of $0.6 million and $0.5 million for the three months ended April 30, 2026 and 2025, respectively, and $1.7 million and $1.3 million for the nine months ended April 30, 2026 and 2025, respectively.

Accrued Compensation

Accrued compensation consisted of the following:

Note 6. Business Combinations

SquareX, Inc.

On February 5, 2026, we acquired all of the outstanding equity of SquareX, Inc. (“SquareX”), a browser security technology company, for total cash consideration of $112.8 million. The acquisition is expected to extend our browser capabilities, including on unmanaged devices.

Pursuant to the purchase agreement, we issued restricted common stock awards with a grant date fair value of $37.4 million, which are subject to future employment service conditions and will be recognized as stock-based compensation expense over the post-combination service period.

The preliminary purchase price was allocated to $9.8 million of developed technology, valued using the replacement cost approach with an estimated useful life of five years.

The resulting goodwill of $93.0 million is primarily attributable to the assembled workforce and anticipated operational synergies and is not expected to be deductible for income tax purposes.

The purchase price allocation is preliminary and subject to adjustment during a measurement period of up to one year from the acquisition date.

SPLXAI Inc.

On October 31, 2025, we acquired all of the outstanding equity of SPLXAI Inc. ("SPLX"), an early-stage artificial intelligence technology company, for total cash consideration of$40.6 million. The acquisition is expected to extend our AI Security capabilities.

Pursuant to the purchase agreement, we issued restricted common stock awards with a grant date fair value of$16.6 million, which are subject to future employment service conditions and will be recognized as stock-based compensation expense over the post-combination service period.

During the three months ended January 31, 2026, and within the measurement period, we revised the preliminary valuation of acquired intangible assets from $14.1 million to $3.3 million, allocated to developed technology with a useful life offour years. This change resulted from transitioning from a benchmarking valuation approach to a replacement cost approach, which we believe provides a more appropriate measure of fair value.

As a result of this adjustment and the related tax impact, goodwill increased from $32.2 million to $39.2 million and is primarily attributable to the assembled workforce and anticipated operational synergies and is not expected to be deductible for income tax purposes.

The purchase price allocation is preliminary and subject to adjustment during the measurement period of up to one year from the acquisition date.

Red Canary Inc.

On August 1, 2025, we acquired all of the outstanding equity of Red Canary Inc. ("Red Canary"), a managed detection and response technology company, for total cash consideration of $651.4 million. The acquisition is expected to accelerate innovation in Agentic AI-driven security operations.

Pursuant to the purchase agreement, we issued restricted common stock awards with a grant date fair value of $20.2 million, which are subject to future employment service conditions and will be recognized as stock-based compensation expense over the post-combination service period.

We estimated the fair value of the acquired intangible assets using the income approach. The resulting goodwill of $544.5 million is primarily attributable to the assembled workforce and anticipated operational synergies and is not expected to be deductible for income tax purposes.

The purchase price allocation is preliminary and subject to adjustment during the measurement period of up to one year from the acquisition date.

The preliminary allocation of the purchase price consideration consisted of the following:

Pro Forma Financial Information

The pro forma financial information from the above business acquisitions, assuming the acquisition had occurred as of the beginning of the fiscal year prior to the fiscal year of the acquisition, as well as revenue and earnings generated during the period after the acquisition date, were not material for disclosure purposes.

Note 7. Goodwill and Acquired Intangible Assets

Goodwill

Changes in the carrying amount of goodwill for the nine months ended April 30, 2026 consisted of the following:

Acquired Intangible Assets

Acquired intangible assets consist of developed technology, customer relationships and trademarks acquired through our business acquisitions. Acquired intangible assets are amortized using the straight-line method over their estimated useful lives.

During three andnine months ended April 30, 2026, in connection with the acquisition of SquareX, SPLX and Red Canary, we acquired certain intangible assets, as further described in Note 6, Business Combinations.

Changes in acquired intangible assets for the nine months ended April 30, 2026 consisted of the following:

Amortization expense of acquired intangible assets for the three and nine months ended April 30, 2026 was $11.4 million and $31.2 million, respectively, andfor the three and nine months ended April 30, 2025 was $4.3 million and$12.7 million, respectively. Amortization expense of developed technology is included primarily within cost of revenue and amortization expense of customer relationships and trademarks is included primarily within sales and marketing expenses, in the condensed consolidated statements of operations.

Future amortization expense of acquired intangible assets as of April 30, 2026 consisted of the following:

Note 8. Derivative Instruments

Foreign Currency Forward Contracts

We use foreign currency forward contracts to manage risks related to fluctuations in exchange rates. We designate certain of these instruments as cash flow hedges to mitigate the impact of currency fluctuations on forecasted operating expenses, typically with maturities of up to 21 months.

We also utilize non-designated forward contracts to manage exposure from the remeasurement of monetary assets and liabilities, typically with maturities ofone tofour months. Changes in the fair value of these non-designated derivatives are reco rded in other income (expense), net and were not material for the periods presented.

As of April 30, 2026 and July 31, 2025, the total notional amount of our outstanding designated foreign currency forward contracts was $793.0 million and $693.1 million, respectively, and for our outstanding non-designated foreign currency forward contracts was $494.3 million and $549.5 million, respectively. As of April 30, 2026, the unrealized loss related to our cash flow hedges expected to be released into earnings over the next 12 months is not expected to be material. Refer to Note 4, Fair Value Measurements, for the fair value of our derivative instruments as reported on the condensed consolidated balance sheet as of April 30, 2026 and July 31, 2025.

The changes in accumulated other comprehensive income (losses) ("AOCI(L)") related to our cash flow hedges consisted of the following:

(1)(Gains) losses related to our cash flow hedges reclassified from AOCI(L) into the condensed consolidated statement of operations consisted of the following:

Our derivative contracts expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the underlying contracts. We mitigate this credit risk by transacting with major financial institutions with high credit ratings and standards. We periodically assess the creditworthiness of our counterparties to ensure they continue to meet our credit quality requirements. We also enter into master netting arrangements, which permit net settlement of transactions with the same counterparty. The potential impact of these rights of set-off associated with our derivative instruments was not material as of April 30, 2026 and July 31, 2025. We are not required to pledge, and are not entitled to receive, cash collateral related to these derivative instruments. We do not enter into derivative contracts for trading or speculative purposes.

Interest Rate Swap Contracts

During the three months ended October 31, 2025, we entered into interest rate swap contracts covering the interest rate applicable to a portion of the outstanding 2028 Notes (as defined below), maturing on July 15, 2028, and designated as fair value hedges. The interest rate swap contracts are intended to hedge a portion of our fair value risk exposure related to changing interest rates by effectively converting the fixed interest rate of a portion of our 2028 Notes to a floating interest rate. The interest rate swap contracts related to the 2025 Notes (as defined below) matured on July 1, 2025. As of April 30, 2026, the carrying amount of the hedged 2028 Notes was $746.9 million and the total notional amount of outstanding interest rate swaps was $750.0 million.

The gains and losses related to changes in the fair value of the interest rate swap contracts are included within interest expense in the condensed consolidated statement of operations. As of April 30, 2026, the cumulative amount of fair value hedge accounting adjustments included in the carrying amount of the convertible senior notes was $7.2 million.

The gains and losses effect of derivative instruments designated as fair value hedges included within interest expense in the condensed statement of operations consisted of the following:

Note 9. Restructuring and Other Charges

During the three months ended October 31, 2025, we carried out and completed a restructuring plan as a part of our planned efforts to streamline operations and to align people, roles and projects to our strategic priorities. As a result, we recognized$4.7 million of restructuring charges consisting of employee severance and benefit payments.

The components of restructuring charges recognized in the condensed consolidated statement of operations for the nine months ended April 30, 2026 consisted of the following:

Note 10. Convertible Senior Notes

2028 Convertible Senior Notes

On July 3, 2025, we issued$1,725.0 million in aggregate principal amount of 0.0% convertible senior notes due 2028 (the "2028 Notes"), including the exercise in full by the initial purchasers of their option to purchase an additional$225.0 million principal amount of the 2028 Notes. The 2028 Notes are unsecured obligations and do not bear regular cash interest and the principal amount of the 2028 Notes will not accrete. The 2028 Notes mature on July 15, 2028, unless earlier converted or repurchased. The total net proceeds from the offering, after deducting initial purchase discounts and other debt issuance costs, was$1,700.0 million. Refer to Note 10, Convertible Senior Notes, to the audited consolidated financial statements included in our Fiscal 2025 Form 10-K for further information on the 2028 Notes.

During thethree months ended April 30, 2026, the conditions allowing holders of the 2028 Notes to convert were not met. Since we have the election of repaying the 2028 Notes in cash, shares of our common stock, or a combination of both, we have classified the 2028 Notes as a noncurrent liability in the condensed consolidated balance sheet as of April 30, 2026.

During the three months ended October 31, 2025, we entered into interest rate swap contracts designated as fair value hedges covering a portion of the outstanding 2028 Notes. For further information refer to Note 8, Derivative Instruments.

The net carrying amount of the 2028 Notes consisted of the following:

The total fair value of the 2028 Notes was $1,569.4 million and $1,686.5 million as of April 30, 2026 and July 31, 2025. The fair value was determined based on the closing trading price per $1,000 of the 2028 Notes as of the last day of trading for the reporting period. We considered the fair value of the 2028 Notes as of April 30, 2026 to be a Level II measurement as they are not actively traded.

The interest expense of the 2028 Notes for thethree and nine months ended April 30, 2026 was $2.0 million and $6.1 million, which consisted of the amortization of debt issuance costs.

2028 Capped Call Transactions

In connection with the pricing of the 2028 Notes, we entered into capped call transactions (the "2028 Capped Calls") with certain financial institutions (the "Option Counterparties"). The 2028 Capped Calls have an initial strike price of $439.52 per share of our common stock, subject to certain adjustments, which corresponds to the initial conversion price of the 2028 Notes. The 2028 Capped Calls have an initial cap price of $784.85 per share of our common stock, subject to certain adjustments. The 2028 Capped Calls cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2028 Notes, the number of shares of our common stock underlying the 2028 Notes. The 2028 Capped Calls are generally expected to reduce potential dilution to our common stock upon any conversion of the 2028 Notes and/or offset any cash payments we are required to make in excess of the principal amount of the converted 2028 Notes, as the case may be, with such reduction and/or offset subject to a cap. As of April 30, 2026, the terms of the 2028 Capped Calls have not been adjusted. Refer to Note 10, Convertible Senior Notes, to the audited consolidated financial statements included in our Fiscal 2025 Form 10-K for further information on the 2028 Capped Calls.

2025 Convertible Senior Notes and 2025 Capped Call Transactions

On June 25, 2020, we issued $1,150.0 million in aggregate principal amount of 0.125% convertible senior notes due 2025 (the "2025 Notes"). The 2025 Notes were unsecured obligations and bore a contractual interest rate of 0.125% per year with interest payable semiannually in arrears on January 1 and July 1 of each year. The 2025 Notes matured on July 1, 2025. We repaid the 2025 Notes in full by paying the principal amount of $1,150.0 million in cash and settling the premium amount by issuing 3.8 million new shares of our common stock. Additionally, we received 2.4 million shares of our common stock from the capped call transactions related to the 2025 Notes.

The interest expense of the 2025 Notes consisted of the following:

Note 11. Leases

In December 2025, we took possession of our new headquarters located in Santa Clara, California. This lease, which was executed in fiscal 2025, consists of approximately 301,000 square feet of rentable space with a rent commencement date of August 15, 2026 and an expiration date of April 30, 2032. In accordance with ASU No. 842, Leases, we recognized in the condensed consolidated balance sheet a right-of-use asset of $14.8 million and a corresponding operating lease liability of $29.4 million upon possession.

Note 12. Commitments and Contingencies

Non-cancelable Purchase Obligations

In the normal course of business, we enter into non-cancelable purchase commitments with various third parties to purchase products and services such as cloud infrastructure capacity, subscription-based cloud service arrangements, technology equipment, corporate and marketing events and consulting services. As of April 30, 2026, there have been no material changes outside the ordinary course of our business to our non-cancelable purchase obligations from those disclosed in the Fiscal 2025 Form 10-K.

Legal Matters

We are a party to various litigation matters from time to time and subject to claims that arise in the ordinary course of business, including patent, commercial, product liability, employment, class action, whistleblower and other litigation and claims, as well as governmental and other regulatory investigations and proceedings. In addition, third parties may from time to time assert claims against us in the form of letters and other communications. There is no pending or threatened legal proceeding to which we are a party that, in our opinion, is likely to have a material adverse effect on our future financial results or operations; however, the results of litigation and claims are inherently unpredictable. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. The expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change and could adversely affect our results of operations.

Note 13. Stock-Based Compensation

Equity Incentive Plan

Equity incentive awards which may be granted to eligible participants under our Amended and Restated FY 2018 Equity Incentive Plan include restricted stock units, restricted stock, stock options, nonstatutory stock options, stock appreciation rights, performance units and performance shares.

Stock Options

The activity of stock options for the nine months ended April 30, 2026 consisted of the following:

The total intrinsic value of options exercised for the nine months ended April 30, 2026 and 2025 was $3.7 million and $59.3 million, respectively. The weighted-average grant date fair value per share of stock options granted in the nine months ended April 30, 2025 was $118.81.

We estimate thefair value of stock options using the Black-Scholes option pricing model with the following assumptions:

There wereno stock options granted during nine months ended April 30, 2026.

Restricted Stock Units and Performance Stock Awards

The activity of restricted stock units ("RSUs") and performance stock awards ("PSAs") consisted of the following for the nine months ended April 30, 2026:

Employee Stock Purchase Plan

In fiscal 2018, we adopted the FY 2018 Employee Stock Purchase Plan (the "ESPP"). During the nine months ended April 30, 2026, employees purchased 0.1 million shares of our common stock under the ESPP at an average purchase price of $175.05 per share, resulting in cash proceeds of $21.5 million. ESPP employee payroll contributions accrued as of April 30, 2026 and July 31, 2025, were $39.3 million and $9.4 million, respectively, and are included within accrued compensation in the condensed consolidated balance sheets. Payroll contributions accrued as of April 30, 2026 will be used to purchase shares at the end of the current ESPP purchase period ending on June 15, 2026. Payroll contributions ultimately used to purchase shares are reclassified to stockholders’ equity on the purchase date.

The fair value of the purchase right for the ESPP was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

Stock-based Compensation Expense

The components of stock-based compensation expense recognized in the condensed consolidated statements of operations consisted of the following:

During the three months ended April 30, 2026 and 2025, we capitalized stock-based compensation primarily associated with the development of software for internal-use of $10.4 million and $9.7 million, respectively. During thenine months ended April 30, 2026 and 2025, the amount capitalized was $29.8 million and $34.4 million, respectively.

Note 14. Income Taxes

Ourtax provision forinterim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each 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.

Our quarterly tax provision for, 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% as a result of our U.S. losses for which no tax benefit will be realized, as well as our foreign operations which are subject to tax rates that differ from those in the United States.

For the three months ended April 30, 2026 and 2025, we recorded provision for income taxes of $11.5 million and $8.7 million, respectively. Werecorded provision for income taxes of$27.8 million and $7.5 million for thenine months ended April 30, 2026 and 2025, respectively. The increase for the three months ended April 30, 2026 was primarily driven by the increase in our pre-tax income in non-U.S. jurisdictions in which we conduct business. The increase for thenine months ended April 30, 2026 was primarily driven by a non-recurring release of valuation allowance on our United Kingdom deferred tax assets in the prior year. We are subject to income tax in the U.S. as well as other tax jurisdictions in which we conduct business. Earnings from our non-U.S. operations are subject to income taxes in the countries in which we operate.

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.

On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act. Included in this legislation are provisions that allow for the immediate expensing of domestic research and development expenses, immediate expensing of certain capital expenditures, and other changes to the U.S. taxation of profits derived from foreign operations. We began accounting for the provisions in the legislation in fiscal 2026, which resulted in an immaterial favorable effect on the income tax provision, mainly due to the Company's valuation allowance.

The Organization for Economic Cooperation and Development’s (OECD) January 2026 guidance introduced a "Side-by-Side Safe Harbor" that may exempt our U.S. operations from certain global minimum tax rules effective for fiscal years beginning on or after January 1, 2026. However, this relief does not extend to foreign jurisdictions where local minimum tax requirements remain applicable. We continue to monitor these developments and are assessing the potential impact on the income tax provision beginning in fiscal 2027.

Note 15. Net Loss Per Share

The computation of basic and diluted net loss per share consisted of the following:

Since we have reported net losses for all periods presented, we have excluded all potentially dilutive securities from the calculation of the diluted net loss per share as their effect is antidilutive and accordingly, the basic and diluted net loss per share is the same for all periods presented.

We calculate the potential dilutive effect of the convertible senior notes under the if-converted method. Under this method, diluted earnings per share are determined by assuming that outstanding convertible senior notes were converted into shares of our common stock at the beginning of the reporting period. In connection with the issuance of the convertible senior notes, we entered into the capped call transactions, which were not included for purposes of calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive. The capped call transactions are expected to partially offset the potential dilution to our common stock upon any conversion of the convertible senior notes.

The following table summarizes the outstanding potentially dilutive securities that were excluded from the computation of diluted net loss per share as their effect would be antidilutive:

(1) The number of unvested PSAs is estimated at 100% of the target number of shares granted and excludes unvested PSAs for which performance conditions have not been established as of April 30, 2026 and 2025, as they are not considered outstanding for accounting purposes. For further information refer to Note 13, Stock-Based Compensation.

(2)Based on the initial conversion price, the entire outstanding principal amount of the 2028 Notes as of April 30, 2026 and the 2025 Notes as of April 30, 2025 would have been convertible into approximately 3.9 million shares and 7.6 million shares of our common stock, respectively.

Note 16. Segment Information

We operate globally as a single operating and reportable segment with one primary business activity. Using a SaaS business model, we primarily generate revenue from sales of subscriptions to grant customers access to our cloud platform along with related support services. Our chief operating decision maker ("CODM") is our chief executive officer. Consolidated financial information, including revenue and significant adjusted segment expenses, is regularly provided to the CODM for purposes of allocating resources and evaluating financial performance. This information is also used in our annual budgeting and forecasting processes to establish goals and compare actual results against both budgeted targets and historical performance. Our CODM uses consolidated net loss as the measure of our segment profit or loss. The measure of our segment assets is reported as total assets on the consolidated balance sheets.

The following table sets forth our segment revenue, significant adjusted segment expenses and other segment items to reconcile to condensed consolidated net loss:

(1) Cost of revenue, sales and marketing expense and research and development expense, adjusted to exclude stock-based compensation and related employer payroll taxes, amortization of acquired intangible assets and restructuring and other charges.

(2) General and administrative expense adjusted to exclude stock-based compensation and related employer payroll taxes and acquisition-related expenses.

(3) Other segment items, net include interest income, interest expense, other expense, net and provision for income taxes.

Note 17. Subsequent Event

On May 19, 2026, we entered into a definitive agreement to acquire Symmetry Systems, Inc. ("Symmetry"), a cybersecurity company specializing in data and identity mapping for AI security. Under the terms of the purchase agreement, we will acquire Symmetry for total consideration of $175.0 million, consisting of cash and restricted shares subject to future employment services. We expect this acquisition to enhance our AI security offerings and our Zero Trust Exchange TM platform. The transaction is expected to close in the fourth quarter of fiscal 2026, subject to the satisfaction of closing conditions.