Zscaler, Inc.
For the period ended Jul 31, 2026. Filed Sep 3, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed Sep 3, 2026
ZS$197.66-3.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2025-07-31; filed 2025-09-11.
0001713683-25-000158
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2026-07-31; filed 2026-09-03.
0001713683-26-000157
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 156 previous paragraphs and 134 current paragraphs.
62 unchanged; 42 reworded; 27 added; 48 removed; 4 previous and 3 current paragraphs rearranged.
Tables are not compared: 21 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
We empower our customers with the cybersecurity solutions necessary to protect their enterprises, drive growth and outpace competitors where success depends on securely adopting the technologies required to operate and compete effectively in an AI world. We were founded in 2007, based on a vision that, with the broad adoption of SaaS applications, the internet would become the new corporate network, the cloud would become the new data center and perimeter-based security would fail to protect users, applications and data. As AI redefines how businesses operate and powerful AI-enabled cyberthreats proliferate, enterprises must now adopt a zero trust approach to security. We deliver a comprehensive, cloud-native zero trust platform that minimizes the attack surface of an enterprise and eliminates lateral threat movement, delivering security at the scale and speed of AI.
Current report
Adoption of the Cloud, Mobility and AI
Current report
Cloud adoption, workforce mobility and the rapid emergence of AI have fundamentally altered enterprise IT architectures and security requirements.
Current report
As enterprise applications have migrated out of data centers and workforces have become increasingly distributed, conventional perimeter-based security, including firewalls and VPNs, are inadequate to address modern threats. These legacy tools can be expensive to maintain, may degrade user experience and were not designed to secure a borderless enterprise. AI adds further complexity as frontier models are accelerating the sophistication of cyberattacks and compressing the time between vulnerability discovery and exploitation, while AI-driven agentic workflows introduce data governance and access control demands that traditional architectures were not built to meet.
Current report
We believe our cloud platform is well-positioned to address these dynamics. By performing inline inspection at scale, hiding applications from the internet and eliminating lateral threat movement our platform is designed to reduce the attack surface that legacy architectures expose. We connect users, devices, workloads, and AI agents to applications based on identity and context rather than network location, an approach we believe is increasingly aligned with how enterprises need to operate in the rapidly evolving AI and digital world.
Current report
•selling a new solution or product, such as selling Data security or Security for AI solutions to an existing ZIA or ZPA customer, or selling ZIA or ZPA to an existing Zero Trust Branch customer.
Current report
Annual Recurring Revenue ("ARR")
Current report
(1) Includes acquisition-related stock-based compensation expense and related payroll taxes of $0.1 million, $0.2 million and nil for fiscal 2026, fiscal 2025 and fiscal 2024, respectively. Acquisition-related stock-based compensation includes deferred merger consideration subject to post-combination service vesting conditions, performance stock awards, and acquisition replacement awards.
Current report
(1) Includes acquisition-related stock-based compensation expense and related payroll taxes of $57.4 million, $33.1 million and $17.7 million for fiscal 2026, fiscal 2025 and fiscal 2024, respectively. Acquisition-related stock-based compensation includes deferred merger consideration subject to post-combination service vesting conditions, performance stock awards, and acquisition replacement awards.
Current report
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.
Current report
(3) Includes restructuring and other charges:
Current report
Gross margin remained flat at 77% for fiscal 2026 as compared to fiscal 2025.
Current report
Sales and marketing expenses increased by$236.7 million, or 19%, for fiscal 2026, compared to fiscal 2025. The change was driven primarily by an increase of$167.0 million in employee-related expenses due to an increase in headcount related to acquisition and organic headcount growth, along withan increase of $36.5 million instock-based compensation expense and$36.4 million in sales commissions expense which was also partially due to headcount growth. The remainder of the increase was primarily attributable to $24.9 million infacility, software and equipment-related expenses, $14.6 million in marketing and advertisement expenses, and $13.9 million in amortization of acquired intangible assets.
Current report
Interest expense increased by$2.3 million for fiscal 2026, compared to fiscal 2025. The change was driven primarily by higher amortization of debt issuance costs.
Current report
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 an immaterial impact on our income tax provision for the fiscal 2026.
Current report
The OECD's 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.
Current report
Critical Accounting Estimates
Current report
We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. Most of our contracts contain multiple performance obligations, which primarily include subscription and support services, along with professional and other services. When a contract contains multiple performance obligations, we allocate the transaction price to each performance obligation based on its relative standalone selling price ("SSP").
Current report
Certain contracts also include variable consideration in the form of service level credits and rebates. We include variable consideration in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue will not occur. We have not experienced material incidents affecting our service level commitments, and rebates or estimated credits have not been material in the periods presented.
Current report
Deferred Contract Acquisition Costs
Current report
Business Combinations
Current report
We allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets. Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience, market conditions, and information obtained from management of the acquired companies and are inherently uncertain. Examples of judgments used to estimate the fair value of intangible assets include, but are not limited to, future expected cash flows, revenue growth rates, expected customer attrition rates, and royalty rates. These estimates are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
Current report
Income Taxes
Current report
We account for income taxes using the asset and liability method, recognizing deferred tax assets and liabilities for the expected future tax consequences of events reported in our financial statements or tax returns. Deferred tax assets are also recorded for future tax benefits, such as net operating losses and tax credit carryforwards.
Current report
We establish a valuation allowance to reduce deferred tax assets to the amount that is "more likely than not" to be realized. This requires significant judgment based on our assessment of all available evidence, including past operating results, estimates of future taxable income, and tax planning strategies. Any change in our determination would result in an adjustment to the valuation allowance and a corresponding impact to our provision for income taxes in that period.
Current report
Due to the weight of objectively verifiable negative evidence, including our history of losses, we believe that it is more likely than not that our U.S. federal and state deferred tax assets will not be realized as of July 31, 2026. Accordingly, we have maintained a full valuation allowance against such deferred tax assets.
Current report
Based on our assessment of current income and anticipated future earnings, there is a reasonable possibility that we will have sufficient evidence to release a significant portion of the valuation allowance in the U.S. within the next 12 months. However, our judgment regarding future earnings and the exact timing and amount of any valuation allowance release are subject to change due to many factors, including future market conditions, the ability to successfully execute our business plans, and the amount of stock-based compensation tax deductions available in the future. Release of the valuation allowance would result in the recognition of net deferred tax assets on our consolidated balance sheet and would decrease income tax expense in the period the release is recorded.
Removed paragraphs (48)
Previous report
Zscaler was incorporated in 2007, during the early stages of cloud adoption and mobility, based on a vision that the internet would become the new corporate network as the cloud becomes the new data center. We correctly predicted that with rapid cloud adoption and increasing workforce mobility, traditional perimeter security approaches would prove to be inadequate in protecting users and data, prohibitively expensive and result in poor user experience. Enterprises now rely on external SaaS applications for critical business functions and have or are moving their internally managed applications to the public cloud infrastructure. As a result, users now expect to be able to seamlessly access applications and data, wherever they are hosted, from any device, anywhere in the world. The emergence and rapid adoption of AI is revolutionizing the transformational impact of cloud adoption and mobility. AI is fundamentally changing how organizations operate, creating new cybersecurity threats and IT challenges, but also the opportunity to use AI to counter cybersecurity threats and improve IT operations.
Previous report
Increased Internet Traffic and Adoption of Cloud-Based Software and Security
Previous report
•selling a subscription to a new solution or product, for example selling a ZPA subscription to a ZIA customer or a ZIA subscription to a ZPA customer.
Previous report
Dollar-Based Net Retention Rate
Previous report
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 July 31, 2025 and 2024, the dollar-based net retention rate was 114% and 116%, respectively.
Previous report
We calculate our dollar-based net retention rate as follows:
Previous report
•Denominator: To calculate our dollar-based net retention rate as of the end of a reporting period, we first establish the ARR from all active subscriptions as of the last day of the same reporting period in the prior fiscal year. This effectively represents recurring dollars that we expect in the next 12-month period from the cohort of customers that existed on the last day of the same reporting period in the prior fiscal year.
Previous report
•Numerator: We measure the ARR for that same cohort of customers representing all subscriptions based on confirmed customer orders booked by us as of the end of the reporting period.
Previous report
Dollar-based net retention rate is obtained by dividing the numerator by the denominator. Our dollar-based net retention rate may fluctuate due to a number of factors, including the performance of our cloud platform, our success in selling bigger deals, including deals for all employees with our higher-end bundles, selling multiple-pillars from the start of our contract with new customers, faster upsells within a year, the timing and the rate of ARR expansion of our existing customers, potential changes in our rate of renewals and other risk factors described elsewhere in this Annual Report on Form 10-K.
Previous report
Calculated Billings
Previous report
Calculated billings is a non-GAAP financial measure that we reported as a key metric to measure our periodic performance through July 31, 2025. However, starting in the first quarter of fiscal 2026, we will transition to ARR as one of our key business metrics. Calculated billings can fluctuate significantly from period to period due to multiple factors such as deal structure, contract terms, payment schedules, timing of large enterprise deals or renewals, seasonality in customer purchasing patterns and external factors. These fluctuations make calculated billings less predictable and harder to compare consistently. As a result, calculated billings will no longer be reported beginning in fiscal 2026.
Previous report
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 $623.1 million, or 24%, in fiscal 2025 over fiscal 2024, and $587.6 million, or 29%, in fiscal 2024 over fiscal 2023. 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 report
Our provision for income taxes consists primarily of income and withholding taxes in the foreign jurisdictions, and U.S. income taxes from a tax law change related to mandatory capitalization of research and development expenses for tax years starting January 1, 2022. In the United States, we have recorded deferred tax assets for which weprovide a full valuation allowance, which includes net operating loss and research and development tax credits carryforwards. We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that some or all of those deferred tax assets may not be realized based on our history of losses.
Previous report
(3) Includes restructuring and other charges, excluding stock-based compensation expense:
Previous report
Gross margin decreased from 78% to 77% for fiscal 2025 as compared to fiscal 2024. The decrease in gross margin is primarily due to an increase in data center operating costs as we expanded our capacity and footprint to support our expanding customer base and an increase in employee-related expenses, including stock-based compensation expense, as a result of an increase in headcount. The remainder of the decrease was primarily attributable to additional hardware costs related to a one-time large private cloud deployment incurred in fiscal 2025.
Previous report
Sales and marketing expenses increased by $158.9 million, or 14%, for fiscal 2025, compared to fiscal 2024. The change was primarily driven by an increase of $116.4 million in employee-related expenses, inclusive of an increase of $33.7 million in sales commissions expense, and an increase of $29.5 million in stock-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 $18.6 million in marketing and advertising expenses, $10.6 million in travel expenses, $5.1 million for facility and IT services and $4.9 million for professional services.
Previous report
Interest expense decreased by$3.6 million for fiscal 2025, compared to fiscal 2024. The change was driven primarily by fair value hedge adjustments related to our Convertible Senior Notes due 2025 (the “2025 Notes”).
Previous report
In June 2020, we completed the private offering of the Convertible Senior Notes due 2025 (the “2025 Notes”) with an aggregate principal amount of $1,150.0 million. The 2025 Notes matured on July 1, 2025. We fully repaid the 2025 Notes by paying the principal amount of $1,150.0 million in cash and settled the premium amount by issuing 3.8 million new shares of our common stock. We also received 2.4 million shares of our common stock from the capped call transactions related to the 2025 Notes. For further information refer to Note 10, Convertible Senior Notes, of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Previous report
Net cash provided by operating activities during fiscal 2024 was $779.8 million, which resulted from a net loss of $57.7 million, adjusted for non-cash charges of $771.5 million and net cash inflows of $66.1 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $527.7 million for stock-based compensation expense, $130.1 million for amortization of deferred contract acquisition costs, $66.3 million for depreciation and amortization expense, $49.4 million for non-cash operating lease costs, $14.6 million for amortization expense of acquired intangible assets and $3.9 million for amortization of debt issuance costs, partially offset by amortization (accretion) of investments purchased at a premium (discount) of $19.1 million and $5.6 million for deferred income taxes.
Previous report
Net cash provided by financing activities of $420.5 million during fiscal 2025 was primarily attributable to $1,725.0 million from proceeds from issuance of the 2028 convertible senior notes, $63.6 million in proceeds from the issuance of common stock under the ESPP and $3.6 million in proceeds from the exercise of stock options. These activities were partially offset by $1,150.0 million for settlement of the 2025 Notes, $196.7 million for purchases of capped calls related to the 2028 Notes and $24.2 million for issuance costs related to the 2028 Notes.
Previous report
Critical Accounting Policies and Estimates
Previous report
We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations and require management’s subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. While our significant accounting policies are more fully described in the notes to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies have the most significant impact on the consolidated financial statements.
Previous report
In accordance with Accounting Standards Codification, or ASC, Topic 606, Revenue From Contracts With Customers, or ASC 606, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration that we expect to be entitled to receive in exchange for these services. To achieve the core principle of this standard, we apply the following five steps:
Previous report
Identify the contract with a customer
Previous report
We consider the terms and conditions of the contracts and our customary business practices in identifying our contracts under ASC 606. We determine we have a contract with a customer when the contract is approved, we can identify each party’s rights regarding the services to be transferred, we can identify the payment terms for the services, we have determined the customer to have the ability and intent to pay, and the contract has commercial substance. We apply judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer.
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Identify the performance obligations in the contract
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Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. Our performance obligations consist of (i) our subscription and support services and (ii) professional and other services.
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Determine the transaction price
Previous report
The transaction price is determined based on the consideration to which we expect to be entitled in exchange for transferring services to the customer. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of our contracts contain a significant financing component.
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Allocate the transaction price to performance obligations in the contract
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If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price ("SSP").
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Recognize revenue when or as we satisfy a performance obligation
Previous report
Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised service to a customer. Revenue is recognized when control of the services is transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those services. We generate all our revenue from contracts with customers and apply judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition.
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Subscription and Support Revenue
Previous report
We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services to our customers. Arrangements with customers do not provide the customer with the right to take possession of our software operating our cloud platform at any time. Instead, customers are granted continuous access to our cloud platform over the contractual period. A time-elapsed output method is used to measure progress because we transfer control evenly over the contractual period. Accordingly, the fixed consideration related to subscription and support revenue is generally recognized on a straight-line basis over the contract term beginning on the date that our service is made available to the customer.
Previous report
The typical subscription and support term is one to three years. Most of our contracts are non-cancelable over the contractual term. Customers typically have the right to terminate their contracts for cause if we fail to perform in accordance with the contractual terms. Some of our customers have the option to purchase additional subscription and support services at a stated price. These options generally do not provide a material right as they are priced at our SSP.
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Professional and Other Services Revenue
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Professional and other services revenue consists of fees associated with providing deployment advisory services that educate and assist our customers on the best use of our solutions, as well as advise customers on best practices as they deploy our solution. These services are distinct from subscription and support services. Professional services do not result in significant customization of the subscription service. Revenue from professional services provided on a time and materials basis is recognized as the services are performed. Total professional and other services revenue has historically been insignificant.
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Contracts with Multiple Performance Obligations
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Variable Consideration
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Reworded paragraphs (42)
Previous wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. As discussed in the section titled "Special Note Regarding Forward-Looking Statements," the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such difference include, but are not limited to, those identified below and those discussed in the section titled "Risk Factors" and elsewhere in this Annual Report on Form 10-K. Our fiscal year end is July 31, and our fiscal quarters end on October 31, January 31, April 30 and July 31. Our fiscal year ended July 31, 2025, July 31, 2024 and July 31, 2023 are referred to as fiscal 2025, fiscal 2024 and fiscal 2023, respectively.
Current wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. As discussed in the section titled "Special Note Regarding Forward-Looking Statements," the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such difference include, but are not limited to, those identified below and those discussed in the section titled "Risk Factors" and elsewhere in this Annual Report on Form 10-K. Our fiscal year end is July 31, and our fiscal quarters end on October 31, January 31, April 30 and July 31. Our fiscal years ended July 31, 2026, July 31, 2025 and July 31, 2024 are referred to as fiscal 2026, fiscal 2025 and fiscal 2024, respectively.
Previous wording
We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services. We also generate an immaterial amount of revenue from professional and other services, which consist primarily of fees associated with mapping, implementation, network design and training. Our subscription pricing is primarily calculated on a per-user basis. We recognize subscription and support revenue ratably over the life of the contract, which is generally one to three years. As of July 31, 2025, we had expanded our operations to over 9,400 customers across major industries, with users in over 185 countries. Government agencies and some of the largest enterprises in the world rely on us to support their secure digital transformation.
Current wording
We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services. We also generate an immaterial amount of revenue from professional and other services, which consist primarily of fees associated with mapping, implementation, network design and training. Our subscription pricing is primarily calculated on a per-user and metered-usage basis. We recognize subscription and support revenue ratably over the life of customer contracts, which is generally one to five years. As of July 31, 2026, we had expanded our operations to approximately 11,000 customers across major industries, with users in over 185 countries. Many of the world's largest enterprises and government agencies rely on our cloud platform to enable secure digital transformation.
Previous wording
We operate our business as one reportable segment. Our revenue has experienced significant growth in recent periods. For fiscal 2025, fiscal 2024 and fiscal 2023, our revenue was $2,673.1 million, $2,167.8 million and $1,617.0 million, respectively. We have incurred net losses in all annual periods since our inception. For fiscal 2025, fiscal 2024 and fiscal 2023, our net loss was $41.5 million, $57.7 million and $202.3 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 12, Commitments and Contingencies, of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Current wording
We operate our business as one reportable segment. Our revenue has experienced significant growth in recent periods. For fiscal 2026, fiscal 2025 and fiscal 2024, our revenue was $3,352.5 million, $2,673.1 million and $2,167.8 million, respectively. We have incurred net losses in all annual periods since our inception. For fiscal 2026, fiscal 2025 and fiscal 2024, our net loss was $63.2 million, $41.5 million and $57.7 million, respectively.
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In a cloud, mobile-first and AI-enabled world where organizations depend on public and third-party infrastructure and technologies to assess critical applications that power their businesses, enterprises that continue to rely on legacy network and security architecture built on firewalls and VPNs face serious challenges. The adoption of cloud applications and infrastructure, explosion of internet traffic volumes and shift to mobile-first computing generally, and the pace at which enterprises adopt the internet as their corporate network in particular, impact our ability to drive market adoption of our cloud platform. However, the dependence on the internet, expanding digital transformation and growing AI usage have increased exposure to malicious or compromised websites, and sophisticated hackers are exploiting the gaps left by legacy network security appliances. To securely access the internet, transform their networks and expand their AI adoption, organizations must also make fundamental changes in their network and security architectures. We believe that most organizations have yet to fully make these investments. Because our cloud platform enables organizations to securely embrace digital transformation, we believe that the imperative for organizations to securely move to the cloud will increase demand for our cloud platform and broaden our customer base.
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We believe the imperative for organizations to securely move to the cloud and safely realize the benefits of AI will increase demand for our cloud platform and broaden our customer base.
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We believe that our ability to increase the number of customers, and more significantly large enterprises, on our cloud platform is an indicator of our market penetration and our future business opportunities. As of July 31, 2025, 2024 and 2023, we had over 9,400, 8,650 and 7,700 customers, respectively, across all major geographies. As of July 31, 2025, we had approximately 40% of the Forbes Global 2000 as customers. Our ability to continue to grow these numbers will increase our future opportunities for renewals and follow-on sales. We believe that we have significant room to capture additional market share and intend to continue to invest significantly in sales and marketing to engage our prospective customers, increase brand awareness, further leverage our channel partnerships and drive adoption of our solution. However, as a result of the challenging and uncertain economic environment, potential new customers are carefully considering purchasing decisions, particularly for large expenditures. We expect customer cautiousness to continue in the near term, elongating our sales cycles and the timing of large deals.
Current wording
Our future success also depends on our ability to acquire new customers. We believe that our ability to increase the number of customers, and more significantly large enterprises, on our cloud platform is an indicator of our market penetration and our future business opportunities. As of July 31, 2026, 2025 and 2024, we had approximately 11,000, 9,400 and 8,650 customers, respectively, across all major geographies and industries. As of July 31, 2026, we had over 40% of the Forbes Global 2000 as customers. Our ability to continue to grow these numbers will increase our future opportunities for renewals and follow-on sales. We believe that we have significant room to capture additional market share and intend to continue to invest significantly in sales and marketing to engage our prospective customers, increase brand awareness, further leverage our channel partnerships and drive adoption of our solution.
Previous wording
We typically expand our relationship with our customers over time. While most of our new customers route all of their internet-bound web traffic through our cloud platform, some of our customers initially use our services for specific users or specific security functionality. We leverage our land-and-expand model with the goal of generating incremental revenue, often within the term of the initial subscription, by increasing sales to our existing customers in one of three ways:
Current wording
We typically expand our relationship with our customers over time. We leverage our organic account expansion strategies to drive incremental revenue, often within the term of the initial subscription, by increasing sales to existing customers in the following ways:
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•expanding deployment of our cloud platform to cover additional users;
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•expanding deployment of our cloud platform to cover additional users and services;
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•upgrading to more advanced capabilities; and
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•upgrading to more advanced capabilities; including AI-enabled features; and
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We also intend to continue to invest significantly in sales and marketing to grow and train our sales force, broaden our brand awareness and expand and deepen our channel partner relationships. While these planned investments will increase our operating expenses in the short term, we believe that over the long term these investments will help us to expand our customer base and grow our business. We also are investing in programs to increase recognition of our brand and solutions, including joint marketing activities with our channel partners and strategic partners.
Current wording
Since our founding, we have invested significantly in growing our business. We intend to continue to invest significantly in sales and marketing to grow and train our sales force, broaden our brand awareness and expand and deepen our channel partner relationships, including with global systems integrators and public cloud marketplaces. While these planned investments will increase our operating expenses in the short term, we believe that over the long term these investments will help us to expand our customer base and grow our business. We also are investing in programs to increase recognition of our brand and solutions, including joint marketing activities with our channel partners and strategic partners.
Previous wording
Since our founding, we have invested significantly in growing our business. We intend to continue (i) investing in our research and development organization and our development efforts to offer new solutions on our cloud platform and (ii) dedicating resources to update and upgrade our existing solutions, including upgrades to our cloud platform. In addition, we expect our general and administrative expenses to increase in absolute dollars in the foreseeable future, as we continue to operate as a public company, and address any legal matters and related accruals, as further described in Note 12, Commitments and Contingencies, of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Current wording
We also intend to continue investing in our research and development organization and our development efforts to offer new solutions on our cloud platform and dedicating resources to update and upgrade our existing solutions.
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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.
Current wording
Changes in macroeconomic and geopolitical conditions, including but not limited to global conflicts, inflation and responses to inflation, tariffs or retaliatory measures due to tariffs, supply chain disruptions, energy shortages and the emergence of AI, can cause uncertainty in our business. In response to uncertain economic conditions, we see customer scrutiny of, and complex approval processes for, transactions, particularly larger deals, as customers carefully consider purchasing decisions and require multiple approvals for large expenditures. As a result, macroeconomic conditions may impact the future demand for subscriptions of our cloud platform.
Previous wording
These purchases increase the annual recurring revenue, or ARR, attributable to our customers over time. ARR refers to the next 12 months of revenue from subscription contracts as of the measurement date. To establish ARR for a customer, we assume that any contract expiring during the next 12 months will be renewed under the existing terms.
Current wording
ARR is a key business metric that we use to measure our periodic performance. ARR refers to the next 12 months of revenue from subscription contracts as of the measurement date. To establish ARR for a customer, we assume that any contract expiring during the next 12 months will be renewed under the existing terms. ARR as of July 31, 2026 and 2025 was $3,771 million and $3,015 million, respectively.
Previous wording
Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less purchases of property, equipment and other assets and capitalized internal-use software. Free cash flow margin is calculated as free cash flow divided by revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our operations that, after the investments in property, equipment and other assets and capitalized internal-use software, can be used for strategic initiatives, including investing in our business, and strengthening our financial position.
Current wording
Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less purchases of property, equipment and other assets and capitalized internal-use software. Free cash flow margin is calculated as free cash flow divided by revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our operations. This amount, after investments in property, equipment and other assets and capitalized internal-use software, can be used for strategic initiatives, including investing in our business and strengthening our financial position.
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%, 97% and 97% of our revenue for each of fiscal 2025, fiscal 2024 and fiscal 2023, 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%, 98% and 97% of our revenue for each of fiscal 2026, fiscal 2025 and fiscal 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
We generate revenue from contracts with typical durations ranging from one to three years. We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. We recognize revenue ratably over the life of the contract. Amounts that have been invoiced are recorded in deferred revenue, or they are recorded in revenue if the revenue recognition criteria have been met. Subscriptions that are invoiced annually in advance or multi-year in advance represent a significant portion of our short-term and long-term deferred revenue in comparison to invoices issued quarterly in advance or monthly in advance. We cannot predict the mix of invoicing schedules in any given period.
Current wording
We generate revenue from contracts with typical durations ranging from one to five years. We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. We recognize revenue ratably over the life of the contract. Amounts that have been invoiced are recorded in deferred revenue or in revenue, if the revenue recognition criteria have been met. Subscriptions that are invoiced annually in advance or multi-year in advance represent a significant portion of our short-term and long-term deferred revenue in comparison to invoices issued quarterly in advance or monthly in advance. We cannot predict the mix of invoicing schedules in any given period.
Previous wording
We generally experience seasonality in terms of when we enter into agreements with our customers. We typically enter into a higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in our second half of our fiscal year. However, because we recognize revenue ratably over the terms of our subscription contracts, a substantial portion of the revenue that we report in each period is attributable to the recognition of deferred revenue relating to agreements that we entered into during previous periods. Consequently, increases or decreases in new sales or renewals in any one period may not be immediately reflected as revenue for that period. Accordingly, the effect of downturns in sales and market acceptance of our platform, and potential changes in our rate of renewals, may not be fully reflected in our results of operations until future periods.
Current wording
We generally experience seasonality in terms of when we enter into agreements with our customers. We typically enter into a higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in the second half of our fiscal year. However, because we recognize revenue ratably over the terms of our subscription contracts, a substantial portion of the revenue that we report in each period is attributable to the recognition of deferred revenue relating to agreements that we entered into during previous periods. Consequently, increases or decreases in new sales or renewals in any one period may not be immediately reflected as revenue for that period. Accordingly, the effect of downturns in sales and market acceptance of our platform and potential changes in our rate of renewals, may not be fully reflected in our results of operations until future periods.
Previous wording
As our customers expand and increase the use of our cloud platform driven by additional applications and connected devices, our cost of revenue will increase due to higher bandwidth and data center expenses. However, we expect to continue to benefit from economies of scale as our customers increase the use of our cloud platform. We intend to continue to invest additional resources in our cloud platform and our customer support organizations as we grow our business. The level and timing of investment in these areas could affect our cost of revenue in the future.
Current wording
As our customers expand and increase the use of our cloud platform, driven by additional users, applications, workloads, AI agents, and connected devices, our cost of revenue will increase due to higher bandwidth and data center expenses. Our cost of revenue may also increase as a result of higher market prices for data center equipment supporting our cloud platform. However, we expect to continue to benefit from economies of scale as our customers increase the use of our cloud platform. We intend to continue to invest additional resources in our cloud platform and our customer support organizations as we grow our business. The level and timing of investment in these areas could affect our cost of revenue in the future.
Previous wording
Gross profit, or revenue less cost of revenue, and gross margin, or gross profit as a percentage of revenue, have been and will continue to be affected by various factors, including the timing of our acquisition of new customers and our renewals of and follow-on sales to existing customers, the average sales price of our services, mix of services offered in our solutions, including new product introductions, the data center and bandwidth costs associated with operating our cloud platform, the extent to which we expand our customer support and cloud operations organizations and the extent to which we can increase the efficiency of our technology, infrastructure and data centers through technological improvements. We expect our gross profit to increase in absolute dollars and our gross margin to increase slightly over the long term, although our gross profit and gross margin could fluctuate from period to period depending on the interplay of all of the above factors.
Current wording
Gross profit, or revenue less cost of revenue, and gross margin, or gross profit as a percentage of revenue, have been and will continue to be affected by various factors. These include the timing of our acquisition of new customers and our renewals of and follow-on sales to existing customers, the average sales price of our services, the mix of services offered in our solutions, including new product introductions, the data center and bandwidth costs associated with operating our cloud platform to support additional users, applications, workloads, AI agents, and connected devices, the extent to which we expand our customer support and cloud operations organizations and the extent to which we can increase the efficiency of our technology, infra structure and data centers through technological improvements. Although we expect our gross profit to increase in absolute dollars and our gross margin to remain relatively consistent, our gross profit and gross margin could fluctuate from period to period depending on the interplay of the above factors.
Previous wording
Our operating expenses consist of sales and marketing expenses, research and development expenses and general and administrative expenses. Personnel expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation expense and, with respect to sales and marketing expenses, sales commissions that are recognized as expenses over the period of benefit. Operating expenses also include overhead expenses for facilities, IT, depreciation expense and amortization expense.
Current wording
Our operating expenses consist of sales and marketing expenses, research and development expenses and general and administrative expenses. Personnel expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation expense and, with respect to sales and marketing expenses, sales commissions that are recognized as expenses over the period of benefit. Operating expenses also include overhead expenses, which primarily consists of facilities, IT, depreciation expense and amortization expense.
Previous wording
Sales and marketing expenses consist primarily of employee compensation and related expenses, including salaries, bonuses and benefits for our sales and marketing employees, sales commissions that are recognized as expenses over the period of benefit, stock-based compensation expense, marketing programs, travel and entertainment expenses, expenses for conferences and events, amortization of intangible assets acquired through our business acquisitions and allocated overhead expenses. We capitalize our sales commissions and associated payroll taxes that are incremental to the acquisition of customer contracts and recognize them as expenses over the estimated period of benefit. The amount recognized in our sales and marketing expenses reflects the amortization of expenses previously deferred as attributable to each period presented in this Annual Report on Form 10-K, as described below under "Critical Accounting Policies and Estimates."
Current wording
Sales and marketing expenses consist primarily of employee compensation and related expenses, including salaries, bonuses and benefits for our sales and marketing employees, sales commissions that are recognized as expenses over the period of benefit, stock-based compensation expense, marketing programs, travel and entertainment expenses, expenses for conferences and events, amortization of intangible assets acquired through our business acquisitions and allocated overhead expenses which primarily consists of facilities, IT, depreciation expense and amortization expense. We capitalize our sales commissions and associated payroll taxes that are incremental to the acquisition of customer contracts and recognize them as expenses over the estimated period of benefit. The amount recognized in our sales and marketing expenses reflects the amortization of expenses previously deferred as attributable to each period presented in this Annual Report on Form 10-K, as described below under "Critical Accounting Estimates."
Previous wording
General and administrative expenses consist primarily of employee-related expenses, including salaries and bonuses, stock-based compensation expense and employee benefit expenses for our finance, legal, human resources and administrative personnel, as well as professional fees for external legal services (including certain litigation-related expenses), accounting and other related consulting services. The litigation-related expenses include professional fees and related expenses incurred by us in defending or settling significant claims that we deem not to be in the ordinary course of our business and, if applicable, accruals related to estimated losses in connection with these claims. We expect our general and administrative expenses to increase in absolute dollars for the foreseeable future as we increase the size of our general and administrative organizations, incur additional costs to support our business growth and due to any legal matters and related accruals, as further described in Note 12, Commitments and Contingencies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. However, we expect our general and administrative expenses to decrease as a percentage of our revenue over the long term, although our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses. In particular, litigation-related expenses related to significant litigation claims may result in significant fluctuations from period to period, as they are inherently subject to change and difficult to estimate.
Current wording
General and administrative expenses consist primarily of employee-related expenses, including salaries and bonuses, stock-based compensation expense and employee benefit expenses for our finance, legal, human resources and administrative personnel, as well as professional fees for external legal services (including certain litigation-related expenses), accounting and other related consulting services. The litigation-related expenses include professional fees and related expenses incurred by us in defending or settling claims and, if applicable, accruals related to estimated losses in connection with these claims. We expect our general and administrative expenses to increase in absolute dollars for the foreseeable future as we increase the size of our general and administrative organizations, incur additional costs to support our business growth and due to any legal matters and related accruals, as further described in Note 12, Commitments and Contingencies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. However, we expect our general and administrative expenses to decrease as a percentage of our revenue over the long term, although our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses. In particular, litigation-related expenses related to significant litigation claims may result in significant fluctuations from period to period, as they are inherently subject to change and difficult to estimate.
Previous wording
Interest expense consists primarily of amortization of debt issuance costs, recognition of contractual interest expense related to the 2025 and 2028 Notes, and gains and losses related to changes in the fair value of interest rate swaps. For further information refer to Note 8, Derivative Instruments and Note 10, Convertible Senior Notes, of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Current wording
Interest expense consists primarily of amortization of debt issuance costs, recognition of contractual interest expense related to the 2025 convertible senior notes, and gains and losses related to changes in the fair value of interest rate swaps. For further information refer to Note 8, Derivative Instruments and Note 10, Convertible Senior Notes, of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Previous wording
Revenue increased by$505.3 million, or 23%, in fiscal 2025, compared to fiscal 2024. The change in revenue was driven primarily by an increase in users and sales of additional subscriptions to existing customers, which contributed$434.0 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 9%from fiscal 2024 to fiscal 2025.
Current wording
Revenue increased by$679.4 million, or 25%, in fiscal 2026, compared to fiscal 2025. The change in revenue was driven primarily by an increase in users and sales of additional subscriptions to existing customers, which contributed$474.6 million in additional revenue. The addition of new customers contributed the remaining$204.8 million in additional revenue, driven by acquisition and organic customer growth, as we grew our customer base by 16%from fiscal 2025 to fiscal 2026.
Previous wording
Cost of revenue increased by $141.0 million, or 30%, in fiscal 2025, compared to fiscal 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 $76.1 million for data center and equipment-related costs for hosting and operating our cloud platform. Additionally, our employee-related expenses increased by $49.4 million, inclusive of an increase of $17.3 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 $7.0 million in additional hardware costs related to a one-time large private cloud deployment and $5.4 million for facility and IT services.
Current wording
Cost of revenue increased by$159.5 million, or 26%, in fiscal 2026, compared to fiscal 2025. 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 $103.1 million for data center and equipment-related costs for hosting and operating our cloud platform. The remainder of the increase was primarily attributable to employee-related expenses of $37.8 million, inclusive of an increase of $18.4 million in stock-based compensation expense, higher amortization of acquired intangible assets of $12.9 million.
Previous wording
Research and development expenses increased by $172.7 million, or 35%, for fiscal 2025, compared to fiscal 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 $167.8 million in employee-related expenses, inclusive of an increase of $69.4 million in stock-based compensation expense, primarily due to an increase in headcount. During fiscal 2025, we recognized $4.8 million of restructuring charges related to employee severance and benefit charges in research and development expenses. The remainder of the increase in research and development expenses was primarily attributable to increased expenses of $24.9 million in facility, software and equipment-related expenses to support our growth and $2.4 million in travel expenses. The increase was partially offset by higher capitalized internal-use software development costs of $31.3 million to support the enhancement and growth of our cloud platform.
Current wording
Research and development expenses increased by $230.9 million, or 34%, for fiscal 2026, compared to fiscal 2025, as we continued 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 $170.4 million in employee-related expenses, inclusive of an increase of $85.1 million in stock-based compensation expense, primarily due to an increase in headcount driven by acquisitions and organic headcount growth. The remainder of the increase was primarily attributable to increased expenses of $62.3 million in facility, cloud hosting, software, equipment-related expenses and lower capitalization of internal-use software development costs.
Previous wording
General and administrative expenses increased by $39.7 million, or 19%, for fiscal 2025, compared to fiscal 2024. The overall increase was primarily due to an increase of $34.2 million in employee-related expenses, inclusive of an increase of $17.5 million instock-based compensation expense, primarily due to an increase in headcount and accelerated vesting of awards related to executive transitions. The remainder of the increase was primarily attributable to $4.8 million for facility-related expenses.
Current wording
General and administrative expenses increased by $57.2 million, or 23%, for fiscal 2026, compared to fiscal 2025. The change was driven primarily by an increase of$39.0 million in employee-related expenses, inclusive of an increase of$20.6 million in stock-based compensation expense, primarily due to an increase in headcount.
Previous wording
Interest income increased by $16.2 million for fiscal 2025, compared to fiscal 2024. The change was driven primarily by our increased balance of cash equivalents and short-term investments.
Current wording
Interest income increased by $10.8 million for fiscal 2026, compared to fiscal 2025. The change was driven primarily by our higher average balance of cash equivalents and short-term investments.
Previous wording
Other expense, net increased by $1.9 million for fiscal 2025, compared to fiscal 2024. The change was driven primarily by fluctuations in foreign currency transactions gains and losses.
Current wording
Other expense, net increased by $2.5 million for fiscal 2026, compared to fiscal 2025. The change was driven primarily by fluctuations in foreign currency transactions gains and losses.
Previous wording
Our provision for income taxes decreased by $5.3 million, or 19%, for fiscal 2025, compared to fiscal 2024. The change was primarily driven by the release of the valuation allowance against our United Kingdom ("U.K.") deferred tax assets. For further information, refer to Note 15, Income Taxes, of the consolidated financial statements included elsewhere in this Annual Report on form 10-K.
Current wording
Our provision for income taxes increased by $22.9 million, or 99%, for fiscal 2026, compared to fiscal 2025. The change was primarily driven by the release of the valuation allowance against our United Kingdom ("U.K.") deferred tax assets for fiscal 2025. For further information, refer to Note 15, Income Taxes, of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Previous wording
Our effective tax rate of (136.5)% and (97.4)% in fiscal 2025 and fiscal 2024, respectively, differs from the applicable U.S. statutory federal income tax rate due to our valuation allowance against our U.S. federal and state deferred tax assets, the release of the valuation allowance against our U.K. deferred tax assets, and our foreign income being taxed at different rates than the U.S. statutory rate.
Current wording
Our effective tax rate of (268.6)% and (126.8)% in fiscal 2026 and fiscal 2025, respectively, differs from the applicable U.S. statutory federal income tax rate due to our valuation allowance against our U.S. federal and state deferred tax assets, the release of the valuation allowance against our U.K. deferred tax assets, and our foreign income being taxed at different rates than the U.S. statutory rate.
Previous wording
On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act ("OBBBA"). 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. The provisions in the legislation are generally effective beginning in fiscal 2026, and as such the tax impacts are not included in our operating results for fiscal 2025. We will continue to evaluate the impact of OBBBA, but currently we do not expect it to have a material impact on our consolidated financial statements in fiscal 2026 due to our valuation allowance.
Current wording
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.
Previous wording
As of July 31, 2025, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $3,572.4 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 July 31, 2026, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $3,474.2 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, corporate debt securities, asset-backed securities, non-U.S. government securities and certificates of deposits.
Previous wording
In July 2025, we completed the private offering of the Convertible Senior Notes due 2028 (the “2028 Notes”) with an aggregate principal amount of $1,725.0 million. The total net proceeds from the offering, after deducting initial purchase discount and issuance costs, was $1,700.0 million. The 2028 Notes mature on July 15, 2028. In connection with the 2028 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 2028 Notes and/or offset any cash payments we could be required to make in excess of the principal amount of the converted notes. We used an aggregate amount of $196.8 million of the net proceeds of the 2028 Notes to purchase the capped call transactions. For further information refer to Note 10, Convertible Senior Notes, of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Current wording
In July 2025, we completed the private offering of the Convertible Senior Notes due 2028 (the “2028 Notes”) with an aggregate principal amount of $1,725.0 million. The total net proceeds from the offering, after deducting initial purchase discount and issuance costs, was $1,700.0 million. The 2028 Notes mature on July 15, 2028. In connection with the issuance of the 2028 Notes, we entered into privately negotiated capped call transactions with certain counterparties. The capped call transactions are generally expected to offset potential dilution to our common stock, as a result of any conversion of the 2028 Notes, or offset any cash payments made in excess of the principal amount of converted 2028 Notes, subject to a cap. We used an aggregate amount of $196.8 million of the net proceeds of the 2028 Notes to purchase the capped call transactions. For further information refer to Note 10, Convertible Senior Notes, of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Previous wording
We have generated significant losses from operations, as reflected in our accumulated deficit of $1,189.6 million as of July 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 $1,252.7 million as of July 31, 2026. 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 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 July 31, 2025, we had deferred revenue of $2,468.0 million, of which $2,054.4 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 July 31, 2026, we had deferred revenue of $2,925.8 million, of which $2,480.5 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.
Previous wording
Net cash provided by operating activities during fiscal 2025 was $972.5 million, which resulted from a net loss of $41.5 million, adjusted for non-cash charges of $987.2 million and net cash inflows of $26.7 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $661.4 million for stock-based compensation expense, $166.3 million for amortization of deferred contract acquisition costs, $104.4 million for depreciation and amortization expense, $63.0 million for non-cash operating lease costs, $16.8 million for amortization expense of acquired intangible assets and $4.3 million for amortization of debt issuance costs, partially offset by $14.4 million for deferred income taxes and accretion of investments purchased at a discount of $15.9 million.
Current wording
Net cash provided by operating activities during fiscal 2026 was $1,129.7 million, which resulted from a net loss of $63.2 million, adjusted for non-cash charges of $1,290.4 million and net cash outflows of $97.6 million from changes in operating assets and liabilities.
Previous wording
Net cash inflows from changes in operating assets and liabilities were primarily the result of an increase of $573.1 million in deferred revenue from advance invoicing in accordance with our subscription contracts, an increase of $21.0 million in accrued compensation and an increase of $17.5 million in accounts payable. Net cash inflows were partially offset by cash outflows resulting from an increase of $230.5 million in deferred contract acquisition costs, as our sales commission payments increased due to the addition of new customers and expansion of our existing customer subscriptions, an increase of $256.0 million in accounts receivable primarily due to timing of billings and collections, a decrease of $62.0 million in operating lease liabilities primarily due to lease payments, an increase of $41.6 million in prepaid expenses, other current and noncurrent assets and an increase of $5.2 million in accrued expenses, other current and noncurrent liabilities.
Current wording
Net cash outflows from changes in operating assets and liabilities were primarily the result from increase of $312.2 million in deferred contract acquisition costs, as our sales commission payments increased due to the addition of new customers and expansion of our existing customer subscriptions, an increase of $140.0 million in accounts receivable primarily due to timing of billings and collections, a decrease of $67.6 million in operating lease liabilities primarily due to lease payments, an increase of $28.1 million in prepaid expenses, other current and noncurrent assets and a decrease of $10.6 million in accounts payable. Net cash outflows were partially offset by cash inflows resulting from an increase of $379.9 million in deferred revenue from advance invoicing in accordance with our subscription contracts, an increase of $44.6 million in accrued compensation and increase of $36.4 million in accrued expenses, other current and noncurrent liabilities.
Previous wording
Net cash used in investing activities during fiscal 2024 of $683.2 million was primarily attributable to the purchases of short-term investments of $1,291.0 million, business acquisitions, net of cash acquired, of $374.7 million, capital expenditures of $194.9 million to support the growth and expansion of our cloud platform, and $2.0 million for purchases of strategic investments. These activities were partially offset by proceeds from the maturities and sales of short-term investments of $1,179.4 million.
Current wording
Net cash used in investing activities during fiscal 2026 of $2,652.7 million was primarily attributable to the purchases of short-term investments of $2,254.3 million, business acquisitions, net of cash acquired, of $918.1 million, capital expenditures of $350.5 million to support the growth and expansion of our cloud platform and purchase of strategic investments of $10.4 million. These activities were partially offset by proceeds from the maturities and sales of short-term investments of $880.5 million.
Previous wording
Net cash provided by financing activities of $64.2 million during fiscal 2024 was primarily attributable to $52.0 million in proceeds from the issuance of common stock under the ESPP and $12.2 million in proceeds from the exercise of stock options.
Current wording
Net cash provided by financing activities of $62.4 million during fiscal 2026 was primarily attributable to $59.4 million in proceeds from the issuance of common stock under the ESPP and $4.0 million in proceeds from the exercise of stock options.
Previous wording
Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. We refer to accounting estimates of this type as critical accounting policies and estimates, which we discuss below.
Current wording
Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ materially from these estimates. We refer to accounting estimates of this type as critical accounting estimates. Of our significant accounting policies described in Note 1. Business and Summary of Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K, the critical accounting estimates that have the most significant impact on our consolidated financial statements are described below.
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Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
In addition, we expect our general and administrative expenses to increase in absolute dollars for the foreseeable future, as we continue to operate as a public company and scale to support the needs of the business.
Current report — wording carried from elsewhere
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. We cannot predict the mix of invoicing schedules in any given period.
Current report — wording carried from elsewhere
We determine the period of benefit by taking into consideration the expected subscription term and expected renewals of our customer contracts, the duration of our customer relationships, customer retention data, our technology development life cycle, and other factors. We periodically review the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit. We did not recognize any impairment losses on deferred contract acquisition costs in the periods presented.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Comparison of Fiscal 2024 and Fiscal 2023
Previous report — wording carried elsewhere
Net cash inflows from changes in operating assets and liabilities were primarily the result of an increase of $450.3 million in deferred revenue from advance invoicing in accordance with our subscription contracts, an increase of $43.6 million in accrued expenses, other current and noncurrent liabilities, an increase of $10.5 million in accrued compensation and an increase of $4.2 million in accounts payable. Net cash inflows were partially offset by cash outflows resulting from an increase of $200.3 million in deferred contract acquisition costs, as our sales commission payments increased due to the addition of new customers and expansion of our existing customer subscriptions, an increase of $153.0 million in accounts receivable primarily due to timing of billings and collections, a decrease of $49.2 million in operating lease liabilities primarily due to lease payments and an increase of $40.0 million in prepaid expenses, other current and noncurrent assets.
Previous report — wording carried elsewhere
Net cash used in investing activities during fiscal 2025 of $427.0 million was primarily attributable to the purchases of short-term investments of $1,280.6 million, capital expenditures of $245.8 million to support the growth and expansion of our cloud platform. These activities were partially offset by proceeds from the maturities and sales of short-term investments of $1,101.0 million.
Previous report — wording carried elsewhere
We capitalize sales commissions 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 on the consolidated balance sheets. We determine whether costs should be deferred based on our sales compensation plans, if the commissions are in fact incremental and would not have occurred absent the customer contract.