Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended July 31, 2025 (the "Fiscal 2025 Form 10-K"), filed with the SEC on September 11, 2025. 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 Quarterly Report on Form 10-Q. 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 is referred to as fiscal 2025 and our fiscal year ending July 31, 2026 is referred to as fiscal 2026.
Overview
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.
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 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 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.
We operate our business as one reportable segment. Our revenue has experienced significant growth in recent periods. For the nine months ended April 30, 2026 and 2025, our revenue was $2,454.3 million and $1,953.9 million, respectively. We have incurred net losses in all annual periods since our inception. For the nine months ended April 30, 2026 and 2025, our net loss was $59.8 million and $23.9 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 unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Impact of Macroeconomic Conditions
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. 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.
Certain Factors Affecting Our Performance
Increased Internet Traffic and Adoption of Cloud-Based Software and Security
In a cloud, mobile-first and AI-enabled world where organizations depend on public and third-party infrastructure and technologies to access critical applications that power their businesses, enterprises that continue to rely on outdated network and security architecture built on firewalls and VPNs face serious challenges. The adoption of cloud applications and infrastructure, the explosion of internet traffic volumes, the 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. In addition, 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 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 and safely realize the benefits of AI will increase demand for our cloud platform and broaden our customer base.
New Customer Acquisition
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 and 2024, we had over 9,400 and over 8,650 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.
Follow-On Sales
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 a 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:
•expanding deployment of our cloud platform to cover additional users and services;
•upgrading to more advanced capabilities, including AI-enabled features; and
•selling a subscription to a new solution or product, for example selling data security or AI security services to an existing ZIA or ZPA customer.
Investing in Business Growth
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. 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.
We also 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. This is further described in Note 12, Commitments and Contingencies, of the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
While we expect our operating expenses to increase in absolute dollars in the foreseeable future, as a result of these activities, we intend to balance these investments in future growth with a continued focus on managing our results of operations and investing judiciously. In the long term we anticipate that these investments will positively impact our business and results of operations.
Key Business Metrics and Other Financial Measures
We review a number of operating and financial metrics, including the following key metrics, to measure our performance, identify trends, formulate business plans and make strategic decisions.
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In particular, free cash flow is not a substitute for cash provided by operating activities. Additionally, the utility of free cash flow as a measure of our liquidity is further limited as it does not represent the total increase or decrease in our cash balance for a given period. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Non-GAAP Gross Profit and Non-GAAP Gross Margin
We define non-GAAP gross profit as GAAP gross profit excluding stock-based compensation expense and related payroll taxes, amortization expense of acquired intangible assets and restructuring and other charges. We define non-GAAP gross margin as non-GAAP gross profit as a percentage of revenue.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | |
Nine Months Ended April 30, |
|
2026 | |
2025 | |
2026 | |
2025 |
| | | | | | | |
| (in thousands) |
| GAAP gross profit |
$ |
657,823 | | |
$ |
522,056 | | |
$ |
1,885,673 | | |
$ |
1,507,951 | |
|
Add: | | | | | | | |
|
Stock-based compensation expense and related payroll taxes |
21,629 | | |
18,262 | | |
64,491 | | |
51,674 | |
Amortization expense of acquired intangible assets | 7,243 | | |
3,830 | | |
19,852 | | |
11,320 | |
|
Restructuring and other charges |
- | | |
- | | |
750 | | |
- | |
|
Non-GAAP gross profit |
$ |
686,695 | | |
$ |
544,148 | | |
$ |
1,970,766 | | |
$ |
1,570,945 | |
|
GAAP gross margin |
77 |
% | |
77 |
% | |
77 |
% | |
77 |
% |
Non-GAAP gross margin | 81 |
% | |
80 |
% | |
80 |
% | |
80 |
% |
Non-GAAP Income from Operations and Non-GAAP Operating Margin
We define non-GAAP income from operations as GAAP loss from operations, excluding stock-based compensation expense and related payroll taxes, amortization expense of acquired intangible assets, restructuring and other charges and acquisition-related expenses. We define non-GAAP operating margin as non-GAAP income from operations as a percentage of revenue.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | |
Nine Months Ended April 30, |
|
2026 | |
2025 | |
2026 | |
2025 |
| | | | | | | |
| (in thousands) |
| GAAP loss from operations |
$ |
(29,640) | | |
$ |
(25,411) | | |
$ |
(117,775) | | |
$ |
(96,218) | |
|
Add: | | | | | | | |
|
Stock-based compensation expense and related payroll taxes |
212,266 | | |
167,809 | | |
626,440 | | |
504,739 | |
|
Amortization expense of acquired intangible assets |
11,441 | | |
4,255 | | |
31,188 | | |
12,740 | |
|
Restructuring and other charges |
- | | |
- | | |
4,741 | | |
- | |
|
Acquisition-related expenses |
1,782 | | |
- | | |
4,077 | | |
- | |
|
Non-GAAP income from operations |
$ |
195,849 | | |
$ |
146,653 | | |
$ |
548,671 | | |
$ |
421,261 | |
|
GAAP operating margin |
(3) |
% | |
(4) |
% | |
(5) |
% | |
(5) |
% |
Non-GAAP operating margin | 23 |
% | |
22 |
% | |
22 |
% | |
22 |
% |
Free Cash Flow and Free Cash Flow Margin
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.
Free cash flow includes the cyclical impact of inflows and outflows resulting from contributions to our employee stock purchase plan for which the purchase period of approximately six months ends in each of our second and fourth fiscal quarters. 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.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | |
Nine Months Ended April 30, |
|
2026 | |
2025 | |
2026 | |
2025 |
| | | | | | | |
| (in thousands) |
| Net cash provided by operating activities |
$ |
198,016 | | |
$ |
211,081 | | |
$ |
850,369 | | |
$ |
721,849 | |
|
Less: | | | | | | | |
|
Purchases of property, equipment and other assets |
(42,401) | | |
(72,163) | | |
(77,467) | | |
(104,206) | |
|
Capitalized internal-use software |
(19,661) | | |
(19,455) | | |
(54,523) | | |
(62,871) | |
|
Free cash flow |
$ |
135,954 | | |
$ |
119,463 | | |
$ |
718,379 | | |
$ |
554,772 | |
As a percentage of revenue: | | | | | | | |
| Net cash provided by operating activities |
23 |
% | |
31 |
% | |
35 |
% | |
37 |
% |
|
Less: | | | | | | | |
|
Purchases of property, equipment and other assets |
(5) |
% | |
(10) |
% | |
(3) |
% | |
(6) |
% |
|
Capitalized internal-use software |
(2) |
% | |
(3) |
% | |
(3) |
% | |
(3) |
% |
|
Free cash flow margin |
16 |
% | |
18 |
% | |
29 |
% | |
28 |
% |
Annual Recurring Revenue ("ARR")
ARR is a non-GAAP financial measure that we believe is a key metric 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, excluding Red Canary's subscription contracts expiring in fiscal year 2026. ARR as of April 30, 2026 and 2025 was $3,525 million and $2,817 million, respectively.
Components of Results of Operations
Revenue
We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services. Subscription and related support services accounted for approximately 98% of our revenue for each of the three and nine months ended April 30, 2026 and 2025, 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.
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 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.
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.
Cost of Revenue
Cost of revenue includes expenses related to operating our cloud platform in data centers, including public cloud providers, depreciation of our data center equipment, amortization of our capitalized internal-use software, amortization of intangible assets acquired through our business acquisitions and allocated overhead expenses (i.e., facilities, IT, depreciation expense and amortization expense). Cost of revenue also includes employee-related expenses, including salaries, bonuses, stock-based compensation expense and employee benefit expenses associated with our customer support and cloud operations organizations.
As our customers expand and increase the use of our cloud platform, driven by additional 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.
Gross Profit and Gross Margin
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 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, infrastructure 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.
Operating Expenses
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 (i.e., facilities, IT, depreciation expense and amortization expense).
Sales and Marketing
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 (i.e., 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 Quarterly Report on Form 10-Q, as described below under "Critical Accounting Policies and Estimates."
We intend to continue to make significant investments in our sales and marketing organization to drive additional revenue, further penetrate the market and expand our global customer base. As a result, we expect our sales and marketing expenses to continue to increase in absolute dollars and to be our largest operating expense category for the foreseeable future. In particular, we will continue to invest in growing and training our sales force, broadening our brand awareness and expanding and deepening our channel partner relationships. However, we expect our sales and marketing expenses to decrease as a percentage of our revenue over the long term, although our sales and marketing expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
Research and Development
Our research and development expenses support our efforts to add new products, new features to our existing offerings and to ensure the reliability, availability and scalability of our solutions. Our cloud platform is software-driven, and our research and development teams employ software engineers in the design, and the related development, testing, certification and support, of these solutions. Accordingly, a majority of our research and development expenses result from employee-related expenses, including salaries, bonuses and benefits, stock-based compensation expense and expenses associated with technology tools used by our engineers. We expect our research and development expenses to continue to increase in absolute dollars for the foreseeable future, as we continue to invest in research and development efforts to enhance the functionality of our cloud platform, improve the reliability, availability and scalability of our platform and access new customer markets. However, we expect our research and development expenses to decrease as a percentage of our revenue over the long term, although our research and development expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
General and Administrative
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 unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. 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.
Interest Income
Interest income consists primarily of income earned on our cash equivalents and short-term investments.
Interest Expense
Interest expense consists primarily of amortization of debt issuance costs, recognition of contractual interest expense related to the 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 unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Other Income (Expense), Net
Other income (expense), net consists primarily of foreign currency transaction gains and losses and changes in fair value of our non-designated derivative instruments.
Provision For Income Taxes
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.
Results of Operations
The following tables set forth our results of operations for the periods presented in dollars and as a percentage of our revenue:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | |
Nine Months Ended April 30, |
|
2026 | |
2025 | |
2026 | |
2025 |
| | | | | | | |
|
(in thousands) |
|
Revenue |
$ |
850,475 | | |
$ |
678,034 | | |
$ |
2,454,338 | | |
$ |
1,953,889 | |
Cost of revenue (1) (2) (3) | 192,652 | | |
155,978 | | |
568,665 | | |
445,938 | |
|
Gross profit |
657,823 | | |
522,056 | | |
1,885,673 | | |
1,507,951 | |
|
Operating expenses: | | | | | | | |
Sales and marketing (1) (2) (3) | 371,941 | | |
314,605 | | |
1,114,449 | | |
928,564 | |
Research and development (1) (2) (3) | 232,281 | | |
169,765 | | |
661,916 | | |
494,879 | |
General and administrative (1) (4) | 83,241 | | |
63,097 | | |
227,083 | | |
180,726 | |
|
Total operating expenses |
687,463 | | |
547,467 | | |
2,003,448 | | |
1,604,169 | |
|
Loss from operations |
(29,640) | | |
(25,411) | | |
(117,775) | | |
(96,218) | |
|
Interest income |
34,043 | | |
31,263 | | |
101,090 | | |
92,189 | |
Interest expense (5) | (2,700) | | |
(1,966) | | |
(9,048) | | |
(7,448) | |
|
Other income (expense), net |
(4,074) | | |
677 | | |
(6,310) | | |
(4,911) | |
|
Income (loss) before income taxes |
(2,371) | | |
4,563 | | |
(32,043) | | |
(16,388) | |
Provision for income taxes (6) | 11,512 | | |
8,688 | | |
27,767 | | |
7,512 | |
|
Net loss |
$ |
(13,883) | | |
$ |
(4,125) | | |
$ |
(59,810) | | |
$ |
(23,900) | |
| | | | | | | | | | | | | | | | | | | | | | | |
(1) Includes stock-based compensation expense and related payroll taxes: |
| Cost of revenue |
$ |
21,629 | | |
$ |
18,262 | | |
$ |
64,491 | | |
$ |
51,674 | |
|
Sales and marketing |
72,206 | | |
63,937 | | |
225,421 | | |
198,782 | |
|
Research and development |
88,779 | | |
63,753 | | |
248,704 | | |
188,514 | |
|
General and administrative |
29,652 | | |
21,857 | | |
87,824 | | |
65,769 | |
|
Total |
$ |
212,266 | | |
$ |
167,809 | | |
$ |
626,440 | | |
$ |
504,739 | |
| | | | | | | | | | | | | | | | | | | | | | | |
(2) Includes amortization expense of acquired intangible assets: |
| Cost of revenue |
$ |
7,243 | | |
$ |
3,830 | | |
$ |
19,852 | | |
$ |
11,320 | |
|
Sales and marketing |
4,198 | | |
425 | | |
11,336 | | |
1,275 | |
|
Research and development |
- | | |
- | | |
- | | |
145 | |
|
Total |
$ |
11,441 | | |
$ |
4,255 | | |
$ |
31,188 | | |
$ |
12,740 | |
| | | | | | | | | | | | | | | | | | | | | | | |
(3) Includes restructuring and other charges: |
| Cost of revenue |
$ |
- | | |
$ |
- | | |
$ |
750 | | |
$ |
- | |
|
Sales and marketing |
- | | |
- | | |
2,809 | | |
- | |
|
Research and development |
- | | |
- | | |
1,182 | | |
- | |
|
Total |
$ |
- | | |
$ |
- | | |
$ |
4,741 | | |
$ |
- | |
| | | | | | | | | | | | | | | | | | | | | | | |
(4) Acquisition-related expenses | $ |
1,782 | | |
$ |
- | | |
$ |
4,077 | | |
$ |
- | |
| | | | | | | | | | | | | | | | | | | | | | | |
(5) Includes amortization of debt issuance costs | $ |
2,043 | | |
$ |
984 | | |
$ |
6,121 | | |
$ |
2,947 | |
(6) During the three and nine months ended April 30, 2025, we recognized a tax benefit of $0.2 million and $17.4 million, respectively attributable to the release of the valuation allowance on United Kingdom (U.K.) deferred tax assets.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | |
Nine Months Ended April 30, |
|
2026 | |
2025 | |
2026 | |
2025 |
|
Revenue |
100% | |
100% | |
100% | |
100% |
|
Cost of revenue |
23 | |
23 | |
23 | |
23 |
|
Gross margin |
77 | |
77 | |
77 | |
77 |
|
Operating expenses | | | | | | | |
|
Sales and marketing |
43 | |
46 | |
46 | |
48 |
|
Research and development |
27 | |
25 | |
27 | |
25 |
|
General and administrative |
10 | |
10 | |
9 | |
9 |
|
Total operating expenses |
80 | |
81 | |
82 | |
82 |
|
Operating margin |
(3) | |
(4) | |
(5) | |
(5) |
|
Interest income |
4 | |
5 | |
4 | |
5 |
|
Interest expense |
- | |
- | |
- | |
(1) |
|
Other income (expense), net |
(1) | |
- | |
- | |
- |
|
Income (loss) before income taxes |
- | |
1 | |
(1) | |
(1) |
|
Provision for income taxes |
2 | |
2 | |
1 | |
- |
|
Net loss |
(2)% | |
(1)% | |
(2)% | |
(1)% |
Comparison of the Three Months Ended April 30, 2026 and 2025
Revenue | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Revenue |
$ |
850,475 | | |
$ |
678,034 | | |
$ |
172,441 | | |
25 |
% |
Revenue increased by $172.4 million, or 25%, for the three months ended April 30, 2026, compared to the three months ended April 30, 2025. The change in revenue was driven primarily by sales of additional subscriptions to existing customers, which contributed $102.7 million in additional revenue. The remainder of the increase was primarily attributable to the addition of new customers, as we increased our customer base by 17% from April 30, 2025 to April 30, 2026.
Cost of Revenue and Gross Margin | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Cost of revenue |
$ |
192,652 | | |
$ |
155,978 | | |
$ |
36,674 | | |
24 |
% |
|
Gross margin |
77 |
% | |
77 |
% | | | | |
Cost of revenue increased by $36.7 million, or 24%, for the three months ended April 30, 2026, compared to the three months ended April 30, 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 $26.4 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 $6.9 million, inclusive of an increase of $3.7 million in stock-based compensation expense, and higher amortization of acquired intangible assets of $3.4 million.
Gross margin remained flat at 77% for the three months ended April 30, 2026, compared to the three months ended April 30, 2025.
Operating Expenses
Sales and Marketing Expenses | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Sales and marketing expenses |
$ |
371,941 | | |
$ |
314,605 | | |
$ |
57,336 | | |
18 |
% |
Sales and marketing expenses increased by $57.3 million, or 18%, for the three months ended April 30, 2026, compared to the three months ended April 30, 2025. The change was driven primarily by an increase of $46.2 million in employee-related expenses, inclusive of an increase of $11.1 million in sales commissions expense and $8.9 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to $6.2 million in facility, software and equipment-related expenses and $3.8 million in amortization of acquired intangible assets.
Research and Development Expenses | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Research and development expenses |
$ |
232,281 | | |
$ |
169,765 | | |
$ |
62,516 | | |
37 |
% |
Research and development expenses increased by $62.5 million, or 37%, for the three months ended April 30, 2026, compared to the three months ended April 30, 2025, as we continue to develop and enhance the functionality of our cloud platform and integrate acquired technologies. The change was driven primarily by an increase of $46.8 million in employee-related expenses, inclusive of an increase of $25.3 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $16.2 million in facility, cloud hosting, software and equipment-related expenses to support our growth.
General and Administrative Expenses | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| General and administrative expenses |
$ |
83,241 | | |
$ |
63,097 | | |
$ |
20,144 | | |
32 |
% |
General and administrative expenses increased by $20.1 million, or 32%, for the three months ended April 30, 2026, compared to the three months ended April 30, 2025. The change was driven primarily by an increase of $13.4 million in employee-related expenses, inclusive of an increase of $7.9 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $1.8 million in acquisition-related expenses and the rise of miscellaneous expenses to support the growth of our business.
Interest Income | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Interest income |
$ |
34,043 | | |
$ |
31,263 | | |
$ |
2,780 | | |
9 |
% |
Interest income increased by $2.8 million, or 9%, for the three months ended April 30, 2026, compared to the three months ended April 30, 2025. The change was driven primarily by our increased balance of cash equivalents and short-term investments.
Interest Expense | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Interest expense |
$ |
(2,700) | | |
$ |
(1,966) | | |
$ |
(734) | | |
37 |
% |
Interest expense increased by $0.7 million for the three months ended April 30, 2026, compared to the three months ended April 30, 2025. The change was driven primarily by higher amortization of debt issuance costs.
Other Income (Expense), Net | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Other income (expense), net |
$ |
(4,074) | | |
$ |
677 | | |
$ |
(4,751) | | |
(702) |
% |
Other income (expense), net increased by $4.8 million for the three months ended April 30, 2026 compared to the three months ended April 30, 2025. The change was driven primarily by fluctuations in foreign currency transactions gains and losses.
Provision For Income Taxes | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Provision for income taxes |
$ |
11,512 | | |
$ |
8,688 | | |
$ |
2,824 | | |
33 |
% |
Our provision for income taxes increased by $2.8 million for the three months ended April 30, 2026, compared to the three months ended April 30, 2025. The change is primarily driven by the increase in our pre-tax income in non-U.S. jurisdictions in which we conduct business.
Our provision for income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each fiscal quarter, we update our estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, we make a cumulative adjustment in such period.
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.
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.
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 the income tax provision for the three months ended April 30, 2026.
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 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.
Comparison of the Nine Months Ended April 30, 2026 and 2025
Revenue | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Revenue |
$ |
2,454,338 | | |
$ |
1,953,889 | | |
$ |
500,449 | | |
26 |
% |
Revenue increased by $500.4 million, or 26%, for the nine months ended April 30, 2026, compared to the nine months ended April 30, 2025. The change in revenue was driven primarily by sales of additional subscriptions to existing customers, which contributed $321.2 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 17% from April 30, 2025 to April 30, 2026.
Cost of Revenue and Gross Margin | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Cost of revenue |
$ |
568,665 | | |
$ |
445,938 | | |
$ |
122,727 | | |
28 |
% |
|
Gross margin |
77 |
% | |
77 |
% | | | | |
Cost of revenue increased by $122.7 million, or 28%, for the nine months ended April 30, 2026, compared to the nine months ended April 30, 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 $80.2 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 $30.7 million, inclusive of an increase of $13.9 million in stock-based compensation expense, higher amortization of acquired intangible assets of $8.5 million and facility related expenses of $3.4 million.
Gross margin remained flat at 77% for the nine months ended April 30, 2026, compared to the nine months ended April 30, 2025.
Operating Expenses
Sales and Marketing Expenses | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Sales and marketing expenses |
$ |
1,114,449 | | |
$ |
928,564 | | |
$ |
185,885 | | |
20 |
% |
Sales and marketing expenses increased by $185.9 million, or 20%, for the nine months ended April 30, 2026, compared to the nine months ended April 30, 2025. The change was driven primarily by an increase of $133.5 million in employee-related expenses, inclusive of an increase of $30.0 million in sales commissions expense and $25.9 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to $18.8 million in facility, software and equipment-related expenses, $12.7 million in marketing and advertisement expenses, $10.1 million in amortization of acquired intangible assets, $8.9 million in travel expenses and $4.1 million in professional services.
Research and Development Expenses | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Research and development expenses |
$ |
661,916 | | |
$ |
494,879 | | |
$ |
167,037 | | |
34 |
% |
Research and development expenses increased by $167.0 million, or 34%, for the nine months ended April 30, 2026, compared to the nine months ended April 30, 2025, as we continue to develop and enhance the functionality of our cloud platform and integrate technologies acquired through our business acquisitions. The change was driven primarily by an increase of $116.4 million in employee-related expenses, inclusive of an increase of $59.9 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $40.4 million in facility, cloud hosting, software and equipment-related expenses to support our growth and lower capitalized internal-use software development costs of $8.3 million.
General and Administrative Expenses | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| General and administrative expenses |
$ |
227,083 | | |
$ |
180,726 | | |
$ |
46,357 | | |
26 |
% |
General and administrative expenses increased by $46.4 million, or 26%, for the nine months ended April 30, 2026, compared to the nine months ended April 30, 2025. The change was driven primarily by an increase of $34.6 million in employee-related expenses, inclusive of an increase of $21.9 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $4.1 million in acquisition-related expenses, $2.8 million in facility-related expenses and the rise of miscellaneous expenses to support the growth of our business.
Interest Income | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Interest income |
$ |
101,090 | | |
$ |
92,189 | | |
$ |
8,901 | | |
10 |
% |
Interest income increased by $8.9 million, or 10%, for the nine months ended April 30, 2026, compared to the nine months ended April 30, 2025. The change was driven primarily by our increased balance of cash equivalents and short-term investments.
Interest Expense | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Interest expense |
$ |
(9,048) | | |
$ |
(7,448) | | |
$ |
(1,600) | | |
21 |
% |
Interest expense increased by $1.6 million for the nine months ended April 30, 2026, compared to the nine months ended April 30, 2025. The change was driven primarily by higher amortization of debt issuance costs.
Other Expense, Net | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Other expense, net |
$ |
(6,310) | | |
$ |
(4,911) | | |
$ |
(1,399) | | |
28 |
% |
Other expense, net increased by $1.4 million for the nine months ended April 30, 2026 compared to the nine months ended April 30, 2025. The change was driven primarily by fluctuations in foreign currency transactions gains and losses.
Provision For Income Taxes | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended April 30, | | Change |
| 2026 | |
2025 | |
$ | |
% |
| | | | | | | |
| (in thousands) |
| Provision for income taxes |
$ |
27,767 | | |
$ |
7,512 | | |
$ |
20,255 | | |
270 |
% |
Our provision for income taxes increased by $20.3 million for the nine months ended April 30, 2026, compared to the nine months ended April 30, 2025. The change is primarily attributable to the prior year's non-recurring release of valuation allowance on United Kingdom deferred tax assets.
Our provision for income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each fiscal quarter, we update our estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, we make a cumulative adjustment in such period.
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 United States.
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.
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 the income tax provision for the nine months ended April 30, 2026.
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.
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.
Liquidity and Capital Resources
As of April 30, 2026, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $3,539.1 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, corporate debt securities, asset-backed securities and non-U.S. government securities.
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, to the audited consolidated financial statements included in our Fiscal 2025 Form 10-K.
We have generated significant losses from operations, as reflected in our accumulated deficit of $1,249.4 million as of April 30, 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.
We believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our working capital, capital expenditure and convertible senior notes repayment requirements for at least the next 12 months from the date of issuance of our financial statements. Our foreseeable cash needs, in addition to our recurring operating costs, include our expected capital expenditures to support expansion of our infrastructure and workforce, lease obligations, purchase commitments, potential business acquisitions, convertible senior notes repayment requirements and other strategic transactions. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary as a result of,
and our future capital requirements, both near-term and long-term, will depend on, many factors, including our growth rate, the timing and extent of spending to support our research and development efforts, the expansion of sales and marketing and international operating activities, the timing of new introductions of solutions or features, and the continuing market acceptance of our services, the impact of macroeconomic and geopolitical conditions to our and our customers', vendors' and partners' businesses. We have and may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Additionally, some of the factors that may influence our operations are not within our control, such as general economic conditions, geopolitical developments and the impact of global crises. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected.
We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. Therefore, a substantial source of our cash is from such prepayments, which are included on our consolidated balance sheets as a contract liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is subsequently recognized as revenue in accordance with our revenue recognition policy. As of April 30, 2026, we had deferred revenue of $2,477.2 million, of which $2,097.1 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.
As of April 30, 2026, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
The following table summarizes our cash flows for the periods presented:
| | | | | | | | | | | |
| Nine Months Ended April 30, |
|
2026 | |
2025 |
| | | |
| (in thousands) |
| Net cash provided by operating activities |
$ |
850,369 | | |
$ |
721,849 | |
|
Net cash used in investing activities |
$ |
(2,281,779) | | |
$ |
(179,440) | |
|
Net cash provided by financing activities |
$ |
24,499 | | |
$ |
25,401 | |
Operating Activities
Net cash provided by operating activities during the nine months ended April 30, 2026 was $850.4 million, which was driven by a net loss of $59.8 million, adjusted for non-cash charges of $965.0 million and net cash outflows of $54.8 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $610.3 million for stock-based compensation expense, $149.7 million for amortization of deferred contract acquisition costs, $105.6 million for depreciation and amortization expense, $60.4 million for non-cash operating lease costs, $31.2 million for amortization expense of acquired intangible assets, and $6.1 million in amortization of debt issuance costs. These non-cash charges were partially offset primarily by $4.6 million in accretion of investments purchased at a discount. Net cash outflows from changes in operating assets and liabilities were primarily attributable from an increase of $184.7 million in deferred contract acquisition costs, a decrease of $65.9 million in deferred revenue, a decrease of $44.0 million in operating lease liabilities, an increase of $29.1 million in prepaid expenses, other current and noncurrent assets, a decrease of $20.0 million in accounts payable and a
decrease of $9.4 million in accrued compensation. Net outflows were partially offset by cash inflows resulting from decrease in accounts receivable, primarily due to the timing of billings and collections of $280.0 million as well as an $18.2 million increase in accrued expenses and other current and noncurrent liabilities.
Net cash provided by operating activities during the nine months ended April 30, 2025 was $721.8 million, which resulted from a net loss of $23.9 million, adjusted for non-cash charges of $716.4 million and net cash inflows of $29.4 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $488.7 million for stock-based compensation expense, $121.5 million for amortization of deferred contract acquisition costs, $74.1 million for depreciation and amortization expense, $47.9 million for non-cash operating lease costs and $12.7 million for amortization expense of acquired intangible assets. Non-cash charges were partially offset by deferred income taxes of $17.8 million and an accretion of investments purchased at a discount of $13.9 million. Net cash inflows from changes in operating assets and liabilities were primarily the result of a decrease of $120.5 million in accounts receivable, primarily due to timing of billings and collections, an increase of $90.0 million in deferred revenue, and an increase of $28.9 million in accounts payable. Net cash inflows were partially offset by cash outflows resulting from an increase of $140.0 million in deferred contract acquisition costs, a decrease of $45.2 million in operating lease liabilities, an increase of $12.2 million in prepaid expenses, other current and noncurrent assets, a decrease of $7.0 million in accrued expenses, other current and noncurrent liabilities and $5.7 million decrease in accrued compensation.
Investing Activities
Net cash used in investing activities during the nine months ended April 30, 2026, totaled $2,281.8 million. This was primarily driven by purchases of short-term investments of $1,971.7 million, payments for business acquisitions, net of cash acquired, of $770.0 million and capital expenditures of $132.0 million to support the growth and expansion of our cloud platform and expenditures on strategic investments of $4.2 million. These outflows were partially offset by proceeds of $596.2 million from sales and maturities of short-term investments.
Net cash used in investing activities during the nine months ended April 30, 2025 of $179.4 million was primarily attributable to purchases of short-term investments of $886.6 million and capital expenditures of $167.1 million to support the growth and expansion of our cloud platform. These activities were partially offset by proceeds from maturities of short-term investments of $875.9 million.
Financing Activities
Net cash provided by financing activities of $24.5 million during the nine months ended April 30, 2026 was primarily attributable to $21.5 million in proceeds from the issuance of common stock under the ESPP and $4.0 million was attributable to proceeds from the exercise of stock options.
Net cash provided by financing activities of $25.4 million during the nine months ended April 30, 2025 was primarily attributable to $22.3 million in proceeds from the issuance of common stock under the ESPP and $3.5 million was attributable to proceeds from the exercise of stock options.
Contractual Obligations and Commitments
During the nine months ended April 30, 2026, there have been no material changes outside the ordinary course of business to our contractual obligations and commitments from those disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7, of our Fiscal 2025 Form 10-K.
Critical Accounting Policies and Estimates
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.
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 nine months ended April 30, 2026.
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