What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-29 compared with 2024-05-30 · 169 added, 123 removed, 239 unchanged (55% of the section changed)

12 unchanged sentences

Our Customer 360 platform unites sales, service, marketing, commerce and IT teams by connecting customer data across systems, apps and devices to create a complete view of customers.

With this single source of customer truth, teams can be more responsive, productive and efficient, deliver intelligent, personalized experiences across every channel and increase productivity.

With this single source of customer truth and integrated artificial intelligence (“AI”), teams can be more responsive, productive and efficient, deliver intelligent, personalized experiences across every channel and increase productivity.

With Slack, we provide a digital headquarters where companies, employees, governments and stakeholders can create success from anywhere.

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The employee actions associated with the Restructuring Plan were substantially completed in fiscal 2024 and the real estate actions associated with the Restructuring Plan are expected to be fully complete in fiscal 2026.

In addition to the Restructuring Plan, we continued to evaluate and operationalize future programs to drive further operational efficiencies, optimize our management structure and increase cost optimization efforts to realize long-term sustainable growth, including a targeted workforce reduction that was initiated in the first quarter of fiscal 2025 and is expected to be substantially complete in fiscal 2025.

In addition to the Restructuring Plan, we continued to evaluate and operationalize future programs to drive further operational efficiencies, optimize our management structure and increase cost optimization efforts to realize long-term sustainable growth, including targeted workforce and office space reductions that were initiated in the first half of fiscal 2025 and are expected to be substantially complete in fiscal 2025.

We have started to see improvements in our operating expenses across all operating categories, with the most opportunity in sales a nd marketing expense and general and administrative expenses.

Over the long term, we expect to see additional operating expense improvements, which could include various restructuring initiatives to drive operational efficiencies.

Highlights from First Quarter of Fiscal 2025

For the three months ended April 30, 2024, revenue was $9.1 billion , an increase of 11 percent year-over-year.

Over the long term, we expect to see additional operating expense improvements, which could include various restructuring initiatives or measured hiring initiatives to drive operational efficiencies.

Highlights from the First Six Months of Fiscal 2025

For the six months ended July 31, 2024, revenue was $18.5 billion , an increase of 10 percent year-over-year.

• Income from Operations:

For the three months ended April 30, 2024, income from operations was $1.7 billion as compared to $0.4 billion from a year ago.

For the six months ended July 31, 2024, income from operations was $3.5 billion as compared to $1.9 billion from a year ago.

Operating margin, which represents income from operations as a percentage

of total revenue, increased to approximately 19 percent for the three months ended April 30, 2024 compared to approximately five percent for the same period in the prior year.

• Earnings per Share:

For the three months ended April 30, 2024 , diluted earnings per share was $1.56 as compared to diluted earnings per share of $0.20 from a year ago.

Cash provided by operations for the three months ended April 30, 2024 was $6.2 billion, an increase of 39 percent y ear-over-year.

Total cash, cash equivalents and marketable securities as of April 30, 2024 was $17.7 billion.

of total revenue, increased to approximately 19 percent for the six months ended July 31, 2024 compared to approximately 11 percent for the same period in the prior year.

• Net Income per Share:

For the six months ended July 31, 2024 , diluted net income per share was $3.03 as compared to diluted net income per share of $1.49 from a year ago.

Cash provided by operations for the six months ended July 31, 2024 was $7.1 billion, an increase of 35 percent y ear-over-year.

Total cash, cash equivalents and marketable securities as of July 31, 2024 was $12.6 billion.

• Remaining Performance Obligation:

Total remaining performance obligation, which represents all future revenue under contract yet to be recognized, as of April 30, 2024 was approximately $53.9 billion, an increase of 15 percent year-over-year .

Current remaining performance obligation as of April 30, 2024 was approximately $26.4 billion , an increase of 10 percent year-over-year.

Total remaining performance obligation, which represents all future revenue under contract yet to be recognized, as of July 31, 2024 was approximately $53.5 billion, an increase of 15 percent year-over-year .

Current remaining performance obligation as of July 31, 2024 was approximately $26.5 billion , an increase of 10 percent year-over-year.

• Share Repurchase Program:

During the three months ended April 30, 2024, we repurchased approximately 7 million shares of our common stock for approximately $2.2 billion.

During the six months ended July 31, 2024, we repurchased approximately 25 million shares of our common stock for approximately $6.5 billion.

• Dividend Program :

During the three months ended April 30, 2024, we paid approximately $388 million in dividends.

During the six months ended July 31, 2024, we paid approximately $772 million in dividends.

We continue to see the impact of macroeconomic factors and the more measured buying behavior of our customers on our business and our customers’ businesses in ways that are difficult to isolate and quantify.

In the first quarter of fiscal 2025, we continued to experience elongated sales cycles, additional deal approval layers and deal compression.

In the first half of fiscal 2025, we continued to experience elongated sales cycles, additional deal approval layers and deal compression.

Slower growth in new and renewal business, particularly if sustained, impacts our remaining performance obligation, revenues and our ability to meet financial guidance and long-term targets.

In addition, the expanding global scope of our business and the heightened volatility of global markets expose us to the risk of fluctuations in foreign currency markets.

Foreign currency fluctuations minimally impacted revenues in the three months ended April 30, 2024 compared to the three months ended April 30, 2023 and our current remaining performance obligatio n was minimally impacted as of April 30, 2024 compared to what we would have reported as of April 30, 2023 using constant currency rates.

During fiscal 2024 and the first quarter of fiscal 2025, the United States Dollar strengthened significantly against certain foreign currencies in the markets in which we operate, particularly against the Euro, British Pound Sterling and Japanese Yen.

Foreign currency fluctuations impacted revenues by approximately one percent in the six months ended July 31, 2024 compared to the six months ended July 31, 2023 and our current remaining performance obligatio n was impacted by approximately one percent as of July 31, 2024 compared to what we would have reported as of July 31, 2023 using constant currency rates.

During fiscal 2024 and the first half of fiscal 2025, the United States Dollar strengthened significantly against certain foreign currencies in the markets in which we operate, particularly against the Euro, British Pound Sterling and Japanese Yen.

The impact of foreign currency fluctuations could impact our near-term results and ability to accurately predict our future results and earnings.

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(1) subscription and support revenues and (2) professional services and other revenues.

Subscription and support revenues accounted for approximately 94 percent of our total revenues for the three months ended April 30, 2024.

Subscription and support revenues accounted for approximately 94 percent of our total revenues for the six months ended July 31, 2024.

Subscription and support revenues include subscription fees from customers accessing our enterprise cloud computing services (collectively, “Cloud Services”), software license revenues from the sales of term software licenses, and support revenues from the sale of support and updates beyond the basic subscription fees or related to the sales of software licenses.

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Changes in contract duration for multi-year term software licenses can impact the amount of revenues recognized upfront.

Revenues from term software licenses represent less than ten percent of total subscription and support revenue for the three months ended April 30, 2024.

Revenues from term software licenses represent less than ten percent of total subscription and support revenue for the three and six months ended July 31, 2024.

The revenue growth rates of each of our service offerings, as described below in “Results of Operations,” fluctuate from quarter to quarter and over time.

Additionally, we manage the total balanced product portfolio to deliver solutions to our customers and, as a result, the revenue result for each offering is not necessarily indicative of the results to be expected for any subsequent quarter.

subsequent quarter.

In addition, some of our Cloud Service offerings have similar features and functions.

customers may use our Sales, Service or Platform service offerings to record account and contact information, which are similar features across these service offerings.

For example, customers may use our Sales, Service or Platform service offerings to record account and contact information, which are similar features across these service offerings.

Depending on a customer’s actual and projected business requirements, more than one service offering may satisfy the customer’s current and future needs.

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We calculate our attrition rate at a point in time on a trailing twelve-month basis as of the end of each month.

As of April 30, 2024, our attrition rate, excluding Slack self service, was appro ximately eight percent.

As of July 31, 2024, our attrition rate, excluding Slack self service, was approximately eight percent.

We continue to maintain a variety of customer programs and initiatives, which, along with increasing enterprise adoption, have helped keep our attrition rate consistent as compared to the prior year.

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Cost of Revenues

Cost of subscription and support revenues primarily consists of expenses related to delivering our service and providing support, including the costs of data center capacity, certain fees paid to various third parties for the use of their technology, services and data, employee-related costs such as salaries and benefits, and allocated overhead.

Cost of subscription and support revenues primarily consists of expenses related to delivering our service and providing support, including the costs of data center capacity, certain fees paid to various third parties for the use of their technology, services and data, allocated overhead and our employee-related costs, which includes salaries, benefits and stock-based compensation expense.

Our cost of subscription and support revenues also includes amortization of certain acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company’s research and development efforts.

Also included in the cost of subscription and support revenues are expenses incurred supporting the free user base of Slack, including third-party hosting costs and employee-related costs, including stock-based compensation expense, specific to customer experience and technical operations.

Cost of professional services and other revenues consists primarily of employee-related costs associated with these services, including stock-based compensation expense, the cost of subcontractors, certain third-party fees and allocated overhead.

We believe that our professional services organization facilitates the adoption of our service offerings, helps us to

secure larger subscription revenue contracts and supports our customers’ success.

Also included in the cost of subscription and support revenues are expenses incurred supporting the free user base of Slack, including third-party hosting costs and employee-related costs specific to customer experience and technical operations.

Cost of professional services and other revenues consists primarily of employee-related costs associated with these services, the cost of subcontractors, certain third-party fees and allocated overhead.

We believe that our professional services organization facilitates the adoption of our service offerings, helps us to secure larger subscription revenue contracts and

supports our customers’ success.

The cost of professional services may exceed revenues from professional services in future fiscal periods.

Research and Development

Research and development expenses consist primarily of salaries and related expenses, including stock-based compensation expense for our engineering staff associated with product development, as well as allocated overhead.

Research and development expenses consist primarily of employee-related costs for our engineering staff associated with product development, as well as allocated overhead.

Sales and Marketing

Sales and marketing expenses make up the majority of our operating expenses and consist primarily of salaries and related expenses, including stock-based compensation expense and commissions, for our sales and marketing staff, as well as payments to partners, marketing programs and allocated overhead.

Sales and marketing expenses make up the majority of our operating expenses and consist primarily of employee-related costs and commissions for our sales and marketing staff, as well as payments to partners, marketing programs and allocated overhead.

Marketing programs consist of advertising, events, corporate communications, brand building and product marketing activities.

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General and Administrative

General and administrative expenses consist primarily of salaries and related expenses, including stock-based compensation expense, for finance and accounting, legal, internal audit, human resources and management information systems personnel, as well as professional services fees and allocated overhead.

General and administrative expenses consist primarily of employee-related costs for finance and accounting, legal, internal audit, human resources and management information systems personnel, as well as professional services fees and allocated overhead.

We allocate overhead such as information technology infrastructure, rent, occupancy charges and certain employee benefits based on headcount.

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Restructuring

Restructuring, primarily related to the Restructuring Plan, consists of charges related to employee transition, severance payments, employee benefits and stock-based compensation as well as exit charges associated with office space reductions.

The employee actions associated with the Restructuring Plan are substantially complete and the targeted workforce reduction initiated in the first quarter of fiscal 2025 is expected to be substantially complete in fiscal 2025.

Restructuring consists of charges related to employee transition, severance payments, employee benefits and stock-based compensation as well as exit charges associated with office space reductions.

The employee actions associated with the Restructuring Plan were substantially completed in fiscal 2024 and the targeted workforce and office space reductions initiated in the first half of fiscal 2025 are expected to be substantially complete in fiscal 2025.

The real estate actions associated with the Restructuring Plan are expected to be fully complete in fiscal 2026.

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The following tables set forth selected data for each of the periods indicated (in millions):

1 Three Months Ended April 30,

2024 % of Total Revenues 2023 % of Total Revenues

2 Three Months Ended July 31, Six Months Ended July 31,

2024 % of Total Revenues 2023 % of Total Revenues 2024 % of Total Revenues 2023 % of Total Revenues

Subscription and support $ 8,764 94 % $ 8,006 93 % $ 17,349 94 % $ 15,648 93 %

13 unchanged sentences

Income from operations 1,783 19 1,476 17 3,492 19 1,888 11

Gains (losses) on strategic investments, net 37 0 (141) (2)

Losses on strategic investments, net (37) 0 (29) 0 0 0 (170) (1)

Other income 91 1 45 0 212 1 100 1

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(1) Amounts related to amortization of intangible assets acquired through business combinations, as follows (in millions):

Three Months Ended April 30,

2024 % of Total Revenues 2023 % of Total Revenues

Three Months Ended July 31, Six Months Ended July 31,

2024 % of Total Revenues 2023 % of Total Revenues 2024 % of Total Revenues 2023 % of Total Revenues

Cost of revenues $ 231 3 % $ 250 3 % $ 469 3 % $ 498 3 %

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(2) Amounts related to stock-based compensation expense, as follows (in millions):

Three Months Ended April 30,

2024 % of Total Revenues 2023 % of Total Revenues

Three Months Ended July 31, Six Months Ended July 31,

2024 % of Total Revenues 2023 % of Total Revenues 2024 % of Total Revenues 2023 % of Total Revenues

Cost of revenues $ 132 2 % $ 112 1 % $ 251 1 % $ 215 1 %

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The following table sets forth selected balance sheet data and other metrics for each of the periods indicated (in millions, except remaining performance obligation, which is presented in billions):

April 30, 2024

July 31, 2024

January 31, 2024

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Remaining performance obligation represents contracted revenue that has not yet been recognized, which includes unearned revenue and unbilled amounts that will be recognized as revenue in future periods.

Three Months Ended April 30, Variance

Three Months Ended July 31, Variance

(in millions) 2024 2023 Dollars Percent

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Total revenues $ 9,325 $ 8,603 $ 722 8 %

The increase in subscription and support revenues for the three months ended April 30, 2024 was primarily caused by volume-driven increases from new business, which includes new customers, upgrades and additional subscriptions from existing customers.

Pricing was not a significant driver of the increase in revenues for the period.

Revenues from term software licenses, which are recognized at a point in time, represented approximately seven percent and five percent of total subscription and support revenues for the three months ended April 30, 2024 and 2023, respectively.

Subscription and support revenues accounted for approximately 94 percent and 93 percent of our total revenues for the three months ended April 30, 2024 and 2023, respectively.

The decrease in professional services and other revenues was due primarily to less demand for larger, multi-year transformation engagements and, in some cases, delayed projects.

Six Months Ended July 31, Variance

(in millions) 2024 2023 Dollars Percent

Subscription and support $ 17,349 $ 15,648 $ 1,701 11 %

Professional services and other 1,109 1,202 (93) (8)

Total revenues $ 18,458 $ 16,850 $ 1,608 10 %

The increase in s ubscription and support revenues for the three and six months ended July 31, 2024 was primarily caused by volume-driven increases from new business, which includes new customers, upgrades, and additional subscriptions from existing customers.

Pricing was not a significant driver of the increase in revenues for either period.

Revenues from term software licenses, which are recognized at a point in time, represented approximately five percent and six percent of total subscription and support revenues for the three and six months ended July 31, 2024, respectively, and five percent for the three and six months ended July 31, 2023.

Subscription and support revenues accounted for approximately 94 percent of our total revenues for the three and six months ended July 31, 2024 and 93 percent for the three and six months ended July 31, 2023.

The decrease in professional services and other revenues for the three and six months ended July 31, 2024 was due primarily to less demand for larger, multi-year transformation engagements and, in some cases, delayed projects.

These trends may continue in the near term.

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Subscription and support revenues consisted of the following (in millions):

Three Months Ended April 30,

Three Months Ended July 31,

2024 As a % of Total Subscription and Support Revenues 2023 As a % of Total Subscription and Support Revenues Growth Rate

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(1) In the fourth quarter of fiscal year 2024, the Company renamed the service offering previously referred to as Data to Integration and Analytics, which includes Mulesoft and Tableau.

Six Months Ended July 31,

2024 As a % of Total Subscription and Support Revenues 2023 As a % of Total Subscription and Support Revenues Growth Rate

Sales $ 4,069 23 % $ 3,705 24 % 10 %

Service 4,439 26 4,013 26 11

Platform and Other 3,504 20 3,205 20 9

Marketing and Commerce 2,590 15 2,408 15 8

Integration and Analytics (1) 2,747 16 2,317 15 19

Total $ 17,349 100 % $ 15,648 100 % 11 %

(1) In the fourth quarter of fiscal year 2024, the Company renamed the service offering previously referred to as Data to Integration and Analytics, which includes Mulesoft and Tableau.

Our industry vertical service offerings revenue is included in one of the above service offerings depending on the primary service purchased.

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Revenues by Geography

Three Months Ended April 30,

Three Months Ended July 31,

(in millions) 2024 As a % of Total Revenues 2023 As a % of Total Revenues Growth Rate

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Asia Pacific 940 10 860 10 9

Total $ 9,133 100 % $ 8,247 100 % 11 %

Revenues by geography are determined based on the region of the Salesforce contracting entity, which may be different than the region of the customer.

The increase in revenues across all regions was due primarily to the continued execution of our business and growth strategy, including increasing our geographic reach primarily through extending our go-to-market capabilities globally.

During the three months ended April 30, 2024, revenues outside of the Americas were negatively impacted by approximately one percent by foreign currency fluctuations compared to the three months ended April 30, 2023.

$ 9,325 100 % $ 8,603 100 % 8 %

Six Months Ended July 31,

(in millions) 2024 As a % of Total Revenues 2023 As a % of Total Revenues Growth Rate

Americas $ 12,263 66 % $ 11,251 67 % 9 %

Europe 4,329 24 3,925 23 10

Asia Pacific 1,866 10 1,674 10 11

$ 18,458 100 % $ 16,850 100 % 10 %

Revenues by geography are determined based on the region of our contracting entity, which may be different than the

region of the customer.

Revenue growth in the Americas was driven by investment of additional sales resources from previous periods.

Revenue growth in Europe and Asia Pacific was primarily driven by our focus on marketing our services internationally and increased productivity, as well as investment in additional resources.

Total revenue during the three months ended July 31, 2024 was negatively impacted by approximately one percent due to foreign currency fluctuations compa red to the three months ended July 31, 2023.

Cost of Revenues

Three Months Ended April 30, Variance

(in millions) 2024 As a % of Total Revenues 2023 As a % of Total Revenues

Three Months Ended July 31, Variance

(in millions) 2024 As a % of Total Revenues 2023 As a % of Total Revenues Dollars

Subscription and support $ 1,556 17 % $ 1,515 18 % $ 41

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Total cost of revenues $ 2,159 23 % $ 2,113 25 % $ 46

For the three months ended April 30, 2024, the increase in cost of revenues in absolute dollars was primarily due to an increase in employee-related costs, including stock-based compensation expense.

Cost of revenues as a percentage of total revenues during the three months ended April 30, 2024 decreased by two percent from the same period a year ago due to a decrease in relative employee-related costs, including stock-based compensation expense, as well as reduced service delivery expenses.

Our cost of revenues headcount increased by one percent during the three months ended April 30, 2024.

Six Months Ended July 31, Variance

(in millions) 2024 As a % of Total Revenues 2023 As a % of Total Revenues Dollars

Subscription and support $ 3,116 17 % $ 3,025 18 % $ 91

Professional services and other 1,205 6 1,213 7 (8)

Total cost of revenues $ 4,321 23 % $ 4,238 25 % $ 83

For the three and six months ended July 31, 2024 , the increase in cost of revenues in absolute dollars was primarily due to an increase in employee-related costs .

Cost of revenue as a percentage of total revenue during the three and six months ended July 31, 2024 decreased by two percent from the same periods a year ago primarily as a result of reduced service delivery expenses.

We intend to continue to invest additional resources in our enterprise cloud computing services and data center capacity to allow us to scale with our customers and continue to evolve our security measures.

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Operating Expenses

Three Months Ended April 30, Variance

(in millions) 2024 As a % of Total Revenues 2023 As a % of Total Revenues

Three Months Ended July 31, Variance

(in millions) 2024 As a % of Total Revenues 2023 As a % of Total Revenues Dollars

Research and development $ 1,349 14 % $ 1,220 14 % $ 129

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Total operating expenses $ 5,383 58 % $ 5,014 58 % $ 369

For the three months ended April 30, 2024, the increase in research and development expenses in absolute dollars was primarily due to an increase in employee-related costs, including stock-based compensation expense.

Research and development expenses as a percentage of total revenues during the three months ended April 30, 2024 was consistent with the same period a year ago.

Our research and development headcount increased by 16 percent during the three months ended April 30, 2024, primarily in lower cost regions.

We expect that research and development expenses will likely remain consistent as a percentage of revenue in the near term as we continue to invest in technology to support the development of new, and improve existing, technologies, including our AI technologies and our Data Cloud service offering, and the integration of acquired technologies combined with our anticipated revenue growth in line with these incremental expenses.

For the three months ended April 30, 2024, the increase in sales and marketing expenses in absolute dollars was primarily due to an increase in employee-related costs, including stock-based compensation expense.

Sales and marketing expenses as a percentage of total revenues during the three months ended April 30, 2024 decreased by three percent from the same period a

year ago due to a decrease in relative employee-related costs, including stock-based compensation expense.

Our sales and marketing headcount decreased by one percent during the three months ended April 30, 2024.

Six Months Ended July 31, Variance

(in millions) 2024 As a % of Total Revenues 2023 As a % of Total Revenues Dollars

Research and development $ 2,717 15 % $ 2,427 14 % $ 290

Sales and marketing 6,463 35 6,267 37 196

General and administrative 1,358 7 1,270 8 88

Restructuring 107 1 760 5 (653)

Total operating expenses $ 10,645 58 % $ 10,724 64 % $ (79)

For the three and six months ended July 31, 2024, the increase in research and development expenses in absolute dollars was primarily due to an increase in employee-related costs.

Research and development expenses as a percentage of total revenues during the three months ended July 31, 2024 was consistent with the same period a year ago.

For the six months ended July 31, 2024, the one percent increase as a percentage of total revenues compared to the same period a year ago was primarily due to increased employee-related costs.

We expect that research and development expenses will likely remain consistent as a percentage of revenues in the near term as we continue to invest in technology to support the development of new, and improve existing, technologies, including our AI technologies and our Data Cloud service offering, and the integration of acquired technologies combined with our anticipated revenue growth in line with these incremental expenses.

For the three and six months ended July 31, 2024, the increase in sales and marketing expenses in absolute dollars was primarily due to an increase in employee-related costs.

Sales and marketing expenses as a percentage of total revenues during the three and six months ended July 31, 2024 decreased by one and two percent, respectively, from the same periods a year ago due to a decrease in relative employee-related costs and a decrease in absolute advertising expenses.

We expect that sales and marketing expenses will likely decrease as a percentage of revenues in the near term as we continue to focus on leveraging our self-serve and partner-led channels and increasing our sales productivity.

For the three months ended April 30, 2024, the increase in general and administrative expenses in absolute dollars was primarily due to an increase in professional services expenses.

General and administrative expenses as a percentage of total revenues during the three months ended April 30, 2024 decreased by one percent from the same period a year ago due to a decrease in employee-related costs.

Our general and administrative headcount decreased by 5 percent during the three months ended April 30, 2024.

For the three and six months ended July 31, 2024, the increase in general and administrative expenses in absolute dollars was primarily due to an increase in employee-related costs, professional services expenses and bad debt expenses.

General and administrative expenses as a percentage of total revenues during the three months ended July 31, 2024 increased one percent compared to the same period a year ago due to increased professional services expenses.

General and administrative expenses as a percentage of total revenues during the six months ended July 31, 2024 decreased one percent compared to the same period a year ago due to a decrease in relative employee-related costs.

We expect that general and administrative expenses will likely decrease as a percentage of revenues in the near term as we continue to invest in process efficiency initiatives.

In the three months ended April 30, 2024, approximately $8 million of costs were incurred related to our restructuring initiatives, which primarily was related to employee transition, severance payments and employee benefits.

We do not expect to incur significant additional charges in connection with our restructuring initiatives in the near term.

Other Income and Expenses

Three Months Ended April 30, Variance

(in millions) 2024 2023

Gains (losses) on strategic investments, net $ 37 $ (141) $ 178

In the three and six months ended July 31, 2024, approximately $99 million and $107 million, respectively, of costs were incurred related to our restructuring initiatives, which primarily was related to employee transition, severance payments and employee benefits.

Other Income and Expense

Three Months Ended July 31, Variance

(in millions) 2024 2023 Dollars

Losses on strategic investments, net $ (37) $ (29) $ (8)

Other income 91 45 46

Gains (losses) on strategic investments, net consists primarily of mark-to-market adjustments related to our publicly held equity securities, observable price adjustments related to our privately held equity securities and other adjustments including impairments.

Our strategic investment portfolio continues to be affected by challenging market conditions for companies in which we hold private equity, debt or other investments, as well as high public equity market volatility.

For the three months ended April 30, 2024, the gain on our strategic investment portfolio was primarily driven by unrealized gains on privately held equity investments of $105 million and realized gains on sales of securities of $59 million, partially offset by impairments of $130 million.

For the three months ended April 30, 2023, the loss on strategic investments was primarily driven by impairments on privately held equity and debt securities of $177 million, partially offset by $38 million in unrealized gains on privately held equity securities.

Other income primarily consists of interest income on our marketable securities portfolio, which is partially offset by interest expense on our debt as well as our finance leases.

Other income increased primarily due to an increase in investment income from rising interest rates.

Six Months Ended July 31, Variance

(in millions) 2024 2023 Dollars

Losses on strategic investments, net $ 0 $ (170) $ 170

Other income 212 100 112

Losses on strategic investments, net consists primarily of mark-to-market adjustments related to our publicly held equity securities, observable price adjustments related to our privately held equity securities, impairments and other adjustments.

Our strategic investment portfolio continues to be affected by challenging market conditions for companies in which we hold private equity or debt investments as well as high public equity market volatility.

For the three months ended July 31, 2024, our strategic investment portfolio losses were primarily driven by impairments on privately held equity investments o f $60 million .

For the six months ended July 31, 2024, our strategic investment portfolio losses were primarily driven by impairments on privately held equity investments of $190 million, partially offset by unrealized gains on privately held equity securities of $149 million and realized gains on sales of securities of $60 million.

Other income primarily consists of investment income, partially offset by interest expense on our debt and finance leases.

Interest expense was $68 million and $75 million for the three months ended July 31, 2024 and 2023, respectively, and $137 million and $224 million for the six months ended July 31, 2024 and 2023, respectively.

Provision For Income Taxes

Three Months Ended April 30, Variance

(in millions) 2024 2023

Three Months Ended July 31, Variance

(in millions) 2024 2023 Dollars

Provision for income taxes $ (408) $ (225) $ (183)

Effective tax rate 22 % 15 %

We recorded a tax provision of $334 million on pretax income of $1.9 billion for the three months ended April 30, 2024.

Our tax provision increased from a year ago primarily due to higher pretax income.

Our effective tax rate decreased from a year ago primarily due to excess tax benefits from stock based compensation.

Our effective tax rate may fluctuate due to changes in our domestic and foreign earnings, or material discrete tax items, or a combination of these factors resulting from transactions or events, including acquisitions, changes to our operating structure and other macroeconomic factors.

Several countries have enacted legislation to implement the Organization for Economic Cooperation and Development’s 15% global minimum tax regime effective January 1, 2024.

Six Months Ended July 31, Variance

(in millions) 2024 2023 Dollars

Provision for income taxes $ (742) $ (352) $ (390)

Effective tax rate 20 % 19 %

We recorded a tax provision of $408 million on pretax income of $1.8 billion for the three months ended July 31, 2024, and a tax provision of $742 million on pretax income of $3.7 billion for the six months ended July 31, 2024.

Our quarter-to-date tax provision increased from a year ago due to higher current year pretax income and prior year discrete benefits.

Our year-to-date tax provision increased from a year ago primarily due to higher pretax income.

Our effective tax rate may fluctuate due to changes in our domestic and foreign earnings, or material discrete tax items, or a combination of these factors resulting from transactions or events, including, for example, acquisitions, changes to our operating structure, and other macroeconomic factors.

We recorded a tax provision of $225 million on pretax income of $1.5 billion for the three months ended July 31, 2023, and a tax provision of $352 million on pretax income of $1.8 billion for the six months ended July 31, 2023.

Several countries have enacted legislation to implement the Organization for Economic Cooperation and Development’s

15% global minimum tax regime effective January 1, 2024.

We expect other countries to follow.

We do not anticipate material changes to our income tax provision for fiscal 2025.

We continue to evaluate the impacts of legislation in the jurisdictions in which we operate.

Our effective tax rate and cash tax payment could increase in future years.

We do not anticipate material

changes to our income tax provision for fiscal 2025.

We continue to evaluate the impacts of legislation in the jurisdictions in

which we operate.

Our effective tax rate and cash tax payments could increase in future years.

Liquidity and Capital Resources

At April 30, 2024, our principal sources of liquidity were cash, cash equivalents and marketable securities totaling $17.7 billion and accounts receivable of $4.3 billion.

At July 31, 2024, our principal sources of liquidity were cash, cash equivalents and marketable securities totaling $12.6 billion and accounts receivable of $5.4 billion.

Our cash equivalents and marketable securities are comprised primarily of corporate notes and obligations, U.S.

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agency obligations, asset-backed securities, foreign government obligations, mortgage-backed obligations, covered bonds, time deposits, money market mutual funds and municipal securities.

Our credit agreement (the “Revolving Loan Credit Agreement”), which as of April 30, 2024, provides the ability to borrow up to $3.0 billion in unsecured financing (the “Credit Facility”), also serves as a source of liquidity.

Cash from operations could continue to be affected by various risks and uncertainties, including, but not limited to, the risks detailed in Part I, Item 1A, “Risk Factors.” We believe our existing cash, cash equivalents, marketable securities, cash provided by operating activities, unbilled amounts related to contracted noncancellable subscription agreements, which are not reflected on the balance sheet, and, if necessary, our borrowing capacity under our Credit Facility will be sufficient to meet our working capital, capital expenditure and debt maintenance needs over the next 12 months.

Our credit agreement (the “Revolving Loan Credit Agreement”), which as of July 31, 2024, provides the ability to borrow up to $3.0 billion in unsecured financing (the “Credit Facility”), also serves as a source of liquidity.

Net cash provided by operating activities could continue to be affected by various risks and uncertainties, including, but not limited to, the risks detailed in Part II, Item 1A, “Risk Factors.” We believe our existing cash, cash equivalents, marketable securities, cash provided by operating activities, unbilled amounts related to contracted noncancellable subscription agreements, which are not reflected on the balance sheet, and, if necessary, our borrowing capacity under our Credit Facility will be sufficient to meet our working capital, capital expenditure and debt maintenance needs over the next 12 months and thereafter.

In the future, we may enter into arrangements to acquire or invest in complementary businesses, services, technologies and intellectual property rights.

To facilitate these acquisitions or investments, we may seek additional equity or debt financing, which may not be available on terms favorable to us or at all, impacting our ability to complete subsequent acquisitions or investments.

For the three months ended April 30, 2024 and 2023 our cash flows were as follows (in millions):

1 Three Months Ended April 30,

For the three and six months ended July 31, 2024 and 2023 our cash flows were as follows (in millions):

2 Three Months Ended July 31, Six Months Ended July 31,

2024 2023 2024 2023

Net cash provided by operating activities $ 892 $ 808 $ 7,139 $ 5,299

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Operating Activities

The net cash provided by operating activities during the three months ended April 30, 2024 was primarily comprised of net income of $1.5 billion, adjusted for non-cash items, including $879 million of depreciation and amortization and $750 million of stock-based compensation expense.

The net cash provided by operating activities during the six months ended July 31, 2024 was primarily comprised of net income of $3.0 billion, adjusted for non-cash items, including $1.8 billion of depreciation and amortization and $1.6 billion of stock-based compensation expense.

Cash provided by operating activities can be significantly impacted by factors such as growth in new business, timing of cash receipts from customers, vendor payment terms and timing of payments to vendors.

Cash provided by operating activities during the three months ended April 30, 2024 was further benefited by the changes in accounts receivable, net of $7.2 billion partially offset by the change in unearned revenue of $3.0 billion and the change in accounts payable and accrued expenses and other liabilities of $755 million .

Cash provided by operating activities during the six months ended July 31, 2024 was further benefited by the changes in accounts receivable, net of $6.0 billion partially offset by the change in unearned revenue of $3.8 billion and the change in accounts payable and accrued expenses and other liabilities of $535 million .

As our business continues to grow, and assuming our expenses remain in line with or less than our revenue growth, we expect to continue to see growth in net cash provided by operating activities.

The net cash provided by operating activities during the three months ended April 30, 2023 was comprised of net income of $199 million, adjusted for non-cash items including $1.3 billion of depreciation and amortization and $696 million related to stock-based compensation expense.

Cash provided by operating activities during the three months ended April 30, 2023 was further benefited by the change in accounts receivable, net of $6.1 billion due to cash collections and was partially offset by the change in unearned revenue of $2.3 billion.

The net cash provided by operating activities during the six months ended July 31, 2023 was comprised of net income of $1.5 billion, adjusted for non-cash items including $2.1 billion of depreciation and amortization and $1.4 billion of stock-based compensation expense.

Cash provided by operating activities during the six months ended July 31, 2023 was further benefited by the change in accounts receivable, net of $5.4 billion due to cash collections and was partially offset by the change in unearned revenue of $3.1 billion and the change in accounts payable and accrued expenses and other liabilities of $1.8 billion.

Investing Activities

The net cash used in investing activities during the three months ended April 30, 2024 was primarily related to net outflows from marketable securities activity of $2.0 billion, net outflows for the acquisition of Spiff of $338 million, net outflows from strategic investment activity of $150 million and capital expenditures of $163 million.

The net cash provided by investing activities during the three months ended April 30, 2023 was related to net inflows of $686 million from marketable securities activity which was partially offset by capital expenditures of $243 million and net outflows of $96 million from strategic investment activity.

The net cash used in investing activities during the six months ended July 31, 2024 was primarily related to net outflows for the acquisition of Spiff of $338 million, net outflows from strategic investment activity of $202 million and capital expenditures of $300 million offset by net inflows from marketable securities activity of $830 million.

The net cash used in investing activities during the six months ended July 31, 2023 was related to net outflows from marketable securities activity of $117 million, capital expenditures of $423 million and net outflows from strategic investment activity of $265 million.

Financing Activities

Net cash used in financing activities during the three months ended April 30, 2024 consisted primarily of $2.1 billion from repurchases of common stock and $388 million related to payments of dividends, partially offset by $533 million from proceeds from equity plans.

Net cash used in financing activities during the three months ended April 30, 2023 consisted primarily of $2.1 billion from repurchases of common stock and $1.0 billion related to the repayment of the 2023 Senior Notes, partially offset by $449 million from proceeds from equity plans.

As of April 30, 2024, we had senior unsecured debt outstanding, with maturities starting in July 2024 and extending through July 2061 with a total carrying value of $9.4 billion, of which $1.0 billion was related to the 2024 Senior Notes due in the next 12 months.

We were in compliance with all debt covenants as of April 30, 2024.

Net cash used in financing activities during the six months ended July 31, 2024 consisted primarily of $6.5 billion used for repurchases of common stock, $1.0 billion related to repayments of debt and $772 million related to payments of dividends, partially offset by $735 million from proceeds from equity plans.

Net cash used in financing activities during the six months ended July 31, 2023 consisted primarily of $4.0 billion used for repurchases of common stock and $1.2 billion related to repayments of debt, partially offset by $811 million from proceeds from equity plans.

As of July 31, 2024, we had senior unsecured debt outstanding, with maturities starting in April 2028 and extending through July 2061 with a total carrying value of $8.4 billion.

We were in compliance with all debt covenants as of July 31, 2024.

In December 2020, we entered into the Revolving Loan Credit Agreement, which provides for a $3.0 billion unsecured revolving Credit Facility that matures in December 2025.

There were no outstanding borrowings under the Credit Facility as of April 30, 2024.

There were no outstanding borrowings under the Credit Facility as of July 31, 2024.

We may use the proceeds of future borrowings under the Credit Facility for general corporate purposes, which may include, without limitation, the consideration, fees, costs and expenses related to any acquisition.

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In February 2023, the Board authorized an additional $10.0 billion in repurchases under the Share Repurchase Program.

In February 2024, the Board of Directors authorized an additional $10.0 billion in repurchases under the Share Repurchase Program for an aggregate total authorization of $30.0 billion.

In February 2024, the Board authorized an additional $10.0 billion in repurchases under the Share Repurchase Program for an aggregate total authorization of $30.0 billion.

We repurchased the following under the Share Repurchase Program (in millions, except average price per share):

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Three months ended April 30 7 $ 293.00 $ 2,168 11 $ 188.17 $ 2,143

Three months ended July 31 18 $ 246.14 $ 4,288 9 $ 211.83 $ 1,913

All repurchases were made in open market transactions.

As of April 30, 2024, we were authorized to purchase a remaining $16.2 billion of the Company’s common stock under the Share Repurchase Program.

Subsequent to April 30, 2024, we have paid approximately $0.6 billion through May 24, 2024 for additional shares under the Share Repurchase Program.

As of July 31, 2024, we were authorized to purchase a remaining $11.9 billion of the Company’s common stock under the Share Repurchase Program.

Subsequent to July 31, 2024, we have paid approximately $0.5 billion through August 23, 2024 for additional shares under the Share Repurchase Program.

The Inflation Reduction Act introduced a new one percent excise tax imposed on certain stock repurchases made after December 31, 2022.

The excise tax is assessed on an annual fiscal year basis and generally paid in the subsequent fiscal year.

However, we expect the timing of the fiscal 2024 payment to be determined by the anticipated final regulations.

The excise tax may apply to our stock repurchases this fiscal year and could be impacted by factors including the Company’s share price.

In the event of an excise tax for fiscal 2025, next fiscal year's financing cash flow could be impacted.

On February 28, 2024, we announced a quarterly dividend policy and the declaration of our first-ever cash dividend.

In April 2024, we paid a cash dividend of $0.40 per share of our outstanding common stock to stockholders of record as of the close of business on March 14, 2024, totaling approximately $388 million.

The declaration and payment of future cash dividends is subject to our Board continuing to determine that the declaration of dividends is in the best interests of the Company and its stockholders, after giving consideration to continued capital availability, general economic and market conditions, and applicable laws and agreements.

We expect to pay an insignificant excise tax in fiscal 2025.

The excise tax may apply to our stock repurchases this year and could be impacted by factors including the Company’s share price.

In the event of an excise tax for fiscal 2025, next year's cash flows from financing activities could be impacted.

We announced the following dividends (in millions, except dividend per share):

Record Date Payment Date Dividend per Share Amount

March 14, 2024 April 11, 2024 $ 0.40 $ 388

July 9, 2024 July 25, 2024 $ 0.40 $ 388

The declaration and payment of future cash dividends is subject to our Board continuing to determine that the declaration of dividends is in the best interests of the Company and our stockholders, after giving consideration to continued capital availability, general economic and market conditions, and applicable laws and agreements.

Contractual Obligations

Our principal commitments consist of obligations under leases for office space, co-location data center facilities and our development and test data center, as well as leases for computer equipment, software, furniture and fixtures.

As of April 30, 2024, the future noncancellable minimum payments under these commitments were approximately $4.4 billion, with payments of $780 million due in the next nine months and $3.6 billion due thereafter.

As of July 31, 2024, the future noncancellable minimum payments under these commitments were approximately $4.1 billion, with payments of $506 million due in the next six months and $3.6 billion due thereafter.

We generally expect to satisfy these commitments with cash on hand and cash provided by operating activities.

During the three months ended April 30, 2024 and in future years, we have made, and expect to continue to make, additional investments in our infrastructure to scale our operations to increase productivity and enhance our security measures.

During the six months ended July 31, 2024 and in future years, we have made, and expect to continue to make, additional investments in our infrastructure to scale our operations to increase productivity and enhance our security measures.

We plan to upgrade or replace various internal systems to scale with our overall growth.

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Other Future Obligations

As of April 30, 2024, we expect approximate ly $180 million to $200 million in future cash payments related to our restructuring initiatives, primarily related to workforce costs such as severance payments.

As of July 31, 2024, we expect approximately $150 million to $300 million in future cash payments related to our restructuring initiatives, primarily related to workforce costs such as severance payments.

We generally expect to satisfy these commitments with cash on hand and cash provided by operating activities.

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Transparency is key to trust, which is why we have published an annual ESG report for over ten years to keep our stakeholders informed and to hold ourselves accountable to our ESG strategy, as well as our key programs, goals, commitments and metrics.

Our ESG disclosures are also informed by relevant topics identified through ESG relevancy assessments and third-party ESG reporting organizations, frameworks and standards, such as the Sustainability Accounting Standards Board (“SASB”) Standards and the Task Force on Climate-Related Financial Disclosures (“TCFD”).

Read more about these initiatives and view our Stakeholder Impact Report at https://salesforce.com/stakeholder-impact-report.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis