What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-12-04 compared with 2024-08-29 · 115 added, 103 removed, 305 unchanged (42% of the section changed)

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Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Salesforce is a global leader in customer relationship management (“CRM”) technology that brings companies and customers together in the digital age.

Salesforce is a global leader in customer relationship management (“CRM”) technology that brings humans together with artificial intelligence (“AI”) agents to drive customer success on one integrated platform.

Founded in 1999, we enable companies of every size and industry to take advantage of powerful technologies to connect to their customers in a whole new way and help them transform their businesses around the customer in this digital-first world.

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.

Our 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 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.

We continue to invest for growth, including investing in generative AI across all products, which we believe will change how our customers help their customers, and continuously look to expand our leadership role in the cloud computing industry.

During the third quarter of fiscal 2025, we introduced Agentforce, a new layer of our trusted platform that enables companies to build and deploy AI agents that can respond to inputs, make decisions and take action autonomously across business functions.

Agentforce includes a suite of customizable agents for use across sales, service, marketing and commerce.

We continue to invest for growth, including investing in generative and agentic AI across all products, which we believe will change how our customers help their customers, and continuously look to expand our leadership role in the cloud computing industry.

We continue to focus on several key growth levers, including driving multiple service offering adoption, increasing our penetration with enterprise and international customers and expanding our industry-specific reach with more vertical software solutions.

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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.

Highlights from the First Nine Months of Fiscal 2025

For the nine months ended October 31, 2024, revenue was $27.9 billion , an increase of 9 percent year-over-year.

• Income from Operations:

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

For the nine months ended October 31, 2024, income from operations was $5.4 billion as compared to $3.4 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 nine months ended October 31, 2024 compared to approximately 13 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.

For the nine months ended October 31, 2024 , diluted net income per share was $4.60 as compared to diluted net income per share of $2.73 from a year ago.

Cash provided by operations for the nine months ended October 31, 2024 was $9.1 billion, an increase of 34 percent y ear-over-year.

Total cash, cash equivalents and marketable securities as of October 31, 2024 was $12.8 billion.

• Remaining Performance Obligation:

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.

Total remaining performance obligation, which represents all future revenue under contract yet to be recognized, as of October 31, 2024 was approximately $53.1 billion, an increase of 10 percent year-over-year .

Current remaining performance obligation as of October 31, 2024 was approximately $26.4 billion , an increase of 10 percent year-over-year.

• Share Repurchase Program:

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

During the nine months ended October 31, 2024, we repurchased approximately 30 million shares of our common stock for approximately $7.7 billion.

• Dividend Program :

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 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.

During the nine months ended October 31, 2024, we paid approximately $1.2 billion in dividends.

In the third quarter of fiscal 2025, we continued seeing increasing momentum for Agentforce and other AI service offerings.

Outside of the demand for AI, the buying environment trends seen over the past two fiscal years have stabilized.

A reemergence of slower growth in new and renewal business could impact 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 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.

Total revenues in the nine months ended October 31, 2024 were minimally impacted by foreign currency fluctuations compared to the nine months ended October 31, 2023.

Our current remaining performance obligatio n as of October 31, 2024 was minimally impacted by foreign currency fluctuations compared to our remaining performance obligation as of October 31, 2023.

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 six months ended July 31, 2024.

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

Revenues from term software licenses represent less than ten percent of total subscription and support revenue for the three and nine months ended October 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.

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.

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

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

As of October 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 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.

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.

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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 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 nine months 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):

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

3 Three Months Ended October 31, Nine Months Ended October 31,

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

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

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

Three Months Ended October 31, Nine Months Ended October 31,

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

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

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

Three Months Ended October 31, Nine Months Ended October 31,

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

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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):

July 31, 2024

October 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 July 31, Variance

Three Months Ended October 31, Variance

(in millions) 2024 2023 Dollars Percent

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Total revenues $ 9,444 $ 8,720 $ 724 8 %

Six Months Ended July 31, Variance

Nine Months Ended October 31, Variance

(in millions) 2024 2023 Dollars Percent

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Total revenues $ 27,902 $ 25,570 $ 2,332 9 %

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.

The increase in s ubscription and support revenues for the three and nine months ended October 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.

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 nine months ended October 31, 2024, respectively, and six percent for the three and nine months ended October 31, 2023.

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

The decrease in professional services and other revenues for the three and nine months ended October 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 July 31,

Three Months Ended October 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,

Nine Months Ended October 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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Revenues by Geography

Three Months Ended July 31,

Three Months Ended October 31,

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

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$ 9,444 100 % $ 8,720 100 % 8 %

Six Months Ended July 31,

Nine Months Ended October 31,

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

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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.

Total revenue during the three and nine months ended October 31, 2024 was minimally impacted by foreign currency fluctuations compa red to the three and nine months ended October 31, 2023.

Cost of Revenues

Three Months Ended July 31, Variance

Three Months Ended October 31, Variance

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

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Total cost of revenues $ 2,105 22 % $ 2,155 25 % $ (50)

Six Months Ended July 31, Variance

Nine Months Ended October 31, Variance

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

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Total cost of revenues $ 6,426 23 % $ 6,393 25 % $ 33

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.

The timing of these expenses may cause our cost of revenues as a percentage of revenues to fluctuate in the near term due to changes in demand for our service offerings.

For the three months ended October 31, 2024, the decrease in cost of revenues in absolute dollars was primarily due to a decrease in service delivery expenses and a decrease in amortization of intangible assets acquired through business combinations, partially offset by an increase in employee-related costs, primarily in lower cost regions.

For the nine months ended October 31, 2024, the increase in cost of revenues in absolute dollars was primarily due to an increase in employee-related costs, primarily in lower cost regions, partially offset by a decrease in service delivery expenses and reduced amortization of intangible assets acquired through business combinations .

Cost of revenue as a percentage of total revenue during the three and nine months ended October 31, 2024 decreased by three and two percent, respectively, from the same periods a year ago primarily as a result of reduced service delivery expenses and a decrease in amortization of intangible assets acquired through business combinations.

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

The timing of these expenses may cause our cost of revenues as a percentage of revenues to fluctuate over time due to changes in demand for our service offerings.

Operating Expenses

Three Months Ended July 31, Variance

Three Months Ended October 31, Variance

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

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Total operating expenses $ 5,446 58 % $ 5,064 58 % $ 382

Six Months Ended July 31, Variance

Nine Months Ended October 31, Variance

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

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Total operating expenses $ 16,091 58 % $ 15,788 62 % $ 303

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 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 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.

For the three and nine months ended October 31, 2024, the increase in research and development expenses in absolute dollars was primarily due to an increase in employee-related costs, primarily in lower cost regions.

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

For the nine months ended October 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, primarily in lower cost regions.

We expect that research and development expenses will likely remain consistent as a percentage of revenues over time as we continue to invest in the development of new, and improve existing, technologies, including our AI and Data Cloud service offerings, and support the integration of acquired technologies, at a pace consistent with our anticipated revenue growth.

For the three and nine months ended October 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 nine months ended October 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 may decrease as a percentage of revenues over time as we continue to focus on leveraging our self-serve and partner-led channels and increasing our sales productivity, which includes the use of AI and agents.

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

General and administrative expenses as a percentage of total revenues during the three and nine months ended October 31, 2024 were materially consistent compared to the same periods a year ago.

We expect that general and administrative expenses may decrease as a percentage of revenues over time as we continue to invest in process efficiency initiatives.

In the three and nine months ended October 31, 2024, approximately $56 million and $163 million, respectively, of costs were incurred related to our restructuring initiatives, primarily related to employee transition, severance payments and employee benefits.

Other Income and Expense

Three Months Ended July 31, Variance

Three Months Ended October 31, Variance

(in millions) 2024 2023 Dollars

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Other income 70 58 12

Six Months Ended July 31, Variance

Nine Months Ended October 31, Variance

(in millions) 2024 2023 Dollars

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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.

For the three months ended October 31, 2024, our strategic investment portfolio losses were primarily driven by impairments on privately held equity investments o f $242 million .

For the nine months ended October 31, 2024, our strategic investment portfolio losses were primarily driven by impairments on privately held equity investments of $432 million, partially offset by unrealized gains on privately held equity securities of $167 million and realized gains on sales of securities of $59 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.

Interest expense was $67 million and $70 million for the three months ended October 31, 2024 and 2023, respectively, and $204 million and $213 million for the nine months ended October 31, 2024 and 2023, respectively.

Provision For Income Taxes

Three Months Ended July 31, Variance

Three Months Ended October 31, Variance

(in millions) 2024 2023 Dollars

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Effective tax rate 13 % 18 %

Six Months Ended July 31, Variance

Nine Months Ended October 31, Variance

(in millions) 2024 2023 Dollars

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Effective tax rate 18 % 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.

We recorded a tax provision of $219 million and $263 million for the three months ended October 31, 2024 and 2023, respectively, and a tax provision of $961 million and $615 million for the nine months ended October 31, 2024 and 2023, respectively.

The year-to-date tax provision increased from the same period a year ago due to higher pretax income partially offset by a tax benefit from the foreign-derived intangible income deduction.

Our quarter-to-date tax provision was lower compared to the same period a year ago due to the tax benefit from the foreign-derived intangible income deduction.

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

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Liquidity and Capital Resources

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.

At October 31, 2024, our principal sources of liquidity were cash, cash equivalents and marketable securities totaling $12.8 billion and accounts receivable of $4.7 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 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.

Our Revolving Loan Credit Agreement (as defined below), which provides the ability to borrow up to $5.0 billion in unsecured financing (the “Credit Facility”) as of October 31, 2024, 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.

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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 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,

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

3 Three Months Ended October 31, Nine Months Ended October 31,

2024 2023 2024 2023

Net cash provided by operating activities $ 1,983 $ 1,532 $ 9,122 $ 6,831

Net cash provided by (used in) investing activities 2,641 (1,152) (10) (805)

Net cash used in investing activities (217) (54) (227) (859)

Net cash used in financing activities (1,446) (1,765) (9,356) (6,531)

Operating Activities

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 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 .

The net cash provided by operating activities during the nine months ended October 31, 2024 was primarily comprised of net income of $4.5 billion, adjusted for non-cash items, including $2.6 billion of depreciation and amortization and $2.4 billion of stock-based compensation expense.

Net 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.

Net cash provided by operating activities during the nine months ended October 31, 2024 was further benefited by the changes in accounts receivable, net of $6.7 billion partially offset by the change in unearned revenue of $5.6 billion and the change in accounts payable and accrued expenses and other liabilities of $503 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 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.

The net cash provided by operating activities during the nine months ended October 31, 2023 was primarily comprised of net income of $2.7 billion, adjusted for non-cash items including $3.0 billion of depreciation and amortization and $2.1 billion of stock-based compensation expense.

Net cash provided by operating activities during the nine months ended October 31, 2023 was further benefited by the change in accounts receivable, net of $5.9 billion due to cash collections and was partially offset by the change in unearned revenue of $4.8 billion and the change in accounts payable and accrued expenses and other liabilities of $1.6 billion.

Investing Activities

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.

The net cash used in investing activities during the nine months ended October 31, 2024 was primarily related to net outflows for acquisitions of $517 million, net outflows from strategic investment activity of $256 million and capital expenditures of $504 million, partially offset by net inflows from marketable securities activity of $1.1 billion.

The net cash used in investing activities during the nine months ended October 31, 2023 was primarily related to capital expenditures of $589 million and net outflows from strategic investment activity of $288 million, partially offset by net inflows related to marketable securities activity of $100 million.

Financing Activities

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 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.

In April 2022 and May 2023, we amended the Revolving Loan Credit Agreement to reflect certain immaterial administrative changes.

The net cash used in financing activities during the nine months ended October 31, 2024 was primarily related to $7.8 billion used for repurchases of common stock, $1.0 billion related to repayments of debt and $1.2 billion related to payments of dividends, partially offset by $1.1 billion from proceeds from equity plans.

The net cash used in financing activities during the nine months ended October 31, 2023 was primarily related to $5.9 billion used for repurchases of common stock and $1.2 billion related to repayments of debt, partially offset by $1.1 billion from proceeds from equity plans.

As of October 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 October 31, 2024.

In October 2024, we entered into a Credit Agreement with the lenders and issuing lenders party thereto, and Bank of America, N.A., as administrative agent (the “Revolving Loan Credit Agreement”).

The Revolving Loan Credit Agreement replaced the Credit Agreement, dated December 23, 2020 (as amended, the “Prior Credit Agreement”), among us, the lenders and the issuing lenders party thereto, and Citibank, N.A., as administrative agent, which provided for a $3.0 billion unsecured revolving credit facility that was scheduled to mature on December 23, 2025.

There were no outstanding borrowings under the Prior Credit Agreement.

The Revolving Loan Credit Agreement provides for a $5.0 billion unsecured revolving credit facility (“Credit Facility”) and matures in October 2029.

We may use the proceeds of future borrowings under the Credit Facility for general corporate purposes.

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

We do not have any special purpose entities and we do not engage in off-balance sheet financing arrangements.

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

Three months ended October 31 5 $ 257.00 $ 1,228 9 $ 209.33 $ 1,924

All repurchases were made in open market transactions.

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.

As of October 31, 2024, we were authorized to purchase a remaining $10.6 billion of the Company’s common stock under the Share Repurchase Program.

Subsequent to October 31, 2024, we have incurred approximately $31 million through November 27, 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.

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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.

The excise tax applies to our fiscal 2025 stock repurchases.

We currently anticipate that it will decrease next year’s financing cash flows, however, the amount could be impacted by factors including the Company’s share price.

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

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

September 18, 2024 October 8, 2024 $ 0.40 $ 385

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.

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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 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.

As of October 31, 2024, the future noncancellable minimum payments under these commitments were approximately $4.2 billion, with payments of $258 million due in the next three months and $3.9 billion due thereafter.

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

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.

During the nine months ended October 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.

While we continue to make investments in our infrastructure, including offices, information technology and data centers, as well as investments with infrastructure service providers, to provide capacity for the growth of our business, our strategy may continue to change related to these investments and we may slow the pace of our investments.

While we continue to make investments in our infrastructure and with infrastructure service providers to provide capacity for the growth of our business, our strategy may continue to change related to these investments and we may slow the pace of our investments.

Other Future Obligations

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.

In November 2024, we acquired all outstanding stock of Zoomin Software Ltd.

(“Zoomin”), a data management company.

Prior to the acquisition, we owned less than ten percent of the outstanding stock of Zoomin.

The total consideration for the remaining shares of Zoomin was approximately $344 million in cash, subject to customary purchase price adjustments.

In November 2024, we acquired all outstanding stock of Own Data Company Ltd.

(“Own”), a leading provider of data protection and data management solutions.

Prior to the acquisition, we owned approximately ten percent of the outstanding stock of Own.

The total consideration for the remaining shares of Own was approximately $1.9 billion in cash, subject to customary purchase price adjustments.

As of October 31, 2024, we expect approximately $100 million to $150 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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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