What changed in this filing

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Item 1. Financial Statements

2023-05-24 compared with 2023-02-22 · 152 added, 128 removed, 539 unchanged (34% of the section changed)

3 unchanged sentences

(in millions, except per share data)

January 31, 2023 July 31, 2022

April 30, 2023 July 31, 2022

Current assets:

1 unchanged sentence

Short-term investments 1,965.3 1,516.0

Accounts receivable, net of allowance for credit losses of $ 8.8 and $ 8.9 at January 31, 2023 and July 31, 2022, respectively

Accounts receivable, net of allowance for credit losses of $ 8.6 and $ 8.9 at April 30, 2023 and July 31, 2022, respectively

1,443.6 2,142.5

27 unchanged sentences

100.0 shares authorized;

none issued and outstanding at January 31, 2023 and July 31, 2022

none issued and outstanding at April 30, 2023 and July 31, 2022

Common stock and additional paid-in capital;

1 unchanged sentence

1,000.0 shares authorized;

302.4 and 298.8 shares issued and outstanding at January 31, 2023 and July 31, 2022, respectively

305.6 and 298.8 shares issued and outstanding at April 30, 2023 and July 31, 2022, respectively

2,708.2 1,932.7

4 unchanged sentences

See notes to condensed consolidated financial statements.

Table of Content

Table of Conten ts

PALO ALTO NETWORKS, INC.

1 unchanged sentence

(Unaudited, in millions, except per share data)

Three Months Ended Six Months Ended

January 31, January 31,

Three Months Ended Nine Months Ended

April 30, April 30,

2023 2022 2023 2022

14 unchanged sentences

Interest expense ( 7.8 ) ( 6.8 ) ( 21.5 ) ( 20.5 )

Other income (expense), net 51.4 ( 0.1 ) 77.4 ( 1.7 )

Other income, net 60.1 1.9 137.5 0.2

Income (loss) before income taxes 131.0 ( 52.5 ) 249.8 ( 224.5 )

6 unchanged sentences

See notes to condensed consolidated financial statements .

Table of Content

Table of Conten ts

PALO ALTO NETWORKS, INC.

1 unchanged sentence

(Unaudited, in millions)

Three Months Ended Six Months Ended

January 31, January 31,

Three Months Ended Nine Months Ended

April 30, April 30,

2023 2022 2023 2022

9 unchanged sentences

See notes to condensed consolidated financial statements .

Table of Content

Table of Conten ts

PALO ALTO NETWORKS, INC.

1 unchanged sentence

(Unaudited, in millions)

Three Months Ended January 31, 2023

Three Months Ended April 30, 2023

Additional Paid-In Capital Accumulated

Comprehensive Income (Loss) Accumulated

Comprehensive Loss Accumulated

Deficit Total

1 unchanged sentence

Shares Amount

Balance as of October 31, 2022 302.3 $ 2,266.2 $ ( 111.1 ) $ ( 1,647.1 ) $ 508.0

Balance as of January 31, 2023 302.4 $ 2,303.0 $ ( 11.1 ) $ ( 1,562.9 ) $ 729.0

Net income — — — 107.8 107.8

Other comprehensive income — — 100.0 — 100.0

Other comprehensive loss — — ( 9.6 ) — ( 9.6 )

Issuance of common stock in connection with employee equity incentive plans 3.2 130.7 — — 130.7

1 unchanged sentence

Share-based compensation for equity-based awards — 276.6 — — 276.6

Repurchase and retirement of common stock ( 1.8 ) ( 250.0 ) — — ( 250.0 )

Balance as of January 31, 2023 302.4 $ 2,303.0 $ ( 11.1 ) $ ( 1,562.9 ) $ 729.0

Three Months Ended January 31, 2022

Balance as of April 30, 2023 305.6 $ 2,708.2 $ ( 20.7 ) $ ( 1,455.1 ) $ 1,232.4

Three Months Ended April 30, 2022

Additional Paid-In Capital Accumulated

3 unchanged sentences

Shares Amount

Balance as of October 31, 2021 296.0 $ 2,033.9 $ ( 11.3 ) $ ( 1,503.7 ) $ 518.9

Balance as of January 31, 2022 295.4 $ 1,745.2 $ ( 30.2 ) $ ( 1,597.2 ) $ 117.8

Net loss — — — ( 73.2 ) ( 73.2 )

3 unchanged sentences

Share-based compensation for equity-based awards — 254.5 — — 254.5

Repurchase and retirement of common stock ( 3.1 ) ( 550.0 ) — — ( 550.0 )

Balance as of January 31, 2022 295.4 $ 1,745.2 $ ( 30.2 ) $ ( 1,597.2 ) $ 117.8

Table of Content

Six Months Ended January 31, 2023

Balance as of April 30, 2022 298.9 $ 2,066.3 $ ( 58.3 ) $ ( 1,670.4 ) $ 337.6

Table of Conten ts

Nine Months Ended April 30, 2023

Additional Paid-In Capital Accumulated

10 unchanged sentences

Repurchase and retirement of common stock ( 1.8 ) ( 250.0 ) — — ( 250.0 )

Balance as of January 31, 2023 302.4 $ 2,303.0 $ ( 11.1 ) $ ( 1,562.9 ) $ 729.0

Six Months Ended January 31, 2022

Balance as of April 30, 2023 305.6 $ 2,708.2 $ ( 20.7 ) $ ( 1,455.1 ) $ 1,232.4

Nine Months Ended April 30, 2022

Additional Paid-In Capital Accumulated

11 unchanged sentences

Repurchase and retirement of common stock ( 3.1 ) ( 550.0 ) — — ( 550.0 )

Balance as of January 31, 2022 295.4 $ 1,745.2 $ ( 30.2 ) $ ( 1,597.2 ) $ 117.8

Balance as of April 30, 2022 298.9 $ 2,066.3 $ ( 58.3 ) $ ( 1,670.4 ) $ 337.6

See notes to condensed consolidated financial statements.

Table of Content

Table of Conten ts

PALO ALTO NETWORKS, INC.

1 unchanged sentence

(Unaudited, in millions)

Six Months Ended

Nine Months Ended

Cash flows from operating activities

10 unchanged sentences

Accounts receivable, net

699.3 ( 0.1 )

Deferred contract costs ( 250.5 ) ( 257.1 )

2 unchanged sentences

Accounts payable

( 36.3 ) 51.6

Accrued compensation

3 unchanged sentences

Deferred revenue

1,094.9 835.4

Net cash provided by operating activities 2,363.4 1,461.0

22 unchanged sentences

See notes to condensed consolidated financial statements .

Table of Content

Table of Conten ts

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

16 unchanged sentences

Summary of Significant Accounting Policies

There have been no material changes to our significant accounting policies as of and for the six months ended January 31, 2023, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022.

There have been no material changes to our significant accounting policies as of and for the nine months ended April 30, 2023, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022.

Stock Split Effected in the Form of a Stock Dividend (“Stock Split”)

4 unchanged sentences

The following table presents revenue by geographic theater (in millions):

Three Months Ended January 31, Six Months Ended January 31,

Three Months Ended April 30, Nine Months Ended April 30,

2023 2022 2023 2022

5 unchanged sentences

Total revenue $ 1,720.9 $ 1,386.7 $ 4,939.4 $ 3,951.0

Table of Content

Table of Conten ts

The following table presents revenue for groups of similar products and services (in millions):

Three Months Ended January 31, Six Months Ended January 31,

Three Months Ended April 30, Nine Months Ended April 30,

2023 2022 2023 2022

6 unchanged sentences

Deferred Revenue

During the six months ended January 31, 2023 and 2022, we recognized approximately $ 2.1 billion and $ 1.6 billion of revenue pertaining to amounts that were deferred as of July 31, 2022 and 2021, respectively.

During the nine months ended April 30, 2023 and 2022, we recognized approximately $ 2.9 billion and $ 2.2 billion of revenue pertaining to amounts that were deferred as of July 31, 2022 and 2021, respectively.

Remaining Performance Obligations

Remaining performance obligations were $ 8.8 billion as of January 31, 2023, of which we expect to recognize as revenue approximately $ 4.4 billion over the next 12 months and the remainder thereafter.

Remaining performance obligations were $ 9.2 billion as of April 30, 2023, of which we expect to recognize as revenue approximately $ 4.5 billion over the next 12 months and the remainder thereafter.

Fair Value Measurements

The following table presents our financial assets and liabilities measured at fair value on a recurring basis as of January 31, 2023 and July 31, 2022 (in millions):

January 31, 2023 July 31, 2022

The following table presents our financial assets and liabilities measured at fair value on a recurring basis as of April 30, 2023 and July 31, 2022 (in millions):

April 30, 2023 July 31, 2022

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

13 unchanged sentences

government and agency securities — — — — — 17.4 — 17.4

Asset-backed securities — 4.4 — 4.4 — — — —

Total short-term investments — 1,965.3 — 1,965.3 — 1,516.0 — 1,516.0

Table of Conten ts

April 30, 2023 July 31, 2022

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Long-term investments:

4 unchanged sentences

Total long-term investments — 2,709.8 — 2,709.8 — 1,051.9 — 1,051.9

Table of Content

January 31, 2023 July 31, 2022

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Prepaid expenses and other current assets:

13 unchanged sentences

Refer to Note 9.

Debt for the carrying amount and estimated fair value of our convertible senior notes as of January 31, 2023 and July 31, 2022.

Debt for the carrying amount and estimated fair value of our convertible senior notes as of April 30, 2023 and July 31, 2022.

Table of Conten ts

Cash Equivalents and Investments

Available-for-sale Debt Securities

The following tables summarize the amortized cost, unrealized gains and losses, and fair value of our available-for-sale debt securities as of January 31, 2023 and July 31, 2022 (in millions):

January 31, 2023

The following tables summarize the amortized cost, unrealized gains and losses, and fair value of our available-for-sale debt securities as of April 30, 2023 and July 31, 2022 (in millions):

April 30, 2023

Amortized Cost Unrealized Gains Unrealized Losses Fair Value

Cash equivalents:

Certificates of deposit $ 6.5 $ — $ — $ 6.5

Commercial paper 369.0 — — 369.0

Corporate debt securities 21.0 — — 21.0

government and agency securities 49.9 — — 49.9

Total available-for-sale cash equivalents $ 439.9 $ — $ — $ 439.9

6 unchanged sentences

Total available-for-sale investments $ 4,691.1 $ 7.7 $ ( 23.7 ) $ 4,675.1

Table of Content

July 31, 2022

14 unchanged sentences

Total available-for-sale investments $ 2,591.5 $ 1.6 $ ( 25.2 ) $ 2,567.9

As of January 31, 2023, the gross unrealized losses that have been in a continuous unrealized loss position for less than 12 months were $ 17.2 million, which were related to $ 2.5 billion of available-for-sale debt securities, and the gross unrealized losses that have been in a continuous unrealized loss position for more than 12 months were $ 10.8 million, which were related to $ 571.6 million of available-for-sale debt securities.

As of April 30, 2023, the gross unrealized losses that have been in a continuous unrealized loss position for less than 12 months were $ 16.6 million, which were related to $ 2.7 billion of available-for-sale debt securities, and the gross unrealized losses that have been in a continuous unrealized loss position for more than 12 months were $ 7.1 million, which were related to $ 474.2 million of available-for-sale debt securities.

As of July 31, 2022 the gross unrealized losses that have been in a continuous unrealized loss position for less than 12 months were $ 24.8 million, which were related to $ 2.0 billion of available-for-sale debt securities, and the gross unrealized losses that have been in a continuous unrealized loss position for more than 12 months were not material.

1 unchanged sentence

We do not intend to sell any of the securities in an unrealized loss position and it is not likely that we would be required to sell these securities before recovery of their amortized cost basis, which may be at maturity.

We did not recognize any credit losses related to our available-for-sale debt securities during the three and six months ended January 31, 2023 and 2022.

The following table summarizes the amortized cost and fair value of our available-for-sale debt securities as of January 31, 2023, by contractual years-to-maturity (in millions):

We did not recognize any credit losses related to our available-for-sale debt securities during the three and nine months ended April 30, 2023 and 2022.

Table of Conten ts

The following table summarizes the amortized cost and fair value of our available-for-sale debt securities as of April 30, 2023, by contractual years-to-maturity (in millions):

Amortized Cost Fair Value

1 unchanged sentence

Due between one and three years 2,457.0 2,449.7

Due between three to five years 123.8 123.5

Due between five to ten years 45.4 45.7

Due between three and five years 215.1 215.2

Due between five and ten years 36.7 36.8

Due after ten years 8.0 8.1

Total $ 5,131.0 $ 5,115.0

1 unchanged sentence

Marketable equity securities consist of money market funds and are included in cash and cash equivalents on our condensed consolidated balance sheets.

As of January 31, 2023 and July 31, 2022, the carrying values of our marketable equity securities were $ 655.9 million and $ 1.2 billion, respectively.

There were no unrealized gains or losses recognized for these securities during the three and six months ended January 31, 2023 and 2022.

Table of Content

As of April 30, 2023 and July 31, 2022, the carrying values of our marketable equity securities were $ 879.5 million and $ 1.2 billion, respectively.

There were no unrealized gains or losses recognized for these securities during the three and nine months ended April 30, 2023 and 2022.

Financing Receivables

The following table summarizes our short-term and long-term financing receivables as of January 31, 2023 and July 31, 2022 (in millions):

January 31, 2023 July 31, 2022

The following table summarizes our short-term and long-term financing receivables as of April 30, 2023 and July 31, 2022 (in millions):

April 30, 2023 July 31, 2022

Short-term financing receivables, gross

8 unchanged sentences

$ 390.4 $ 192.1

There was no significant activity in allowance for credit losses during the three and six months ended January 31, 2023 and 2022.

Past due amounts on financing receivables were not material as of January 31, 2023 and July 31, 2022.

There was no significant activity in allowance for credit losses during the three and nine months ended April 30, 2023 and 2022.

Past due amounts on financing receivables were not material as of April 30, 2023 and July 31, 2022.

Derivative Instruments

3 unchanged sentences

We enter into foreign currency derivative contracts with maturities of 24 months or less, which we designate as cash flow hedges, to manage the foreign currency exchange risk associated with our operating expenditures.

As of January 31, 2023 and July 31, 2022, the total notional amount of our outstanding foreign currency forward contracts was $ 1.1 billion and $ 856.9 million, respectively.

As of April 30, 2023 and July 31, 2022, the total notional amount of our outstanding foreign currency forward contracts was $ 1.1 billion and $ 856.9 million, respectively.

Refer to Note 3.

Fair Value Measurements for the fair value of our derivative instruments as reported on our condensed consolidated balance sheets as of January 31, 2023 and July 31, 2022.

As of January 31, 2023, unrealized gains in accumulated other comprehensive income (“AOCI”) related to our cash flow hedges were $ 14.2 million, of which $ 11.9 million of gains are expected to be recognized into earnings within the next 12 months.

As of July 31, 2022, unrealized losses in AOCI related to our cash flow hedges were $ 24.8 million, of which $ 22.0 million of losses are expected to be recognized into earnings within the next 12 months.

Fair Value Measurements for the fair value of our derivative instruments as reported on our condensed consolidated balance sheets as of April 30, 2023 and July 31, 2022.

As of April 30, 2023, unrealized gains and losses in accumulated other comprehensive income (“AOCI”) related to our cash flow hedges were $ 2.6 million net gain, of which $ 4.7 million gains are expected to be recognized into earnings within the next 12 months.

As of July 31, 2022, unrealized gains and losses in AOCI related to our cash flow hedges were $ 24.8 million net loss, of which $ 22.0 million losses are expected to be recognized into earnings within the next 12 months.

Table of Conten ts

Cider Security Ltd.

13 unchanged sentences

Total $ 198.3

Table of Content

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Cider technology into our platforms.

5 unchanged sentences

$ 27.8 5 years

Other acquisition

In April 2023, we completed an acquisition for a total purchase consideration of $ 18.9 million in cash.

We have accounted for this transaction as a business combination, and recorded goodwill of $ 14.5 million.

The goodwill is not deductible for income tax purposes.

Goodwill and Intangible Assets

The following table presents details of our goodwill during the six months ended January 31, 2023 (in millions):

The following table presents details of our goodwill during the nine months ended April 30, 2023 (in millions):

Balance as of July 31, 2022 $ 2,747.7

Goodwill acquired 179.1

Balance as of January 31, 2023 $ 2,912.3

Balance as of April 30, 2023 $ 2,926.8

Table of Conten ts

Purchased Intangible Assets

The following table presents details of our purchased intangible assets as of January 31, 2023 and July 31, 2022 (in millions):

January 31, 2023 July 31, 2022

The following table presents details of our purchased intangible assets as of April 30, 2023 and July 31, 2022 (in millions):

April 30, 2023 July 31, 2022

Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

9 unchanged sentences

Total purchased intangible assets $ 834.7 $ ( 494.1 ) $ 340.6 $ 798.9 $ ( 414.4 ) $ 384.5

We recognized amortization expense of $ 24.8 million and $ 53.9 million for the three and six months ended January 31, 2023, respectively, and $ 31.7 million and $ 63.5 million for the three and six months ended January 31, 2022, respectively.

The following table summarizes estimated future amortization expense of our intangible assets subject to amortization as of January 31, 2023 (in millions):

We recognized amortization expense of $ 25.8 million and $ 79.7 million for the three and nine months ended April 30, 2023, respectively, and $ 31.8 million and $ 95.3 million for the three and nine months ended April 30, 2022, respectively.

The following table summarizes estimated future amortization expense of our intangible assets subject to amortization as of April 30, 2023 (in millions):

Fiscal years ending July 31,

1 unchanged sentence

Future amortization expense $ 336.7 $ 25.2 $ 97.9 $ 84.2 $ 62.4 $ 35.3 $ 31.7

Table of Content

Convertible Senior Notes

14 unchanged sentences

2025 Notes 10.0806 $ 99.20 March 1, 2025 20.1

Table of Conten ts

Holders of the Notes may surrender their Notes for conversion at their option at any time prior to the close of business on the business day immediately preceding their respective convertible dates only under the following circumstances:

7 unchanged sentences

Additionally, upon the occurrence of a corporate event that constitutes a “fundamental change” under the applicable Indenture, holders of the Notes of such series may require us to repurchase for cash all or a portion of the Notes of such series at a repurchase price equal to 100 % of the principal amount of the Notes of such series plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The sale price condition for the Notes was met during the fiscal quarter ended January 31, 2023, and as a result, holders may convert their Notes at any time during the fiscal quarter ending April 30, 2023.

The net carrying amount of the Notes was classified as a current liability on our condensed consolidated balance sheet as of January 31, 2023.

Table of Content

The following table sets forth the components of the Notes (in millions):

January 31, 2023 July 31, 2022

On or after April 1, 2023, holders may surrender their 2023 Notes for conversion at any time prior to maturity, in accordance with the terms described above.

Such conversion requests will settle upon maturity of the 2023 Notes.

The sale price condition for the 2025 Notes was met during the fiscal quarter ended April 30, 2023, and as a result, holders may convert their 2025 Notes at any time during the fiscal quarter ending July 31, 2023.

The net carrying amount of the Notes was classified as a current liability on our condensed consolidated balance sheet as of April 30, 2023.

The following table sets forth the net carrying amount of our Notes (in millions):

April 30, 2023 July 31, 2022

2023 Notes 2025 Notes Total 2023 Notes 2025 Notes Total

Liability component:

Principal $ 1,691.9 $ 1,999.4 $ 3,691.3 $ 1,691.9 $ 1,999.4 $ 3,691.3

1 unchanged sentence

Net carrying amount $ 1,691.4 $ 1,990.7 $ 3,682.1 $ 1,689.3 $ 1,987.5 $ 3,676.8

The total estimated fair value of the 2023 Notes and 2025 Notes were $ 3.0 billion and $ 3.3 billion at January 31, 2023, respectively, and $ 3.2 billion and $ 3.5 billion at July 31, 2022, respectively.

The total estimated fair value of the 2023 Notes and 2025 Notes were $ 3.5 billion and $ 3.7 billion at April 30, 2023, respectively, and $ 3.2 billion and $ 3.5 billion at July 31, 2022, respectively.

The fair value was determined based on the closing trading price per $100 of the applicable series of the Notes as of the last day of trading for the period.

We consider the fair value of the Notes at January 31, 2023 and July 31, 2022 to be a Level 2 measurement.

We consider the fair value of the Notes at April 30, 2023 and July 31, 2022 to be a Level 2 measurement.

The fair value of the Notes is primarily affected by the trading price of our common stock and market interest rates.

Table of Conten ts

The following table sets forth interest expense recognized related to the Notes (dollars in millions):

Three Months Ended January 31, Six Months Ended January 31,

Three Months Ended April 30, Nine Months Ended April 30,

2023 2022 2023 2022

17 unchanged sentences

The 2023 Warrants and 2025 Warrants are exercisable beginning October 2023 and September 2025, respectively.

Table of Content

The following table presents details of our Warrants (in millions, except per share data):

10 unchanged sentences

On September 4, 2018, we entered into a credit agreement (the “2018 Credit Agreement”) with certain institutional lenders that provides for a $ 400.0 million unsecured revolving credit facility (the “2018 Credit Facility”), with an option to increase the amount of the 2018 Credit Facility by up to an additional $ 350.0 million, subject to certain conditions.

The Credit Facility matures on the earlier of (i) September 4, 2023 and (ii) the date that is 91 days prior to the stated maturity of our 2023 Notes if (a) any of the 2023 Notes are still outstanding and (b) our unrestricted cash and cash equivalents are less than the then outstanding principal amount of our 2023 Notes plus $ 400.0 million.

The borrowings under the Credit Facility currently bear interest, at our option, at a base rate plus a spread of 0.00 % to 0.75 %, or an adjusted LIBO Rate plus a spread of 1.00 % to 1.75 %, in each case with such spread being determined based on our leverage ratio.

The 2018 Credit Facility expired in April 2023.

Table of Conten ts

On April 13, 2023, we entered into a new credit agreement (the “2023 Credit Agreement”) with certain institutional lenders that provides for a $ 400.0 million unsecured revolving credit facility (the “2023 Credit Facility”), with an option to increase the amount of the 2023 Credit Facility by up to an additional $ 350.0 million, subject to certain conditions.

The 2023 Credit Facility matures on April 13, 2028.

The borrowings under the 2023 Credit Facility bear interest, at our option, at a base rate plus a spread of 0.00 % to 0.375 %, or an adjusted term Secured Overnight Financing Rate (“SOFR”) plus a spread of 1.00 % to 1.375 %, in each case with such spread being determined based on our leverage ratio.

We are obligated to pay an ongoing commitment fee on undrawn amounts at a rate of 0.090 % to 0.150 %, depending on our leverage ratio.

In March 2021, the ICE Benchmark Administration, the administrator of LIBO Rate, announced that it will cease publication of the LIBO Rate by June 2023.

Under the terms of our Credit Facility, in the event of the discontinuance of the LIBO Rate, a mutually agreed-upon alternative benchmark rate will be established to replace the LIBO Rate, which may include the Secured Overnight Financing Rate (“SOFR”).

We do not anticipate that the discontinuance of the LIBO Rate will materially impact our liquidity or financial position.

As of January 31, 2023, there were no amounts outstanding and we were in compliance with all covenants under the Credit Agreement.

The interest rates and commitment fees are also subject to upward and downward adjustments based on our progress towards the achievement of certain sustainability goals related to greenhouse gas emissions.

As of April 30, 2023, there were no amounts outstanding and we were in compliance with all covenants under the 2023 Credit Agreement.

Commitments and Contingencies

2 unchanged sentences

In order to reduce manufacturing lead times and plan for adequate supply, we enter into agreements with manufacturing partners and component suppliers to procure inventory based on our demand forecasts.

The following table presents details of the aggregate future minimum or fixed purchase commitments under these arrangements, excluding obligations under contracts that we can cancel as of January 31, 2023 (in millions):

Fiscal years ending July 31,

4 unchanged sentences

We have entered into various non-cancelable agreements with certain service providers, under which we are committed to minimum or fixed purchases.

The following table presents details of the aggregate future non-cancelable purchase commitments under these agreements as of January 31, 2023 (in millions):

The following table presents details of the aggregate future non-cancelable purchase commitments under these agreements as of April 30, 2023 (in millions):

Fiscal years ending July 31,

3 unchanged sentences

Additionally, we have a $ 157.5 million minimum purchase commitment with a service provider through September 2027 with no specified annual commitments.

Table of Content

We are subject to legal proceedings, claims, and litigation arising in the ordinary course of business, including intellectual property litigation.

2 unchanged sentences

To the extent there is a reasonable possibility that a loss exceeding amounts already recognized may be incurred and the amount of such additional loss would be material, we will either disclose the estimated additional loss or state that such an estimate cannot be made.

As of January 31, 2023, we have not recorded any significant accruals for loss contingencies associated with such legal proceedings, determined that an unfavorable outcome is probable or reasonably possible, or determined that the amount or range of any possible loss is reasonably estimable.

As of April 30, 2023, we have not recorded any significant accruals for loss contingencies associated with such legal proceedings, determined that an unfavorable outcome is probable or reasonably possible, or determined that the amount or range of any possible loss is reasonably estimable.

Stockholders’ Equity

4 unchanged sentences

Repurchases may be made at management’s discretion from time to time on the open market, through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing.

Table of Conten ts

The following table summarizes the share repurchase activity under our share repurchase program (in millions, except per share amounts):

Three and Six Months Ended January 31,

Nine Months Ended April 30,

Number of shares repurchased 1.8 3.1

5 unchanged sentences

(1) Includes transaction costs

In addition to the share repurchase activity summarized in the table above, during the six months ended January 31, 2023, we paid $ 22.7 million related to share repurchases of our common stock that were not settled as of July 31, 2022.

As of January 31, 2023, $ 750.0 million remained available for future share repurchases under our current repurchase authorization.

We did not repurchase shares of our common stock during the three months ended April 30, 2023 and 2022.

In addition to the share repurchase activity summarized in the table above, during the nine months ended April 30, 2023, we paid $ 22.7 million related to share repurchases of our common stock that were not settled as of July 31, 2022.

As of April 30, 2023, $ 750.0 million remained available for future share repurchases under our current repurchase authorization.

The total price of the shares repurchased and related transaction costs are reflected as a reduction to common stock and additional paid-in capital on our condensed consolidated balance sheets.

1 unchanged sentence

Restricted Stock Unit (“RSU”) and Performance-Based Stock Unit (“PSU”) Activities

The following table summarizes the RSU and PSU activity under our stock plans during the six months ended January 31, 2023 (in millions, except per share amounts):

The following table summarizes the RSU and PSU activity under our stock plans during the nine months ended April 30, 2023 (in millions, except per share amounts):

RSUs Outstanding PSUs Outstanding

4 unchanged sentences

Forfeited ( 1.2 ) $ 124.37 ( 0.3 ) $ 136.96

Balance—January 31, 2023 15.4 $ 133.47 $ 2,442.8 4.5 $ 124.21 $ 711.5

Balance—April 30, 2023 13.7 $ 137.16 $ 2,492.5 4.4 $ 124.24 $ 798.2

______________

(1) For PSUs, shares granted represent the aggregate maximum number of shares that may be earned and issued with respect to these awards over their full terms.

Table of Content

Our RSUs generally vest over a period of three to four years from the date of grant.

1 unchanged sentence

Our PSUs generally vest over a period of one to four years from the date of grant.

The actual number of PSUs earned and eligible to vest is determined based on the level of achievement against certain performance conditions such as revenue growth, billings and operating margin, or individual performance for the fiscal year, or market conditions, or a combination of performance and market conditions for certain awards.

During the six months ended January 31, 2023, we granted 0.8 million shares of PSUs with both service and market conditions to certain employees.

The actual number of PSUs earned and eligible to vest is determined based on the level of achievement against certain performance conditions, such as revenue growth, billings and operating margin, or individual performance for the fiscal year;

market conditions;

or a combination of performance and market conditions for certain awards.

During the nine months ended April 30, 2023, we granted 0.9 million shares of PSUs with both service and market conditions to certain employees.

The market conditions are satisfied when the price of our common stock is equal to or exceeds stock price targets of $ 233.33 , $ 266.67 , $ 300.00 , and $ 333.33 based on the average closing price for 30 consecutive trading days during the three - or four-year period following the date of grant.

To the extent that the market conditions have been met, one-fourth of the awards will vest on each anniversary date of the grant date, subject to continued service.

As of January 31, 2023, the stock price targets for these PSU awards have not been met.

During the six months ended January 31, 2023 and 2022, we granted 1.6 million and 0.6 million shares of PSUs, respectively, which contain service, performance and market conditions, to certain employees.

As of April 30, 2023, the stock price targets for these PSU awards have not been met.

During the nine months ended April 30, 2023 and 2022, we granted 1.6 million and 0.6 million shares of PSUs, respectively, which contain service, performance and market conditions, to certain employees.

The service conditions are satisfied over a period of one to three years .

1 unchanged sentence

The market condition is measured based on our total shareholder return (“TSR”) relative to the TSR of the companies listed in the Standard & Poor’s 500 index.

As of January 31, 2023, we have approved 2.3 million shares of PSUs, which will be granted upon the performance condition being established during the next two years.

As of April 30, 2023, we have approved 2.3 million shares of PSUs, which will be granted upon the performance condition being established during the next two years.

Table of Conten ts

The fair value of the PSUs subject to market conditions is estimated on the grant date using a Monte Carlo simulation model.

The following table summarizes the assumptions used and the grant-date fair value of these PSUs granted:

Six Months Ended

Three Months Ended Nine Months Ended

April 30, April 30,

2023 2022 2023 2022

Volatility 38.3 %

39.1 % - 41.1 %

38.3 % - 44.8 %

36.0 % - 41.1 %

Expected term (in years)

Dividend yield

0.0 % 0.0 % 0.0 % 0.0 %

Risk-free interest rate

1 unchanged sentence

3.2 % - 4.1 %

0.2 % - 2.0 %

Grant-date fair value per share

1 unchanged sentence

$ 256.95 - $ 260.71

$ 91.77 - $ 280.41

$ 137.16 - $ 260.71

Performance Stock Option (“PSO”) Activities

1 unchanged sentence

The market conditions were achieved when certain stock price targets were met.

As of January 31, 2023, all stock price targets for our outstanding PSOs have been satisfied.

As of April 30, 2023, all stock price targets for our outstanding PSOs have been satisfied.

One-fourth of the PSOs will vest on each anniversary date of the grant date, subject to continued service.

The contractual term for the PSOs outstanding ranges from seven to seven and a half years following the date of grant in fiscal year 2018 and 2019.

The following table summarizes the PSO activity under our stock plans during the six months ended January 31, 2023 (in millions, except per share amounts):

The following table summarizes the PSO activity under our stock plans during the nine months ended April 30, 2023 (in millions, except per share amounts):

PSOs Outstanding

2 unchanged sentences

Balance—July 31, 2022 8.0 $ 64.85 3.2 $ 809.3

Balance—January 31, 2023 8.0 $ 64.85 2.7 $ 747.7

Exercisable—January 31, 2023 8.0 $ 64.85 2.7 $ 747.7

Table of Content

Exercised ( 0.6 ) $ 62.08

Balance—April 30, 2023 7.4 $ 65.09 2.4 $ 862.3

Exercisable—April 30, 2023 7.4 $ 65.09 2.4 $ 862.3

Share-Based Compensation

The following table summarizes share-based compensation included in costs and expenses (in millions):

Three Months Ended Six Months Ended

January 31, January 31,

Three Months Ended Nine Months Ended

April 30, April 30,

2023 2022 2023 2022

10 unchanged sentences

Total share-based compensation $ 277.2 $ 247.3 $ 833.1 $ 772.7

As of January 31, 2023, total compensation cost related to unvested share-based awards not yet recognized was $ 2.3 billion.

As of April 30, 2023, total compensation cost related to unvested share-based awards not yet recognized was $ 2.1 billion.

This cost is expected to be amortized over a weighted-average period of approximately 2.5 years .

For the three and six months ended January 31, 2023, our provision for income taxes reflected an effective tax rate of 0.2 % and 12.3 %, respectively.

For the three and six months ended January 31, 2022, our provision for income taxes reflected an effective tax rate of negative 15.7 % and negative 14.6 %, respectively.

Our income taxes for the three and six months ended January 31, 2023 were primarily due to U.S.

For the three and nine months ended April 30, 2023, our provision for income taxes reflected an effective tax rate of 17.7 % and 15.1 %, respectively.

For the three and nine months ended April 30, 2022, our provision for income taxes reflected an effective tax rate of negative 39.4 % and negative 20.4 %, respectively.

Table of Conten ts

Our income taxes for the three and nine months ended April 30, 2023 were primarily due to U.S.

federal and state income taxes, withholding taxes, and foreign income taxes.

Our effective tax rate varied for the three and six months ended January 31, 2023 compared to the same periods in 2022 primarily due to an increase in current taxes driven by capitalization of research and development expenditures with no offsetting deferred benefit as a result of our valuation allowance.

Our effective tax rate varied for the three and nine months ended April 30, 2023 compared to the same periods in 2022 primarily due to an increase in current taxes driven by capitalization of research and development expenditures with no offsetting deferred benefit as a result of our valuation allowance.

This increase was offset by a tax benefit from a release of tax reserves related to uncertain tax positions resulting from an agreement with a non-U.S.

tax authority to pay $ 28.9 million to settle a tax audit during the three months ended January 31, 2023.

Our income taxes for the three and six months ended January 31, 2022 were primarily due to foreign income taxes and withholding taxes.

tax authority to pay $ 28.9 million to settle a tax audit during the nine months ended April 30, 2023.

Our income taxes for the three and nine months ended April 30, 2022 were primarily due to foreign income taxes and withholding taxes.

Our effective tax rates differed from the U.S.

statutory tax rate primarily due to changes in our valuation allowance.

As of January 31, 2023, our gross uncertain tax positions were $ 396.0 million and our interest and penalties were $ 6.7 million.

As of April 30, 2023, our gross uncertain tax positions were $ 412.1 million and our interest and penalties were $ 7.2 million.

We recognize both interest and penalties associated with uncertain tax positions as a component of income tax.

We maintain a full valuation allowance for domestic and certain foreign deferred tax assets, including net operating loss carryforwards and certain domestic tax credits.

We regularly evaluate the need for a valuation allowance.

Due to recent profitability, a reversal of our valuation allowance in certain jurisdictions in the foreseeable future is reasonably possible.

Net Income (Loss) Per Share

3 unchanged sentences

Potentially dilutive securities also include warrants related to the issuance of convertible senior notes and equity awards under our employee equity incentive plans using the treasury stock method.

Table of Content

The following table presents the computation of basic and diluted net income (loss) per share of common stock (in millions, except per share data):

Three Months Ended Six Months Ended

January 31, January 31,

Three Months Ended Nine Months Ended

April 30, April 30,

2023 2022 2023 2022

9 unchanged sentences

The following securities were excluded from the computation of diluted net income (loss) per share of common stock as their effect would have been antidilutive or issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the applicable period (in millions):

Three Months Ended Six Months Ended

January 31, January 31,

Three Months Ended Nine Months Ended

April 30, April 30,

2023 2022 2023 2022

3 unchanged sentences

Total 3.2 107.3 5.0 107.3

Other Income (Expense), Net

The following table sets forth the components of other income (expense), net (in millions):

Three Months Ended Six Months Ended

January 31, January 31,

Table of Conten ts

Other Income, Net

The following table sets forth the components of other income, net (in millions):

Three Months Ended Nine Months Ended

April 30, April 30,

2023 2022 2023 2022

2 unchanged sentences

Other ( 3.6 ) ( 4.2 ) ( 9.3 ) ( 3.6 )

Total other income (expense), net $ 51.4 $ ( 0.1 ) $ 77.4 $ ( 1.7 )

Table of Content

Total other income, net $ 60.1 $ 1.9 $ 137.5 $ 0.2

Table of Conten ts

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 1. Financial Statements