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Item 1. Financial Statements

2025-05-21 compared with 2025-02-14 · 131 added, 128 removed, 643 unchanged (29% of the section changed)

3 unchanged sentences

(in millions, except per share data)

January 31, 2025 July 31, 2024

April 30, 2025 July 31, 2024

Current assets:

1 unchanged sentence

Short-term investments 916.8 1,043.6

Accounts receivable, net of allowance for credit losses of $ 8.5 and $ 7.5 as of January 31, 2025 and July 31, 2024, respectively

Accounts receivable, net of allowance for credit losses of $ 10.6 and $ 7.5 as of April 30, 2025 and July 31, 2024, respectively

1,950.0 2,618.6

33 unchanged sentences

100.0 shares authorized;

none issued and outstanding as of January 31, 2025 and July 31, 2024

none issued and outstanding as of April 30, 2025 and July 31, 2024

Common stock and additional paid-in capital;

1 unchanged sentence

2,000.0 shares authorized;

660.4 and 650.2 shares issued and outstanding as of January 31, 2025 and July 31, 2024, respectively

665.9 and 650.2 shares issued and outstanding as of April 30, 2025 and July 31, 2024, respectively

4,952.2 3,821.1

Accumulated other comprehensive loss ( 13.9 ) ( 1.6 )

Accumulated other comprehensive income (loss)

Retained earnings

6 unchanged sentences

(Unaudited, in millions, except per share data)

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

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

2025 2024 2025 2024

20 unchanged sentences

$ 262.1 $ 278.8 $ 880.1 $ 2,219.9

$ 267.3 $ 1,746.9 $ 618.0 $ 1,941.1

Net income per share, basic

10 unchanged sentences

(Unaudited, in millions)

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

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

2025 2024 2025 2024

14 unchanged sentences

(Unaudited, in millions)

Three Months Ended January 31, 2025

Three Months Ended April 30, 2025

Common Stock and Additional Paid-In Capital

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

1 unchanged sentence

Shares Amount

Balance as of October 31, 2024 655.4 $ 4,214.9 $ ( 4.0 ) $ 1,700.9 $ 5,911.8

Balance as of January 31, 2025 660.4 $ 4,421.0 $ ( 13.9 ) $ 1,968.2 $ 6,375.3

Net income — — — 262.1 262.1

Other comprehensive loss

Other comprehensive income

— — 61.9 — 61.9

5 unchanged sentences

( 2.2 ) — — — —

Balance as of January 31, 2025 660.4 $ 4,421.0 $ ( 13.9 ) $ 1,968.2 $ 6,375.3

Three Months Ended January 31, 2024

Balance as of April 30, 2025 665.9 $ 4,952.2 $ 48.0 $ 2,230.3 $ 7,230.5

Three Months Ended April 30, 2024

Common Stock and Additional Paid-In Capital

Accumulated Other Comprehensive Loss

Retained Earnings (Accumulated Deficit)

Retained Earnings

Total Stockholders’ Equity

Shares Amount

Balance as of October 31, 2023 627.5 $ 3,296.7 $ ( 93.0 ) $ ( 1,033.2 ) $ 2,170.5

Balance as of January 31, 2024 645.4 $ 3,650.0 $ ( 6.5 ) $ 713.7 $ 4,357.2

— — — 278.8 278.8

Other comprehensive income

Other comprehensive loss

— — ( 48.9 ) — ( 48.9 )

2 unchanged sentences

Share-based compensation for equity-based awards — 270.0 — — 270.0

Repurchase and retirement of common stock ( 3.4 ) ( 500.0 ) — — ( 500.0 )

Settlement of convertible notes 9.1 ( 1.7 ) — — ( 1.7 )

1 unchanged sentence

( 9.1 ) — — — —

Settlement of warrants 11.9 — — — —

Balance as of January 31, 2024 645.4 $ 3,650.0 $ ( 6.5 ) $ 713.7 $ 4,357.2

Six Months Ended January 31, 2025

Balance as of April 30, 2024 646.7 $ 3,530.7 $ ( 55.4 ) $ 992.5 $ 4,467.8

Nine Months Ended April 30, 2025

Common Stock and Additional Paid-In Capital

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

3 unchanged sentences

Net income — — — 880.1 880.1

Other comprehensive loss

Other comprehensive income

— — 49.6 — 49.6

5 unchanged sentences

( 8.4 ) — — — —

Balance as of January 31, 2025 660.4 $ 4,421.0 $ ( 13.9 ) $ 1,968.2 $ 6,375.3

Six Months Ended January 31, 2024

Balance as of April 30, 2025 665.9 $ 4,952.2 $ 48.0 $ 2,230.3 $ 7,230.5

Nine Months Ended April 30, 2024

Common Stock and Additional Paid-In Capital

5 unchanged sentences

Net income — — — 2,219.9 2,219.9

Other comprehensive income

Other comprehensive loss

— — ( 12.2 ) — ( 12.2 )

7 unchanged sentences

Settlement of warrants

Balance as of January 31, 2024 645.4 $ 3,650.0 $ ( 6.5 ) $ 713.7 $ 4,357.2

Balance as of April 30, 2024 646.7 $ 3,530.7 $ ( 55.4 ) $ 992.5 $ 4,467.8

See notes to condensed consolidated financial statements.

2 unchanged sentences

(Unaudited, in millions)

Six Months Ended January 31,

Nine Months Ended April 30,

Cash flows from operating activities

44 unchanged sentences

Restricted cash included in prepaid expenses and other current assets 11.6 8.2

Restricted cash included in other assets — 0.5

Total cash, cash equivalents, and restricted cash $ 2,395.0 $ 1,381.9

29 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, 2025, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 31, 2024, except for the update to the disclosure of our accounting policies as described below resulting from our acquisition of certain QRadar assets from International Business Machines Corporation (“IBM”).

There have been no material changes to our significant accounting policies as of and for the nine months ended April 30, 2025, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 31, 2024, except for the update to the disclosure of our accounting policies as described below resulting from our acquisition of certain QRadar assets from International Business Machines Corporation (“IBM”).

Refer to Note 7.

12 unchanged sentences

Early adoption is permitted.

We are currently evaluating the impact of this standard on our disclosures in the consolidated financial statements.

We expect the adoption of this standard will not have a material impact on our consolidated financial statements.

Income Tax Disclosures

10 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,

2025 2024 2025 2024

6 unchanged sentences

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,

2025 2024 2025 2024

6 unchanged sentences

Deferred Revenue

During the six months ended January 31, 2025 and 2024, we recognized approximately $ 3.1 billion and $ 2.7 billion of revenue pertaining to amounts that were deferred as of July 31, 2024 and 2023, respectively.

During the nine months ended April 30, 2025 and 2024, we recognized approximately $ 4.4 billion and $ 3.7 billion of revenue pertaining to amounts that were deferred as of July 31, 2024 and 2023, respectively.

Remaining Performance Obligations

Remaining performance obligations were $ 13.0 billion as of January 31, 2025, of which we expect to recognize as revenue approximately $ 6.1 billion over the next 12 months and the remainder thereafter.

Remaining performance obligations were $ 13.5 billion as of April 30, 2025, of which we expect to recognize as revenue approximately $ 6.2 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, 2025 and July 31, 2024 (in millions):

January 31, 2025 July 31, 2024

The following table presents our financial assets and liabilities measured at fair value on a recurring basis as of April 30, 2025 and July 31, 2024 (in millions):

April 30, 2025 July 31, 2024

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

13 unchanged sentences

Total short-term investments — 916.8 — 916.8 — 1,043.6 — 1,043.6

January 31, 2025 July 31, 2024

April 30, 2025 July 31, 2024

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

28 unchanged sentences

The following table presents a reconciliation of our contingent consideration liability (in millions):

Three Months Ended January 31, 2025 Six Months Ended January 31, 2025

Three Months Ended April 30, 2025 Nine Months Ended April 30, 2025

Contingent consideration liability at the beginning of the period

3 unchanged sentences

$ 669.2 $ 669.2

The total estimated fair value of our financing receivables approximates their carrying amounts as of January 31, 2025 and July 31, 2024.

The total estimated fair value of our financing receivables approximates their carrying amounts as of April 30, 2025 and July 31, 2024.

We consider the fair value of our financing receivables to be a Level 3 measurement as we use unobservable inputs in determining discounted cash flows to estimate the fair value.

Refer to Note 9.

Debt for the carrying amount and estimated fair value of our convertible senior notes as of January 31, 2025 and July 31, 2024.

Debt for the carrying amount and estimated fair value of our convertible senior notes as of April 30, 2025 and July 31, 2024.

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, 2025 and July 31, 2024 (in millions):

January 31, 2025

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, 2025 and July 31, 2024 (in millions):

April 30, 2025

Amortized Cost

4 unchanged sentences

Corporate debt securities 0.7 — — 0.7

government and agency securities 18.0 — — 18.0

Total available-for-sale cash equivalents $ 575.7 $ — $ — $ 575.7

Certificates of deposit $ 1.0 $ — $ — $ 1.0

Commercial paper 53.6 — — 53.6

20 unchanged sentences

Total available-for-sale investments $ 5,188.9 $ 35.4 $ ( 7.5 ) $ 5,216.8

As of January 31, 2025, the gross unrealized losses that have been in a continuous unrealized loss position for less than 12 months were $ 8.9 million, which were related to $ 1.5 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 $ 0.4 million, which were related to $ 215.4 million of available-for-sale debt securities.

As of April 30, 2025, the gross unrealized losses that have been in a continuous unrealized loss position for less than 12 months were $ 1.4 million, which were related to $ 691.9 million 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 $ 0.2 million, which were related to $ 145.5 million of available-for-sale debt securities.

As of July 31, 2024 the gross unrealized losses that have been in a continuous unrealized loss position for less than 12 months were $ 1.5 million, which were related to $ 949.4 million 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 $ 6.0 million, which were related to $ 915.3 million of available-for-sale debt securities.

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, 2025 and 2024.

The following table summarizes the amortized cost and fair value of our available-for-sale debt securities as of January 31, 2025, 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, 2025 and 2024.

The following table summarizes the amortized cost and fair value of our available-for-sale debt securities as of April 30, 2025, by contractual years-to-maturity (in millions):

Amortized Cost Fair Value

7 unchanged sentences

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, 2025 and July 31, 2024, the carrying values of our marketable equity securities were $ 1.3 billion and $ 494.0 million, respectively.

There were no unrealized gains or losses recognized for these securities during the three and six months ended January 31, 2025 and 2024.

As of April 30, 2025 and July 31, 2024, the carrying values of our marketable equity securities were $ 1.1 billion and $ 494.0 million, respectively.

There were no unrealized gains or losses recognized for these securities during the three and nine months ended April 30, 2025 and 2024.

Financing Receivables

The following table summarizes our short-term and long-term financing receivables as of January 31, 2025 and July 31, 2024 (in millions):

January 31, 2025 July 31, 2024

The following table summarizes our short-term and long-term financing receivables as of April 30, 2025 and July 31, 2024 (in millions):

April 30, 2025 July 31, 2024

Short-term financing receivables, gross $ 833.7 $ 830.2

10 unchanged sentences

Internal Risk Rating (1)

January 31, 2025 July 31, 2024

April 30, 2025 July 31, 2024

Fiscal Year of Origination

7 unchanged sentences

(1) Internal risk ratings are categorized as 1 through 10, with the lowest rating representing the highest quality.

There was no significant activity in allowance for credit losses during the three and six months ended January 31, 2025 and 2024.

Past due amounts on financing receivables were not material as of January 31, 2025 and July 31, 2024.

As part of our financing credit risk management policy, we may sell financing receivables with an internal risk rating of 5 or greater on a non-recourse basis to third-party financial institutions when the outstanding balance of our financing receivables exceeds preestablished thresholds.

We sold $ 28.1 million and $ 30.4 million of our financing receivables during the three and nine months ended April 30, 2025, respectively.

The associated gains and losses were not material.

The related proceeds were classified as cash flows from operating activities on our condensed consolidated statements of cash flows.

There was no significant activity in allowance for credit losses during the three and nine months ended April 30, 2025 and 2024.

Past due amounts on financing receivables were not material as of April 30, 2025 and July 31, 2024.

Derivative Instruments

We are exposed to foreign currency exchange risk.

Our revenue is primarily transacted in U.S.

dollars, however, a portion of our operating expenditures are incurred outside of the United States and are denominated in foreign currencies, making them subject to fluctuations in foreign currency exchange rates.

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, 2025 and July 31, 2024, the total notional amount of our outstanding foreign currency forward contracts designated as cash flow hedges was $ 1.0 billion and $ 804.8 million, respectively.

Our sales contracts are primarily denominated in U.S.

A portion of our operating expenditures are denominated in foreign currencies, making them subject to fluctuations in foreign currency exchange rates.

As of April 30, 2025 and July 31, 2024, the total notional amount of our outstanding foreign currency forward contracts designated as cash flow hedges was $ 1.1 billion and $ 804.8 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, 2025 and July 31, 2024.

As of January 31, 2025, unrealized gains and losses in accumulated other comprehensive income (“AOCI”) related to our cash flow hedges were a $ 16.0 million net loss, of which $ 14.1 million in 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, 2025 and July 31, 2024.

As of April 30, 2025, unrealized gains and losses in accumulated other comprehensive income (“AOCI”) related to our cash flow hedges were a $ 31.4 million net gain, of which $ 23.0 million in gains are expected to be recognized into earnings within the next 12 months.

As of July 31, 2024, unrealized gains and losses in AOCI related to our cash flow hedges were a $ 10.6 million net loss.

As of January 31, 2025 and July 31, 2024, the notional amount of our outstanding foreign currency forward contracts not designated as hedging instruments was $ 567.2 million and $ 375.6 million, respectively.

As of April 30, 2025 and July 31, 2024, the notional amount of our outstanding foreign currency forward contracts not designated as hedging instruments was $ 563.8 million and $ 375.6 million, respectively.

Protect AI, Inc.

On April 27, 2025, we entered into a definitive agreement to acquire Protect AI, Inc., a privately-held cyber security company (“Protect AI”), for a total consideration of $ 700.0 million in cash and replacement awards, subject to adjustment.

We expect the acquisition will enhance the capabilities of our AI security platform.

The acquisition of Protect AI is expected to close by the first quarter of fiscal 2026, subject to the satisfaction of closing conditions, including regulatory clearance.

IBM QRadar Assets

On August 31, 2024, we completed the acquisition of certain IBM QRadar assets, including certain intellectual property rights, customer relationships, and software as a service customer contracts.

We expect the acquisition will help accelerate the growth of our Cortex business.

We expect the acquisition will help accelerate the growth of our Cortex Security Operations business.

The total purchase consideration for the acquisition was $ 1.1 billion, which consisted of the following (in millions):

3 unchanged sentences

As part of the acquisition, we agreed to make post-closing payments to IBM contingent upon customers entering into qualified new transactions through June 30, 2028.

We also expect to receive a return of purchase consideration of $ 6.3 million due to timing of transition of certain underlying customer contracts, of which $ 0.5 million was received during the three and six months ended January 31, 2025.

In addition, we have entered into a transition services arrangement with IBM, under which IBM will perform certain services supporting the acquired assets and customers for a limited period of time.

Payments related to the contingent consideration liability are expected to begin in the fiscal quarter ending April 2025 and continue through the fiscal quarter ending October 2028.

We also expect to receive a return of purchase consideration of $ 6.3 million due to timing of transition of certain underlying customer contracts, of which $ 1.4 million and $ 1.9 million were received during the three and nine months ended April 30, 2025, respectively.

In addition, we have entered into a transition services arrangement with IBM, under which IBM will perform certain services supporting the acquired assets and customers for a period of time that ends in the fiscal quarter ending October 2026.

Payments related to the contingent consideration liability are expected to begin in the fiscal quarter ending July 2025 and continue through the fiscal quarter ending October 2028.

The estimated range of undiscounted contingent consideration is between $ 0.5 billion and $ 0.9 billion.

6 unchanged sentences

Total $ 1,142.6

Goodwill generated from this business combination is primarily attributable to the expected post-acquisition synergies from increased market penetration to support the growth of our Cortex business.

Goodwill generated from this business combination is primarily attributable to the expected post-acquisition synergies from increased market penetration to support the growth of our Cortex Security Operations business.

The goodwill is deductible for U.S.

8 unchanged sentences

Goodwill and Intangible Assets

The following table presents details of our goodwill during the six months ended January 31, 2025 (in millions):

The following table presents details of our goodwill during the nine months ended April 30, 2025 (in millions):

Balance as of July 31, 2024 $ 3,350.1

Goodwill acquired 700.7

Balance as of January 31, 2025 $ 4,050.8

Balance as of April 30, 2025 $ 4,050.8

Purchased Intangible Assets

The following table presents details of our purchased intangible assets as of January 31, 2025 and July 31, 2024 (in millions):

January 31, 2025 July 31, 2024

The following table presents details of our purchased intangible assets as of April 30, 2025 and July 31, 2024 (in millions):

April 30, 2025 July 31, 2024

Gross Carrying Amount

11 unchanged sentences

Total purchased intangible assets $ 1,499.2 $ ( 769.0 ) $ 730.2 $ 1,015.1 $ ( 640.2 ) $ 374.9

We recognized amortization expense of $ 44.3 million and $ 85.6 million for the three and six months ended January 31, 2025, respectively, and $ 28.4 million and $ 53.3 million for the three and six months ended January 31, 2024, respectively.

The following table summarizes estimated future amortization expense of our intangible assets subject to amortization as of January 31, 2025 (in millions):

We recognized amortization expense of $ 43.2 million and $ 128.8 million for the three and nine months ended April 30, 2025, respectively, and $ 33.4 million and $ 86.7 million for the three and nine months ended April 30, 2024, respectively.

The following table summarizes estimated future amortization expense of our intangible assets subject to amortization as of April 30, 2025 (in millions):

Fiscal years ending July 31,

21 unchanged sentences

Additionally, upon the occurrence of a corporate event that constitutes a “fundamental change” under the Indenture, holders of the 2025 Notes may require us to repurchase for cash all or a portion of the 2025 Notes at a repurchase price equal to 100 % of the principal amount of the 2025 Notes plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Holders of the 2025 Notes were able to early convert their 2025 Notes during the fiscal quarter ended January 31, 2025 as the sales price condition had been met during the fiscal quarter ended October 31, 2024.

During the three and six months ended January 31, 2025, holders of the 2025 Notes converted $ 112.4 million and $ 431.4 million, respectively, in aggregate principal amount of the 2025 Notes, which we repaid in cash.

We also issued 1.7 million and 6.2 million shares of our common stock to the holders of the 2025 Notes during the three and six months ended January 31, 2025, respectively, for the conversion value in excess of the principal amount.

During the three and six months ended January 31, 2024, holders of the 2025 Notes converted $ 126.3 million and $ 172.3 million, respectively, in aggregate principal amount of the 2025 Notes, which we repaid in cash.

We also issued 1.7 million and 2.2 million shares of our common stock to the holders of the 2025 Notes during the three and six months ended January 31, 2024, respectively, for the conversion value in excess of the principal amount.

Holders of the 2025 Notes were able to early convert their 2025 Notes at any time prior to the close of business on the business day immediately preceding March 1, 2025 for settlement prior to the maturity date as the sales price condition had been met during the fiscal quarter ended January 31, 2025.

During the three and nine months ended April 30, 2025, holders of the 2025 Notes converted $ 150.9 million and $ 582.3 million, respectively, in aggregate principal amount of the 2025 Notes, which we repaid in cash.

We also issued 2.2 million and 8.4 million shares of our common stock to the holders of the 2025 Notes during the three and nine months ended April 30, 2025, respectively, for the conversion value in excess of the principal amount.

During the three and nine months ended April 30, 2024, holders of the 2025 Notes converted $ 661.8 million and $ 834.1 million, respectively, in aggregate principal amount of the 2025 Notes, which we repaid in cash.

We also issued 9.1 million and 11.3 million shares of our common stock to the holders of the 2025 Notes during the three and nine months ended April 30, 2024, respectively, for the conversion value in excess of the principal amount.

These shares were fully offset by shares we received from the corresponding exercise of the note hedges.

Refer to Note 16.

Subsequent Events for additional information regarding conversion of the 2025 Notes after January 31, 2025 through the filing date of this Quarterly Report on Form 10-Q.

The sale price condition for the 2025 Notes was met during the fiscal quarter ended January 31, 2025 and, as a result, holders may convert their 2025 Notes during the fiscal quarter ending April 30, 2025 at any time prior to the close of business on the business day immediately preceding March 1, 2025 for settlement prior to the maturity date.

The net carrying amount of the 2025 Notes was classified as a current liability on our condensed consolidated balance sheet as of January 31, 2025.

On or after March 1, 2025, holders may surrender their 2025 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 2025 Notes.

The net carrying amount of the 2025 Notes was classified as a current liability on our condensed consolidated balance sheet as of April 30, 2025.

The following table sets forth the net carrying amount of our 2025 Notes (in millions):

January 31, 2025 July 31, 2024

April 30, 2025 July 31, 2024

Principal $ 383.3 $ 965.6

2 unchanged sentences

Net carrying amount $ 383.2 $ 963.9

The total estimated fair value of the 2025 Notes was $ 2.0 billion as of January 31, 2025 and $ 3.2 billion as of July 31, 2024.

The total estimated fair value of the 2025 Notes was $ 1.4 billion as of April 30, 2025 and $ 3.2 billion as of July 31, 2024.

The fair value was determined based on the closing trading price per $100 of the 2025 Notes as of the last day of trading for the period.

We consider the fair value of the 2025 Notes as of January 31, 2025 and July 31, 2024 to be a Level 2 measurement.

We consider the fair value of the 2025 Notes as of April 30, 2025 and July 31, 2024 to be a Level 2 measurement.

The fair value of the 2025 Notes is primarily affected by the trading price of our common stock and market interest rates.

The following table sets forth interest expense recognized related to the 2025 Notes (dollars in millions):

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

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

2025 2024 2025 2024

10 unchanged sentences

We paid an aggregate amount of $ 370.8 million for the 2025 Note Hedges, which is included in additional paid-in capital on our condensed consolidated balance sheets.

As a result of the conversions of the 2025 Notes settled during the three and six months ended January 31, 2025, we exercised the corresponding portion of our 2025 Note Hedges and received 1.7 million and 6.2 million shares of our common stock during the respective periods.

As a result of the conversions of the 2025 Notes settled during the three and six months ended January 31, 2024, we exercised the corresponding portion of our 2025 Note Hedges and received 1.7 million and 2.2 million shares of our common stock during the respective periods.

As a result of the conversions of the 2025 Notes settled during the three and nine months ended April 30, 2025, we exercised the corresponding portion of our 2025 Note Hedges and received 2.2 million and 8.4 million shares of our common stock during the respective periods.

As a result of the conversions of the 2025 Notes settled during the three and nine months ended April 30, 2024, we exercised the corresponding portion of our 2025 Note Hedges and received 9.1 million and 11.3 million shares of our common stock during the respective periods.

Separately, but concurrently with the issuance of each series of our convertible senior notes, we entered into transactions whereby we sold warrants (the “2023 Warrants,” with respect to the 0.75 % convertible senior notes due 2023 issued in July 2018, the “2025 Warrants,” with respect to the 2025 Notes, and the 2023 Warrants together with the 2025 Warrants, the “Warrants”) to acquire shares of our common stock, subject to anti-dilution adjustments.

The 2023 Warrants and 2025 Warrants are exercisable over 60 scheduled trading days beginning October 2023 and September 2025, respectively.

The 2023 Warrants were, and the 2025 Warrants are, exercisable over 60 scheduled trading days beginning October 2023 and September 2025, respectively.

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

10 unchanged sentences

The aggregate proceeds received from the sale of the Warrants are included in additional paid-in capital on our condensed consolidated balance sheets.

During the six months ended January 31, 2024, we net settled all of the 2023 Warrants with 18.0 million shares of our common stock with a fair value of $ 2.4 billion, of which 11.9 million shares of our common stock with a fair value of $ 1.7 billion were net settled during the three months ended January 31, 2024.

During the nine months ended April 30, 2024, we net settled all of the 2023 Warrants with 18.0 million shares of our common stock with a fair value of $ 2.4 billion.

The number of net shares issued was determined based on the number of 2023 Warrants exercised multiplied by the difference between the strike price of the 2023 Warrants and their daily volume-weighted-average stock price.

5 unchanged sentences

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 January 31, 2025, there were no amounts outstanding and we were in compliance with all covenants under the Credit Agreement.

As of April 30, 2025, there were no amounts outstanding and we were in compliance with all covenants under the Credit Agreement.

Commitments and Contingencies

2 unchanged sentences

In addition, in order to reduce manufacturing lead times and plan for adequate supply, we have entered 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 non-cancelable purchase commitments under these agreements as of January 31, 2025 (in millions):

Other purchase obligations include non-cancellable subscription agreements and other commitments in the normal course of business.

The following table presents details of the aggregate future non-cancelable purchase commitments under these agreements as of April 30, 2025 (in millions):

Fiscal years ending July 31,

28 unchanged sentences

As of July 31, 2024, we accrued $ 184.4 million for the verdict amount and estimated interest.

As of January 31, 2025, we accrued $ 142.8 million based on the judgment and estimated interest, which is recorded in other long-term liabilities on our condensed consolidated balance sheets.

The corresponding amount was a charge of $ 1.4 million for the three months ended January 31, 2025, and a release of $ 41.6 million for the six months ended January 31, 2025, which is included in general and administrative expense on our condensed consolidated statements of operations.

As of April 30, 2025, we accrued $ 144.1 million based on the judgment and estimated interest, which is recorded in other long-term liabilities on our condensed consolidated balance sheets.

The corresponding amount was a charge of $ 1.3 million for the three months ended April 30, 2025, and a release of $ 40.3 million for the nine months ended April 30, 2025, which is included in general and administrative expense on our condensed consolidated statements of operations.

Palo Alto Networks

2 unchanged sentences

The complaint requests injunctive relief, monetary damages, and attorneys’ fees.

A trial date is set for June 9, 2025.

On March 21, 2025, the judge issued an order granting summary judgment of non-infringement on all remaining patents at issue.

Plaintiff filed a Notice of Appeal on April 21, 2025.

We are unable, at this time, to reasonably estimate a possible loss or potential range of loss, if any.

5 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.

We did no t repurchase shares of our common stock during the three and six months ended January 31, 2025.

During the six months ended January 31, 2024, we repurchased and retired 0.6 million shares of our common stock under our current repurchase authorization for an aggregate purchase price of $ 66.7 million, including transaction costs, at an average price of $ 113.34 per share.

As of January 31, 2025, $ 1.0 billion remained available for future share repurchases under our current repurchase authorization.

We did not repurchase shares of our common stock during the three and nine months ended April 30, 2025.

During the three and nine months ended April 30, 2024, we repurchased and retired 3.4 million and 4.0 million shares of our common stock under our current repurchase authorization for an aggregate purchase price of $ 500.0 million and $ 566.7 million, including transaction costs, at an average price of $ 146.96 and $ 142.00 per share, respectively.

As of April 30, 2025, $ 1.0 billion 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, 2025 (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, 2025 (in millions, except per share amounts):

Unvested RSUs

10 unchanged sentences

Forfeited ( 1.6 ) $ 111.29 ( 3.2 ) $ 91.73

Balance—January 31, 2025 16.3 $ 130.05 $ 3,000.4 9.5 $ 140.37 $ 1,758.0

Balance—April 30, 2025 14.6 $ 135.64 $ 2,721.3 9.4 $ 140.92 $ 1,765.5

(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.

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The number of PSUs eligible to vest is determined based on the level of achievement against certain performance conditions, market conditions, and a combination thereof.

During the six months ended January 31, 2025, we granted 3.4 million shares of PSUs that contain service, performance, and market conditions, of which 0.1 million shares were granted during the three months ended January 31, 2025.

During the nine months ended April 30, 2025, we granted 3.4 million shares of PSUs that contain service, performance, and market conditions.

The service conditions are satisfied after 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, 2025, we have approved 2.7 million shares of PSUs, which will be granted upon the performance condition being established during the next two fiscal years.

As of April 30, 2025, we have approved 2.7 million shares of PSUs, which will be granted upon the performance condition being established during the next two fiscal years.

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 resulting grant-date fair value of our PSUs subject to market conditions granted during the three and six months ended January 31, 2025 and 2024:

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

2025 2024 2025 2024

The following table summarizes the assumptions used and the resulting grant-date fair value of our PSUs subject to market conditions granted during the nine months ended April 30, 2025 and 2024:

Nine Months Ended April 30,

Volatility 43.5 % - 47.6 %

40.8 % - 43.4 %

Expected term (in years) 1.0 - 2.9

2 unchanged sentences

4.4 % - 5.3 %

4.5 % - 5.3 %

Grant-date fair value per share $ 264.51 - $ 305.83

$ 173.46 - $ 310.61

$ 173.46 - $ 197.32

Performance Stock Option (“PSO”) Activities

1 unchanged sentence

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

As of January 31, 2025, all of our outstanding PSOs have been fully vested.

As of April 30, 2025, all of our outstanding PSOs have been fully vested.

The maximum contractual term of our outstanding PSOs is seven and a half years from 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, 2025 (in millions, except per share amounts):

The following table summarizes the PSO activity under our stock plans during the nine months ended April 30, 2025 (in millions, except per share amounts):

Number of Shares

4 unchanged sentences

Exercised ( 7.9 ) $ 32.66

Balance—January 31, 2025 4.3 $ 32.87 0.8 $ 654.1

Exercisable—January 31, 2025 4.3 $ 32.87 0.8 $ 654.1

Balance—April 30, 2025 1.7 $ 32.67 0.8 $ 258.3

Exercisable—April 30, 2025 1.7 $ 32.67 0.8 $ 258.3

Share-Based Compensation

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

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

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

2025 2024 2025 2024

5 unchanged sentences

Total share-based compensation $ 325.9 $ 263.5 $ 940.7 $ 809.8

As of January 31, 2025, total compensation cost related to unvested share-based awards not yet recognized was $ 2.5 billion.

As of April 30, 2025, total compensation cost related to unvested share-based awards not yet recognized was $ 2.4 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, 2025, our provision for income taxes reflected effective tax rates of 17.7 % and 10.9 %, respectively.

Our income taxes for the three and six months ended January 31, 2025 were primarily due to U.S.

For the three and nine months ended April 30, 2025, our provision for income taxes reflected effective tax rates of 15.6 % and 12.3 %, respectively.

Our income taxes for the three and nine months ended April 30, 2025 were primarily due to U.S.

and foreign income taxes.

Our effective tax rate for the three and six months ended January 31, 2025 differed from the U.S.

Our effective tax rates for the three and nine months ended April 30, 2025 differed from the U.S.

statutory tax rate primarily due to excess tax benefits from share-based compensation.

For the three and six months ended January 31, 2024, our benefit from income taxes reflected an effective tax rate of negative 1,189.2 % and negative 364.3 %, respectively.

Our effective tax rate for the three and six months ended January 31, 2024 differed from the U.S.

statutory tax rate primarily due to the release of our valuation allowance on U.S.

For the three and nine months ended April 30, 2024, our benefit from income taxes reflected effective tax rates of negative 11.0 % and negative 231.7 %, respectively.

Our effective tax rate for the three months ended April 30, 2024 differed from the U.S.

statutory tax rate primarily due to excess tax benefits from share-based compensation and the release of our valuation allowance on U.S.

federal, U.S.

states other than California, and United Kingdom (“U.K.”) deferred tax assets.

As a result of the valuation allowance release, during the three and six months ended January 31, 2024, we recognized a deferred tax benefit of $ 3.2 billion for the U.S.

Our effective tax rate for the nine months ended April 30, 2024 differed from the U.S.

statutory tax rate primarily due to the release of our valuation allowance on U.S.

federal, U.S.

1 unchanged sentence

deferred tax assets.

In addition, during the three and six months ended January 31, 2024, we recognized a deferred tax expense of $ 1.7 billion for the U.S.

As a result of the valuation allowance release, during the three and nine months ended April 30, 2024, we recognized a deferred tax benefit of $ 40.0 million and $ 3.3 billion, respectively, for the U.S.

federal, U.S.

states other than California, and U.K.

deferred tax assets.

In addition, during the three and nine months ended April 30, 2024, we recognized a deferred tax expense of $ 7.4 million and $ 1.7 billion, respectively, for the U.S.

federal indirect tax effect of foreign deferred taxes consistent with our policy to record deferred taxes for basis differences relating to our global intangible low-taxed income.

Accordingly, during the three and six months ended January 31, 2024, we recognized a net tax benefit of $ 1.5 billion relating to our valuation allowance release.

Accordingly, during the three and nine months ended April 30, 2024, we recognized a net tax benefit of $ 32.6 million and $ 1.6 billion, respectively, relating to our valuation allowance release.

Net Income Per Share

3 unchanged sentences

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

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

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

2025 2024 2025 2024

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The following securities were excluded from the computation of diluted net income 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 January 31, Six Months Ended January 31,

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

2025 2024 2025 2024

2 unchanged sentences

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

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

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

2025 2024 2025 2024

3 unchanged sentences

Total other income, net $ 92.4 $ 76.8 $ 261.0 $ 231.8

Subsequent Events

2025 Notes Conversion

Subsequent to January 31, 2025, $ 100.4 million in aggregate principal amount of the 2025 Notes was converted or had been submitted by the holders for conversion and will settle during the fiscal quarter ending April 30, 2025.

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