What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-06 compared with 2025-10-31 · 200 added, 91 removed, 303 unchanged (49% of the section changed)

12 unchanged sentences

Our deeply interconnected portfolio of apps, AI agents, and products, each with discrete value propositions, delivers solutions for software teams, IT operations and support teams, leadership, and business teams.

We’ve put AI at the center of our portfolio to enhance teamwork for users across our apps and Collections;

a carefully curated set of apps and agents designed to solve complex tasks.

We’ve put AI at the center of our portfolio to enhance teamwork for users across our apps and Collections, a carefully curated set of apps and agents designed to solve complex tasks.

These apps, agents, and Collections are all built on the Atlassian Cloud Platform and data model:

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In order to support customers who face unique requirements or challenges, we will offer an approximately three-year extended maintenance period for certain customers.

In the second quarter of fiscal 2026, we completed the acquisitions of The Browser Company of New York Inc.

(“BCNY”) and A Software Company (“DX”).

We believe integrating these technologies into our offerings will enhance customer value.

BCNY has built a browser for enterprises optimized for SaaS applications in the AI-era.

DX offers market-leading engineering intelligence that provides leaders with data-driven insights to understand how their

investments are helping teams accelerate and improve their work and enhances the value of the offerings in our Collections.

Economic Conditions

5 unchanged sentences

Restructuring

During the three months ended September 30, 2025, we initiated a rebalancing of resources resulting in the elimination of certain roles.

During the first quarter of fiscal 2026, we initiated a rebalancing of resources, resulting in the elimination of certain roles.

These actions were part of our initiatives to reduce additional capacity no longer necessary due to the increased ability, accessibility, performance, stability, and supportability of our products.

As a result, we recorded severance and other termination benefits of $27.9 million and stock-based compensation of $1.4 million for the affected employees for the three months ended September 30, 2025.

In addition, during the three months ended September 30, 2025, we exited certain floors of a leased property, which we plan to sublease, in order to optimize our real estate footprint.

As a result, we recorded impairment charges for the related operating lease right-of-use assets and leasehold improvements of $26.3 million for the three months ended September 30, 2025.

A summary of restructuring charges for the three months ended September 30, 2025 by major activity type is as follows (in thousands):

As a result, we recorded severance and other termination benefits of $27.9 million and stock-based compensation of $1.4 million for the affected employees for the six months ended December 31, 2025.

In addition, during the first quarter of fiscal 2026, we exited certain floors of a leased property, which we plan to sublease, in order to optimize our real estate footprint.

As a result, we recorded impairment charges for the related operating lease right-of-use assets and leasehold improvements of $26.3 million for the six months ended December 31, 2025.

A summary of restructuring charges for the six months ended December 31, 2025 by major activity type is as follows (in thousands):

Severance and Other Termination Benefits Stock-based Compensation Lease Consolidation Total

4 unchanged sentences

Total $ 27,889 $ 1,432 $ 26,357 $ 55,678

The execution of these actions, including cash payment of the severance and other termination benefits related liabilities, is expected to be substantially completed as of December 31, 2025.

The execution of these actions, including cash payment of the severance and other termination benefits related liabilities, was substantially completed as of December 31, 2025.

Refer to Note 14, “ Restructuring ,” in the notes of our condensed consolidated financial statements for additional information.

7 unchanged sentences

We define the number of total customers at the end of any particular period as the number of organizations with unique domains with an active subscription for two or more seats.

We define the number of customers with Cloud ARR greater than $10,000 using the same definition as total customers, with the distinction of having an active Cloud subscription and greater than $10,000 in Cloud ARR .

We define the number of customers with Cloud ARR greater than $10,000 using the same definition as total customers, with the distinction of having an

active Cloud subscription and greater than $10,000 in Cloud ARR .

We define Cloud ARR as the annualized recurring revenue run-rate of Cloud subscription agreements at a point in time.

We calculate Cloud ARR by taking the Cloud monthly recurring revenue (“Cloud MRR”) run-rate and multiplying it by 12.

Cloud MRR for each month is

calculated by aggregating monthly recurring revenue from committed contractual amounts at a point in time.

Cloud MRR for each month is calculated by aggregating monthly recurring revenue from committed contractual amounts at a point in time.

Cloud ARR and Cloud MRR should be viewed independently of revenue and do not represent our revenue under GAAP, as they are operational metrics that can be affected by contract start and end dates and renewal rates.

While a single customer may have distinct departments, operating segments, or subsidiaries with multiple active licenses or subscriptions of our apps, if the app deployments share a unique domain name, we only include the customer once for purposes of calculating a customer.

As of September 30, 2025, we had more than 300,000 customers.

As of December 31, 2025, we had more than 350,000 customers.

If we include single-user accounts and organizations that have only adopted our free or starter offerings, the active use of our offerings extends well beyond our total customer base.

2 unchanged sentences

The following table sets forth our number of customers with greater than $10,000 in Cloud ARR as of the dates presented:

September 30, 2024 December 31, 2024 March 31, 2025 June 30, 2025 September 30, 2025

December 31, 2024 March 31, 2025 June 30, 2025 September 30, 2025 December 31, 2025

Number of customers with greater than $10,000 in Cloud ARR 49,449 50,715 51,978 53,017 55,369

5 unchanged sentences

The following table presents a reconciliation of net cash provided by operating activities to free cash flow for the periods presented (in thousands):

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

2025 2024 2025 2024

Net cash provided by operating activities $ 177,805 $ 351,905 $ 306,519 $ 432,397

1 unchanged sentence

Free cash flow $ 168,516 $ 342,569 $ 283,118 $ 416,910

Free cash flow increased by $40.3 million during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024.

The increase in free cash flow was primarily attributable to an increase in net cash provided by operating activities.

The increase in net cash provided by operating activities was primarily attributable to an increase in cash received from customers, partially offset by an increase in cash paid to employees and vendors.

Free cash flow decreased by $174.1 million during the three months ended December 31, 2025, as compared to the three months ended December 31, 2024.

The decrease in free cash flow was primarily attributable to a decrease in net cash provided by operating activities.

The decrease in net cash provided by operating activities was primarily attributable to an increase in cash paid to employees, vendors, and cash paid for income taxes, partially offset by an increase in cash received from customers.

Free cash flow decreased by $133.8 million during the six months ended December 31, 2025 as compared to the six months ended December 31, 2025.

The decrease in free cash flow was primarily attributable to a decrease in net cash provided by operating activities.

For more information about net cash provided by operating activities, please see “Liquidity and Capital Resources.”

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Cost of Revenues

Cost of revenues primarily consists of expenses related to compensation expenses for our employees, including stock-based compensation, hosting our cloud infrastructure, which includes third-party hosting fees and depreciation associated with computer equipment, payment processing fees, consulting and contractors costs associated with our customer support and infrastructure service teams, amortization of acquired intangible assets, such as the amortization of the cost associated with an acquired company’s developed technology, certain IT program expenses, and facilities and related overhead costs.

Cost of revenues primarily consists of expenses related to hosting our cloud infrastructure, which includes third-party hosting fees and depreciation associated with computer equipment, compensation expenses for our employees, including stock-based compensation, payment processing fees, consulting and contractors costs associated with our customer support and infrastructure service teams, amortization of acquired intangible assets, such as the amortization of the cost associated with an acquired company’s developed technology, certain IT program expenses, and facilities and related overhead costs.

We expect cost of revenues to increase as we continue to invest in our cloud-based infrastructure to support our Cloud customers.

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Gross margin can fluctuate from period to period as a result of changes in product mix.

We expect gross margin to be approximately flat, driven by the optimization of Cloud infrastructure costs, offset by the revenue mix shift from Data Center offerings to Cloud offerings.

We expect gross margin to increase modestly, driven by optimization of our Cloud infrastructure and support costs, partially offset by the revenue mix shift from Data Center offerings to Cloud offerings.

Operating Expenses

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Actual results may differ from these estimates under different assumptions or conditions, and such differences could be material.

There have been no significant changes to our critical accounting policies and estimates during the three months ended September 30, 2025, as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Results of Operations included in our Annual Report on Form 10-K for fiscal year 2025.

Business Combinations

The allocation of the purchase price in a business combination requires management to make significant estimates in determining the fair value of acquired assets and assumed liabilities, especially with respect to intangible assets.

The excess of the purchase price in a business combination over the fair value of these tangible and intangible assets acquired and liabilities assumed is recorded as goodwill.

Critical assumptions used to estimate the fair value of intangible assets include projected revenue growth, discount rate, and technology migration curves.

These assumptions are inhere ntly uncertain and unpredictable and, as a result, actual results may differ from estimates.

We evaluate these estimates and assumptions as new information is obtained and may record adjustments to the fair value of the tangible and intangible assets acquired and liabilities assumed, but not later than one year from the acquisition date.

There have been no other significant changes to our critical accounting policies and estimates during the three and six months ended December 31, 2025, as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Results of Operations included in our Annual Report on Form 10-K for fiscal year 2025.

New Accounting Pronouncements Pending Adoption

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The following table sets forth our results of operations for the periods indicated (in thousands, except for percentages of total revenues):

Three Months Ended September 30,

2025 % of Total Revenues 2024 % of Total Revenues

Three Months Ended December 31, Six Months Ended December 31,

2025 % of Total Revenues 2024 % of Total Revenues 2025 % of Total Revenues 2024 % of Total Revenues

Subscription $ 1,507,656 95 % $ 1,213,248 94 % $ 2,882,158 95 % $ 2,345,196 95 %

15 unchanged sentences

Net loss $ (42,645) (3) % $ (38,208) (3) % $ (94,515) (3) % $ (161,977) (7) %

Three Months Ended September 30, 2025 and 2024

Three Months Ended September 30,

Three Months Ended December 31, 2025 and 2024

Three Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

2 unchanged sentences

Total revenues $ 1,586,315 $ 1,286,463 $ 299,852 23 %

Total revenues increased $244.8 million, or 21%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

Total revenues increased $299.9 million, or 23%, in the three months ended December 31, 2025 compared to the three months ended December 31, 2024.

Growth in total revenues was primarily attributable to increased demand for our offerings from existing customers.

Of total revenues recognized in the three months ended September 30, 2025, over 90% was attributable to sales to customer accounts existing on or before June 30, 2025.

Subscription revenues increased $242.6 million, or 21%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

Of total revenues recognized in the three months ended December 31, 2025, over 90% was attributable to sales to customer accounts existing on or before September 30, 2025.

Subscription revenues increased $294.4 million, or 24%, in the three months ended December 31, 2025 compared to the three months ended December 31, 2024.

The increase in subscription revenues was primarily attributable to paid seat expansion from our existing customers and price increases.

Other revenues increased $2.2 million, or 4%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

Other revenues increased $5.4 million, or 7%, in the three months ended December 31, 2025 compared to the three months ended December 31, 2024.

The increase in other revenues was primarily attributable to an increase of $4.9 million in marketplace revenue.

Total revenues by deployment options were as follows:

Three Months Ended September 30,

Three Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

4 unchanged sentences

Total revenues by geography were as follows:

Three Months Ended September 30,

Three Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

4 unchanged sentences

Cost of Revenues

Three Months Ended September 30,

Three Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

1 unchanged sentence

Gross margin 85 % 83 %

Cost of revenues increased $40.3 million, or 19%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

The overall increase was primarily attributable to restructuring charges of $31.6 million, which were composed of $29.2 million of severance and other termination benefits, and $2.4 million related to impairment charges for a lease and leasehold improvements, as well as an increase of $14.4 million in hosting fees.

Cost of revenues increased $14.6 million, or 7%, in the three months ended December 31, 2025 compared to the three months ended December 31, 2024.

The overall increase was primarily attributable to an increase of $23.0 million in hosting fees and an increase of $9.6 million in amortization expense, partially offset by a decrease of $13.6 million in compensation expense for employees (which includes a decrease of $2.9 million in stock-based compensation) and a decrease of $4.0 million in consulting and other professional fees.

Operating Expenses

Research and Development

Three Months Ended September 30,

Three Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Research and development $ 826,489 $ 680,213 $ 146,276 22 %

Research and development expenses increased $152.9 million, or 25%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

Research and development expenses increased $146.3 million, or 22%, in the three months ended December 31, 2025 compared to the three months ended December 31, 2024.

The overall increase was primarily attributable to an increase of $141.8 million in compensation expenses for employees (which includes an increase of $64.6 million in stock-based compensation ).

In addition, we recorded restructuring charges of $12.1 million in the three months ended September 30, 2025 related to impairment charges for a lease and leasehold improvements.

Marketing and Sales

Three Months Ended September 30,

Three Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Marketing and sales $ 376,434 271,894 $ 104,540 38 %

Marketing and sales expenses increased $84.0 million , or 33%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 .

Marketing and sales expenses increased $104.5 million , or 38%, for the three months ended December 31, 2025 compared to the three months ended December 31, 2024 .

The overall increase was primarily attributable to an increase of $64.0 million in compensation expenses for employees (which includes an increase of $12.2 million in stock-based compensation) , and an increase of $29.7 million in advertising and marketing program expenses.

In addition, we recorded restructuring charges of $8.2 million in the three months ended September 30, 2025 related to impairment charges for a lease and leasehold improvements.

General and Administrative

Three Months Ended September 30,

Three Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

General and administrative $ 193,448 168,708 $ 24,740 15 %

General and administrative expenses increased $31.9 million, or 22%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024 .

The overall increase was primarily attributable to an increase of $19.6 million in compensation expense for employees (which includes an increase of $2.2 million in stock-based compensation), and an increase of $4.4 million in legal fees.

In addition, we recorded restructuring charges of $3.7 million in the three months ended September 30, 2025 related to impairment charges for a lease and leasehold improvements.

General and administrative expenses increased $24.7 million, or 15%, in the three months ended December 31, 2025 compared to the three months ended December 31, 2024 .

The overall increase was primarily attributable to an increase of $16.7 million in compensation expense for employees, an increase of $2.5 million in software subscription related expense and an increase of $1.7 million in professional service fees.

Other Expense, net

Three Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Other expense, net $ (13,550) $ (7,999) $ (5,551) 69 %

Other expense, net increased $5.6 million, or 69%, in the three months ended December 31, 2025, compared to the three months ended December 31, 2024.

The overall increase in other expense was primarily attributable to an increase of $6.5 million in realized loss on strategic investments.

Interest Income

Three Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Interest income 18,065 25,586 $ (7,521) (29) %

Interest income decreased $7.5 million, or (29)% in the three months ended December 31, 2025, compared to the three months ended December 31, 2024 .

The decrease was primarily attributable to a decrease in investment income as a result of decreased invested cash balances.

Interest Expense

Three Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Interest expense $ (12,525) $ (7,291) $ (5,234) 72 %

Interest expense increased $5.2 million, or 72% in the three months ended December 31, 2025 compared to the three months ended December 31, 2024 .

The increase was primarily attributable to the amortization of interest rate swap contracts.

Benefit from Income Taxes

Three Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Benefit from income taxes $ (13,112) $ (8,975) $ (4,137) *

Effective tax rate * *

* Not meaningful

Benefit from income taxes increased $4.1 million for the three months ended December 31, 2025, as compared to the three months ended December 31, 2024.

The increase was primarily attributable to the partial release of valuation allowance on certain U.S.

deferred tax assets resulting from the recognition of additional deferred tax liabilities in connection with the business combinations and the change in the mix of earnings and losses in foreign jurisdictions.

See Note 7, “Business Combinations,” and Note 17, “ Income Taxes ,” of the notes to our condensed consolidated financial statements for additional information.

Our future effective annual tax rate may be materially affected by the expense or benefit from tax amounts associated with our foreign earnings that are taxed at rates different from the federal statutory rate, level of profit before tax, accounting for uncertain tax positions, business combinations, changes in our valuation allowances to the extent sufficient positive evidence becomes available, closure of statute of limitations or settlement of tax audits, and changes in tax laws.

A significant amount of our earnings is generated by our Australian subsidiaries.

Our future effective tax rates may be adversely affected to the extent earnings are lower than anticipated in countries where we have lower statutory tax rates.

Changes in our global operations could result in changes to our effective tax rates, future cash flows, and overall profitability of our operations.

We recognize the tax benefit of an uncertain tax position only if we conclude it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits.

The tax benefit recognized is measured as the largest amount of benefit which is greater than 50 percent likely to be realized upon settlement with the taxing authority.

We believe we have provided adequate reserves for income tax uncertainties in all open tax years.

Based on the information currently available, we do not anticipate a material change in unrecognized tax benefits in the next 12 months.

On July 4, 2025, the U.S.

government enacted The One Big Beautiful Bill Act (“OBBBA”), which includes, among other provisions, changes to the U.S.

corporate income tax system such as allowing the immediate expensing of qualifying domestic research and development costs and permanent extensions of certain provisions within the Tax Cuts and Jobs Act.

Certain provisions are effective for us beginning in fiscal year 2026.

The changes had an immaterial impact on our income tax benefit for the three and six months ended December 31, 2025 and we currently do not anticipate these changes to have a material impact on our results for fiscal year 2026.

We will continue to monitor any developments and guidance related to OBBBA.

The Organization for Economic Co-operation and Development introduced a framework for a global minimum corporate income tax of 15% known as the Global Anti-Base Erosion rules.

This legislation has been enacted in certain jurisdictions where we operate and is effective for our fiscal year 2026.

As of December 31, 2025, the global minimum tax does not have a significant impact on our financial statements.

As additional jurisdictions enact legislation, transitional rules lapse, and other provisions of the global minimum tax legislation become effective, our effective tax rate and cash tax payments may increase in future years.

Six Months Ended December 31, 2025 and 2024

Six Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Subscription $ 2,882,158 $ 2,345,196 $ 536,962 23 %

Other 136,710 129,048 7,662 6

Total revenues $ 3,018,868 $ 2,474,244 $ 544,624 22 %

Total revenues increased $544.6 million, or 22%, in the six months ended December 31, 2025 compared to the six months ended December 31, 2024.

Growth in total revenues was primarily attributable to increased demand for our products from existing customers.

Of total revenues recognized in the six months ended December 31, 2025, over 90% was attributable to sales to customer accounts existing on or before June 30, 2025.

Subscription revenues increased $537.0 million, or 23%, in the six months ended December 31, 2025 compared to the six months ended December 31, 2024.

The increase in subscription revenues was primarily attributable to paid seat expansion from our existing customers and price increases.

Other revenues increased $7.7 million, or 6%, in the six months ended December 31, 2025 compared to the six months ended December 31, 2024.

The increase in other revenues was primarily attributable to an increase of $7.9 million in marketplace revenue.

Total revenues by deployment options were as follows:

Six Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Cloud $ 2,064,735 $ 1,639,268 $ 425,467 26 %

Data Center 808,264 697,875 110,389 16

Marketplace and other 145,869 137,101 8,768 6

Total revenues $ 3,018,868 $ 2,474,244 $ 544,624 22 %

Total revenues by geography were as follows:

Six Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Americas $ 1,452,034 $ 1,203,664 $ 248,370 21 %

EMEA 1,229,419 994,751 234,668 24

Asia Pacific 337,415 275,829 61,586 22

Total revenues $ 3,018,868 $ 2,474,244 $ 544,624 22 %

Cost of Revenues

Six Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Cost of revenues $ 495,615 $ 440,751 $ 54,864 12 %

Gross margin 84 % 82 %

Cost of revenues increased $54.9 million, or 12%, in the six months ended December 31, 2025 compared to the six months ended December 31, 2024.

The overall increase was primarily attributable to an increase of $37.4 million in hosting fees paid to third-party providers.

In addition, we recorded restructuring charges of $31.6 million in the six months ended December 31, 2025, which were composed of $29.2 million of severance and other termination benefits, and $2.4 million of impairment charges for a lease and leasehold improvements.

The increase was partially offset by a decrease of $6.8 million in fees paid for consulting and other professional services.

Operating Expenses

Research and Development

Six Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Research and development $ 1,582,483 $ 1,283,314 $ 299,169 23 %

Research and development expenses increased $299.2 million, or 23%, in the six months ended December 31, 2025 compared to the six months ended December 31, 2024.

The overall increase was primarily attributable to an increase of $278.3 million in compensation expenses for employees (which includes an increase of $117.6 million in stock-based compensation ).

In addition, we recorded restructuring charges of $12.1 million in the six months ended December 31, 2025 , related to impairment charges for a lease and leasehold improvements.

Marketing and Sales

Six Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Marketing and sales $ 712,861 $ 524,287 $ 188,574 36 %

Marketing and sales expenses increased $188.6 million, or 36%, for the six months ended December 31, 2025 , compared to the six months ended December 31, 2024 .

The overall increase was primarily attributable to an increase of $109.8 million in compensation expenses for employees (which includes an increase of $20.2 million in stock-based compensation), and an increase of $50.9 million in advertising and marketing program expenses.

In addition, we recorded restructuring charges of $8.2 million in the six months ended December 31, 2025 , related to impairment charges for a lease and leasehold improvements.

General and Administrative

Six Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

General and administrative $ 371,993 $ 315,349 $ 56,644 18 %

General and administrative expenses increased $56.6 million, or 18%, in the six months ended December 31, 2025 compared to the six months ended December 31, 2024 .

The overall increase was primarily attributable to an increase of $36.4 million in compensation expenses for employees (which includes an increase of $2.2 million in stock-based compensation) and an increase of $6.2 million in professional service fees .

In addition, we recorded restructuring charges of $3.7 million in the six months ended December 31, 2025 , related to impairment charges for a lease and leasehold improvements.

Other Income (Expense), net

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Other income (expense), net $ 5,254 $ (27,431) $ 32,685 (119) %

Other income (expense), net increased $38.2 million, or 197%, in the three months ended September 30, 2025, compared to the three months ended September 30, 2024.

The overall increase in other income (expense) was primarily attributable to an increase of $24.7 million in unrealized gains on public equity investments and a decrease of $15.3 million in expense r elated to our share of loss from an equity method investment.

Other income (expense), net increased $32.7 million, or 119% in the six months ended December 31, 2025 compared to the six months ended December 31, 2024.

The overall increase in other income was primarily attributable to an increase of $24.7 million in unrealized gains on public equity investments and a decrease of $15.3 million in expenses related to our share of loss from an equity method investment.

Interest Income

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Interest income $ 47,910 $ 54,150 $ (6,240) (12) %

Interest income increased $1.3 million, or 4% in the three months ended September 30, 2025 compared to the three months ended September 30, 2024 .

The increase was primarily attributable to an increase in investment income as a result of increased invested cash balances.

Interest income decreased $6.2 million , or 12% in the six months ended December 31, 2025 compared to the six months ended December 31, 2024 .

The decrease was primarily attributable to a decrease in our portfolio yield due to declining interest rates.

Interest Expense

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

Interest expense $ (21,161) $ (14,609) $ (6,552) 45 %

Interest expense increased $1.3 million, or 18% in the three months ended September 30, 2025 compared to the three months ended September 30, 2024 .

Interest expense increased $6.6 million, or 45%, in the six months ended December 31, 2025 compared to the six months ended December 31, 2024 .

The increase was primarily attributable to the amortization of interest rate swap contracts.

Provision for (Benefit from) Income Taxes

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands, except percentage data) 2025 2024 $ Change % Change

2 unchanged sentences

* Not meaningful

Provision for (benefit from) income taxes decreased $98.1 million for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024.

The decrease was primarily attributable to the change in the mix of earnings and losses in foreign jurisdictions.

See Note 17, “ Income Taxes ,” of the notes to our condensed consolidated financial statements for additional information.

the extent sufficient positive evidence becomes available, closure of statute of limitations or settlement of tax audits, and changes in tax laws.

Provision for (benefit from) income taxes decreased $102.2 million for the six months ended December 31, 2025, as compared to the six months ended December 31, 2024.

The decrease was primarily attributable to the change in the mix of earnings and losses in foreign jurisdictions and the partial release of valuation allowance on certain U.S.

deferred tax assets resulting from the recognition of additional deferred tax liabilities in connection with the business combinations.

See Note 7, “Business Combinations,” and Note 17, “ Income Taxes ,” of the notes to our condensed consolidated financial statements for additional information.

Our future effective annual tax rate may be materially impacted by the expense or benefit from tax amounts associated with our foreign earnings that are taxed at rates different from the federal statutory rate, level of profit before tax, accounting for uncertain tax positions, business combinations, changes in our valuation allowances to the extent sufficient positive evidence becomes available, closure of statute of limitations or settlement of tax audits, and changes in tax laws.

A significant amount of our earnings is generated by our Australian subsidiaries.

6 unchanged sentences

On July 4, 2025, the U.S.

government enacted The One Big Beautiful Bill Act (“OBBBA”), which includes, among other provisions, changes to the U.S.

government enacted OBBBA, which includes, among other provisions, changes to the U.S.

Certain provisions are effective for us beginning in fiscal year 2026.

The changes had an immaterial impact on our income tax benefit for the three months ended September 30, 2025 and we currently do not anticipate these changes to have a material impact on our results for fiscal year 2026.

We will continue to monitor any developments and guidance related to OBBBA.

1 unchanged sentence

This legislation has been enacted in certain jurisdictions where we operate and is effective for our fiscal year 2026.

As of September 30, 2025, the global minimum tax does not have a significant impact on our financial statements.

As of December 31, 2025, the global minimum tax does not have a significant impact on our financial statements.

Liquidity and Capital Resources

As of September 30, 2025, we had cash and cash equivalents totaling $2.3 billion, marketable securities totaling $456.0 million, and accounts receivable totaling $536.9 million.

As of December 31, 2025, we had cash and cash equivalents totaling $1.2 billion, marketable securities totaling $407.9 million, and accounts receivable totaling $911.9 million.

Since our inception, we have primarily financed our operations through cash flows generated by operations and corporate debt.

Our cash flows from operating activities, investing activities, and financing activities for the periods presented were as follows (in thousands):

Three Months Ended September 30,

Six Months Ended December 31,

Net cash provided by operating activities $ 306,519 $ 432,397

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Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash (6,752) (5,492)

Net decrease in cash, cash equivalents, and restricted cash $ (190,707) $ (121,387)

Net increase (decrease) in cash, cash equivalents, and restricted cash $ (1,355,065) $ 40,517

Our primary source of cash is collections from our customers.

Our primary uses of cash from operating activities are general business expenses, including employment expenses, cloud platform and other infrastructure services, income taxes, professional services fees, marketing expenses, software expenses, and facility expenses.

Net cash provided by operating activities increased by $48.2 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024.

The net increase was primarily attributable to an increase in cash received from customers, partially offset by an increase in cash paid to employees and vendors.

Net cash used in investing activities increased by $42.0 million during the three months ended September 30, 2025, compared to the three months ended September 30, 2024.

The net increase was primarily attributable to an increase in net outflows of $23.3 million related to our strategic investment and marketable security activity and an increase in cash consideration paid for acquisitions, net of cash acquired of approximately $10.7 million.

Net cash used in financing activities increased by $66.1 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024.

Net cash provided by operating activities decreased by $125.9 million for the six months ended December 31, 2025, compared to the six months ended December 31, 2024.

The net decrease was primarily attributable to an increase in cash paid to employees, vendors, and cash paid for income taxes, partially offset by an increase in cash received from customers.

Net cash used in investing activities increased by $1,074.2 million during the six months ended December 31, 2025, compared to the six months ended December 31, 2024.

The net increase was primarily attributable to an increase in cash consideration paid for acquisitions, net of cash acquired of approximately $1,223.9 million.

Net cash used in financing activities increased by $194.3 million for the six months ended December 31, 2025, compared to the six months ended December 31, 2024.

The net increase was primarily attributable to an increase in repurchases of Class A Common Stock of $197.4 million.

Material Cash Requirements

As of September 30, 2025 , we had $500.0 million aggregate principal amount of 5.250% senior notes due 2029 (the “2029 Notes”) and $500.0 million aggregate principal amount of 5.500% senior notes due 2034 (the “2034 Notes,” and together with the 2029 Notes, the “Notes”).

As of December 31, 2025 , we had $500.0 million aggregate principal amount of 5.250% senior notes due 2029 (the “2029 Notes”) and $500.0 million aggregate principal amount of 5.500% senior notes due 2034 (the “2034 Notes,” and together with the 2029 Notes, the “Notes”).

The 2029 Notes and the 2034 Notes will mature on May 15, 2029, and May 15, 2034, respectively.

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The 2024 Credit Facility matures in August 2029.

As of September 30, 2025, there were no borrowings under the 2024 Credit Facility.

As of December 31, 2025, there were no borrowings under the 2024 Credit Facility.

Refer to Note 10, “ Debt, ” to our condensed consolidated financial statements for additional information.

Share Repurchase Program

In January 2023, the Board of Directors authorized a program to repurchase up to $1.0 billion of our outstanding Class A Common Stock (the “2023 Repurchase Program”).

In September 2024, the Board of Directors authorized a new program under which we may repurchase up to an additional $1.5 billion of our outstanding Class A Common Stock (the “2024 Repurchase Program” and, together with the 2023 Repurchase Program, the “Repurchase Programs”).

The 2024 Repurchase Program commenced in April 2025 following completion of the 2023 Repurchase Program.

The 2024 Share Repurchase Program does not have a fixed expiration date, may be suspended or discontinued at any time, and does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares.

During the three months ended September 30, 2025, we repurchased and subsequently retired approximately 1.4 million shares of our Class A Common Stock for approximately $249.9 million at an average price per share of $180.74.

In September 2024, the Board of Directors authorized a program to repurchase up to $1.5 billion of our outstanding Class A Common Stock (the “2024 Repurchase Program”).

The 2024 Repurchase Program commenced in April 2025 following completion of the prior repurchase program.

In October 2025, the Board of Directors authorized a new program under which we may repurchase up to an additional $2.5 billion of the Company’s outstanding Class A Common Stock (the “2025 Repurchase Program” and, together with the 2024 Repurchase Program, the “Repurchase Programs”).

The 2025 Repurchase Program will commence following completion of the 2024 Repurchase Program.

The Repurchase Programs do not have a fixed expiration date, may be suspended or discontinued at any time, and do not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares.

During the three and six months ended December 31, 2025, we repurchased and subsequently retired approximately 1.3 million and 2.7 million shares of Class A Common Stock for approximately $200.4 million and $450.3 million at an average price per share of $156.74 and $169.21, respectively.

All repurchases were made in open market transactions.

As of September 30, 2025, $921.3 million of our Class A Common Stock remained available for repurchase under the 2024 Repurchase Program.

As of December 31, 2025, $720.9 million and $2.5 billion of Class A Common Stock remained available for repurchase under the 2024 Share Repurchase Program and 2025 Share Repurchase Program, respectively.

Contractual Obligations

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Other Future Obligations

On October 20, 2025, we acquired 100% of the outstanding equity of The Browser Company of New York Inc.

(“BCNY”), the company behind the Dia and Arc browsers.

Under the terms of the agreement, we acquired BCNY for approximately $610 million.

Total purchase price consideration was composed of approximately $488.3 million in cash, which was funded through our existing cash balance, and the remainder in the form of shares of our Class A Common Stock, which are subject to continued vesting provisions.

In September 2025, we entered into a definitive agreement to acquire A Software Company (“ DX”), a leader in engineering intelligence.

Under the terms of the agreement, we will acquire DX for approximately $1.0 billion , inclusive of DX’s cash balance, subject to customary adjustments.

Total consideration will be comprised of cash and shares of our Class A Common Stock, which are subject to continued vesting provisions.

We expect to fund the cash consideration through existing cash balances.

We anticipate the transaction to close in the second quarter of fiscal year 2026, subject to customary closing conditions, including required regulatory approvals .

We believe that our existing cash and cash equivalents, together with cash generated from operations, and borrowing capacity from the 2024 Credit Facility will be sufficient to meet our anticipated cash needs for at least the next 12 months.

Our other future cash requirements will depend on many factors including our growth rate, the timing and extent of spend on research and development efforts, employee headcount, marketing and sales activities, payments to tax authorities, acquisitions of additional businesses and technologies, the introduction of new software and services offerings, enhancements to our existing software and services offerings and the continued market acceptance of our offerings.

As of September 30, 2025, we are not party to any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

As of December 31, 2025, we are not party to any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

Non-GAAP Financial Measures

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We compensate for such limitations by reconciling these Non-GAAP Financial Measures to the most comparable GAAP financial measures.

The following table presents a reconciliation of our Non-GAAP Financial Measures to the most comparable GAAP financial measure for the three months ended September 30, 2025 and 2024 (in thousands, except percentage and per share data):

Three Months Ended September 30,

The following table presents a reconciliation of our Non-GAAP Financial Measures to the most comparable GAAP financial measure for the three and six months ended December 31, 2025 and 2024 (in thousands, except percentage and per share data):

Three Months Ended December 31, Six Months Ended December 31,

2025 2024 2025 2024

GAAP gross profit $ 1,348,624 $ 1,063,336 $ 2,523,253 $ 2,033,493

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Additionally, we considered our current operating structure and other factors such as our existing tax positions in various jurisdictions and key legislation in major jurisdictions where we operate.

For fiscal year 2026 and 2025, we determined the projected non-GAAP tax rate to be 24% and 26%, respectively.

For fiscal years 2026 and 2025, we determined the projected non-GAAP tax rate to be 24% and 26%, respectively.

This fixed long-term projected non-GAAP tax rate eliminates the effects of non-recurring and period-specific items which can vary in size and frequency.

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The rate could be subject to change for a variety of reasons, for example, significant changes in the geographic earnings mix or fundamental tax law changes in major jurisdictions where we operate.

(2) The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for the three months ended September 30, 2025 and September 30, 2024 because the effect would have been anti-dilutive.

(3) Restructuring charges include stock-based compensation expense related to the rebalancing of resources for the three months ended September 30, 2025.

(2) The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for the three and six months ended December 31, 2025 and December 31, 2024 because the effect would have been anti-dilutive.

(3) Restructuring charges include stock-based compensation expense related to the rebalancing of resources for the six months ended December 31, 2025.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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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