What changed in this filing

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Item 1. Financial Statements

2023-11-28 compared with 2023-08-24 · 132 added, 108 removed, 617 unchanged (28% of the section changed)

3 unchanged sentences

(in thousands)

July 31, 2023 January 31, 2023

October 31, 2023 January 31, 2023

Current assets:

37 unchanged sentences

(in thousands, except per share data)

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

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

2023 2022 2023 2022

19 unchanged sentences

(1) Costs and expenses include share-based compensation expenses as follows:

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

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

2023 2022 2023 2022

9 unchanged sentences

(in thousands)

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

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

2023 2022 2023 2022

11 unchanged sentences

(in thousands)

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

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

2023 2022 2023 2022

2 unchanged sentences

Issuance of common stock under employee equity plans, net of shares withheld for employee taxes 1 1 5 5

Settlement of convertible senior notes — 1 — 1

Balance, end of period 264 257 264 257

20 unchanged sentences

Total stockholders’ equity $ 6,624,917 $ 5,409,108 $ 6,624,917 $ 5,409,108

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

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

2023 2022 2023 2022

10 unchanged sentences

(in thousands)

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

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

2023 2022 2023 2022

7 unchanged sentences

(Gains) losses on investments 9,488 ( 3,833 ) 16,764 20,746

Accretion of discounts on marketable debt securities, net ( 39,379 ) ( 13,121 ) ( 111,180 ) ( 15,797 )

Other ( 10,037 ) 16,372 ( 19,696 ) 31,170

Changes in operating assets and liabilities:

Changes in operating assets and liabilities, net of business combinations:

Trade and other receivables, net 37,719 61,885 327,647 200,008

11 unchanged sentences

Capital expenditures, excluding owned real estate projects ( 58,524 ) ( 58,665 ) ( 181,053 ) ( 286,013 )

Business combinations, net of cash acquired ( 8,517 ) — ( 8,517 ) —

Purchase of other intangible assets ( 700 ) ( 700 ) ( 10,200 ) ( 700 )

15 unchanged sentences

See Notes to Condensed Consolidated Financial Statements

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

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

2023 2022 2023 2022

4 unchanged sentences

Purchases of property and equipment, accrued but not paid 18,094 68,028 18,094 68,028

As of July 31,

As of October 31,

Reconciliation of cash, cash equivalents, and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows:

20 unchanged sentences

All such adjustments are of a normal, recurring nature.

The results of operations for the three and six months ended July 31, 2023, shown in this report are not necessarily indicative of the results to be expected for the full fiscal year ending January 31, 2024.

The results of operations for the three and nine months ended October 31, 2023, shown in this report are not necessarily indicative of the results to be expected for the full fiscal year ending January 31, 2024.

The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed with the SEC on February 27, 2023.

Certain prior period amounts reported in our unaudited condensed consolidated financial statements and notes thereto have been reclassified to conform to current period presentation.

Use of Estimates

5 unchanged sentences

This change in accounting estimate was effective beginning fiscal 2024.

Based on the carrying amount of data center equipment that was in-service as of January 31, 2023, this change decreased depreciation expense by $ 25 million and $ 55 million for the three and six months ended July 31, 2023, respectively.

Based on the carrying amount of data center equipment that was in-service as of January 31, 2023, this change decreased depreciation expense by $ 22 million and $ 77 million for the three and nine months ended October 31, 2023, respectively.

Segment Information

1 unchanged sentence

Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by a chief operating decision maker (“CODM”) in deciding how to allocate resources and assessing performance.

For the six months ended July 31, 2023, our co-chief executive officers together served as CODM for purposes of segment reporting.

For the nine months ended October 31, 2023, our co-chief executive officers together served as CODM for purposes of segment reporting.

Our CODM allocates resources and assesses performance based upon discrete financial information at the consolidated level.

5 unchanged sentences

Our deposits exceed federally insured limits.

No customer individually accounted for more than 10% of trade and other receivables, net as of July 31, 2023, or January 31, 2023.

No customer individually accounted for more than 10% of total revenues during the three and six months ended July 31, 2023, or 2022.

Other than the United States, no country individually accounted for more than 10% of total revenues during the three and six months ended July 31, 2023, or 2022.

In order to reduce the risk of down-time of our cloud applications, we have established data centers in various geographic regions.

No customer individually accounted for more than 10% of trade and other receivables, net as of October 31, 2023, or January 31, 2023.

No customer individually accounted for more than 10% of total revenues during the three and nine months ended October 31, 2023, or 2022.

Other than the United States, no country individually accounted for more than 10% of total revenues during the three and nine months ended October 31, 2023, or 2022.

In order to reduce the risk of disruption of our cloud applications, we have established data centers in various geographic regions.

We serve our customers and users from data center facilities operated by third parties, located in the United States, Canada, and Europe.

4 unchanged sentences

We are also exposed to concentration of risk in our equity investments portfolio, which consists of marketable equity investments and non-marketable equity investments measured using the measurement alternative.

As of both July 31, 2023, and January 31, 2023, we held one marketable equity investment with a carrying value that was individually greater than 10% of our total equity investments portfolio.

As of both October 31, 2023, and January 31, 2023, we held one marketable equity investment with a carrying value that was individually greater than 10% of our total equity investments portfolio.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires disclosure of incremental segment information on an annual and interim basis.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements.

We are currently evaluating the impacts of the new standard.

Debt Securities

As of July 31, 2023, debt securities consisted of the following (in thousands):

As of October 31, 2023, debt securities consisted of the following (in thousands):

Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value

15 unchanged sentences

Included in Marketable securities $ 4,169,980 $ 1,694 $ ( 17,357 ) $ 4,154,317

The contractual maturities of the debt securities were as follows (in thousands):

July 31, 2023

The contractual maturities of debt securities were as follows (in thousands):

October 31, 2023

Due within 1 year $ 3,885,682

4 unchanged sentences

Debt securities included in Marketable securities on the Condensed Consolidated Balance Sheets consist of securities with original maturities at the time of purchase greater than three months, and the remaining securities are included in Cash and cash equivalents.

As of July 31, 2023, and January 31, 2023, the fair value of debt securities in an unrealized loss position was $ 4.1 billion and $ 3.1 billion, respectively, the majority of which had been in a continuous unrealized loss position for less than 12 months.

As of October 31, 2023, and January 31, 2023, the fair values of debt securities in an unrealized loss position were $ 4.3 billion and $ 3.1 billion, respectively, the majority of which had been in a continuous unrealized loss position for less than 12 months.

We did not recognize any credit or non-credit related losses related to our debt securities during the periods presented.

We sold $ 6 million and $ 18 million of debt securities during the three and six months ended July 31, 2023, respectively.

We sold $ 28 million of debt securities during the three and six months ended July 31, 2022.

We sold $ 24 million and $ 20 million of debt securities during the three months ended October 31, 2023, and 2022, respectively.

We sold $ 42 million and $ 48 million of debt securities during the nine months ended October 31, 2023, and 2022, respectively.

The realized gains and losses from the sales were immaterial.

1 unchanged sentence

Equity investments consisted of the following (in thousands):

Condensed Consolidated Balance Sheets Location July 31, 2023 January 31, 2023

Condensed Consolidated Balance Sheets Location October 31, 2023 January 31, 2023

Money market funds Cash and cash equivalents $ 675,910 $ 902,226

3 unchanged sentences

Total realized and unrealized gains and losses associated with our equity investments consisted of the following (in thousands):

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

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

2023 2022 2023 2022

8 unchanged sentences

The carrying values for our non-marketable equity investments are summarized below (in thousands):

July 31, 2023 January 31, 2023

October 31, 2023 January 31, 2023

Total initial cost $ 207,485 $ 206,833

1 unchanged sentence

Carrying value $ 250,311 $ 261,922

During the three months ended July 31, 2023, we recorded impairment losses of $ 10 million to the carrying value of non-marketable equity investments.

During the three months ended July 31, 2022, we recorded upward adjustments to the carrying value of non-marketable equity investments of $ 3 million and no material impairment losses.

During the six months ended July 31, 2023, we recorded impairment losses of $ 12 million to the carrying value of non-marketable equity investments.

During the six months ended July 31, 2022, we recorded upward adjustments to the carrying value of non-marketable equity investments of $ 6 million and impairment losses of $ 14 million.

During the three months ended October 31, 2023, we recorded impairment losses of $ 9 million to the carrying value of non-marketable equity investments.

During the three months ended October 31, 2022, we recorded upward adjustments to the carrying value of non-marketable equity investments of $ 2 million, impairment losses of $ 2 million, and a gain of $ 4 million upon exiting a non-marketable equity investment.

During the nine months ended October 31, 2023, we recorded impairment losses of $ 22 million to the carrying value of non-marketable equity investments.

During the nine months ended October 31, 2022, we recorded upward adjustments to the carrying value of non-marketable equity investments of $ 8 million, impairment losses of $ 10 million, and a net loss of $ 2 million upon exiting a non-marketable equity investment.

Marketable Equity Investments

1 unchanged sentence

The carrying values for our marketable equity investments are summarized below (in thousands):

July 31, 2023 January 31, 2023

October 31, 2023 January 31, 2023

Total initial cost $ 14,817 $ 38,449

2 unchanged sentences

$ 29,173 $ 80,766

During the three months ended July 31, 2023, we sold marketable equity investments for proceeds of $ 20 million and net realized gains of $ 2 million.

We did no t sell any marketable equity investments during the three months ended July 31, 2022.

During the six months ended July 31, 2023, and 2022, we sold marketable equity investments for proceeds of $ 30 million and $ 5 million, respectively, with corresponding net realized gains of $ 1 million and $ 1 million, respectively.

During the three months ended July 31, 2023, and 2022, we recorded unrealized net gains of $ 8 million and net losses of $ 20 million, respectively, on marketable equity investments held as of the end of each period.

During the six months ended July 31, 2023, and 2022, we recorded unrealized net gains of $ 4 million and net losses of $ 17 million, respectively, on marketable equity investments held as of the end of each period.

During the three months ended October 31, 2023, we sold marketable equity investments for proceeds of $ 22 million.

We did no t sell any marketable equity investments during the three months ended October 31, 2022.

During the nine months ended October 31, 2023, and 2022, we sold marketable equity investments for proceeds of $ 52 million and $ 5 million, respectively.

The realized gains and losses from the sales were immaterial.

For the marketable equity investments held as of the end of each period, we recorded unrealized net losses of $ 4 million during the three months ended October 31, 2023, no material unrealized net gains or losses during the three months ended October 31, 2022, and unrealized net losses of $ 2 million and $ 17 million during the nine months ended October 31, 2023, and 2022, respectively.

Fair Value Measurements

6 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of July 31, 2023 (in thousands):

Level 1 Level 2 Level 3 Total

29 unchanged sentences

Deferred Costs

Deferred costs, which consist of deferred sales commission s, w ere $ 614 million and $ 612 million as of July 31, 2023, and January 31, 2023, respectively.

Amortization expense for the deferred costs was $ 52 million and $ 43 million for the three months ended July 31, 2023, and 2022, respectively, and $ 101 million and $ 82 million for the six months ended July 31, 2023, and 2022, respectively.

Deferred costs, which consist of deferred sales commissions, were $ 640 million and $ 612 million as of October 31, 2023, and January 31, 2023, respectively.

Amortization expense for the deferred costs was $ 54 million and $ 45 million for the three months ended October 31, 2023, and 2022, respectively, and $ 155 million and $ 127 million for the nine months ended October 31, 2023, and 2022, respectively.

There was no impairment loss in relation to the costs capitalized for the periods presented.

1 unchanged sentence

Property and equipment, net consisted of the following (in thousands):

July 31, 2023 January 31, 2023

October 31, 2023 January 31, 2023

Computers, equipment, and software $ 1,348,381 $ 1,286,540

6 unchanged sentences

Property and equipment, net $ 1,206,564 $ 1,201,254

Depre ciation expense totaled $ 49 million and $ 71 million for the three months ended July 31, 2023, and 2022, respectively, and $ 97 million and $ 138 million for the six months ended July 31, 2023, and 2022, respectively.

Depre ciati on expense totaled $ 52 million and $ 69 million for the three months ended October 31, 2023, and 2022, respectively, and $ 149 million and $ 207 million for the nine months ended October 31, 2023, and 2022, respectively.

Acquisition-Related Intangible Assets, Net

Acquisition-related intangible assets, net consisted of the following (in thousands):

July 31, 2023 January 31, 2023

October 31, 2023 January 31, 2023

Developed technology $ 326,800 $ 342,700

5 unchanged sentences

Acquisition-related intangible assets, net $ 249,242 $ 305,465

Amortization expense related to acquisition-related intangible assets was $ 21 million and $ 21 million for the three months ended July 31, 2023, and 2022, respectively, and $ 42 million and $ 43 million for the six months ended July 31, 2023, and 2022, respectively.

As of July 31, 2023, our future estimated amortization expense related to acquisition-related intangible assets was as follows (in thousands):

Amortization expense related to acquisition-related intangible assets was $ 16 million and $ 21 million for the three months ended October 31, 2023, and 2022, respectively, and $ 58 million and $ 64 million for the nine months ended October 31, 2023, and 2022, respectively.

As of October 31, 2023, our future estimated amortization expense related to acquisition-related intangible assets was as follows (in thousands):

Fiscal Period:

2 unchanged sentences

Total $ 249,242

Other Noncurrent Assets

Other noncurrent assets consisted of the following (in thousands):

July 31, 2023 January 31, 2023

October 31, 2023 January 31, 2023

Non-marketable equity and other investments $ 250,311 $ 263,485

Derivative assets 37,725 21,757

Technology patents and other intangible assets, net 27,175 20,534

Prepayments for goods and services 16,463 23,466

Derivative assets 14,676 21,757

Net deferred tax assets 7,105 12,650

3 unchanged sentences

Technology patents and other intangible assets with estimable useful lives are amortized on a straight-line basis.

As of July 31, 2023, the future estimated amortization expense was as follows (in thousands):

As of October 31, 2023, the future estimated amortization expense was as follows (in thousands):

Fiscal Period:

13 unchanged sentences

Gains or losses resulting from changes in the fair value of these hedges are recorded in Accumulated other comprehensive income (loss) (“AOCI”) on the Condensed Consolidated Balance Sheets and are subsequently reclassified to the same line item as the hedged transaction on the Condensed Consolidated Statements of Operations in the same period that the hedged transaction affects earnings.

As of July 31, 2023, we estimate that $ 41 million of net gains recorded in AOCI related to our cash flow hedges will be reclassified into income within the next 12 months.

As of July 31, 2023, and January 31, 2023, the notional values of the cash flow hedges that we held to buy U.S.

As of October 31, 2023, we estimate that $ 33 million of net gains recorded in AOCI related to our cash flow hedges will be reclassified into income within the next 12 months.

As of October 31, 2023, and January 31, 2023, the notional values of the cash flow hedges that we held to buy U.S.

dollars in exchange for other currencies were $ 2.2 billion and $ 1.7 billion, respectively.

The notional values of the cash flow hedges that we held to sell U.S.

dollars in exchange for other currencies were $ 350 million and $ 324 million as of July 31, 2023, and January 31, 2023, respectively.

dollars in exchange for other currencies were $ 369 million and $ 324 million as of October 31, 2023, and January 31, 2023, respectively.

All contracts had maturities of less than 48 months.

4 unchanged sentences

Cash flows from the settlement of these forward contracts are classified as operating activities on the Condensed Consolidated Statements of Cash Flows.

As of July 31, 2023, and January 31, 2023, the notional values of the non-designated hedges that we held to buy U.S.

As of October 31, 2023, and January 31, 2023, the notional values of the non-designated hedges that we held to buy U.S.

dollars in exchange for other currencies were $ 125 million and $ 235 million, respectively, and the notional values of the non-designated hedges that we held to sell U.S.

1 unchanged sentence

The fair values of outstanding derivative instruments were as follows (in thousands):

Condensed Consolidated Balance Sheets Location July 31, 2023 January 31, 2023

Condensed Consolidated Balance Sheets Location October 31, 2023 January 31, 2023

Derivative assets:

10 unchanged sentences

The effect of cash flow hedges on the Condensed Consolidated Statements of Operations was as follows (in thousands):

Three Months Ended July 31,

Three Months Ended October 31,

Condensed Consolidated Statements of Operations Location 2023 2022

2 unchanged sentences

Costs and expenses 1,777,820 839 1,625,424 ( 11,852 )

Six Months Ended July 31,

Provision for (benefit from) income taxes

15,534 — 52,563 ( 3,220 )

Nine Months Ended October 31,

Condensed Consolidated Statements of Operations Location 2023 2022

2 unchanged sentences

Costs and expenses 5,232,441 1,781 4,702,800 ( 18,636 )

Provision for (benefit from) income taxes

25,459 — 59,021 ( 3,220 )

Pre-tax gains (losses) associated with cash flow hedges were as follows (in thousands):

Condensed Consolidated Statements of Operations and Statements of Comprehensive Income (Loss) Locations Three Months Ended July 31, Six Months Ended July 31,

Condensed Consolidated Statements of Operations and Statements of Comprehensive Income (Loss) Locations Three Months Ended October 31, Nine Months Ended October 31,

2023 2022 2023 2022

2 unchanged sentences

Gains (losses) reclassified from AOCI into income (effective portion) Costs and expenses 839 ( 11,852 ) 1,781 ( 18,636 )

Gains (losses) reclassified from AOCI into income (effective portion) Provision for (benefit from) income taxes

— ( 3,220 ) — ( 3,220 )

Gains (losses) associated with non-designated hedges were as follows (in thousands):

Condensed Consolidated Statements of Operations Location Three Months Ended July 31, Six Months Ended July 31,

Condensed Consolidated Statements of Operations Location Three Months Ended October 31, Nine Months Ended October 31,

2023 2022 2023 2022

4 unchanged sentences

We manage our exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring outstanding positions.

As of July 31, 2023, information related to these offsetting arrangements was as follows (in thousands):

As of October 31, 2023, information related to these offsetting arrangements was as follows (in thousands):

Gross Amounts of Recognized Assets Gross Amounts Offset on the Condensed Consolidated Balance Sheets Net Amounts of Assets Presented on the Condensed Consolidated Balance Sheets Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets Net Assets Exposed

17 unchanged sentences

Outstanding debt consisted of the following (in thousands):

July 31, 2023 January 31, 2023

October 31, 2023 January 31, 2023

2027 Notes $ 1,000,000 $ 1,000,000

5 unchanged sentences

Debt, noncurrent $ 2,978,800 $ 2,975,934

As of July 31, 2023, the future principal payments for the outstanding debt were as follows (in thousands):

As of October 31, 2023, the future principal payments for the outstanding debt were as follows (in thousands):

Fiscal Period:

9 unchanged sentences

The indenture governing the Senior Notes also includes covenants (including certain limited covenants restricting our ability to incur certain liens and enter into certain sale and leaseback transactions), events of default, and other customary provisions.

As of July 31, 2023, we were in compliance with all covenants associated with the Senior Notes.

As of October 31, 2023, we were in compliance with all covenants associated with the Senior Notes.

We incurred debt discount and issuance costs of approximately $ 27 million in connection with the Senior Notes offering, which were allocated on a pro rata basis to the 2027 Notes, 2029 Notes, and 2032 Notes.

1 unchanged sentence

The effective interest rates on the 2027 Notes, 2029 Notes, and 2032 Notes, which are calculated as the contractual interest rates adjusted for the debt discount and issuance costs, are 3.67 %, 3.82 %, and 3.90 %, respectively.

As of July 31, 2023, the total estimated fair value of the Senior Notes was $ 2.8 billion.

As of October 31, 2023, the total estimated fair value of the Senior Notes was $ 2.6 billion.

The estimated fair values of the Senior Notes, which we have classified as Level 2 financial instruments, were determined based on quoted bid prices in an over-the-counter market on the last trading day of the reporting period.

4 unchanged sentences

The modification to our revolving credit facility and extinguishment of the term loan under the 2020 Credit Agreement did not have a material impact to our Condensed Consolidated Statements of Operations for fiscal 2023.

As of July 31, 2023, we had no outstanding revolving loans under the 2022 Credit Agreement.

As of October 31, 2023, we had no outstanding revolving loans under the 2022 Credit Agreement.

The revolving loans under the 2022 Credit Agreement may be borrowed, repaid, and reborrowed until April 6, 2027, at which time all amounts borrowed must be repaid.

4 unchanged sentences

The financial covenant, based on a quarterly financial test, requires that we do not exceed a maximum leverage ratio of 3.50 :1.00, subject to a step-up to 4.50 :1.00 at our election for a certain period following an acquisition.

As of July 31, 2023, we were in compliance with all covenants.

As of October 31, 2023, we were in compliance with all covenants included in the 2022 Credit Agreement.

Convertible Senior Notes

11 unchanged sentences

The following table sets forth total interest expense recognized related to our debt (in thousands):

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

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

2023 2022 2023 2022

3 unchanged sentences

We have entered into operating lease agreements for our office space, data centers, and other property and equipment.

Operating lease right-of-use assets were $ 262 million and $ 249 million as of July 31, 2023, and January 31, 2023, respectively, and operating lease liabilities were $ 291 million and $ 273 million as of July 31, 2023, and January 31, 2023, respectively.

Operating lease right-of-use assets were $ 266 million and $ 249 million as of October 31, 2023, and January 31, 2023, respectively, and operating lease liabilities were $ 297 million and $ 273 million as of October 31, 2023, and January 31, 2023, respectively.

We have also entered into finance lease agreements for other property and equipment.

As of July 31, 2023, and January 31, 2023, finance leases were not material.

As of October 31, 2023, and January 31, 2023, finance leases were not material.

The components of operating lease expense were as follows (in thousands):

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

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

2023 2022 2023 2022

4 unchanged sentences

Supplemental cash flow information related to our operating leases was as follows (in thousands):

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

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

2023 2022 2023 2022

2 unchanged sentences

Other information related to our operating leases was as follows:

July 31, 2023 January 31, 2023

October 31, 2023 January 31, 2023

Weighted average remaining lease term (in years) 5 5

Weighted average discount rate 3.55 % 2.79 %

As of July 31, 2023, maturities of operating lease liabilities were as follows (in thousands):

As of October 31, 2023, maturities of operating lease liabilities were as follows (in thousands):

Fiscal Period:

4 unchanged sentences

Total operating lease liabilities $ 297,168

As of July 31, 2023 , we have additional operating leases for data centers and office space that had not yet commenced with total undiscounted lease payments of $ 63 million.

These operating leases will commence in fiscal 2024 and fiscal 2025, with lease terms ranging from five to six years .

As of October 31, 2023 , we have additional operating leases for data centers and office space that had not yet commenced with total undiscounted lease payments of $ 71 million.

These operating leases will commence between fiscal 2024 and fiscal 2026, with lease terms ranging from approximately three to six years .

Commitments and Contingencies

1 unchanged sentence

Our purchase obligations are primarily related to agreements for third-party hosted infrastructure platforms, data center equipment and software, business technology software and support, and sales and marketing activities.

During the six months ended July 31, 2023, there were no material changes outside the ordinary course of business to our non-cancelable purchase obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023.

During the nine months ended October 31, 2023, there were no material changes outside the ordinary course of business to our non-cancelable purchase obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023.

Legal Matters

2 unchanged sentences

These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter.

In our opinion, as of July 31, 2023, there was not at least a reasonable possibility that we had incurred a material loss, or a material loss in excess of a recorded accrual, with respect to such loss contingencies.

In our opinion, as of October 31, 2023, there was not at least a reasonable possibility that we had incurred a material loss, or a material loss in excess of a recorded accrual, with respect to such loss contingencies.

Stockholders’ Equity

As of July 31, 2023, there were 207 million shares of Class A common stock, net of treasury stock, and 55 million shares of Class B common stock outstanding.

As of October 31, 2023, there were 209 million shares of Class A common stock, net of treasury stock, and 54 million shares of Class B common stock outstanding.

The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion.

6 unchanged sentences

The Share Repurchase Program has a term of 18 months, may be suspended or discontinued at any time, and does not obligate us to acquire any amount of Class A common stock.

During the six months ended July 31, 2023, we repurchased approximately 0.6 million shares of Class A common stock for approximately $ 139 million at an average price per share of $ 218.33 .

During the three and nine months ended October 31, 2023, we repurchased approximately 0.7 million and 1 million shares of Class A common stock for approximately $ 148 million and $ 286 million, at an average price per share of $ 218.35 and $ 218.34 , respectively.

All repurchases were made in open market transactions.

As of July 31, 2023, we were authorized to purchase a remaining $ 287 million of our outstanding shares of Class A common stock under the Share Repurchase Program.

As of October 31, 2023, we were authorized to purchase a remaining $ 139 million of our outstanding shares of Class A common stock under the Share Repurchase Program.

Employee Equity Plans

3 unchanged sentences

Prior awards granted under the 2012 Plan continue to be subject to the terms and provisions of the 2012 Plan.

As of July 31, 2023, we had 21 million shares of Class A common stock available for future grants.

As of October 31, 2023, we had 21 million shares of Class A common stock available for future grants.

In June 2022, our stockholders approved the Amended and Restated 2012 Employee Stock Purchase Plan (“ESPP”).

1 unchanged sentence

Options to purchase shares are granted twice yearly on or about June 1 and December 1, and are exercisable on or about the succeeding November 30 and May 31, respectively.

As of July 31, 2023, 4 million shares of Class A common stock were available for issuance under the ESPP.

As of October 31, 2023, 4 million shares of Class A common stock were available for issuance under the ESPP.

Restricted Stock Units

1 unchanged sentence

RSUs generally vest over four years .

RSU activity during the six months ended July 31, 2023, was as follows (in thousands, except per share data):

RSU activity during the nine months ended October 31, 2023, was as follows (in thousands, except per share data):

Number of Shares Weighted-Average Grant Date Fair Value

3 unchanged sentences

RSUs forfeited ( 1,269 ) 203.10

Balance as of July 31, 2023 17,362 199.79

As of July 31, 2023, there was a total of $ 2.6 billion in unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately three years .

Balance as of October 31, 2023 16,123 201.22

As of October 31, 2023, there was a total of $ 2.5 billion in unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately three years .

Market-Based Restricted Stock Units

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However, the number of shares that ultimately vest can vary significantly with the achievement of the specified market criteria.

As of July 31, 2023, there was a total of $ 27 million in unrecognized compensation cost related to the PVU Award, which is expected to be recognized over approximately four years .

As of October 31, 2023, there was a total of $ 23 million in unrecognized compensation cost related to the PVU Award, which is expected to be recognized over approximately four years .

Stock Options

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Stock options issued under the Stock Plans generally are exercisable for periods not to exceed ten years and generally vest over five years .

Stock option activity during the six months ended July 31, 2023, was as follows (in thousands, except aggregate intrinsic value, which is reflected in millions and per share data):

Stock option activity during the nine months ended October 31, 2023, was as follows (in thousands, except aggregate intrinsic value, which is reflected in millions, and per share data):

Outstanding Stock Options Weighted-Average Exercise Price Aggregate Intrinsic Value

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Stock options canceled — —

Balance as of July 31, 2023 101 29.53 21

Vested and expected to vest as of July 31, 2023 101 29.53 21

Exercisable as of July 31, 2023 101 29.53 21

As of July 31, 2023, there was no unrecognized compensation cost related to unvested stock options .

Balance as of October 31, 2023 98 29.58 18

Vested and expected to vest as of October 31, 2023 98 29.58 18

Exercisable as of October 31, 2023 98 29.58 18

As of October 31, 2023, all stock options were fully vested with no remaining unrecognized compensation cost.

Unearned Revenue and Performance Obligations

Subscription services revenues of $ 1.3 billion and $ 1.2 billion were recognized during the three months ended July 31, 2023, and 2022, respectively, that were included in the unearned revenue balances as of April 30, 2023, and 2022, respectively.

Subscription services revenues of $ 2.4 billion and $ 2.0 billion were recognized during the six months ended July 31, 2023, and 2022, respectively, that were included in the unearned revenue balances as of January 31, 2023, and 2022, respectively.

Unearned Revenue

Unearned revenue primarily consists of amounts we have the right to invoice in advance of performance under a customer contract.

Total unearned revenue was $ 3.3 billion and $ 3.6 billion as of October 31, 2023, and January 31, 2023, respectively.

Included in this balance are amounts related to professional services that are subject to cancellation and pro-rated refund rights of $ 70 million and $ 68 million as of October 31, 2023, and January 31, 2023, respectively.

Subscription services revenues of $ 1.4 billion and $ 1.2 billion were recognized during the three months ended October 31, 2023, and 2022, respectively, that were included in the unearned revenue balances as of July 31, 2023, and 2022, respectively.

Subscription services revenues of $ 3.0 billion and $ 2.7 billion were recognized during the nine months ended October 31, 2023, and 2022, respectively, that were included in the unearned revenue balances as of January 31, 2023, and 2022, respectively.

Professional services revenues recognized in the same periods from unearned revenue balances at the beginning of the respective periods were not material.

Transaction Price Allocated to the Remaining Performance Obligations

As of July 31, 2023, approximately $ 17.8 billion of revenues are expected to be recognized from remaining performance obligations for subscription contracts.

We expect to recognize revenues on approximately $ 10.3 billion of these remaining performance obligations over the next 24 months, with the balance recognized thereafter.

Revenues from remaining performance obligations for professional services contracts as of July 31, 2023, were not material.

As of October 31, 2023, approximately $ 18.4 billion of revenues are expected to be recognized from remaining performance obligations for subscription contracts.

We expect to recognize revenues on approximately $ 6.0 billion and $ 10.6 billion of these remaining performance obligations over the next 12 and 24 months, respectively, with the balance recognized thereafter.

Revenues from remaining performance obligations for professional services contracts as of October 31, 2023, were not material.

Other Income (Expense), Net

Other income (expense), net consisted of the following (in thousands):

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

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

2023 2022 2023 2022

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For further information, see Note 3, Investments .

We reported an income tax provision of $ 10 million and $ 6 million for the six months ended July 31, 2023, and 2022, respectively.

The income tax provision for the six months ended July 31, 2023, was primarily attributable to income tax expenses in profitable foreign jurisdictions and capitalized research and development expenditures in the U.S.

The income tax provision for the six months ended July 31, 2022, was primarily attributable to a taxable gain recognized from integrating intellectual property, income tax expenses in profitable foreign jurisdictions, and an increase in state taxes due to capitalized research and development expenditures.

We reported an income tax provision of $ 25 million and $ 59 million for the nine months ended October 31, 2023, and 2022, respectively.

The income tax provision for the nine months ended October 31, 2023, was primarily attributable to income tax expenses in profitable foreign jurisdictions and an increase in U.S.

taxes due to capitalized research and development expenditures.

The income tax provision for the nine months ended October 31, 2022, was primarily attributable to a taxable gain recognized from integrating intellectual property, income tax expenses in profitable foreign jurisdictions, and an increase in state taxes due to capitalized research and development expenditures.

We are subject to income tax audits in the U.S.

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Due to our history of tax losses, all years remain open to tax audit.

We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative.

The realization of net deferred tax assets is dependent on our ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets.

We may release all or a portion of our valuation allowance if there is sufficient positive evidence that outweighs the negative evidence.

As of July 31, 2023, we continue to maintain a full valuation allowance on our deferred tax assets in certain jurisdictions.

We periodically evaluate the realizability of our deferred tax assets based on all available evidence, both positive and negative.

The realization of the net deferred tax assets is dependent on our ability to generate sufficient future taxable income during the periods prior to the expiration of tax attributes to fully utilize these assets.

Given our current and anticipated future earnings, we may release a significant portion of our valuation allowance if there is sufficient positive evidence that outweighs the negative evidence.

The release of the valuation allowance would result in the recognition of certain deferred tax assets and a corresponding decrease to income tax expense for the period the release is recorded.

However, the exact timing and amount of the valuation allowance to be released is uncertain.

As of October 31, 2023, we continue to maintain a full valuation allowance on our deferred tax assets in certain jurisdictions.

Net Income (Loss) Per Share

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Diluted net income (loss) per share is computed by giving effect to all potentially dilutive shares of common stock, including our convertible senior notes, outstanding warrants related to the issuance of the convertible senior notes, and outstanding share-based awards consisting primarily of unvested RSUs and ESPP obligations.

We determine the dilutive effect of outstanding share-based awards and warrants using the treasury stock method, and the dilutive effect of shares underlying our convertible senior notes using the if-converted method.

The net income (loss) per share is allocated based on the contractual participation rights of the Class A common shares and Class B common shares as if the income (loss) for the period had been distributed.

As the liquidation and dividend rights are identical, the net income (loss) is allocated on a proportionate basis.

Basic and diluted net income (loss) per share was the same for the three and six months ended July 31, 2023, and 2022.

For the three and six months ended July 31, 2022, potentially dilutive securities were excluded from the computation of diluted net income (loss) per share calculations because the impact of including them would have been anti-dilutive.

Basic and diluted net loss per share was the same for the three and nine months ended October 31, 2022, as the inclusion of potentially outstanding weighted-average shares of common stock would have been anti-dilutive due to the incurrence of net loss during these periods.

The following table presents the calculation of basic and diluted net income (loss) per share (in thousands, except per share data):

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

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

2023 2022 2023 2022

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The effects of these potentially outstanding shares were not included in the calculation of diluted net income (loss) per share because the effect would have been anti-dilutive (in thousands):

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

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

2023 2022 2023 2022

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The following table sets forth revenues by geographic area (in thousands):

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

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

2023 2022 2023 2022

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Aggregate Property and equipment, net and Operating lease right-of-use assets by geographic area was as follows (in thousands):

July 31, 2023 January 31, 2023

October 31, 2023 January 31, 2023

United States $ 1,175,275 $ 1,206,486

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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 1. Financial Statements