What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-28 compared with 2024-03-04 · 108 added, 127 removed, 309 unchanged (43% of the section changed)

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Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the section titled “Risk Factors” and in other parts of this Annual Report on Form 10-K.

Our mission is to provide one platform that delivers limitless human connection.

Zoom is an intelligent, secure collaboration platform that makes connecting easier, more immersive, and more dynamic for businesses and individuals.

We’re committed to evolving our platform in ways that empower limitless human connection and solve real business problems.

All of our product innovation has a unified goal:

to help streamline the workday through effective communication and collaboration tools.

The Zoom platform makes teamwork more meaningful, drives impact with intelligence, strengthens customer relationships, and enables seamless workflows.

Additionally, trust is a cornerstone of the

Zoom platform.

We equip users with a comprehensive set of tools to make their interactions safe, secure, and private.

We believe that strong security should never compromise a great user experience.

We’re on a mission to reimagine the way we communicate and collaborate in a hybrid working world.

The Zoom platform brings employee and customer experience together that people love to use.

Flagship products like Zoom Meetings, Zoom Phone, and Zoom Team Chat are among the core products on the platform that are critical to business communication and collaboration needs.

We strive to continue building a platform that helps people work smarter, be more engaged with work, and better connect with each other.

AI has been core to Zoom’s product DNA over many years, grounded in our conviction that AI can make work more human by strengthening collaboration, productivity, and inclusivity.

In fiscal year 2024, we continued to invest in AI and focused on three key areas regarding AI innovation:

supporting individual productivity, powering better collaboration, and helping customer-facing teams delight their customers.

We recently launched Zoom AI Companion, our smart assistant that is designed to empower workers to increase productivity, improve team effectiveness, and enhance skills.

Additionally, we introduced our federated approach to AI, which enables us to make Zoom’s AI capabilities accessible and affordable so that more people can incorporate them in their day-to-day workflows.

Zoom Workplace with AI Companion is an open, AI-first work platform for human connection.

Our platform is designed to enable seamless communication and collaboration through a suite of products that includes Zoom Meetings, Zoom Phone, Zoom Team Chat, and Zoom Docs, and more, all powered by AI to improve productivity, collaboration, and business outcomes.

We strive to simplify the workday with tools that drive meaningful team collaboration and customer engagement.

Zoom Workplace, our AI-driven platform, supports businesses by providing an open, scalable solution for communication and collaboration.

This includes Zoom Contact Center, Zoom Revenue Accelerator, and Zoom Events, which empower sales, marketing, and customer experience teams to foster stronger customer relationships.

AI is core to Zoom’s product innovation.

In fiscal year 2025, Zoom continued to invest in AI and focused on three key areas regarding AI:

supporting individual productivity, powering better collaboration, and helping customer-facing teams deliver meaningful business value and delight to their customers.

Our federated approach to AI enables users to leverage multiple AI models (including those from OpenAI, Anthropic, and Meta), making AI more accessible and affordable so that more people can incorporate them in their day-to-day workflows.

In line with our commitment to responsible AI, Zoom does not use customer audio, video, chat, screen sharing, attachments, or other communications (such as poll results, whiteboard, and reactions) to train Zoom’s or third-party AI models.

We believe that face-to-face communications build greater empathy and trust.

We strive to live up to the trust our customers place in us by delivering a communications solution while prioritizing their privacy and security.

Our 29 co-located data centers worldwide and the public cloud in conjunction with our proprietary adaptive rate codec enable us to provide both high-quality and high-definition, real-time video to our customers even in low-bandwidth environments.

We generate revenue from the sale of subscriptions to our unified communications and collaboration platform.

Subscription revenue is driven primarily by the number of customers as well as purchases of additional products, including Zoom Phone, Zoom Spaces, Zoom Events, Zoom Contact Center and Zoom Revenue Accelerator.

We define a customer as a separate and distinct buying entity, which can be a single paid user or an organization of any size (including a distinct unit of an organization) that has multiple users.

Our Zoom One Basic offering is free and gives users access to Zoom Meetings with core features but with the limitation that meetings time-out at 40 minutes.

Our core paid offerings are available with our Zoom One bundles:

Zoom One Pro, Business, Business Plus, Enterprise, Enterprise Plus, and Enterprise Premier.

The Zoom One bundles are designed for different business needs and are composed of Zoom Meetings, Zoom Team Chat, Zoom Whiteboard and Mail and Calendar as well as Zoom Phone, Zoom Webinars and Zoom Rooms for our Enterprise plans.

We also offer vertical-specific plans for Education, Healthcare and Government which provide incremental features and functionality, such as different participant limits, administrative controls, and reporting.

For Zoom Phone, plans include Zoom Phone Pro, which provides extension-to-extension calling or can be used with the Bring Your Own Carrier model wherein the customer connects Zoom Phone to an existing carrier.

We also offer Regional Unlimited and Regional Metered calling plans in four specific markets (Australia/New Zealand, Japan, United Kingdom/Ireland and United States/Canada).

In addition, we introduced the Global Select plan in August 2020, which allows customers to select from local numbers and domestic calling in more than 45 countries and territories where Zoom has local public switched telephone network (“PSTN”) coverage.

Zoom’s platform prioritizes security and privacy, with 32 co-located data centers globally and robust encryption.

We are committed to delivering high-quality, real-time video, even in low-bandwidth conditions, while safeguarding our customers' data.

Revenue is driven by subscriptions to Zoom Workplace and Zoom Business Services.

Our core offerings include Zoom Workplace Pro, Business, and Enterprise bundles, with vertical-specific plans for Education, Healthcare, and Government.

We also offer Zoom Phone, with regional and global calling plans designed to meet diverse customer needs.

Our revenue was $4,665.4 million, $4,527.2 million, and $4,393.0 million for the fiscal years ended January 31, 2025, 2024, and 2023, respectively, representing year-over-year growth of 3.1% and 3.1%, respectively.

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Macroeconomic Conditions and Other Factors

Recent macroeconomic shifts, including high inflation, elevated interest rates, and the responses by central banking authorities, potential recessionary environments, and fluctuations in foreign currency exchange rates, have introduced uncertainty to our business.

Additionally, the possibility of a U.S.

federal government shutdown, resulting from budgetary challenges, may negatively impact global economic conditions, influencing corporate and consumer spending as well as capital market liquidity.

For the fiscal year ended January 31, 2024, we continued to experience growth in total revenue and revenue from Enterprise customers.

However, macroeconomic conditions, including high inflation and continued uncertainty regarding the current and future political and economic environment, have and may continue to impact the future demand for subscriptions to our unified communications and collaboration platform.

For example, we have experienced and may continue to experience elongated sales cycles as well as a decrease in customers’ overall corporate spending, which is negatively impacting our revenue growth rate and net dollar expansion rate for Enterprise customers.

In addition, for the fiscal year ended January 31, 2024, we experienced unfavorable foreign currency impact as a result of the continued strengthening of the U.S.

dollar compared to certain foreign jurisdictions where we do a significant amount of business, which resulted in a $34.1 million

negative impact on revenue for the fiscal year ended January 31, 2024.

Many factors may contribute to declines in our growth rate as compared to prior fiscal years, among other things, higher market penetration, increased competition, slowing demand for our platform, a slower than anticipated capitalization on growth opportunities, and the maturation of our business.

We are continuously monitoring the impact of these circumstances on our business and financial results, as well as the overall global economy and geopolitical landscape.

The macroeconomic environment including geopolitical conflicts, tariffs and trade tensions, inflationary pressures, interest rate fluctuations, and foreign currency exchange rate volatility continues to create uncertainty in demand for subscriptions to our unified communications and collaboration platform.

These factors, along with responses by central banks and government policies, have placed pressure on consumer and business behavior, leading to elongated sales cycles and increased scrutiny of IT budgets among existing and potential customers.

For the fiscal year ended January 31, 2025, compared to the fiscal year ended January 31, 2024, we experienced continued growth in total revenue and revenue from Enterprise customers.

However, several factors have impacted and may continue to impact our growth rate, such as higher market penetration, increased competition, and the maturation of our business, among others.

While we have seen improvement in the macroeconomic environment in recent periods, we continue to monitor the potential effects of these circumstances as well as the overall global economy and geopolitical landscape on our business and financial results, as well as the overall global economy.

The implications of macroeconomic conditions on our business, results of operations, and overall financial position, particularly in the long term, remain uncertain.

On February 7, 2023, as a result of the economic environment, we announced a restructuring plan intended to reduce operating costs and continue advancing our ongoing commitment to profitable growth.

The restructuring plan included a reduction of our then-current workforce by approximately 15%.

In addition, the global impacts stemming from the Russian invasion of Ukraine and the recent conflict in Israel and the surrounding area continue to present a high level of uncertainty.

Our customers in these regions collectively represented approximately 1% of our net assets and total consolidated revenue as of and for the fiscal year ended January 31, 2024.

If the conflicts in these regions persist or worsen, possibly leading to additional sanctions, tightened export restrictions, and greater global economic disruptions and uncertainty, our business and results of operations could be materially impacted.

Refer to “Part I, Item 1A.

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Acquiring New Customers

We are focused on continuing to grow the number of customers that use our platform.

We are focused on continuing to grow the number of customers who use Zoom Workplace and Zoom Business Services.

Our operating results and growth prospects will depend, in part, on our ability to attract new customers.

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We believe that there is a large opportunity for growth with many of our existing customers.

Many customers have increased the size of their subscriptions as they have expanded their use of our platform across their operations.

Some of our larger customers start with a deployment of Zoom Meetings with one team, location, or geography, before rolling out our platform throughout their organization.

Several of our largest customers have deployed our platform globally to their entire workforce following smaller initial deployments.

This expansion in the use of our platform also provides us with opportunities to market and sell additional products to our customers, such as Zoom Phone, Spaces, Contact Center, Revenue Accelerator, Events and Developer Platform Solutions.

Historically, customers have increased the size of their subscriptions as they have expanded their use of our platform across their operations.

Over the past few years, macroeconomic headwinds have resulted in slower hiring and higher seat count downsells from our existing Enterprise customers in key markets that has impacted the rate of expansion and have caused our net dollar expansion rate for Enterprise customers to drop below one hundred percent.

Despite the decline in our rate of expansion, we believe there are still opportunities for future growth with our existing customers as we innovate our platform with additional product offerings and the use of AI.

This expansion in the use of our platform also provides us with opportunities to market and sell additional products to our customers, such as Zoom Phone, Contact Center, and Workvivo.

In order for us to address this opportunity and expand the use of our products with our existing customers, we will need to maintain the reliability of our platform and produce new features and functionality that are responsive to our customers’ requirements for enterprise-grade solutions.

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MRR is defined as the recurring revenue run-rate of subscription agreements from all Enterprise customers for the last month of the period, including revenue from monthly subscribers who have not provided any indication that they intend to cancel their subscriptions.

We then calculate the ARR from these Enterprise customers as of the current period end (“Current Period ARR”), which includes any upsells, contraction, and attrition.

We then calculate the ARR from these Enterprise customers as of the current period end (“Current Period ARR”), which includes any upsells, contractions, and attrition.

We divide the Current Period ARR by the Prior Period ARR to arrive at the net dollar expansion rate.

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Retention of Online Customers

In addition to Enterprise customers, we also have a significant number of customers that subscribe to our services directly through our website (“Online customers”).

In addition to Enterprise customers, we also have a significant number of customers who subscribe to our services directly through our website (“Online customers” or “Online business”).

Online customers represent a diverse customer base, ranging from individual consumers to small and medium-size businesses.

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The online monthly average churn for our Online customers was 2.9%, 3.1%, and 3.4% per month for the fiscal years ended January 31, 2025, 2024, and 2023, respectively.

One of the dynamics in the Online portion of the business is the MRR contribution from customers that have retained Zoom services for a certain portion of time as these customers tend to maintain their subscriptions and contribute meaningfully to the Online business.

One of the dynamics in the Online portion of the business is the MRR contribution from customers who have retained Zoom services for a certain portion of time as these customers tend to maintain their subscriptions and contribute meaningfully to the Online business.

As of January 31, 2025, 2024, and 2023 the percentage of total Online MRR from Online customers with a continual term of service of at least 16 months was 75.1%, 74.2% and 72.0% respectively.

We calculate our online average monthly churn by starting with the Online customer MRR as of the beginning of the applicable quarter (“Entry MRR”).

We define Entry MRR as the recurring revenue run-rate of subscription agreements from all Online customers except for subscriptions that we recorded as churn in a previous quarter based on the customers' earlier indication to us of their intention to cancel that subscription.

We then determine the MRR related to customers who canceled or downgraded their subscription or notified us of that intention during the applicable quarter (“Applicable Quarter MRR Churn”) and divide the Applicable Quarter MRR Churn by the applicable quarter Entry MRR to arrive at the MRR churn rate for Online customers for the applicable quarter.

We then divided that amount by three to calculate the online average monthly churn.

indication to us of their intention to cancel that subscription.

We then divided that amount by three to calculate the Online average monthly churn for the applicable quarter.

Innovation and Expansion of Our Platform

We continue to invest resources to enhance the capabilities of our platform.

For example, we have recently introduced a number of new products and enhancements including Zoom AI Companion, new features for Zoom Contact Center, Zoom Notes, integration of Workvivo into the Zoom desktop client, and ongoing enhancements for Zoom Phone, Meetings, Zoom Rooms, Huddles, Webinars and Zoom Events.

We continue to invest resources to enhance the capabilities of Zoom Workplace and Zoom Business Services.

For example, we have introduced a number of new products and enhancements, including Zoom AI Companion, Zoom Docs, and ongoing enhancements for Zoom Phone, Meetings, Zoom Rooms, Sessions, Webinars, Events, and Contact Center.

We also deliver Zoom Phone calling plans in more than 45 countries and territories as of January 31, 2025.

We also recently announced several upcoming products including Zoom Docs and an enhanced version of AI Companion that is designed to allow the handling of complex tasks across our platform using information from multiple sources including third party applications.

These products are expected to be generally available in 2024.

In April 2023, we acquired Workvivo, an employee experience platform that combines internal communication and engagement tools, a social intranet, and an employee app.

With the acquisition, we continue our evolution to provide a collaboration platform that enables modern work and powers the digital-first workplace, offering our customers new ways to keep employees informed, engaged, and connected.

We recently announced several upcoming products, including Zoom Tasks, a custom AI Companion add-on, Zoom Workplace for Frontline Workers, and Zoom Workplace for Clinicians.

The custom AI Companion add-on is designed to handle complex tasks across our platform by integrating data from multiple sources, including third-party apps.

Zoom Workplace for Frontline Workers is an AI-powered mobile solution aimed at enhancing on-shift communications, task management, and insights for frontline employees and their managers.

Zoom Workplace for Clinicians is designed to automate clinical workflows, leveraging healthcare AI to streamline clinical notes, reduce documentation overhead, and improve doctor-patient interactions.

These products are expected to be generally available in the first half of 2025.

Third-party developers are also a key component of our strategy for platform innovation to make it easier for customers and developers to extend our product portfolio with new functionalities.

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We will need to expend additional resources to continue introducing new products, features, and functionality, and supporting the efforts of third parties to enhance the value of our platform with their own applications.

An end-to-end encryption (“E2EE”) option is available to free and paid Zoom customers globally who host meetings with up to 200 participants as well as on Zoom Phone.

Zoom’s E2EE uses the same AES-256-GCM encryption that secures Zoom meetings by default, but with Zoom’s E2EE, the meeting host, or originating caller in the case of Zoom Phone, as opposed to Zoom's servers, generates encryption keys and uses public key cryptography to distribute these keys to the other meeting participants or call recipient.

An E2EE option is available to free and paid Zoom customers globally who host meetings with up to 1,000 participants as well as on Zoom Phone for one-on-one calls on the same Zoom account.

Zoom’s E2EE uses the same 256-bit AES-GCM encryption to encrypt real-time media in meetings during transit that supports standard Zoom Meetings, but with Zoom’s E2EE, the feature is designed so that the device of the meeting host, or originating caller in the case of Zoom Phone, as opposed to Zoom’s servers, generates encryption keys and uses public key cryptography to distribute these keys to the other meeting participants or call recipient.

Additionally, Zoom’s post-quantum E2EE is now globally available for Zoom Workplace, specifically for Zoom Meetings and Zoom Phone, with support for Zoom Rooms coming soon.

We believe that the launch of the new security enhancement makes Zoom the first UCaaS company to offer a post-quantum E2EE solution for video conferencing.

International Opportunity

Our platform addresses the communications and collaboration needs of users worldwide, and we see international expansion as a major opportunity.

Our revenue from the rest of world (APAC and EMEA) represented 28.7%, 30.5%, and 33.3% of our total revenue for the fiscal years ended January 31, 2024, 2023, and 2022, respectively.

The decrease in revenue from the rest of the world in the fiscal years ended January 31, 2024 and 2023 was due to the impact of the strengthening of the U.S dollar along with macroeconomic conditions in the EMEA region.

We plan to add local sales support in further select international markets over time.

Our revenue from the rest of the world (APAC and EMEA) represented 28.2%, 28.7%, and 30.5% of our total revenue for the fiscal years ended January 31, 2025, 2024, and 2023, respectively.

We use strategic partners and resellers to sell in certain international markets where we have limited or no direct sales presence.

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Number of Enterprise Customers

We believe that our ability to increase the number of Enterprise customers is an indicator of our potential future business opportunities, the growth of our business, and an indicator of our market penetration.

Increasing awareness of our platform and capabilities, coupled with the mainstream adoption of our technology, has expanded the diversity of our customer base to include organizations of all sizes across all industries.

Over time, we expect Enterprise customers to represent a larger share of our business.

As Zoom continues to expand and evolve, we have seen an increasing overlap between our Enterprise and Online customer categories.

Over time, customers with lower MRR are expected to move from Enterprise to Online as we optimize our sales strategies.

While these moves do not have a material impact on other key business metrics, the number of customers between these two groups has become less meaningful as a key business metric.

Therefore, beginning in the first quarter of fiscal year 2026, we will no longer report the number of Enterprise customers as a key business metric.

However, we will

continue to provide this metric in the appendix of our investor deck through the end of fiscal year 2026, which will be accessible on our investor relations website (investors.zoom.us).

Instead of using Enterprise customer count as an indicator of our performance, we believe that revenue from Enterprise customers and the number of customers contributing more than $100,000 in trailing 12 month revenue are better indicators of our ability to grow and scale with larger organizations.

These metrics better reflect our progress in attracting and retaining high-value customers and scaling our business over time.

As of January 31, 2025, 2024, and 2023, we had approximately 192,600, 220,400, and 213,000 Enterprise customers, respectively.

During the three months ended April 30, 2024, in order to enhance customer experience and improve efficiency, we transitioned approximately 26,800 Enterprise customers with lower MRR away from working with direct sales teams, resellers, or strategic partners.

These customers are now considered Online customers and no longer included in our Enterprise customer total as of January 31, 2025.

The impact of this transition did not have a material impact on the percentage of revenue from Enterprise and Online customers, net dollar expansion rate, or Online average monthly churn.

Customers Contributing More Than $100,000 of Trailing 12 Months Revenue

We focus on growing the number of customers that contribute more than $100,000 of trailing 12 months revenue as it is a measure of our ability to scale with our customers and attract larger organizations to Zoom.

We focus on growing the number of customers who contribute more than $100,000 of trailing 12 months revenue as it is a measure of our ability to scale with our customers and attract larger organizations to Zoom.

Revenue from these customers represented 31.0%, 29.2%, and 27.1% of total revenue for the fiscal years ended January 31, 2025, 2024, and 2023, respectively.

As of January 31, 2024, 2023, and 2022, we had 3,810, 3,471, and 2,725 customers, respectively, that contributed more than $100,000 of trailing 12 months revenue, demonstrating our rapid penetration of larger organizations, including enterprises.

As of January 31, 2025, 2024, and 2023, we had 4,088, 3,810, and 3,471 customers, respectively, that contributed more than $100,000 of trailing 12 months revenue, demonstrating our penetration of larger organizations, including enterprises.

These customers are a subset of Enterprise customers.

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Net cash used in investing activities $ (1,106,024) $ (1,183,689) $ (318,322)

Net cash provided by (used in) financing activities $ 60,186 $ (936,942) $ 34,068

Net cash (used in) provided by financing activities $ (1,028,077) $ 60,186 $ (936,942)

Components of Results of Operations

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Our customers generally do not have the ability to take possession of our software.

We also provide services, which include professional services, consulting services, and online event hosting, which are generally considered distinct from the access to our unified communications and collaboration platform.

The amount of revenue recognized reflects

the consideration that we expect to receive in exchange for these services over the contract term which can include a free period discount.

We also provide services, which include professional services, consulting services, and online event hosting, which are generally considered

distinct from the access to our unified communications and collaboration platform.

The amount of revenue recognized reflects the consideration that we expect to receive in exchange for these services over the contract term which can include a free period discount.

Cost of Revenue

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Gains (losses) on strategic investments, net consist primarily of remeasurement gains or losses on our equity investments.

Other Income (Expense), Net

Other income (expense) income, net consists primarily of interest income and net accretion on our marketable securities and effect of changes in foreign currency exchange rates.

Provision for (Benefit from) Income Taxes

Provision for (benefit from) income taxes consists primarily of income taxes related to federal, state, and foreign jurisdictions where we conduct business.

Other Income, Net

Other income, net consists primarily of interest income and net accretion on our marketable securities and effect of changes in foreign currency exchange rates.

Provision for Income Taxes

Provision for income taxes consists primarily of income taxes related to federal, state, and foreign jurisdictions where we conduct business.

Results of Operations

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177,142 109,770 (37,571)

Other income (expense), net 197,263 41,418 (5,720)

Income before provision for (benefit from) income taxes

Other income, net 325,147 197,263 41,418

Income before provision for income taxes

1,315,584 832,312 249,276

Provision for (benefit from) income taxes

Provision for income taxes

305,346 194,850 145,565

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3.8 % 2.4 % (0.9) %

Other income (expense), net 4.4 % 1.0 % (0.1) %

Income before provision for (benefit from) income taxes

Other income, net 7.0 % 4.4 % 1.0 %

Income before provision for income taxes

28.2 % 18.4 % 5.7 %

Provision for (benefit from) income taxes

Provision for income taxes

6.5 % 4.3 % 3.3 %

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Revenue for the fiscal year ended January 31, 2025 increased by $138.2 million, or 3.1%, compared to the fiscal year ended January 31, 2024.

The increase in revenue was due to an 8.7% increase in revenue from subscription services provided to Enterprise customers, of which 80.3% and 19.7% were from existing and new customers, respectively.

This increase was partially offset by a 3.8% decline in revenue from subscription services provided to Online customers.

The increase in revenue was due to a 5.2% increase in revenue from subscription services provided to Enterprise customers, of which 63.5% and 36.5% were from existing and new customers, respectively.

Revenue from Online customers remained flat year over year.

Cost of Revenue

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Gross margin 75.8 % 76.2 %

Cost of revenue for the fiscal year ended January 31, 2024, decreased by $22.7 million, or 2.1%, compared to the fiscal year ended January 31, 2023.

The decrease was primarily due to a $22.5 million decrease in personnel-related expenses, which includes a $32.6 million decrease in stock-based compensation expense, driven by a prior year change in our equity program, partially offset by restructuring and related expenses of $7.1 million and a $2.9 million increase in payroll taxes and benefits.

Gross margin increased to 76.2% for the fiscal year ended January 31, 2024 from 74.9% for the fiscal year ended January 31, 2023.

The increase in gross margin was mainly due to the decrease in personnel-related expenses.

Cost of revenue for the fiscal year ended January 31, 2025, increased by $51.8 million, or 4.8%, compared to the fiscal year ended January 31, 2024.

The increase was primarily due to a $67.5 million increase in hosting and infrastructure costs, partially offset by a $17.4 million decrease in stock-based compensation and a $7.1 million decrease in restructuring costs as a result of the prior year restructuring plan.

The increase in hosting costs was due to the increased use of AI functionality along with investments to upgrade our data center backbone.

Gross margin decreased to 75.8% for the fiscal year ended January 31, 2025 from 76.2% for the fiscal year ended January 31, 2024.

The decrease in gross margin was mainly due to increased costs associated with the use of AI functionality along with the investments to upgrade our data center backbone.

Operating Expenses

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Research and development expense for the fiscal year ended January 31, 2025, increased by $49.2 million, or 6.1%, compared to the fiscal year ended January 31, 2024.

The increase was primarily due to a $15.7 million increase in personnel-related expenses, which includes a $25.8 million increase in payroll taxes and benefits, and $19.6 million in restructuring and related expenses, partially offset by a $29.7 million decrease in stock-based compensation expense, driven by a prior year change in our equity program.

The remaining increase was primarily due to a $4.3 million increase in software costs.

The increase was driven by our continued investments in AI-first innovation, which consisted of a $39.4 million increase in payroll taxes and benefits partially offset by $19.6 million decrease in restructuring costs as a r esult of the prior year restructuring plan.

The remaining increase is due to costs from AI-related software and facilities used in development.

Sales and Marketing

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Sales and marketing expense for the fiscal year ended January 31, 2025, decreased by $113.9 million, or 7.4%, compared to the fiscal year ended January 31, 2024.

The decrease in sales and marketing expense was primarily due to a $167.5 million decrease personnel-related expenses, which includes a $159.3 million decrease in stock-based compensation expense, driven by a prior year change in our equity program, and a $41.0 million decrease in payroll taxes and benefits, partially offset by

restructuring and related expenses of $32.9 million.

The decrease in personnel-related expenses was partially offset by a $23.4 million increase in channel partner referral fees.

General and Administrative

The decrease in sales and marketing expense was primarily due to a $53.5 million

decrease in stock-based compensation expense, a $32.9 million decrease in restructuring costs as a result of the prior year restructuring plan, and a $29.2 million decrease in marketing spend.

Year Ended January 31,

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General and administrative $ 442,712 $ 579,650 $ (136,938) (23.6) %

General and administrative expense for the fiscal year ended January 31, 2024, increased by $3.2 million, or 0.6%, compared to the fiscal year ended January 31, 2023.

The increase in general and administrative expense was primarily due to $34.8 million increase in legal expense, including litigation settlements, and restructuring and related expenses of $13.3 million;

partially offset by $24.3 million decrease in stock-based compensation expense, driven by a prior year change in our equity program and $14.4 million decrease in administrative overhead.

General and administrative expense for the fiscal year ended January 31, 2025, decreased by $136.9 million, or 23.6%, compared to the fiscal year ended January 31, 2024.

The decrease in general and administrative expense was primarily due to a $39.4 million decrease in stock-based compensation expense, a $37.8 million decrease in litigation settlements, a $15.2 million decrease in bad debt expense, a $13.3 million decrease in restructuring costs as a result of the prior year restructuring plan;

and a $5.4 million decrease in legal expenses.

Gains (Losses) on Strategic Investments, Net

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Gains (losses) on strategic investments, net $ 177,142 $ 109,770 $ 67,372 61.4 %

Gains on strategic investments, net, of $109.8 million for the fiscal year ended January 31, 2024, was driven by realized and unrealized gains on our publicly and privately held securities, while losses on strategic investments, net, of $37.6 million for the fiscal year ended January 31, 2023, were primarily driven by unrealized losses recognized on our publicly traded equity securities.

Gains on strategic investments, net, of $177.1 million and $109.8 million for the fiscal years ended January 31, 2025 and 2024, respectively, was primarily driven by unrealized gains from valuation changes on our publicly and privately held securities.

Other Income, Net

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Other income, net for the fiscal year ended January 31, 2025 increased by $127.9 million, or 64.8%, compared to the fiscal year ended January 31, 2024.

The increase was mainly driven by an increase of $155.9 million in investment yield on our marketable securities.

The increase was mainly driven by an increase of $130.5 million in investment yield from cash and marketable securities.

Provision for Income Taxes

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Provision for income taxes for the fiscal year ended January 31, 2025 increased by $110.5 million, or 56.7%, compared to the fiscal year ended January 31, 2024.

The change in income taxes was primarily due to changes in income before taxes, tax shortfalls on stock-based compensation, the foreign-derived intangible income deduction, and the valuation allowance recorded against certain federal, state, and foreign deferred tax assets as of January 31, 2024.

See Note 11 of the Notes to Consolidated Financial Statements for further information.

The change in income taxes was primarily due to an increase in income before taxes, increases in non-deductible compensation and other permanent items, and a reduction in tax shortfalls on stock-based compensation for the fiscal year ended January 31, 2025.

See Part II, Item 8, Note 12 “Income Taxes” to the consolidated financial statements in this Annual Report for further information.

For a discussion of the fiscal year ended January 31, 2024 compared to the fiscal year ended January 31, 2023, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024.

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We have financed our operations primarily through income from operations and sales of equity securities.

Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, the recent macroeconomic shifts, such as high inflation, changes in interest rates and the responses by central banking authorities, potential recessionary environments, and the fluctuations in foreign currency exchange rates, which could impact the timing of cash collections from our customers and other risks detailed in the section titled “Risk Factors.” However, based on our current business plan and revenue prospects, we believe our existing cash, cash equivalents, and marketable securities, together with net cash provided by operations, will be sufficient to meet our needs for at least the next 12 months and allow us to capitalize on growth opportunities.

Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, macroeconomic factors, such as geopolitical conflicts, tariffs and trade tensions, inflationary pressures, interest rate fluctuations, and the fluctuations in foreign currency exchange rates.

These factors and other risks detailed in the section titled “Risk Factors” could impact the timing of cash collections from our customers.

However, based on our current business plan and revenue prospects, we believe our existing cash, cash equivalents, and marketable securities, together with net cash provided by operations, will be sufficient to meet our needs for at least the next 12 months and allow us to capitalize on growth opportunities.

We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities and available cash balances.

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Obligations under contracts that we can cancel without a significant penalty are not included in the table above.

Refer to the “Future minimum lease payments” table in Note 7 and “Non-cancelable Purchase Obligations” in Note 9 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more details.

Refer to the “Future minimum lease payments” table in Note 7, “Operating Leases” and “Non-cancelable Purchase Obligations” in Note 9, “Commitments and Contingencies” to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more details.

We have not provided a detailed estimate of the payment timing of unrecognized tax benefits due to the uncertainty of when the related tax settlements will become due.

See Part II, Item 8, Note 11, “Income Taxes” to the consolidated financial statements in this Annual Report for a discussion of income taxes.

The following table summarizes our cash flows for the periods presented:

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Net cash used in investing activities $ (1,106,024) $ (1,183,689) $ (318,322)

Net cash provided by (used in) financing activities $ 60,186 $ (936,942) $ 34,068

Net cash (used in) provided by financing activities $ (1,028,077) $ 60,186 $ (936,942)

Operating Activities

Our largest source of operating cash is cash collections from our customers for subscriptions to our platform.

Our primary uses of cash from operating activities are for employee-related expenditures, costs related to hosting our platform, and

marketing expenses.

Our primary uses of cash from operating activities are for employee-related expenditures, costs related to hosting our platform, and marketing expenses.

Net cash provided by operating activities is impacted by our net income adjusted for certain non-cash items, such as stock-based compensation expense, depreciation and amortization expenses, as well as the effect of changes in operating assets and liabilities.

Net cash provided by operating activities was $1,945.3 million for the fiscal year ended January 31, 2025, compared to $1,598.8 million for the fiscal year ended January 31, 2024.

The increase in operating cash flow was mainly driven by higher net income of $533.8 million and the positive impact from changes in operating assets and liabilities of $158.2 million, offset by a decrease in non-cash adjustments of $383.5 million, which is primarily a result of higher gains on strategic investments, net, and lower stock-based compensation expense.

The increase in operating cash flow was mainly driven by higher net income year over year.

Investing Activities

Net cash used in investing activities of $1,183.7 million for the fiscal year ended January 31, 2024 was due to net purchases of marketable securities of $951.4 million, cash paid for acquisition, net of cash acquired, of $204.9 million, purchases of property and equipment of $127.0 million, purchases of strategic investments of $70.5 million, partially offset by proceeds from strategic investments of $170.1 million.

Net cash used in investing activities of $318.3 million for the fiscal year ended January 31, 2023 was primarily due to cash paid for acquisition, net of cash acquired, of $120.6 million, purchases of property and equipment of $103.8 million, purchases of strategic investments of $69.1 million, net purchases of marketable securities of $13.9 million, and purchases of intangible assets of $11.3 million.

Net cash used in investing activities of $1,106.0 million for the fiscal year ended January 31, 2025 was due to net purchases of marketable securities of $964.3 million, purchases of property and equipment of $136.6 million, and purchases of strategic investments of $18.5 million, partially offset by proceeds from strategic investments of $13.4 million.

Net cash used in investing activities of $1,183.7 million for the fiscal year ended January 31, 2024 was due to net purchases of marketable securities of $951.4 million, cash paid for acquisition, net of cash acquired, of $204.9 million, purchases of property and equipment of $127.0 million, and purchases of strategic investments of $70.5 million, partially offset by proceeds from strategic investments of $170.1 million.

Financing Activities

Net cash used in financing activities of $1,028.1 million for the fiscal year ended January 31, 2025 was due to cash paid for repurchases of common stock of $1,093.9 million, partially offset by proceeds from issuance of common stock pursuant to our employee stock purchase plan (“ESPP”) of $54.0 million, proceeds from employee equity transactions to be remitted to employees and tax authorities, net, of $7.2 million, and proceeds from the exercise of stock options of $4.6 million.

Net cash provided by financing activities of $60.2 million for the fiscal year ended January 31, 2023 was due to proceeds from issuance of common stock pursuant to our employee stock purchase plan (“ESPP”) of $54.1 million and proceeds from the exercise of stock options of $10.2 million, partially offset by proceeds from employee equity transactions remitted to employees and tax authorities, net, of $4.1 million.

Net cash used in financing activities of $936.9 million for the fiscal year ended January 31, 2023 was primarily due to cash paid for repurchases of common stock of $1.0 billion, offset by proceeds from issuance of common stock pursuant to our employee stock purchase plan (“ESPP”) of $53.7 million and proceeds from the exercise of stock options of $8.6 million.

For a discussion of the fiscal year ended January 31, 2023, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024.

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In February 2024, our Board of Directors authorized a stock repurchase program of up to $1.5 billion of our Class A common stock.

In November 2024, our Board of Directors authorized the repurchase of an additional $1.2 billion of our outstanding Class A common stock.

Repurchases of our Class A common stock may be effected, from time to time, either on the open market (including pre-set trading plans), in privately negotiated transactions, and other transactions in accordance with applicable securities laws.

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The repurchase program does not obligate us to acquire any particular amount of Class A common stock, and the repurchase program may be suspended or discontinued at any time at our discretion.

As of March 1, 2024, there have been no repurchases made.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC under the Securities Act.

During the fiscal year ended January 31, 2025, we repurchased and subsequently retired 15,888,316 shares of our Class A common stock for an aggregate amount of $1.1 billion.

Critical Accounting Estimates

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Critical accounting estimates are accounting estimates where the nature of the estimates are material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and the impact of the estimates on financial condition or operating performance is material.

We believe that of our significant accounting policies, which are described in Note 1 “Summary of Business and Significant Accounting Policies” to our consolidated financial statements, the following critical estimates involve a greater degree of judgment and complexity.

We believe that of our significant accounting policies, which are described in Part II, Item 8, Note 1 “Summary of Business and Significant Accounting Policies” to the consolidated financial statements in this Annual Report, the following critical estimates involve a greater degree of judgment and complexity.

Revenue Recognition

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We assess our privately held debt and equity securities strategic investment portfolio quarterly for indicators for impairment.

Our impairment analysis encompasses a qualitative assessment evaluates key factors including but not limited to the investee’s financial metrics, market acceptance of the product or technology, and the rate at which the investee is using its cash.

Our impairment analysis encompasses a qualitative assessment that evaluates key factors including but not limited to the investee’s financial metrics, market acceptance of the product or technology, and the rate at which the investee is using its cash.

If the investment is considered to be impaired, we record the investment at fair value by recognizing an impairment through the consolidated statement of operations and establishing a new carrying value for the investment.

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As a result, our investment value in a specific company may move by more or less than any change in the value of that overall company.

An immediate decrease of ten percent in enterprise value of our largest privately held equity securities held as of January 31, 2024 would not have had a material impact on the value of our investment portfolio.

An immediate decrease of 10% in enterprise value of our largest privately held equity securities held as of January 31, 2025 would not have had a material impact on the value of our investment portfolio.

We use the asset and liability method of accounting for income taxes.

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Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in Australia, China, Europe and the United States.

Our results of current and future operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates.

Our results of current

and future operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates.

For the fiscal year ending January 31, 2025, 2024 and 2023, 19.3% , 19.3% and 20.0% of our revenue, respectively and 16.4%, 13.7% and 10.8% of our expenses, respectively, were denominated in currencies other than the U.S.

The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our historical consolidated financial statements for the fiscal years ended January 31, 2025, 2024, and 2023.

As the impact of

foreign currency exchange rates has not been material to our historical operating results, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant.

As the impact of foreign currency exchange rates has not been material to our historical operating results, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant.

Interest Rate 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-K

Item 7. Management’s Discussion and Analysis