Zoom Communications, Inc. 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ZOOM COMMUNICATIONS, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm 66 Consolidated Balance Sheets 68 Consolidated Statements of Operations 69 Consolidated Statements of Comprehensive Income 70 Consolidated Statements of Stockholders’ Equity 71 Consolidated Statements of Cash Flows 72 Notes to Consolidated Financial Statements 74 65 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Zoom Communications, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Zoom Communications, Inc. and subsidiaries (the Company) as of January 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended January 31, 2025, and the related notes and financial statement schedule II: valuation and qualifying accounts(collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of January 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended January 31, 2025, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 66 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Sufficiency of Audit Evidence Over Revenue As discussed in Notes 1 and 2 to the consolidated financial statements, the Company’s revenue is principally derived from the sale of subscriptions to the Company’s video communications platform. The Company recorded $4,665 million of revenue for the year ended January 31, 2025. We identified the evaluation of sufficiency of audit evidence over revenue as a critical audit matter. This matter required especially subjective auditor judgment because the Company’s revenue recognition process is highly automated and is reliant upon a number of customized and proprietary information technology (IT) systems. Involvement of IT professionals with specialized skills and knowledge was required to assist with the performance of certain procedures and determination of IT applications subject to testing. The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over revenue. We evaluated the design and tested the operating effectiveness of certain internal controls related to revenue recognition. This included certain controls related to the Company’s general information technology and application controls related to the systems utilized within the Company’s revenue recognition process. We involved IT professionals with specialized skills and knowledge, who assisted in testing the IT controls of the various systems interacting with the Company’s revenue recognition process. We recalculated revenue for system-generated sales transactions during the year using a software audit tool. For a sample of transactions, we compared the amounts recognized for consistency with underlying documentation, including contracts with customers and cash receipts. Additionally, for the same sample of transactions, we recalculated the amount of revenue recognized in the period based on the terms of the arrangement and the satisfaction of the underlying performance obligation. In addition, we evaluated the sufficiency of audit evidence obtained over revenue by assessing the results of procedures performed. /s/ KPMG LLP We have served as the Company’s auditor since 2016. San Francisco, California February 28, 2025 67 Table of Contents ZOOM COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) As of January 31, 2025 2024 Assets Current assets: Cash and cash equivalents $ 1,349,380 $ 1,558,252 Marketable securities 6,442,329 5,404,233 Accounts receivable, net of allowances of $ 22,078 and $ 32,371 as of January 31, 2025 and 2024, respectively 495,228 536,078 Deferred contract acquisition costs, current 188,358 208,474 Prepaid expenses and other current assets 200,679 219,182 Total current assets 8,675,974 7,926,219 Deferred contract acquisition costs, noncurrent 123,464 138,724 Property and equipment, net 330,475 293,704 Operating lease right-of-use assets 55,900 58,975 Strategic investments 591,481 409,222 Goodwill 307,295 307,295 Deferred tax assets 749,759 662,177 Other assets, noncurrent 154,073 133,477 Total assets $ 10,988,421 $ 9,929,793 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 8,345 $ 10,175 Accrued expenses and other current liabilities 558,562 500,164 Deferred revenue, current 1,336,387 1,251,848 Total current liabilities 1,903,294 1,762,187 Deferred revenue, noncurrent 17,274 18,514 Operating lease liabilities, noncurrent 37,406 48,308 Other liabilities, noncurrent 95,363 81,378 Total liabilities 2,053,337 1,910,387 Commitments and contingencies (Note 9) Stockholders’ equity: Common stock, $ 0.001 par value per share, 2,000,000,000 Class A shares authorized as of January 31, 2025 and 2024; 263,113,866 and 260,896,822 shares issued and outstanding as of January 31, 2025 and 2024, respectively; 300,000,000 Class B shares authorized as of January 31, 2025 and 2024; 42,626,998 and 46,661,531 shares issued and outstanding as of January 31, 2025 and 2024, respectively 305 307 Additional paid-in capital 5,130,271 5,228,756 Accumulated other comprehensive income 4,990 1,063 Retained earnings 3,799,518 2,789,280 Total stockholders’ equity 8,935,084 8,019,406 Total liabilities and stockholders’ equity $ 10,988,421 $ 9,929,793 The accompanying notes are an integral part of these consolidated financial statements. 68 Table of Contents ZOOM COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Year Ended January 31, 2025 2024 2023 Revenue $ 4,665,433 $ 4,527,224 $ 4,392,960 Cost of revenue 1,129,627 1,077,801 1,100,451 Gross profit 3,535,806 3,449,423 3,292,509 Operating expenses: Research and development 852,415 803,187 774,059 Sales and marketing 1,427,384 1,541,307 1,696,590 General and administrative 442,712 579,650 576,431 Total operating expenses 2,722,511 2,924,144 3,047,080 Income from operations 813,295 525,279 245,429 Gains (losses) on strategic investments, net 177,142 109,770 ( 37,571 ) Other income, net 325,147 197,263 41,418 Income before provision for income taxes 1,315,584 832,312 249,276 Provision for income taxes 305,346 194,850 145,565 Net income 1,010,238 637,462 103,711 Undistributed earnings attributable to participating securities — — ( 7 ) Net income attributable to common stockholders $ 1,010,238 $ 637,462 $ 103,704 Net income per share attributable to common stockholders: Basic $ 3.28 $ 2.12 $ 0.35 Diluted $ 3.21 $ 2.07 $ 0.34 Weighted-average shares used in computing net income per share attributable to common stockholders: Basic 307,981,971 300,748,162 296,560,501 Diluted 315,069,582 308,519,897 304,231,350 The accompanying notes are an integral part of these consolidated financial statements. 69 Table of Contents ZOOM COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Year Ended January 31, 2025 2024 2023 Net income $ 1,010,238 $ 637,462 $ 103,711 Other comprehensive income (loss): Unrealized gain (loss) on available-for-sale marketable securities, net of income tax (expense) benefit of $( 1,205 ), $( 15,501 ), and $ 9,834 during the fiscal years ended January 31, 2025, 2024 and 2023, respectively 3,927 51,448 ( 32,483 ) Comprehensive income $ 1,014,165 $ 688,910 $ 71,228 The accompanying notes are an integral part of these consolidated financial statements. 70 Table of Contents ZOOM COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except share data) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Retained Earnings Total Stockholders’ Equity Shares Amount Balance as of January 31, 2022 299,037,805 $ 299 $ 3,749,514 $ ( 17,902 ) $ 2,048,107 $ 5,780,018 Issuance of common stock upon exercise of stock options 1,299,758 1 8,814 — — 8,815 Issuance of common stock upon release of restricted stock units 3,977,915 4 ( 4 ) — Repurchase of common stock ( 11,170,907 ) ( 11 ) ( 999,992 ) — — ( 1,000,003 ) Issuance of common stock for employee stock purchase plan 678,279 1 53,709 — — 53,710 Stock-based compensation expense — — 1,292,839 — — 1,292,839 Other comprehensive loss — — — ( 32,483 ) — ( 32,483 ) Net income — — — — 103,711 103,711 Balance as of January 31, 2023 293,822,850 $ 294 $ 4,104,880 $ ( 50,385 ) $ 2,151,818 $ 6,206,607 Issuance of common stock upon exercise of stock options 1,464,158 1 10,194 — — 10,195 Issuance of common stock upon release of restricted stock units 11,349,453 11 ( 11 ) — — — Issuance of common stock for employee stock purchase plan 921,892 1 54,096 — — 54,097 Stock-based compensation expense — — 1,059,597 — — 1,059,597 Other comprehensive income — — — 51,448 — 51,448 Net income — — — — 637,462 637,462 Balance as of January 31, 2024 307,558,353 $ 307 $ 5,228,756 $ 1,063 $ 2,789,280 $ 8,019,406 Issuance of common stock upon exercise of stock options 908,844 1 4,618 — — 4,619 Issuance of common stock upon release of restricted stock units 12,095,006 12 ( 12 ) — — — Repurchase of common stock, including excise tax ( 15,888,316 ) ( 16 ) ( 1,095,102 ) — — ( 1,095,118 ) Issuance of common stock for employee stock purchase plan 1,066,977 1 54,007 — — 54,008 Stock-based compensation expense — — 938,004 — — 938,004 Other comprehensive income — — — 3,927 — 3,927 Net income — — — — 1,010,238 1,010,238 Balance as of January 31, 2025 305,740,864 $ 305 $ 5,130,271 $ 4,990 $ 3,799,518 $ 8,935,084 The accompanying notes are an integral part of these consolidated financial statements. 71 Table of Contents ZOOM COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended January 31, 2025 2024 2023 Cash flows from operating activities: Net income $ 1,010,238 $ 637,462 $ 103,711 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation expense 931,309 1,057,161 1,285,752 Deferred income taxes ( 90,551 ) ( 116,679 ) ( 160,961 ) Amortization of deferred contract acquisition costs 282,103 270,701 259,368 (Gains) losses on strategic investments, net ( 177,142 ) ( 109,770 ) 37,571 Depreciation and amortization 122,632 104,451 82,321 Provision for accounts receivable allowances 20,022 35,244 50,285 Unrealized foreign exchange losses 17,165 12,259 13,266 Non-cash operating lease cost 24,066 21,066 28,933 Amortization of discount/premium on marketable securities ( 71,636 ) ( 50,770 ) 1,206 Other 4,048 ( 7,670 ) 1,647 Changes in operating assets and liabilities: Accounts receivable 26,640 53,270 ( 231,845 ) Prepaid expenses and other assets ( 17,114 ) ( 71,247 ) ( 18,066 ) Deferred contract acquisition costs ( 246,727 ) ( 214,657 ) ( 298,629 ) Accounts payable ( 3,133 ) ( 4,416 ) 11,611 Accrued expenses and other liabilities 62,277 51,974 20,530 Deferred revenue 79,995 ( 46,719 ) 127,401 Operating lease liabilities, net ( 28,884 ) ( 22,824 ) ( 23,839 ) Net cash provided by operating activities 1,945,308 1,598,836 1,290,262 Cash flows from investing activities: Purchases of marketable securities ( 4,622,104 ) ( 4,083,968 ) ( 2,849,121 ) Maturities of marketable securities 3,610,274 3,131,419 2,835,196 Sales of marketable securities 47,482 1,191 — Purchases of property and equipment ( 136,560 ) ( 126,953 ) ( 103,826 ) Purchases of strategic investments ( 18,500 ) ( 70,527 ) ( 69,050 ) Proceeds from strategic investments 13,384 170,067 300 Cash paid for acquisition, net of cash acquired — ( 204,918 ) ( 120,553 ) Purchases of intangible assets — — ( 11,268 ) Net cash used in investing activities ( 1,106,024 ) ( 1,183,689 ) ( 318,322 ) Cash flows from financing activities: Cash paid for repurchases of common stock ( 1,093,878 ) — ( 1,000,003 ) Proceeds from issuance of common stock for employee stock purchase plan 54,008 54,097 53,710 Proceeds from exercise of stock options 4,619 10,195 8,577 Proceeds from employee equity transactions to be remitted (remitted) to employees and tax authorities, net 7,174 ( 4,106 ) 774 Net cash (used in) provided by financing activities ( 1,028,077 ) 60,186 ( 936,942 ) Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 15,170 ) ( 10,196 ) ( 8,108 ) Net (decrease) increase in cash, cash equivalents, and restricted cash ( 203,963 ) 465,137 26,890 Cash, cash equivalents, and restricted cash—beginning of year 1,565,380 1,100,243 1,073,353 Cash, cash equivalents, and restricted cash—end of year $ 1,361,417 $ 1,565,380 $ 1,100,243 72 Table of Contents Supplemental disclosures of cash flow information Cash paid for income taxes, net $ 395,401 $ 348,129 $ 309,084 Supplemental disclosures of non-cash investing and financing information Purchase of equipment during the period included in accounts payable and accrued expenses $ 20,393 $ 16,206 $ 11,946 Excise tax on share repurchases included in accrued expenses $ 1,240 $ — $ — Vesting of early exercised stock options $ — $ — $ 238 Reconciliation of cash, cash equivalents, and restricted cash within the consolidated balance sheets to the amounts shown in the consolidated statements of cash flows above: Cash and cash equivalents $ 1,349,380 $ 1,558,252 $ 1,086,830 Restricted cash, current included in prepaid expenses and other current assets 12,037 6,874 13,141 Restricted cash, noncurrent included in other assets, noncurrent — 254 272 Total cash, cash equivalents, and restricted cash $ 1,361,417 $ 1,565,380 $ 1,100,243 The accompanying notes are an integral part of these consolidated financial statements. 73 Table of Contents ZOOM COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Business and Significant Accounting Policies Description of Business Zoom provides an open, AI-first work platform for human connection. Our culture of delivering happiness drives our mission and values and is fundamental to everything we do at Zoom. We were incorporated in the state of Delaware in April 2011, and are headquartered in San Jose, California. Fiscal Year Our fiscal year ends on January 31. References to fiscal year 2025, for example, refer to the fiscal year ended January 31, 2025. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the accounts of Zoom Communications, Inc., its subsidiaries, and a variable interest entity for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include, but are not limited to, the estimated expected benefit period for deferred contract acquisition costs, stock-based compensation expense, the fair value of marketable securities, acquired intangible assets and goodwill, the valuation of deferred income tax assets and uncertain tax positions, and accruals and contingencies. Actual results could materially differ from those estimates. Concentration of Risks Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, restricted cash, and accounts receivable. We maintain our cash, cash equivalents, marketable securities, and restricted cash with high-quality financial institutions with investment-grade ratings. A majority of the cash balances are with U.S. banks and are insured to the extent defined by the Federal Deposit Insurance Corporation. No single customer accounted for more than 10% of accounts receivable at January 31, 2025 or 2024. No single customer accounted for 10% or more of total revenue during the fiscal years ended January 31, 2025, 2024, or 2023. Cash, Cash Equivalents, and Restricted Cash Cash and cash equivalents consist of cash in banks and highly liquid investments, primarily money market funds, purchased with an original maturity of three months or less. Restricted cash consists of certificates of deposit collateralizing our operating leases and cash from proceeds from international employees’ sales of our common stock, and is included in prepaid expenses and other current assets and other assets, noncurrent in the consolidated balance sheets. As of January 31, 2025 and 2024, we had $ 12.0 million and $ 6.9 million, respectively, of cash from proceeds from international employees’ sales of our common stock. The amount is held in our bank account until it is remitted to the employees and the tax authorities. Due to the restrictions on the use of the funds in the bank account, we have classified the amount as restricted cash included in prepaid expenses and other current assets, and a corresponding amount is included in accrued expenses and other current liabilities in the consolidated balance sheets. Allowance for Credit Losses We are exposed to credit losses primarily through our accounts receivable and investments in available-for-sale debt securities. See Note 3 for additional information related to our available-for-sale debt securities. Accounts receivable, net 74 Table of Contents Accounts receivable are recorded for invoiced amounts and amounts for which revenue has been recognized, but not invoiced, net of allowances. Our short-term accounts receivable consist of the following: As of January 31, 2025 As of January 31, 2024 (in thousands) Accounts receivable, gross $ 517,306 $ 568,449 Less: Allowance for credit losses ( 17,262 ) ( 25,916 ) Less: Other reserves ( 4,816 ) ( 6,455 ) Accounts receivable, net $ 495,228 $ 536,078 We maintain an allowance for credit losses for expected uncollectible accounts receivable, which is recorded as an offset to accounts receivable, and changes in such are classified as general and administrative expense in the consolidated statements of operations. The allowance for credit losses is based on management’s estimate for expected credit losses for outstanding accounts receivable. We determine expected credit losses based on historical write-off experience, an analysis of the aging of outstanding receivables, customer payment patterns, the establishment of specific reserves for customers in an adverse financial condition, and adjust based upon our expectations of changes in macroeconomic conditions that may impact the collectibility of outstanding receivables, including noncurrent accounts receivable. We also consider current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. We reassess the adequacy of the allowance for credit losses each reporting period. Other reserves generally represent a reduction of accounts receivable with an offsetting reduction to deferred revenue. For the fiscal year ended January 31, 2025, our assessment took into account recent changes in macroeconomic conditions such as inflation pressures, fluctuations in foreign currency exchange rates, and uncertain environments, which may impact our estimates of credit and collectibility trends. Below is a rollforward of our allowance for credit losses for the fiscal year ended January 31, 2025. January 31, 2025 January 31, 2024 (in thousands) Balance as of beginning of year $ 25,916 $ 24,900 Provision for credit losses 22,198 47,267 Write-offs ( 30,852 ) ( 46,251 ) Balance as of end of year $ 17,262 $ 25,916 Available-for-sale Investments Available-for-sale investments consist primarily of high-grade commercial paper, agency bonds, corporate bonds, corporate and other debt securities, U.S. government agency securities, and treasury bills. We classify our marketable securities as available-for-sale at the time of purchase and reevaluate such classification at each balance sheet date. We may sell these securities at any time for use in current operations even if they have not yet reached maturity. As a result, we classify our securities, including those with maturities beyond 12 months, as current assets in the consolidated balance sheets. We carry these securities at fair value and record unrealized gains and losses in accumulated other comprehensive income (loss), which is reflected as a component of stockholders’ equity. We evaluate our securities with unrealized loss positions as to whether the declines in fair value were due to credit losses, and record the portion of impairment relating to the credit losses through allowance for credit losses limited to the amount that fair value was less than the amortized cost basis. Realized gains and losses from the sale of marketable securities are determined based on the specific identification method. Realized gains and losses are reported in other income (expense), net in the consolidated statements of operations. Strategic Investments We hold strategic investments in publicly held equity securities and privately held debt and equity securities in which we do not have a controlling interest. Publicly held equity securities are measured using quoted prices in their respective active markets with changes recorded through gains (losses) on strategic investments, net in the consolidated statements of operations. Privately held equity securities without a readily determinable fair value are recorded at cost and adjusted for impairments and observable price changes with a same or similar security from the same issuer (i.e. using the measurement alternative) and are recorded through gains (losses) on strategic investments, net in the consolidated statements of operations. If, based on the terms of these publicly traded and privately held securities, we determine that we exercise significant influence on the entity to which these securities relate, we will apply the equity method of accounting for such investments. 75 Table of Contents Privately held equity securities that are accounted for under the equity method are measured at cost less any impairment, plus or minus our share of equity method investee income or loss, which is reported in gains (losses) on strategic investments, net in the consolidated statements of operations. Privately held debt securities are recorded at fair value with changes in fair value recorded through accumulated other comprehensive income (loss) on the consolidated balance sheets. On a quarterly basis, we assess our privately held debt and equity securities in our strategic investment portfolio for indicators for impairment. For the fiscal years ended January 31, 2025, 2024, and 2023, we recognized an immaterial amount of impairment to our privately held debt and equity securities. Fair Value Measurements Fair value is defined as the exchange price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We measure financial assets and liabilities at fair value at each reporting period using a fair value hierarchy, which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Financial instruments consist of cash equivalents, restricted cash, marketable securities, accounts receivable, and accounts payable. Cash equivalents, restricted cash, and marketable securities are stated at fair value on a recurring basis. Accounts receivable and accounts payable are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date. Property and Equipment, Net Property and equipment, net, are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the respective assets, determined to be three to five years . Leasehold improvements are amortized over the shorter of the remaining lease term or the estimated useful life of five years . Expenditures for maintenance and repairs are expensed as incurred. Significant improvements and betterments that substantially enhance the life of an asset are capitalized. Software Development Costs We capitalize certain development costs related to our unified communications and collaboration platform during the application development stage as long as it is probable the project will be completed, and the software will be used to perform the function intended. Capitalized software development costs are recorded as part of property and equipment, net. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Capitalized software development costs are amortized on a straight-line basis over the software’s estimated useful life, which is generally three years , and are recorded in cost of revenue in the consolidated statements of operations. We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. We have capitalized $ 14.9 million, $ 8.1 million, and $ 18.0 million of software development costs during the fiscal years ended January 31, 2025, 2024, and 2023, respectively. Leases All lease arrangements are generally recognized at lease commencement. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized at commencement. For short-term leases (an initial term of 12 months or less), an ROU asset and corresponding lease liability are not recorded and we record rent expense in our consolidated statements of operations on a straight-line basis over the lease term and record variable lease payments as incurred. ROU assets represent our right to use an underlying asset during the reasonably certain lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of fixed payments not yet paid over the lease term. We use our incremental 76 Table of Contents borrowing rate based on the information available at the commencement date in determining the lease liabilities as our leases generally do not provide an implicit rate. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, in an economic environment where the leased asset is located. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. We reassess the lease term if and when a significant event or change in circumstances occurs within our control. We currently do not have any finance leases. Impairment of Long-Lived Assets We evaluate long-lived assets or asset groups for impairment whenever events indicate that the carrying value of an asset or asset group may not be recoverable based on expected future cash flows attributable to that asset or asset group. Recoverability of assets held and used is measured by comparing the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds estimated undiscounted future cash flows, then an impairment charge would be recognized based on the excess of the carrying amount of the asset or asset group over its fair value. Assets to be disposed of are reported at the lower of their carrying amount or fair value, less costs to sell. There were no impairment charges recognized related to long-lived assets during the fiscal years ended January 31, 2025, 2024, or 2023. Business Combinations We account for our business combinations using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date. The excess of the fair value of purchase consideration over the values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, we make estimates and assumptions, especially with respect to intangible assets. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, not to exceed one year from the date of acquisition, we may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances that existed as of the acquisition date. After the measurement period, any subsequent adjustments are reflected in the consolidated statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred. Goodwill and Intangible Assets Goodwill amounts are not amortized, but rather tested for impairment at least annually or more often if circumstances indicate that the carrying value may not be recoverable. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. We have one reporting unit and as a result, goodwill has been assigned to the single reporting unit. We conducted our annual impairment test of goodwill in the fourth quarter of fiscal year 2025 and determined that no adjustment to the carrying value of goodwill was required. Intangible assets consist of acquired identifiable intangible assets resulting from business combinations, as well as other intangible assets purchased outside of a business combination, such as domains and intellectual property addresses. Finite-lived intangible assets are initially recorded at fair value and are amortized on a straight-line basis over their estimated useful lives. We routinely evaluate the estimated remaining useful lives of our finite-lived intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. Indefinite-lived intangible assets are recorded at fair value and are not amortized. We review the useful lives of indefinite-lived intangible assets each reporting period to determine whether events and circumstances continue to support the indefinite useful life classification. If we determine that the life of an intangible asset is no longer indefinite, that asset would be tested for impairment and amortized prospectively over its estimated remaining useful life. There were no impairment charges to acquired intangible assets during the fiscal year ended January 31, 2025. Revenue Recognition We derive our revenue primarily from subscription agreements with customers for access to our unified communications and collaboration platform and services. We also provide other services, which include professional services, consulting services, and online event hosting, which were immaterial to our consolidated financial statements. Revenue is recognized when a customer obtains control of promised services. 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 determine revenue recognition through the following steps: 77 Table of Contents 1. Identification of the contract, or contracts, with the customer We determine a contract with a customer to exist when the contract is approved, each party’s rights regarding the services to be transferred can be identified, the payment terms for the services can be identified, the customer has the ability and intent to pay, and the contract has commercial substance. At contract inception, we will evaluate whether two or more contracts should be combined and accounted for as a single contract and whether the combined or single contract includes more than one performance obligation. We apply judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer. 2. Identification of the performance obligations in the contract Performance obligations committed in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the services or products is separately identifiable from other promises in the contract. Promised services or products under which both of these two criteria are not met are recognized as a combined, single performance obligation. Our performance obligations primarily relate to access to our unified communications and collaboration platform, which consists of one or more software-based services. Our customers do not have the ability to take possession of our software, and through access to our platform, we provide a series of distinct software-based services that are satisfied over the term of the subscription. 3. Determination of the transaction price The transaction price is determined based on the consideration to which we expect to be entitled in exchange for transferring services to the customer. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue recognized under the contract will not occur. None of our contracts contain a significant financing component. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental entities (e.g., sales and other indirect taxes). Our unified communications and collaboration platform and related services are typically warranted to perform in a professional manner that will comply with the terms of the subscription agreements. In addition, we include service-level commitments to our customers warranting certain levels of uptime reliability and performance and permitting those customers to receive credits in the event that we fail to meet those service levels. These credits represent a form of variable consideration. We have not provided any material refunds related to these agreements in the consolidated financial statements during the periods presented. 4. Allocation of the transaction price to the performance obligations in the contract Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on each performance obligation’s relative standalone selling price. Our contracts with multiple performance obligations are generally sold over the same subscription term and have the same pattern of transfer to the customer, and so they are accounted for as one combined performance obligation in the context of the contract. Accordingly, the transaction price is allocated to this single performance obligation. 5. Recognition of the revenue when, or as, a performance obligation is satisfied Revenue is recognized at the time the related performance obligation is satisfied by transferring the control of the promised service to a customer. Revenue is recognized in an amount that reflects the consideration that we expect to receive in exchange for those services. Fees for access to our unified communications and collaboration platform and related services are subscription revenue and are considered one performance obligation, and the related revenue is recognized ratably over the subscription period as we satisfy the performance obligation. Professional services are time-based arrangements and revenue is recognized as these services are performed. Fees for services represent less than 1 % of total revenue during the periods presented. Cost of Revenue Cost of revenue primarily consists of costs related to hosting our unified communications and collaboration platform and providing general operating support services to our customers. These costs are composed of co-located data center costs, third-party cloud hosting costs, integrated third-party PSTN services, personnel-related expenses, amortization of capitalized software development costs and acquired intangible assets, royalty payments, and allocated overhead costs. Indirect overhead 78 Table of Contents costs associated with corporate facilities and related depreciation, health care benefits, training, and other employee benefits are allocated to cost of revenue and operating expenses based on applicable headcount. Research and Development Research and development costs include personnel-related expenses associated with our engineering personnel and consultants responsible for the design, development, and testing of our unified communications and collaboration platform, depreciation of equipment used in research and development, and allocated overhead costs. Research and development costs are expensed as incurred. Advertising Costs Advertising costs are expensed as incurred in sales and marketing expense and amounted to $ 50.8 million, $ 56.5 million, and $ 64.7 million for the fiscal years ended January 31, 2025, 2024, and 2023, respectively. Stock-Based Compensation Stock-based compensation expense related to stock awards with only service conditions, including stock options, RSUs, and ESPP, are measured based on the fair value of the awards granted and recognized as an expense on a straight-line basis over the requisite service period. For RSU’s with service and performance conditions, expense is recognized over the requisite service period if it is probable the performance condition will be achieved. The probability of achievement is assessed quarterly, and the effect of any change in the estimated number of performance-based awards expected to vest is recognized in the period those estimates are revised as a cumulative catch-up adjustment to stock-based compensation expense. The fair value of each option and ESPP award is estimated on the grant date using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the use of assumptions, including the fair value of the underlying common stock, the expected term of the award, the expected volatility of the price of our common stock, risk-free interest rates, and the expected dividend yield of our common stock. The fair value of each RSU award is based on the fair value of the underlying common stock as of the grant date. The assumptions used to determine the fair value of the stock awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. We account for forfeitures as they occur instead of estimating the number of awards expected to be forfeited. Foreign Currency The functional currency of our foreign subsidiaries is the U.S. dollar. Accordingly, monetary assets and liabilities of our foreign subsidiaries are remeasured into U.S. dollars at the exchange rates in effect at the reporting date, non-monetary assets and liabilities are remeasured at historical rates, and revenue and expenses are remeasured at average exchange rates in effect during each reporting period. Income Taxes We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe it is more likely than not that they will not be realized. We consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. We consider many factors when evaluating our uncertain tax positions, which involve significant judgment and may require periodic adjustments. The resolution of these uncertain tax positions in a manner inconsistent with management's expectations could have a material impact on our consolidated financial statements. We recognize interest and penalties related to uncertain tax positions as a component of our provision for income taxes. Accrued interest and penalties are included with the related tax liability. 79 Table of Contents Net Income Per Share Attributable to Common Stockholders We calculate our net income per share attributable to Class A and Class B common stock using the two-class method required for companies with participating securities. We consider our convertible preferred stock and unvested common stock, which includes early exercised stock options, to be participating securities as holders of such securities have non-forfeitable dividend rights in the event of our declaration of a dividend for shares of common stock. Distributed and undistributed earnings allocated to participating securities are subtracted from net income in determining net income attributable to common stockholders. Basic net income per share is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of our Class A and Class B common stock outstanding. The diluted net income per share attributable to common stockholders is computed by giving effect to all dilutive securities. Diluted net income per share attributable to common stockholders is computed by dividing the resulting net income attributable to common stockholders by the weighted-average number of fully diluted common shares outstanding. Recently Adopted Accounting Pronouncements In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which aims to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis to enable investors to develop more decision-useful financial analyses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We adopted the ASU as of February 1, 2024, and applied the amendments in this Update retrospectively to all prior periods presented in these financial statements. Our adoption resulted in the addition of a note to consolidated financial statements, “14. Segment Information.” Recent Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which aims to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted. We are currently evaluating the impact from the adoption of this ASU on our consolidated financial statements. In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which aims to improve financial reporting by requiring additional disclosure about specific expense categories in the notes to financial statements at interim and annual reporting periods. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact from the adoption of this ASU on our consolidated financial statements. 80 Table of Contents 2. Revenue Recognition Disaggregation of Revenue The following table summarizes revenue by region based on the billing address of customers: Year Ended January 31, 2025 2024 2023 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage of Revenue (in thousands, except percentages) Americas $ 3,351,286 71.8 % $ 3,228,914 71.3 % $ 3,054,172 69.5 % APAC 571,443 12.2 % 571,596 12.6 % 590,512 13.4 % EMEA 742,704 16.0 % 726,714 16.1 % 748,276 17.1 % Total $ 4,665,433 100.0 % $ 4,527,224 100.0 % $ 4,392,960 100.0 % Contract Balances We receive payments from customers based on a billing schedule as established in our customer contracts. Accounts receivable are recorded when we contractually have the right to consideration. In some arrangements, a right to consideration for our performance under the customer contract may occur before invoicing to the customer, resulting in an unbilled accounts receivable. The amount of unbilled accounts receivable included within accounts receivable, net of allowances on the consolidated balance sheets was $ 118.5 million and $ 124.8 million as of January 31, 2025 and 2024, respectively, and the amount of unbilled accounts receivable included within other assets, noncurrent on the consolidated balance sheets was immaterial as of January 31, 2025 and 2024. Contract liabilities consist of deferred revenue. Revenue is deferred when we have the right to invoice in advance of performance under a customer contract. The current portion of deferred revenue balances is recognized over the next 12 months. The amount of revenue recognized during the fiscal years ended January 31, 2025, 2024, and 2023 that was included in deferred revenue at the beginning of each period was $ 1,249.8 million, $ 1,257.4 million, and $ 1,140.7 million, respectively. Remaining Performance Obligations The terms of our subscription agreements are monthly, annual, and multiyear and we may bill for the full term in advance or on an annual, quarterly, or monthly basis, depending on the billing terms with customers. As of January 31, 2025, the aggregate amount of the transaction price allocated to our remaining performance obligations was $ 3,801.9 million, which consists of both billed consideration in the amount of $ 1,353.7 million and unbilled consideration in the amount of $ 2,448.2 million that we expect to recognize as revenue. We expect to recognize 59 % of our remaining performance obligations as revenue over the next 12 months and the remainder thereafter. Cost to Obtain a Contract We primarily capitalize sales commissions and associated payroll taxes paid to internal sales personnel that are incremental costs from the acquisition of customer contracts. These costs are recorded as deferred contract acquisition costs in the consolidated balance sheets. We determine whether costs should be deferred based on our sales compensation plans and if the commissions are incremental and would not have occurred absent the customer contract. Sales commissions paid upon the initial acquisition of a customer contract are amortized over an estimated period of benefit of three years , which is typically greater than the contractual terms of the customer contracts. Generally, we do not pay sales commissions upon contract renewal. Amortization is recognized on a straight-line basis commensurate with the pattern of revenue recognition. We determine the period of benefit for commissions paid for the acquisition of the initial customer contract by taking into consideration the initial estimated customer life and the technological life of our unified communications and collaboration platform and related significant features. Amortization of deferred contract acquisition costs is included in sales and marketing expense in the consolidated statements of operations. We periodically review these deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit. There were no impairment losses recorded during the periods presented. 81 Table of Contents The following table represents a rollforward of deferred contract acquisition costs: Year Ended January 31, 2025 2024 (in thousands) Beginning balance $ 347,198 $ 403,241 Additions to deferred contract acquisition costs 246,727 214,657 Amortization of deferred contract acquisition costs ( 282,103 ) ( 270,700 ) Ending balance $ 311,822 $ 347,198 Deferred contract acquisition costs, current (to be amortized in next 12 months) $ 188,358 $ 208,474 Deferred contract acquisition costs, noncurrent 123,464 138,724 Total deferred contract acquisition costs $ 311,822 $ 347,198 3. Investments Marketable Securities As of January 31, 2025 and 2024, our marketable securities consisted of the following: As of January 31, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (in thousands) Commercial paper $ 20,841 $ — $ — $ 20,841 Agency bonds 1,173,518 1,609 ( 643 ) 1,174,484 Corporate and other debt securities 719,145 2,069 ( 419 ) 720,795 U.S. government agency securities 4,412,730 8,449 ( 5,249 ) 4,415,930 Treasury bills 110,237 43 ( 1 ) 110,279 Marketable securities $ 6,436,471 $ 12,170 $ ( 6,312 ) $ 6,442,329 As of January 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (in thousands) Commercial paper $ 41,564 $ — $ — $ 41,564 Agency bonds 1,667,601 2,426 ( 3,344 ) 1,666,683 Corporate and other debt securities 663,122 1,161 ( 1,124 ) 663,159 U.S. government agency securities 3,003,224 7,859 ( 6,241 ) 3,004,842 Treasury bills 27,992 — ( 7 ) 27,985 Marketable securities $ 5,403,503 $ 11,446 $ ( 10,716 ) $ 5,404,233 Unrealized losses for securities that have been in an unrealized loss position for less than 12 months were $ 6.2 million and $ 6.0 million as of January 31, 2025 and 2024, respectively. Unrealized losses for securities that have been in an unrealized loss position for 12 months or longer were immaterial as of January 31, 2025 and $ 4.8 million as of January 31, 2024. We review the individual securities that have unrealized losses on a regular basis to evaluate whether or not any security has experienced, or is expected to experience, credit losses resulting in the decline in fair value. We evaluate, among other factors, whether we have the intention to sell any of these marketable securities and whether it is more likely than not that we will be required to sell any of them before recovery of the amortized cost basis. We have not recorded an allowance for credit losses, as we believe any such losses would be immaterial based on the high-grade credit rating for each of our marketable securities as of the end of each fiscal year. There were no material realized gains or losses from available-for-sale securities that were reclassified out of accumulated other comprehensive income (loss) for the fiscal years ended January 31, 2025, 2024, and 2023. 82 Table of Contents The following table presents the contractual maturities of our marketable securities as of January 31, 2025 and 2024: As of January 31, 2025 2024 (in thousands) Less than one year $ 3,534,014 $ 2,883,598 Due in one to five years 2,908,315 2,520,635 Total $ 6,442,329 $ 5,404,233 Strategic Investments Strategic investments by form and measurement category as of January 31, 2025 were as follows: Measurement Category Fair Value Measurement Alternative Equity Method Total (in thousands) Equity securities $ 35,280 $ 452,160 $ 99,591 $ 587,031 Debt securities 4,450 — — 4,450 Strategic investments $ 39,730 $ 452,160 $ 99,591 $ 591,481 Strategic investments by form and measurement category as of January 31, 2024 were as follows: Measurement Category Fair Value Measurement Alternative Equity Method Total (in thousands) Equity securities $ 23,160 $ 285,509 $ 96,725 $ 405,394 Debt securities 3,828 — — 3,828 Strategic investments $ 26,988 $ 285,509 $ 96,725 $ 409,222 During the fiscal year ended January 31, 2025, we recorded net unrealized gains of $ 151.4 million on our investments accounted for under the measurement alternative method, mainly driven by changes in the fair value, sales of investments, along with dividends received from these investments. 83 Table of Contents 4. Fair Value Measurements The following tables present information about our financial instruments that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value: As of January 31, 2025 Fair Value Level 1 Level 2 Level 3 (in thousands) Financial Assets: Money market funds $ 825,044 $ 825,044 $ — $ — Treasury bills 17,965 — 17,965 — Agency Bonds 23,992 — 23,992 — Cash equivalents 867,001 825,044 41,957 — Commercial paper 20,841 — 20,841 — Agency bonds 1,174,484 — 1,174,484 — Corporate and other debt securities 720,795 — 720,795 — U.S. government agency securities 4,415,930 — 4,415,930 — Treasury bills 110,279 — 110,279 — Marketable securities 6,442,329 — 6,442,329 — Publicly held equity securities included in strategic investments 35,280 35,280 — — Privately held debt securities included in strategic investments 4,450 — — 4,450 Total financial assets $ 7,349,060 $ 860,324 $ 6,484,286 $ 4,450 As of January 31, 2024 Fair Value Level 1 Level 2 Level 3 (in thousands) Financial Assets: Money market funds $ 851,100 $ 851,100 $ — $ — Treasury bills 100,629 — 100,629 — Corporate debt securities 2,715 — 2,715 — U.S. government agency securities 20,155 — 20,155 — Cash equivalents 974,599 851,100 123,499 — Commercial paper 41,564 — 41,564 — Agency bonds 1,666,683 — 1,666,683 — Corporate and other debt securities 663,159 — 663,159 — U.S. government agency securities 3,004,842 — 3,004,842 — Treasury bills 27,985 — 27,985 — Marketable securities 5,404,233 — 5,404,233 — Certificates of deposit included in other assets, noncurrent 254 — 254 — Publicly held equity securities included in strategic investments 23,160 23,160 — — Privately held debt securities included in strategic investments 3,828 — — 3,828 Total financial assets $ 6,406,074 $ 874,260 $ 5,527,986 $ 3,828 We classify our highly liquid money market funds and publicly held equity securities within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. We classify our commercial paper, agency bonds, corporate and other debt securities, U.S. government agency securities, treasury bills, and certificates of deposit within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security, which may not be actively traded. We classify our privately held debt securities as Level 3 due to the lack of relevant observable market data over fair value inputs, such as the probability weighting of the various scenarios that can impact settlement of the arrangement. 84 Table of Contents 5. Business Combinations Workvivo Limited On April 21, 2023, we acquired 100 % of the issued and outstanding share capital of Workvivo Limited (“Workvivo”), a private technology company that provides an employee experience platform, for an all-cash purchase consideration of $ 221.8 million. The acquisition extends our platform and offers our customers new ways to keep employees informed, engaged, and connected. The acquisition has been accounted for as a business combination. In allocating the purchase consideration, $ 184.7 million was attributed to goodwill, $ 28.0 million to intangible assets (primarily consisting of $ 10.8 million to developed technology and $ 17.0 million to customer relationships), and $ 9.1 million to other net assets acquired. The goodwill amount represents synergies related to our existing products expected to be realized from the acquisition and assembled workforce. The associated goodwill is not deductible for tax purposes. At the date of the acquisition, the developed technology and customer relationships both had an estimated useful life of 5.0 years, and both are amortized using the straight-line method over their respective estimated useful lives. Amortization of developed technology and customer relationships is recorded within cost of revenue and sales and marketing expense, respectively, within the consolidated statements of operations. As of January 31, 2025, the developed technology and customer relationships both had a remaining useful life of 3.2 years. Transaction costs incurred in connection with the acquisition were immaterial. The results of operations of Workvivo, which are not material, have been included in our consolidated financial statements from the date of the acquisition. Pro forma and historical results of operations of the company have not been presented, as the results do not have a material effect on any of the periods presented in our consolidated statements of operations. 6. Balance Sheet Components Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following: As of January 31, 2025 2024 (in thousands) Prepaid expenses 166,924 188,259 Restricted cash 12,037 6,874 Other 21,718 24,049 Prepaid expenses and other current assets $ 200,679 $ 219,182 Property and Equipment, Net Property and equipment consisted of the following: As of January 31, 2025 2024 (in thousands) Servers $ 427,664 $ 340,868 Software 123,259 95,409 Computer and office equipment 47,021 44,571 Leasehold improvements 54,885 43,981 Furniture and fixtures 5,767 5,192 Property and equipment, gross 658,596 530,021 Less: accumulated depreciation and amortization ( 328,121 ) ( 236,317 ) Property and equipment, net $ 330,475 $ 293,704 Depreciation and amortization expense was $ 109.1 million, $ 91.9 million, and $ 77.0 million for the fiscal years ended January 31, 2025, 2024, and 2023, respectively. 85 Table of Contents Other Assets, Noncurrent Other assets, noncurrent consisted of the following: As of January 31, 2025 2024 (in thousands) Accounts receivable, noncurrent $ 19,266 $ 26,099 Intangible assets subject to amortization, net 33,410 46,935 Indefinite-lived intangible assets 25,239 25,239 Prepaid expense, noncurrent 52,156 23,351 Income tax receivable, noncurrent 12,230 — Other 11,772 11,853 Other assets, noncurrent $ 154,073 $ 133,477 Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following: As of January 31, 2025 2024 (in thousands) Accrued expenses $ 200,416 $ 173,993 Accrued compensation and benefits 193,110 185,128 Income tax liabilities 18,815 21,880 Sales and other non-income tax liabilities 41,755 35,460 Customer deposit liabilities 47,312 40,142 Operating lease liabilities, current 27,026 24,645 Other 30,128 18,916 Accrued expenses and other current liabilities $ 558,562 $ 500,164 Other Liabilities, Noncurrent Other liabilities, noncurrent consisted of the following: As of January 31, 2025 2024 (in thousands) Sales and other non-income tax liabilities $ 41,517 $ 42,254 Long-term income tax liabilities 49,449 33,864 Other 4,397 5,260 Other liabilities, noncurrent $ 95,363 $ 81,378 86 Table of Contents 7. Operating Leases We have entered into various operating lease agreements for office space, with remaining contractual periods of up to five years . We also enter into equipment operating lease agreements related to our Hardware-as-a-Service (“HaaS”) offering. We elect to apply the lessor practical expedient per ASC 842 and account for HaaS with customers as a combined performance obligation with the right to access our unified communications and collaboration platform under ASC 606, Revenue from Contracts with Customers . HaaS was immaterial to our consolidated financial statements. Many of our leases contain one or more options to extend. As leases approach maturity, we consider various factors such as market conditions and the terms of any renewal options that may exist to determine whether we are reasonably certain to exercise the options to extend the lease. Operating lease expense for the fiscal years ended January 31, 2025, 2024 and 2023 was $ 26.7 million, $ 24.9 million and $ 32.7 million , respectively, excluding short-term lease costs, variable lease costs, and sublease income, each of which was immaterial for the fiscal years ended January 31, 2025, 2024 and 2023 . Supplemental balance sheet information related to operating leases was as follows: As of January 31, 2025 2024 (in thousands, except life and percentages) Reported as: Assets: Operating lease right-of-use assets $ 55,900 $ 58,975 Liabilities: Accrued expenses and other current liabilities $ 27,026 $ 24,645 Operating lease liabilities, noncurrent 37,406 48,308 Total operating lease liabilities $ 64,432 $ 72,953 Weighted average remaining lease term 3.3 years 3.7 years Weighted average discount rate 4.4 % 4.1 % Supplemental cash flow and other information related to operating leases was as follows: 87 Table of Contents Year Ended January 31, 2025 2024 2023 (in thousands) Cash payments included in the measurement of our operating lease liabilities $ 31,197 $ 26,471 $ 27,120 Operating lease right-of-use assets recognized in exchange for new operating lease obligations $ 21,760 $ — $ 13,857 As of January 31, 2025, the future minimum lease payments included in the measurement of our operating lease liabilities are as follows: As of January 31, 2025 (in thousands) Year Ending January 31, 2026 $ 27,171 2027 18,017 2028 11,512 2029 9,658 2030 2,645 Thereafter 240 Total operating lease payments $ 69,243 Less: imputed interest ( 4,811 ) Total operating lease liabilities $ 64,432 8. Goodwill and Intangible Assets Goodwill The following table summarizes the changes in the carrying amount of goodwill during the years: As of January 31, 2025 2024 (in thousands) Balance, beginning of the year $ 307,295 $ 122,641 Increase in goodwill related to business combinations — 184,654 Balance, ending of the year $ 307,295 $ 307,295 During the fiscal year ended January 31, 2024, we acquired Workvivo, and recorded goodwill of $ 184.7 million. See Note 5 for additional information related to the acquisition. Intangibles The following table summarizes intangible assets with a finite useful life included within other asset, noncurrent on the consolidated balance sheet: As of January 31, 2025 2024 Gross Carrying Amount Accumulated Amortization Net Value Gross Carrying Amount Accumulated Amortization Net Value (in thousands) Customer relationships $ 31,732 $ ( 14,044 ) $ 17,688 $ 31,732 $ ( 7,684 ) $ 24,048 Technology 26,959 ( 14,080 ) 12,879 26,959 ( 8,676 ) 18,283 Assembled workforce 7,034 ( 4,191 ) 2,843 7,034 ( 2,430 ) 4,604 Total $ 65,725 $ ( 32,315 ) $ 33,410 $ 65,725 $ ( 18,790 ) $ 46,935 88 Table of Contents Intangible asset amortization expense was $ 13.5 million, $ 12.5 million, and $ 5.3 million for the fiscal years ended January 31, 2025, 2024 and 2023, respectively. Estimated amortization expense for each of the five succeeding fiscal years and thereafter is as follows: As of January 31, 2025 (in thousands) Year Ending January 31, 2026 13,000 2027 12,088 2028 7,105 2029 1,217 2030 — Thereafter — Total amortization expense 33,410 The following table summarizes intangible assets with an indefinite useful life included within other asset, noncurrent on the consolidated balance sheet: As of January 31, 2025 2024 (in thousands) Domain and IP Addresses $ 20,232 $ 20,232 Patents and trade names 5,007 5,007 Total $ 25,239 $ 25,239 For the years ended January 31, 2025, 2024 and 2023, there were no intangible assets impairment losses. 9. Commitments and Contingencies Non-cancelable Purchase Obligations In the normal course of business, we enter into non-cancelable purchase commitments with various parties to purchase primarily software-based services. As of January 31, 2025, we had outstanding non-cancelable purchase obligations with a term of less than 12 months of $ 236.5 million and non-cancelable purchase obligations with a term 12 months or longer of $ 233.7 million. Indemnifications and Contingency Our agreements with certain larger customers include certain provisions for indemnifying customers against liabilities if our services infringe a third party’s intellectual property rights. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances that may be involved in each particular agreement. To date, we have not incurred any material costs as a result of such provisions and have not accrued any liabilities related to such obligations in our consolidated financial statements. In addition, we have indemnification agreements with our directors and our executive officers that require us, among other things, to indemnify our directors and executive officers for costs associated with any fees, expenses, judgments, fines, and settlement amounts incurred by any of those persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by us, arising out of that person’s services as our director or officer or that person’s services provided to any other company or enterprise at our request. We maintain director and officer insurance coverage that may enable us to recover a portion of any future indemnification amounts paid. To date, there have been no claims under any of our directors’ and executive officers’ indemnification provisions. Sales and Other Tax Liabilities We conduct operations in many tax jurisdictions. In many jurisdictions, non-income-based taxes, such as sales and use tax and other indirect taxes, are assessed on our operations. Although we are diligent in collecting and remitting such taxes, 89 Table of Contents there is uncertainty as to what constitutes sufficient presence for a jurisdiction to levy taxes, fees, and surcharges for sales made over the Internet. As of January 31, 2025 and 2024, we recorded sales and other tax liabilities of $ 83.3 million and $ 77.7 million, respectively, of which $ 41.8 million and $ 35.5 million are included in accrued expenses and other current liabilities, respectively, and $ 41.5 million and $ 42.3 million are included in other liabilities, noncurrent, respectively, in our consolidated balance sheets, based on our best estimate of the probable liability for the loss contingency incurred as of those dates. Our estimate of a probable outcome under the loss contingency is based on analysis of our sales and marketing activities, revenue subject to sales tax, and applicable regulations in applicable jurisdictions in each period. No significant adjustments to the sales and other tax liabilities have been recognized in the accompanying consolidated financial statements for changes to the assumptions underlying the estimate; however, changes in our assumptions may occur in the future as we obtain new information, which can result in adjustments to the recorded liability. Legal Proceedings In June 2020, we received a grand jury subpoena from the Department of Justice’s U.S. Attorney’s Office for Eastern District of New York (“EDNY”), which requested information regarding our interactions with foreign governments and foreign political parties, including the Chinese government, as well as information regarding storage of and access to user data, the development and implementation of Zoom’s privacy policies, and the actions we took responding to law enforcement requests from the Chinese government. In July 2020, we received subpoenas from the Department of Justice’s U.S. Attorney’s Office for the Northern District of California (“NDCA”) and the SEC. Both subpoenas seek documents and information relating to various security, data protection and privacy matters, including our encryption, and our statements relating thereto, as well as calculation of usage metrics and related public statements. In addition, the NDCA subpoena seeks information relating to any contacts between our employees and representatives of the Chinese government, and any attempted or successful influence by any foreign government in our policies, procedures, practices, and actions as they relate to users in the United States. We have since received additional subpoenas from EDNY and NDCA seeking related information. We are fully cooperating with all of these investigations and have conducted our own thorough internal investigation. These investigations are ongoing, and a negative outcome in any or all of these matters could cause us to incur substantial fines, penalties, or other financial exposure, as well as reputational harm. During the fiscal year ended January 31, 2025, we recorded an $ 18.0 million accrual with respect to a tentative settlement offer for the SEC matter that remains subject to SEC approval. We do not know when these matters will be completed, including the SEC matter, which facts we will ultimately discover as a result of the investigations, or what actions the government may or may not take. We are unable to predict the ultimate outcome of these matters and are unable to reasonably estimate any range of possible loss beyond the $ 18.0 million settlement offer for the SEC matter. On June 11, 2020 and July 30, 2020, purported shareholder derivative complaints were filed in the United States District Court for the District of Delaware. The first complaint names as defendants nine of our officers and directors, and the second complaint names eight of our officers and directors. The lawsuits assert state and federal claims and are based on the same alleged misstatements as the shareholder class action complaint. The lawsuits accuse our board of directors of failing to exercise reasonable and prudent supervision over our management, policies, practices, and internal controls. The plaintiffs seek unspecified monetary damages on behalf of us as well as governance reforms. On September 25, 2020, the derivative cases were consolidated. On October 27, 2021, a third substantially identical lawsuit was filed in the same court against the same defendants, seeking unspecified monetary damages and governance reforms. On November 17, 2021, all three derivative lawsuits were consolidated. The consolidated case was stayed pending resolution of the motion to dismiss the securities class action. On April 11, 2023, the court entered a stipulated order that required defendants to answer, move, or otherwise respond to the operative complaint by June 12, 2023. On June 12, 2023, defendants filed a motion to dismiss the consolidated case. On August 11, 2023, the plaintiff in the consolidated case filed an amended complaint. On October 18, 2023, defendants filed their motion to dismiss the amended complaint. On December 22, 2023, plaintiff filed her opposition to the motion to dismiss, and on January 26, 2024, defendants filed their reply in support of the motion to dismiss. On April 1, 2024, the parties notified the court that the parties are engaged in good-faith, material settlement discussions, and requested that the court stay any proceedings and rulings in connection with the pending motion to dismiss while the parties attempt to reach a proposed resolution of this action. On April 2, 2024, the Court stayed the case. On January 14, 2025, the parties executed a Stipulation of Settlement (“Stipulation”) to resolve this matter. Under the terms of the Stipulation, in exchange for the release and dismissal with prejudice of all claims against all defendants in the matter, Zoom agreed to enact certain corporate governance reforms and to pay plaintiff’s counsel a fee award of up to $ 1.35 million. The Stipulation and settlement remain subject to preliminary and final approval by the court. On January 16, 2025, plaintiff filed a motion for preliminary approval of the settlement. On February 6, 2025, the court held a hearing on the motion for preliminary approval of the settlement. We accrued the $ 1.35 million fee award and recorded it as a general and administrative expense in our consolidated statement of operations for the year ended January 31, 2025. We are vigorously defending ourselves against these lawsuits. Given the uncertainty of litigation, the preliminary stage of the cases, and the legal standards that must be met for, among other things, class certification and success on the merits, 90 Table of Contents except as otherwise described above, we cannot estimate the reasonably possible loss or range of loss that may result from these actions. On April 7, 2020 and April 8, 2020, securities class action complaints were filed against us and two of our officers in the United States District Court for the NDCA. The plaintiffs are purported stockholders of ours. The complaints allege, among other things, that we violated Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 by making false and misleading statements and omissions of material fact about our data privacy and security measures. The complaints seek unspecified damages, interest, fees, and costs. On May 18, 2020, the actions were consolidated. On November 4, 2020, the court appointed a lead plaintiff. On December 23, 2020, the lead plaintiff filed a consolidated complaint. We filed a motion to dismiss the consolidated complaint on May 20, 2021. Plaintiff filed an opposition to our motion to dismiss on July 9, 2021. Our reply in support of the motion to dismiss was filed on August 9, 2021. On February 16, 2022, the court granted in part, and denied in part, our motion to dismiss. On March 14, 2022, we moved for reconsideration of the court’s ruling on the motion to dismiss. On March 22, 2022, the court ordered plaintiff to respond to our motion, which plaintiff did on March 29, 2022. On April 22, 2022, we answered the complaint. On March 8, 2023, the court denied our motion for reconsideration. On April 6, 2023, the court entered a scheduling order. On July 17, 2023, the parties entered into a stipulation and agreement of settlement (the “Stipulation”) to resolve this matter. Under the terms of the stipulation, in exchange for the release and dismissal with prejudice of all claims against all defendants in the matter, we have agreed to pay and/or cause our insurance carriers to pay a total of $ 150.0 million. The Stipulation and settlement remain subject to preliminary and final approval by the court. On July 25, 2023, the court entered an order staying further proceedings in the matter pending the filing of a motion for preliminary approval of the settlement. On October 17, 2023, lead plaintiff filed a motion for preliminary approval of the settlement. A hearing on the motion for preliminary approval was held on June 13, 2024, but the court has yet to enter a preliminary approval order. As a result of the settlement, we made net payments of $ 60.0 million ($ 150.0 million for the settlement net of $ 90.0 million covered by insurance) during the year ended January 31, 2024, of which $ 7.5 million had been accrued during the year ended January 31, 2023 and $ 52.5 million was recorded as a general and administrative expense in our consolidated statement of operations for the year ended January 31, 2024. In addition, from time to time, we are involved in various other legal proceedings arising from the normal course of business activities. We are not presently a party to any other such litigation the outcome of which, we believe, if determined adversely to us, would individually, or taken together, have a material adverse effect on our business, operating results, cash flows, or financial condition. Defending such proceedings is costly and can impose a significant burden on management and employees. We may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained. 10. Stockholders’ Equity and Equity Incentive Plans Dual-Class Common Stock Structure In November 2018, we implemented a dual class common stock structure pursuant to which all the then-outstanding shares of our common stock were reclassified as Class B common stock and a new class of Class A common stock was authorized. The Class A common stock is entitled to one vote per share and the Class B common stock is entitled to 10 votes per share. The Class A and Class B common stock have the same dividend and liquidation rights. Each share of Class B common stock will automatically convert into one share of Class A common stock upon (a) any transfer of such share, except for certain permitted transfers described in our amended and restated certificate of incorporation and (b) the death of the holder of such share. In addition, each share of Class B common stock will be automatically converted into one share of Class A common stock upon the earliest of (a) the date that is six months following the death or incapacity of Eric S. Yuan (our CEO), (b) the date that is six months following the date that Mr. Yuan is no longer providing services to us or his employment is terminated for cause, (c) the date specified by the holders of a majority of the then-outstanding shares of convertible preferred stock, voting together on an as-converted basis, and the holders of a majority of the then-outstanding shares of Class B common stock, voting as a separate class, and (d) the 15 -year anniversary of the closing of our IPO. In connection with the implementation of the dual-class common stock structure, each then-outstanding share of our convertible preferred stock became convertible into one share of Class B common stock, and all outstanding options to purchase shares of common stock became options to purchase an equivalent number of shares of Class B common stock. Upon the effectiveness of the amended and restated certificate of incorporation in November 2018, the number of shares of common stock that are authorized to be issued consisted of 320,000,000 shares of Class A common stock, $ 0.001 par value per share and 300,000,000 shares of Class B common stock, $ 0.001 par value per share. Class A and Class B common stock are collectively referred to as “common stock” throughout the notes to the consolidated financial statements, unless otherwise noted. Common Stock 91 Table of Contents Upon the completion of the IPO in April 2019, our amended and restated certificate of incorporation became effective, which also authorized the issuance of 2,000,000,000 shares of Class A common stock, $ 0.001 par value per share and 300,000,000 shares of Class B common stock, $ 0.001 par value per share. We have the following shares of Class A common stock reserved for future issuance: As of January 31, 2025 2024 Stock options outstanding 2,394,918 3,314,228 RSUs outstanding 23,870,513 26,040,557 ESPP purchase rights outstanding 2,311,567 2,086,604 Remaining shares available for future issuance under the 2011 and 2019 plan 56,022,675 50,559,254 Remaining shares available for future issuance under the ESPP 18,807,595 14,712,385 Total shares of Class A common stock reserved 103,407,268 96,713,028 Stock Repurchase Plan 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 preset trading plans), in privately negotiated transactions, and other transactions in accordance with applicable securities laws. The program does not obligate us to repurchase any specific number of shares and may be discontinued at any time. 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. As of January 31, 2025, $ 1.6 billion of the repurchase authorization remained available. Equity Incentive Plans In 2011, we adopted the 2011 Global Share Plan (“2011 Plan”), under which officers, employees, and consultants were granted various forms of equity incentive compensation at the discretion of the board of directors, including stock options and restricted stock awards. In connection with the IPO, the shares of Class B common stock remaining available for issuance under the 2011 Plan became available for issuance for a corresponding number of shares of our Class A common stock under the 2019 Equity Incentive Plan (“2019 Plan”), which is a successor to and continuation of our 2011 Plan. In April 2019, we adopted the 2019 Plan, which became effective in connection with our IPO. Our 2019 Plan provides for the grant of stock options, stock appreciation rights, RSU awards, performance awards, and other forms of awards. The awards generally vest over four years . The plan administrator determines the term of stock options granted under the 2019 Plan, up to a maximum of 10 years. The maximum number of shares of our Class A common stock that may be issued under our 2019 Plan will not exceed 58,300,889 shares of our Class A common stock, which is the sum of (1) 34,000,000 new shares, plus (2) an additional number of shares not to exceed 24,300,889 , consisting of (A) shares that remain available for the issuance of awards under our 2011 Plan as of immediately prior to the time our 2019 Plan becomes effective and (B) shares of Class B common stock subject to outstanding stock options or other stock awards granted under our 2011 Plan that, on or after the 2019 Plan became effective, terminate, or expire prior to exercise or settlement; are not issued because the award is settled in cash; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price, if any, as such shares become available from time to time. In addition, the number of shares of our Class A common stock reserved for issuance under our 2019 Plan automatically increases on February 1 of each calendar year, starting on February 1, 2020 through February 1, 2029, in an amount equal to (i) 5 % of the total number of shares of our common stock (both Class A and Class B) outstanding on January 31 of the fiscal year before the date of each automatic increase or (ii) a lesser number of shares determined by our board of directors prior to the applicable February 1. 92 Table of Contents Stock Options A summary of stock option activity under our equity incentive plan and related information is as follows: Stock Options Outstanding Stock Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands, except share, life and per share data) Outstanding as of January 31, 2024 3,314,228 $ 8.21 3.9 $ 189,921 Exercised ( 908,844 ) $ 5.08 $ 62,063 Canceled/forfeited/expired ( 10,466 ) $ 93.57 Outstanding and Exercisable as of January 31, 2025 2,394,918 $ 9.02 2.6 $ 187,284 There were no options granted for the fiscal years ended January 31, 2025, 2024 and 2023. The intrinsic value of the options exercised, which represents the difference between the fair market value of our common stock on the date of exercise and the exercise price of each option, was $ 62.1 million, $ 90.0 million, and $ 121.5 million during the fiscal years ended January 31, 2025, 2024, and 2023, respectively. As of January 31, 2025, all options have vested and there is no unrecognized stock-based compensation expense remaining. Restricted Stock Units A summary of RSU activity under our equity incentive plan and related information is as follows: RSUs Unvested RSUs Weighted-Average Grant Date Fair Value Per Share Unvested as of January 31, 2024 26,040,557 $ 83.14 Granted 13,811,816 $ 67.30 Vested ( 12,095,006 ) $ 85.54 Forfeited ( 3,886,854 ) $ 78.72 Unvested as of January 31, 2025 23,870,513 $ 73.48 As of January 31, 2025, unrecognized stock-based compensation expense related to outstanding unvested RSUs was $ 1,495.8 million, which is expected to be recognized over a weighted-average period of 2.6 years. For the fiscal year ended January 31, 2025, we granted 1.7 million RSUs that contain both service and performance vesting criteria. The ultimate number of shares eligible to vest pursuant to these RSUs range from 0 % to 100 % of the target number of shares depending on achievement of the performance metrics. The number of RSUs with service and performance vesting conditions included in the granted amount in the table above reflects the shares that would be eligible to vest at 100 % of the target amount. 2019 Employee Stock Purchase Plan In April 2019, we adopted the 2019 ESPP, which became effective in connection with the IPO. A total of 9,000,000 shares of our Class A common stock were initially reserved for issuance under the ESPP. The number of shares of our Class A common stock reserved for issuance automatically increases on February 1 of each calendar year, beginning on February 1, 2020 through February 1, 2029, by the lesser of (1) 1 % of the total number of shares of our common stock (both Class A and Class B) outstanding on the last day of the fiscal year before the date of the automatic increase, and (2) 7,500,000 shares; provided that before the date of any such increase, our board of directors may determine that such increase will be less than the amount set forth in clauses (1) and (2). Under our current ESPP, Class A common stock will be purchased for the accounts of employees participating in the ESPP at a price per share equal to the lesser of (1) 85 % of the fair market value of a share of our Class A common stock on the first date of an offering or (2) 85 % of the fair market value of a share of our Class A common stock on the date of purchase. No employee may purchase shares under the ESPP at a rate in excess of $ 25,000 worth of our Class A common stock based on the fair market value per share of our Class A common stock at the beginning of an offering for each calendar year such purchase right is outstanding or 3,000 shares. The 2019 ESPP provides for, at maximum, 27 months offering periods with four offering dates, generally in June and December of each year. The first offering period began on April 18, 2019. During the fiscal years 93 Table of Contents ended January 31, 2025, 2024, and 2023, 1,066,977 , 921,892 , and 678,279 shares, respectively, of our Class A common stock were purchased under the ESPP. As of January 31, 2025, unrecognized stock-based compensation expense related to the ESPP was $ 36.2 million, which is expected to be recognized over a weighted-average period of 1.6 years. We estimated the fair value of ESPP purchase rights using a Black-Scholes option-pricing model with the following assumptions: Year Ended January 31, 2025 2024 2023 Expected term (years) 0.5 - 2.0 0.5 - 2.0 0.5 - 2.0 Expected volatility 28.4 % - 43.3 % 30.0 % - 57.6 % 57.6 % - 64.6 % Risk-free interest rate 4.2 % - 5.4 % 4.6 % - 5.4 % 2.2 % - 4.8 % Expected dividend yield — — — The stock-based compensation expense by line item in the accompanying consolidated statements of operations is summarized as follows: Year Ended January 31, 2025 2024 2023 (in thousands) Cost of revenue $ 124,561 $ 143,798 $ 174,546 Research and development 333,767 336,309 361,720 Sales and marketing 319,631 381,298 532,371 General and administrative 153,350 195,756 217,115 Total stock-based compensation expense 931,309 1,057,161 1,285,752 Benefit from income taxes ( 176,463 ) ( 197,068 ) ( 199,971 ) Total stock-based compensation expense recorded to net income $ 754,846 $ 860,093 $ 1,085,781 11. Restructuring Activities On February 7, 2023, we announced a restructuring plan (the “Plan”) intended to reduce operating costs and continue advancing our ongoing commitment to profitable growth. The Plan included a reduction of our then-current workforce by approximately 15 %. The execution of the Plan was completed as of July 31, 2023, and therefore no restructuring expense was recorded for the year ended January 31, 2025. For the year ended January 31, 2024, we recorded net restructuring costs of $ 73.0 million, which consisted of $ 54.4 million related to employee transition, severance payments, and employee benefits; $ 17.3 million related to stock-based compensation awards; and $ 1.3 million for other related expenses. The following table summarizes our restructuring expenses that were recorded as an operating expense in the consolidated statement of operations for the year ended January 31, 2024: Year Ended January 31, 2024 (in thousands) Cost of revenue $ 7,119 Research and development 19,629 Sales and marketing 32,930 General and administrative 13,315 Total restructuring expenses $ 72,993 There was no restructuring liability as of January 31, 2025 and January 31, 2024. 12. Income Taxes The components of the net income before the provision for income taxes were as follows: 94 Table of Contents Year Ended January 31, 2025 2024 2023 (in thousands) Domestic $ 1,238,452 $ 792,495 $ 196,224 Foreign 77,132 39,817 53,052 Total $ 1,315,584 $ 832,312 $ 249,276 The provision for income taxes was as follows: Year Ended January 31, 2025 2024 2023 (in thousands) Current: Federal $ 323,625 $ 257,913 $ 254,505 State 52,186 44,457 33,548 Foreign 20,086 9,159 18,473 Total current income tax expense 395,897 311,529 306,526 Deferred: Federal ( 78,476 ) ( 88,110 ) ( 173,941 ) State ( 12,875 ) ( 20,201 ) 16,673 Foreign 800 ( 8,368 ) ( 3,693 ) Total deferred income tax expense ( 90,551 ) ( 116,679 ) ( 160,961 ) Total provision for income taxes $ 305,346 $ 194,850 $ 145,565 The provision for income taxes differs from the amount computed by applying the statutory federal tax rate as follows: Year Ended January 31, 2025 2024 2023 (in thousands, except percentages) Tax at federal statutory rate $ 276,270 $ 174,785 $ 52,277 State taxes 56,336 37,137 13,666 Foreign rate differential 141 2,943 1,017 Non-deductible compensation 15,757 10,639 10,231 Stock-based compensation 58,770 96,936 124,631 Permanent items 10,371 4,016 9,090 Foreign-derived intangible income deduction ( 56,630 ) ( 63,571 ) ( 76,686 ) Research and development credits ( 49,813 ) ( 39,226 ) ( 38,127 ) Tax uncertainties 7,478 2,674 2,296 Change in valuation allowance ( 7,765 ) ( 14,109 ) 39,288 Deferred rate change ( 3,993 ) ( 6,803 ) 2,014 Other ( 1,576 ) ( 10,571 ) 5,868 Total $ 305,346 $ 194,850 $ 145,565 Effective tax rate 23.2 % 23.4 % 58.4 % Deferred income taxes result from differences in the recognition of amounts for tax and financial reporting purposes, as well as operating loss and tax credit carryforwards. Significant components of our deferred income tax assets as of January 31, 2025 and 2024 are as follows: 95 Table of Contents As of January 31, 2025 2024 (in thousands) Deferred tax assets: Net operating loss carryforwards $ 7,362 $ 12,995 Research and development credit carryforwards 6,586 16,610 Stock-based compensation 59,565 84,906 Accruals and reserves 43,953 39,295 Deferred revenue 328,114 308,152 Capitalized research expenditures 514,667 379,102 Operating lease liabilities 16,551 17,829 Other assets 2,957 4,105 Total deferred tax assets 979,755 862,994 Valuation allowance ( 28,990 ) ( 35,949 ) Total deferred tax assets net of valuation allowance 950,765 827,045 Deferred tax liabilities: Property and equipment and intangible assets ( 38,343 ) ( 35,007 ) Deferred contract acquisition costs ( 76,439 ) ( 83,862 ) Operating right-of-use assets ( 14,233 ) ( 14,396 ) Strategic investments ( 75,290 ) ( 35,480 ) Total deferred tax liabilities ( 204,305 ) ( 168,745 ) Net deferred tax assets $ 746,460 $ 658,300 The realization of tax benefits of net deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence during the year ended January 31, 2025, we believe that it is more likely than not that the tax benefits relating to U.S. losses that are capital in nature and certain state deferred tax assets may not be realized prior to expiration. Accordingly, we have maintained a valuation allowance against these deferred tax assets and intend to maintain the applicable valuation allowance until sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance. As of January 31, 2025, we had net operating loss carryforwards of approximately $ 1.8 million for federal income tax purposes, and $ 12.5 million for state income tax purposes, which will begin to expire in the year 2033 if unused. We also had certain foreign net operating loss carryforwards of $ 22.4 million, which have an indefinite life. As of January 31, 2025, we also had research and development credit carryforwards of approximately $ 1.2 million for federal income tax purposes and $ 23.4 million for state income tax purposes. The federal research and development tax credits have a twenty-year carryover period while the state research and development tax credits carry forward indefinitely. We indefinitely reinvest earnings from our foreign subsidiaries and therefore no deferred tax liability has been recognized on the basis difference created by such earnings. We have not provided foreign withholding taxes for any undistributed earnings of our foreign subsidiaries. 96 Table of Contents A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows: Unrecognized Tax Benefits (in thousands) Year Ended January 31, 2025 2024 2023 Balance, beginning of year $ 41,772 $ 30,404 $ 19,171 Tax Positions taken in prior year: Gross increases 931 228 877 Gross decreases — — — Tax Positions taken in current year: Gross increases 13,650 12,415 10,547 Gross decreases ( 19 ) ( 891 ) — Lapse of Statute of Limitations — ( 384 ) ( 191 ) Acquisitions — — — Balance, end of year $ 56,334 $ 41,772 $ 30,404 As of January 31, 2025, gross unrecognized tax benefits related to uncertain tax positions were $ 56.3 million ($ 66.0 million total, including $ 9.7 million associated with interest and penalties). As of January 31, 2024, gross unrecognized tax benefits related to uncertain tax positions were $ 41.8 million ($ 46.5 million total, including $ 4.7 million associated with interest and penalties). As of January 31, 2023, gross unrecognized tax benefits related to uncertain tax positions were $ 30.4 million ($ 32.5 million total, including $ 1.6 million associated with interest and penalties). We recognized approximately $ 9.7 million, $ 4.7 million, and $ 1.6 million in potential interest and penalties associated with uncertain tax positions during fiscal years ended January 31, 2025, 2024, and 2023, respectively. To the extent taxes are not assessed with respect to uncertain tax positions, substantially all amounts accrued (including interest and penalties) will be reduced and reflected as a reduction of the overall income tax provision. Unrecognized tax benefits and associated accrued interest and penalties are included in our income tax provision. We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various foreign jurisdictions. As of January 31, 2025, all of the years in which net operating losses or tax credits were utilized remain open to examination by the federal and state tax authorities. We believe that an adequate provision has been made for any adjustments that may result from tax examinations. Although the timing of the resolution, settlement, and closure of audits is not certain, we do not believe it is reasonably possible that our unrecognized tax benefits will materially change in the next 12 months. As required by the 2017 Tax Cuts and Jobs Act, we started capitalizing research and development expenses incurred beginning in fiscal year 2023. These expenses are capitalized and amortized over five years for domestic research and fifteen years for international research. The mandatory capitalization requirement increases our cash tax liabilities but also decreases our effective tax rate due to increasing the foreign-derived intangible income deduction. The cash flow impact will decrease over time as capitalized research and development expenditures continue to amortize. 97 Table of Contents 13. Net Income Per Share Attributable to Common Stockholders The following table sets forth the computation of basic and diluted net income per share attributable to common stockholders for the periods presented: Year Ended January 31, 2025 2024 2023 Class A Class B Class A Class B Class A Class B Numerator: (in thousands, except share and per share data) Net income $ 861,755 $ 148,483 $ 538,554 $ 98,908 $ 87,246 $ 16,465 Less: undistributed earnings attributable to participating securities — — — — — ( 7 ) Net income attributable to common stockholders, basic $ 861,755 $ 148,483 $ 538,554 $ 98,908 $ 87,246 $ 16,458 Reallocation of net income attributable to common stockholders ( 5,170 ) 5,170 ( 4,653 ) 4,653 ( 1,205 ) 1,205 Net income attributable to common stockholders, diluted $ 856,585 $ 153,653 $ 533,901 $ 103,561 $ 86,041 $ 17,663 Denominator: Weighted-average shares used in computing net income per share attributable to common stockholders, basic 262,715,505 45,266,466 254,084,540 46,663,622 249,494,904 47,065,597 Weighted-average shares used in computing net income per share attributable to common stockholders, diluted 267,148,873 47,920,709 258,398,674 50,121,223 252,413,234 51,818,116 Net income per share attributable to common stockholders, basic $ 3.28 $ 3.28 $ 2.12 $ 2.12 $ 0.35 $ 0.35 Net income per share attributable to common stockholders, diluted $ 3.21 $ 3.21 $ 2.07 $ 2.07 $ 0.34 $ 0.34 The potential shares of common stock that were excluded from the computation of diluted net income per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive are as follows: Year Ended January 31, 2025 2024 2023 Class A Class B Class A Class B Class A Class B Outstanding stock options 95,963 — 109,441 — 88,019 — Unvested RSUs 8,082,027 — 9,124,205 — 9,228,633 — Purchase rights committed under the ESPP 1,236,530 — 1,789,166 — 1,674,853 — Total 9,414,520 — 11,022,812 — 10,991,505 — For the years ended January 31, 2025, 2024, and 2023, the table above does not include 405,156 of issued Class A common stock held by us that are reserved for the sole purpose of being transferred to nonprofit organizations. 14. Segment Information Our CEO is the Chief Operating Decision Maker (“CODM”) of the Company. The Company manages the business activities on a consolidated basis and all information provided to and reviewed by our CODM is compiled at the consolidated entity level. Therefore, we have only one operating and reportable segment. The description of the types of products and services from which the reportable segment derives its revenue is the same as those described in the Summary of Business and Significant Accounting Policies. The measure of segment profit or loss that our CODM uses to allocate resources and assess performance is our consolidated net income. The CODM uses net income to monitor results and to decide whether to reinvest profits. Our CODM does not assess segment performance or make decisions using asset or liability information. 98 Table of Contents The following table summarizes the significant segment expenses regularly provided to the CODM as well as other segment items: Year Ended January 31, 2025 2024 2023 Revenue $ 4,665,433 $ 4,527,224 $ 4,392,960 Adjusted cost of revenue (1) 984,916 908,283 912,913 Adjusted research and development (1) 500,177 430,117 393,548 Adjusted sales and marketing (1) 1,090,294 1,116,356 1,153,660 Adjusted general and administrative (1) 252,152 297,580 353,755 Stock-based compensation expense 931,309 1,057,161 1,285,752 Interest income ( 340,474 ) ( 210,009 ) ( 54,103 ) Other segment items (2) ( 68,525 ) 95,424 98,159 Provision for income taxes 305,346 194,850 145,565 Segment net income 1,010,238 637,462 103,711 Adjustments and reconciling items — — — Consolidated net income 1,010,238 637,462 103,711 (1) Excludes stock-based compensation expense and related payroll taxes, acquisition-related expenses, restructuring expenses, and litigation settlements, net (2) Includes stock-based compensation related payroll taxes, acquisition-related expenses, restructuring expenses, litigation settlements, net, gains on strategic investments, net, and other income, net excluding interest income The following table presents our property and equipment, net of depreciation and amortization, by geographic region: As of January 31, 2025 2024 (in thousands) Americas $ 238,328 $ 202,022 APAC 51,036 45,321 EMEA 41,111 46,361 Total property and equipment, net $ 330,475 $ 293,704 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.