FULLTEXT DEL 3 AV 3
10-K – 2025-09-11 – zs-20250731.htm
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Zscaler, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Zscaler, Inc. and its subsidiaries (the "Company") as of July 31, 2025 and 2024, and the related consolidated statements of operations, of comprehensive loss, of stockholders' equity and of cash flows for each of the three years in the period ended July 31, 2025, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of July 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of July 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible senior notes as of August 1, 2022.
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 Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and 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
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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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) 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.
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 Matters
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 (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters 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.
Revenue Recognition – Subscription and Support Revenue
As described in Notes 1 and 2 to the consolidated financial statements, revenue is recognized when control of the services is transferred to the customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company generates all revenue from contracts with customers and management applies judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition. For the year ended July 31, 2025, the Company’s revenue was $2,673 million of which approximately 98 % relates to subscription and support revenue.
The principal consideration for our determination that performing procedures relating to revenue recognition for subscription and support revenue is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process for subscription and support revenue. These procedures also included, among others (i) testing revenue recognized for a sample of subscription and support revenue transactions by obtaining and inspecting source documents, such as sales quotes, purchase orders, sales orders, invoices, and payment receipts and (ii) confirming a sample of outstanding customer invoice balances as of July 31, 2025 and, for confirmations not returned, obtaining and inspecting source documents, such as sales quotes, purchase orders, sales orders, invoices, and subsequent payment receipts.
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/s/ PricewaterhouseCoopers LLP
San Jose, California
September 11, 2025
We have served as the Company's auditor since 2015.
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ZSCALER, INC.
Consolidated Balance Sheets
(in thousands, except per share amounts)
July 31,
2025 2024
Assets
Current assets:
Cash and cash equivalents $ 2,389,023 $ 1,423,080
Short-term investments 1,183,386 986,574
Accounts receivable, net 992,181 736,529
Deferred contract acquisition costs 180,819 148,873
Prepaid expenses and other current assets 148,881 101,561
Total current assets 4,894,290 3,396,617
Property and equipment, net 543,377 383,121
Operating lease right-of-use assets 89,772 89,758
Deferred contract acquisition costs, noncurrent 328,722 296,525
Acquired intangible assets, net 47,323 63,835
Goodwill 417,730 417,029
Other noncurrent assets 98,674 58,083
Total assets $ 6,419,888 $ 4,704,968
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 46,906 $ 23,309
Accrued expenses and other current liabilities 93,984 91,708
Accrued compensation 181,807 160,810
Deferred revenue 2,054,417 1,643,919
Convertible senior notes — 1,142,275
Operating lease liabilities 52,497 50,866
Total current liabilities 2,429,611 3,112,887
Convertible senior notes, noncurrent 1,700,727 —
Deferred revenue, noncurrent 413,609 251,055
Operating lease liabilities, noncurrent 43,352 44,824
Other noncurrent liabilities 33,316 22,100
Total liabilities 4,620,615 3,430,866
Commitments and contingencies (Note 12)
Stockholders’ Equity
Preferred stock; $ 0.001 par value; 200,000 shares authorized as of July 31, 2025 and 2024, respectively; no shares issued and outstanding as of July 31, 2025 and 2024
— —
Common stock; $ 0.001 par value; 1,000,000 shares authorized as of July 31, 2025 and 2024, respectively; 158,301 and 152,490 shares issued and outstanding as of July 31, 2025 and 2024, respectively
159 152
Additional paid-in capital 2,980,591 2,426,819
Accumulated other comprehensive income (loss) 8,081 ( 4,789 )
Accumulated deficit ( 1,189,558 ) ( 1,148,080 )
Total stockholders’ equity 1,799,273 1,274,102
Total liabilities and stockholders’ equity $ 6,419,888 $ 4,704,968
The accompanying notes are an integral part of these consolidated financial statements.
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ZSCALER, INC.
Consolidated Statements of Operations
(in thousands, except per share amounts)
Year Ended July 31,
2025 2024 2023
Revenue $ 2,673,115 $ 2,167,771 $ 1,616,952
Cost of revenue 618,178 477,129 362,832
Gross profit 2,054,937 1,690,642 1,254,120
Operating expenses:
Sales and marketing 1,259,158 1,100,239 959,102
Research and development 672,485 499,828 350,786
General and administrative 251,754 212,052 178,855
Total operating expenses 2,183,397 1,812,119 1,488,743
Loss from operations ( 128,460 ) ( 121,477 ) ( 234,623 )
Interest income 125,364 109,130 60,462
Interest expense ( 9,522 ) ( 13,132 ) ( 6,541 )
Other expense, net ( 5,673 ) ( 3,750 ) ( 1,862 )
Loss before income taxes ( 18,291 ) ( 29,229 ) ( 182,564 )
Provision for income taxes 23,187 28,477 19,771
Net loss $ ( 41,478 ) $ ( 57,706 ) $ ( 202,335 )
Net loss per share, basic and diluted $ ( 0.27 ) $ ( 0.39 ) $ ( 1.40 )
Weighted-average shares used in computing net loss per share, basic and diluted 154,404 149,586 144,942
The accompanying notes are an integral part of these consolidated financial statements.
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ZSCALER, INC.
Consolidated Statements of Comprehensive Loss
(in thousands)
Year Ended July 31,
2025 2024 2023
Net loss $ ( 41,478 ) $ ( 57,706 ) $ ( 202,335 )
Available-for-sale securities:
Change in net unrealized gains on available-for-sale securities 1,308 9,948 1,592
Cash flow hedging instruments:
Change in net unrealized gains (losses) 9,004 ( 10,761 ) 11,103
Net realized (gains) losses reclassified into net loss 2,558 ( 2,400 ) 11,579
Net change on cash flow hedges 11,562 ( 13,161 ) 22,682
Other comprehensive income (loss) 12,870 ( 3,213 ) 24,274
Comprehensive loss $ ( 28,608 ) $ ( 60,919 ) $ ( 178,061 )
The accompanying notes are an integral part of these consolidated financial statements.
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ZSCALER, INC.
Consolidated Statements of Stockholders’ Equity
(in thousands)
Common Stock Additional
Paid-In
Capital Accumulated Other Comprehensive Income (Loss) Accumulated
Deficit Total
Stockholders’ Equity
Shares Amount
Balance as of July 31, 2022 143,038 $ 143 $ 1,590,885 $ ( 25,850 ) $ ( 991,878 ) $ 573,300
Cumulative effect adjustment from adoption of ASU 2020-06 — — ( 273,738 ) — 103,839 ( 169,899 )
Issuance of common stock upon exercise of stock options 451 — 3,944 — — 3,944
Issuance of common stock under the employee stock purchase plan 425 — 42,263 — — 42,263
Vesting of restricted stock units, performance stock awards and other stock issuances 3,255 4 ( 4 ) — — —
Stock-based compensation — — 453,565 — — 453,565
Other comprehensive income — — — 24,274 — 24,274
Net loss — — — — ( 202,335 ) ( 202,335 )
Balance as of July 31, 2023 147,169 147 1,816,915 ( 1,576 ) ( 1,090,374 ) 725,112
Issuance of common stock upon exercise of stock options 864 — 12,249 — — 12,249
Issuance of common stock under the employee stock purchase plan 489 — 51,998 — — 51,998
Vesting of restricted stock units and performance stock awards 3,624 5 ( 5 ) — — —
Issuance of restricted shares of common stock in connection with business acquisitions subject to future vesting 344 — — — — —
Issuance of replacement awards attributable to pre-combination vesting in connection with business acquisitions — — 3,805 — — 3,805
Stock-based compensation — — 541,857 — — 541,857
Other comprehensive loss — — — ( 3,213 ) — ( 3,213 )
Net loss — — — — ( 57,706 ) ( 57,706 )
Balance as of July 31, 2024 152,490 152 2,426,819 ( 4,789 ) ( 1,148,080 ) 1,274,102
Issuance of common stock upon exercise of stock options 352 — 3,581 — — 3,581
Issuance of common stock under the employee equity stock purchase plan 434 — 63,563 — — 63,563
Vesting of restricted stock units and performance stock awards 3,631 5 ( 5 ) — — —
Cash settlement for fractional shares upon settlement of the 2025 Notes — — ( 86 ) — — ( 86 )
Shares issued to settle the premium amount upon repayment of the 2025 Notes
3,817 4 ( 4 ) — — —
Shares received and retired from the 2025 Capped Calls upon repayment of the 2025 Notes
( 2,423 ) ( 2 ) 2 — — —
Purchase of the 2028 Capped Calls related to the 2028 Notes — — ( 196,847 ) — — ( 196,847 )
Stock-based compensation — — 683,568 — — 683,568
Other comprehensive income — — — 12,870 — 12,870
Net loss — — — — ( 41,478 ) ( 41,478 )
Balance as of July 31, 2025 158,301 $ 159 $ 2,980,591 $ 8,081 $ ( 1,189,558 ) $ 1,799,273
The accompanying notes are an integral part of these consolidated financial statements.
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ZSCALER, INC.
Consolidated Statements of Cash Flows
(in thousands)
Year Ended July 31,
2025 2024 2023
Cash Flows From Operating Activities
Net loss $ ( 41,478 ) $ ( 57,706 ) $ ( 202,335 )
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization expense 104,361 66,308 55,756
Amortization expense of acquired intangible assets 16,820 14,624 11,060
Amortization of deferred contract acquisition costs 166,310 130,139 98,718
Amortization of debt issuance costs 4,293 3,914 3,894
Non-cash operating lease costs 62,998 49,445 32,212
Stock-based compensation expense 661,350 527,676 444,834
Accretion of investments purchased at a discount ( 15,923 ) ( 19,062 ) ( 6,582 )
Unrealized (gains) losses on hedging transactions 369 753 ( 3,319 )
Deferred income taxes ( 14,351 ) ( 5,633 ) 352
Other 987 3,320 ( 820 )
Changes in operating assets and liabilities, net of effects of business combinations:
Accounts receivable ( 256,010 ) ( 152,960 ) ( 183,858 )
Deferred contract acquisition costs ( 230,453 ) ( 200,303 ) ( 176,950 )
Prepaid expenses, other current and noncurrent assets ( 41,572 ) ( 39,971 ) ( 39,922 )
Accounts payable 17,532 4,164 ( 8,416 )
Accrued expenses, other current and noncurrent liabilities 5,180 43,556 26,814
Accrued compensation 20,997 10,507 24,538
Deferred revenue 573,052 450,314 418,564
Operating lease liabilities ( 62,009 ) ( 49,239 ) ( 32,197 )
Net cash provided by operating activities 972,453 779,846 462,343
Cash Flows From Investing Activities
Purchases of property, equipment and other assets ( 164,252 ) ( 144,588 ) ( 97,197 )
Capitalized internal-use software ( 81,508 ) ( 50,308 ) ( 31,527 )
Payments for business acquisitions, net of cash acquired ( 834 ) ( 374,702 ) ( 15,643 )
Purchase of strategic investments ( 824 ) ( 2,000 ) ( 3,206 )
Purchases of short-term investments ( 1,280,629 ) ( 1,291,015 ) ( 1,064,143 )
Proceeds from maturities of short-term investments 1,101,025 1,132,268 901,849
Proceeds from sale of short-term investments — 47,165 50,530
Net cash used in investing activities ( 427,022 ) ( 683,180 ) ( 259,337 )
Cash Flows From Financing Activities
Proceeds from issuance of common stock upon exercise of stock options 3,581 12,249 3,944
Proceeds from issuance of common stock under the employee stock purchase plan 63,563 51,998 42,263
Payment of deferred consideration related to business acquisitions ( 792 ) — ( 215 )
Proceeds from issuance of the 2028 Notes 1,725,000 — —
Payments for issuance costs related to the 2028 Notes ( 24,150 ) — —
Purchases of capped calls related to the 2028 convertible senior notes ( 196,650 ) — —
Payments for the settlement of the 2025 Notes ( 1,150,040 ) — —
Other — ( 39 ) ( 2 )
Net cash provided by financing activities 420,512 64,208 45,990
Net increase in cash and cash equivalents 965,943 160,874 248,996
Cash and cash equivalents at beginning of period
1,423,080 1,262,206 1,013,210
Cash and cash equivalents at end of period
$ 2,389,023 $ 1,423,080 $ 1,262,206
The accompanying notes are an integral part of these consolidated financial statements.
ZSCALER, INC.
Consolidated Statements of Cash Flows (continued)
(in thousands)
Year Ended July 31,
2025 2024 2023
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes, net of tax refunds $ 23,335 $ 23,123 $ 14,940
Cash paid for interest expense $ 1,436 $ 1,436 $ 1,438
Non-Cash Activities
Operating lease right-of-use assets obtained in exchange for operating lease obligations, net of terminations $ 57,632 $ 64,700 $ 29,129
Equity consideration for business acquisitions $ — $ 3,805 $ —
Net change in purchased equipment included in accounts payable and accrued expenses $ 10,977 $ 1,111 $ 1,588
Shares issued to settle the premium amount upon repayment of the 2025 Notes
$ 4 $ — $ —
Shares received and retired from the 2025 Capped Calls upon repayment of the 2025 Notes
$ 2 $ — $ —
Debt issuance and capped call costs included in accounts payable and accrued liabilities $ 999 $ — $ —
The accompanying notes are an integral part of these consolidated financial statements.
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ZSCALER, INC.
Notes to Consolidated Financial Statements
Note 1. Business and Summary of Significant Accounting Policies
Description of the Business
Zscaler, Inc. ("Zscaler," the "Company," "we," "us," or "our") is a cloud security company that developed a platform incorporating core security functionalities needed to enable fast and secure access to cloud resources based on identity, context and an organization’s policies. Our solution is a purpose-built, multi-tenant, distributed cloud platform that implements Zero Trust principles to securely connect users, devices, applications and workloads (including AI agents) without relying on traditional network-based security. We deliver our solutions using a software-as-a-service ("SaaS") business model and sell subscriptions to customers to access our cloud platform, together with related support services. Our ever-evolving platform provides our customers with a flexible and scalable approach to better secure their operations, optimize user experience, eliminate complexity, reduce costs and respond to the challenges and opportunities of AI and future new technologies. We were incorporated in Delaware in September 2007 and conduct business worldwide, with presence in North America, South America, Europe and Asia. Our headquarters are in San Jose, California.
Fiscal Year
Our fiscal year ends on July 31. References to fiscal 2025, for example, refer to our fiscal year ending July 31, 2025.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and have been prepared in conformity with generally accepted accounting principles in the United States ("GAAP"). All intercompany balances and transactions have been eliminated in consolidation.
Prior Period Reclassification
Certain prior period amounts have been recast to align with the current period presentation, with no impact to the consolidated net loss or consolidated comprehensive loss previously reported.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Such estimates include, but are not limited to, the determination of revenue recognition, deferred revenue, deferred contract acquisition costs, capitalized internal-use software, valuation of acquired intangible assets, period of benefit generated from our deferred contract acquisition costs, allowance for doubtful accounts, valuation of common stock options and stock-based awards, useful lives of property and equipment, useful lives of acquired intangible assets, recoverability of goodwill, valuation of deferred tax assets and liabilities, loss contingencies related to litigation, fair value of convertible senior notes and the discount rate used for operating leases. Management determines these estimates and assumptions based on historical experience and on various other assumptions that are believed to be reasonable. Actual results could differ significantly from these estimates, and such differences may be material to the consolidated financial statements.
Due to uncertainty in the macroeconomic and geopolitical environment, there is ongoing disruption in the global economy and financial markets. We are not aware of any specific event or circumstances that would require an update to our estimates, judgments or assumptions or a revision to the carrying value of our assets or liabilities as of the date of issuance of
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these consolidated financial statements. These estimates, judgments and assumptions may change in the future, as new events occur or additional information is obtained.
Foreign Currency
The functional currency of our foreign subsidiaries is the U.S. dollar. Accordingly, monetary assets and liabilities of our foreign subsidiaries are re-measured into U.S. dollars at the exchange rates in effect at the reporting date, non-monetary assets and liabilities are re-measured at historical rates, revenue and expenses are re-measured at average exchange rates in effect during each reporting period. Foreign currency transaction gains and losses are recorded in other expense, net in the consolidated statements of operations. Foreign currency remeasurement gains and losses and foreign currency transaction gains and losses are not significant to the consolidated financial statements for all periods presented.
Concentration of Risks
We generate revenue primarily from sale of subscriptions to access our cloud platform, together with related support services. Our sales team, along with our channel partner network of global telecommunications service providers, system integrators and value-added resellers (collectively "channel partners"), sells our services worldwide to organizations of all sizes. Due to the nature of our services and the terms and conditions of our contracts with our channel partners, our business could be affected unfavorably if we are not able to continue our relationships with them.
Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents, derivative contracts, short-term investments and accounts receivable. Although we deposit our cash with multiple financial institutions, the deposits, at times, may exceed federally insured limits. Cash equivalents and short-term investments consist of highly liquid investments in money market funds, U.S. treasury, U.S. agency securities, certificates of deposit and corporate debt securities, which are invested through financial institutions.
We grant credit to our customers in the normal course of business. We monitor the financial condition of our customers to reduce credit risk. Refer to Note 2, Revenue Recognition, for information regarding customers with concentration of 10% or more of the total balance of accounts receivable, net.
Segment Information
We operate as one reportable and operating segment. Our chief operating decision maker is our chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.
Revenue Recognition
In accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue From Contracts With Customers ("ASC 606"), revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration that we expect to be entitled to receive in exchange for these services. To achieve the core principle of this standard, we apply the following five steps:
1) Identify the contract with a customer
We consider the terms and conditions of the contracts and our customary business practices in identifying our contracts under ASC 606. We determine we have a contract with a customer when the contract is approved, we can identify each party’s rights regarding the services to be transferred, we can identify the payment terms for the services, we have determined the customer has the ability and intent to pay and the contract has commercial substance. 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.
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2) Identify the performance obligations in the contract
Performance obligations promised 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 is separately identifiable from other promises in the contract. Our performance obligations consist of (i) our subscription and support services and (ii) professional and other services.
3) Determine 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 under the contract will not occur. None of our contracts contain a significant financing component.
4) Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price ("SSP").
5) Recognize revenue when or as we satisfy a performance obligation
Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised service to a customer. Revenue is recognized when control of the services is transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those services. We generate all our revenue from contracts with customers and apply judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition.
Subscription and Support Revenue
We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services to our customers. Arrangements with customers do not provide the customer with the right to take possession of our software operating our cloud platform at any time. Instead, customers are granted continuous access to our cloud platform over the contractual period. A time-elapsed output method is used to measure progress because we transfer control evenly over the contractual period. Accordingly, the fixed consideration related to subscription and support revenue is generally recognized on a straight-line basis over the contract term beginning on the date that our service is made available to the customer.
The typical subscription and support term is one to three years . Most of our contracts are non-cancelable over the contractual term. Customers typically have the right to terminate their contracts for cause if we fail to perform in accordance with the contractual terms. Some of our customers have the option to purchase additional subscription and support services at a stated price. These options generally do not provide a material right as they are priced at our SSP.
Professional and Other Services Revenue
Professional and other services revenue consists of fees associated with providing deployment advisory services that educate and assist our customers on the best use of our solutions, as well as advise customers on best practices as they deploy our solution. These services are distinct from subscription and support services. Professional services do not result in significant customization of the subscription service. Revenue from professional services provided on a time and materials
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basis is recognized as the services are performed. Total professional and other services revenue has historically not been material.
Contracts with Multiple Performance Obligations
Most of our contracts with customers contain multiple promised services consisting of: (i) our subscription and support services and (ii) professional and other services that are distinct and accounted for separately. The transaction price is allocated to the separate performance obligations on a relative SSP basis. We determine SSP based on our overall pricing objectives, taking into consideration the type of subscription and support services and professional and other services, the geographical region of the customer and the number of users.
Variable Consideration
Revenue from sales is recorded at the net sales price, which is the transaction price, and includes estimates of variable consideration. The amount of variable consideration that is included in the transaction price is constrained and included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue will not occur when the uncertainty is resolved.
If our services do not meet certain service level commitments, our customers are entitled to receive service credits, and in certain cases, refunds, each representing a form of variable consideration. We have historically not experienced any significant incidents affecting the defined levels of reliability and performance as required by our subscription contracts. Accordingly, estimated refunds related to these agreements were not material to the periods presented.
We provide rebates and other credits within our contracts with certain customers, which are estimated based on the value expected to be earned or claimed on the related sales transaction. Overall, the transaction price is reduced to reflect our estimate of the amount of consideration to which we are entitled based on the terms of the contract. Estimated rebates and other credits were not material during the periods presented.
Accounts Receivable and Allowance
Accounts receivable are recorded at the invoiced amount and are non-interest bearing. Accounts receivable are stated at their net realizable value, net of an allowance for doubtful accounts. We have a well-established collections history from our customers. Credit is extended to customers based on an evaluation of their financial condition and other factors. In determining the necessary allowance for doubtful accounts, we estimate the lifetime expected credit losses against the existing accounts receivable balance. Our estimate is based on certain factors including historical loss rates, current economic conditions, reasonable and supportable forecasts and customer-specific circumstances. The allowance for doubtful accounts has historically not been material. There were no material write-offs recognized in the periods presented. Accordingly, the movements in the allowance for doubtful accounts were not material for any of the periods presented. We do not have any off-balance-sheet credit exposure related to our customers.
Cash Equivalents and Short-Term Investments
We classify all highly liquid investments purchased with an original maturity of 90 days or less from the date of purchase as cash equivalents and all highly liquid investments with original maturities beyond 90 days at the time of purchase as short-term investments. Our cash equivalents and short-term investments consist of highly liquid investments in money market funds, U.S. treasury securities, U.S. government agency securities, certificates of deposit and corporate debt securities.
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We classify our investments as available-for-sale investments and present them within current assets since these investments represent funds available for current operations and we have the ability and intent, if necessary, to liquidate any of these investments in order to meet our liquidity needs or to grow our business, including for potential business acquisitions or other strategic transactions. Our investments are carried at fair value, with unrealized gains and losses unrelated to credit loss factors reported in accumulated other comprehensive income (loss) ("AOCI(L)").
Our investments are reviewed periodically when there is a decline in a security’s fair value below the amortized cost basis. We consider our intent to sell and whether it is more likely than not that we will be required to sell the securities before the recovery of its cost basis. If either of these criteria are triggered, the amortized cost basis of the debt security is written down to fair value through other expense, net. If neither criteria is met, we evaluate whether the decline in fair value below the amortized cost basis is related to credit-related factors or other factors such as interest rate fluctuations. The factors considered in this analysis include the extent the fair value is less than the amortized cost basis, whether there were changes to the rating of the security by a ratings agency, whether the issuer has failed to make scheduled interest payments and other adverse conditions as applicable. Credit-related impairment losses, limited by the amount that the fair value is less than the amortized cost basis, are recorded through an allowance for credit losses in other expense, net. For purposes of identifying and measuring credit-related impairments, our policy is to exclude the applicable accrued interest from both the fair value and amortized cost basis of the related debt security. Accrued interest receivable, net of the allowance for credit losses, if any, is recorded to prepaid expenses and other current assets. There were no credit-related impairments recognized on our investments during the periods presented.
Interest income, accretion of investments purchased at a discount and realized gains and losses are included in interest income in the consolidated statements of operations.
Strategic Investments
Our strategic investments consist of non-marketable equity investments of privately held companies. Investments in non-marketable equity investments of privately held companies without readily determinable fair values are measured using the measurement alternative, as we have less than 20% ownership and do not have the ability to exercise significant influence over their operations. The carrying amount of non-marketable equity investments is adjusted based on observable price changes from orderly transactions for identical or similar investments of the same issuer and by impairments when events or circumstances indicate a decline in value has occurred. Non-marketable equity investments that have been remeasured during the period due to an observable event or impairment are classified within Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the investments we hold. Our strategic investments are included within other noncurrent assets in the consolidated balance sheets and adjustments to their carrying amounts are recorded in other expense, net in the consolidated statements of operations. There were no material events or circumstances impacting the carrying amount of our strategic investments during the periods presented.
Fair Value of Financial Instruments
Our financial instruments consist of cash equivalents, short-term investments, accounts receivable, accounts payable, accrued liabilities, derivative instruments and convertible senior notes. Cash e quivalents and short-term investments are recorded at fair value. Accounts receivable, accounts payable and accrued liabilities are stated at their carrying value, which approximates fair value due to the short-time to the expected receipt or payment date. Assets recorded at fair value on a recurring basis in the consolidated balance sheets, consisting of cash equivalents and short-term investments, are categorized in accordance with the fair value hierarchy based upon the level of judgment associated with the inputs used to measure their fair values. We carry the convertible senior notes at face value less debt issuance costs and hedge accounting fair value adjustments on our consolidated balance sheet. The fair value of the convertible senior notes is presented at each reporting period for disclosure purposes only.
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Property and Equipment
Property and equipment, net are stated at historical cost net of accumulated depreciation. Property and equipment, excluding leasehold improvements, are depreciated using the straight-line method over the estimated useful lives of the respective assets, generally ranging from three to five years . Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the respective assets or the lease term. Expenditures for maintenance and repairs are expensed as incurred and significant improvements and betterments that substantially enhance the life of an asset are capitalized.
In August 2023, we completed an assessment of the useful lives of our servers and networking equipment, which resulted in an extension of their useful lives from four to five years . This change in accounting estimate was effective beginning fiscal 2024. Based on the carrying amount of these assets as of July 31, 2023, this change decreased depreciation expense by $ 13.4 million for fiscal 2024.
Capitalized Internal-Use Software
We capitalize certain costs incurred during the application development stage in connection with software development for our cloud security platform. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Capitalized costs are recorded as part of property and equipment in the consolidated balance sheets. Maintenance and training costs are expensed as incurred. Capitalized internal-use software is amortized on a straight-line basis over its estimated useful life, which is generally three to five years , and is recorded as cost of revenue in the consolidated statements of operations. Capitalization of development costs, inclusive of stock-based compensation, of software for internal-use in fiscal 2025, fiscal 2024 and fiscal 2023 was $ 124.5 million, $ 76.9 million and $ 48.6 million, respectively. Amortization expense of capitalized software for internal-use in fiscal 2025, fiscal 2024 and fiscal 2023 was $ 61.6 million, $ 36.3 million and $ 24.2 million, respectively.
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 Other Long-Lived Assets, including Acquired Intangible Assets
Goodwill represents the excess of the fair value of purchase consideration in a business combination over the fair value of net tangible and intangible assets acquired. 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. There was no impairment of goodwill during any of the periods presented.
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Acquired intangible assets consist of identifiable intangible assets, including developed technology and customer relationships, resulting from business combinations. Acquired finite-lived intangible assets are initially recorded at fair value and are amortized on a straight-line basis over their estimated useful lives. Amortization expense of developed technology and customer relationships is recorded primarily within cost of revenues and sales and marketing expenses, respectively, in the consolidated statements of operations.
Long-lived assets, such as property and equipment and acquired intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We measure the recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that these assets are expected to generate. If the total of the future undiscounted cash flows are less than the carrying amount of an asset, we record an impairment charge for the amount by which the carrying amount of the asset exceeds the fair value. There were no asset impairments for all periods presented.
Derivative Instruments
We enter into foreign currency forward contracts, a portion of which we designate as cash flow hedges, in order to manage the volatility of cash flows that relate to our cost of revenues and operating expenses denominated in foreign currencies.
We also use interest rate swaps to economically convert a certain tranche of our fixed interest rate convertible senior notes to floating interest rates, in order to match the floating rate nature of a portion of our cash, cash equivalents, and short-term investments. These interest rate swaps are designated as fair value hedges, and changes in fair value of the interest rate swaps offset the changes in fair market value of the convertible senior notes due to benchmark interest rate movements. Gains or losses related to our fair value hedges are included within interest expense in the consolidated statement of operations in the period of change together with the offsetting loss or gain on the hedged item attributed to the risk being hedged. We measure hedge effectiveness of the interest rate swaps using regression analysis at inception and periodically thereafter.
Gains or losses related to our cash flow hedges are recorded as a component of AOCI(L) in the consolidated statements of stockholders' equity until the forecasted transaction occurs in earnings. When the forecasted transaction occurs, the related gains and losses are reclassified into earnings within the financial statement line item associated with the underlying hedged transaction. If the underlying hedged transaction does not occur, or it becomes probable that the hedged transaction will not occur, the cumulative unrealized gain or loss is reclassified immediately from AOCI(L) into earnings within the financial statement line item associated with the underlying hedged transaction. We measure hedge effectiveness using regression analysis at hedge inception and periodically thereafter. We include time value in our effectiveness assessment.
We recognize changes in the fair value of non-designated derivative instruments within other expense, net in the consolidated statements of operations in the same period that the fair value measurement occurs.
All of our derivative instruments are measured at fair value. We have elected to present the derivative assets and derivative liabilities on a gross basis on the consolidated balance sheets. Derivative instruments are classified in the consolidated statements of cash flows as cash from operating activities, which reflect the classification of the underlying hedged transactions.
Operating Leases
We enter into operating lease arrangements for real estate assets related to office space and co-location assets related to space and racks at data center facilities. We determine if an arrangement contains a lease at its inception by assessing whether there is an identified asset and whether the arrangement conveys the right to control the use of the identified asset in exchange for consideration. Operating leases related balances are included in "operating lease right-of-use assets," "operating lease liabilities," and "operating lease liabilities, noncurrent" in the consolidated balance sheets. Right-of-use assets represent
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our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make payments arising from the lease. Operating lease right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Lease payments consist of the fixed payments under the arrangement. The operating lease liabilities are adjusted for any unpaid lease incentives, such as tenant improvement allowances. Variable costs, such as maintenance and utilities based on actual usage, are not included in the measurement of right-to-use assets and lease liabilities but are expensed when the event determining the amount of variable consideration to be paid occurs. As the implicit rate of our leases is not determinable, we use an incremental borrowing rate ("IBR") based on the information available at the lease commencement date in determining the present value of lease payments. The lease expense is recognized on a straight-line basis over the lease term.
We generally use the base, non-cancelable lease term when recognizing the right-of-use assets and lease liabilities, unless it is reasonably certain that a renewal or termination option will be exercised. We account for lease components and non-lease components as a single lease component.
Leases with a term of twelve months or less are not recognized on the consolidated balance sheets.
Stock-Based Compensation
Compensation expense related to stock-based awards granted to employees and non-employees is calculated based on the fair value of stock-based awards on the date of grant. We recognize stock-based compensation expense in the consolidated statement of operations over an award’s requisite service period based on the award’s fair value.
Stock-based compensation for common stock options is measured based on the fair value of the awards granted, determined using the Black-Scholes option pricing model. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period, generally four years .
Stock-based compensation for purchase rights granted under the employee stock purchase plan ("ESPP") is measured based on the fair value of the number of awards estimated at the beginning of the offering period, as determined using the Black-Scholes option pricing model. Stock-based compensation expense is recognized on a straight-line basis over the two-year offering period.
Stock-based compensation for restricted stock units ("RSUs") with only service conditions is measured based on the market closing price of our common stock on the grant date. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period, generally four years .
Stock-based compensation for performance stock awards (“PSAs”), which have the same grant date and service inception date, and subject to both service and performance conditions, is measured based on the probable number of shares to be attained and the market closing price of our common stock at the grant date. The expense is recognized using the accelerated attribution method over the requisite service period. For PSAs where the service inception date of the awards precedes the grant date, stock-based compensation expense is recognized based on the number of PSAs for which it is probable that the performance condition will be met, using the accelerated attribution method and the market closing price of our common stock at each reporting date up to the grant date. The number of these PSAs for which it is probable that the performance condition will be met is determined using management’s best estimate at the end of each reporting period. At the completion of the performance period for these PSAs, any earned PSAs are granted upon approval of the compensation committee of our board of directors.
We account for forfeitures as they occur for all stock-based awards.
Convertible Senior Notes
We account for each series of its convertible senior notes as a liability in its entirety, measured at amortized cost. Debt
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issuance costs incurred in connection with the issuance of convertible senior notes are reflected in the consolidated balance sheets as a direct deduction from the carrying amount of the outstanding convertible senior notes. These costs are amortized using the effective interest rate method over the terms of the convertible senior notes and are included within interest expense on the consolidated statements of operations.
We use the if-converted method to calculate the potentially diluted effect of the convertible senior notes. Accordingly, to account for the potentially diluted shares related to the convertible senior notes under a net income position, we are required to add back the related interest expense to the net income. Since we have reported net losses for all periods presented, the convertible senior notes were determined to be anti-dilutive and therefore had no impact to the diluted net loss per share for all periods presented.
Research and Development
Our research and development expenses support our efforts to add new products, new features to our existing offerings and to ensure the reliability, availability and scalability of our solutions. Our cloud platform is software-driven, and our research and development teams employ software engineers in the design and the related development, testing, certification and support of our solutions. Accordingly, the majority of our research and development expenses result from employee-related costs, including salaries, bonuses, benefits, stock-based compensation and costs associated with technology tools used by our engineers.
Advertising Expenses
Advertising expenses are charged to sales and marketing expenses in the consolidated statements of operations as incurred. We recognized advertising expense of $ 29.9 million, $ 25.0 million and $ 24.0 million in fiscal 2025, fiscal 2024 and fiscal 2023, respectively.
Warranties and Indemnification
Our cloud platform is generally warranted to be free of defects under normal use and to perform substantially in accordance with the subscription agreement. Additionally, our contracts generally include provisions for indemnifying customers and channel partners against liabilities if our services infringe or misappropriate a third party’s intellectual property rights. Costs and liabilities incurred as a result of warranties and indemnification obligations were not material during the periods presented.
Legal Contingencies
We may be subject to legal proceedings and litigation arising from time to time. We record a liability when we believe that it is both probable that a loss has been incurred and the amount can be reasonably estimated. We periodically evaluate developments in our legal matters that could affect the amount of liability that we accrue, if any, and adjust, as appropriate. Until the final resolution of any such matter for which we may be required to record a liability, there may be a loss exposure in excess of the liability recorded and such amount could be significant. We expense legal fees as incurred.
I ncome Taxes
We account for income taxes using the asset and liability method. Deferred income taxes are recognized by applying the enacted statutory tax rates applicable to future years to differences between the carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance to amounts that are more likely than not to be realized.
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We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. We recognize interest and penalties associated with our unrecognized tax benefits as a component of our income tax expense.
Comprehensive Loss
Comprehensive loss is comprised of the net loss and other comprehensive income (loss). Our other comprehensive income (loss) includes unrealized gains and losses on available-for-sale securities and unrealized gains and losses and realized gains and losses reclassified into net loss on cash flow hedges, as reflected in the consolidated statements of comprehensive loss.
Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase.
D iluted earnings per share adjusts basic earnings per share for all potentially dilutive common stock equivalents outstanding during the period. Potentially dilutive securities consist primarily of stock options, share purchase rights under the ESPP, unvested RSUs, unvested PSAs, unvested common stock and shares related to convertible senior notes. Since we have reported net losses for all periods presented, we have excluded all potentially dilutive securities from the calculation of the diluted net loss per share, as their effect is antidilutive. Accordingly, basic and diluted net loss per share is the same for all periods presented.
Recently Adopted Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires disclosure of incremental segment information on an annual and interim basis. We adopted this standard during the fiscal year ended July 31, 2025, refer to Note 17, Segment and Geographic Information for the additional required disclosures.
In June 2020, the FASB issued ASU No. 2020-06. This standard removes the separation model for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. Such convertible debt will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The update also requires the if-converted method to be used for convertible instruments and the effect of potential share settlement be included in the diluted earnings per share calculation when an instrument may be settled in cash or shares. We adopted this standard effective on August 1, 2022, the beginning of fiscal 2023, using the modified retrospective method.
Recently Issued Accounting Pronouncements Not Yet Adopted
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This standard amends guidance on measuring expected credit losses for current accounts receivable and contract assets arising from revenue contracts. This amended guidance requires to estimate credit losses for these short-term assets based on the economic conditions that exist as of the balance sheet date, without forecasting future economic conditions . This standard is effective for us in the annual periods beginning in fiscal 2027 and interim periods beginning in the first quarter of fiscal 2028. We are currently evaluating the potential impact of this standard on financial statement disclosures.
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In December 2023, the FASB issued 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amended guidance enhances income tax disclosures primarily related to the effective tax rate reconciliation and income taxes paid information. This guidance requires disclosures of specific categories in the effective tax rate reconciliation and further information on reconciling items meeting a quantitative threshold. In addition, the amended guidance requires disaggregating income taxes paid (net of refunds received) by federal, state and foreign taxes. It also requires disaggregating individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5% of total income taxes paid (net of refunds received). This standard is effective for us in the annual periods beginning in fiscal 2026. We are currently evaluating the potential impact of this standard on financial statement disclosures.
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 . This standard requires disclosures of additional information about specific expense categories in the notes to the financial statements for interim and annual reporting periods . This standard is effective for us in the annual periods beginning in fiscal 2028 and interim periods beginning in the first quarter of fiscal 2029. We are currently evaluating the potential impact of this standard on our consolidated financial statement disclosures.
Note 2. Revenue Recognition
Disaggregation of Revenue
Subscription and support revenue is recognized over time and accounted for approximately 98 %, 97 % and 97 % of our revenue for each of fiscal 2025, fiscal 2024 and fiscal 2023, respectively.
The following table summarizes the revenue by region based on the shipping address of customers who have contracted to use our cloud platform:
Year Ended July 31,
2025 2024 2023
Amount % Revenue Amount % Revenue Amount % Revenue
(in thousands, except for percentage data)
United States
$ 1,359,325 51 % $ 1,092,304 50 % $ 808,527 50 %
Europe, Middle East and Africa 792,823 30 672,421 31 515,136 32
Asia Pacific
423,811 16 327,816 15 241,250 15
Other
97,156 3 75,230 4 52,039 3
Total
$ 2,673,115 100 % $ 2,167,771 100 % $ 1,616,952 100 %
The following table summarizes the revenue from contracts by type of customer:
Year Ended July 31,
2025 2024 2023
Amount % Revenue Amount % Revenue Amount % Revenue
(in thousands, except for percentage data)
Channel partners
$ 2,360,224 88 % $ 1,967,908 91 % $ 1,488,379 92 %
Direct customers
312,891 12 199,863 9 128,573 8
Total
$ 2,673,115 100 % $ 2,167,771 100 % $ 1,616,952 100 %
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Significant Customers
No single customer accounted for 10% or more of the total revenue during the periods presented. The following table summarizes the concentration of 10% or more of the total balance of accounts receivable, net:
July 31, 2025 July 31, 2024
Channel partner A 12 % *
Contract Balances
Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are recognized as revenue over the contractual period. Deferred revenue, including current and noncurrent balances as of July 31, 2025 and July 31, 2024 was $ 2,468.0 million and $ 1,895.0 million, respectively. In fiscal 2025, fiscal 2024 and fiscal 2023 we recognized revenue of $ 1,643.1 million, $ 1,277.8 million and $ 919.9 million, respectively, that was included in the corresponding contract liability balance at the beginning of the related fiscal year.
We receive payments from customers based upon contractual billing schedules and accounts receivable are recorded when the right to consideration becomes unconditional. Payment terms on invoiced amounts are typically 30 days but may be up to 90 days for some of our channel partners. Contract assets include amounts related to our contractual right to consideration for both completed and partially completed performance obligations that may not have been invoiced and such amounts have historically not been material.
Remaining Performance Obligations
The typical subscription and support term is one to three years . Most of our subscription and support contracts are non-cancelable over the contractual term. However, customers typically have the right to terminate their contracts for cause, if we fail to perform. As of July 31, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 5,780.1 million. We expect to recognize 46 % of the transaction price over the next 12 months and 90 % of the transaction price over the next three years , with the remainder recognized thereafter.
Costs to Obtain and Fulfill a Contract
We capitalize sales commission and associated payroll taxes paid to sales personnel that are incremental to 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, if the commissions are in fact incremental and would not have occurred absent the customer contract.
Sales commissions for renewal of a contract are not considered commensurate with the commissions paid for the acquisition of the initial contract given the substantive difference in commission rates in proportion to their respective contract values. Commissions paid upon the initial acquisition of a contract are amortized over an estimated period of benefit of five years while commissions paid for renewal contracts are amortized over the contractual term of the renewals. Amortization of deferred contract acquisition costs is recognized on a straight-line basis commensurate with the pattern of revenue recognition and included in sales and marketing expense in the consolidated statements of operations.
We determine the period of benefit for commissions paid for the acquisition of the initial contract by taking into consideration the expected subscription term and expected renewals of our customer contracts, the duration of our relationships with our customers, customer retention data, our technology development lifecycle and other factors. We periodically review the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs. We did not recognize any impairment losses of deferred contract acquisition costs during the periods presented.
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The activity of the deferred contract acquisition costs consisted of the following:
Year Ended July 31,
2025 2024 2023
(in thousands)
Beginning balance
$ 445,398 $ 375,234 $ 297,002
Capitalization of contract acquisition costs
230,453 200,303 176,950
Amortization of deferred contract acquisition costs
( 166,310 ) ( 130,139 ) ( 98,718 )
Ending balance
$ 509,541 $ 445,398 $ 375,234
The outstanding balance of the deferred contract acquisition costs consisted of the following:
July 31,
2025 2024
(in thousands)
Deferred contract acquisition costs, current
$ 180,819 $ 148,873
Deferred contract acquisition costs, noncurrent
328,722 296,525
Total deferred contract acquisition costs
$ 509,541 $ 445,398
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Note 3. Cash Equivalents and Short-Term Investments
Cash equivalents and short-term investments consisted of the following as of July 31, 2025:
Amortized
Cost Unrealized
Gains Unrealized
Losses
Fair Value
(in thousands)
Cash equivalents:
Money market funds $ 1,403,678 $ — $ — $ 1,403,678
Corporate debt securities 8,468 — — 8,468
Certificates of deposit 131,463 — — 131,463
Total cash equivalents $ 1,543,609 $ — $ — $ 1,543,609
Short-term investments:
U.S. treasury securities $ 231,193 $ 56 $ ( 250 ) $ 230,999
U.S. government agency securities 75,006 26 ( 40 ) 74,992
Corporate debt securities 876,330 1,812 ( 747 ) 877,395
Total short-term investments $ 1,182,529 $ 1,894 $ ( 1,037 ) $ 1,183,386
Total cash equivalents and short-term investments $ 2,726,138 $ 1,894 $ ( 1,037 ) $ 2,726,995
Cash equivalents and short-term investments consisted of the following as of July 31, 2024:
Amortized
Cost Unrealized
Gains Unrealized
Losses
Fair Value
(in thousands)
Cash equivalents:
Money market funds $ 956,932 $ — $ — $ 956,932
U.S. treasury securities 178,188 — ( 15 ) 178,173
U.S. government agency securities 57,555 — ( 6 ) 57,549
Certificates of deposit 80,940 — — 80,940
Total cash equivalents $ 1,273,615 $ — $ ( 21 ) $ 1,273,594
Short-term investments:
U.S. treasury securities $ 257,841 $ 8 $ ( 828 ) $ 257,021
U.S. government agency securities 160,574 43 ( 542 ) 160,075
Corporate debt securities 568,589 1,514 ( 625 ) 569,478
Total short-term investments $ 987,004 $ 1,565 $ ( 1,995 ) $ 986,574
Total cash equivalents and short-term investments $ 2,260,619 $ 1,565 $ ( 2,016 ) $ 2,260,168
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The amortized cost and fair value of our short-term investments based on their stated maturities consisted of the following as of July 31, 2025:
Amortized
Cost Fair Value
(in thousands)
Due within one year $ 457,832 $ 458,067
Due between one to three years 724,697 725,319
Total $ 1,182,529 $ 1,183,386
Short-term investments that were in continuous unrealized loss position as of July 31, 2025 consisted of the following:
Less than 12 Months Greater than 12 Months Total
Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
(in thousands)
U.S. treasury securities $ 156,395 $ ( 250 ) $ — $ — $ 156,395 $ ( 250 )
U.S. government agency securities 36,098 ( 40 ) — — 36,098 ( 40 )
Corporate debt securities
360,840 ( 747 ) — — 360,840 ( 747 )
Total $ 553,333 $ ( 1,037 ) $ — $ — $ 553,333 $ ( 1,037 )
Short-term investments that were in continuous unrealized loss position as of July 31, 2024 consisted of the following:
Less than 12 Months Greater than 12 Months Total
Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
(in thousands)
U.S. treasury securities $ 152,574 $ ( 115 ) $ 87,808 $ ( 713 ) $ 240,382 $ ( 828 )
U.S. government agency securities 65,563 ( 28 ) 65,334 ( 514 ) 130,897 ( 542 )
Corporate debt securities 81,020 ( 102 ) 94,666 ( 523 ) 175,686 ( 625 )
Total $ 299,157 $ ( 245 ) $ 247,808 $ ( 1,750 ) $ 546,965 $ ( 1,995 )
We review the individual securities that have unrealized losses in our short-term investment portfolio on a regular basis. We evaluate, among other criteria, whether we have the intention to sell any of these investments 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. Neither of these criteria were met in any period presented. We additionally evaluate whether the decline in fair value of the corporate debt securities below their amortized cost basis is related to credit losses or other factors. Based on this evaluation, we determined that unrealized losses of the above securities were primarily attributable to changes in interest rates and non credit-related factors. Accordingly, we determined that an allowance for credit losses was unnecessary for our short-term investments as of July 31, 2025 and 2024.
As of July 31, 2025 and 2024, we recorded $ 17.9 million and $ 10.7 million, respectively, of accrued interest receivable within prepaid expenses and other current assets in the consolidated balance sheets.
Strategic Investments
Our strategic investments consist primarily of non-marketable equity securities of privately held companies which do not have a readily determinable fair value. These investments are primarily accounted for under the cost method as we have less than 20% ownership and do not have the ability to exercise significant influence over their operations. As of July 31,
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2025 and 2024, the carrying amount of our strategic investments was $ 10.6 million and $ 9.8 million, respectively, and is included within other noncurrent assets in the consolidated balance sheets. There were no material events or circumstances impacting their carrying amounts during the periods presented.
Note 4. 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 our 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 I - Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities;
• Level II - Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments; and
• Level III - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs are based on our own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.
Our money market funds are classified within Level I due to the highly liquid nature of these assets and have quoted prices in active markets. Certain of our investments in available-for-sale securities (i.e., U.S. treasury securities, U.S. government agency securities, certificates of deposit and corporate debt securities), as well as our assets and liabilities arising from our foreign currency forward contracts and our interest rate swap contracts, are classified within Level II. The fair value of our Level II financial assets and liabilities is determined by using inputs based on non-binding market consensus prices that are primarily corroborated by observable market data or quoted market prices for similar instruments, for substantially the full term of the financial assets and liabilities.
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Assets and liabilities that are measured at fair value on a recurring basis consisted of the following as of July 31, 2025:
Level I Level II Level III
Fair Value Quoted Prices
in Active
Markets for
Identical Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs
(in thousands)
Cash equivalents:
Money market funds $ 1,403,678 $ 1,403,678 $ — $ —
Corporate debt securities 8,468 — 8,468 —
Certificates of deposit 131,463 — 131,463 —
Total cash equivalents $ 1,543,609 $ 1,403,678 $ 139,931 $ —
Short-term investments:
U.S. treasury securities $ 230,999 $ — $ 230,999 $ —
U.S. government agency securities 74,992 — 74,992 —
Corporate debt securities 877,395 — 877,395 —
Total short-term investments $ 1,183,386 $ — $ 1,183,386 $ —
Total cash equivalents and short-term investments $ 2,726,995 $ 1,403,678 $ 1,323,317 $ —
Designated derivative instruments:
Foreign currency contracts assets-current (1)
$ 10,713 $ — $ 10,713 $ —
Foreign currency contracts assets-noncurrent (2)
$ 3,705 $ — $ 3,705 $ —
Foreign currency contracts liabilities-current (3)
$ 4,006 $ — $ 4,006 $ —
Foreign currency contracts liabilities-noncurrent (4)
$ 1,319 $ — $ 1,319 $ —
Non-designated derivative instruments:
Foreign currency contracts assets-current (1)
$ 5,115 $ — $ 5,115 $ —
Foreign currency contracts liabilities-current (3)
$ 3,956 $ — $ 3,956 $ —
(1) Included within prepaid expenses and other current assets in the consolidated balance sheets.
(2) Included within other noncurrent assets in the consolidated balance sheets.
(3) Included within accrued expenses and other current liabilities in the consolidated balance sheets.
(4) Included within other noncurrent liabilities in the consolidated balance sheets.
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Assets that are measured at fair value on a recurring basis consisted of the following as of July 31, 2024:
Level I Level II Level III
Fair Value Quoted Prices
in Active
Markets for
Identical Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs
(in thousands)
Cash equivalents:
Money market funds $ 956,932 $ 956,932 $ — $ —
U.S. treasury securities 178,173 — 178,173 —
U.S. government agency securities 57,549 — 57,549 —
Certificates of deposit 80,940 — 80,940 —
Total cash equivalents $ 1,273,594 $ 956,932 $ 316,662 $ —
Short-term investments:
U.S. treasury securities $ 257,021 $ — $ 257,021 $ —
U.S. government agency securities 160,075 — 160,075 —
Corporate debt securities 569,478 — 569,478 —
Total short-term investments $ 986,574 $ — $ 986,574 $ —
Total cash equivalents and short-term investments $ 2,260,168 $ 956,932 $ 1,303,236 $ —
Designated derivative instruments:
Foreign currency contracts assets-current (1)
$ 2,541 $ — $ 2,541 $ —
Foreign currency contracts assets-noncurrent (2)
$ 800 $ — $ 800 $ —
Foreign currency contracts liabilities-current (3)
$ 3,731 $ — $ 3,731 $ —
Foreign currency contracts liabilities-noncurrent (4)
$ 844 $ — $ 844 $ —
Interest rate contracts liabilities-current (3)
$ 3,829 $ — $ 3,829 $ —
Non-designated derivative instruments:
Foreign currency contracts assets-current (1)
$ 2,132 $ — $ 2,132 $ —
Foreign currency contracts liabilities-current (3)
$ 1,748 $ — $ 1,748 $ —
(1) Included within prepaid expenses and other current assets in the consolidated balance sheets.
(2) Included within other noncurrent assets in the consolidated balance sheets.
(3) Included within accrued expenses and other current liabilities in the consolidated balance sheets.
(4) Included within other noncurrent liabilities in the consolidated balance sheets.
We did not have transfers between levels of the fair value hierarchy of assets measured at fair value during the periods presented.
Refer to Note 10, Convertible Senior Notes, for the carrying amount and estimated fair value of our convertible senior notes as of July 31, 2025 and 2024.
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Note 5. Balance Sheet Components
Property and Equipment and Purchased Intangible Assets
Property and equipment consisted of the following:
July 31,
Estimated Useful Life
2025 2024
(in thousands)
Hosting equipment (1)
4 - 5 years
$ 571,312 $ 418,775
Capitalized internal-use software
3 - 5 years
322,265 197,769
Computers and equipment
3 - 5 years
9,138 6,741
Purchased software
3 years
1,102 1,102
Furniture and fixtures
5 years
1,195 1,071
Leasehold improvements
Shorter of useful life or lease term 10,141 7,974
Total property and equipment, gross 915,153 633,432
Less: Accumulated depreciation and amortization
( 371,776 ) ( 250,311 )
Total property and equipment, net
$ 543,377 $ 383,121
(1) Includes purchased equipment that had not been placed in service, totaling $ 163.5 million and $ 115.1 million as of July 31, 2025 and 2024, respectively.
Purchased intangible assets consist of internet protocol addresses and source codes, which are amortized on a straight-line basis over an estimated useful life of 10 years. As of July 31, 2025, their historical cost and accumulated amortization were $ 20.3 million and $ 4.6 million, respectively. As of July 31, 2024, their historical cost and accumulated amortization were $ 12.4 million and $ 2.8 million, respectively. Purchased intangible assets are included within other noncurrent assets in the consolidated balance sheets.
We recognized depreciation and amortization expense on property and equipment and purchased intangible assets of $ 104.4 million, $ 66.3 million and $ 55.8 million in fiscal 2025, fiscal 2024 and fiscal 2023, respectively. Additionally, we recognized stock-based compensation expense on the amortization of capitalized stock-based compensation associated with capitalized internal-use software of $ 21.6 million, $ 13.0 million and $ 8.4 million in fiscal 2025, fiscal 2024 and fiscal 2023, respectively.
Accrued compensation
Accrued compensation consisted of the following:
July 31,
2025 2024
(in thousands)
Accrued commissions
$ 59,429 $ 51,371
Accrued bonuses
51,598 53,452
Accrued payroll and related expenses
61,370 47,184
Employee stock purchase plan
9,410 8,803
Total accrued compensation
$ 181,807 $ 160,810
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Note 6. Business Combinations
Airgap Networks Inc.
On April 12, 2024, we completed the acquisition of Airgap Networks Inc. ("Airgap"), an early-stage technology company incorporated in United States, for total purchase price consideration of $ 124.4 million. We have integrated Airgap's technology into our cloud platform.
In addition to the consideration noted above, pursuant to the terms of the purchase agreement, certain Airgap employees who became our employees are entitled to receive deferred merger consideration with a fair value as of the grant date of $ 20.3 million payable in the form of restricted shares of our common stock. These awards are subject to time-based vesting and will be recognized as stock-based compensation expense during the post-combination period. Additionally, in connection with this acquisition, we committed to issue replacement awards with a fair value as of the closing date of the acquisition of $ 6.2 million, of which $ 1.4 million attributable to pre-combination vesting was allocated to the purchase price consideration. The remaining balance is attributable to post-combination vesting and will be recognized as compensation expense during the post-combination period.
In connection with this acquisition, we completed a valuation of the acquired identifiable intangible assets as of April 12, 2024. The purchase price consideration was allocated to identified intangible assets, which include $ 28.7 million of developed technology, $ 3.1 million of customer relationships, and $ 95.5 million of goodwill. The developed technology was valued using a replacement cost approach, which is based on the cost of a market participant to reconstruct a substitute asset of comparable utility. The customer relationships were also valued using the replacement cost approach, which is based on the cost a market participant would incur to generate the acquired portfolio of customers. Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired and is primarily attributable to the acquired workforce and expected operating synergies. The acquisition-related transaction expenses were not material and recorded as incurred within general and administrative expenses in the consolidated statement of operations for fiscal 2024.
The acquisition qualified as a stock transaction for tax purposes. The goodwill is not expected to be deductible for income tax purposes.
The allocation of the purchase price consideration consisted of the following:
Amount Estimated Useful Life
(in thousands)
Assets acquired:
Cash, cash equivalents and other assets $ 5,764
Acquired intangible assets:
Developed technology
28,700 5 years
Customer relationships 3,100 5 years
Goodwill
95,463
Total
$ 133,027
Liabilities assumed:
Accounts payable, accrued expenses and other liabilities $ 3,467
Deferred tax liability 5,123
Total $ 8,590
Total purchase price consideration
$ 124,437
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Avalor Technologies Ltd.
On March 8, 2024, we completed the acquisition of Avalor Technologies Ltd. ("Avalor"), an early-stage technology company incorporated in Israel, for total purchase price consideration of $ 256.7 million. We have integrated Avalor's technology into our cloud platform.
In addition to the consideration noted above, pursuant to the terms of the stock purchase agreement, certain Avalor employees who became our employees are entitled to receive deferred merger consideration with a fair value as of the grant date of $ 46.5 million payable in the form of restricted shares of our common stock. These awards are subject to time-based vesting and will be recognized as stock-based compensation expense during the post-combination period. Additionally, in connection with this acquisition, we committed to issue replacement awards with a fair value as of the closing date of the acquisition of $ 14.4 million, of which $ 2.4 million attributable to pre-combination vesting was allocated to the purchase price consideration. The remaining balance is attributable to post-combination vesting and will be recognized as compensation expense during the post-combination period.
In connection with this acquisition, we completed a valuation of the acquired identifiable intangible assets as of March 8, 2024. The purchase price consideration was allocated to identified intangible assets, which include $ 14.7 million of developed technology, $ 3.3 million of customer relationships, and $ 229.2 million of goodwill. The developed technology was valued using a replacement cost approach, which is based on the cost of a market participant to reconstruct a substitute asset of comparable utility. The customer relationships were also valued using the replacement cost approach, which is based on the cost a market participant would incur to generate the acquired portfolio of customers. Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired and is primarily attributable to the acquired workforce and expected operating synergies. The acquisition-related transaction expenses were not material and recorded as incurred within general and administrative expenses in the consolidated statement of operations for fiscal 2024.
The acquisition qualified as a stock transaction for tax purposes. The goodwill is not expected to be deductible for income tax purposes.
The allocation of the purchase price consideration consisted of the following:
Amount Estimated Useful Life
(in thousands)
Assets acquired:
Cash, cash equivalents and other assets $ 13,405
Acquired intangible assets:
Developed technology
14,700 5 years
Customer relationships 3,300 5 years
Deferred tax asset 841
Goodwill
229,151
Total $ 261,397
Liabilities assumed:
Accounts payable, accrued expenses and other liabilities $ 4,017
Deferred tax liability 693
Total $ 4,710
Total purchase price consideration
$ 256,687
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Canonic Security Technologies Ltd.
On February 20, 2023, we completed the acquisition of Canonic Security Technologies Ltd. ("Canonic"), an early-stage technology company incorporated in Israel, for total purchase price consideration of $ 16.5 million . We have integrated this company's technology into our cloud platform.
In addition to the cash consideration noted above, pursuant to the terms of the purchase agreement, certain of Canonic's employees who became our employees are entitled to receive deferred merger consideration with a fair value as of the grant date of $ 4.1 million payable in the form of restricted shares of our common stock. These awards are subject to time-based vesting and will be recognized as stock-based compensation expense during the post-combination period.
In connection with this acquisition, we completed a valuation of the acquired identifiable assets as of February 20, 2023. The allocation of the purchase price consideration resulted in the recognition of $ 10.6 million of goodwill and $ 5.1 million of developed technology. The developed technology was valued using a replacement cost approach, which is based on the cost of a market participant to reconstruct a substitute asset of comparable utility. Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired and is primarily attributable to the acquired workforce and expected operating synergies. The acquisition-related transaction expenses were not material and recorded as incurred within general and administrative expenses in the consolidated statement of operations for fiscal 2023.
The acquisition qualified as a stock transaction for tax purposes. The goodwill is not expected to be deductible for income tax purposes.
The allocation of the purchase price consideration consisted of the following:
Amount Estimated Useful Life
(in thousands)
Assets acquired:
Cash, cash equivalents and other assets $ 673
Acquired intangible assets:
Developed technology
5,100 5 years
Deferred tax asset 781
Goodwill
10,645
Total
$ 17,199
Liabilities assumed:
Accounts payable, accrued expenses and other liabilities $ 692
Total
$ 692
Total purchase price consideration
$ 16,507
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Other Acquisitions
In December 2024 and August 2023, we completed acquisitions for total purchase price consideration of $ 1.1 million and $ 5.3 million, respectively. These transactions were accounted for as business combinations, resulting in the recognition of goodwill of $ 0.7 million and $ 3.2 million, respectively. The goodwill from these transactions is not deductible for income tax purposes.
Pro Forma Financial Information
The pro forma financial information from the above business acquisitions, assuming the acquisition had occurred as of the beginning of the fiscal year prior to the fiscal year of the acquisition, as well as revenue and earnings generated during the period after the acquisition date, were not material for disclosure purposes.
Note 7. Goodwill and Acquired Intangible Assets
Goodwill
Changes in the carrying amount of goodwill consisted of the following:
Amount
(in thousands)
Balance as of July 31, 2024 $ 417,029
Goodwill acquired 701
Balance as of July 31, 2025 $ 417,730
Acquired Intangible Assets
Acquired intangible assets consist of developed technology and customer relationships acquired through our business acquisitions. Acquired intangible assets are amortized using the straight-line method over their estimated useful lives.
During fiscal 2025, in connection with the acquisition of Fidenty B.V., we acquired developed technology with a fair value of $ 0.3 million with an estimated useful life of five years . For further information refer to Note 6, Business Combinations.
Changes in acquired intangible assets for July 31, 2025 and 2024, consisted of the following:
Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Useful life
July 31, 2024 Additions July 31, 2025 July 31, 2024 Amortization Expense July 31, 2025 July 31, 2024 July 31, 2025 July 31, 2025
(in thousands) (years)
Developed technology $ 99,656 $ 308 $ 99,964 $ ( 42,651 ) $ ( 15,121 ) $ ( 57,772 ) $ 57,005 $ 42,192 3.3
Customer relationships 9,960 — 9,960 ( 3,130 ) ( 1,699 ) ( 4,829 ) 6,830 5,131 3.5
Total $ 109,616 $ 308 $ 109,924 $ ( 45,781 ) $ ( 16,820 ) $ ( 62,601 ) $ 63,835 $ 47,323 3.4
As of July 31, 2024, the weighted-average remaining useful life for developed technology and customer relationships was 4.2 years and 4.4 years , respectively.
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Amortization expense of acquired intangible assets was $ 16.8 million, $ 14.6 million and $ 11.1 million in fiscal 2025, fiscal 2024 and fiscal 2023, respectively. Amortization expense of developed technology and customer relationships is included primarily within cost of revenue and sales and marketing expenses, respectively, in the consolidated statements of operations.
Future amortization expense of acquired intangible assets as of July 31, 2025 consisted of the following:
Amount
(in thousands)
Fiscal Year ending July 31,
2026 $ 15,833
2027 13,010
2028 11,177
2029 7,278
2030 25
Total
$ 47,323
Note 8. Derivative Instruments
Foreign Currency Forward Contracts
As a global business, we are exposed to foreign currency exchange rate risk. Substantially all of our revenue is transacted in U.S. dollars; however, a portion of our cost of revenue and operating expenditures are incurred outside of the United States and are denominated in foreign currencies, making them subject to fluctuations in foreign currency exchange rates. In order to mitigate the impact of foreign currency fluctuations on our future cash flows and earnings, we enter into foreign currency forward contracts, which we designate as cash flow hedges. The maximum length of time over which forecasted foreign currency denominated operating expenses are hedged is 21 months. All cash flow hedges were considered effective for all periods presented.
We also use foreign currency forward contracts to mitigate variability in gains and losses generated from the remeasurement of certain monetary assets and liabilities denominated in foreign currencies. The outstanding non-designated derivative instruments are carried at fair value with the change in fair value recorded in other expense, net in the consolidated statement of operations in the same period as the changes in fair value from the remeasurement of the underlying assets and liabilities. Cash flows from such derivatives are classified as operating activities. These foreign exchange contracts typically have maturities of approximately one to four months . Changes in the fair value of these derivatives were not material for all periods presented.
As of July 31, 2025 and July 31, 2024, the total notional amount of our outstanding designated foreign currency forward contracts was $ 693.1 million and $ 544.5 million, respectively, and for our outstanding non-designated foreign currency forward contracts was $ 549.5 million and $ 352.8 million, respectively. As of July 31, 2025, an estimated $ 6.1 million of the unrealized gain related to our cash flow hedges are expected to be released into earnings over the next 12 months. Refer to Note 4, Fair Value Measurements, for the fair value of our derivative instruments as reported on the consolidated balance sheet as of July 31, 2025 and July 31, 2024.
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The changes in AOCI(L) related to our cash flow hedges consisted of the following:
Year Ended July 31,
2025 2024 2023
(in thousands)
Balance of AOCI(L) as of the beginning of the period $ ( 4,224 ) $ 8,937 $ ( 13,745 )
Net unrealized gains (losses) recognized in accumulated other comprehensive income 9,004 ( 10,761 ) 11,103
(Gains) losses reclassified from AOCI(L) into the consolidated statement of operations (1)
2,558 ( 2,400 ) 11,579
Balance of AOCI(L) as of the end of the period $ 7,338 $ ( 4,224 ) $ 8,937
(1) (Gains) losses related to our cash flow hedges reclassified from AOCI(L) into the consolidated statement of operations consisted of the following :
Year Ended July 31,
2025 2024 2023
(in thousands)
Cost of revenue $ 302 $ ( 785 ) $ 1,835
Sales and marketing
2,037 ( 789 ) 7,670
Research and development
293 ( 433 ) 1,506
General and administrative
( 74 ) ( 393 ) 568
Total
$ 2,558 $ ( 2,400 ) $ 11,579
Our derivative contracts expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the underlying contracts. We mitigate this credit risk by transacting with major financial institutions with high credit ratings and standards. We periodically assess the creditworthiness of our counterparties to ensure they continue to meet our credit quality requirements. We also enter into master netting arrangements, which permit net settlement of transactions with the same counterparty. The potential impact of these rights of set-off associated with our derivative instruments was not material as of July 31, 2025 and July 31, 2024. We are not required to pledge, and are not entitled to receive, cash collateral related to these derivative instruments. We do not enter into derivative contracts for trading or speculative purposes.
Interest Rate Swap Contracts
During fiscal 2023, we entered into interest rate swaps contracts, maturing on July 1, 2025, designated as fair value hedges intended to hedge a portion of our fair value risk exposure due to changing interest rates by economically converting the fixed interest rate of a portion of our 2025 convertible senior notes to a floating interest rate. These interest rate swap contracts matured on July 1, 2025. As of July 31, 2024, the carrying amount of the hedged convertible senior notes was $ 498.2 million and the total notional amount of our outstanding interest rate swaps was $ 500.0 million . The gains and losses related to changes in the fair value of the interest rate swaps are included within interest expense in the consolidated statement of operations and substantially offset changes in the fair value of the hedged portion of the underlying convertible senior notes that are attributable to the changes in underlying benchmark interest rates. As of July 31, 2024, the cumulative amount of fair value hedge accounting adjustments included in the carrying amount of the convertible senior notes was $ 4.1 million.
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The gains (losses) effect of derivative instruments designated as fair value hedges included within interest expense in the statement of operations consisted of the following:
Year Ended July 31,
2025 2024 2023
(in thousands)
Gains (losses) on interest rate swaps:
Hedge accounting fair value adjustments $ ( 4,065 ) $ ( 4,241 ) $ 8,306
Derivatives designated as hedging instruments
3,829 4,198 ( 8,028 )
Total
$ ( 236 ) $ ( 43 ) $ 278
Note 9. Restructuring and Other Charges
During fiscal 2025 and fiscal 2023, we announced a restructuring plan as a part of our planned efforts to streamline operations and to align people, roles and projects to our strategic priorities.
During fiscal 2025, we incurred $ 4.9 million of restructuring charges related to employee severance and benefit charges. D uring fiscal 2023, we incurred $ 7.6 million of restructuring charges, consisting of $ 6.6 million of employee severance and benefit charges and $ 1.0 million of stock-based compensation expense related to modified equity incentive awards.
The following table summarizes our restructuring charges recognized in the consolidated statements of operations:
Year Ended July 31,
2025 2023
(in thousands)
Cost of revenue
$ 138 $ —
Sales and marketing
— 5,238
Research and development
4,783 1,051
General and administrative
— 1,311
Total
$ 4,921 $ 7,600
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Note 10. Convertible Senior Notes
2028 Convertible Senior Notes
On July 3, 2025, we issued $ 1,725.0 million in aggregate principal amount of 0.0 % convertible senior notes due 2028 (the "2028 Notes"), including the exercise in full by the initial purchasers of the 2028 Notes of their option to purchase an additional $ 225.0 million principal amount of the 2028 Notes. The 2028 Notes are unsecured obligations and do not bear regular cash interest and the principal amount of the 2028 Notes will not accrete. The 2028 Notes mature on July 15, 2028, unless earlier converted, redeemed or repurchased. The total net proceeds from the offering, after deducting initial purchase discounts and other debt issuance costs, was $ 1,700.0 million.
The 2028 Notes do not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by us or any of our subsidiaries.
The following table presents details of the 2028 Notes:
Initial Conversion Rate per $1,000 Principal Initial Conversion Price Initial Number of Shares
(in thousands)
Notes 2.2752 $ 439.52 3,925
The 2028 Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding April 15, 2028, only under the following circumstances:
• During any fiscal quarter commencing after the fiscal quarter ending on October 31, 2025 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price of the 2028 Notes on each applicable trading day;
• During the five -business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the 2028 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate of the 2028 Notes on each such trading day;
• If we call any or all of the 2028 Notes for redemption, the 2028 Notes called for redemption (or, at our election all Notes) may be submitted for conversion at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or
• Upon the occurrence of specified corporate events as set forth within the indenture governing the 2028 Notes.
On or after April 15, 2028, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert, all or any portion of their 2028 Notes at any time, in multiples of $1,000 principal amount, at their option regardless of the foregoing circumstances. Upon conversion, we will satisfy the conversion obligation by paying or delivering, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. It is our current intent to settle the principal amount of the 2028 Notes in cash.
During the three months ended July 31, 2025, the conditions allowing holders of the 2028 Notes to convert were not met. Since we have the election of repaying the 2028 Notes in cash, shares of our common stock, or a combination of both, we have classified the 2028 Notes as a noncurrent liability in the consolidated balance sheet as of July 31, 2025.
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In the event of a corporate event that constitutes a “fundamental change" (as defined in the indenture governing the Notes),” holders of the 2028 Notes will have the right, at their option to require us to repurchase for cash all or any portion of the 2028 Notes upon the occurrence of a fundamental change, at a purchase price equal to 100 % of the principal amount of the 2028 Notes, plus any accrued and unpaid special interest to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date, or if we issue a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 2028 Notes in connection with such corporate event or notice of redemption, as the case may be.
The net carrying amount of the 2028 Notes consisted of t he following:
July 31,
2025
(in thousands)
Principal amount $ 1,725,000
Less:
Unamortized debt issuance costs
24,273
Total $ 1,700,727
The total fair value of the 2028 Notes was 1,686.5 million as of July 31, 2025. The fair value was determined based on the closing trading price per $1,000 of the 2028 Notes as of the last day of trading for the period. We considered the fair value of the 2028 Notes as of July 31, 2025 to be a Level II measurement as they are not actively traded. The fair value of the 2028 Notes is primarily affected by the trading price of our common stock and market interest rates.
2028 Capped Call Transactions
In connection with the pricing of the 2028 Notes, we entered into capped call transactions with the option counterparties (the "2028 Capped Calls"). The 2028 Capped Calls each have an initial strike price of $ 439.52 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2028 Notes. The 2028 Capped Calls have an initial cap price of $ 784.85 per share, subject to certain adjustments. The 2028 Capped Calls are generally expected to reduce potential dilution to our common stock upon any conversion of the 2028 Notes and/or offset any cash payments we are required to make in excess of the principal amount of the converted 2028 Notes, as the case may be, with such reduction and/or offset subject to a cap. The 2028 Capped Calls are subject to adjustment upon the occurrence of specified extraordinary events affecting us, including merger events, tender offers and the announcement of such events. In addition, the 2028 Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the 2028 Capped Calls, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings and hedging disruptions. For accounting purposes, the 2028 Capped Calls are separate transactions, and not part of the terms of the 2028 Notes. As the 2028 Capped Calls qualify for a scope exception from derivative accounting for instruments that are both indexed to the issuer's own stock and classified in stockholder's equity in the consolidated balance sheet, the premium of $ 196.8 million paid for the purchase of the 2028 Capped Calls was recorded as a reduction to additional paid-in capital and will not be remeasured. As of July 31, 2025, we have not exercised any 2028 Capped Calls.
2025 Convertible Senior Notes and 2025 Capped Call Transactions
On June 25, 2020, we issued $ 1,150.0 million in aggregate principal amount of 0.125 % convertible senior notes due 2025 (the "2025 Notes"), including the exercise in full by the initial purchasers of the 2025 Notes of their option to purchase an additional $ 150.0 million principal amount of the 2025 Notes. The 2025 Notes were unsecured obligations and bore interest at a rate of 0.125 % per year and interest is payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2021. The total net proceeds from the offering, after deducting initial purchase discounts and other debt issuance costs, was $ 1,130.5 million.
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The 2025 Notes matured on July 1, 2025. We fully repaid the 2025 Notes by paying the principal amount of $ 1,150.0 million in cash and settled the premium amount by issuing 3.8 million new shares of our common stock.
Additionally, we received 2.4 million shares of our common stock from the capped call transactions related to the 2025 Notes (the "2025 Capped Calls").
The net carrying amount of the 2025 Note s consisted of the following:
July 31,
2025 2024
(in thousands)
Principal amount $ — $ 1,149,954
Less:
Unamortized debt issuance costs
— 3,614
Hedge accounting fair value adjustments — 4,065
Total $ — $ 1,142,275
The total fair value of the 2025 Notes was $ 1,465.5 million as of July 31, 2024. The fair value was determined based on the closing trading price per $1,000 of the 2025 Notes as of the last day of trading for the period. We considered the fair value of the 2025 Notes as of July 31, 2024 to be a Level II measurement as they are not actively traded.
The interest expense related to the 2028 Notes and 2025 Notes consisted of the following:
Year Ended July 31,
2025 2024 2023
2028 Notes 2025 Notes 2025 Notes 2025 Notes
(in thousands)
Contractual interest expense $ — $ 1,316 $ 1,436 $ 1,439
Amortization of debt issuance costs
679 3,614 3,914 3,894
Total $ 679 $ 4,930 $ 5,350 $ 5,333
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Note 11. Operating Leases
The following is a summary of our operating lease costs:
Year Ended July 31,
2025 2024 2023
Real Estate Arrangements Co-Location Arrangements Total Real Estate Arrangements Co-Location Arrangements Total Real Estate Arrangements Co-Location Arrangements Total
(in thousands)
Operating lease, including imputed interest $ 13,745 $ 49,170 $ 62,915 $ 9,902 $ 39,577 $ 49,479 $ 7,858 $ 24,677 $ 32,535
Short-term lease cost 4,802 12,678 17,480 5,138 8,090 13,228 4,314 5,688 10,002
Variable lease cost 9,602 9,230 18,832 9,907 6,047 15,954 6,992 4,956 11,948
Total operating lease costs $ 28,149 $ 71,078 $ 99,227 $ 24,947 $ 53,714 $ 78,661 $ 19,164 $ 35,321 $ 54,485
Weighted-average remaining lease term (in years) 2.4 2.0 2.1 1.9 3.0 2.0
Weighted-average discount rate 5.6 % 5.0 % 5.3 % 4.7 % 4.5 % 3.2 %
The following table presents information about our leases in the consolidated balance sheets:
July 31,
2025 2024
Real Estate Arrangements Co-Location Arrangements Total Real Estate Arrangements Co-Location Arrangements Total
(in thousands)
Operating lease right-of-use assets $ 21,858 $ 67,914 $ 89,772 $ 22,612 $ 67,146 $ 89,758
Operating lease liabilities, current $ 13,359 $ 39,138 $ 52,497 $ 11,381 $ 39,485 $ 50,866
Operating lease liabilities, noncurrent $ 9,575 $ 33,777 $ 43,352 $ 12,974 $ 31,850 $ 44,824
Cash paid, net of tenant incentives for amounts included in the measurement of operating lease liabilities was $ 62.0 million, $ 49.2 million and $ 32.2 million for fiscal 2025, fiscal 2024 and fiscal 2023, respectively.
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Maturities of operating lease liabilities consisted of the following as of July 31, 2025:
Real Estate Arrangements Co-Location Arrangements Total
Year ending July 31, (in thousands)
2026 $ 14,308 $ 41,700 $ 56,008
2027 5,225 25,904 31,129
2028 2,849 8,830 11,679
2029 1,631 — 1,631
2030 1,223 — 1,223
Total future minimum lease payments 25,236 76,434 101,670
Less: Imputed interest 2,302 3,519 5,821
Total $ 22,934 $ 72,915 $ 95,849
As of July 31, 2025, we have entered into non-cancelable operating leases, including the lease for our new headquarters as described below, with terms greater than 12 months that have not yet commenced. These leases, totaling $ 85.3 million in undiscounted future minimum payments, are excluded from the above table and are expected to commence between August 2025 and September 2026, with lease terms ranging from approximately 1.75 to 6.33 years.
Effective April 29, 2025, we entered into a lease agreement (the “lease”) for our new headquarters. The property subject to the lease is located in Santa Clara, California, and consists of approximately 301,000 square feet of rentable space. The lease term begins on September 1, 2026, and ends on April 30, 2032, with an option for early access in January 2026 to facilitate tenant improvements. The total base rent, including committed fixed expenses for the duration of the lease term, is approximately $ 69.5 million. In addition to the base rent, we will be responsible for operating costs and other related expenses. In accordance with Accounting Standard Codification 842, Leases, we will recognize the related right-of-use assets and corresponding operating lease liabilities upon taking possession of the properties.
Note 12. Commitments and Contingencies
Non-cancelable Purchase Obligations
In the normal course of business, we enter into non-cancelable purchase commitments with various third parties to purchase products and services such as cloud infrastructure capacity, subscription-based cloud service arrangements, technology equipment, corporate and marketing events and consulting services.
The maturities of non-cancelable purchase obligations with a remaining term in excess of one year as of July 31, 2025 consisted of the following:
Amount
Year ending July 31, (in thousands)
2026 $ 129,282
2027 168,049
2028 150,551
2029 122,700
2030 29,309
Thereafter 7,996
Total $ 607,887
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Other Commitments
As of July 31, 2025 and 2024, we had outstanding irrevocable standby unsecured letters of credit and a guarantee, which serve as security for certain real estate leases described in Note 11, Operating Leases. The aggregate value of these commitments was not material to our consolidated financial statements.
Legal Matters
Litigation and Claims
We are a party to various litigation matters from time to time and subject to claims that arise in the ordinary course of business, including patent, commercial, product liability, employment, class action, whistleblower and other litigation and claims, as well as governmental and other regulatory investigations and proceedings. In addition, third parties may from time to time assert claims against us in the form of letters and other communications. There is no pending or threatened legal proceeding to which we are a party that, in our opinion, is likely to have a material adverse effect on our future financial results or operations; however, the results of litigation and claims are inherently unpredictable. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. The expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change and could adversely affect our results of operations.
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Note 13. Stock-Based Compensation
Equity Incentive Plan
Equity incentive awards which may be granted to eligible participants under our Amended and Restated FY2018 Equity Incentive Plan (the "2018 Plan") include restricted stock units, restricted stock, stock options, nonstatutory stock options, stock appreciation rights, performance units and performance shares.
As of July 31, 2025, a total of 60.8 million shares of common stock have been reserved for the issuance of equity awards under the 2018 Plan, of which 35.8 million shares remained available for grant. The number of shares of common stock available for issuance under the 2018 Plan also includes an annual increase on the first day of each fiscal year through August 1, 2027, pursuant to its automatic annual increase provision.
Stock Options
The activity of stock options for fiscal 2025 consisted of the following:
Outstanding
Stock
Options Weighted-Average
Exercise
Price Weighted-Average
Remaining
Contractual Term
(in years) Aggregate
Intrinsic
Value
(in thousands, except per share amounts)
Balance as of July 31, 2024 453 $ 46.72 2.5 $ 60,923
Granted 100 $ 250.32
Exercised ( 352 ) $ 10.17 $ 65,225
Canceled, forfeited or expired ( 24 ) $ 152.99
Balance as of July 31, 2025 177 $ 220.95 7.8 $ 11,854
Exercisable and expected to vest as of July 31, 2024 367 $ 15.84 1.0 $ 59,989
Exercisable and expected to vest as of July 31, 2025 47 $ 172.65 3.8 $ 5,304
The weighted-average grant-date fair value per share of stock options granted was $ 144.58 , $ 117.41 and $ 88.97 during fiscal 2025, fiscal 2024 and fiscal 2023 respectively.
The total grant-date fair value of stock options vested was $ 3.6 million, $ 1.4 million and $ 1.5 million during fiscal 2025, fiscal 2024 and fiscal 2023, respectively. The total intrinsic value of options exercised was $ 65.2 million, $ 157.8 million and $ 56.5 million, during fiscal 2025, fiscal 2024 and fiscal 2023, respectively .
We estimate the fair value of stock options using the Black-Scholes option pricing model with the following assumptions:
Year Ended July 31,
2025 2024 2023
Expected term (in years) 6.0 - 6.1
6.0 6.1
Expected stock price volatility 57.0 % - 57.7 %
59.5 % 58.2 %
Risk-free interest rate 4.1 %
4.2 % 3.9 %
Dividend yield 0.0 % 0.0 % 0.0 %
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The expected term was estimated using the simplified method. The expected volatility was determined using a weighted-average of the historical volatility of our common stock and peer volatility. Peer volatility was calculated as the average of historical volatilities of selected industry peers corresponding to the expected term of the awards. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the stock-based award. Our expected dividend yield is zero, as we have not and do not currently intend to declare dividends in the foreseeable future.
Restricted Stock Units and Performance Stock Awards
The 2018 Plan allows for the grant of RSUs and PSAs. Generally, RSUs are subject to a four-year vesting period.
The right to earn PSAs is subject to the achievement of the defined and approved performance metrics and continuous employment service. The performance metrics are defined and approved by the compensation committee of our board of directors or by our senior management for certain types of awards. Generally, earned PSAs are subject to additional time-based vesting.
As of July 31, 2025, there were 0.1 million outstanding PSAs with performance metrics that have not been defined and/or approved. As of July 31, 2025, these awards are not considered granted for accounting purposes and accordingly, have been excluded from the table below .
The activity of RSUs and PSAs consisted of the following for fiscal 2025:
Underlying Shares Weighted-Average Grant Date Fair Value Aggregate
Intrinsic Value
(in thousands, except per share data)
Balance as of July 31, 2024 9,814 $ 162.41 $ 1,760,079
Granted 5,151 $ 190.70
Vested ( 3,631 ) $ 165.41 $ 807,998
Canceled or forfeited ( 1,890 ) $ 168.06
Balance as of July 31, 2025 9,444 $ 175.55 $ 2,697,026
The aggregate fair value, as of the respective vesting dates, of RSUs and PSAs vested was $ 808.0 million, $ 684.4 million and $ 462.3 million, during fiscal 2025, fiscal 2024 and fiscal 2023, respectively.
Employee Stock Purchase Plan
In fiscal 2018, we adopted the Fiscal Year 2018 Employee Stock Purchase Plan (the "ESPP"). Through July 31, 2025, a total of 11.8 million shares of common stock have been reserved for issuance under the ESPP, out of which 7.3 million shares were available for future grant as of July 31, 2025. The number of shares reserved includes an annual increase on the first day of each fiscal year pursuant to the ESPP's automatic annual increase provision. The ESPP provides for consecutive offering periods that will typically have a duration of approximately 24 months in length and are comprised of four purchase periods of approximately six months in length. The offering periods are scheduled to start on the first trading day on or after June 15 and December 15 of each year. The ESPP contains a reset provision under which the offering period resets if the fair market value of our common stock on the purchase date is less than the fair market value on the first day of the offering period. During fiscal 2025, fiscal 2024 and fiscal 2023, employees purchased under the ESPP approximately 0.4 million, 0.5 million and 0.4 million shares of common stock, respectively, at an average purchase price of $ 146.31 , $ 106.46 and $ 99.59 , respectively, with cash proceeds of $ 63.6 million, $ 52.0 million and $ 42.3 million, respectively.
ESPP employee payroll contributions accrued as of July 31, 2025 and 2024, were $ 9.4 million and $ 8.8 million, respectively, and are included within accrued compensation in the consolidated balance sheets. Payroll contributions accrued
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as of July 31, 2025 will be used to purchase shares at the end of the current ESPP purchase period ending on December 15, 2025. Payroll contributions ultimately used to purchase shares are reclassified to stockholders' equity on the purchase date.
In June 2024, one outstanding ESPP offering period was reset and automatically rolled over into a new ESPP offering period that started on June 17, 2024. The reset was accounted for as a modification, which resulted in an incremental stock-based compensation of $ 2.7 million, which will be recognized over the remaining term of the modified ESPP offering period of 18 months. In December 2022, certain outstanding ESPP offering periods were reset and automatically rolled over into a new ESPP offering period that started on December 15, 2022. The reset was accounted for as a modification, which resulted in an incremental stock-based compensation of $ 8.3 million, which was recognized over the remaining term of the modified ESPP offering periods, ranging from approximately 6 months to 18 months.
The fair value of the purchase rights offered under the ESPP was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:
Year Ended July 31,
2025 2024 2023
Expected term (in years)
0.5 - 2.0
0.5 - 2.0
0.5 - 2.0
Expected stock price volatility
43.6 % - 47.6 %
42.5 % - 64.8 %
58.1 % - 75.9 %
Risk-free interest rate
4.0 % - 4.3 %
4.4 % - 5.4 %
4.2 % - 5.3 %
Dividend yield
0.0 %
0.0 %
0.0 %
The expected term represents the term from the first day of the offering period to the purchase dates within each offering period. The expected volatility was based on the historical volatility of our common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the stock-based award. Our expected dividend yield is zero, as we have not and do not currently intend to declare dividends in the foreseeable future.
Departure of Certain Executives of the Company
In the fourth quarter of fiscal 2025 , certain executives of the Company departed from their positions, including our former Chief Financial Officer. In connection with some of the departures, we modified certain equity incentive awards resulting in an incremental stock-based compensation expense of $ 11.7 million, of which $ 2.2 million and $ 9.5 million was recognized in research and development expenses and general and administrative expenses, respectively, in the consolidated statement of operations in fiscal 2025 . Additionally, in connection with these departures, we recognized a reversal of stock-based compensation expense related to forfeited unvested equity incentive awards of $ 12.2 million, of which $ 4.2 million, $ 6.0 million and $ 2.0 million was recognized in sales and marketing expenses, research and development expenses and general and administrative expenses, respectively, in the consolidated statement of operations in fiscal 2025 .
In February 2024, our Chief Operating Officer, who led sales activities, resigned from his position at the Company. In connection with his resignation, we recognized a reversal of stock-based compensation expense of $ 11.7 million associated with the cancellation of unvested incentive equity awards, which was recognized in sales and marketing expenses in the consolidated statement of operations in fiscal 2024 .
In October 2022, our President, who led research and development activities, resigned from his position as President of the Company, but continued to serve as a member of our Board of Directors through January 2024. In connection with his resignation as President of the Company, we recognized a reversal of stock-based compensation expense of $ 9.9 million associated with the cancellation of unvested incentive equity awards, which was recognized in research and development expenses in the consolidated statement of operations in fiscal 2023 .
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Stock-based Compensation Expense
The components of stock-based compensation expense recognized in the consolidated statements of operations consisted of the following:
Year Ended July 31,
2025 2024 2023
(in thousands)
Cost of revenue
$ 68,145 $ 50,820 $ 39,168
Sales and marketing
248,570 219,096 216,413
Research and development
249,919 180,554 118,123
General and administrative
94,716 77,206 71,130
Total
$ 661,350 $ 527,676 $ 444,834
As of July 31, 2025, the unrecognized stock-based compensation cost related to outstanding equity-based awards, including awards for which the service inception date has been met but the grant date has not been met, was $ 1,557.2 million, which we expect to be amortized over a weighted-average period of 2.5 years.
During fiscal 2025, fiscal 2024 and fiscal 2023, we capitalized stock-based compensation primarily associated with the development of software for internal-use of $ 44.0 million, $ 27.2 million and $ 17.2 million, respectively.
Note 14. Common Stock
Holders of our common stock are entitled to one vote for each share of common stock held and are not entitled to receive dividends unless declared by our board of directors.
Common Stock Reserved for Future Issuance
The following table summarizes our shares of common stock reserved for future issuance:
July 31, 2025
(in thousands)
Equity awards outstanding:
Stock options 177
Unvested RSUs 8,463
Committed unvested PSAs, based on the target number of shares 607
Unvested PSAs 981
Share purchase rights committed under the ESPP 536
Equity awards available for future grants:
2018 Plan 35,146
ESPP 7,323
Stock reserved for settlement of the 2028 Notes 3,925
Total 57,158
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Note 15. Income Taxes
The following table sets forth the geographical breakdown of the income (loss) before the provision for income taxes:
Year ended July 31,
2025 2024 2023
(in thousands)
Domestic $ ( 87,892 ) $ ( 112,758 ) $ ( 228,715 )
International 69,601 83,529 46,151
Loss before provision for income taxes $ ( 18,291 ) $ ( 29,229 ) $ ( 182,564 )
The following table sets forth the components of the provision for income taxes:
Year ended July 31,
2025 2024 2023
Current: (in thousands)
Federal $ ( 331 ) $ 203 $ 1,091
State 4,272 1,337 3,890
Foreign 32,747 32,620 14,438
Total current tax expense 36,688 34,160 19,419
Deferred:
Federal 74 ( 4,526 ) —
State 129 ( 693 ) —
Foreign ( 13,704 ) ( 464 ) 352
Total deferred tax benefit (expense) ( 13,501 ) ( 5,683 ) 352
Total provision for income taxes $ 23,187 $ 28,477 $ 19,771
During fiscal 2025, fiscal 2024 and fiscal 2023, we recognized tax benefits on total stock-based compensation expense of $ 31.5 million, $ 23.0 million and $ 13.4 million, respectively, which are reflected within the provision for income taxes in the consolidated statements of operations.
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The following table presents the reconciliation of the statutory federal income tax rate to our effective rate:
Year ended July 31,
2025 2024 2023
Tax at federal statutory rate 21.0 % 21.0 % 21.0 %
State taxes ( 20.5 ) % ( 0.4 ) % ( 2.1 ) %
Impact of foreign rate differential 139.6 % 48.7 % 11.3 %
Meals and entertainment ( 17.1 ) % ( 7.0 ) % ( 0.8 ) %
Stock-based compensation 187.7 % 162.6 % ( 0.8 ) %
Transaction costs ( 0.2 ) % ( 1.3 ) % — %
U.S. tax credits 199.9 % 89.3 % 7.8 %
Change in valuation allowance ( 611.7 ) % ( 471.3 ) % ( 34.1 ) %
Withholding tax ( 31.5 ) % ( 12.5 ) % ( 1.3 ) %
Waived deductions under Section 59A — % 72.1 % ( 11.8 ) %
Nondeductible penalties ( 2.0 ) % ( 0.2 ) % — %
Return to provision true ups ( 0.2 ) % 2.2 % — %
Other ( 1.5 ) % ( 0.6 ) % ( 0.1 ) %
Effective tax rate ( 136.5 ) % ( 97.4 ) % ( 10.9 ) %
Our effective tax rate for fiscal 2025 differs from the U.S. statutory rate primarily due to a portion of our earnings that are taxed at different rates from the U.S. statutory rate, the benefit of stock based compensation deductions, withholding taxes related to customer payments in certain foreign jurisdictions in which we conduct business, and the impact in the valuation allowance against deferred tax assets, including the release of the UK valuation allowance.
Our effective tax rate for fiscal 2024 differs from the U.S. statutory rate primarily due to a portion of our earnings that are taxed at different rates from the U.S. statutory rate, the benefit of stock based compensation deductions, withholding taxes related to customer payments in certain foreign jurisdictions in which we conduct business, and the impact of the valuation allowance we maintain against our U.S. federal and state deferred tax assets. During fiscal 2024, we also effectuated certain tax planning actions which reduced the amount of waived deductions under Section 59A related to our fiscal 2023.
Our effective tax rate for fiscal 2023 differs from the U.S. statutory rate primarily due to a portion of our earnings that are taxed at different rates from the U.S. statutory rate, the effect of waived deductions under Section 59A, the benefit of stock based compensation deductions, withholding taxes related to customer payments in certain foreign jurisdictions in which we conduct business, and the impact of the valuation allowance we maintain against our U.S. federal and state deferred tax assets.
During fiscal 2024 we recognized an income tax benefit of $ 5.2 million as a result of a release in our valuation allowance on deferred tax assets due to deferred taxes recorded as part of the acquisition accounting of business combinations . During fiscal 2025 and 2023 , we did no t recognize income tax benefits from business combinations. Refer to Note 6, Business Combinations, for further information.
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The following table presents the tax effects of temporary differences that give rise to significant portions of our deferred tax assets and liabilities:
July 31,
2025 2024
(in thousands)
Deferred tax assets:
Net operating losses and credit carryovers $ 277,413 $ 373,611
Deferred revenue 246,181 181,654
Research and development capitalization 289,735 168,918
Tax credits carryovers 226,685 157,861
Other 137,987 100,930
Gross deferred tax assets 1,178,001 982,974
Less: Valuation allowance ( 995,412 ) ( 833,908 )
Total deferred tax assets $ 182,589 $ 149,066
Deferred tax liabilities:
Intangible assets $ ( 6,489 ) $ ( 10,273 )
Deferred contract acquisition costs ( 114,182 ) ( 99,123 )
Property and equipment ( 17,004 ) ( 9,929 )
Operating lease right-of-use assets ( 29,959 ) ( 29,137 )
Total deferred tax liabilities $ ( 167,634 ) $ ( 148,462 )
Net deferred tax assets $ 14,955 $ 604
A deferred tax liability has not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are indefinitely reinvested outside the U.S. Income taxes are generally incurred upon a repatriation of assets, a sale, or a liquidation of the subsidiary. The excess of the amount for financial reporting over the tax basis in the investments in foreign subsidiaries, as well as the unrecognized deferred tax liability, are not material for the periods presented.
The following table presents the change in the valuation allowance:
Year ended July 31,
2025 2024 2023
(in thousands)
Balance as of the beginning of the period $ 833,908 $ 671,381 $ 553,916
Change during the period 161,504 162,527 117,465
Balance as of the end of the period $ 995,412 $ 833,908 $ 671,381
The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. We regularly assess our ability to realize the deferred tax assets on a quarterly basis and we establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. We weigh all available positive and negative evidence, including our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. Due to the weight of objectively verifiable negative evidence, including our history of losses, we believe that it is more likely than not that our U.S. federal and state deferred tax assets will not be realized as of July 31, 2025 and 2024. Accordingly, we have maintained
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a full valuation allowance against such deferred tax asset s. The portion of the valuation allowance for deferred tax assets for which subsequently recognized tax benefits will be credited directly to contributed capital was $ 46.1 million in fiscal 2025.
The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth. In the event we determine that we will be able to realize all or part of our net deferred tax assets in the future, the valuation allowance against our deferred tax assets will be reversed in the period in which we make such determination. The release of a valuation allowance may cause greater volatility in the effective tax rate in the periods in which the valuation allowance is released.
During fiscal 2025, based on an analysis of all positive and negative evidence, we concluded it is more likely than not that our U.K. deferred tax assets will be realizable. This conclusion is based on a demonstrated return to sustained profitability when considering pre-tax income adjusted for permanent differences, as well as anticipated future earnings. The change in judgment as to the realizability of U.K. deferred tax assets in future years resulted in the release of the U.K. valuation allowance of $ 18.4 million.
As of July 31, 2025, we have net operating loss carryforwards for U.S. federal income tax purposes of $ 1,057.0 million, which are available to offset future federal taxable income. These net operating losses will carry forward indefinitely. As of July 31, 2025, we have net operating loss carryforwards for state income tax purposes of $ 504.7 million. Beginning in 2025, $ 426.8 million of state net operating losses will begin to expire at different periods. The remaining $ 77.9 million of state net operating losses will carry forward indefinitely. As of July 31, 2025, we had foreign net operating loss carryforward of $ 87.7 million, all of which will be carried forward indefinitely.
As of July 31, 2025, we also had U.S. federal, California and foreign research and development and other tax credit carryforwards of $ 192.8 million, $ 102.6 million and $ 2.1 million respectively. If not utilized, the federal research and development tax credit carryforwards will begin expiring at different periods beginning in 2037. Our California research and development tax credits may be carried forward indefinitely. Foreign tax credits will begin to expire in the fiscal year ending 2033.
Federal and state tax laws impose restrictions on the utilization of net operating loss carryforwards in the event of a change in our ownership as defined by the Internal Revenue Code, Sections 382. Under Section 382 of the Code, substantial changes in our ownership and the ownership of acquired companies may limit the amount of net operating loss carryforwards that are available to offset taxable income. The annual limitation would not automatically result in the loss of net operating loss carryforwards but may limit the amount available in any given future period.
We are subject to income taxes in the U.S. and various foreign jurisdictions. As of July 31, 2025, all years are open for examination and may become subject to examination in the future. Significant judgment is required in evaluating our tax positions and determining our income tax expense for the fiscal year. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. Our estimate of the potential outcome of any tax position is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. These unrecognized tax benefits are established when we believe that certain positions might be challenged despite the belief that our tax return positions are fully supportable. We recognize interest and penalties associated with our unrecognized tax benefits as a component of our income tax expense. For the periods presented, we did not have material interest or penalties associated with the unrecognized tax benefits in the consolidated financial statements.
We had $ 87.2 million of gross unrecognized tax benefits as of July 31, 2025, of which $ 5.3 million would affect our effective tax rate if recognized. The remaining gross unrecognized tax benefits relate to income tax positions which, if recognized, would be in the form of additional deferred tax assets that would be offset by a valuation allowance. As of July 31, 2025, we do not believe that our estimates, as otherwise provided for, on such tax positions will significantly increase or
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decrease within the next twelve months. We recognize interest and penalties related to our unrecognized tax benefits within our provision for income taxes. The amount of interest and penalties accrued as of July 31, 2025 was insignificant.
The changes in our gross unrecognized tax benefits consisted of the following:
Amount
(in thousands)
Balance as of July 31, 2023 $ 40,689
Gross increase for tax positions of prior years
6,960
Gross (decrease) for tax positions of prior years
( 2,102 )
Gross increase for tax positions of current year
18,378
Balance as of July 31, 2024 63,925
Gross increase for tax positions of prior years
861
Gross (decrease) for tax positions of prior years
( 2,592 )
Gross increase for tax positions of current year
24,967
Balance as of July 31, 2025 $ 87,161
Note 16. Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase. The diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, our stock options, share purchase rights under the employee stock purchase plan, unvested RSUs, unvested PSAs, unvested common stock and shares related to the 2028 and 2025 Notes are considered to be potential common stock equivalents.
The computation of basic and diluted net loss per share consisted of the following:
Year Ended July 31,
2025 2024 2023
(in thousands, except per share data)
Net loss $ ( 41,478 ) $ ( 57,706 ) $ ( 202,335 )
Weighted-average shares used in computing net loss per share, basic and diluted 154,404 149,586 144,942
Net loss per share, basic and diluted $ ( 0.27 ) $ ( 0.39 ) $ ( 1.40 )
Since we have reported net losses for all periods presented, we have excluded all potentially dilutive securities from the calculation of the diluted net loss per share as their effect is antidilutive and accordingly, the basic and diluted net loss per share is the same for all periods presented.
We calculate the potential dilutive effect of the convertible senior notes under the if-converted method. Under this method, diluted earnings per share are determined by assuming that outstanding convertible senior notes were converted into shares of our common stock at the beginning of the reporting period.
In connection with the issuance of the convertible senior notes, we entered into capped call transactions, which were not included for purposes of calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive. The capped call transactions are expected to partially offset the potential dilution to our common stock upon any conversion of the convertible senior notes.
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The following table summarizes the outstanding potentially dilutive securities that were excluded from the computation of diluted net loss per share as their effect would be antidilutive:
July 31,
2025 2024 2023
(in thousands)
Unvested RSUs and shares of common stock 8,702 9,198 8,442
Stock options 177 453 1,267
Unvested PSAs (1)
981 1,009 1,012
Share purchase rights under the ESPP 536 514 1,119
2028 Notes (2)
3,925 — —
2025 Notes (2)
— 7,626 7,626
Total 14,321 18,800 19,466
(1) The number of unvested PSAs is estimated at 100 % of the target number of shares granted and excludes unvested PSAs for which performance conditions have not been established as of July 31, 2025, as they are not considered outstanding for accounting purposes. For further information refer to Note 13, Stock-Based Compensation.
(2) Based on the initial conversion price, the entire outstanding principal amount of the Notes as of July 31, 2025, July 31, 2024 and July 31, 2023 would have been convertible into approximately 3.9 million shares, 7.6 million shares and 7.6 million shares, respectively, of our common stock, which are reflected in the table above.
Note 17. Segment and Geographic Information
We operate globally as a single operating and reportable segment with one primary business activity. Using a SaaS business model, we primarily generate revenue from sales of subscriptions to grant customers access to our cloud platform along with related support services. Our chief operating decision maker ("CODM") is our chief executive officer. Consolidated financial information, including revenue and significant adjusted segment expenses, is regularly provided to the CODM for purposes of allocating resources and evaluating financial performance. This information is also used in our annual budgeting and forecasting processes to establish goals and compare actual results against both budgeted targets and historical performance. Our CODM uses consolidated net loss as the measure of our segment profit or loss. The measure of our segment assets is reported as total assets on the consolidated balance sheets.
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The following table sets forth our segment revenue, significant adjusted segment expenses and other segment items to reconcile to consolidated net loss:
Year Ended July 31,
2025 2024 2023
(in thousands)
Revenue $ 2,673,115 $ 2,167,771 $ 1,616,952
Less:
Adjusted cost of revenue (1)
532,067 411,484 312,961
Adjusted sales and marketing expenses (1)
997,896 868,410 730,811
Adjusted research and development expenses (1)
409,894 313,208 227,871
Adjusted general and administrative expenses (2)
153,127 132,422 104,493
Stock-based compensation expense and related payroll taxes 685,534 549,100 457,815
Amortization expense of acquired intangible assets 16,820 14,624 11,060
Restructuring and other charges 4,921 — 6,564
Acquisition-related expenses
1,316 — —
Add: Other segment items, net (3)
86,982 63,771 32,288
Net loss $ ( 41,478 ) $ ( 57,706 ) $ ( 202,335 )
(1) Cost of revenue, sales and marketing expense and research and development expense, adjusted to exclude stock-based compensation and related payroll taxes, amortization of acquired intangible assets and restructuring and other charges.
(2) General and administrative expense adjusted to exclude stock-based compensation and related payroll taxes, acquisition-related expenses and restructuring and other charges.
(3) Other segment items, net includes interest income, interest expense, other expense, net and provision for income taxes.
Our long-lived assets consist of property and equipment and operating lease right-of-use assets, which are summarized by geographic area as follows:
July 31,
2025 2024
(in thousands)
United States
$ 431,072 $ 325,146
Rest of the world
202,077 147,735
Total
$ 633,149 $ 472,881
Refer to Note 2, Revenue Recognition for information on revenue by geography.
Note 18. 401(k) Plan
We have a defined-contribution plan intended to qualify under Section 401 of the Internal Revenue Code. We contract with a third-party provider to act as a custodian and trustee, and to process and maintain the records of participant data. For fiscal 2025, fiscal 2024 and fiscal 2023, we incurred expenses of $ 13.5 million, $ 9.5 million and $ 4.5 million related to the matching contributions, respectively.
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Note 19. Subsequent Events
On August 1, 2025, we completed our acquisition of Red Canary, Inc., a privately-held cybersecurity company that provides managed detection and response solutions, for a total consideration of $ 675.0 million in cash, subject to customary adjustments, plus equity awards to employees. We anticipate that this acquisition will expand upon our security operations offerings and enhance our ability to leverage our Data Fabric for Security. The purchase consideration for the acquired business will be allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the closing date. Due to the timing of the acquisition, the initial accounting for the acquisition is incomplete. As such, we are not able to disclose certain information relating to the acquisition, including the preliminary fair value of assets acquired and liabilities assumed. We expect to complete the initial accounting for this acquisition during the first quarter of fiscal 2026.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain "disclosure controls and procedures," as defined in Rule 13a–15(e) and Rule 15d–15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act"), that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of July 31, 2025. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate “internal control over financial reporting,” as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of July 31, 2025 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on the results of its evaluation, management concluded that our internal control over financial reporting was effective as of July 31, 2025. The effectiveness of our internal control over financial reporting as of July 31, 2025 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report which is included in Item 8 of this Form 10-K.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter ended July 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the
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individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost–effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. Other Information
Securities Trading Plans of Directors and Executive Officers
During the three months ended July 31, 2025, the following officer, as defined in Rule 16a-1(f) under the Securities Act of 1934, as amended, or the Securities Act, adopted a “Rule 10b5-1 trading arrangement” as defined in Regulation S-K Item 408:
On July 3, 2025 , Robert Schlossman , the Company's chief legal officer and secretary , adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 43,343 shares of our common stock. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until September 30, 2026 , or earlier if all transactions under the trading arrangement are completed.
No other officers or directors, as defined in Rule 16a-1(f) under the Securities Act adopted or terminated a “Rule 10b5-1 trading arrangement” as defined in Regulation S-K Item 408, during the three months ended July 31, 2025.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item (other than the information set forth in the following paragraphs) will be included in our definitive proxy statement for our 2025 annual meeting of stockholders, or the 2025 Proxy Statement, which will be filed with the SEC within 120 days after the end of our fiscal year ended July 31, 2025, and is incorporated herein by reference.
Code of Conduct
We have adopted a code of business conduct and ethics, or Code of Conduct, that applies to all of our employees, executive officers and directors. The full text of the Code of Conduct is available on our website at ir.zscaler.com. The nominating and corporate governance committee of our board of directors is responsible for overseeing the Code of Conduct and must approve any waivers of the Code of Conduct for employees, executive officers and directors. We expect that any amendments to the Code of Conduct, or any waivers of its requirements, will be disclosed on our website, as required by applicable law or the listing standards of The Nasdaq Global Market.
Insider Trading Policy
We have adopted an Insider Trading Policy that governs the purchase, sale and/or other dispositions of our securities by directors, executive officers and employees. Our Insider Trading Policy also provides that we will not transact in any of our own securities unless in compliance with U.S. securities laws. We believe that our Insider Trading Policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, and the listing standards of The Nasdaq Global Market. A copy of our Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to our 2025 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated herein by reference to our 2025 Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to our 2025 Proxy Statement.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated herein by reference to our 2025 Proxy Statement.
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PART IV
Item 15. Exhibits, Financial Statement Schedule
(a)(1) Financial Statements
See Index to Financial Statements in Item 8 of this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedule
All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable or because the information required is already included in the financial statements or the notes to those financial statements.
(a)(3) Exhibits
Incorporated by Reference
Exhibit
Number
Exhibit Description
Form File No. Exhibit Filing Date Filed Herewith
3.1 Amended and Restated Certificate of Incorporation.
10-Q 001-38413 3.1 June 7, 2018
3.2 Amended and Restated Bylaws.
8-K 001-38413 3.1 March 2, 2023
4.1 Form of C ommon S tock C ertificate of the Registrant.
S-1 333-223072 4.2 February 16, 2018
4.2 Description of Capital Stock.
10-K 001-38413 4.3 September 18, 2019
4.3 Indenture, dated as of July 3, 2025 by and between the Registrant and U.S. Bank Trust Company, National Association, as Trustee.
8-K 001-38413 4.1 July 3, 2025
4.4 Form of Note, representing Registrant's 0.00% Convertible Senior Notes due 2028 (included as Exhibit A to the Indenture filed as Exhibit 4.3).
8-K 001-38413 4.1 July 3, 2025
10.1 Form of Indemnification Agreement between the Registrant and each of its directors and executive officers.
S-1 333-223072 10.1 February 16, 2018
10.2+ Amended and Restated FY 2018 Equity Incentive Pl an
X
10.3+ Form of Stock Option Agreement under the Amended and Restated FY2018 Equity Incentive Plan .
10-K 001-38413 10.2 September 18, 2019
10.4+ Form of Restricted Stock Unit Agreement under the Amended and Restated FY2018 Equity Incentive Plan .
10-K 001-38413 10.2 September 18, 2019
10.5+ Form of Restricted Stock Award Agreement under the Amended and Restated FY2018 Equity Incentive Plan
X
10.6+ FY 2018 Employee Stock Purchase Plan and related form agreements.
S-1/A 333-223072 10.3 March 13, 2018
10.7+ 2007 Stock Plan and related form agreements.
S-1/A 333-223072 10.4 March 5, 2018
10.8+ Employee Incentive Compensation Plan.
S-1 333-223072 10.5 February 16, 2018
10.9† Sublease, by and between Registrant and Micron Technology, Inc.
10-Q 001-38413 10.1 June 5, 2019
10.10† Sublease, by and between Registrant and Airbnb, Inc., dated April 24, 2025
10-Q 001-38413 10.1 May 29, 2025
10.11+ Change of Control and Severance Policy (as amended and restated on November 2 6 , 202 4) .
8-K 001-38413 10.1 December 2, 2024
10.12+ Employment Agreement between the Registrant and Jagtar S. Chaudhry, dated as of August 23, 2017.
S-1 333-223072 10.8 February 16, 2018
10.13+ O ffer Letter between the Registra nt and Remo Canessa, dated as of January 8, 2017.
S-1 333-223072 10.10 February 16, 2018
10.14+ Offer Letter between the Registrant and Robert Schlossman, dated as of December 22, 2015.
S-1 333-223072 10.11 February 16, 2018
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10.15+ Offer Letter between the Registrant and Karen Blasing, dated as of December 23, 2016.
S-1 333-223072 10.14 February 16, 2018
10.16+ Offer Letter between the Registrant and Andrew Brown, dated as of October 14, 2015.
S-1 333-223072 10.15 February 16, 2018
10.17+ Offer Letter between the Registrant and Scott Darling, dated as of November 16, 2016.
S-1 333-223072 10.16 February 16, 2018
10.18+ Offer Letter between the Registrant and Charles Giancarlo, dated as of November 22, 2016.
S-1 333-223072 10.17 February 16, 2018
10.19+ Offer Letter between the Registrant and Syam Nair, dated as of April 12, 2023.
10-Q 001-38413 10.1 December 12, 2023
10.20+ Offer Letter between the Registrant and Mike Rich, dated as of November 2, 2023.
10-K 001-38413 10.17 September 12, 2024
10.21+ Offer Letter between the Registrant and Adam Geller, dated as of August 8, 2024.
X
10.22+ Offer Letter between the Registrant and Raj Judge, dated as of March 31, 2025.
X
10.23+ Offer Letter between the Registrant and Kevin Rubin, dated as of April 23, 2025.
X
10.24+ Transition Agreement and Release Agreement between the Registrant and Remo Canessa, dated as of June 9, 2025.
X
10.25 Form of Confirmation for Capped Call Transactions.
8-K 001-38413 10.1 July 3, 2025
19.1 Insider Trading Policy
10-K 001-38413 19.1 September 12, 2024
21.1 Significant Subsidiaries of the Registrant.
X
23.1 Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
X
24.1 Power of Attorney (incorporated by reference to the signature page to this Annual Report on Form 10-K).
X
31.1 Certification of the Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2 Certification of the Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
32.1* Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
97.1+ Compensation Recovery Policy.
10-K 001-38413 97.1 September 12, 2024
101.INS Inline XBRL Instance Document
X
101.SCH Inline XBRL Taxonomy Extension Schema Document
X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
X
_______________________________________
+ Indicates management contract or compensatory plan or arrangement.
† Certain portions of this exhibit (indicated by "[***]") have been omitted as Registrant determined the omitted information (i) is not material and (ii) would be competitively harmful to Registrant if publicly disclosed.
* The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.
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Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Zscaler, Inc.
September 11, 2025 /s/ Kevin Rubin
Kevin Rubin
Chief Financial Officer
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Jagtar Chaudhry and Kevin Rubin, and each of them, as his or her true and lawful attorney-in-fact and agent with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact, proxy, and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact, proxy and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Jagtar Chaudhry Chief Executive Officer and Chairman of the Board of Directors
(Principal Executive Officer) September 11, 2025
Jagtar Chaudhry
/s/ Kevin Rubin Chief Financial Officer
(Principal Accounting and Financial Officer) September 11, 2025
Kevin Rubin
/s/ James Beer Director September 11, 2025
James Beer
/s/ Karen Blasing Director September 11, 2025
Karen Blasing
/s/ Andrew Brown Director September 11, 2025
Andrew Brown
/s/ Scott Darling Director September 11, 2025
Scott Darling
/s/ Charles Giancarlo
Director September 11, 2025
Charles Giancarlo
/s/ Raj Judge Director September 11, 2025
Raj Judge
/s/ Eileen Naughton Director September 11, 2025
Eileen Naughton
/s/ David Schneider Director September 11, 2025
David Schneider
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