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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-39504
snow-20211031_g1.jpg
SNOWFLAKE INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware46-0636374
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
Suite 3A, 106 East Babcock Street
Bozeman, MT 59715
(Address of principal executive offices and Zip Code)1
(844) 766-9355
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.0001 par valueSNOWThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmall reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒
As of November 19, 2021, there were 306.3 million shares of the registrant’s Class A common stock, par value of $0.0001 per share, outstanding.
1 We are a Delaware corporation with a globally distributed workforce and no corporate headquarters. Under the Securities and Exchange Commission's rules, we are required to designate a “principal executive office.” For purposes of this report, we have designated our office in Bozeman, Montana as our principal executive office, as that is where our Chief Executive Officer and Chief Financial Officer are based.


TABLE OF CONTENTS
Page

2

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

our expectations regarding our revenue, expenses, and other operating results, including statements relating to the portion of our remaining performance obligations that we expect to be recognized as revenue in future periods;
our ability to acquire new customers and successfully retain existing customers;
our ability to increase consumption on our platform;
our ability to achieve or sustain our profitability;
future investments in our business, our anticipated capital expenditures, and our estimates regarding our capital requirements;
the costs and success of our sales and marketing efforts, and our ability to promote our brand;
our growth strategies for, and market acceptance of, our platform and the Data Cloud, as well as our ability to execute such strategies;
our reliance on key personnel and our ability to identify, recruit, and retain skilled personnel;
our ability to effectively manage our growth, including any international expansion;
our ability to protect our intellectual property rights and any costs associated therewith;
the effects of the ongoing COVID-19 pandemic or other public health crises and their related public health measures on our business, the business of our customers and partners, and the economy;
our ability to compete effectively with existing competitors and new market entrants; and
the growth rates of the markets in which we compete.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Other sections of this Quarterly Report on Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.

3

You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (investors.snowflake.com), our filings with the Securities and Exchange Commission (SEC), webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with investors and the general public about our company, our products, and other issues. It is possible that the information that we make available on our website may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website.

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

4

SNOWFLAKE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
October 31, 2021January 31, 2021
Assets
Current assets:
Cash and cash equivalents$935,217 $820,177 
Short-term investments2,955,613 3,087,887 
Accounts receivable, net254,243 294,017 
Deferred commissions, current42,896 32,371 
Prepaid expenses and other current assets120,288 66,200 
Total current assets4,308,257 4,300,652 
Long-term investments1,211,858 1,165,275 
Property and equipment, net94,377 68,968 
Operating lease right-of-use assets184,057 186,818 
Goodwill8,449 8,449 
Intangible assets, net26,167 16,091 
Deferred commissions, non-current101,551 86,164 
Other assets228,755 89,322 
Total assets$6,163,471 $5,921,739 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$10,559 $5,647 
Accrued expenses and other current liabilities163,238 125,315 
Operating lease liabilities, current25,194 19,650 
Deferred revenue, current759,744 638,652 
Total current liabilities958,735 789,264 
Operating lease liabilities, non-current178,697 184,887 
Deferred revenue, non-current7,132 4,194 
Other liabilities12,225 6,923 
Total liabilities1,156,789 985,268 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock; $0.0001 par value per share; 200,000,000 shares authorized as of October 31, 2021 and January 31, 2021; zero shares issued and outstanding as of October 31, 2021 and January 31, 2021
  
Class A common stock; $0.0001 par value per share; 2,500,000,000 shares authorized as of October 31, 2021 and January 31, 2021; 305,899,486 and 111,374,416 shares issued and outstanding as of October 31, 2021 and January 31, 2021, respectively(1)
30 11 
Class B common stock; $0.0001 par value per share; 185,461,432 and 355,000,000 shares authorized as of October 31, 2021 and January 31, 2021, respectively; zero and 176,543,188 shares issued and outstanding as of October 31, 2021 and January 31, 2021, respectively(1)
 17 
Additional paid-in capital6,797,354 6,175,425 
Accumulated other comprehensive income (loss)(3,486)439 
Accumulated deficit(1,787,216)(1,239,421)
Total stockholders’ equity5,006,682 4,936,471 
Total liabilities and stockholders’ equity$6,163,471 $5,921,739 
________________
(1)On March 1, 2021, all shares of the Company’s then-outstanding Class B common stock were automatically converted into the same number of shares of Class A common stock, pursuant to the terms of the Company’s amended and restated certificate of incorporation. No additional shares of Class B common stock will be issued following such conversion. See Note 11 for further details.

See accompanying notes to condensed consolidated financial statements.
5

SNOWFLAKE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)

Three Months Ended October 31,Nine Months Ended October 31,
2021202020212020
Revenue$334,441 $159,624 $835,553 $401,584 
Cost of revenue120,786 66,681 324,253 159,684 
Gross profit213,655 92,943 511,300 241,900 
Operating expenses:
Sales and marketing190,971 134,727 540,678 325,267 
Research and development115,900 74,138 343,783 143,949 
General and administrative64,055 53,532 189,846 116,224 
Total operating expenses370,926 262,397 1,074,307 585,440 
Operating loss(157,271)(169,454)(563,007)(343,540)
Interest income1,985 1,517 6,787 5,654 
Other income (expense), net1,609 (519)9,867 (1,561)
Loss before income taxes(153,677)(168,456)(546,353)(339,447)
Provision for income taxes1,179 433 1,442 720 
Net loss$(154,856)$(168,889)$(547,795)$(340,167)
Net loss per share attributable to Class A and Class B common stockholders – basic and diluted(1)
$(0.51)$(1.01)$(1.84)$(3.63)
Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders – basic and diluted(1)
303,006,685 166,868,200 297,435,637 93,763,599 
________________
(1)On March 1, 2021, all shares of the Company’s then-outstanding Class B common stock were automatically converted into the same number of shares of Class A common stock, pursuant to the terms of the Company’s amended and restated certificate of incorporation. No additional shares of Class B common stock will be issued following such conversion. See Note 11 for further details.

See accompanying notes to condensed consolidated financial statements.
6

SNOWFLAKE INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
Three Months Ended October 31,Nine Months Ended October 31,
2021202020212020
Net loss$(154,856)$(168,889)$(547,795)$(340,167)
Other comprehensive income (loss):
Foreign currency translation adjustments(361) (63) 
Net change in unrealized gains or losses on available-for-sale securities(4,266)(771)(3,862)159 
Total other comprehensive income (loss)(4,627)(771)(3,925)159 
Comprehensive loss$(159,483)$(169,660)$(551,720)$(340,008)

See accompanying notes to condensed consolidated financial statements.
7


SNOWFLAKE INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share and per share data)
(unaudited)
Three Months Ended October 31, 2021
Redeemable Convertible Preferred StockClass A
Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmountSharesAmount
BALANCE—July 31, 2021
 $ 300,584,903 $30 $6,596,154 $1,141 $(1,632,360)$4,964,965 
Issuance of common stock upon exercise of stock options— — 4,222,037 — 24,708 — — 24,708 
Issuance of common stock under employee stock purchase plan— — 111,645 — 25,829 — — 25,829 
Vesting of early exercised stock options and restricted common stock— — — — 191 — — 191 
Vesting of restricted stock units— — 980,901 — — — — — 
Stock-based compensation— — — — 150,472 — — 150,472 
Other comprehensive loss— — — — — (4,627)— (4,627)
Net loss— — — — — — (154,856)(154,856)
BALANCE—October 31, 2021
 $ 305,899,486 $30 $6,797,354 $(3,486)$(1,787,216)$5,006,682 
Three Months Ended October 31, 2020
Redeemable Convertible Preferred StockClass A and Class B
Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive Income
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
SharesAmountSharesAmount
BALANCE—July 31, 2020
182,271,099 $1,415,047 62,257,063 $6 $219,046 $1,146 $(871,597)$(651,399)
Conversion of redeemable convertible preferred stock to common stock upon initial public offering(182,271,099)(1,415,047)182,271,099 18 1,415,029 — — 1,415,047 
Issuance of common stock upon initial public offering and private placements, net of underwriting discounts— — 36,366,666 4 4,242,280 — — 4,242,284 
Issuance of common stock upon exercise of stock options— — 2,186,819 — 10,362 — — 10,362 
Exercise of common stock warrants— — 32,241 — — — — — 
Vesting of early exercised stock options and restricted common stock— — — — 1,756 — — 1,756 
Vesting of restricted stock units— — 5,657 — — — — — 
Stock-based compensation— — — — 119,425 — — 119,425 
Other comprehensive loss— — — — — (771)— (771)
Net loss— — — — — — (168,889)(168,889)
BALANCE—October 31, 2020
 $ 283,119,545 $28 $6,007,898 $375 $(1,040,486)$4,967,815 

8


SNOWFLAKE INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
(in thousands, except share and per share data)
(unaudited)

Nine Months Ended October 31, 2021
Redeemable Convertible Preferred Stock
Class A and Class B
Common Stock(1)
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmountSharesAmount
BALANCE—January 31, 2021
 $ 287,917,604 $28 $6,175,425 $439 $(1,239,421)$4,936,471 
Issuance of common stock upon exercise of stock options— — 15,278,682 2 90,374 — — 90,376 
Issuance of common stock under employee stock purchase plan— — 370,452 — 52,227 — — 52,227 
Vesting of early exercised stock options and restricted common stock— — — — 614 — — 614 
Vesting of restricted stock units— — 2,332,748 — — — — — 
Stock-based compensation— — — — 478,714 — — 478,714 
Other comprehensive loss— — — — — (3,925)— (3,925)
Net loss— — — — — — (547,795)(547,795)
BALANCE—October 31, 2021
 $ 305,899,486 $30 $6,797,354 $(3,486)$(1,787,216)$5,006,682 
Nine Months Ended October 31, 2020
Redeemable Convertible Preferred StockClass A and Class B
Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive Income
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
SharesAmountSharesAmount
BALANCE—January 31, 2020
169,921,272 $936,474 55,452,421 $6 $155,340 $216 $(700,319)$(544,757)
Issuance of Series G-1 and Series G-2 redeemable convertible preferred stock at $38.77 per share, net of issuance costs of $230
12,349,827 478,573 — — — — — — 
Conversion of redeemable convertible preferred stock to common stock upon initial public offering(182,271,099)(1,415,047)182,271,099 18 1,415,029 1,415,047 
Issuance of common stock upon initial public offering and private placements, net of underwriting discounts— — 36,366,666 4 4,242,280 4,242,284 
Issuance of common stock upon exercise of stock options— — 9,031,461 — 31,098 — — 31,098 
Exercise of common stock warrants— — 32,241 — — — 
Repurchase of early exercised stock options— — (40,000)— — — — — 
Vesting of early exercised stock options and restricted common stock— — — — 5,341 — — 5,341 
Vesting of restricted stock units5,657 — — 
Stock-based compensation— — — — 158,810 — — 158,810 
Other comprehensive income— — — — — 159 — 159 
Net loss— — — — — — (340,167)(340,167)
BALANCE—October 31, 2020
 $ 283,119,545 $28 $6,007,898 $375 $(1,040,486)$4,967,815 
________________
(1)On March 1, 2021, all shares of the Company’s then-outstanding Class B common stock were automatically converted into the same number of shares of Class A common stock, pursuant to the terms of the Company’s amended and restated certificate of incorporation. No additional shares of Class B common stock will be issued following such conversion. See Note 11 for further details.

See accompanying notes to condensed consolidated financial statements.
9

SNOWFLAKE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended October 31,
20212020
Cash flows from operating activities:
Net loss$(547,795)$(340,167)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization15,586 6,611 
Non-cash operating lease costs25,895 24,840 
Amortization of deferred commissions26,824 21,233 
Stock-based compensation, net of amounts capitalized459,392 157,790 
Net amortization of premiums on investments36,938 1,117 
Unrealized gains on strategic investments in equity securities(8,515) 
Other2,535 4,073 
Changes in operating assets and liabilities, net of effect of business combinations:
Accounts receivable39,142 9,221 
Deferred commissions(52,892)(27,261)
Prepaid expenses and other assets(112,798)(29,480)
Accounts payable4,591 (3,806)
Accrued expenses and other liabilities43,106 22,477 
Operating lease liabilities(24,758)(23,418)
Deferred revenue124,030 111,739 
Net cash provided by (used in) operating activities31,281 (65,031)
Cash flows from investing activities:
Purchases of property and equipment(12,209)(24,018)
Capitalized internal-use software development costs(8,612)(4,014)
Cash paid for business combinations, net of cash acquired (6,035)
Purchases of intangible assets(11,182)(6,184)
Purchases of investments(3,042,396)(1,235,020)
Sales of investments407,003 28,705 
Maturities and redemptions of investments2,610,429 371,528 
Net cash used in investing activities(56,967)(875,038)
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs 478,573 
Proceeds from initial public offering and private placements, net of underwriting discounts 4,242,284 
Proceeds from early exercised stock options 159 
Proceeds from exercise of stock options90,444 31,100 
Proceeds from issuance of common stock under the employee stock purchase plan52,227  
Proceeds from repayments of a nonrecourse promissory note 2,090 
Repurchases of early exercised stock options (30)
Payments of deferred purchase consideration for business combinations (1,164)
Net cash provided by financing activities142,671 4,753,012 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash21  
Net increase in cash, cash equivalents, and restricted cash117,006 3,812,943 
Cash, cash equivalents, and restricted cash—beginning of period835,193 141,976 
Cash, cash equivalents, and restricted cash—end of period$952,199 $3,954,919 
Supplemental disclosures of non-cash investing and financing activities:
Property and equipment included in accounts payable and accrued expenses$3,115 $2,803 
Stock-based compensation included in capitalized software development costs$18,923 $1,020 
Vesting of early exercised stock options and restricted common stock$615 $3,251 
Intangible assets included in accrued expenses and other liabilities$4,544 $ 
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents$935,217 $3,939,925 
Restricted cash – included in other assets and prepaid expenses and other current assets16,982 14,994 
Total cash, cash equivalents, and restricted cash$952,199 $3,954,919 

See accompanying notes to condensed consolidated financial statements.
10

SNOWFLAKE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1. Organization and Description of Business
Description of Business
Snowflake Inc. (Snowflake or the Company) provides a cloud-based data platform, which enables customers to consolidate data to drive meaningful business insights, build data-driven applications, and share data. The Company provides its platform through a customer-centric, consumption-based business model, only charging customers for the resources they use. Through its platform, the Company delivers the Data Cloud, an ecosystem where Snowflake customers, partners, data providers, and data consumers can break down data silos and derive value from rapidly growing data sets in secure, governed, and compliant ways. Snowflake was incorporated in the state of Delaware on July 23, 2012.

2. Basis of Presentation and Summary of Significant Accounting Policies
Fiscal Year
The Company’s fiscal year ends on January 31. For example, references to fiscal 2022 refer to the fiscal year ending January 31, 2022.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and applicable rules and regulations of the U.S. Securities and Exchange Commission (SEC) regarding interim financial reporting. Accordingly, they do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021, which was filed with the SEC on March 31, 2021.

In management’s opinion, these unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of October 31, 2021 and the results of operations for the three and nine months ended October 31, 2021 and 2020, and cash flows for the nine months ended October 31, 2021 and 2020. The condensed balance sheet as of January 31, 2021 was derived from the audited financial statements but does not include all disclosures required by GAAP. The results of operations for the three and nine months ended October 31, 2021 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Snowflake Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Segment Information
The Company has a single operating and reportable segment. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. For information regarding the Company’s long-lived assets and revenue by geographic area, see Note 14.

11

Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such estimates include, but are not limited to, stand-alone selling prices (SSP) for each distinct performance obligation, internal-use software development costs, expected period of benefit for deferred commissions, the useful lives of long-lived assets, the carrying value of operating lease right-of-use assets, the valuation of the Company’s common stock prior to its initial public offering (IPO) in September 2020, stock-based compensation, accounting for income taxes, and the fair value of investments in marketable and non-marketable securities.

The Company bases its estimates on historical experience and also on assumptions that management considers reasonable. The Company assesses these estimates on a regular basis; however, actual results could differ from these estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the COVID-19 pandemic.
Summary of Significant Accounting Policies
The Company’s significant accounting policies are discussed in “Note 2 – Basis of Presentation and Summary of Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021, which was filed with the SEC on March 31, 2021. There have been no significant changes to these policies during the nine months ended October 31, 2021, except for (i) the accounting policies for accounts receivable and investments that were updated below as a result of the Company’s adoption of the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-13, Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, effective February 1, 2021, and (ii) the accounting policy for strategic investments that was updated below with respect to the Company’s strategic investment in marketable equity securities during the three months ended October 31, 2021.
Accounts Receivable
Accounts receivable includes billed and unbilled receivables, net of allowance for credit losses. Trade accounts receivable are recorded at invoiced amounts and do not bear interest. The allowance for credit losses is estimated based on the Company’s assessment of the collectibility of accounts receivable by considering various factors, including the age of each outstanding invoice, the collection history of each customer, historical write-off experience, current economic conditions, and reasonable and supportable forecasts of future economic conditions over the life of the receivable. The Company assesses collectibility by reviewing accounts receivable on an aggregate basis when similar characteristics exist and on an individual basis when specific customers with collectibility issues are identified. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified. Allowance for credit losses was $0.9 million and $2.6 million as of October 31, 2021 and January 31, 2021, respectively.
Investments
The Company’s investments in marketable debt securities have been classified and accounted for as available-for-sale and are recorded at estimated fair value. The Company classifies its marketable debt securities as either short-term or long-term at each balance sheet date based on each instrument’s underlying contractual maturity date. Short-term investments are investments with original maturities of less than one year when purchased.

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell or it is more likely than not that the Company will be required to sell the security before the recovery of its entire amortized cost basis. If either of these criteria is met, the security’s amortized cost basis is written down to fair value through other income (expense), net in the condensed consolidated statements of operations. If neither of these criteria is met, the Company further assesses whether the decline in fair value below amortized cost is due to credit or non-credit related factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and any adverse conditions specifically related to the security, among other factors. Credit related unrealized losses are recognized as an allowance on the condensed consolidated balance sheets with a corresponding charge in the other income (expense), net in the condensed consolidated statements of operations. Non-credit related unrealized losses and unrealized gains on available-for-sale debt securities are included in accumulated other comprehensive income (loss).

12

Realized gains and losses are determined based on the specific identification method and are reported in other income (expense), net in the condensed consolidated statements of operations.
Strategic Investments
The Company’s strategic investments consist of non-marketable equity and debt securities in privately-held companies and marketable equity securities in publicly-traded companies, in each case in which the Company does not have a controlling interest or significant influence. Strategic investments are included in other assets on the condensed consolidated balance sheets.

The Company’s non-marketable equity securities are recorded at cost and adjusted for observable transactions for the same or similar investments of the same issuer (referred to as the Measurement Alternative) or impairment. For these investments, the Company recognizes remeasurement adjustments, including upward and downward adjustments, and impairments, if any, in other income (expense), net in the condensed consolidated statements of operations. Valuations of privately-held securities are inherently complex due to the lack of readily available market data and require the use of judgment. For example, determining whether an orderly transaction is for an identical or similar investment requires judgment based on the rights and obligations that attached to the securities. In determining the estimated fair value of these investments, the Company uses the most recent data available to the Company.

Marketable equity securities are measured at fair value with changes in fair value recorded in other income (expense), net in the condensed consolidated statements of operations.

Non-marketable debt securities are classified as available-for-sale and are recorded at their estimated fair value with changes in fair value recorded through accumulated other comprehensive income (loss).

Strategic investments are subject to periodic impairment analyses, which involve an assessment of both qualitative and quantitative factors, including the investee’s financial metrics, market acceptance of the investee’s product or technology, and the rate at which the investee is using its cash. If the investment is considered impaired, the Company recognizes an impairment through other income (expense), net in the condensed consolidated statements of operations and establishes a new carrying value for the investment.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected, with further clarifications made more recently. For trade receivables, loans, and other financial instruments, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which reflects losses that are probable. Credit losses relating to available-for-sale debt securities are required to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. This guidance is effective for the Company for its fiscal year beginning February 1, 2023 and interim periods within that fiscal year, and requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. Early adoption is permitted. The Company early adopted this guidance effective February 1, 2021 on a modified retrospective basis, and the adoption did not result in any cumulative effect adjustment in its condensed consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by this new guidance. This new guidance is effective for the Company for its fiscal year beginning February 1, 2021 and interim periods within its fiscal year beginning February 1, 2022, and early adoption is permitted. The Company adopted this guidance effective February 1, 2021 on a prospective basis, and the adoption did not have a material impact on its condensed consolidated financial statements.

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In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating some exceptions to the general approach in ASC 740, Income Taxes (ASC 740) in order to reduce the cost and complexity of its application. This new guidance is effective for the Company for its fiscal year beginning February 1, 2022 and interim periods within its fiscal year beginning February 1, 2023, and early adoption is permitted. Most amendments within this guidance are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company early adopted this guidance effective February 1, 2021, and the adoption did not have a material impact on its condensed consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date. This new guidance is effective for the Company for its fiscal year beginning February 1, 2023 and interim periods within that fiscal year, and early adoption is permitted. The Company early adopted this guidance upon issuance to all business combinations that occur on or after the date of adoption. The adoption had no impact on the Company’s condensed consolidated financial statements as there were no acquisitions accounted for as business combinations in fiscal 2022.

3. Cash Equivalents and Investments
The following is a summary of the Company’s cash equivalents, short-term investments, and long-term investments on the condensed consolidated balance sheets (in thousands):
October 31, 2021
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Cash equivalents:
Money market funds$581,689 $ $ $581,689 
U.S. government securities60,000   60,000 
Commercial paper46,992 1  46,993 
Certificates of deposit27,001 1  27,002 
Corporate notes and bonds6,193 1 (1)6,193 
Total cash equivalents721,875 3 (1)721,877 
Investments:
Corporate notes and bonds2,512,863 192 (3,278)2,509,777 
Commercial paper1,066,027 82 (131)1,065,978 
U.S. government and agency securities391,632 25 (321)391,336 
Certificates of deposit200,382 31 (33)200,380 
Total investments4,170,904 330 (3,763)4,167,471 
Total cash equivalents and investments$4,892,779 $333 $(3,764)$4,889,348 
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January 31, 2021
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Cash equivalents:
Money market funds$334,891 $ $ $334,891 
Commercial paper242,040 2 (5)242,037 
Corporate notes and bonds58,969 3 (2)58,970 
U.S. government securities23,700   23,700 
Certificates of deposit23,500 3  23,503 
Total cash equivalents683,100 8 (7)683,101 
Investments:
Corporate notes and bonds2,287,006 628 (481)2,287,153 
U.S. government and agency securities1,016,059 250 (46)1,016,263 
Commercial paper711,389 85 (102)711,372 
Certificates of deposit238,278 97 (1)238,374 
Total investments4,252,732 1,060 (630)4,253,162 
Total cash equivalents and investments$4,935,832 $1,068 $(637)$4,936,263 

As of October 31, 2021, the contractual maturities of the Company’s available-for-sale marketable debt securities did not exceed 36 months. The estimated fair values of available-for-sale debt securities, by remaining contractual maturity, are as follows (in thousands):
October 31, 2021
Estimated
Fair Value
Due within 1 year$3,095,801 
Due in 1 year to 3 years1,211,858 
Total$4,307,659 
The following table shows the fair values and the gross unrealized losses of these securities, classified by the length of time that the securities have been in a continuous unrealized loss position, and aggregated by investment types, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheets (in thousands):
October 31, 2021
Less than 12 Months12 Months or GreaterTotal
Fair ValueGross
Unrealized
Losses
Fair ValueGross
Unrealized
Losses
Fair ValueGross
Unrealized
Losses
Cash equivalents:
Commercial paper$17,998 $ $ $ $17,998 $ 
Corporate notes and bonds5,058 (1)  5,058 (1)
Total cash equivalents23,056 (1)  23,056 (1)
Investments:
Corporate notes and bonds2,170,442 (3,278)  2,170,442 (3,278)
Commercial paper449,901 (131)  449,901 (131)
U.S. government and agency securities230,705 (321)  230,705 (321)
Certificates of deposit40,844 (33)