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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 April 30, 2024
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: 001-38413
_____________________________________
ZSCALER, INC.
(Exact Name of Registrant as Specified in its Charter)
_____________________________________
Delaware
(State or other jurisdiction of
incorporation or organization)
26-1173892
(I.R.S. Employer
Identification Number)
120 Holger Way
San Jose, California 95134
(Address of principal executive offices)
Registrant’s telephone number, including area code: (408) 533-0288
___________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.001 Par ValueZSThe Nasdaq Stock Market LLC

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 ý 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 ý 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 filerýAccelerated filer
Non-accelerated filerSmaller 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 ý
As of May 31, 2024, the number of shares of registrant’s common stock outstanding was 151,149,087.

ZSCALER, INC.
Table of Contents
Page No.
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding our financial outlook and market positioning. These forward-looking statements are made as of the date they were first issued and were based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. The words "believe," "may," "will," "potentially," "estimate," "continue," "anticipate," "intend," "could," "would," "project," "plan," "expect," and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements.
These forward-looking statements include, but are not limited to, statements concerning the following:
beliefs about the impact of macroeconomic influences and instability, including the ongoing effects of inflation, and geopolitical events on our business;
our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses (including changes in sales and marketing, research and development and general and administrative expenses), and our ability to achieve, and maintain, future profitability;
market acceptance of our cloud platform;
the effects of increased competition in our markets and our ability to compete effectively;
our ability to maintain the security and availability of our cloud platform;
our ability to maintain and expand our customer base, including by attracting new customers;
our ability to develop new solutions, or enhancements to our existing solutions, including artificial intelligence and machine learning capabilities, and bring them to market in a timely manner;
market acceptance of any new solutions or enhancements to our existing solutions;
anticipated trends, growth rates and challenges in our business and in the markets in which we operate;
our business plan and our ability to effectively manage our growth and associated investments;
beliefs about and objectives for future operations;
beliefs about and objectives for future acquisitions, strategic investments, partnerships and alliances and our ability to successfully integrate completed acquisitions;
our relationships with third parties, including channel partners;
our ability to maintain, protect and enhance our intellectual property rights;
our ability to successfully defend litigation brought against us;
our ability to successfully expand in our existing markets and into new markets;
sufficiency of cash to meet cash needs for at least the next 12 months and service our outstanding debt;
our need and ability to raise additional capital in future debt or equity financings;
1

our expectations regarding settlement of the Notes (as defined in Note 10, Convertible Senior Notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q);
our ability to comply with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;
beliefs about the impacts of legal and geopolitical developments upon our business;
the attraction and retention of qualified employees and key personnel; and
the future trading prices of our common stock.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in "Risk Factors" elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, 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 materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements and you should not place undue reliance on our forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.
You should read this Quarterly Report on Form 10-Q in conjunction with the audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the fiscal year ended July 31, 2023 filed with the Securities and Exchange Commission, or the SEC, on September 14, 2023.
2


PART I. FINANCIAL INFORMATION
Item. 1 Financial Statements
ZSCALER, INC.
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
(unaudited)
April 30, 2024July 31, 2023
Assets
Current assets:
Cash and cash equivalents$1,259,197 $1,262,206 
Short-term investments980,802 838,026 
Accounts receivable, net506,284 582,636 
Deferred contract acquisition costs135,095 115,827 
Prepaid expenses and other current assets88,636 91,619 
Total current assets2,970,014 2,890,314 
Property and equipment, net330,646 242,355 
Operating lease right-of-use assets92,473 70,671 
Deferred contract acquisition costs, noncurrent268,079 259,407 
Acquired intangible assets, net68,959 25,859 
Goodwill417,029 89,192 
Other noncurrent assets51,551 30,519 
Total assets$4,198,751 $3,608,317 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$28,030 $18,481 
Accrued expenses and other current liabilities82,639 64,975 
Accrued compensation163,119 136,800 
Deferred revenue1,376,676 1,281,143 
Operating lease liabilities50,857 34,469 
Total current liabilities1,701,321 1,535,868 
Convertible senior notes, net1,137,687 1,134,159 
Deferred revenue, noncurrent200,338 158,533 
Operating lease liabilities, noncurrent46,897 41,917 
Other noncurrent liabilities19,369 12,728 
Total liabilities3,105,612 2,883,205 
Commitments and contingencies (Note 11)
Stockholders’ Equity
Common stock; $0.001 par value; 1,000,000 shares authorized as of April 30, 2024 and July 31, 2023; 151,304 and 147,169 shares issued and outstanding as of April 30, 2024 and July 31, 2023, respectively
151 147 
Additional paid-in capital2,241,865 1,816,915 
Accumulated other comprehensive loss(15,675)(1,576)
Accumulated deficit(1,133,202)(1,090,374)
Total stockholders’ equity1,093,139 725,112 
Total liabilities and stockholders’ equity$4,198,751 $3,608,317 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

ZSCALER, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended April 30,Nine Months Ended April 30,
2024202320242023
Revenue$553,201 $418,800 $1,574,903 $1,161,946 
Cost of revenue118,331 95,849 346,924 260,150 
Gross profit434,870 322,951 1,227,979 901,796 
Operating expenses:
Sales and marketing262,447 236,273 806,039 701,054 
Research and development124,958 92,637 360,678 253,348 
General and administrative50,478 43,486 155,789 131,164 
Restructuring and other charges 6,301  6,301 
Total operating expenses437,883 378,697 1,322,506 1,091,867 
Loss from operations(3,013)(55,746)(94,527)(190,071)
Interest income27,570 18,577 81,897 39,111 
Interest expense(2,764)(1,383)(9,528)(4,047)
Other expense, net(927)(809)(1,967)(1,531)
Income (loss) before income taxes20,866 (39,361)(24,125)(156,538)
Provision for income taxes1,742 6,685 18,703 15,123 
Net income (loss)$19,124 $(46,046)$(42,828)$(171,661)
Net income (loss) per share
Basic$0.13 $(0.32)$(0.29)$(1.19)
Diluted$0.12 $(0.32)$(0.29)$(1.19)
Weighted-average shares used in computing net income (loss) per share
Basic150,290 145,354 148,945 144,442 
Diluted154,081 145,354 148,945 144,442 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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ZSCALER, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)
Three Months Ended April 30,Nine Months Ended April 30,
2024202320242023
Net income (loss)$19,124 $(46,046)$(42,828)$(171,661)
Available-for-sale securities:
Change in net unrealized gains (loss) on available-for-sale securities(5,940)2,817 2,675 4,670 
Cash flow hedging instruments:
Change in net unrealized gains (loss)(5,316)817 (13,099)10,797 
Net realized (gains) losses reclassified into net income (loss) (1,410)1,301 (3,675)10,281 
        Net change on cash flow hedges(6,726)2,118 (16,774)21,078 
Other comprehensive income (loss)(12,666)4,935 (14,099)25,748 
Comprehensive income (loss)$6,458 $(41,111)$(56,927)$(145,913)

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

ZSCALER, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)

Stockholders' equity activity for the three months ended April 30, 2024:

Common Stock Additional
Paid-In
Capital
Accumulated Other Comprehensive LossAccumulated DeficitTotal
Stockholders’ Equity
SharesAmount
Balance as of January 31, 2024149,758 $150 $2,114,041 $(3,009)$(1,152,326)$958,856 
Issuance of common stock upon exercise of stock options305 — 7,439 — — 7,439 
Vesting of restricted stock units897 1 (1)— —  
Issuance of common stock in connection with business acquisitions subject to future vesting344 — — — — — 
Fair value of replacement awards attributable to pre-combination vesting in connection with business acquisitions    
— — 3,805 — — 3,805 
Stock-based compensation— — 116,581 — — 116,581 
Other comprehensive loss— — — (12,666)— (12,666)
Net income— — — — 19,124 19,124 
Balance as of April 30, 2024151,304 $151 $2,241,865 $(15,675)$(1,133,202)$1,093,139 
Stockholders' equity activity for the three months ended April 30, 2023:
Common Stock Additional
Paid-In
Capital
Accumulated Other Comprehensive LossAccumulated DeficitTotal
Stockholders’ Equity
Shares Amount
Balance as of January 31, 2023145,087 $145 $1,547,203 $(5,037)$(1,013,654)$528,657 
Issuance of common stock upon exercise of stock options128 — 1,090 — — 1,090 
Vesting of restricted stock units627 1 (1)— —  
Issuance of common stock in connection with business acquisitions subject to future vesting32 — — — — — 
Stock-based compensation— — 112,638 — — 112,638 
Other comprehensive income— — — 4,935 — 4,935 
Net loss— — — — (46,046)(46,046)
Balance as of April 30, 2023145,874 $146 $1,660,930 $(102)$(1,059,700)$601,274 
The accompanying notes are an integral part of these condensed consolidated financial statements.

6

ZSCALER, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)

Stockholders' equity activity for the nine months ended April 30, 2024:
Common Stock Additional
Paid-In
Capital
Accumulated Other Comprehensive LossAccumulated DeficitTotal
Stockholders’ Equity
Shares Amount
Balance as of July 31, 2023147,169 $147 $1,816,915 $(1,576)$(1,090,374)$725,112 
Issuance of common stock upon exercise of stock options773 — 11,287 — — 11,287 
Issuance of common stock under the employee stock purchase plan176 — 18,407 — — 18,407 
Vesting of restricted stock units2,842 4 (4)— —  
Issuance of common stock in connection with business acquisitions subject to future vesting344 — — — — — 
Fair value of replacement awards attributable to pre-combination vesting in connection with business acquisitions    
— — 3,805 — — 3,805 
Stock-based compensation— — 391,455 — — 391,455 
Other comprehensive loss— — — (14,099)— (14,099)
Net loss— — — — (42,828)(42,828)
Balance as of April 30, 2024151,304 $151 $2,241,865 $(15,675)$(1,133,202)$1,093,139 

Stockholders' equity activity for the nine months ended April 30, 2023:
Common Stock Additional
Paid-In
Capital
Accumulated Other Comprehensive LossAccumulated DeficitTotal
Stockholders’ Equity
Shares Amount
Balance as of July 31, 2022143,038 $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 options352 — 3,194 — — 3,194 
Issuance of common stock under the employee stock purchase plan115 — 11,410 — — 11,410 
Vesting of restricted stock units2,337 3 (3)— —  
Issuance of common stock in connection with business acquisitions subject to future vesting32 — — — — — 
Stock-based compensation— — 329,182 — — 329,182 
Other comprehensive income— — — 25,748 — 25,748 
Net loss— — — — (171,661)(171,661)
Balance as of April 30, 2023145,874 $146 $1,660,930 $(102)$(1,059,700)$601,274 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

ZSCALER, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended April 30,
20242023
Cash Flows From Operating Activities
Net loss$(42,828)$(171,661)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization expense47,033 39,769 
Amortization expense of acquired intangible assets9,500 8,078 
Amortization of deferred contract acquisition costs94,711 71,368 
Amortization of debt issuance costs2,934 2,919 
Non-cash operating lease costs34,913 23,320 
Stock-based compensation expense382,806 322,730 
Accretion of investments purchased at a discount(14,584)(3,389)
Unrealized (gains) losses on hedging transactions1,574 (1,140)
Deferred income taxes(5,769)158 
Other1,717 (947)
Changes in operating assets and liabilities, net of effects of business combinations
Accounts receivable78,406 23,005 
Deferred contract acquisition costs(122,651)(110,566)
Prepaid expenses, other current and noncurrent assets(23,452)(29,605)
Accounts payable7,520 (4,079)
Accrued expenses, other current and noncurrent liabilities14,647 14,861 
Accrued compensation12,816 10,933 
Deferred revenue132,354 154,256 
Operating lease liabilities(35,358)(23,603)
Net cash provided by operating activities576,289 326,407 
Cash Flows From Investing Activities
Purchases of property, equipment and other assets(95,204)(70,127)
Capitalized internal-use software(32,453)(23,962)
Payments for business acquisitions, net of cash acquired(361,781)(15,643)
Purchase of strategic investments(2,000)(2,200)
Purchases of short-term investments(1,003,972)(740,239)
Proceeds from maturities of short-term investments839,253 748,166 
Proceeds from sale of short-term investments47,165 25,083 
Net cash used in investing activities(608,992)(78,922)
Cash Flows From Financing Activities
Proceeds from issuance of common stock upon exercise of stock options11,287 3,194 
Proceeds from issuance of common stock under the employee stock purchase plan18,407 11,410 
Other (2)
Net cash provided by financing activities29,694 14,602 
Net increase (decrease) in cash and cash equivalents
(3,009)262,087 
Cash and cash equivalents at beginning of period
1,262,206 1,013,210 
Cash and cash equivalents at end of period
$1,259,197 $1,275,297 
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes, net of tax refunds$19,429 $6,582 
Cash paid for interest expense$718 $719 
Non-Cash Activities
Operating lease right-of-use assets obtained in exchange for operating lease obligations, net of terminations$54,007 $18,737 
Net change in purchased equipment included in accounts payable and accrued expenses$2,109 $3,120 

The accompanying notes are an integral part of these condensed consolidated financial statements.
8

ZSCALER, INC.
Notes to Unaudited Condensed 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 organization’s policies. Our solution is a purpose-built, multi-tenant, distributed cloud platform that incorporates the security functionality needed to enable users, applications, and devices to safely and efficiently utilize authorized applications and services based on an organization’s business policies. 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. We were incorporated in Delaware in September 2007 and conduct business worldwide, with presence in North America, Europe and Asia. Our headquarters are in San Jose, California.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP") and applicable regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting, and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the applicable required disclosures and regulations of the SEC. Therefore, these unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company's audited consolidated financial statements and related notes in its Annual Report on Form 10-K for the fiscal year ended July 31, 2023 (the "Fiscal 2023 Form 10-K"), as filed with the SEC on September 14, 2023.
Interim Unaudited Condensed Consolidated Financial Statements
The accompanying condensed consolidated balance sheet as of July 31, 2023 was derived from the audited consolidated financial statements as of that date. The accompanying interim unaudited condensed consolidated financial statements, including the condensed consolidated balance sheet as of April 30, 2024, the condensed consolidated statements of operations for the three and nine months ended April 30, 2024 and 2023, the condensed consolidated statements of comprehensive income (loss) for the three and nine months ended April 30, 2024 and 2023, the condensed consolidated statements of stockholders’ equity for the three and nine months ended April 30, 2024 and 2023 and the condensed consolidated statements of cash flows for the nine months ended April 30, 2024 and 2023 are unaudited. The related financial data and the other financial information disclosed in the accompanying notes to these interim unaudited condensed consolidated financial statements are also unaudited. These interim unaudited condensed consolidated financial statements have been prepared on a basis consistent with our annual consolidated financial statements and, in our opinion, include all normal recurring adjustments necessary to state fairly our quarterly results. The results of operations for the three and nine months ended April 30, 2024 are not necessarily indicative of the results to be expected for our fiscal year ending July 31, 2024 or for any other future fiscal year or interim period.
9

Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. 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 condensed consolidated financial statements.
Due to uncertainty in the macroeconomic environment, including but not limited to the effects of inflation, and geopolitical events, 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 these condensed consolidated financial statements. These estimates, judgments and assumptions may change in the future, as new events occur or additional information is obtained.
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 $3.4 million and $9.7 million for the three and nine months ended April 30, 2024, respectively.
Fiscal Year
Our fiscal year ends on July 31. References to fiscal 2024, for example, refer to our fiscal year ending July 31, 2024.
Significant Accounting Policies
Our significant accounting policies are described in the Fiscal 2023 Form 10-K. There have been no significant changes to these policies that have had a material impact on the condensed consolidated financial statements and related notes for the three and nine months ended April 30, 2024.
Recently Issued Accounting Pronouncements Not Yet Adopted
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. This standard is effective for us in the annual periods beginning in fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026. We are currently evaluating the potential impact of this standard.

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
10

taxes paid (net of refunds received). This standard is effective for us in the annual periods beginning in fiscal 2026 and interim periods beginning in the first quarter of fiscal 2027. We are currently evaluating the potential impact of this standard.
Note 2. Revenue Recognition
Disaggregation of Revenue
Subscription and support revenue is recognized over time and accounted for approximately 98% and 97% of our revenue for the three and nine months ended April 30, 2024, respectively, and 97% for each of the three and nine months ended April 30, 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:
Three Months Ended April 30,Nine Months Ended April 30,
2024202320242023
Amount% RevenueAmount% RevenueAmount% RevenueAmount% Revenue
(in thousands, except for percentage data)
United States$278,974 50 %$212,454 51 %$790,476 50 %$581,477 50 %
Europe, Middle East and Africa 170,815 31 %128,964 31 %492,086 31 %370,713 32 %
Asia Pacific83,773 15 %62,928 15 %237,912 15 %172,785 15 %
Other19,639 4 %14,454 3 %54,429 4 %36,971 3 %
Total$553,201 100 %$418,800 100 %$1,574,903 100 %$1,161,946 100 %
The following table summarizes the revenue from contracts by type of customer:
Three Months Ended April 30,Nine Months Ended April 30,
2024202320242023
Amount% RevenueAmount% RevenueAmount% RevenueAmount% Revenue
(in thousands, except for percentage data)
Channel partners$502,362 91 %$383,222 92 %$1,437,410 91 %$1,070,744 92 %
Direct customers50,839 9 %35,578 8 %137,493 9 %91,202 8 %
Total$553,201 100 %$418,800 100 %$1,574,903 100 %$1,161,946 100 %
Significant Customers
No single customer accounted for 10% or more of the total revenue or the total balance of accounts receivable, net in the periods presented.
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 April 30, 2024 and July 31, 2023 was $1,577.0 million and $1,439.7 million, respectively. In the nine months ended April 30, 2024 and 2023, we recognized revenue of $1,115.1 million and $802.1 million, respectively, that was included in the corresponding contract liability balance at the beginning of these periods.
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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 April 30, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $3,824.1 million. We expect to recognize 51% of the transaction price over the next 12 months and 95% 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 channel partner and direct customer contracts. These costs are recorded as deferred contract acquisition costs in the condensed consolidated balance sheets.
The activity of the deferred contract acquisition costs consisted of the following:
Three Months Ended April 30,Nine Months Ended April 30,
2024202320242023
(in thousands)
Beginning balance
$381,474 $315,151 $375,234 $297,002 
Capitalization of contract acquisition costs54,907 46,364 122,651 110,566 
Amortization of deferred contract acquisition costs(33,207)(25,315)(94,711)(71,368)
Ending balance
$403,174 $336,200 $403,174 $336,200 
The outstanding balance of the deferred contract acquisition costs consisted of the following:
April 30, 2024July 31, 2023
(in thousands)
Deferred contract acquisition costs, current$135,095 $115,827 
Deferred contract acquisition costs, noncurrent268,079 259,407 
Total deferred contract acquisition costs$403,174 $375,234 
Sales commissions accrued but not paid as of April 30, 2024 and July 31, 2023, totaled $33.4 million and $48.0 million, respectively, which are included within accrued compensation in the condensed consolidated balance sheets.
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Note 3. Cash Equivalents and Short-Term Investments
Cash equivalents and short-term investments consisted of the following as of April 30, 2024:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses

Fair Value
Cash equivalents:(in thousands)
Money market funds$756,115 $ $ $756,115 
U.S. treasury securities242,890  (26)242,864 
U.S. government agency securities17,453  (2)17,451 
Certificates of deposit52,583   52,583 
Total cash equivalents$1,069,041 $ $(28)$1,069,013 
Short-term investments:
U.S. treasury securities$286,264 $ $(2,838)$283,426 
U.S. government agency securities151,656  (1,447)150,209 
Corporate debt securities542,578 34 (3,445)539,167 
Certificates of deposit8,000   8,000 
Total short-term investments$988,498 $34 $(7,730)$980,802 
Total cash equivalents and short-term investments$2,057,539 $34 $(7,758)$2,049,815 
Cash equivalents and short-term investments consisted of the following as of July 31, 2023:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses

Fair Value
Cash equivalents:(in thousands)
Money market funds$768,003 $ $ $768,003 
U.S. treasury securities157,250  (30)157,220 
U.S. government agency securities166,671  (35)166,636 
Corporate debt securities38,800   38,800 
Total cash equivalents$1,130,724 $ $(65)$1,130,659 
Short-term investments:
U.S. treasury securities$175,451 $ $(1,875)$173,576 
U.S. government agency securities266,392 2 (4,299)262,095 
Corporate debt securities406,517 49 (4,211)402,355 
Total short-term investments$848,360 $51 $(10,385)$838,026 
Total cash equivalents and short-term investments$1,979,084 $51 $(10,450)$1,968,685 
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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 April 30, 2024:
Amortized
Cost
Fair Value
(in thousands)
Due within one year$494,507 $492,508 
Due between one to three years493,991 488,294 
Total$988,498 $980,802 
Short-term investments that were in an unrealized loss position as of April 30, 2024 consisted of the following:
Less than 12 MonthsGreater than 12 MonthsTotal
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(in thousands)
U.S. treasury securities$274,376 $(2,838)$ $ $274,376 $(2,838)
U.S. government agency securities87,456 (297)62,752 (1,150)150,208 (1,447)
Corporate debt securities359,390 (2,762)61,648 (683)421,038 (3,445)
Total$721,222 $(5,897)$124,400 $(1,833)$845,622 $(7,730)
Short-term investments that were in an unrealized loss position as of July 31, 2023 consisted of the following:
Less than 12 MonthsGreater than 12 MonthsTotal
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(in thousands)
U.S. treasury securities$173,576 $(1,875)$ $ $173,576 $(1,875)
U.S. government agency securities119,558 (292)131,530 (4,007)251,088 (4,299)
Corporate debt securities232,504 (2,034)82,599 (2,177)315,103 (4,211)
Total $525,638 $(4,201)$214,129 $(6,184)$739,767 $(10,385)
We review the individual securities that have unrealized losses in our short-term investment portfolio on a regular basis. We evaluate, among others, whether we have the intention to sell any of these investments and whether it is not 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 April 30, 2024 and July 31, 2023.
As of April 30, 2024 and July 31, 2023, we recorded $10.6 million and $7.2 million, respectively, of accrued interest receivable within prepaid expenses and other current assets in the condensed consolidated balance sheets.
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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. As of April 30, 2024 and July 31, 2023, the carrying amount of our strategic investments was $9.8 million and $7.8 million, respectively, and is included within other noncurrent assets in the condensed consolidated balance sheets. There were no material events or circumstances impacting their carrying amount during the periods presented.    
Note 4. Fair Value Measurements
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.
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 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.
15

Assets and liabilities that are measured at fair value on a recurring basis consisted of the following as of April 30, 2024:
Level ILevel IILevel III
Fair Value
Quoted Prices
in Active
Markets for
Identical Assets
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Cash equivalents:(in thousands)
Money market funds$756,115 $756,115 $ $ 
U.S. treasury securities242,864  242,864  
U.S. government agency securities17,451  17,451  
Certificates of deposit52,583  52,583  
Total cash equivalents$1,069,013 $756,115 $312,898 $ 
Short-term investments:
U.S. treasury securities$283,426 $ $283,426 $ 
U.S. government agency securities150,209  150,209  
Corporate debt securities539,167  539,167  
Certificates of deposit8,000  8,000  
Total short-term investments$980,802 $ $980,802 $ 
Total cash equivalents and short-term investments$2,049,815 $756,115 $1,293,700 $ 
Designated derivative instruments:
Foreign currency contracts assets-current (1)
$1,647 $ $1,647 $ 
Foreign currency contracts assets-noncurrent (2)
$622 $ $622 $ 
Foreign currency contracts liabilities-current (3)
$6,151 $ $6,151 $ 
Foreign currency contracts liabilities-noncurrent (4)
$1,345 $ $1,345 $ 
Interest rate contracts liabilities-current (3)
$4,816 $ $4,816 $ 
Interest rate contracts liabilities-noncurrent (4)
$2,445 $ $2,445 $ 
Non-designated derivative instruments:
Foreign currency contracts assets-current (1)
$2,168 $ $2,168 $ 
Foreign currency contracts liabilities-current (3)
$1,976 $ $1,976 $ 
(1) Included within prepaid expenses and other current assets in the condensed consolidated balance sheets.
(2) Included within other noncurrent assets in the condensed consolidated balance sheets.
(3) Included within accrued expenses and other current liabilities in the condensed consolidated balance sheets.
(4) Included within other noncurrent liabilities in the condensed consolidated balance sheets.

16

Assets that are measured at fair value on a recurring basis consisted of the following as of July 31, 2023:
Level ILevel IILevel III
Fair Value
Quoted Prices
in Active
Markets for
Identical Assets
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Cash equivalents:(in thousands)
Money market funds$768,003 $768,003 $ $ 
U.S. treasury securities157,220  157,220  
U.S. government agency securities166,636  166,636  
Corporate debt securities38,800  38,800  
Total cash equivalents$1,130,659 $768,003 $362,656 $ 
Short-term investments:
U.S. treasury securities$173,576 $ $173,576 $ 
U.S. government agency securities262,095  262,095  
Corporate debt securities402,355  402,355  
Total short-term investments$838,026 $ $838,026 $ 
Total cash equivalents and short-term investments$1,968,685 $768,003 $1,200,682 $ 
Designated derivative instruments:
Foreign currency contracts assets-current (1)
$12,581 $ $12,581 $ 
Foreign currency contract assets-noncurrent (2)
$2,264 $ $2,264 $ 
Foreign currency contracts liabilities-current (3)
$1,452 $ $1,452 $ 
Foreign currency contracts liabilities-noncurrent (4)
$669 $ $669 $ 
Interest rate contracts liabilities-current (3)
$6,439 $ $6,439 $ 
Interest rate contracts liabilities-noncurrent (4)
$1,588 $ $1,588 $ 
Non-designated derivative instruments:
Foreign currency contracts assets-current (1)
$2,061 $ $2,061 $ 
Foreign currency contracts liabilities-current (3)
$465 $ $465 $ 
(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 April 30, 2024 and July 31, 2023.
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Note 5. Property and Equipment and Purchased Intangible Assets
Property and equipment consisted of the following:
April 30, 2024July 31, 2023
(in thousands)
Hosting equipment$370,734 $280,851 
Capitalized internal-use software