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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 October 31, 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 filer☐Smaller 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 November 30, 2024, the number of shares of registrant’s common stock outstanding was 153,438,623.

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:
•the impact of macroeconomic and geopolitical events, developments and conditions 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;
•our expectations regarding settlement of the Notes (as defined in Note 9, Convertible Senior Notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q);
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•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 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, 2024 filed with the Securities and Exchange Commission, or the SEC, on September 12, 2024.
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PART I. FINANCIAL INFORMATION
Item. 1 Financial Statements
ZSCALER, INC.
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
(unaudited)
October 31, 2024July 31, 2024
Assets
Current assets:
Cash and cash equivalents$1,553,645 $1,423,080 
Short-term investments1,154,252 986,574 
Accounts receivable, net424,573 736,529 
Deferred contract acquisition costs152,475 148,873 
Prepaid expenses and other current assets108,835 101,561 
Total current assets3,393,780 3,396,617 
Property and equipment, net409,005 383,121 
Operating lease right-of-use assets84,091 89,758 
Deferred contract acquisition costs, noncurrent286,656 296,525 
Acquired intangible assets, net59,595 63,835 
Goodwill417,029 417,029 
Other noncurrent assets58,846 58,083 
Total assets$4,709,002 $4,704,968 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$25,368 $23,309 
Accrued expenses and other current liabilities83,384 91,708 
Accrued compensation126,379 160,810 
Deferred revenue1,533,080 1,643,919 
Convertible senior notes1,145,799 1,142,275 
Operating lease liabilities49,600 50,866 
Total current liabilities2,963,610 3,112,887 
Deferred revenue, noncurrent250,640 251,055 
Operating lease liabilities, noncurrent41,938 44,824 
Other noncurrent liabilities24,269 22,100 
Total liabilities3,280,457 3,430,866 
Commitments and contingencies (Note 10)
Stockholders’ Equity
Preferred stock; $0.001 par value; 200,000 shares authorized as of October 31, 2024 and July 31, 2024; no shares issued and outstanding as of October 31, 2024 and July 31, 2024
— — 
Common stock; $0.001 par value; 1,000,000 shares authorized as of October 31, 2024 and July 31, 2024; 153,415 and 152,490 shares issued and outstanding as of October 31, 2024 and July 31, 2024, respectively
153 152 
Additional paid-in capital2,593,010 2,426,819 
Accumulated other comprehensive loss(4,487)(4,789)
Accumulated deficit(1,160,131)(1,148,080)
Total stockholders’ equity1,428,545 1,274,102 
Total liabilities and stockholders’ equity$4,709,002 $4,704,968 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ZSCALER, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended October 31,
20242023
Revenue$627,955 $496,703 
Cost of revenue141,462 111,394 
Gross profit486,493 385,309 
Operating expenses:
Sales and marketing306,087 267,111 
Research and development154,254 113,539 
General and administrative56,819 50,716 
Total operating expenses517,160 431,366 
Loss from operations(30,667)(46,057)
Interest income30,048 25,942 
Interest expense(3,143)(3,159)
Other expense, net(652)(1,212)
Loss before income taxes(4,414)(24,486)
Provision for income taxes7,637 8,997 
Net loss$(12,051)$(33,483)
Net loss per share, basic and diluted $(0.08)$(0.23)
Weighted-average shares used in computing net loss per share, basic and diluted152,557 147,625 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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ZSCALER, INC.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
Three Months Ended October 31,
20242023
Net loss$(12,051)$(33,483)
Available-for-sale securities:
Change in net unrealized gains (losses) on available-for-sale securities1,041 (589)
Cash flow hedging instruments:
Change in net unrealized gains (losses) 469 (15,136)
Net realized gains reclassified into net loss(1,208)(654)
        Net change on cash flow hedges(739)(15,790)
Other comprehensive income (loss) 302 (16,379)
Comprehensive loss$(11,749)$(49,862)

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

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

Stockholders' equity activity for the three months ended October 31, 2024:

Common Stock Additional
Paid-In
Capital		Accumulated Other Comprehensive LossAccumulated DeficitTotal
Stockholders’ Equity
SharesAmount
Balance as of July 31, 2024152,490 $152 $2,426,819 $(4,789)$(1,148,080)$1,274,102 
Issuance of common stock upon exercise of stock options87 — 890 — — 890 
Vesting of restricted stock units and performance stock awards838 1 (1)— — — 
Stock-based compensation— — 165,302 — — 165,302 
Other comprehensive income— — — 302 — 302 
Net loss— — — — (12,051)(12,051)
Balance as of October 31, 2024153,415 $153 $2,593,010 $(4,487)$(1,160,131)$1,428,545 
Stockholders' equity activity for the three months ended October 31, 2023:
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 options151 — 1,256 — — 1,256 
Vesting of restricted stock units, performance stock awards and other stock issuances993 1 (1)— — — 
Stock-based compensation— — 131,019 — — 131,019 
Other comprehensive loss— — — (16,379)— (16,379)
Net loss— — — — (33,483)(33,483)
Balance as of October 31, 2023148,313 $148 $1,949,189 $(17,955)$(1,123,857)$807,525 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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ZSCALER, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended October 31,
20242023
Cash Flows From Operating Activities
Net loss$(12,051)$(33,483)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization expense21,423 13,962 
Amortization expense of acquired intangible assets4,240 3,036 
Amortization of deferred contract acquisition costs39,068 30,111 
Amortization of debt issuance costs981 977 
Non-cash operating lease costs15,657 9,903 
Stock-based compensation expense157,178 129,138 
Accretion of investments purchased at a discount(5,003)(3,199)
Unrealized gains on hedging transactions 3,689 1,564 
Deferred income taxes186 (43)
Other644 1,031 
Changes in operating assets and liabilities, net of effects of business combinations:
Accounts receivable311,975 215,082 
Deferred contract acquisition costs(32,801)(27,680)
Prepaid expenses, other current and noncurrent assets(8,767)1,349 
Accounts payable1,043 4,596 
Accrued expenses, other current and noncurrent liabilities(6,240)4,859 
Accrued compensation(34,431)(39,232)
Deferred revenue(111,254)(40,154)
Operating lease liabilities(14,202)(11,011)
Net cash provided by operating activities331,335 260,806 
Cash Flows From Investing Activities
Purchases of property, equipment and other assets(17,025)(28,659)
Capitalized internal-use software(22,429)(7,429)
Payments for business acquisitions, net of cash acquired— (4,377)
Purchase of strategic investments(561)— 
Purchases of short-term investments(430,296)(375,929)
Proceeds from maturities of short-term investments268,651 253,849 
Net cash used by investing activities(201,660)(162,545)
Cash Flows From Financing Activities
Proceeds from issuance of common stock upon exercise of stock options890 1,256 
Net cash provided by financing activities890 1,256 
Net increase in cash and cash equivalents130,565 99,517 
Cash and cash equivalents at beginning of period
1,423,080 1,262,206 
Cash and cash equivalents at end of period
$1,553,645 $1,361,723 
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes, net of tax refunds$9,399 $5,286 
Non-Cash Activities
Operating lease right-of-use assets obtained in exchange for operating lease obligations, net of terminations$8,894 $15,617 
Net change in purchased equipment included in accounts payable and accrued expenses$462 $489 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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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, South 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, 2024 (the "Fiscal 2024 Form 10-K"), as filed with the SEC on September 12, 2024.
Interim Unaudited Condensed Consolidated Financial Statements
The accompanying condensed consolidated balance sheet as of July 31, 2024 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 October 31, 2024, the condensed consolidated statements of operations for the three months ended October 31, 2024 and 2023, the condensed consolidated statements of comprehensive loss for the three months ended October 31, 2024 and 2023, the condensed consolidated statements of stockholders’ equity for the three months ended October 31, 2024 and 2023 and the condensed consolidated statements of cash flows for the three months ended October 31, 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 months ended October 31, 2024 are not necessarily indicative of the results to be expected for our fiscal year ending July 31, 2025 or for any other future fiscal year or interim period.
8
Use of Estimates
The preparation of condensed 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 condensed 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 these condensed consolidated financial statements. These estimates, judgments and assumptions may change in the future, as new events occur or additional information is obtained.
Fiscal Year
Our fiscal year ends on July 31. References to fiscal 2025, for example, refer to our fiscal year ending July 31, 2025.
Significant Accounting Policies
Our significant accounting policies are described in the Fiscal 2024 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 months ended October 31, 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 on our consolidated financial statement disclosures.

In December 2023, the FASB issued ASU No. 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 standard 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 our consolidated 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
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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 97% of our revenue for the three months ended October 31, 2024 and 2023.
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 October 31,
20242023
Amount% RevenueAmount% Revenue
(in thousands, except for percentage data)
United States$319,312 51 %$247,531 50 %
Europe, Middle East and Africa 186,069 30 %157,245 32 %
Asia Pacific99,382 16 %75,080 15 %
Other23,192 3 %16,847 3 %
Total$627,955 100 %$496,703 100 %
The following table summarizes the revenue from contracts by type of customer:
Three Months Ended October 31,
20242023
Amount% RevenueAmount% Revenue
(in thousands, except for percentage data)
Channel partners$558,360 89 %$454,456 91 %
Direct customers69,595 11 %42,247 9 %
Total$627,955 100 %$496,703 100 %
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:
October 31, 2024July 31, 2024
Channel partner A11%*
(*) Represents less than 10%.


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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 October 31, 2024 and July 31, 2024 was $1,783.7 million and $1,895.0 million, respectively. In the three months ended October 31, 2024 and 2023, we recognized revenue of $595.2 million and $462.9 million, respectively, that was included in the corresponding contract liability balance at the beginning of these periods.
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 October 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $4,410.6 million. We expect to recognize 49% of the transaction price over the next 12 months and 93% 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 condensed consolidated balance sheets.
The activity of the deferred contract acquisition costs consisted of the following:
Three Months Ended October 31,
20242023
(in thousands)
Beginning balance
$445,398 $375,234 
Capitalization of contract acquisition costs32,801 27,680 
Amortization of deferred contract acquisition costs(39,068)(30,111)
Ending balance
$439,131 $372,803 
The outstanding balance of the deferred contract acquisition costs consisted of the following:
October 31, 2024July 31, 2024
(in thousands)
Deferred contract acquisition costs, current$152,475 $148,873 
Deferred contract acquisition costs, noncurrent286,656 296,525 
Total deferred contract acquisition costs$439,131 $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 October 31, 2024:
Amortized
Cost		Unrealized
Gains		Unrealized
Losses
Fair Value
Cash equivalents:(in thousands)
Money market funds$1,172,163 $— $— $1,172,163 
U.S. treasury securities35,898 5 — 35,903 
U.S. government agency securities107,255 3 (19)107,239 
Certificates of deposit106,452 — — 106,452 
Total cash equivalents$1,421,768 $8 $(19)$1,421,757 
Short-term investments:
U.S. treasury securities$314,332 $59 $(436)$313,955 
U.S. government agency securities183,431 92 (195)183,328 
Corporate debt securities655,888 2,164 (1,083)656,969 
Total short-term investments$1,153,651 $2,315 $(1,714)$1,154,252 
Total cash equivalents and short-term investments$2,575,419 $2,323 $(1,733)$2,576,009 
Cash equivalents and short-term investments consisted of the following as of July 31, 2024:
Amortized
Cost		Unrealized
Gains		Unrealized
Losses
Fair Value
Cash equivalents:(in thousands)
Money market funds$956,932 $— $— $956,932 
U.S. treasury securities178,188 — (15)178,173 
U.S. government agency securities57,555 — (6)57,549 
Certificates of deposit80,940 — — 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 securities160,574 43 (542)160,075 
Corporate debt securities568,589 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 October 31, 2024:
Amortized
Cost		Fair Value
(in thousands)
Due within one year$562,736 $562,907 
Due between one to three years590,915 591,345 
Total$1,153,651 $1,154,252 
Short-term investments that were in continuous unrealized loss position as of October 31, 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$146,042 $(436)$— $— $146,042 $(436)
U.S. government agency securities127,374 (174)11,096 (21)138,470 (195)
Corporate debt securities166,536 (1,050)25,384 (33)191,920 (1,083)
Total$439,952 $(1,660)$36,480 $(54)$476,432 $(1,714)
Short-term investments that were in continuous unrealized loss position as of July 31, 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$152,574 $(115)$87,808 $(713)$240,382 $(828)
U.S. government agency securities65,563 (28)65,334 (514)130,897 (542)
Corporate debt securities81,020 (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 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 October 31, 2024 and July 31, 2024.
As of October 31, 2024 and July 31, 2024, we recorded $12.6 million and $10.7 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 October 31, 2024 and July 31, 2024, the carrying amount of our strategic investments was $10.3 million and $9.8 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, 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 October 31, 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$1,172,163 $1,172,163 $— $— 
U.S. treasury securities35,903 — 35,903 — 
U.S. government agency securities107,239 — 107,239 — 
Certificates of deposit106,452 — 106,452 — 
Total cash equivalents$1,421,757 $1,172,163 $249,594 $— 
Short-term investments:
U.S. treasury securities$313,955 $— $313,955 $— 
U.S. government agency securities183,328 — 183,328 — 
Corporate debt securities656,969 — 656,969 — 
Total short-term investments$1,154,252 $— $1,154,252 $— 
Total cash equivalents and short-term investments$2,576,009 $1,172,163 $1,403,846 $— 
Designated derivative instruments:
Foreign currency contracts assets-current (1)
$2,918 $— $2,918 $— 
Foreign currency contracts assets-noncurrent (2)
$665 $— $665 $— 
Foreign currency contracts liabilities-current (3)
$4,720 $— $4,720 $— 
Foreign currency contracts liabilities-noncurrent (4)
$1,201 $— $1,201 $— 
Interest rate contracts liabilities-current (3)
$1,428 $— $1,428 $— 
Non-designated derivative instruments:
Foreign currency contracts assets-current (1)
$745 $— $745 $— 
Foreign currency contracts liabilities-current (3)
$3,492 $— $3,492 $— 
(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.

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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 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$956,932 $956,932 $— $— 
U.S. treasury securities178,173 — 178,173 — 
U.S. government agency securities57,549 — 57,549 — 
Certificates of deposit80,940 — 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 securities160,075 — 160,075 — 
Corporate debt securities569,478 — 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 contract 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 9, Convertible Senior Notes, for the carrying amount and estimated fair value of our convertible senior notes as of October 31, 2024 and July 31, 2024.
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Note 5. Balance Sheet Components
Property and Equipment and Purchased Intangible Assets
Property and equipment consisted of the following:
October 31, 2024July 31, 2024
(in thousands)
Hosting equipment $434,018 $418,775 
Capitalized internal-use software232,092 197,769 
Computers and equipment7,081 6,741 
Purchased software1,103 1,102 
Furniture and fixtures1,077 1,071 
Leasehold improvements8,341 7,974 
Total property and equipment, gross683,712 633,432 
Less: Accumulated depreciation and amortization(274,707)(250,311)
Total property and equipment, net$409,005 $383,121 
Purchased intangible assets consist of internet protocol (IP) addresses and source codes, which are amortized on a straight-line basis over an estimated useful life of 10 years. As of October 31, 2024, their historical cost and accumulated amortization were $12.4 million and $3.2 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 condensed consolidated balance sheets.
We recognized depreciation and amortization expense on property and equipment and purchased intangible assets of $21.4 million and $14.0 million for the three months ended October 31, 2024 and 2023, respectively. Additionally, we recognized stock-based compensation expense on the amortization of capitalized stock-based compensation associated with capitalized internal-use software of $4.2 million and $2.9 million for the three months ended October 31, 2024 and 2023, respectively.
Accrued compensation
Accrued compensation consisted of the following:
October 31, 2024July 31, 2024
(in thousands)
Accrued commissions
$22,045 $51,371 
Accrued bonuses
33,372 53,452 
Accrued payroll and related expenses
47,924 47,184 
Employee stock purchase plan
23,038 8,803 
Total accrued compensation
$126,379 $160,810 
Note 6. Business Combinations
On August 31, 2023, we completed the acquisition of Securelyshare Software Private Ltd., an early-stage technology company incorporated in India, for total purchase price consideration of $5.3 million. We have integrated this company's technology into our cloud platform. The transaction was accounted for as a business combination. We recognized intangible
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assets of $2.8 million for developed technology and goodwill of $3.2 million. The developed technology is amortized over its economic useful life of five years. 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 qualified as a stock transaction for tax purposes. The goodwill is not deductible for income tax purposes. The acquisition-related transaction expenses were not material and recorded as incurred within general and administrative expenses in the condensed consolidated statement of operations for the three months ended October 31, 2023. The pro forma financial information, 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

The carrying amount of goodwill was $417.0 million as of October 31, 2024 and July 31, 2024.

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.
Changes in acquired intangible assets for the three months ended October 31, 2024 consisted of the following:
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted Average Remaining Useful life
July 31, 2024AdditionsOctober 31, 2024July 31, 2024Amortization ExpenseOctober 31, 2024July 31, 2024October 31, 2024October 31, 2024
(in thousands)(years)
Developed technology$99,656 $— $99,656 $(42,651)$(3,815)$(46,466)$57,005 $53,190 4.0
Customer relationships9,960 — 9,960 (3,130)(425)(3,555)6,830 6,405 4.1
Total$109,616 $— $109,616 $(45,781)$(4,240)$(50,021)$63,835 $59,595 4.0
Amortization expense of acquired intangible assets for the three months ended October 31, 2024 and 2023 was $4.2 million and $3.0 million, respectively. Amortization expense of developed technology and customer relationships is included primarily within cost of revenue and sales and marketing expenses, respectively, in the condensed consolidated statements of operations.
Future amortization expense of acquired intangible assets as of October 31, 2024 consists of the following:
Amount
Fiscal Year ending July 31,(in thousands)
2025 (remaining nine months)$12,545 
202615,772 
202712,948 
202811,115 
20297,215 
Total$59,595 
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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 during the three months ended October 31, 2024 and 2023.
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 condensed 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 the three months ended October 31, 2024 and 2023.
As of October 31, 2024 and July 31, 2024, the total notional amount of our outstanding designated foreign currency forward contracts was $604.8 million and $544.5 million, respectively, and for our outstanding non-designated foreign currency forward contracts was $397.7 million and $352.8 million, respectively. As of October 31, 2024, an estimated $2.7 million of the unrealized gain related to our cash flow hedges are expected to be released into earnings over the next 12 months. Refer to Note 4, Fair Value Measurements, for the fair value of our derivative instruments as reported on the condensed consolidated balance sheet as of October 31, 2024 and July 31, 2024.
During the three months ended October 31, 2024 and 2023, changes in the fair value of our non-designated derivative instruments recognized within other expense, net in the condensed consolidated statement of operations, were not material.
The changes in accumulated other comprehensive income (loss) related to our cash flow hedges consisted of the following:
Three Months Ended October 31,
20242023
(in thousands)
Balance of AOCI as of the beginning of the period$(4,224)$8,937 
Net unrealized gains (losses) recognized in accumulated other comprehensive income 469 (15,136)
(Gains) reclassified from AOCI into the condensed consolidated statement of operations (1)
(1,208)(654)
Balance of AOCI as of the end of the period $(4,963)$(6,853)






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(1) Gains related to our cash flow hedges reclassified from AOCI into the condensed consolidated statement of operations consisted of the following:
Three Months Ended October 31,
20242023
(in thousands)
Cost of revenue$277 $176 
Sales and marketing
672 295 
Research and development
161 92 
General and administrative
98 91 
Total
$1,208 $654 
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 October 31, 2024 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 certain tranche of our convertible senior notes to a floating interest rate. As of October 31, 2024 and July 31, 2024 the carrying amount of the hedged convertible senior notes was $499.3 million and $498.2 million, respectively. The total notional amount of our outstanding interest rate swaps was $500.0 million as of October 31, 2024 and July 31, 2024. The gains and losses related to changes in the fair value of the interest rate swaps are included within interest expense in the condensed 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 October 31, 2024 and July 31, 2024, the cumulative amount of fair value hedge accounting adjustments included in the carrying amount of the convertible senior notes was $1.5 million and $4.1 million, respectively.
The gains (losses) effect of derivative instruments designated as fair value hedges included within interest expense in the condensed statement of operations consisted of the following:
Three Months Ended October 31,
20242023
(in thousands)
Gains (losses) on interest rate swaps:
Hedge accounting fair value adjustments$(2,543)$(1,110)
Derivatives designated as hedging instruments
2,401 1,094 
Total
$(142)$(16)
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Note 9. Convertible Senior Notes
On June 25, 2020, we issued $1,150.0 million in aggregate principal amount of 0.125% convertible senior notes due 2025 (the “Notes”), including the exercise in full by the initial purchasers of the Notes of their option to purchase an additional $150.0 million principal amount of the Notes. The Notes are unsecured obligations and bear 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 Notes mature on July 1, 2025, unless earlier converted, redeemed or repurchased. The total net proceeds from the offering, after deducting initial purchase discounts and other debt issuance costs, was $1,130.5 million. Refer to Note 10, Convertible Senior Notes, to the audited consolidated financial statements included in our Fiscal 2024 Form 10-K for further information on the Notes.
During the three months ended October 31, 2024, the conditions allowing holders of the Notes to convert were not met.
The net carrying amount of the Notes consisted of the following:
October 31,July 31,
20242024
(in thousands)
Principal amount$1,149,954 $1,149,954 
Less:
Unamortized debt issuance costs
2,633 3,614 
Hedge accounting fair value adjustments1,522 4,065 
Total$1,145,799 $1,142,275 
The interest expense related to the Notes consisted of the following:
Three Months Ended October 31,
20242023
(in thousands)
Contractual interest expense$359 $359 
Amortization of debt issuance costs981 977 
Total$1,340 $1,336 
The total fair value of the Notes was $1,459.8 million and $1,465.5 million as of October 31, 2024 and July 31, 2024, respectively. The fair value was determined based on the closing trading price per $1,000 of the Notes as of the last day of trading for the period. We consider the fair value of the Notes as of October 31, 2024 to be a Level II measurement as they are not actively traded. The fair value of the Notes is primarily affected by the trading price of our common stock and market interest rates.
In connection with the pricing of the Notes, we entered into capped call transactions with the option counterparties (the "Capped Calls"). The Capped Calls each have an initial strike price of $150.80 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have an initial cap price of $246.76 per share, subject to certain adjustments. The Capped Calls are generally expected to reduce potential dilution to our common stock upon any conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of the converted Notes, as the case may be, with such reduction and/or offset subject to a cap. During the three months ended October 31, 2024 and 2023, we have not exercised any Capped Call options. Refer to Note 10, Convertible Senior Notes, to the audited consolidated financial statements included in our Fiscal 2024 Form 10-K for further information on the Capped Calls.
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Note 10. 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. As of October 31, 2024, there have been no material changes outside the ordinary course of our business to our non-cancelable purchase obligations from those disclosed in the Fiscal 2024 Form 10-K, except for a non-cancelable agreement entered with a public cloud provider in September 2024 for a total minimum purchase commitment of $100.0 million over a five-year term and the renewal of bandwidth and internet service agreements for a total minimum purchase commitment of $27.1 million over a period ranging from two to three years.
Legal Matters
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.
Note 11. Stock-Based Compensation
Equity Incentive Plan
Equity incentive awards which may be granted to eligible participants under our Fiscal Year 2018 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.
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Stock Options
The activity of stock options for the three months ended October 31, 2024 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, 2024453 $46.72 2.5$60,923 
Granted— $— 
Exercised(87)$10.19 $14,330 
Canceled, forfeited or expired— — 
Balance as of October 31, 2024366 $55.46 2.7$46,604 
Exercisable and expected to vest as of July 31, 2024367 $15.84 1.0$59,989 
Exercisable and expected to vest as of October 31, 2024283 $19.11 0.9$45,707 
The total intrinsic value of options exercised for the three months ended October 31, 2024 and 2023 was $14.3 million and $23.2 million, respectively. There were no stock options granted during the three months ended October 31, 2024 and 2023.
Restricted Stock Units and Performance Stock Awards
The activity of restricted stock units ("RSUs") and performance stock awards ("PSAs") consisted of the following for the three months ended October 31, 2024:
Underlying SharesWeighted-Average Grant Date Fair ValueAggregate
Intrinsic Value
(in thousands, except per share data)
Balance as of July 31, 20249,814 $162.41 $1,760,079 
Granted3,197 $169.58 
Vested(838)$152.78 $144,131 
Canceled or forfeited(423)$167.99 
Balance as of October 31, 202411,750 $164.84 $2,124,164 
As of October 31, 2024, the number of outstanding PSAs for which the performance metrics have not been defined as of such date was not material. These awards are not considered granted for accounting purposes as of October 31, 2024 and accordingly, have been excluded from the above table.
Employee Stock Purchase Plan
In fiscal 2018, we adopted the Fiscal Year 2018 Employee Stock Purchase Plan (the "ESPP"). ESPP employee payroll contributions accrued as of October 31, 2024 and July 31, 2024, were $23.0 million and $8.8 million, respectively, and are included within accrued compensation in the condensed consolidated balance sheets. Payroll contributions accrued as of October 31, 2024 will be used to purchase shares at the end of the current ESPP purchase period ending on December 16, 2024. Payroll contributions ultimately used to purchase shares are reclassified to stockholders’ equity on the purchase date. There were no shares issued under the ESPP during the periods presented.

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Stock-based Compensation Expense
The components of stock-based compensation expense recognized in the condensed consolidated statements of operations consisted of the following:
Three Months Ended October 31,
20242023
(in thousands)
Cost of revenue$15,226 $12,584 
Sales and marketing63,179 56,630 
Research and development58,071 40,193 
General and administrative20,702 19,731 
Total$157,178 $129,138 
During the three months ended October 31, 2024 and 2023, we capitalized stock-based compensation primarily associated with the development of software for internal-use of $12.4 million and $4.7 million, respectively.
Note 12. Income Taxes
Our tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, we update our estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, we make a cumulative adjustment in such period.
Our quarterly tax provision, and estimate of our annual effective tax rate, is subject to variation due to several factors, including variability in pre-tax income (or loss), the mix of jurisdictions to which such income relates, changes in how we do business, and tax law developments. Our estimated annual effective tax rate for the year differs from the U.S. statutory rate of 21% as a result of our U.S. losses for which no tax benefit will be realized, as well as our foreign operations which are subject to tax rates that differ from those in the United States.
For the three months ended October 31, 2024 and 2023, we recorded provision for income taxes of $7.6 million and $9.0 million, respectively. The decrease in the tax expense for three months ended October 31, 2024 is primarily attributable to tax expense associated with the integration of a business acquisition in the three months ended October 31, 2023. We are subject to income tax in the United States as well as other tax jurisdictions in which we conduct business. Earnings from our non-U.S. operations are subject to income taxes in the countries in which we operate.
The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. We 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 in certain jurisdictions, we believe that it is more likely than not that our U.S. federal, state and foreign jurisdictions deferred tax assets will not be realized. Accordingly, we have maintained a valuation allowance on our U.S. federal, state and certain foreign jurisdiction deferred tax assets.
Continued performance improvement in the United Kingdom ("U.K.") could result in a change in the realization of the deferred tax assets in the next twelve months, which would result in a release of the valuation allowance for such jurisdiction. A change in our assessment as to the realizability of the U.K. deferred tax assets is dependent upon the existence of sufficient objectively verifiable positive evidence in future periods. The reversal of such valuation allowance would result in an income tax benefit for the quarterly and annual fiscal periods in which we release the valuation allowance. However, the exact timing
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and amount of the valuation allowance release are subject to change on the basis of the positive evidence that exists at such time.
Note 13. Net Loss Per Share
The computation of basic and diluted net loss per share consisted of the following:
Three Months Ended October 31,
20242023
(in thousands, except per share data)
Net loss$(12,051)$(33,483)
Weighted-average shares used in computing net loss per share, basic and diluted152,557 147,625
Net loss per share, basic and diluted $(0.08)$(0.23)
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.
In connection with the issuance of the Notes, we entered into Capped Calls, which were not included for purposes of calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive. The Capped Calls are expected to partially offset the potential dilution to our common stock upon any conversion of the Notes. We have not exercised any of the Capped Calls as of October 31, 2024.
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:
October 31,
20242023
(in thousands)