Zscaler, Inc.
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PART I
Item 1. Business
Overview
We enable our customers to succeed in a digital world where technology decisions not only impact growth and competitiveness, but also directly impact enterprise risk. We were incorporated in 2007, during the early stages of cloud adoption and mobility, based on a vision that the internet would become the new corporate network, as the cloud became the new data center.
We correctly predicted that with rapid cloud adoption and increasing workforce mobility, traditional perimeter security approaches would fail to protect users and data, become prohibitively expensive and deliver poor user experience. Enterprises now rely on external software as a service, or SaaS, applications for critical business functions and have moved, or are moving, their internally managed applications to the public cloud infrastructure. As a result, users now expect to be able to seamlessly access applications and data, wherever they are hosted, from any device, anywhere in the world. The emergence and rapid adoption of artificial intelligence, or AI, is revolutionizing the transformational impact of cloud adoption and mobility. AI is fundamentally changing how organizations operate, creating new cybersecurity threats and IT challenges.
Our cloud native, multitenant architecture is distributed across more than 160 public exchanges globally and thousands of private exchanges at the edge, which brings security and business policy close to users and devices in over 185 countries and provides fast, secure and reliable access. Each day, we block over 225 million threats and perform over 250,000 unique security updates. Our customers benefit from the cloud security effect of our ever-expanding ecosystem, enhanced by our advanced AI and ML capabilities, because once a new threat is detected, it can be blocked across our customer base within minutes.
Many of the largest enterprises and government agencies in the world rely on our solutions to help them accelerate their move to the cloud. We have over 9,400 customers across all major geographies, with an emphasis on larger organizations, and we currently count approximately 40% of the Forbes Global 2000 and over 45% of Fortune 500 companies as customers. Our customers span every major industry, including financial services, healthcare, insurance, manufacturing, automotive, airlines and transportation, conglomerates, consumer goods and retail, media and communications, public sector and education, energy, technology and telecommunications services.
We have experienced significant growth, with revenue increasing from $1,617.0 million in fiscal 2023 to $2,167.8 million in fiscal 2024 to $2,673.1 million in fiscal 2025, representing year-over-year revenue growth of 34% and 23%, respectively. We experienced net losses of $41.5 million, $57.7 million and $202.3 million in fiscal 2025, fiscal 2024 and fiscal 2023, respectively. We expect we will continue to incur net losses for the foreseeable future.
We pioneered a cloud platform, the Zscaler Zero Trust ExchangeTM platform, which represented a fundamental shift in the architectural design and approach to networking and security that allows companies to securely accelerate their digital transformation initiatives.
The Zscaler Zero Trust Exchange is a cloud-native platform, which implements Zero Trust principles to securely connect users, devices, applications and workloads, including AI agents, without relying on traditional hub-and-spoke network architecture and firewall-centric security. These technologies have become a roadblock to transformation for organizations that want to compete in today’s digital world. Firewalls and virtual private networks, or VPNs, create a perimeter around the corporate network and everything inside the perimeter is implicitly trusted. This is one of the root causes of ransomware attacks. Zscaler’s Zero Trust model operates on the principle that users, workloads, devices and AI
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Agents are untrusted by default, irrespective of the network they are connected to. This approach reduces the attack surface and prevents lateral threat movement, while improving business resilience. We believe that Zero Trust combined with AI is rapidly becoming the new foundation for enterprise security architectures. Zscaler is pioneering this convergence of Zero Trust + AI, enabling enterprises to embrace technologies in a manner that is more secure, more scalable, more resilient and increasingly adaptable to the modern world.
Our ever-evolving platform provides our customers with a flexible and scalable approach to better secure their operations, optimize user experience, eliminate complexity, reduce costs and respond to the challenges and opportunities of AI and future new technologies. As the threat landscape evolves and companies look to further embrace AI and the cloud, our platform has evolved to focus on four core solutions: Zero Trust Everywhere, Data Security Everywhere, Security for AI and Agentic Operations.
•Zero Trust Everywhere – extends the principles of Zero Trust across all locations – branches, campuses, cloud, factories, entities, users, workloads, IoT/OT systems and autonomous AI agents.
•Data Security Everywhere – is Zscaler’s approach to safeguarding sensitive information across its entire lifecycle, from creation to storage, transmission and access, regardless of location, device or application.
•Security for AI – allows organizations to securely embrace public and private AI applications.
•Agentic Operations – refers to the integration of advanced AI technologies to empower both Security Operations, or SecOps, and IT Operations, or ITOps, teams with increased efficiency and actionable insights.
Zero Trust Everywhere
Our Zero Trust Exchange cloud security platform delivers our core Zero Trust Everywhere products through the deployment of our comprehensive and integrated solutions, each built natively in the cloud to power digital transformation.
Zero Trust Everywhere spans three core domains: Zero Trust Users, where users are never placed on the corporate network; Zero Trust Cloud, where workloads communicate only through the Exchange; and Zero Trust Branch, where branches, factories, warehouses, IoT/OT devices and autonomous AI agents are secured as independent entities and connected solely through policy-based access. Together, these capabilities deliver a unified Zero Trust architecture that replaces legacy firewalls, VPNs and SD-WANs with a model purpose-built for the modern enterprise.
Zero Trust Users
People remain the weakest link in enterprise security. Compromised credentials, unmanaged devices and phishing attacks continue to be the entry point for many breaches. Zero Trust Users is designed to protect the workforce, third parties, business-to-business, or B2B, partners and suppliers by assuming no user is trusted by default. Every user – internal or external, on any device, from any location – must prove their identity, demonstrate a secure posture and meet policy requirements before being granted access to an application.
This approach eliminates the risks of putting users on a corporate network. Instead, users connect only to the specific applications they are authorized to use – whether SaaS, internet, AI applications or private applications hosted in data centers, clouds or factories. By removing the network path, threats cannot move laterally if a user is compromised.
By treating every user as untrusted, continuously analyzing risk and enforcing adaptive, per-session policies, Zero Trust Users reduces the likelihood of breaches, protects sensitive data and ensures a secure, reliable experience for everyone
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accessing enterprise applications and services. Zscaler delivers this functionality via the following core services: Zscaler Internet AccessTM, or ZIATM, Zscaler Private AccessTM, or ZPATM, and Zscaler Digital ExperienceTM, or ZDXTM.
Zscaler Internet Access
ZIA provides secure access to externally managed applications, including SaaS applications and internet destinations regardless of device, location or network. ZIA provides inline content inspection and firewall access controls across all ports and protocols to protect organizations and users from external threats, secure data in motion and prevent data from leaking out to unauthorized sites. Policies follow the user to provide identical protection on any device, regardless of location; any policy changes are enforced for users worldwide. Our inline cloud security platform assesses and correlates the risk of the content to protect against sophisticated attacks, including ransomware and phishing. The cloud platform applies AI and machine learning, or ML, across over 500 billion daily transactions to quickly identify and block unknown threats and to identify and categorize unknown destinations.
ZIA enables the following capabilities:
Cyberthreat Capabilities – Our holistic, future-ready threat defense functionality enables protection against threats using a range of approaches and techniques. Our threat prevention capabilities provide multiple layers of protection to prevent sophisticated ransomware, phishing and zero-day cyber attacks. Built on the principle of least privilege, our proxy architecture enables full Transport Layer Security, or TLS,/Secure Sockets Layer inspection at scale, with connections brokered between users and applications based on identity, context and business policies. We provide functionality that traditionally has been offered by disparate, stand-alone products. Our core cloud platform threat prevention capabilities include:
•Advanced Threat Protection: Our advanced threat protection functionality uses techniques including AI/ML, advanced heuristics, signatures and reputation to deliver real-time protection from malicious internet content like browser exploits, scripts, zero-pixel iFrames, malware and botnet callbacks. Over 250,000 unique security updates are performed every day to the Zscaler cloud to keep organizations protected. Once we detect a new threat to a user, we block it for all users across all customers. We call this the “cloud security effect.”
•Sandbox: Our cloud sandbox enables enterprises to block zero-day exploits and advanced persistent threats by analyzing unknown files for malicious behavior, and it can scale to every user regardless of location. Our cloud sandbox was designed and built to be multi-tenant and allows customers, using AI, among other analytics, to determine which traffic should be sent for detonation. As an integrated cloud security platform, customers can set policies by users and destinations to prevent patient-zero scenarios and to analyze, hold and detonate suspicious files in the cloud sandbox before they are sent to a user.
•Browser Isolation: Our cloud browser isolation functionality creates an isolated browsing session that enables users to access any webpage on the internet without downloading any of the web content served by the webpage onto a local device or the corporate network. With cloud browser isolation, users are not directly accessing active web content; instead, only a safe rendering of pixels is delivered to the user. Malicious code that may be hidden in the web content is kept at bay. Customers can select and isolate traffic based on specific policies and/or automatically based on our AI enabled risk determination. The combination of cloud browser isolation and cloud sandbox enables administrators to perform content disarm and reconstruction to flatten, sanitize and securely deliver files free of active content.
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Zscaler Private Access
ZPA provides Zero Trust Network Access to secure access to internally managed applications, either hosted internally in data centers or hosted in private or public clouds. ZPA is designed around four key tenets that fundamentally change the way users access internal applications:
•connect users to applications without bringing users on the network, preventing lateral movement;
•never expose applications to the internet;
•segment access to applications without relying on the traditional approach of network segmentation; and
•provide remote access over the internet without VPNs.
ZPA leverages a global policy engine that governs access to internally managed applications regardless of location. If access is granted to a user, our ZPA solution connects the user’s device only to the authorized application without exposing the identity or location of the application. As a result, applications are not exposed to the internet, further limiting the external attack surface. This results in reduced cost and complexity, while offering better security and an improved user experience.
Our ZPA solution includes broad functionality, which we categorize by the following areas:
•Cyberthreat Protection and Data Protection: Our ZPA solution delivers the same cyberthreat protection and data protection functionality that is applied to internet traffic via our ZIA solution.
•Application Discovery: Similar to cloud access security broker, or CASB, application discovery reports for internet hosted SaaS applications, our ZPA solution provides granular discovery of internally managed applications to aid in the creation and oversight of segmentation policies. Because our ZPA solution sits on the application layer and is name-based or domain-based, organizations can quickly and seamlessly identify their internally-managed applications and then easily provision appropriate policies.
•Secure Application Access:
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. As discussed in the section titled "Special Note Regarding Forward-Looking Statements," the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such difference include, but are not limited to, those identified below and those discussed in the section titled "Risk Factors" and elsewhere in this Annual Report on Form 10-K. Our fiscal year end is July 31, and our fiscal quarters end on October 31, January 31, April 30 and July 31. Our fiscal year ended July 31, 2025, July 31, 2024 and July 31, 2023 are referred to as fiscal 2025, fiscal 2024 and fiscal 2023, respectively.
Overview
Zscaler was incorporated in 2007, during the early stages of cloud adoption and mobility, based on a vision that the internet would become the new corporate network as the cloud becomes the new data center. We correctly predicted that with rapid cloud adoption and increasing workforce mobility, traditional perimeter security approaches would prove to be inadequate in protecting users and data, prohibitively expensive and result in poor user experience. Enterprises now rely on external SaaS applications for critical business functions and have or are moving their internally managed applications to the public cloud infrastructure. As a result, users now expect to be able to seamlessly access applications and data, wherever they are hosted, from any device, anywhere in the world. The emergence and rapid adoption of AI is revolutionizing the transformational impact of cloud adoption and mobility. AI is fundamentally changing how organizations operate, creating new cybersecurity threats and IT challenges, but also the opportunity to use AI to counter cybersecurity threats and improve IT operations.
We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services. We also generate an immaterial amount of revenue from professional and other services, which consist primarily of fees associated with mapping, implementation, network design and training. Our subscription pricing is primarily calculated on a per-user basis. We recognize subscription and support revenue ratably over the life of the contract, which is generally one to three years. As of July 31, 2025, we had expanded our operations to over 9,400 customers across major industries, with users in over 185 countries. Government agencies and some of the largest enterprises in the world rely on us to support their secure digital transformation.
We operate our business as one reportable segment. Our revenue has experienced significant growth in recent periods. For fiscal 2025, fiscal 2024 and fiscal 2023, our revenue was $2,673.1 million, $2,167.8 million and $1,617.0 million, respectively. We have incurred net losses in all annual periods since our inception. For fiscal 2025, fiscal 2024 and fiscal 2023, our net loss was $41.5 million, $57.7 million and $202.3 million, respectively. We expect we will continue to incur net losses for the foreseeable future, as we continue to invest in our sales and marketing organization to maximize our market opportunity, to invest in research and development efforts to enhance the functionality of our cloud platform, and to address any legal matters and related accruals, as further described in Note 12, Commitments and Contingencies, of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Impact of Macroeconomic Conditions
Changes in macroeconomic and geopolitical conditions can cause uncertainty in our business. We continue to see customer scrutiny of and elongated approval processes for transactions, particularly larger deals, as customers continue to carefully consider purchasing decisions and are requiring multiple approvals for large expenditures in response to the uncertain economic environment. Macroeconomic conditions may impact the future demand for subscriptions of our cloud platform.
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Certain Factors Affecting Our Performance
Increased Internet Traffic and Adoption of Cloud-Based Software and Security
In a cloud, mobile-first and AI-enabled world where organizations depend on public and third-party infrastructure and technologies to assess critical applications that power their businesses, enterprises that continue to rely on legacy network and security architecture built on firewalls and VPNs face serious challenges. The adoption of cloud applications and infrastructure, explosion of internet traffic volumes and shift to mobile-first computing generally, and the pace at which enterprises adopt the internet as their corporate network in particular, impact our ability to drive market adoption of our cloud platform. However, the dependence on the internet, expanding digital transformation and growing AI usage have increased exposure to malicious or compromised websites, and sophisticated hackers are exploiting the gaps left by legacy network security appliances. To securely access the internet, transform their networks and expand their AI adoption, organizations must also make fundamental changes in their network and security architectures. We believe that most organizations have yet to fully make these investments. Because our cloud platform enables organizations to securely embrace digital transformation, we believe that the imperative for organizations to securely move to the cloud will increase demand for our cloud platform and broaden our customer base.
New Customer Acquisition
We believe that our ability to increase the number of customers, and more significantly large enterprises, on our cloud platform is an indicator of our market penetration and our future business opportunities. As of July 31, 2025, 2024 and 2023, we had over 9,400, 8,650 and 7,700 customers, respectively, across all major geographies. As of July 31, 2025, we had approximately 40% of the Forbes Global 2000 as customers. Our ability to continue to grow these numbers will increase our future opportunities for renewals and follow-on sales. We believe that we have significant room to capture additional market share and intend to continue to invest significantly in sales and marketing to engage our prospective customers, increase brand awareness, further leverage our channel partnerships and drive adoption of our solution. However, as a result of the challenging and uncertain economic environment, potential new customers are carefully considering purchasing decisions, particularly for large expenditures. We expect customer cautiousness to continue in the near term, elongating our sales cycles and the timing of large deals.
Follow-On Sales
We typically expand our relationship with our customers over time. While most of our new customers route all of their internet-bound web traffic through our cloud platform, some of our customers initially use our services for specific users or specific security functionality. We leverage our land-and-expand model with the goal of generating incremental revenue, often within the term of the initial subscription, by increasing sales to our existing customers in one of three ways:
•expanding deployment of our cloud platform to cover additional users;
•upgrading to more advanced capabilities; and
•selling a subscription to a new solution or product, for example selling a ZPA subscription to a ZIA customer or a ZIA subscription to a ZPA customer.
These purchases increase the annual recurring revenue, or ARR, attributable to our customers over time. ARR refers to the next 12 months of revenue from subscription contracts as of the measurement date. To establish ARR for a customer, we assume that any contract expiring during the next 12 months will be renewed under the existing terms.
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Investing in Business Growth
Since our founding, we have invested significantly in growing our business. We intend to continue (i) investing in our research and development organization and our development efforts to offer new solutions on our cloud platform and (ii) dedicating resources to update and upgrade our existing solutions, including upgrades to our cloud platform. In addition, we expect our general and administrative expenses to increase in absolute dollars in the foreseeable future, as we continue to operate as a public company, and address any legal matters and related accruals, as further described in Note 12, Commitments and Contingencies, of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We also intend to continue to invest significantly in sales and marketing to grow and train our sales force, broaden our brand awareness and expand and deepen our channel partner relationships. While these planned investments will increase our operating expenses in the short term, we believe that over the long term these investments will help us to expand our customer base and grow our business. We also are investing in programs to increase recognition of our brand and solutions, including joint marketing activities with our channel partners and strategic partners.
While we expect our operating expenses to increase in absolute dollars in the foreseeable future, as a result of these activities, we intend to balance these investments in future growth with a continued focus on managing our results of operations and investing judiciously. In the long term we anticipate that these investments will positively impact our business and results of operations.
Key Business Metrics and Other Financial Measures
We review a number of operating and financial metrics, including the following key metrics, to measure our performance, identify trends, formulate business plans and make strategic decisions.
Dollar-Based Net Retention Rate
We believe that dollar-based net retention rate is an indicator to measure the long-term value of our customer relationships because it is driven by our ability to retain and expand the recurring revenue generated from our existing customers. Our dollar-based net retention rate compares the recurring revenue from a set of customers against the same metric for the prior 12-month period on a trailing basis. Because our customers have repeat buying patterns and the average term of our contracts is more than 12 months, we measure this metric over a set of customers who were with us as of the last day of the same reporting period in the prior fiscal year. For the trailing 12 months ended July 31, 2025 and 2024, the dollar-based net retention rate was 114% and 116%, respectively.
We calculate our dollar-based net retention rate as follows:
•Denominator: To calculate our dollar-based net retention rate as of the end of a reporting period, we first establish the ARR from all active subscriptions as of the last day of the same reporting period in the prior fiscal year. This effectively represents recurring dollars that we expect in the next 12-month period from the cohort of customers that existed on the last day of the same reporting period in the prior fiscal year.
•Numerator: We measure the ARR for that same cohort of customers representing all subscriptions based on confirmed customer orders booked by us as of the end of the reporting period.
Dollar-based net retention rate is obtained by dividing the numerator by the denominator. Our dollar-based net retention rate may fluctuate due to a number of factors, including the performance of our cloud platform, our success in selling bigger deals, including deals for all employees with our higher-end bundles, selling multiple-pillars from the start of our contract with new customers, faster upsells within a year, the timing and the rate of ARR expansion of our existing
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customers, potential changes in our rate of renewals and other risk factors described elsewhere in this Annual Report on Form 10-K.
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In particular, free cash flow is not a substitute for cash provided by operating activities. Additionally, the utility of free cash flow as a measure of our liquidity is further limited as it does not represent the total increase or decrease in our cash balance for a given period. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Non-GAAP Gross Profit and Non-GAAP Gross Margin
We define non-GAAP gross profit as GAAP gross profit excluding stock-based compensation expense and related payroll taxes, amortization expense of acquired intangible assets and restructuring and other charges. We define non-GAAP gross margin as non-GAAP gross profit as a percentage of revenue.
| Year Ended July 31, | |||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||
| GAAP gross profit | $ | 2,054,937 | $ | 1,690,642 | $ | 1,254,120 | |||||||||||||||||||||
Add: | |||||||||||||||||||||||||||
| Stock-based compensation expense and related payroll taxes | 70,998 | 52,766 | 40,297 | ||||||||||||||||||||||||
| Amortization expense of acquired intangible assets | 14,975 | 12,879 | 9,574 | ||||||||||||||||||||||||
Restructuring and other charges | 138 | — | — | ||||||||||||||||||||||||
| Non-GAAP gross profit | $ | 2,141,048 | $ | 1,756,287 | $ | 1,303,991 | |||||||||||||||||||||
| GAAP gross margin | 77 | % | 78 | % | 78 | % | |||||||||||||||||||||
Non-GAAP gross margin | 80 | % | 81 | % | 81 | % | |||||||||||||||||||||
Non-GAAP Income from Operations and Non-GAAP Operating Margin
We define non-GAAP income from operations as GAAP loss from operations excluding stock-based compensation expense and related payroll taxes, amortization expense of acquired intangible assets, restructuring and other charges and acquisition-related expenses. We define non-GAAP operating margin as non-GAAP income from operations as a percentage of revenue.
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| Year Ended July 31, | |||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||
| GAAP loss from operations | $ | (128,460) | $ | (121,477) | $ | (234,623) | |||||||||||||||||||||
| Add: | |||||||||||||||||||||||||||
| Stock-based compensation expense and related payroll taxes | 685,534 | 549,100 | 457,815 | ||||||||||||||||||||||||
| Amortization expense of acquired intangible assets | 16,820 | 14,624 | 11,060 | ||||||||||||||||||||||||
Restructuring and other charges | 4,921 | — | 6,564 | ||||||||||||||||||||||||
Acquisition-related expenses | 1,316 | — | — | ||||||||||||||||||||||||
| Non-GAAP income from operations | $ | 580,131 | $ | 442,247 | $ | 240,816 | |||||||||||||||||||||
| GAAP operating margin | (5) | % | (6) | % | (15) | % | |||||||||||||||||||||
Non-GAAP operating margin | 22 | % | 20 | % | 15 | % | |||||||||||||||||||||
Free Cash Flow and Free Cash Flow Margin
Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less purchases of property, equipment and other assets and capitalized internal-use software. Free cash flow margin is calculated as free cash flow divided by revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our operations that, after the investments in property, equipment and other assets and capitalized internal-use software, can be used for strategic initiatives, including investing in our business, and strengthening our financial position.
Free cash flow includes the cyclical impact of inflows and outflows resulting from contributions to our employee stock purchase plan for which the purchase period of approximately six months ends in each of our second and fourth fiscal quarters. Payroll contributions accrued as of July 31, 2025 will be used to purchase shares at the end of the current ESPP purchase period ending on December 15, 2025. Payroll contributions ultimately used to purchase shares are reclassified to stockholders' equity on the purchase date.
| Year Ended July 31, | |||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 972,453 | $ | 779,846 | $ | 462,343 | |||||||||||||||||||||
| Less: | |||||||||||||||||||||||||||
| Purchases of property, equipment and other assets | (164,252) | (144,588) | (97,197) | ||||||||||||||||||||||||
| Capitalized internal-use software | (81,508) | (50,308) | (31,527) | ||||||||||||||||||||||||
| Free cash flow | $ | 726,693 | $ | 584,950 | $ | 333,619 | |||||||||||||||||||||
As a percentage of revenue: | |||||||||||||||||||||||||||
| Net cash provided by operating activities | 36 | % | 36 | % | 29 | % | |||||||||||||||||||||
| Less: | |||||||||||||||||||||||||||
Purchases of property, equipment and other assets | (6) | (7) | (6) | ||||||||||||||||||||||||
| Capitalized internal-use software | (3) | (2) | (2) | ||||||||||||||||||||||||
| Free cash flow margin | 27 | % | 27 | % | 21 | % | |||||||||||||||||||||
Calculated Billings
Calculated billings is a non-GAAP financial measure that we reported as a key metric to measure our periodic performance through July 31, 2025. However, starting in the first quarter of fiscal 2026, we will transition to ARR as one of
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our key business metrics. Calculated billings can fluctuate significantly from period to period due to multiple factors such as deal structure, contract terms, payment schedules, timing of large enterprise deals or renewals, seasonality in customer purchasing patterns and external factors. These fluctuations make calculated billings less predictable and harder to compare consistently. As a result, calculated billings will no longer be reported beginning in fiscal 2026.
Calculated billings represents our total revenue plus the change in deferred revenue in a period. Calculated billings in any particular period aims to reflect amounts invoiced for subscriptions to access our cloud platform, together with related support services for our new and existing customers. We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. Calculated billings increased $623.1 million, or 24%, in fiscal 2025 over fiscal 2024, and $587.6 million, or 29%, in fiscal 2024 over fiscal 2023. As calculated billings continues to grow in absolute terms, we expect our calculated billings growth rate to trend down over time. We also expect that calculated billings will be affected by seasonality in terms of when we enter into agreements with customers and the mix of billings, in particular the mix of multi-year in advance billings. We strategically enter into agreements for multi-year in advance billings with our customers to achieve our and/or our customers' business objectives. Multi-year in advance billings increase our calculated billings in the period where such billings are invoiced and reduce the amount that could be invoiced and thus count toward calculated billings in future periods.
| Year Ended July 31, | |||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||
| Revenue | $ | 2,673,115 | $ | 2,167,771 | $ | 1,616,952 | |||||||||||||||||||||
Add: Total deferred revenue, end of period | 2,468,026 | 1,894,974 | 1,439,676 | ||||||||||||||||||||||||
Less: Total deferred revenue, beginning of period | (1,894,974) | (1,439,676) | (1,021,123) | ||||||||||||||||||||||||
Calculated billings | $ | 3,246,167 | $ | 2,623,069 | $ | 2,035,505 | |||||||||||||||||||||
Components of Results of Operations
Revenue
We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services. Subscription and related support services accounted for approximately 98%, 97% and 97% of our revenue for each of fiscal 2025, fiscal 2024 and fiscal 2023, respectively. Our contracts with our customers do not at any time provide the customer with the right to take possession of the software that runs our cloud platform. Our customers may also purchase professional services, such as mapping, implementation, network design and training. Professional services account for an immaterial portion of our revenue.
We generate revenue from contracts with typical durations ranging from one to three years. We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. We recognize revenue ratably over the life of the contract. Amounts that have been invoiced are recorded in deferred revenue, or they are recorded in revenue if the revenue recognition criteria have been met. Subscriptions that are invoiced annually in advance or multi-year in advance represent a significant portion of our short-term and long-term deferred revenue in comparison to invoices issued quarterly in advance or monthly in advance. We cannot predict the mix of invoicing schedules in any given period.
We generally experience seasonality in terms of when we enter into agreements with our customers. We typically enter into a higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in our second half of our fiscal year. However, because we recognize revenue ratably over the terms of our subscription contracts, a substantial portion of the revenue that we report in each period is attributable to the recognition of deferred revenue relating to agreements that we entered into during previous periods. Consequently, increases or decreases in new sales or renewals in
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any one period may not be immediately reflected as revenue for that period. Accordingly, the effect of downturns in sales and market acceptance of our platform, and potential changes in our rate of renewals, may not be fully reflected in our results of operations until future periods.
Cost of Revenue
Cost of revenue includes expenses related to operating our cloud platform in data centers, including public cloud providers, depreciation of our data center equipment, amortization of our capitalized internal-use software, amortization of intangible assets acquired through our business acquisitions and allocated overhead expenses (i.e., facilities, IT, depreciation expense and amortization expense). Cost of revenue also includes employee-related expenses, including salaries, bonuses, stock-based compensation expense and employee benefit expenses associated with our customer support and cloud operations organizations.
As our customers expand and increase the use of our cloud platform driven by additional applications and connected devices, our cost of revenue will increase due to higher bandwidth and data center expenses. However, we expect to continue to benefit from economies of scale as our customers increase the use of our cloud platform. We intend to continue to invest additional resources in our cloud platform and our customer support organizations as we grow our business. The level and timing of investment in these areas could affect our cost of revenue in the future.
Gross Profit and Gross Margin
Gross profit, or revenue less cost of revenue, and gross margin, or gross profit as a percentage of revenue, have been and will continue to be affected by various factors, including the timing of our acquisition of new customers and our renewals of and follow-on sales to existing customers, the average sales price of our services, mix of services offered in our solutions, including new product introductions, the data center and bandwidth costs associated with operating our cloud platform, the extent to which we expand our customer support and cloud operations organizations and the extent to which we can increase the efficiency of our technology, infrastructure and data centers through technological improvements. We expect our gross profit to increase in absolute dollars and our gross margin to increase slightly over the long term, although our gross profit and gross margin could fluctuate from period to period depending on the interplay of all of the above factors.
Operating Expenses
Our operating expenses consist of sales and marketing expenses, research and development expenses and general and administrative expenses. Personnel expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation expense and, with respect to sales and marketing expenses, sales commissions that are recognized as expenses over the period of benefit. Operating expenses also include overhead expenses for facilities, IT, depreciation expense and amortization expense.
Sales and Marketing
Sales and marketing expenses consist primarily of employee compensation and related expenses, including salaries, bonuses and benefits for our sales and marketing employees, sales commissions that are recognized as expenses over the period of benefit, stock-based compensation expense, marketing programs, travel and entertainment expenses, expenses for conferences and events, amortization of intangible assets acquired through our business acquisitions and allocated overhead expenses. We capitalize our sales commissions and associated payroll taxes that are incremental to the acquisition of customer contracts and recognize them as expenses over the estimated period of benefit. The amount recognized in our sales and marketing expenses reflects the amortization of expenses previously deferred as attributable to each period presented in this Annual Report on Form 10-K, as described below under "Critical Accounting Policies and Estimates."
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We intend to continue to make significant investments in our sales and marketing organization to drive additional revenue, further penetrate the market and expand our global customer base. As a result, we expect our sales and marketing expenses to continue to increase in absolute dollars and to be our largest operating expense category for the foreseeable future. In particular, we will continue to invest in growing and training our sales force, broadening our brand awareness and expanding and deepening our channel partner relationships. However, we expect our sales and marketing expenses to decrease as a percentage of our revenue over the long term, although our sales and marketing expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
Research and Development
Our research and development expenses support our efforts to add new products, new features to our existing offerings and to ensure the reliability, availability and scalability of our solutions. Our cloud platform is software-driven, and our research and development teams employ software engineers in the design, and the related development, testing, certification and support, of these solutions. Accordingly, a majority of our research and development expenses result from employee-related expenses, including salaries, bonuses and benefits, stock-based compensation expense and expenses associated with technology tools used by our engineers. We expect our research and development expenses to continue to increase in absolute dollars for the foreseeable future, as we continue to invest in research and development efforts to enhance the functionality of our cloud platform, improve the reliability, availability and scalability of our platform and access new customer markets. However, we expect our research and development expenses to decrease as a percentage of our revenue over the long term, although our research and development expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
General and Administrative
General and administrative expenses consist primarily of employee-related expenses, including salaries and bonuses, stock-based compensation expense and employee benefit expenses for our finance, legal, human resources and administrative personnel, as well as professional fees for external legal services (including certain litigation-related expenses), accounting and other related consulting services. The litigation-related expenses include professional fees and related expenses incurred by us in defending or settling significant claims that we deem not to be in the ordinary course of our business and, if applicable, accruals related to estimated losses in connection with these claims. We expect our general and administrative expenses to increase in absolute dollars for the foreseeable future as we increase the size of our general and administrative organizations, incur additional costs to support our business growth and due to any legal matters and related accruals, as further described in Note 12, Commitments and Contingencies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. However, we expect our general and administrative expenses to decrease as a percentage of our revenue over the long term, although our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses. In particular, litigation-related expenses related to significant litigation claims may result in significant fluctuations from period to period, as they are inherently subject to change and difficult to estimate.
Interest Income
Interest income consists primarily of income earned on our cash equivalents and short-term investments.
Interest Expense
Interest expense consists primarily of amortization of debt issuance costs, recognition of contractual interest expense related to the 2025 and 2028 Notes, and gains and losses related to changes in the fair value of interest rate swaps. For further information refer to Note 8, Derivative Instruments and Note 10, Convertible Senior Notes, of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
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Other Expense, Net
Other expense, net consists primarily of foreign currency transaction gains and losses and changes in fair value of our non-designated derivative instruments.
Provision for Income Taxes
Our provision for income taxes consists primarily of income and withholding taxes in the foreign jurisdictions, and U.S. income taxes from a tax law change related to mandatory capitalization of research and development expenses for tax years starting January 1, 2022. In the United States, we have recorded deferred tax assets for which we provide a full valuation allowance, which includes net operating loss and research and development tax credits carryforwards. We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that some or all of those deferred tax assets may not be realized based on our history of losses.
Results of Operations
The following tables set forth our results of operations for the periods presented in dollars and as a percentage of our revenue:
| Year Ended July 31, | |||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||
| Revenue | $ | 2,673,115 | $ | 2,167,771 | $ | 1,616,952 | |||||||||||||||||||||
Cost of revenue (1)(2)(3) | 618,178 | 477,129 | 362,832 | ||||||||||||||||||||||||
| Gross profit | 2,054,937 | 1,690,642 | 1,254,120 | ||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||
Sales and marketing (1)(2)(3) | 1,259,158 | 1,100,239 | 959,102 | ||||||||||||||||||||||||
Research and development (1)(2)(3) | 672,485 | 499,828 | 350,786 | ||||||||||||||||||||||||
General and administrative (1)(3)(4) | 251,754 | 212,052 | 178,855 | ||||||||||||||||||||||||
| Total operating expenses | 2,183,397 | 1,812,119 | 1,488,743 | ||||||||||||||||||||||||
| Loss from operations | (128,460) | (121,477) | (234,623) | ||||||||||||||||||||||||
| Interest income | 125,364 | 109,130 | 60,462 | ||||||||||||||||||||||||
Interest expense (5) | (9,522) | (13,132) | (6,541) | ||||||||||||||||||||||||
| Other expense, net | (5,673) | (3,750) | (1,862) | ||||||||||||||||||||||||
| Loss before income taxes | (18,291) | (29,229) | (182,564) | ||||||||||||||||||||||||
Provision for income taxes | 23,187 | 28,477 | 19,771 | ||||||||||||||||||||||||
| Net loss | $ | (41,478) | $ | (57,706) | $ | (202,335) | |||||||||||||||||||||
(1) Includes stock-based compensation expense and related payroll taxes:
| Cost of revenue | $ | 70,998 | $ | 52,766 | $ | 40,297 | ||||||||||||||
| Sales and marketing | 259,562 | 230,597 | 223,096 | |||||||||||||||||
| Research and development | 257,663 | 186,107 | 121,359 | |||||||||||||||||
| General and administrative | 97,311 | 79,630 | 73,063 | |||||||||||||||||
| Total | $ | 685,534 | $ | 549,100 | $ | 457,815 | ||||||||||||||
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(2) Includes amortization expense of acquired intangible assets:
| Cost of revenue | $ | 14,975 | $ | 12,879 | $ | 9,574 | ||||||
| Sales and marketing | 1,700 | 1,232 | 773 | |||||||||
| Research and development | 145 | 513 | 713 | |||||||||
| Total | $ | 16,820 | $ | 14,624 | $ | 11,060 | ||||||
(3) Includes restructuring and other charges, excluding stock-based compensation expense:
| Cost of revenue | $ | 138 | $ | — | $ | — | ||||||
| Sales and marketing | — | — | 4,422 | |||||||||
| Research and development | 4,783 | — | 843 | |||||||||
| General and administrative | — | — | 1,299 | |||||||||
| Total | $ | 4,921 | $ | — | $ | 6,564 | ||||||
(4) Includes acquisition-related expenses | $ | 1,316 | $ | — | $ | — | ||||||
(5) Includes amortization of debt issuance costs | $ | 4,293 | $ | 3,914 | $ | 3,894 | ||||||
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The following table sets forth our results of operations for the periods presented as a percentage of our revenue:
| Year Ended July 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-07-27 | RUBIN KEVIN | Chief Financial Officer | Sell | -503 ×5 | $147.12 | -$74,002 |
| 2026-07-06 | Schlossman Robert | Chief Legal Officer | Sell | -122 | $150.00 | -$18,300 |
| 2026-06-25 | RUBIN KEVIN | Chief Financial Officer | Sell | -3,000 ×5 | $124.22 | -$372,669 |
| 2026-06-22 | Geller Adam | Chief Product Officer | Sell | -2,817 | $122.60 | -$345,364 |
| 2026-06-17 | BEER JAMES A | Director | Sell | -177 | $125.50 | -$22,214 |
| 2026-06-16 | Chaudhry Jagtar Singh | CEO & Chairman | Sell | -2,878 | $126.43 | -$363,864 |
| 2026-06-16 | Geller Adam | Chief Product Officer | Sell | -1,940 | $126.43 | -$245,273 |
| 2026-06-16 | Rich Michael J. | CRO and President of WW Sales | Sell | -4,184 | $126.43 | -$528,981 |
| 2026-06-16 | Schlossman Robert | Chief Legal Officer | Sell | -3,146 | $126.43 | -$397,748 |
| 2026-06-16 | RUBIN KEVIN | Chief Financial Officer | Sell | -1,686 | $126.43 | -$213,160 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-09-10 10-K expected by 2026-09-25 (in 16 days)
- ~2026-11-24 10-Q expected by 2026-11-29 (in 91 days)
- ~2027-02-25 10-Q expected by 2027-03-02 (in 184 days)
- ~2027-05-25 10-Q expected by 2027-05-30 (in 273 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-05-26 10-Q Quarterly Report
- 2026-05-26 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-16 8-K Officer/Director Change
- 2026-02-26 10-Q Quarterly Report
- 2026-02-26 8-K Earnings Release; Financial Statements and Exhibits
- 2025-11-25 10-Q Quarterly Report
- 2025-11-25 8-K Earnings Release; Financial Statements and Exhibits
- 2025-09-11 10-K Annual Report
- 2025-09-02 8-K Earnings Release; Financial Statements and Exhibits
- 2025-07-03 8-K Material Agreement Entered; Material Financial Obligation; Unregistered Equity Sale; Other Events; Financial Statements and Exhibits
- 2025-06-23 8-K Officer/Director Change
- 2025-06-13 8-K Officer/Director Change
- 2025-05-29 10-Q Quarterly Report
- 2025-05-29 8-K Earnings Release; Officer/Director Change; Financial Statements and Exhibits
- 2025-05-23 8-K Officer/Director Change; Financial Statements and Exhibits