The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K. Amounts reported in millions are rounded based on the amounts in thousands. As a result, the sum of the components reported in millions may not equal the total amount reported in millions due to rounding. In addition, percentages presented may not add to their respective totals or recalculate due to rounding. In addition to historical financial information, the following discussion contains forward-looking statements that are based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” under Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A of our Annual Report on Form 10-K. Our fiscal year ends January 31. References to fiscal 2027, for example, refer to the fiscal year ending January 31, 2027.
Overview
We are the leading independent identity provider. Our Okta Platform and Auth0 Platform enable our customers to securely connect the right people to the right technologies and services at the right time. Every day, thousands of organizations and millions of people use our platforms to securely access a wide range of cloud, mobile, web and SaaS applications, on-premises servers, application programming interfaces (“APIs”), IT infrastructure providers, and services from a multitude of devices. For IT and security leaders, the Okta Platform governs the seamless and secure access by human users and non-human identities (“NHIs”) to the applications they need to do their most important work. We are expanding these capabilities to include AI agents through product offerings that are currently available or under development. Developers leverage our Okta Platform and Auth0 Platform to securely and efficiently embed identity for both human users and, increasingly, AI agents into the software they build, allowing them to innovate and focus on their core mission.
Our customers consist of leading global organizations ranging from the largest enterprises to small- and medium-sized businesses, universities, nonprofits and government agencies. We partner with a broad range of application, IT infrastructure and security vendors through our Okta Integration Network. As of July 31, 2026, we had over 7,000 integrations with these cloud, mobile and web applications and IT infrastructure and security vendors.
We employ a SaaS business model and generate revenue primarily by selling multi-year subscriptions to our cloud-based offerings. We focus on attracting and retaining our customers by building on and increasing the value we provide to them over time. This commitment to our customers’ success helps drive increased customer investment in the number of users of our Okta Platform and Auth0 Platform and adoption of our additional product offerings. We sell our product offerings directly through our field and inside sales teams, as well as indirectly through our network of channel partners, including cloud marketplaces, resellers, system integrators and other distribution partners. Our subscription fees include the use of our service and our technical support and management of our platforms. We base subscription fees primarily on the solutions used and the number of users on our platforms. We typically invoice customers in advance in annual installments for subscriptions to our platforms.
Our revenue is relatively predictable as a result of our subscription-based business model, which constituted 98% of total revenue for the six months ended July 31, 2026. Future growth may be impacted by longer sales cycles, which we have experienced, which in turn, could result in delays in deals closing, creating near-term headwinds for cash flow, RPO and current RPO growth as well as potential future impacts on revenue growth and other key metrics on a trailing basis.
Impact of Cybersecurity Incidents
In the past we have experienced cybersecurity incidents, such as the January 2022 incident involving one of our third-party service providers and the October 2023 incident where a threat actor gained unauthorized access to and stole information from our third-party customer support system, that harmed our reputation and customer relations and adversely impacted our financial results. While we expect the impact of these security incidents to adversely affect our future financial performance, we cannot predict the extent of such impact with certainty. Due to
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the nature of our business, the announcement of any security incidents, even if not significant, could have these impacts.
Impact of Current Economic Conditions
Worldwide economic and political uncertainties and negative trends, including financial and credit market fluctuations, tariffs and increasing trade protectionism, changes in government spending levels, uncertainty in the banking sector, changing interest rates, inflation and other impacts from the macroeconomic environment have, and could continue to, adversely affect our business operations or financial results. As we continue to monitor the direct and indirect impacts of these circumstances, the broader implications of these macroeconomic and political events on our business, results of operations and overall financial position remain uncertain. See the section titled “Risk Factors” included under Part II, Item 1A below for further discussion of the possible impact of these factors and other risks on our business.
Components of Results of Operations
Revenue
Subscription Revenue. Subscription revenue primarily consists of fees for access to and usage of our cloud-based platforms and related support. Subscription revenue is driven primarily by the number of customers, the number of users per customer and the solutions used. We typically invoice customers in advance in annual installments for subscriptions to our platforms.
Professional Services and Other. Professional services revenue includes fees from assisting customers in implementing and optimizing the use of our solutions. These services include application configuration, system integration and training services.
We generally invoice customers as the work is performed for time-and-materials arrangements, and up front for fixed fee arrangements. Professional services revenue is recognized as the services are performed.
Overhead Allocation and Employee Compensation Costs
We allocate shared costs, such as facilities costs (including rent, utilities and depreciation on assets shared by all departments), certain information technology costs, security costs and recruiting costs to all departments based on headcount. As such, allocated shared costs are reflected in each of the cost of revenue and operating expense categories. Employee compensation costs reflected in each of the cost of revenue and operating expense categories include salaries, bonuses, compensation related taxes, benefits and stock-based compensation. Additionally included in the sales and marketing expense category are sales commissions and related taxes.
Cost of Revenue and Gross Margin
Cost of Subscription. Cost of subscription primarily consists of expenses related to hosting our services and providing support. These expenses include employee-related costs associated with our cloud-based infrastructure, our product security organization and our customer support organization, third-party hosting fees, software and maintenance costs, outside services associated with the delivery of our subscription services, amortization expense associated with capitalized internal-use software and acquired developed technology and allocated overhead.
We intend to continue to invest additional resources in our platform infrastructure, our platforms’ support organizations and security posture. We will continue to invest in technology innovation and we anticipate that costs qualifying for capitalization of internal-use software costs and related amortization may fluctuate over time. We expect our investment in technology to expand the capability of our platforms, enabling us to improve our gross margin over time. The level and timing of investment in these areas could affect our cost of subscription revenue in the future.
Cost of Professional Services and Other. Cost of professional services and other consists primarily of employee-related costs for our professional services delivery team, travel-related costs, allocated overhead and costs of outside services associated with supplementing our professional services delivery team. The cost of providing professional services has historically been higher than the associated revenue we generate.
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Gross Margin. Gross margin is gross profit expressed as a percentage of total revenue. Our gross margin may fluctuate from period to period as a result of the timing and amount of investments to expand our hosting capacity and our continued efforts to build platform support and professional services teams.
Operating Expenses
Research and Development. Research and development expenses consist primarily of employee compensation costs and allocated overhead. We believe that continued investment in our platforms is important for our growth.
Sales and Marketing. Sales and marketing expenses consist primarily of employee compensation costs, costs of general marketing and promotional activities, travel-related expenses, amortization expense associated with acquired customer relationships and trade names and allocated overhead. Commissions earned by our sales force that are considered incremental and recoverable costs of obtaining a contract with a customer are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be generally five years.
General and Administrative. General and administrative expenses consist primarily of employee compensation costs for finance, accounting, legal, information technology and human resources personnel. In addition, general and administrative expenses include acquisition and integration-related costs, non-personnel costs, such as legal, accounting and other professional fees, charitable contributions, allocated overhead and all other supporting corporate expenses.
Interest and Other, Net
Interest and other, net consists of interest income, which primarily includes income from our investment holdings, gains and losses from our strategic investments, and interest expense which consists of amortization of debt issuance costs and contractual interest expense for our convertible senior notes.
Provision for Income Taxes
Our provision for income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions where we operate. We evaluate and update our estimated annual effective income tax rate on a quarterly basis based on current and forecasted operating results and enacted tax laws. The timing and mix of actual results compared to forecasted results may impact the timing of recognition of our provision for income taxes.
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Results of Operations
The following table sets forth our results of operations for the periods presented:
Three Months Ended July 31, Six Months Ended July 31,
2026 2025 2026 2025
(dollars in millions)
Revenue:
Subscription $ 793 $ 711 $ 1,543 $ 1,384
Professional services and other 12 17 27 32
Total revenue 805 728 1,570 1,416
Cost of revenue:
Subscription(1) 145 147 295 283
Professional services and other(1) 19 21 39 40
Total cost of revenue 164 168 334 323
Gross profit 641 560 1,236 1,093
Operating expenses:
Research and development(1) 163 160 326 314
Sales and marketing(1) 273 246 551 483
General and administrative(1) 98 113 196 216
Total operating expenses 534 519 1,073 1,013
Operating income 107 41 163 80
Interest expense — (1) (1) (2)
Interest income and other, net 19 27 42 57
Interest and other, net 19 26 41 55
Income before provision for income taxes 126 67 204 135
Provision for income taxes 10 — 14 6
Net income $ 116 $ 67 $ 190 $ 129
(1) Includes stock-based compensation expense as follows:
Three Months Ended July 31, Six Months Ended July 31,
2026 2025 2026 2025
(dollars in millions)
Cost of subscription revenue $ 15 $ 21 $ 31 $ 38
Cost of professional services and other revenue 1 2 3 5
Research and development 36 51 77 98
Sales and marketing 32 35 61 67
General and administrative 30 35 59 64
Total stock-based compensation expense $ 114 $ 144 $ 231 $ 272
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The following table sets forth our results of operations for the periods presented as a percentage of our total revenue:
Three Months Ended July 31, Six Months Ended July 31,
2026 2025 2026 2025
Revenue
Subscription 99 % 98 % 98 % 98 %
Professional services and other 1 2 2 2
Total revenue 100 100 100 100
Cost of revenue
Subscription 18 20 19 20
Professional services and other 2 3 2 3
Total cost of revenue 20 23 21 23
Gross profit 80 77 79 77
Operating expenses
Research and development 20 22 21 22
Sales and marketing 35 34 35 34
General and administrative 12 15 13 15
Total operating expenses 67 71 69 71
Operating income 13 6 10 6
Interest expense — — — —
Interest income and other, net 3 3 3 4
Interest and other, net 3 3 3 4
Income before provision for income taxes 16 9 13 10
Provision for income taxes 2 — 1 1
Net income 14 % 9 % 12 % 9 %
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Comparison of the Three and Six Months Ended July 31, 2026 and 2025
Revenue
Three Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
Revenue:
Subscription $ 793 $ 711 $ 82 12 %
Professional services and other 12 17 (5) (33)
Total revenue $ 805 $ 728 $ 77 11 %
Percentage of revenue:
Subscription 99 % 98 %
Professional services and other 1 2
Total 100 % 100 %
Six Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
Revenue:
Subscription $ 1,543 $ 1,384 $ 159 12 %
Professional services and other 27 32 (5) (17)
Total revenue $ 1,570 $ 1,416 $ 154 11 %
Percentage of revenue:
Subscription 98 % 98 %
Professional services and other 2 2
Total 100 % 100 %
Three and six months ended
For the three and six months ended July 31, 2026, the increase in subscription revenue was primarily due to an increase in users and sales of additional solutions to existing customers and the addition of new customers. The increase in revenue was attributable to increased revenue from existing customers as reflected in our 107% Dollar-Based Net Retention Rate as of July 31, 2026 and an increase in the number of customers as detailed in our Key Business Metrics.
For the three and six months ended July 31, 2026, professional services and other revenue decreased as a result of the shift of our professional services business to global systems integrators. We expect professional services and other revenue to decline as we shift more engagements to our partner ecosystem.
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Cost of Revenue, Gross Profit and Gross Margin
Three Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
Cost of revenue:
Subscription $ 145 $ 147 $ (2) — %
Professional services and other 19 21 (2) (8)
Total cost of revenue $ 164 $ 168 $ (4) (1) %
Gross profit $ 641 $ 560 $ 81 14 %
Gross margin:
Subscription 82 % 80 %
Professional services and other (70) (24)
Total gross margin 80 % 77 %
Six Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
Cost of revenue:
Subscription $ 295 $ 283 $ 12 4 %
Professional services and other 39 40 (1) (2)
Total cost of revenue $ 334 $ 323 $ 11 4 %
Gross profit $ 1,236 $ 1,093 $ 143 13 %
Gross margin:
Subscription 81 % 80 %
Professional services and other (49) (25)
Total gross margin 79 % 77 %
Three months ended
For the three months ended July 31, 2026, cost of subscription revenue decreased primarily due to a $7 million decrease in amortization expense associated with acquired developed technology, and a $6 million decrease in stock-based compensation expense, offset by an $8 million increase in hosting fees and a $3 million increase in software costs.
Our gross margin for subscription revenue increased to 82% for the three months ended July 31, 2026 compared to 80% for the three months ended July 31, 2025. The increase was primarily driven by lower amortization expense associated with acquired developed technology and improved spend efficiency resulting in lower relative cost of subscription revenue.
For the three months ended July 31, 2026, cost of professional services and other revenue remained relatively flat.
Our gross margin for professional services and other revenue decreased to (70)% for the three months ended July 31, 2026 compared to (24)% for the three months ended July 31, 2025 as a result of lower professional services and other revenue while associated costs remained relatively flat.
Six months ended
For the six months ended July 31, 2026, cost of subscription revenue increased primarily due to an increase in hosting fees of $16 million, software costs of $5 million and labor costs of $4 million, offset by decreases in stock-
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based compensation expense of $7 million and amortization expense associated with acquired developed technology of $6 million.
Our gross margin for subscription revenue improved to 81% for the six months ended July 31, 2026 compared to 80% for the six months ended July 31, 2025. The improvement was primarily driven by lower amortization expense associated with acquired developed technology and improved spend efficiency resulting in lower relative cost of subscription revenue.
For the six months ended July 31, 2026, cost of professional services and other revenue remained relatively flat.
Our gross margin for professional services and other revenue decreased to (49)% for the six months ended July 31, 2026 compared to (25)% for the six months ended July 31, 2025 as a result of lower professional services and other revenue while associated costs remained relatively flat.
Operating Expenses
Research and Development Expenses
Three Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
Research and development $ 163 $ 160 $ 3 2 %
Percentage of revenue 20 % 22 %
Six Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
Research and development $ 326 $ 314 $ 12 4 %
Percentage of revenue 21 % 22 %
Three months ended
For the three months ended July 31, 2026, research and development expenses increased due to an increase in labor costs of $10 million and hosting fees of $5 million, offset by a decrease in stock-based compensation expense of $15 million. The decrease in research and development as a percentage of total revenue was primarily driven by improved spend efficiency.
Six months ended
For the six months ended July 31, 2026, research and development expenses increased due to an increase in labor costs of $21 million and hosting fees of $8 million, offset by a decrease in stock-based compensation expense of $21 million. The decrease in research and development as a percentage of total revenue was primarily driven by improved spend efficiency.
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Sales and Marketing Expenses
Three Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
Sales and marketing $ 273 $ 246 $ 27 10 %
Percentage of revenue 35 % 34 %
Six Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
Sales and marketing $ 551 $ 483 $ 68 14 %
Percentage of revenue 35 % 34 %
Three months ended
For the three months ended July 31, 2026, sales and marketing expenses increased primarily due to increases in labor costs of $25 million and marketing costs of $2 million, offset by a decrease in stock-based compensation expense of $3 million.
Six months ended
For the six months ended July 31, 2026, sales and marketing expenses increased primarily due to increases in labor costs of $54 million and marketing costs of $8 million, offset by a decrease in stock-based compensation expense of $6 million.
We expect our sales and marketing expenses will continue to be our largest operating expense category for the foreseeable future.
General and Administrative Expenses
Three Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
General and administrative $ 98 $ 113 $ (15) (13) %
Percentage of revenue 12 % 15 %
Six Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
General and administrative $ 196 $ 216 $ (20) (9) %
Percentage of revenue 13 % 15 %
Three months ended
For the three months ended July 31, 2026, general and administrative expenses decreased primarily due to decreases in stock-based compensation expense of $5 million and the impact of timing of Okta for Good grants of $4 million. The decrease in general and administrative as a percentage of total revenue was primarily driven by improved spend efficiency. We expect general and administrative expenses as a percentage of total revenue to decrease as our total revenue grows.
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Six months ended
For the six months ended July 31, 2026, general and administrative expenses decreased primarily due to decreases in stock-based compensation expense of $5 million and the impact of timing of Okta for Good grants of $6 million. The decrease in general and administrative as a percentage of total revenue was primarily driven by improved spend efficiency. We expect general and administrative expenses as a percentage of total revenue to decrease as our total revenue grows.
Interest and Other, Net
Three Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
Interest expense $ — $ (1) $ 1 (68) %
Interest income and other, net 19 27 (8) (29)
Interest and other, net $ 19 $ 26 $ (7) (27) %
Six Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
Interest expense $ (1) $ (2) $ 1 (61) %
Interest income and other, net 42 57 (15) (27)
Interest and other, net $ 41 $ 55 $ (14) (26) %
Three and six months ended
For the three and six months ended July 31, 2026, interest and other, net decreased primarily due to lower interest income from our short-term investment holdings. We expect interest income to decrease in fiscal 2027 following the cash settlement of our 2026 Notes and as we deploy investable cash to fund our Share Repurchase Program.
Provision for Income Taxes
Three Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
Provision for income taxes $ 10 $ — $ 10 Not Meaningful
Six Months Ended July 31,
2026 2025 $ Change % Change
(dollars in millions)
Provision for income taxes $ 14 $ 6 $ 8 117 %
Three and six months ended
For the three and six months ended July 31, 2026, our provision for income taxes increased by $10 million and $8 million, respectively. This change was primarily driven by the increase of forecasted pre-tax income for the full fiscal year 2027 and the tax impacts of the Axiom integration.
We periodically evaluate the realizability of our deferred tax assets based on all available evidence, both positive and negative. The realization of the net deferred tax assets is dependent on our ability to generate sufficient future taxable income during the periods prior to the expiration of tax attributes to fully utilize these assets. Given
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our current and anticipated future earnings, we may release a significant portion of our valuation allowance in the foreseeable future if there is sufficient positive evidence that outweighs the negative evidence. The release of the valuation allowance would result in the recognition of certain deferred tax assets and a corresponding decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of any potential valuation allowance release remains uncertain and is subject to change on the basis of the level of profitability that we are able to actually achieve. As of July 31, 2026, we continue to maintain a full valuation allowance on our deferred tax assets in the United States.
Key Business Metrics
We review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
As of July 31,
2026 2025
(dollars in millions)
Customers with annual contract value (“ACV”) above $100,000 5,255 4,945
Dollar-based net retention rate for the trailing 12 months ended 107 % 106 %
Current remaining performance obligations $ 2,585 $ 2,265
Remaining performance obligations $ 4,858 $ 4,152
Number of Customers with Annual Contract Value Above $100,000
The number of customers who have greater than $100,000 in annual contract value (“ACV”) with us was 5,255 and 4,945 as of July 31, 2026 and 2025, respectively. We expect this trend to continue as larger enterprises recognize the value of our platforms and replace their legacy identity access management infrastructure. We define a customer as a separate and distinct buying entity, such as a company, an educational or government institution, or a distinct business unit of a large company that has an active contract with us or one of our partners to access our platforms. For purposes of determining our customer count, we do not include customers that use our platforms under self-service arrangements only.
Dollar-Based Net Retention Rate
Part of our ability to generate revenue is dependent upon our ability to maintain our relationships with our customers and to increase their utilization of our platforms. We believe we can achieve these goals by focusing on delivering value and functionality that enables us to both retain our existing customers and expand the number of users and solutions used within an existing customer. One way that we assess our performance in this area is by measuring our Dollar-Based Net Retention Rate. Our Dollar-Based Net Retention Rate measures our ability to increase revenue across our existing customer base through expansion of users and solutions associated with a customer as offset by churn and contraction in the number of users and/or solutions associated with a customer.
Our Dollar-Based Net Retention Rate is based upon our ACV, which is calculated based on the terms of that customer’s contract and represents the total contracted annual subscription amount as of that period end. We calculate our Dollar-Based Net Retention Rate as of a period end by starting with the ACV from all customers as of twelve months prior to such period end (“Prior Period ACV”). We then calculate the ACV from these same customers as of the current period end (“Current Period ACV”). Current Period ACV includes any upsells and is net of contraction or churn over the trailing twelve months but excludes ACV from new customers in the current period. We then divide the Current Period ACV by the Prior Period ACV to arrive at our Dollar-Based Net Retention Rate. Our Dollar-Based Net Retention Rate is inclusive of ACV from self-service customers.
Our Dollar-Based Net Retention Rate is primarily attributable to our healthy gross retention, an expansion of users and upselling additional solutions within our existing customers. Larger enterprises often implement a limited initial deployment of our platforms before increasing their deployment on a broader scale.
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Remaining Performance Obligations (“RPO”)
RPO represent all future, non-cancelable, contracted revenue under our subscription contracts with customers that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-cancelable amounts that will be invoiced and recognized as revenue in future periods. Current RPO represents the portion of RPO expected to be recognized during the next 12 months. RPO fluctuates due to a number of factors, including the timing, duration and dollar amount of customer contracts and fluctuations in foreign currency exchange rates.
Liquidity and Capital Resources
As of July 31, 2026, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $2,299 million, which were held for working capital and general corporate purposes, including potential future acquisition activity. Our cash equivalents and investments consisted primarily of U.S. government securities, money market funds, corporate debt securities and certificates of deposit.
Recent macroeconomic events, including changes in interest rates, global inflation and bank failures, have led to further economic uncertainty in the global economy. To mitigate risk, our cash and cash equivalents are distributed across large financial institutions. In addition, we have policy restrictions in place on the types of securities that can be purchased as part of our available-for-sale securities portfolio. These restrictions take credit quality, liquidity and diversification into consideration among other criteria. We continue to monitor the impacts of this situation; however, there can be no assurances that conditions in the banking sector and in global financial markets will not worsen and/or adversely affect us.
In January 2026, our board authorized a stock repurchase program of up to $1 billion of our outstanding shares of Class A common stock. We have repurchased and may continue to repurchase shares of our Class A common stock from time to time through open market purchases, in privately negotiated transactions, or by other means. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18. We may also, from time to time, enter into Rule 10b5-1 trading plans to facilitate repurchases of shares. The timing and the amount of stock repurchases under the Share Repurchase Program will be based on our evaluation of factors including business and market conditions, corporate and regulatory requirements, and other considerations. The Share Repurchase Program does not obligate us to repurchase any specific number of shares and may be modified, suspended, or terminated at any time. During the six months ended July 31, 2026, we repurchased and immediately retired 4,569,262 shares of our Class A common stock for an aggregate amount, including commissions, of $366 million under the Share Repurchase Program. As of July 31, 2026, $555 million of the originally authorized amount under the Share Repurchase Program remained available for future repurchases.
We satisfy employee tax withholding obligations due upon the vesting of share-based awards through net share settlement using available cash. This practice reduces our equity dilution rate and impacts liquidity as our cash requirements for these obligations are primarily driven by the market price of our Class A common stock at the time of vesting. During the six months ended July 31, 2026 and July 31, 2025, cash paid to satisfy these employee tax withholding obligations was $100 million and $102 million, respectively.
The 2026 Notes matured on June 15, 2026, and we settled the full remaining $350 million principal amount outstanding in cash.
We believe our existing cash and cash equivalents, our investments and cash provided by sales of our solutions will be sufficient to meet our short-term and long-term projected working capital and capital expenditure needs for the foreseeable future. Our future capital requirements will depend on many factors, including our subscription growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the expansion of our international operations, the introduction of new and enhanced product offerings, and the continuing market adoption of our platforms. We continue to assess our capital structure and evaluate the merits of deploying available cash. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights; additionally, we have repurchased, and may in the future, repurchase shares of our Class A common stock from time to time under our Share Repurchase Program. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash
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flows necessary to expand our operations and invest in new technologies, this could reduce our ability to compete successfully and harm our results of operations.
A significant majority of our customers pay in advance for annual subscriptions. Therefore, a substantial source of our cash is from our deferred revenue, which is included on our condensed consolidated balance sheet as a liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is recognized as revenue in accordance with our revenue recognition policy. As of July 31, 2026, we had deferred revenue of $1,781 million, of which $1,751 million was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Six Months Ended July 31,
2026 2025
(dollars in millions)
Net cash provided by operating activities $ 511 $ 408
Net cash provided by investing activities 193 118
Net cash used in financing activities (794) (67)
Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash (5) 10
Net increase (decrease) in cash, cash equivalents and restricted cash $ (95) $ 469
Operating Activities
Our largest source of operating cash is cash collections from our customers for subscription and professional services. Our primary uses of cash from operating activities are for employee-related expenditures, marketing expenses and third-party hosting costs.
During the six months ended July 31, 2026, cash provided by operating activities was $511 million, an increase of $103 million compared to the six months ended July 31, 2025. The increase was primarily attributable to an increase in cash received from customers and improved spend efficiency.
Investing Activities
During the six months ended July 31, 2026, cash provided by investing activities was $193 million compared to cash provided by investing activities of $118 million during the six months ended July 31, 2025. The change was primarily driven by higher proceeds from sales, maturities and redemption of available-for-sale securities partially offset by higher purchases of securities available-for-sale.
Financing Activities
During the six months ended July 31, 2026, cash used in financing activities was $794 million, an increase of $727 million compared to the six months ended July 31, 2025. The increase was primarily attributable to an increase in common stock repurchases and payments upon maturity of the 2026 Notes. The cash outlay for common stock repurchases and taxes paid on net share settlement of equity awards are generally predicated on the closing price of our stock on the respective transaction dates.
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Material Cash Requirements
Contractual Obligations
The following table represents our known short-term (i.e., the next twelve months) and long-term (i.e., beyond the next twelve months) obligations as of July 31, 2026:
Short-term Long-term Total
(dollars in millions)
Operating leases 36 55 91
Purchase obligations(1) 445 696 1,141
Total contractual obligations $ 481 $ 751 $ 1,232
(1) Purchase obligations primarily relate to data center hosting services and other sales and marketing obligations.
Indemnification Agreements
In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with our directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No material demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our condensed consolidated balance sheets, condensed consolidated statements of operations, condensed consolidated statements of comprehensive income, or condensed consolidated statements of cash flows.
Critical Accounting Estimates
There have been no significant changes to our critical accounting estimates for the six months ended July 31, 2026 from those discussed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026.
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