You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current expectations 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 discussed in the section titled “Risk Factors” and in other parts of this Quarterly Report on Form 10-Q. 25 Table of Contents Overview Zoom is redefining modern work as a system of action, turning live collaboration into completed results and moving conversations to completion. From entrepreneurs to global enterprises, customers choose Zoom to seamlessly collaborate, communicate, and drive outcomes across meetings, chat, phone, contact center, events, and more—all with the built-in assistance of Zoom AI. Our culture of delivering happiness, grounded in our core value of care, is fundamental to everything we do at Zoom. Our system of action for modern work bridges work both inside and outside the organization, connecting horizontal and vertical workflows, driving outcomes for customers, turning seamless communication into action across sales, marketing and customer experience to drive business value, all powered by Zoom AI. AI is core to Zoom’s product innovation. We continue to advance our AI capabilities, focusing on three priorities that bring our system of action to life: elevating Zoom Workplace with AI, driving growth of new AI products, and scaling AI-first customer experience. Zoom AI is embedded directly into Zoom products to empower workers to increase productivity and drive business value. Our federated approach to AI enables the use of multiple third-party and open-source large language models (“LLMs”), including models that we have fine-tuned or adapted, alongside Zoom’s small language models (“SLMs”), to complete tasks for users. Zoom’s federated approach allows its platform architecture to dynamically select from multiple AI models, including those from OpenAI, Anthropic, and NVIDIA, making AI accessible and affordable so more people can incorporate it into their day-to-day workflows. As part of our continued innovation, Zoom recently introduced ZoomMate, a next-generation product that connects live conversational context to agentic search, workflow execution, custom agents, and AI content creation. Zoom Workplace brings together Zoom’s core communication and productivity tools—including Zoom Meetings, Zoom Phone, Zoom Team Chat, Zoom Canvas, Zoom Whiteboard, and Workvivo—to support collaboration within large enterprises to small and medium businesses. Zoom Customer Experience (“Zoom CX”) supports customer engagement across the customer lifecycle through Zoom Contact Center and Zoom Virtual Agent for customer service teams. For other verticals, Zoom offers solutions such as Zoom Revenue Accelerator and Common Room for sales teams, Zoom Events and Zoom Webinars for marketing teams, and BrightHire for human resources. We believe we are well-positioned as AI technology continues to advance. We are enhancing our agentic AI capabilities throughout the platform to continue delivering business value to customers, with the recent introduction of ZoomMate, Zoom AI Productivity Suite, and My Notes, among other capabilities. In line with our commitment to responsible AI, Zoom does not use customer audio, video, chat, screen sharing, attachments, or other communications (such as poll results, whiteboard, and reactions) to train Zoom’s or third-party AI models. Trust is a cornerstone of the Zoom platform. We equip users with a comprehensive set of tools designed to make their interactions safe, secure, and private. We believe that strong security should never compromise a great user experience. Zoom’s platform prioritizes security and privacy, with 20 co-located data centers globally and robust encryption options. We are committed to safeguarding our customers' data. We derive our revenue primarily from subscription agreements with customers for access to our AI-first, open work platform, which was $1,277.2 million and $1,217.2 million for the three months ended July 31, 2026 and 2025, respectively, representing period-over-period growth of 4.9%. We generated net income of $1,542.4 million and $358.6 million for the three months ended July 31, 2026 and 2025, respectively. Our revenue was $2,516.2 million and $2,391.9 million for the six months ended July 31, 2026 and 2025, respectively, representing period-over-period growth of 5.2%. We generated net income of $1,968.1 million and $613.2 million for the six months ended July 31, 2026 and 2025, respectively. Net cash provided by operating activities was $1,016.4 million and $1,005.2 million for the six months ended July 31, 2026 and 2025, respectively. Macroeconomic Conditions and Other Factors The macroeconomic environment, including ongoing geopolitical uncertainties, evolving monetary policy, energy market volatility, and foreign currency exchange rate fluctuations, has created and may continue to create uncertainty in demand for subscriptions to our AI-first, open work platform. Geopolitical developments and broader regional conflicts have contributed to elevated energy prices and heightened volatility in financial markets, which may influence inflation expectations, corporate cost structures, and global growth prospects. Although headline inflation in many major economies has moderated relative to prior years, cost pressures remain uneven across regions, and interest rates remain elevated relative to recent historical levels. The combined effects of interest rates, policy actions, and slower global growth conditions continue to influence corporate spending patterns. These dynamics, together with shifts in customers’ internal priorities, including budget 26 Table of Contents realignment and evolving investment focus, have contributed to variability in sales cycles and continued caution in enterprise spending decisions, potentially affecting customer upsell, downsell, or renewal activity. We continue to monitor the potential effects of these circumstances as well as the overall global economy and geopolitical landscape on our business and financial results. The implications of macroeconomic conditions on our business, results of operations, and overall financial position, particularly over the long term, remain uncertain. Refer to “Part II—Other Information, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q for further discussions of the potential impacts of the current macroeconomic conditions on our business. Key Business Metrics and Factors Affecting Our Performance We review the following key business metrics and strategic factors to measure our performance, identify trends, formulate financial projections, and make strategic decisions, including evaluating our ability to grow the number of customers who use our AI-first, open work platform. Our operating results and growth prospects will depend, in part, on our ability to attract new customers. While we believe there is a significant market opportunity for our products and services, it is difficult to predict customer adoption rates, the future growth rate, or the size of the market for our platform. Large Enterprise Customers - Customers Contributing More Than $100,000 of Trailing 12 Months Revenue We focus on growing the number of customers that contribute more than $100,000 of trailing 12 months revenue as it is a measure of our ability to scale with our customers and attract larger organizations to Zoom. Revenue from these customers represented 33.4% and 32.2% of total revenue for the three months ended July 31, 2026 and 2025, respectively, and 33.2% and 32.2% of total revenue for the six months ended July 31, 2026 and 2025, respectively. As of July 31, 2026 and 2025, we had 4,625 and 4,274 customers, respectively, that contributed more than $100,000 of trailing 12 months revenue, demonstrating our increasing penetration of larger organizations. These customers are a subset of Enterprise customers. Expansion of Zoom Across Existing Enterprise Customers - Net Dollar Expansion Rate We believe that there is a large opportunity for growth with many of our existing Enterprise customers. Historically, customers have increased the size of their subscriptions as they expanded their use of our AI-first, open work platform across their operations. Over the past few years, macroeconomic headwinds resulted in slower hiring and higher seat count downsells from our existing Enterprise customers in key markets, which impacted the rate of expansion and caused our net dollar expansion rate for Enterprise customers to drop below one hundred percent. Despite the decline, we believe there are still opportunities for future growth with our existing Enterprise customers as we innovate our platform with additional product offerings and by incorporating AI. Expansion in the use of our platform also provides us with opportunities to market and sell additional products to our customers, such as Zoom Phone, Zoom Contact Center, and Workvivo. To address this opportunity and expand the use of our products by our existing Enterprise customers, we will need to maintain the reliability of our platform and produce new features and functionality that are responsive to our customers’ requirements for enterprise-grade solutions. We quantify our expansion across existing Enterprise customers through our net dollar expansion rate. We define Enterprise customers as distinct business units who have been engaged by either our direct sales team, resellers, or strategic partners. Revenue from Enterprise customers represented 61.7% and 60.0% of total revenue for the three months ended July 31, 2026 and 2025, respectively, and 61.3% and 60.0% of total revenue for the six months ended July 31, 2026 and 2025, respectively. Our net dollar expansion rate includes the increase in user adoption within our Enterprise customers, as our subscription revenue is primarily driven by the number of paid licenses within a customer and the purchase of additional products, and compares our subscription revenue from the same set of Enterprise customers across comparable periods. We calculate net dollar expansion rate as of a period end by starting with the annual recurring revenue (“ARR”) from all Enterprise customers as of 12 months prior (“Prior Period ARR”). We define ARR as the annualized revenue run rate of subscription agreements from all customers at a point in time. We calculate ARR by taking the monthly recurring revenue (“MRR”) and multiplying it by 12. MRR is defined as the recurring revenue run-rate of subscription agreements from all Enterprise customers for the last month of the period, including revenue from monthly subscribers who have not provided any indication that they intend to cancel their subscriptions. We then calculate the ARR from these Enterprise customers as of the current period end (“Current Period ARR”), which includes any upsells, contractions, and attrition. We divide the Current Period ARR by the Prior Period ARR to arrive at the net dollar expansion rate. For the trailing 12 months calculation, we take an average of the net dollar expansion rate over the trailing 12 months. Our net dollar expansion rate may fluctuate as a result of a number of factors, including the level of penetration within our Enterprise customer base, expansion of products and features, and our ability to retain our Enterprise customers. Our trailing 12-month net dollar expansion rate for Enterprise customers was 99% and 98% as of July 31, 2026 and 2025, respectively. 27 Table of Contents Retention of Online Customers - Average Monthly Churn Rate & Percentage of MRR from ≥16-Month Customers In addition to Enterprise customers, we also have a significant number of customers who subscribe to our services directly through our website (“Online customers” or “Online business”). Online customers represent a diverse customer base, ranging from individual consumers to small and medium-sized businesses. We continue to focus on acquisition and retention of our Online customer base through various strategies to improve the features and functionalities of our products and services. Revenue from Online customers represented 38.3% and 40.0% of total revenue for the three months ended July 31, 2026 and 2025, respectively, and 38.7% and 40.0% of total revenue for the six months ended July 31, 2026 and 2025, respectively. Our ability to retain these Online customers will have an impact on our future revenue. The online monthly average churn for our Online customers was 2.9% per month for both the three months ended July 31, 2026 and 2025, and 3.0% and 2.9% per month for the six months ended July 31, 2026 and 2025, respectively. One of the dynamics in the Online portion of the business is the MRR contribution from customers who have retained Zoom services for a certain portion of time as these customers tend to maintain their subscriptions and contribute meaningfully to the Online business. As of July 31, 2026 and 2025, the percentage of total Online MRR from Online customers with a continuous term of service of at least 16 months was 75.6% and 74.9%, respectively. We calculate the Online average monthly churn by starting with the Online customer MRR as of the beginning of the applicable quarter (“Entry MRR”). We define Entry MRR as the recurring revenue run-rate of subscription agreements from all Online customers except for subscriptions that we recorded as churn in a previous quarter based on the customers' earlier indication to us of their intention to cancel that subscription. We then determine the MRR related to customers who canceled or downgraded their subscription or notified us of that intention during the applicable quarter (“Applicable Quarter MRR Churn”) and divide the Applicable Quarter MRR Churn by the applicable quarter Entry MRR to arrive at the MRR churn rate for Online customers. We then divide that amount by three to calculate the Online average monthly churn for the applicable quarter. Innovation and Expansion of Our Platform We continue to invest and enhance the capabilities of our system of action for modern work, focused on expanding agentic AI skills, agents, and models to drive business value. During the current quarter, we introduced a series of new products and enhancements across our platform. These included ZoomMate, an AI-powered teammate that connects meetings, messages, and workflows to help users move seamlessly from conversation to completion while retaining context across Zoom and integrated systems; the AI Productivity Suite, which introduces Canvas, Slides, Sheets, and Paper to transform meeting insights into actionable deliverables; agentic agents, which allow users to create and deploy custom AI agents within ZoomMate for support, scheduling, and automation; Zoom AI On-Prem, for organizations that need to run Zoom's AI capabilities within their own infrastructure; and a voice translator, which provides live speech‑to‑speech translation in Meetings so participants can hear real‑time translated audio. These offerings expand our agentic AI capabilities across collaboration, customer support, and industry-specific workflows through new integrations and platform enhancements. In July 2026, we acquired Common Room, an AI-native go-to-market intelligence platform that unifies fragmented buyer signals and first-party customer data into person-level buyer intelligence, activated through AI agents for revenue teams. With the acquisition, we extend Zoom Revenue Accelerator upstream of the sales conversation, combining Common Room's buyer intelligence with the conversation data and insights Zoom already captures, further advancing our strategy to become a system of action for revenue teams. Zoom is an open platform, and third-party developers are a key component of our strategy for platform innovation, making it easier for customers and developers to extend our product portfolio with new functionalities. We believe that as more developers and other third parties use our platform to integrate major third-party applications, we will become the ubiquitous platform for modern work as a system of action, turning live collaboration into completed results and moving conversations to completion. We will need to expend additional resources to continue introducing new products, features, and AI functionality, and supporting the efforts of third parties to enhance the value of our platform with their own applications. 28 Table of Contents International Opportunities Our AI-first, open work platform is a system of action for modern work that addresses the communications and collaboration needs of users worldwide, and international expansion remains a meaningful component of our long-term growth strategy. Our revenue outside of the Americas (APAC and EMEA) represented 27.7% and 28.2% of our total revenue for the three months ended July 31, 2026 and 2025, respectively, and 27.8% and 28.0% of our total revenue for the six months ended July 31, 2026 and 2025, respectively. We use strategic partners and resellers to sell in certain international markets where we have limited or no direct sales presence. While we believe global demand for our platform will continue to increase as international market awareness of Zoom grows, our ability to conduct our operations internationally will require considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal and regulatory systems, alternative dispute systems, and commercial markets. Non-GAAP Financial Measure In addition to our results determined in accordance with GAAP, free cash flow (“FCF”) is a non-GAAP financial measure that we believe is useful in evaluating our liquidity. Free Cash Flow We define FCF as GAAP net cash provided by operating activities less purchases of property and equipment. We believe that FCF is a useful indicator of liquidity that provides information to management and investors about the amount of cash generated from our operations that, after investments in property and equipment, can be used for future growth or other corporate purposes. FCF 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 analysis of other GAAP financial measures, such as net cash provided by operating activities. It is important to note that other companies, including companies in our industry, may not use this metric, may calculate this metric differently, or may use other financial measures to evaluate their liquidity, all of which could reduce the usefulness of this non-GAAP metric as a comparative measure. The following table presents a summary of our cash flows for the periods presented and a reconciliation of FCF to net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP: Six Months Ended July 31, 2026 2025 (in thousands) Net cash provided by operating activities $ 1,016,361 $ 1,005,201 Less: purchases of property and equipment (43,466) (33,876) Free cash flow (non-GAAP) $ 972,895 $ 971,325 Net cash used in investing activities $ (554,237) $ (185,803) Net cash used in financing activities $ (795,221) $ (985,392) Components of Results of Operations Revenue We derive our revenue primarily from subscription agreements with customers for access to our AI-first, open work platform. We also provide services, which include professional services, consulting services, and online event hosting, which are generally considered distinct from the access to our AI-first, open work platform. The amount of revenue recognized reflects the consideration that we expect to receive in exchange for these services over the contract term, which can include a free period discount. Cost of Revenue Cost of revenue primarily consists of costs related to hosting our AI-first, open work platform and providing general operating support services to our customers. These costs are related to our co-located data centers, third-party cloud hosting, integrated third-party PSTN services, personnel-related expenses, amortization of capitalized software development and acquired intangible assets, royalty payments, and allocated overhead. 29 Table of Contents Operating Expenses Research and Development Research and development expenses primarily consist of personnel-related expenses directly associated with our research and development organization, depreciation of equipment used in research and development, and allocated overhead. Research and development costs are expensed as incurred. Sales and Marketing Sales and marketing expenses primarily consist of personnel-related expenses directly associated with our sales and marketing organization. Other sales and marketing expenses include advertising and promotional events to promote our brand, such as awareness programs, digital programs, public relations, tradeshows, and our user conference, Zoomtopia, and allocated overhead. Sales and marketing expenses also include credit card processing fees related to customer transactions and amortization of deferred contract acquisition costs. General and Administrative General and administrative expenses primarily consist of personnel-related expenses associated with our finance, legal, and other organizations; professional fees for external legal, accounting, and other consulting services; expected credit losses; insurance; certain indirect taxes; litigation settlements; corporate security and regulatory expenses; and allocated overhead. Gains on Strategic Investments, Net Gains on strategic investments, net consist primarily of remeasurement gains or losses on our equity investments. Other Income, Net Other income, net consists primarily of interest income and net accretion on our marketable securities and effect of changes in foreign currency exchange rates. Provision for Income Taxes Provision for income taxes consists primarily of income taxes related to federal, state, and foreign jurisdictions where we conduct business. 30 Table of Contents Results of Operations The following tables set forth selected condensed consolidated statements of operations data and such data as a percentage of revenue for each of the periods indicated: Three Months Ended July 31, Six Months Ended July 31, 2026 2025 2026 2025 (in thousands) Revenue $ 1,277,217 $ 1,217,227 $ 2,516,223 $ 2,391,942 Cost of revenue (1) 291,722 273,165 566,009 551,567 Gross profit 985,495 944,062 1,950,214 1,840,375 Operating expenses: Research and development (1) 242,497 206,447 470,423 411,863 Sales and marketing (1) 330,521 338,995 660,571 685,965 General and administrative (1) 98,161 76,885 194,431 179,220 Total operating expenses 671,179 622,327 1,325,425 1,277,048 Income from operations 314,316 321,735 624,789 563,327 Gains on strategic investments, net 1,614,203 45,056 1,766,500 31,437 Other income, net 66,448 81,371 135,298 169,163 Income before provision for income taxes 1,994,967 448,162 2,526,587 763,927 Provision for income taxes 452,522 89,570 558,465 150,732 Net income $ 1,542,445 $ 358,592 $ 1,968,122 $ 613,195 (1) Includes stock-based compensation expense as follows: Cost of revenue $ 20,272 $ 24,222 $ 41,235 $ 51,649 Research and development 74,566 70,476 145,592 143,412 Sales and marketing 57,561 63,094 115,600 131,527 General and administrative 27,385 30,907 56,310 63,680 Total stock-based compensation expense $ 179,784 $ 188,699 $ 358,737 $ 390,268 Three Months Ended July 31, Six Months Ended July 31, 2026 2025 2026 2025 (as a percentage of revenue) Revenue 100.0 % 100.0 % 100.0 % 100.0 % Cost of revenue 22.8 22.4 22.5 23.1 Gross profit 77.2 77.6 77.5 76.9 Operating expenses: Research and development 19.0 17.0 18.7 17.2 Sales and marketing 25.9 27.8 26.3 28.7 General and administrative 7.7 6.4 7.7 7.4 Total operating expenses 52.6 51.2 52.7 53.3 Income from operations 24.6 26.4 24.8 23.6 Gains on strategic investments, net 126.4 3.7 70.2 1.3 Other income, net 5.2 6.7 5.4 7.1 Income before provision for income taxes 156.2 36.9 100.4 31.9 Provision for income taxes 35.4 7.4 22.2 6.3 Net income 120.8 % 29.5 % 78.2 % 25.6 % 31 Table of Contents Comparison of the Three Months Ended July 31, 2026 and 2025 Revenue Three Months Ended July 31, 2026 2025 % Change (in thousands) Revenue $ 1,277,217 $ 1,217,227 4.9 % Revenue for the three months ended July 31, 2026 increased by $60.0 million, or 4.9%, compared to the three months ended July 31, 2025. The increase was driven by 7.8% growth in revenue from Enterprise customers, of which 42.3% and 57.7% was from new and existing customers, respectively, and by a 0.6% increase in revenue from Online customers. Cost of Revenue Three Months Ended July 31, 2026 2025 % Change (in thousands) Cost of revenue $ 291,722 $ 273,165 6.8 % Gross profit 985,495 944,062 4.4 % Gross margin 77.2 % 77.6 % Cost of revenue for the three months ended July 31, 2026 increased by $18.6 million, or 6.8%, compared to the three months ended July 31, 2025. The increase was primarily due to a $24.4 million increase in third-party hosting costs, primarily driven by increased platform usage, including growth in AI-related consumption from the launch of new products, partially offset by a $7.5 million decrease in co-located data center costs primarily driven by data center optimization and cost reduction efforts, and a $3.9 million reduction in stock-based compensation resulting from changes in our equity program. Gross margin decreased to 77.2% for the three months ended July 31, 2026, from 77.6% for the three months ended July 31, 2025. The decrease in gross margin was mainly driven by the increase in third-party hosting costs discussed above. Operating Expenses Research and Development Three Months Ended July 31, 2026 2025 % Change (in thousands) Research and development $ 242,497 $ 206,447 17.5 % Research and development expense for the three months ended July 31, 2026 increased by $36.1 million, or 17.5%, compared to the three months ended July 31, 2025, driven by continued investments in AI innovation. This included a $23.7 million increase in personnel-related expenses and a $4.1 million increase in stock-based compensation, both from higher headcount, as well as a $5.4 million increase in AI-related expenses, reflecting higher AI-related consumption and development activity. Sales and Marketing Three Months Ended July 31, 2026 2025 % Change (in thousands) Sales and marketing $ 330,521 $ 338,995 (2.5) % Sales and marketing expense for the three months ended July 31, 2026 decreased by $8.5 million, or 2.5%, compared to the three months ended July 31, 2025. The decrease was primarily driven by a $15.9 million decrease in commissions expense, which includes both internal and external costs, from the change in the amortization period for deferred contract acquisition costs from three years to five years, effective January 31, 2026, and a $5.5 million decrease in stock-based compensation due to 32 Table of Contents changes in our equity program. These decreases were partially offset by a $8.3 million increase in personnel-related expenses and continued investments supporting customer acquisition, retention, and expansion initiatives. General and Administrative Three Months Ended July 31, 2026 2025 % Change (in thousands) General and administrative $ 98,161 $ 76,885 27.7 % General and administrative expense for the three months ended July 31, 2026 increased by $21.3 million, or 27.7%, compared to the three months ended July 31, 2025. The increase was primarily driven by the absence of the $18.0 million prior-year favorable impact from the reversal of an SEC investigation accrual. Gains on Strategic Investments, Net Three Months Ended July 31, 2026 2025 % Change (in thousands) Gains on strategic investments, net $ 1,614,203 $ 45,056 NM(1) (1) NM — Not meaningful. Percentage changes are not presented when the calculation is not meaningful or would not provide useful information. The increase in gains on strategic investments, net during the three months ended July 31, 2026 compared to the three months ended July 31, 2025 was primarily due to a $1,612.7 million increase in the fair value of our Anthropic investment. Other Income, Net Three Months Ended July 31, 2026 2025 % Change (in thousands) Other income, net $ 66,448 $ 81,371 (18.3) % Other income, net for the three months ended July 31, 2026 decreased by $14.9 million, or 18.3%, compared to the three months ended July 31, 2025. The decrease was primarily driven by a $12.5 million decrease in interest income from cash and marketable securities due to lower interest rates and investment balances, and a $2.1 million unfavorable impact from changes in foreign currency exchange rates. Provision for Income Taxes Three Months Ended July 31, 2026 2025 % Change (in thousands) Provision for income taxes $ 452,522 $ 89,570 NM Provision for income taxes for the three months ended July 31, 2026 increased by $363.0 million compared to the three months ended July 31, 2025. The year-over-year change was primarily due to an increase in income before taxes, driven by the unrealized gain on our Anthropic investment, partially offset by a decrease in tax shortfalls and increase in tax benefits related to stock-based compensation. 33 Table of Contents Comparison of the Six Months Ended July 31, 2026 and 2025 Revenue Six Months Ended July 31, 2026 2025 % Change (in thousands) Revenue $ 2,516,223 $ 2,391,942 5.2 % Revenue for the six months ended July 31, 2026 increased by $124.3 million, or 5.2%, compared to the six months ended July 31, 2025. The increase in revenue was driven by a 7.5% growth in revenue from Enterprise customers, of which 37.5% and 62.5% was from new and existing customers, respectively, and by a 1.7% increase in revenue from Online customers. Cost of Revenue Six Months Ended July 31, 2026 2025 % Change (in thousands) Cost of revenue $ 566,009 $ 551,567 2.6 % Gross profit $ 1,950,214 $ 1,840,375 6.0 % Gross margin 77.5 % 76.9 % Cost of revenue for the six months ended July 31, 2026 increased by $14.4 million, or 2.6%, compared to the six months ended July 31, 2025. The increase was primarily due to a $34.4 million increase in third-party hosting costs, primarily driven by increased platform usage, including growth in AI-related consumption from the launch of new products, partially offset by a $14.7 million decrease in co-located data center costs primarily driven by data center optimization and cost reduction efforts, and a $10.4 million decrease in stock-based compensation resulting from changes in our equity program. Gross margin increased to 77.5% for the six months ended July 31, 2026 from 76.9% for the six months ended July 31, 2025. The increase in gross margin was mainly driven by the decrease in stock-based compensation as well as other operational efficiencies. Operating Expenses Research and Development Six Months Ended July 31, 2026 2025 % Change (in thousands) Research and development $ 470,423 $ 411,863 14.2 % Research and development expense for the six months ended July 31, 2026 increased by $58.6 million, or 14.2%, compared to the six months ended July 31, 2025, driven by continued investments in AI innovation. This included a $43.4 million increase in personnel-related expenses and a $2.2 million increase in stock-based compensation, both from higher headcount, as well as a $9.8 million increase in AI-related expenses, reflecting higher AI-related consumption and development activity. Sales and Marketing Six Months Ended July 31, 2026 2025 % Change (in thousands) Sales and marketing $ 660,571 $ 685,965 (3.7) % Sales and marketing expense for the six months ended July 31, 2026 decreased by $25.4 million, or 3.7%, compared to the six months ended July 31, 2025. The decrease in sales and marketing expense was mainly driven by a $37.9 million decrease in commissions expense, which includes both internal and external costs, from the change in the amortization period 34 Table of Contents for deferred contract acquisition costs from three years to five years, effective January 31, 2026, and a $15.9 million decrease in stock-based compensation due to changes in our equity program. These decreases were partially offset by a $15.5 million increase in personnel-related expenses and continued investments supporting customer acquisition, retention, and expansion initiatives. General and Administrative Six Months Ended July 31, 2026 2025 % Change (in thousands) General and administrative $ 194,431 $ 179,220 8.5 % General and administrative expense for the six months ended July 31, 2026 increased by $15.2 million, or 8.5%, compared to the six months ended July 31, 2025. The increase was primarily driven by the absence of the $18.0 million prior-year favorable impact from the reversal of an SEC investigation accrual. Gains on Strategic Investments, Net Six Months Ended July 31, 2026 2025 % Change (in thousands) Gains on strategic investments, net $ 1,766,500 $ 31,437 NM The increase in gains on strategic investments, net during the six months ended July 31, 2026 compared to the six months ended July 31, 2025 was primarily due to a $1,612.7 million increase in the fair value of our Anthropic investment. Other Income, Net Six Months Ended July 31, 2026 2025 % Change (in thousands) Other income, net $ 135,298 $ 169,163 (20.0) % Other income, net for the six months ended July 31, 2026 decreased by $33.9 million, or 20.0%, compared to the six months ended July 31, 2025. The decrease was primarily due to a $24.0 million decrease in interest income from cash and marketable securities due to lower interest rates and investment balances, and a $9.1 million unfavorable impact from changes in foreign currency exchange rates. Provision for Income Taxes Six Months Ended July 31, 2026 2025 % Change (in thousands) Provision for income taxes $ 558,465 $ 150,732 NM Provision for income taxes for the six months ended July 31, 2026 increased by $407.7 million compared to the six months ended July 31, 2025. The year-over-year change was due primarily to an increase in income before taxes, driven by the unrealized gain on our Anthropic investment, offset by a decrease in tax shortfalls and increase in tax benefits related to stock-based compensation. Liquidity and Capital Resources As of July 31, 2026, our principal sources of liquidity were cash, cash equivalents, and marketable securities of $7.2 billion, which were held for working capital purposes and for investment in growth opportunities. Our marketable 35 Table of Contents securities generally consist of high-grade commercial paper, agency bonds, corporate and other debt securities, U.S. government agency securities, and treasury bills. We finance our operations primarily through income from operations. Cash from operations may also be affected by various risks and uncertainties, including, but not limited to, macroeconomic factors, such as geopolitical conflicts, tariffs and trade tensions, inflationary pressures, interest rate fluctuations, and the fluctuations in foreign currency exchange rates. These factors and other risks detailed in the section titled “Risk Factors” could impact the timing of cash collections from our customers. However, based on our current business plan and revenue prospects, we believe our existing cash, cash equivalents, and marketable securities, together with net cash provided by operations, will be sufficient to meet our needs for at least the next 12 months and allow us to capitalize on growth opportunities. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities and available cash balances. Our future capital requirements will depend on many factors, including our revenue growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support further sales and marketing and research and development efforts, as well as expenses associated with our international expansion, and the timing and extent of additional capital expenditures to invest in existing and new office spaces as well as data center infrastructure. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may choose or 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 enter into debt agreements on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be materially and adversely affected. There have been no material changes to our cash requirements from known contractual and other obligations from those disclosed in our Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended January 31, 2026, filed with the SEC on February 27, 2026. Cash Flows The following table summarizes our cash flows for the periods presented: Six Months Ended July 31, 2026 2025 (in thousands) Net cash provided by operating activities $ 1,016,361 $ 1,005,201 Net cash used in investing activities $ (554,237) $ (185,803) Net cash used in financing activities $ (795,221) $ (985,392) Operating Activities Our largest source of operating cash is cash collections from our customers for subscriptions to our AI-first, open work platform. Our primary uses of cash from operating activities are for employee-related expenditures, costs related to hosting our platform, and marketing expenses. Net cash provided by operating activities is impacted by our net income adjusted for certain non-cash items, such as stock-based compensation expense, depreciation and amortization expenses, as well as the effect of changes in operating assets and liabilities. Net cash provided by operating activities was $1,016.4 million for the six months ended July 31, 2026, compared to $1,005.2 million for the six months ended July 31, 2025. The increase in operating cash flow was mainly due to higher collections driven by revenue growth, partially offset by higher vendor payments, primarily driven by an increase in cost of revenue. Investing Activities Net cash used in investing activities of $554.2 million for the six months ended July 31, 2026 was primarily driven by purchases of strategic investments of $441.1 million, which included an additional $300.9 million investment in preferred stock of Anthropic, cash paid for acquisitions, net of cash acquired, of $248.7 million, and purchases of property and equipment of $43.5 million, partially offset by net maturities of marketable securities of $179.2 million. Net cash used in investing activities of $185.8 million for the six months ended July 31, 2025 was primarily due to net purchases of marketable securities of $126.4 million, purchases of property and equipment of $33.9 million, and purchases of strategic investments of $27.5 million. 36 Table of Contents Financing Activities Net cash used in financing activities of $795.2 million for the six months ended July 31, 2026 was primarily due to cash paid for repurchases of common stock of $722.2 million and taxes paid related to net share settlement of equity awards of $121.8 million, partially offset by proceeds from the issuance of common stock under our ESPP of $40.9 million and proceeds from employee equity transactions to be remitted to employees and tax authorities, net, of $6.3 million. Net cash used in financing activities of $985.4 million for the six months ended July 31, 2025 was primarily due to cash paid for repurchases of common stock of $883.3 million and taxes paid related to net share settlement of equity awards of $137.5 million, partially offset by proceeds from the issuance of common stock under our ESPP of $36.1 million. Stock Repurchase Program In May 2026, our Board of Directors authorized the repurchase of an additional $1.0 billion of our outstanding Class A common stock, under our existing repurchase program, bringing the total amount authorized since February 2024 to $4.7 billion. Repurchases of our Class A common stock may be effected, from time to time, either on the open market (including pre-set trading plans), in privately negotiated transactions, and other transactions in accordance with applicable securities laws. The timing and the amount of any repurchased Class A common stock will be determined by our management based on its evaluation of market conditions and other factors. The repurchase program will be funded using our working capital. Any repurchased shares of Class A common stock will be retired. The repurchase program, which has no expiration date, does not obligate us to acquire any particular amount of Class A common stock, and the repurchase program may be suspended or discontinued at any time at our discretion. During the three and six months ended July 31, 2026, we repurchased and subsequently retired 3,740,213 and 7,909,421 shares of our Class A common stock, respectively, for an aggregate amount of $351.9 million and $713.5 million, respectively. As of July 31, 2026, $1.3 billion of the repurchase authorization remained available. Critical Accounting Estimates Critical accounting estimates are those accounting estimates that require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates are developed based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Critical accounting estimates are accounting estimates where the nature of the estimates is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and the impact of the estimates on financial condition or operating performance is material. There have been no material changes to our critical accounting estimates as compared to the critical accounting estimates described in our Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended January 31, 2026, filed with the SEC on February 27, 2026.