Financial Analysis

Business Combination 1touch Acquisition On May 7, 2026, we acquired all outstanding equity interests in 1touch, an innovator in data intelligence and orchestration that provides a comprehensive, unified view of enterprise information, for total cash consideration of $125.9 million. The transaction costs associated with the acquisition were not material and expensed as incurred. The preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date, primarily includes $19.5 million of intangible assets and $101.2 million of goodwill. Acquired Intangible Assets The following table sets forth the components of identifiable intangible assets acquired and their useful lives by major class of intangible assets as of the acquisition date (in thousands): Useful Lives As of May 7, 2026 Customer relationships 7 years $ 5,500 Developed technology 6 years 9,200 In-progress research and development (1) N/A 2,800 Customer contract backlog (2) 3 years 2,000 Total intangible assets acquired $ 19,500 _________________________________ (1) In-progress research and development will be amortized over the estimated useful life once developments are complete. (2) Customer contract backlog represents the value of signed contracts for which services have not yet been performed or billed. To derive the fair value of acquired intangible assets, we applied the excess earnings method for customer relationships and customer co …

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Commitments and Contingencies Leases At the end of the second quarter of fiscal 2027, we had various non-cancelable operating and finance lease commitments for office and data center facilities. Refer to Note 9Leases for additional information regarding lease commitments. Letters of Credit At the end of fiscal 2026 and the second quarter of fiscal 2027, we had outstanding letters of credit in the aggregate amount of $13.0 million and $16.6 million in connection with our facility leases and a certain employee-related benefit, that mature on various dates through December 2031. Of the $13.0 million and $16.6 million outstanding as of the end of fiscal 2026 and the second quarter of fiscal 2027, $2.0 million and $4.9 million was issued under the Credit Facility. Long-Term Supply Arrangements During the second quarter of fiscal 2027, certain conditions of one of our long-term supply arrangements were met, triggering the commitment to acquire approximately $1.1 billion of component supply through calendar year 2027. Under these agreements, purchases can be made by either us or our approved contract manufacturers to fulfill the overall commitment. We would be obligated to purchase amounts to fulfill the commitment if they are not purchased by our contract manufacturers. At this time, we expect our contract manufacturers will purchase substantially all of this committed volume in the ordinary course of business. Legal Matters From time to time, we have become involved in claims and …

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Equity Incentive Plans 2015 Equity Incentive Plan The 2015 Equity Incentive Plan (the 2015 Plan) provides for grants of incentive stock options to our employees and non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units (RSUs), performance-based stock and cash awards, market-based stock awards, and other forms of stock awards to our employees, directors and consultants. Our equity awards generally vest over a two to five year period and expire no later than ten years from the date of grant. Upon vesting of equity awards, 1.1 million and 1.0 million shares were withheld during the second quarter of fiscal 2026 and 2027 to cover $57.8 million and $74.3 million in tax withholding obligations, and 2.3 million and 2.6 million shares were withheld to cover $117.9 million and $175.3 million in tax withholding during the first two quarters of fiscal 2026 and 2027. The shares withheld to satisfy employee tax withholding obligations are returned to our 2015 Plan and will be available for future issuance. Payments for employees tax obligations to the tax authorities are recognized as a reduction to additional paid-in capital and reflected as a financing activity in our condensed consolidated statements of cash flows. 2015 Amended and Restated Employee Stock Purchase Plan Under our Amended and Restated 2015 Employee Stock Purchase Plan (2015 ESPP), our Board of Directors (or a committee thereof) has the authority to establish the length and terms …

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Income Taxes Our provision (benefit) for income tax primarily reflects taxes on international operations and U.S. income taxes. The difference between the income tax provision (benefit) that would be derived by applying the statutory rate to our income before provision (benefit) for income taxes and the income tax provision (benefit) recorded was primarily attributable to our valuation allowance on U.S. deferred tax assets, research and development credits, U.S. taxes on foreign income, and stock-based compensation expense. At the end of the second quarter of fiscal 2027, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for fiscal 2026.

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Leases We lease office and data center facilities under non-cancelable operating lease agreements expiring through October 2040. Our lease agreements do not contain any material residual value guarantees or restrictive covenants. During the first two quarters of fiscal 2027, we have executed certain lease agreements primarily related to our headquarter office and data center that are expected to commence between fiscal 2027 and fiscal 2031, with duration of these leases ranging from 5 to 12 years. As such, aggregate lease payments of approximately $385.8 million are excluded from our future lease payments tabular disclosure below. We also lease certain engineering test equipment under financing agreements. These finance leases have a lease term of three to five years and contain a bargain purchase option that we have exercised or expect to exercise at the end of the respective lease terms. Lease assets and liabilities associated with these leases were not material for all periods presented. The components of operating lease costs during the periods presented were as follows (in thousands): Second Quarter of Fiscal First Two Quarters of Fiscal 2026 2027 2026 2027 Fixed operating lease cost $ 13,407 $ 14,199 $ 26,274 $ 28,029 Variable lease cost (1) 3,749 2,602 5,782 5,974 Short-term lease cost (12 months or less) 1,177 1,129 2,303 2,490 Total lease cost $ 18,333 $ 17,930 $ 34,359 $ 36,493 ____________________________________ (1) Variable lease cost predominantly included commo …

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Debt Revolving Credit Facility In June 2025, we entered into a Credit Agreement with a consortium of financial institutions and lenders that provides for a five-year, senior unsecured revolving credit facility of $500.0 million (Credit Facility) that expires on June 10, 2030, unless otherwise extended. Proceeds from borrowings under the Credit Facility may be used for general corporate purposes and working capital. The Credit Facility replaced our prior $300.0 million revolving credit facility in which the outstanding borrowings of $100.0 million was repaid in full and terminated effective June 10, 2025. U.S. Dollar denominated borrowings under the Credit Facility will bear interest, at our option, at a base rate, subject to a floor of 0%, plus a margin ranging from 0% to 0.50%, or the term Secured Overnight Financing Rate (SOFR) rate (based on one, three or six-month interest periods), subject to a floor of 0%, plus a margin ranging from 0.875% to 1.50%. Interest is payable quarterly in arrears with respect to base rate borrowings and at the end of the interest period with respect to term SOFR borrowing. We are also obligated to pay an ongoing commitment fee on undrawn amounts at a rate ranging from 0.075% to 0.20% per annum, payable quarterly in arrears. The respective margins will fluctuate based on the then-applicable Consolidated Net Leverage Ratio (as defined in the Credit Agreement) and, if available, our debt rating. We are subject to certain affirmative and negative …

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Recent Accounting Pronouncements Not Yet Adopted In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires additional disclosures of specific expense categories included within each expense caption presented on the Statements of Operations. The new standard can be applied on either a fully retrospective or prospective basis. ASU 2024-03 will be effective for our fiscal year beginning February 1, 2027, and interim periods within our fiscal year beginning February 7, 2028, with early adoption permitted. We are currently evaluating the impact of this standard on our financial statement disclosures. In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use-Software , which amends the cost capitalization criteria for internal-use software development costs by removing all references to software project development stages and providing new guidance on how to evaluate whether the probable-to-complete recognition threshold has been met. The new standard can be applied on either a fully retrospective, modified transition, or prospective basis. ASU 2025-06 will be effective for our fiscal years beginning after fiscal 2028 and interim periods within those fiscal years, with early adoption permitted. We are curren …

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Deferred Revenue and Commissions Deferred Commissions Deferred commissions consist of incremental costs paid to our sales force to obtain customer contracts. Changes in total deferred commissions during the periods presented are as follows (in thousands): Second Quarter of Fiscal First Two Quarters of Fiscal 2026 2027 2026 2027 Beginning balance $ 332,277 $ 432,249 $ 328,620 $ 419,569 Additions 53,100 82,097 99,027 167,167 Recognition of deferred commissions (45,362) (67,452) (87,632) (139,842) Ending balance $ 340,015 $ 446,894 $ 340,015 $ 446,894 Of the $446.9 million total deferred commissions balance at the end of the second quarter of fiscal 2027, we expect to recognize approximately 34% as sales commission expense over the next 12 months and the remainder thereafter. There was no impairment related to capitalized commissions for the second quarter and first two quarters of fiscal 2026 and 2027. Deferred Revenue Deferred revenue primarily consists of amounts that have been invoiced but have not yet been recognized as revenue including performance obligations pertaining to subscription services. Changes in total deferred revenue during the periods presented are as follows (in thousands): Second Quarter of Fiscal First Two Quarters of Fiscal 2026 2027 2026 2027 Beginning balance $ 1,827,545 $ 2,377,357 $ 1,795,303 $ 2,227,497 Additions 495,801 629,356 923,488 1,276,386 Recognition of deferred revenue (412,282) (485,442) (807,727) (982,612) Ending balance $ 1,911,064 $ 2,52 …

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Segment Information and Geographic Areas Segment Information Our chief operating decision maker (CODM), the Chief Executive Officer, manages business activities as a single operating and reportable segment at the consolidated level. The CODM reviews and utilizes consolidated financial information, including revenue, gross profit, operating income (loss) and net income as reported on the condensed consolidated statements of operations, to assess performance and allocate resources to support strategic priorities. Condensed consolidated net income is our segments primary measure of profit. The measure of segment assets is reported on the condensed consolidated balance sheets as total consolidated assets. Our CODM reviews the following significant segment expenses, which are each separately disclosed and presented in the condensed consolidated statements of operations: cost of revenue for product, cost of revenue for subscription services, research and development expenses, sales and marketing expenses, and general and administrative expenses. Other segment items within condensed consolidated net income include other income (expense), net and income tax provision (benefit). Other significant noncash segment expenses include stock-based compensation and depreciation and amortization. Disaggregation of Revenue The following table depicts the disaggregation of revenue by geographic area based on the billing address of our customers and is consistent with how we evaluate our financia …

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Stockholders Equity Preferred Stock We have 20.0 million authorized shares of undesignated preferred stock, the rights, preferences and privileges of which may be designated from time to time by our Board of Directors. At the end of the second quarter of fiscal 2027, there were no shares of preferred stock issued or outstanding. Class A and Class B Common Stock We have two classes of authorized common stock, Class A common stock, which we refer to as our common stock, and Class B common stock. At the end of the second quarter of fiscal 2027, we had 2.0 billion authorized shares of Class A common stock and 250.0 million authorized shares of Class B common stock, with each class having a par value of $0.0001 per share. At the end of the second quarter of fiscal 2027, 333.3 million shares of Class A common stock were issued and outstanding. Share Repurchase Program Our Board of Directors has authorized up to $1.8 billion under our share repurchase program. At the end of the second quarter of fiscal 2027, $176.0 million remained available for future share repurchases under our current repurchase authorization. The following table summarizes the stock repurchase activity for the second quarter and first two quarters of fiscal 2026 and 2027 (in thousands except for per share amounts): Second Quarter of Fiscal First Two Quarters of Fiscal 2026 2027 2026 2027 Number of shares repurchased and retired 772 932 3,264 2,214 Average price per share (1) $ 54.70 $ 74.01 $ 49.66 $ 69.13 Aggre …

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