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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Investors should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. 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 Annual Report on Form 10-K. See also the section titled “Note Regarding Forward-Looking Statements” in this report. Our fiscal year end is the first Sunday after January 30.

The following discussion of our financial condition and results of operations covers fiscal 2025 and fiscal 2024 items and year-over-year comparisons between fiscal 2025 and fiscal 2024. Discussions of fiscal 2023 items and year-over-year comparisons between fiscal 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended February 4, 2024, that was filed with the SEC on April 1, 2024.

Overview

Data is foundational to our customers, and we are focused on delivering innovative and differentiated data storage solutions and services that enable customers to fully realize the value of their data.

We are a global leader in data management and storage with a mission to redefine the storage experience by simplifying how people manage, consume and interact with data. Our vision of an all-flash data center integrates our foundation of simplicity and reliability with four major market trends that are impacting all organizations large and small: (1) the shift to modernizing today’s data infrastructure with all-flash; (2) the increase of modern cloud-native applications; (3) increasing demand to consume data storage as a service; and (4) increasing demand for data storage to support the acceleration in artificial intelligence adoption while managing rising energy costs.

Our Pure Platform supporting structured and unstructured data, at scale and across any data workloads in on premises, cloud and hosted environments makes it possible for customers to construct their Enterprise Data Clouds. This allows them to serve a variety of data workloads including mission-critical production, test and development, analytics, disaster recovery, backup and restore, artificial intelligence and machine learning with a single consistent, highly automated and agile cloud operating model.

Components of Results of Operations

Revenue

We derive revenue primarily from the sale of our products and services that comprise our Pure Platform. Our Pure Platform primarily includes our FlashArray and FlashBlade solutions, and our portfolio of Evergreen subscription services offerings. Subscription services also include our professional services offerings such as installation and implementation consulting services.

Provided that all other revenue recognition criteria have been met, we typically recognize product revenue upon transfer of control to our customers and the satisfaction of our performance obligations. For Evergreen//Flex, product revenue is recognized upon the commencement of the underlying subscription services. Products are typically shipped directly by us to customers, and our channel partners generally do not stock our inventory. We expect our product revenue may vary from period to period based on, among other things, the timing and size of orders and delivery of products and the impact of significant transactions.

We generally recognize revenue from the fair value of subscription services provided ratably over the contractual service period or on a consumption basis based on the minimum usage commitment as well as usage above the commitment amount and professional services as delivered. We expect our subscription services revenue to increase and continue to grow faster than our product revenue as more customers choose to consume our storage solutions as a service and our existing Evergreen subscription customers renew and expand their offerings.

Cost of Revenue

Cost of product revenue primarily consists of costs paid to our third-party contract manufacturers, which includes the costs of our raw material components, and personnel costs associated with our supply chain operations. Personnel costs consist of salaries, bonuses and stock-based compensation expense. Our cost of product revenue also includes allocated overhead costs, adjustments to inventory and purchase commitments based on forecasted demand, product warranty costs, amortization of intangible assets pertaining to developed technology, and freight. Allocated overhead costs consist of certain employee benefits and facilities-related costs. We expect our cost of product revenue to increase in absolute dollars as our product revenue increases.

Cost of subscription services revenue primarily consists of personnel costs associated with delivering our subscription and professional services, part replacements, allocated overhead costs, depreciation of infrastructure used to deliver our subscription services, and amortization of capitalized internal-use software. We expect our cost of subscription services revenue to increase in absolute dollars, as our subscription services revenue increases.

Operating Expenses

Operating expenses consist of research and development, sales and marketing and general and administrative expenses. Salaries and personnel-related costs, including stock-based compensation expense, are the most significant component of each category of operating expenses. Operating expenses also include allocated overhead costs for employee benefits, facilities, and certain information technology costs.

Research and Development. Research and development expenses consist primarily of employee compensation and related expenses, prototype expenses, depreciation associated with assets acquired for research and development, data center and cloud services costs, third-party engineering and contractor support costs, as well as allocated overhead. We expect our research and development expenses to increase in absolute dollars. Key incremental investments will focus on accelerating density of our direct flash modules, and increasing operational scale of our supply chain partners to support expected production deployment ramp in connection with our hyperscale design win for large production deployments starting in fiscal 2027.

Sales and Marketing. Sales and marketing expenses consist primarily of employee compensation and related expenses, sales commissions, marketing programs, travel and entertainment expenses as well as allocated overhead. Marketing programs consist of advertising, events, corporate communications and brand-building activities. We expect our sales and marketing expenses to increase in absolute dollars.

General and Administrative. General and administrative expenses consist primarily of employee compensation and related expenses for administrative functions including finance, legal, human resources, facilities, IT and fees for third-party professional services as well as amortization of intangible assets pertaining to defensive technology patents and allocated overhead. We expect our general and administrative expenses to increase in absolute dollars.

Restructuring and Impairment. Restructuring and impairment expenses consist primarily of employee severance and termination benefits, and certain lease impairment and abandonment charges.

Other Income (Expense), Net

Other income (expense), net consists primarily of interest income related to cash, cash equivalents and marketable securities, interest expense related to our debt and gains (losses) from foreign currency transactions.

Provision for Income Taxes

Provision for income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business and current federal and state income taxes in the United States. Our foreign subsidiaries earn a profit margin based upon transfer pricing principles which require an arm’s length return. Our foreign subsidiaries’ sales and marketing expenses are expected to increase over time as we grow, resulting in higher pre-tax foreign earnings and higher foreign income taxes.

We have provided a full valuation allowance for U.S. deferred tax assets, which includes net operating loss carryforwards, capitalized research costs, and tax credits related primarily to research and development. When considering our historical earnings trend, sufficient positive evidence may become available where we will release all or a portion of the valuation allowance within 12 months. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.

Results of Operations

Basis of Presentation

We operate using a 52/53 week fiscal year ending on the first Sunday after January 30. Fiscal 2024 and 2025 were both 52-week years that ended on February 4, 2024 and February 2, 2025, respectively. Unless otherwise stated, all dates refer to our fiscal years.

Year Over Year Comparisons

Revenue

Fiscal Year Ended Change

(in thousands)

The slight increase in product revenue during fiscal 2025 compared to fiscal 2024 was primarily driven by sales of our FlashBlade//E and FlashArray//E solutions. The increase in subscription services revenue during fiscal 2025 compared to fiscal 2024 was largely driven by renewals of our Evergreen subscription services across our installed base and increased revenue from our Evergreen//One offering.

During fiscal 2025 compared to fiscal 2024, total revenue in the United States grew by 12% from $2.0 billion to $2.2 billion, while total rest of the world revenue grew by 13% from $851.3 million to $960.8 million.

Subscription Annual Recurring Revenue (ARR)

We use Subscription ARR as a key business metric to evaluate the performance of subscription services. Subscription ARR should be viewed independently of revenue, deferred revenue and remaining performance obligations and is not intended as a substitute for any of these items.

Subscription ARR is calculated as the total annualized contract value of all active customer subscription agreements at the end of a fiscal quarter, plus on-demand revenue for the quarter multiplied by four. Contract values are established prior to any adjustments made in accordance with ASC 606.

The following table sets forth our Subscription ARR for the periods presented:

At the End of Year-over-Year Growth

The year-over-year growth in our Subscription ARR at the end of fiscal 2025 was 21% compared to growth of 25% in fiscal 2024. Year-over-year growth in subscription ARR to 21% was impacted by lower Total Contract Value (TCV) sales of Evergreen//One.

Remaining Performance Obligations

Total remaining performance obligations (RPO) which is total contracted but not recognized revenue was $2.6 billion at the end of fiscal 2025, and includes non-cancelable TCV sales for our storage-as-a-service offerings, including Evergreen//One, Evergreen//Flex, and Cloud Block Store consumption and subscription based offerings, as well as $41.1 million of non-cancelable product orders. RPO consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods. Product orders are generally cancelable until delivery has occurred, and as such, unfulfilled product orders that are cancelable are excluded from RPO. Cancelable orders will fluctuate depending on numerous factors.

TCV sales for our storage-as-a-service offerings is a key business metric we use to evaluate the performance of our consumption and subscription based offerings. TCV sales for these offerings include recurring subscription fees, any non-recurring charges such as initial setup fees, and any other billable services directly tied to the execution of the underlying service contract. The year-over-year growth in RPO to 14% at the end of fiscal 2025 compared to 31% at the end of fiscal 2024 was primarily due to lower TCV sales of Evergreen//One. TCV sales of Evergreen//One was impacted by both extended closing timelines for larger Evergreen//One opportunities and increased conversion to a traditional sale of our higher velocity Evergreen//One opportunities.

We expect to recognize approximately 48% of total RPO over the next 12 months, and the remainder thereafter. RPO is expected to increase as our subscription services business grows over time.

Cost of Revenue and Gross Margin

Fiscal Year Ended Change

(in thousands)

% of Product revenue 29 % 34 %

% of Subscription services revenue 28 % 26 %

% of Revenue 29 % 30 %

Product gross margin 71 % 66 %

Subscription services gross margin 72 % 74 %

Total gross margin 71 % 70 %

The decrease in product gross margin during fiscal 2025 when compared to fiscal 2024 was primarily due to increasing sales of our FlashBlade//E, FlashArray//E, and FlashArray//C solutions as customers’ transition their cost-sensitive workloads from traditional disk solutions to flash. We also experienced higher QLC component costs that were partially offset by lower excess and obsolete charges.

The increase in subscription services gross margin during fiscal 2025 when compared to fiscal 2024 was primarily driven by (i) lower depreciation expense from increasing the estimated useful lives of assets supporting our Evergreen//One offering during the third quarter of fiscal 2025 and (ii) continued optimization and increased efficiencies in our technical services operations, combined with cost benefits from automating our service logistics workflows that support delivery of our Evergreen subscription services to our installed base. Our Evergreen//One offering, supported by our own infrastructure, demonstrate a longer estimated life as a result of deriving benefits from our technology and Evergreen support. These lower costs were partially offset by additional stock-based compensation resulting from a modification of our fiscal 2024 performance restricted stock units (PRSUs).

Operating Expenses

Stock-based compensation expense in fiscal 2025 included $36.6 million relating to a modification of our fiscal 2024 PRSUs that was recognized in the first quarter of fiscal 2025, contributing to higher stock-based compensation expense when compared to fiscal 2024. Refer to Note 11 of Part II, Item 8 of this Annual Report on Form 10-K for further information.

In addition, operating expenses during fiscal 2025 were positively impacted as a result of the workforce alignment that we initiated in the fourth quarter of fiscal 2024.

Research and Development

Fiscal Year Ended Change

(in thousands)

% of Total revenue 26 % 25 %

The increase in research and development expense during fiscal 2025 compared to fiscal 2024 was primarily driven by an increase in employee compensation and related costs, including stock-based compensation, and, to a lesser extent, an increase in outside services costs, and higher data center and cloud services costs.

Sales and Marketing

Fiscal Year Ended Change

(in thousands)

% of Total revenue 33 % 32 %

The increase in sales and marketing expense during fiscal 2025 compared to fiscal 2024 was primarily due to an increase in employee compensation and related costs, including stock-based compensation and, to a lesser extent, higher travel costs.

General and Administrative

Fiscal Year Ended Change

(in thousands)

% of Total revenue 9 % 9 %

The increase in general and administrative expense during fiscal 2025 compared to fiscal 2024 was primarily due to higher stock-based compensation.

Restructuring and Impairment

Fiscal Year Ended Change

(in thousands)

% of Total revenue 1 % 1 %

During fiscal 2025, we recognized $15.9 million of restructuring and impairment costs. We recognized $9.5 million of incremental restructuring costs primarily related to one-time severance and other termination benefits associated with the workforce realignment plan discussed below. We also recognized $6.4 million in incremental abandonment and impairment charges related to certain leases associated with our former corporate headquarters. The incremental impairment charge was due to a revision to the underlying sublease assumptions during fiscal 2025.

During fiscal 2024, we recognized $33.6 million of restructuring and impairment costs related to severance and other termination benefits associated with a workforce realignment that was initiated in the fourth quarter of fiscal 2024, and the cease use of our former headquarters during the second quarter of fiscal 2024.

Other Income (Expense), Net

Fiscal Year Ended Change

(in thousands)

The increase in other income (expense), net during fiscal 2025 compared to fiscal 2024 was primarily due to an increase in interest income from a larger balance in cash, cash equivalents and marketable securities and a higher interest rate environment, partially offset by higher net foreign exchange losses as the U.S. dollar strengthened relative to certain foreign currencies.

Provision for Income Taxes

Fiscal Year Ended Change

(in thousands)

The increase in provision for income taxes during fiscal 2025 compared to fiscal 2024 was primarily due to an increase in profits generated in our foreign jurisdictions.

Liquidity and Capital Resources

At the end of fiscal 2025, we had cash, cash equivalents and marketable securities of $1.5 billion. Our cash and cash equivalents primarily consist of bank deposits and money market accounts. Our marketable securities generally consist of highly rated debt instruments of the U.S. government and its agencies, debt instruments of highly rated corporations, debt instruments issued by foreign governments, and asset-backed securities.

We believe our existing cash, cash equivalents, marketable securities and revolving credit facility will be sufficient to fund our operating and capital needs for at least the next 12 months. Our future capital requirements will depend on many factors including our sales growth, the timing and extent of capital spending to support development efforts including investments to scale operations in support of our recent hyperscale design win with Meta, growth of our Evergreen//One offering, the addition or closure of office space, the timing of new product introductions, our share repurchases, the timing of renewal and/or repayment of borrowings under the revolving credit facility, and cash payments for tax withholding obligations for equity awards held by employees. We may continue to enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property and other licensing rights. We may enter into equipment financing arrangements and seek additional equity or debt financing in the future.

Purchase Obligations and Lease Commitments

At the end of fiscal 2025, we had non-cancelable contractual purchase obligations of $540.1 million, of which $385.9 million is short-term. These purchase obligations primarily includes non-cancelable inventory purchase commitments with contract manufacturers and suppliers, software service contracts, and hosting arrangements.

At the end of fiscal 2025, aggregate future minimum lease payments under non-cancelable operating leases and finance leases were $219.2 million, of which $55.8 million is short-term. Non-cancelable operating leases include leases that have been executed, but not yet commenced. We lease office and data center facilities under operating leases expiring through July 2032 and lease certain engineering test equipment under finance leases.

Revolving Credit Facility

In August 2020, we entered into a Credit Agreement with a consortium of financial institutions and lenders that provides for a five-year, senior secured revolving credit facility of $300.0 million (Credit Facility). Proceeds from the Credit Facility may be used for general corporate purposes and working capital. The Credit Facility expires, absent default or early termination by us, on August 24, 2025. In March 2023, we amended the Credit Facility to transition LIBOR to the Secured Overnight Financing Rate (SOFR) effective April 1, 2023. The annual interest rates applicable to loans under the Credit Facility are, at our option, equal to either a base rate plus a margin ranging from 0.50% to 1.25% or term SOFR (based on one, three, or six-month interest periods), subject to a floor of 0%, plus a margin ranging from 1.50% to 2.25%. Interest on revolving loans is payable quarterly in arrears with respect to loans based on the base rate and at the end of an interest period in the case of loans based on term SOFR (or at each three-month interval, if the interest period is longer than three months). We are also required to pay a commitment fee on the unused portion of the commitments ranging from 0.25% to 0.40% per annum, payable quarterly in arrears.

The outstanding balance of $100.0 million at the end of fiscal 2025 bore weighted-average interest at an annual rate of approximately 6.59% based on a one-month term SOFR period resulting in interest expense of $6.6 million during fiscal2025.

Loans under the Credit Facility are collateralized by substantially all of our assets and subject to certain restrictions and two financial ratios measured as of the last day of each fiscal quarter: a consolidated leverage ratio not to exceed 4.5:1 and an interest coverage ratio not to be less than 3:1. We were in compliance with all covenants under the Credit Facility at the end of fiscal 2025.

Letters of Credit

At the end of fiscal 2024 and 2025, we had outstanding letters of credit in the aggregate amount of $7.7 million and $7.2 million in connection with our facility leases. The letters of credit are collateralized by either restricted cash or the Credit Facility and mature on various dates through September 2030.

Share Repurchase Program and Shares Withheld to Cover Taxes

In February 2024, our Board of Directors authorized a $250.0 million increase to repurchase shares of our common stock under our share repurchase program, of which $21.5 million remained available at the end of fiscal 2025. In February 2025, our Board of Directors authorized an additional $250.0 million to repurchase shares of our common stock, increasing the total remaining authorization amount to $271.5 million. The authorization allows us to repurchase shares of our common stock opportunistically and will be funded from available working capital. Repurchases may be made at management’s discretion from time to time on the open market through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing. The share repurchase program does not obligate us to acquire any of our common stock, has no end date, and may be suspended or discontinued by us at any time without prior notice. During fiscal 2025, we repurchased and retired 6.7 million shares of common stock at an average purchase price of $55.57 per share for an aggregate repurchase price of $373.8 million.

Cash Flows

The following table summarizes our cash flows for the periods presented (in thousands):

Fiscal Year Ended

Net cash provided by operating activities $ 677,722 $ 753,098

Net cash provided by (used in) investing activities $ 3,246 $ (217,700)

Net cash used in financing activities $ (560,235) $ (509,779)

Operating Activities

Cash provided by operating activities consists of net income, adjusted for non-cash items and changes in operating assets and liabilities. Non-cash items primarily included stock-based compensation and depreciation and amortization. The year-over-year increase in net cash provided by operating activities was primarily driven by higher net income of $132.0 million, when excluding non-cash items, partially offset by a decrease of $56.1 million from changes in operating assets and liabilities. The decrease from changes in operating assets and liabilities were primarily impacted by prepayments for certain software license and subscription services, partially offset by lower deferred commissions and accounts receivable due to timing of collections.

Our primary source of cash from operating activities during fiscal 2024 and 2025 were from cash collections from billings for sales of our product and subscription services.

Our primary uses of cash from operating activities during fiscal 2024 and 2025 were payments to our contract manufacturers, payments for employee compensation, and general corporate operating expenditures.

Investing Activities

Net cash used in investing activities during fiscal 2025 was driven by $226.7 million in capital expenditures and the purchase of a strategic investment. Key capital expenditures included investments for: (a) testing new products and services, including for our recent design win with Meta; (b) accelerating density of our direct flash modules; and (c) developing our Pure Fusion v2 solution. Cash outflows were partially offset by maturities and net sales of marketable securities of $41.4 million.

Net cash provided by investing activities during fiscal 2024 was driven by maturities and net sales of marketable securities of $193.4 million, partially offset by capital expenditures of $195.2 million relating to test equipment for new product innovation, and equipment supporting our growing Evergreen//One offering, as well as the construction of our headquarters facility.

Financing Activities

Net cash used in financing activities during fiscal 2025 was primarily driven by cash outflows related to share repurchases of $374.0 million, and tax withholding remittances on vesting of equity awards of $206.6 million, partially offset by issuance of common stock under our employee stock purchase plan (ESPP) of $51.7 million, and exercise of stock options of $27.2 million. The year-over-year increase in tax withholding remittances on vested equity awards was due to extending the net-share settlement of equity awards to satisfy tax withholding obligations to the majority of our employees in June 2024 whereas previously, shares were sold to cover such tax withholding obligations.

Net cash used in financing activities during fiscal 2024 was primarily driven by cash outflows related to the repayment of the principal amount of the Convertible Senior Notes of approximately $575.0 million, share repurchases of $135.8 million, and tax withholding remittances on vested equity awards of $30.0 million, partially offset by proceeds from borrowing under the Credit Facility of $100.0 million, issuance of common stock under our ESPP of $45.1 million, and exercise of stock options of $39.8 million.

Off-Balance Sheet Arrangements

Through the end of fiscal 2025, we did not have any relationships with any entities or financial partnerships, such as structured finance or special purpose entities established for the purpose of facilitating off-balance sheet arrangements or other purposes.

Critical Accounting Policy and Estimates

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. A summary of significant accounting policies applicable to our consolidated financial statements is included in Note 2 of our Notes to Consolidated Financial Statements in Part II, Item 8. We deem an accounting policy to be critical if the nature of the estimate or assumption it incorporates is subject to material level of judgment related to matters that are highly uncertain and changes in those estimates and assumptions are reasonably likely to materially impact our consolidated financial statements.

We evaluate our estimates and assumptions on an ongoing basis. Our estimates and judgments are based on historical experience, forecasted events and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

We believe the accounting policy below has the most significant impact on our consolidated financial statements and require management’s most difficult, subjective, or complex judgments.

Revenue Recognition

Our revenue is derived from sales of our integrated storage hardware and embedded licensed software products and subscription services which also includes support and maintenance and professional services. We enter into contracts with customers that may include combinations of these products and subscription services, resulting in arrangements containing multiple promised performance obligations.

Determining whether our products and subscription services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. For these contracts, we account for individual performance obligations separately if they are distinct.

Revenue is recognized when, or as, control of the promised products or subscription services is transferred to the customer at the transaction price. The transaction price is determined based on the consideration which we will be entitled to in exchange for transferring goods or services to the customer. Transaction price may be adjusted for variable consideration which we estimate by applying the expected value or most likely estimate and subsequently update at each reporting period as additional information becomes available.

To recognize revenue for the products and subscription services for which control has been transferred, we allocate the transaction price for the contract among the identified performance obligations on a relative standalone selling price (SSP) basis. We establish SSP for most of our products and subscription services based on the observable price of the products or subscription services when sold separately in similar circumstances to similar customers. When the SSP is not directly observable through historical transactions, we estimate SSP based on management judgment by considering available data, such as internal margin objectives, pricing strategies, approved pricing guidelines, market/competitive conditions, historical profitability data, as well as other observable inputs. We establish SSP ranges for our products and subscription services and reassess them periodically.

Recent Accounting Pronouncements

Refer to Note 2of our Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

We have operations both within the United States and internationally, and we are exposed to market risk in the ordinary course of our business.

Interest Rate Risk

Our cash, cash equivalents and marketable securities primarily consist of bank deposits and money market accounts, highly rated debt instruments of the U.S. government and its agencies, debt instruments of highly rated corporations, debt instruments issued by foreign governments, and asset-backed securities. At the end of fiscal 2024 and 2025, we had cash, cash equivalents and marketable securities of $1.5 billion. The carrying amount of our cash equivalents reasonably approximates fair value, due to the short maturities of these instruments. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair value of our investments.

We considered the historical volatility of short-term interest rates and determined that it was reasonably possible that an adverse change of 100 basis points could be experienced in the near term. A hypothetical 1.00% (100 basis points) increase in interest rates would have resulted in a decrease in the fair value of our marketable securities of approximately $8.8 million as of the end of fiscal 2025.

Foreign Currency Exchange Risk

Our sales contracts are primarily denominated in U.S. dollars with a proportionally small number of contracts denominated in foreign currencies. A portion of our operating expenses are incurred outside the United States and denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British pound, Euro and Yen. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations. Given the impact of foreign currency exchange rates has not been material to our historical operating results, we have not entered into any derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency exchange should become more significant.

We considered the historical trends in currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 10% for all currencies could be experienced in the near term. These reasonably possible adverse changes in exchange rates of 10% were applied to total monetary assets and liabilities denominated in currencies other than U.S. dollar at the end of fiscal 2025 to compute the adverse impact these changes would have had on our income before income taxes in the near term. These changes would have resulted in an adverse impact on income before provision for income taxes of approximately $9.0 million at the end of fiscal 2025.

Item 8. Financial Statements and Supplementary Data.

PURE STORAGE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Reports of Independent Registered Public Accounting Firm 53

Consolidated Balance Sheets 56

Consolidated Statements of Operations 57

Consolidated Statements of Comprehensive Income 58

Consolidated Statements of Stockholders’ Equity 59

Consolidated Statements of Cash Flows 60

Notes to Consolidated Financial Statements 61

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Pure Storage, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Pure Storage, Inc. and subsidiaries (the “Company”) as of February 4, 2024 and February 2, 2025, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period ended February 2, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 4, 2024 and February 2, 2025, and the results of its operations and its cash flows for each of the three years in the period ended February 2, 2025 in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of February 2, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 26, 2025 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition—Determination of Standalone Selling Prices — Refer to Note 2 of the Financial Statements

Critical Audit Matter Description

The Company generates revenue from product revenue and subscription services revenue. For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on a relative standalone selling price. The standalone selling price is determined based on the price at which the performance obligation is sold separately, or if not observable through past transactions, is estimated taking into account available information such as market conditions and internally approved pricing guidelines related to performance obligations. The determination of the standalone selling price requires management to make significant estimates and judgments related to market conditions and pricing guidelines.

We identified the determination of standalone selling price as a critical audit matter because of the significant judgments made by management in estimating standalone selling price when the price at which the performance obligation sold separately is not available. This required a high degree of auditor judgment and an increased extent of effort to perform qualitative evaluations of the audit evidence related to management’s determination of the standalone selling price.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to standalone selling price included the following, among others:

•We tested the effectiveness of controls over the Company’s methodology and determination of standalone selling price.

•We evaluated the appropriateness of the Company’s methodology used to determine standalone selling price by comparing to historical analysis completed by the Company, internal forecasts, practices observed in the industry, and other significant assumptions.

•We tested the underlying data that served as the basis for the Company’s analysis and the mathematical accuracy of such analysis and verified the consistent application of the methodology of establishing standalone selling price.

•We evaluated the reasonableness of the Company’s overall conclusion of standalone selling price.

•We tested the allocation of the transaction price among performance obligations based on relative standalone selling price.

/s/ Deloitte & Touche LLP

San Jose, California

March 26, 2025

We have served as the Company’s auditor since 2013.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Pure Storage, Inc.:

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Pure Storage, Inc. and subsidiaries (the “Company”) as of February 2, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 2, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended February 2, 2025, of the Company and our report dated March 26, 2025, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

San Jose, California

March 26, 2025

PURE STORAGE, INC.

Consolidated Balance Sheets

(in thousands, except per share data)

At the End of Fiscal

ASSETS

Current assets:

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Commitments and contingencies (Note 7)

Stockholders’ equity:

Accumulated other comprehensive income (loss) (3,782) 954

See the accompanying notes to the consolidated financial statements.

PURE STORAGE, INC.

Consolidated Statements of Operations

(in thousands, except per share data)

Fiscal Year Ended

Revenue:

Cost of revenue:

Operating expenses:

See the accompanying notes to the consolidated financial statements.

PURE STORAGE, INC.

Consolidated Statements of Comprehensive Income

(in thousands)

Fiscal Year Ended

Other comprehensive income (loss):

See the accompanying notes to consolidated financial statements.

PURE STORAGE, INC.

Consolidated Statements of Stockholders’ Equity

(in thousands)

Shares Amount

Vesting of restricted stock units 13,916 1 (1) — — —

Tax withholding on vesting of equity awards (643) — (19,601) — — (19,601)

Common stock issued under employee stock purchase plan 3,014 — 39,965 — — 39,965

Other comprehensive loss — — — (7,139) — (7,139)

Vesting of restricted stock units 14,038 2 (2) — — —

Tax withholding on vesting of equity awards (909) — (29,984) — — (29,984)

Common stock issued under employee stock purchase plan 2,233 — 45,089 — — 45,089

Vesting of restricted stock units 12,370 1 (1) — — —

Common stock issued under employee stock purchase plan 2,388 — 51,736 — — 51,736

Other comprehensive income — — — 4,736 — 4,736

See the accompanying notes to the consolidated financial statements.

PURE STORAGE, INC.

Consolidated Statements of Cash Flows

(in thousands)

Fiscal Year Ended

CASH FLOWS FROM OPERATING ACTIVITIES

Noncash portion of lease impairment and abandonment — 16,766 4,630

Changes in operating assets and liabilities, net of effect of acquisition:

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of strategic investments — — (31,080)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings — 106,890 —

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION

Property and equipment purchased but not yet paid $ 14,902 $ 15,709 $ 16,205

See the accompanying notes to the consolidated financial statements.

PURE STORAGE, INC.

Notes to Consolidated Financial Statements

Note 1. Business Overview

Organization and Description of Business

Pure Storage, Inc. (the Company, we, us, or other similar pronouns) was originally incorporated in the state of Delaware in October 2009 under the name OS76, Inc. In January 2010, we changed our name to Pure Storage, Inc. We are headquartered in Santa Clara, California and have wholly owned subsidiaries throughout the world.

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

We operate using a 52/53 week fiscal year ending on the first Sunday after January 30. Fiscal 2023, 2024, and 2025 were 52-week years that ended on February 5, 2023, February 4, 2024 and February 2, 2025, respectively. Unless otherwise stated, all dates refer to our fiscal years.

The consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States (U.S. GAAP). All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ from these estimates and assumptions due to risks and uncertainties. Such estimates include, but are not limited to, the determination of standalone selling price for revenue arrangements with multiple performance obligations when the price at which the performance obligation sold separately or observable past transactions are not available, useful lives of intangible assets and property and equipment, the period of benefit for deferred contract costs for commissions, fair value for certain stock-based awards, provision for income taxes including related reserves, fair value of leases and impairment of related right-of-use (ROU) assets. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Foreign Currency

The functional currency of our foreign subsidiaries is the U.S. dollar. Transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the average exchange rate in effect during the period. At the end of each reporting period, monetary assets and liabilities are remeasured using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Foreign currency transaction gains and losses are recorded in other income (expense), net in the consolidated statements of operations.

Concentration Risk

Financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents, marketable securities, and accounts receivable. At the end of fiscal 2024 and 2025, the majority of our cash and cash equivalents are primarily invested with two global financial institutions and our deposits exceed federally insured limits. These two global financial institutions were identified by the Financial Stability Board in 2024 as being global systemically important banks and are allocated to buckets 3 or higher. Our investments are intended to facilitate liquidity and capital preservation and consist predominantly of highly-rated fixed income securities. Our investment policy also requires diversification of investment type and credit exposures, and includes certain limits on portfolio duration. Management believes that the financial institutions that hold our cash, cash equivalents and marketable securities are financially sound and, accordingly, are subject to minimal credit risk.

We define a customer as an entity that purchases our products and services from one of our channel partners or from us directly. A substantial amount of our revenue and accounts receivable are derived from the United States across a multitude of industries. We perform ongoing evaluations to determine partner and customer credit.

No customer or channel partner represented more than 10 percent of revenue for fiscal 2023 and 2025. One customer represented more than 10 percent of total accounts receivable at the end of fiscal 2024 and 2025 and more than 10 percent of revenue for fiscal 2024.

We rely on a limited number of contract manufacturers and suppliers of components for our products. In instances where contract manufacturers and suppliers fail to perform their obligations, we may be unable to find alternative contract manufacturers and suppliers or satisfactorily deliver our products to our customers on time.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash in banks and highly liquid investments, primarily money market accounts and U.S. government treasury notes, purchased with an original maturity of three months or less.

Marketable Securities

We classify our marketable securities as available-for-sale (AFS) at the time of purchase and reevaluate such classification at each balance sheet date. We may sell these securities at any time for use in current operations even if they have not yet reached maturity. As a result, we classify our securities, including those with maturities beyond twelve months, as current assets in the consolidated balance sheets. We carry these securities at estimated fair value and record unrealized gains and losses in accumulated other comprehensive income (loss), which is reflected as a component of stockholders’ equity. We evaluate our AFS debt securities with an unamortized cost basis in excess of estimated fair value to determine what amount of that difference, if any, is caused by expected credit losses. Credit-related impairment losses, not to exceed the amount that fair value is less than the amortized cost basis, are recognized through an allowance for credit losses with changes in the allowance for credit losses recognized as a charge to other income (expense), net, in the consolidated statements of operations. Any remaining impairment is included in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Realized gains and losses from the sale of marketable securities are determined based on the specific identification method and are reported in other income (expense), net in the consolidated statements of operations.

Strategic Investments

Our strategic investments consist primarily of equity investments in privately-held companies without readily determinable fair values in which we do not own a controlling interest or exercise significant influence. These investments are recorded at cost using the fair value measurement alternative and are adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer or impairment events. Additionally, we assess these investments quarterly for impairment. Adjustments and impairments, if any, are recorded in other income (expense), net on the consolidated statements of operations.

Nonqualified Deferred Compensation Plan (NQDC)

Deferred compensation payments are held in investment accounts within a consolidated NQDC trust. The trust is classified in other assets, non-current on the consolidated balance sheets as the funds in the trust are not available for use in our operations. The value of the trust is adjusted each quarter based on the fair value of the underlying investments which are considered trading securities, with unrealized gains and losses classified as other income (expense), net in the consolidated statements of operations.

Our obligation with respect to the NQDC trust is recorded in other liabilities, non-current on the consolidated balance sheets. Increases or decreases in the fair value of the NQDC trust liability are recognized as compensation expense in the consolidated statements of operations. There is no net impact to our net income from the fair value adjustments as changes in the fair value of the investment accounts held in the NQDC trust and the NQDC trust liability offset.

Fair Value of Financial Instruments

The carrying value of our financial instruments, including cash equivalents, accounts receivable, accounts payable, accrued liabilities, and debt, approximates fair value.

Accounts Receivable and Allowance

Accounts receivable are recorded at the invoiced amount, and stated at realizable value, net of an allowance for doubtful accounts. Credit is extended to partners and customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations and maintain an allowance for doubtful accounts.

We assess the collectability of the accounts by taking into consideration the aging of our trade receivables, historical experience, and management judgment. We write off trade receivables against the allowance when management determines a balance is uncollectible and no longer actively pursues collection of the receivable.

Changes to the allowance for doubtful accounts balance during fiscal 2023, 2024 and 2025 were not material.

Restricted Cash

Restricted cash is associated with our letters of credit for leases and certain employee-related benefits. At the end of fiscal 2024 and 2025, we had restricted cash of $9.6 million and $14.2 million. Our restricted cash balance at the end of fiscal 2025 includes $1.6 million in prepaid expenses and other current assets on our consolidated balance sheets.

Inventory

Inventory consists of finished goods and component parts, which are purchased from contract manufacturers. Product demonstration units, which we regularly sell, are the primary component of our inventories. Inventories are stated at the lower of cost or net realizable value. Cost is determined using the specific identification method for finished goods and weighted-average method for component parts. We account for excess and obsolete inventory by reducing the carrying value to the estimated net realizable value of the inventory based upon management’s assumptions about future demand and market conditions.

In addition, we record a liability for firm, non-cancelable and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of future demand forecasts consistent with excess and obsolete inventory valuations. The liabilities for these purchase commitments amounted to $23.6 million and $13.6 million at the end of fiscal 2024 and 2025 and are reported in accrued expenses and other liabilities on the consolidated balance sheets.

Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the respective assets (test and infrastructure equipment—5 to 7 years, computer equipment and software—4 to 7 years, furniture and fixtures—7 years). Leasehold improvements are amortized over the shorter of their estimated useful lives or the remaining lease term. Depreciation commences once the asset is placed in service.

In accordance with our accounting practices, we review the estimated useful lives of our property and equipment on an ongoing basis. In the third quarter of fiscal 2025, management determined that the estimated useful lives of our test and infrastructure equipment and assets supporting our Evergreen//One offerings should be revised from 4 years to a range of 5 to 7 years. The change in estimated useful lives was recognized on a prospective basis effective at the beginning of the third quarter of fiscal 2025. The effect of this change in estimate resulted in an aggregate reduction to depreciation expense and corresponding increase in net income of $20.1 million, or $0.06 per basic and diluted share, during fiscal 2025.

Goodwill

Goodwill represents the excess of the purchase price consideration over the estimated fair value of the tangible and intangible assets acquired and liabilities assumed in a business combination. Goodwill is evaluated for impairment annually in the fourth quarter of our fiscal year as a single reporting unit, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. We may elect to qualitatively assess whether it is more likely than not that the fair value of our reporting unit is less than its carrying value. If we opt not to qualitatively assess, a quantitative goodwill impairment test is performed. The quantitative test compares our reporting unit’s carrying amount, including goodwill, to its fair value calculated based on our enterprise value. If the carrying amount exceeds its fair value, an impairment loss is recognized for the excess.

Purchased Intangible Assets

Purchased intangible assets with finite lives are stated at cost, net of accumulated amortization. We amortize our intangible assets on a straight-line basis over an estimated useful life of three to seven years.

Impairment of Long-Lived Assets

We review our long-lived assets, including property and equipment, finite-lived intangible assets and ROU assets associated with leased facilities, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. We measure the recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If the total of the future undiscounted cash flows is less than the carrying amount of an asset, we record an impairment charge for the amount by which the carrying amount of the asset exceeds its fair value.

Deferred Commissions

Deferred commissions consist of variable sales costs paid to our sales force to obtain customer contracts. Deferred commissions related to product revenue are recognized upon transfer of control to customers. As the deferred commissions paid for initial contracts are not commensurate with the amounts paid for renewal contracts, such amounts are amortized over an expected benefit period of six years. We determine the expected benefit period by evaluating our technology development life cycle, expected customer relationship period and other factors. Deferred commissions paid for renewal contracts are amortized over the related contractual period. We classify deferred commissions as current and non-current in our consolidated balance sheets based on the timing of when we expect to recognize the expense. Amortization of deferred commissions is included in sales and marketing expense in the consolidated statements of operations.

Lessee Leases

We assess whether an arrangement contains a lease at inception and, if so, we evaluate the classification of the lease as operating or finance. Lease liabilities are recognized at the present value of the future lease payments at commencement date. The interest rate implicit in our operating and finance leases is not readily determinable, and therefore an incremental borrowing rate is estimated to determine the present value of future payments. The estimated incremental borrowing rate factors in a hypothetical interest rate on a collateralized basis with similar terms, payments, and economic environments. The lease ROU asset is determined based on the lease liability initially established and reduced for any prepaid lease payments and any lease incentives. We account for the lease and non-lease components of operating and finance lease contract consideration as a single lease component.

Certain of the operating lease agreements contain rent concession, rent escalation, and option to renew provisions. Rent concession and rent escalation provisions are considered in determining the lease cost. Lease cost under our operating leases is recognized on a straight-line basis over the lease term commencing on the date we have the right to use the leased property. We generally use the base, non-cancelable, lease term when recognizing the lease assets and liabilities, unless it is reasonably certain that an extension or termination option will be exercised. In addition, certain of our operating lease agreements contain tenant improvement allowances from our landlords. These allowances are accounted for as lease incentives and reduce our ROU asset and lease cost over the lease term.

For short-term leases (defined as leases that, at the commencement date, have a lease term of twelve months or less, and do not include an option to purchase the underlying asset that we are reasonably certain to exercise), we recognize rent expense in our consolidated statements of operations on a straight-line basis over the lease term and record variable lease payments as incurred.

Our finance leases contain a purchase option at the end of the lease term that we are reasonably certain to exercise. As such, we include the purchase option in the measurement of the finance lease liability and utilize the useful life of the underlying assets as the period to amortize the finance lease ROU assets over on a straight-line basis. We record interest expense for finance lease liabilities based on the incremental borrowing rate. Assets recognized are included in property and equipment, net, and the short and long-term lease liabilities are included in accrued expenses and other liabilities, non-current, in the consolidated balance sheets.

Lessor Lease

We will at times lease our data storage solutions and subscription services. Total net consideration is allocated to each component based on relative standalone selling price. The amounts allocated to the lease and non-lease components are accounted for in accordance with ASC 842 and ASC 606, respectively.

For sales-type leases, we recognize the selling profit or loss upfront and a lease receivable equal to the present value of the future lease payments is included in prepaid expenses and other current assets and other assets, non-current in our consolidated balance sheets. The future lease payments are discounted using the interest rate implicit in the lease or our incremental borrowing rate if the implicit interest rate cannot be reasonably determined. Lease income associated with sales-type leases are classified as product revenue on our consolidated statements of operations.

For operating leases, we recognize the lease income over the lease term as subscription services revenue on our consolidated statements of operations.

Revenue associated with non-lease components are classified as subscription services revenue on our consolidated statements of operations.

Initial direct costs are incremental costs directly related to negotiating and executing the lease are allocated to the lease and non-lease components based on relative standalone selling price. Initial direct costs allocated to sales-type leases are expensed immediately and included in the selling profit or loss while initial direct costs allocated to operating leases are deferred and amortized on a straight line basis over the lease term as an operating expense.

Deferred Revenue

Deferred revenue primarily consists of amounts that have been invoiced but have not yet been recognized as revenue and performance obligations pertaining to subscription services. The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the consolidated balance sheet dates.

Revenue Recognition

We generate revenue from two sources: (1) product revenue which includes the sale of integrated storage hardware and embedded licensed operating system software and (2) subscription services revenue which includes primarily our portfolio of Evergreen offerings. Subscription services revenue also include our professional services offerings such as installation and implementation consulting services.

We typically recognize product revenue upon transfer of control to our customers and the satisfaction of our performance obligations. For Evergreen//Flex, product revenue is recognized upon the commencement of the underlying subscription services. Products are typically shipped directly by us to customers.

We recognize subscription services revenue from Evergreen//Forever and Evergreen//Flex ratably over the contractual term, which generally ranges from one to six years. The majority of our product solutions are sold with either a Evergreen//Forever or Evergreen//Flex subscription service agreement, which begins upon either transfer of control of the corresponding products or commencement of the subscription services to our customers. In addition, thesubscription service agreement provides our customers with a new controller based upon certain contractual terms. The controller refresh represents a separate performance obligation that is included within the subscription service agreement and the allocated revenue is recognized upon shipment of the controller. Costs associated with Evergreen//Forever and Evergreen//Flex subscription services are expensed when incurred.

Our Evergreen//Forever and Evergreen//Flex subscription services also include the right to receive unspecified software updates and upgrades on a when-and-if-available basis, software bug fixes, replacement parts and other services related to the underlying infrastructure, as well as access to our cloud-based management and support platform.

For Evergreen//One, subscription services revenue is recognized over the contractual term on a consumption basis, beginning on the commencement date of the underlying subscription services to our customers. Our Evergreen//One subscription services agreement generally includes a minimum usage commitment amount as well as fees for usage in excess of such amount.

We also sell professional services such as installation and implementation consulting services and the related revenue is recognized as services are performed.

We recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services. This is achieved through applying the following five-step approach:

•Identification of the contract, or contracts, with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, we satisfy a performance obligation

When applying this five-step approach, we apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience and/or published credit and financial information pertaining to the customer. To the extent a customer contract includes multiple promised goods or services, we determine whether promised goods or services should be accounted for as a separate performance obligation. The transaction price is determined based on the consideration which we will be entitled to in exchange for transferring goods or services to the customer. For contracts that contain multiple performance obligations, we allocate the transaction price to each performance obligation based on a relative standalone selling price (SSP). The SSP is determined based on the price at which the performance obligation is sold separately, or if not observable through past transactions, is estimated taking into account available information such as market conditions and internally approved pricing guidelines related to performance obligations.

Warranty

We generally provide a three-year warranty on hardware and a 90-day warranty on our software embedded in the hardware that commences upon shipment. Our hardware warranty provides for parts replacement for defective components and our software warranty provides for bug fixes. Our Evergreen subscription agreement provides for the same parts replacement that customers are entitled to under our warranty program, except that replacement parts are delivered according to targeted response times to minimize disruption to our customers’ critical business applications. Substantially all customers purchase Evergreen subscription agreements. We will establish a warranty reserve for specifically identified products if and when we determine we have systemic product failure. Our estimate for future estimated costs related to warranty activities is based upon historical product failure rates and historical costs incurred in correcting product failures. Warranty reserves at the end of fiscal 2024 and 2025 were not material.

Research and Development

Research and development costs are expensed as incurred. Research and development costs consist primarily of employee compensation and related expenses, prototype expenses, to the extent there is no alternative use for that equipment, depreciation of equipment used in research and development, third-party engineering and contractor support costs, data center and cloud services costs as well as allocated overhead costs.

Capitalized Internal-Use Software Costs

We expense costs to develop software that is externally marketed before technological feasibility is reached. We have determined that technological feasibility is reached shortly before the release of our products and as a result, the development costs incurred after the establishment of technological feasibility and before the release of those products have not been significant and accordingly, have been expensed as incurred.

We capitalize (i) costs incurred to develop or modify software solely for our internal use, including hosted applications used to deliver our support services, and (ii) certain implementation costs incurred in a hosting arrangement that is a service contract when the preliminary project stage is complete, management with the relevant authority authorizes and commits to the funding of the software project, and it is probable the project will be completed and used to perform the intended function. Costs related to preliminary project activities and post implementation activities are expensed as incurred.

Software development costs are capitalized to property, plant and equipment and amortized using the straight-line method over an estimated useful life of four years. Software development costs capitalized to property and equipment were $20.7 million and $29.4 million for fiscal 2024 and 2025. Amortization expense for software development costs was $2.2 million, $3.5 million and $4.1 million during fiscal 2023, 2024 and 2025.

Software implementation costs are capitalized to either prepaid and other current assets or other assets, non-current in our consolidated balance sheets and amortized over the terms of the associated hosting arrangements. Software implementation costs capitalized were $4.3 million and $0.6 million for fiscal 2024 and 2025. Amortization expense for software implementation costs was $1.5 million, $2.4 million and $4.0 million during fiscal 2023, 2024 and 2025.

Advertising Expenses

Advertising costs are expensed as incurred. Advertising expenses were $11.1 million, $11.3 million and $6.2 million for fiscal 2023, 2024 and 2025.

Stock-Based Compensation

Stock-based compensation includes expenses related to restricted stock units (RSUs), performance-based restricted stock units (PRSUs), market-based long-term performance incentive restricted stock units (LTP Awards), and restricted stock, stock options and purchase rights issued to employees under our employee stock purchase plan (ESPP).

The fair value of RSUs, PRSUs and restricted stock are measured at the fair market value of the underlying stock at the grant date. The fair value of LTP Awards on the grant date is calculated using a Monte Carlo simulation model that takes into account similar input assumptions as the Black-Scholes option pricing model as well as the possibility that the market condition may not be satisfied and a post-vest holding period discount. We determine the fair value of ESPP purchase rights and stock options on the date of grant utilizing the Black-Scholes option pricing model, which is impacted by the fair value of our common stock, as well as changes in assumptions regarding a number of subjective variables. These variables include the expected common stock price volatility over the term of the purchase rights or options, the expected term of the purchase rights or options, risk-free interest rates and expected dividend yield.

We recognize stock-based compensation expense for stock-based awards with only service conditions on a straight-line basis over the period during which an employee is required to provide services in exchange for the award (generally the vesting period of the award).

For stock-based awards granted to employees that include a performance condition, we recognize stock-based compensation expense for these awards under the accelerated attribution method over the requisite service period when management determines it is probable that the performance condition will be satisfied.

For stock-based awards granted to employees that include a market condition, we recognize stock-based compensation expense under the accelerated attribution method over the requisite service period. Stock-based compensation expense that was previously recognized is not reversed if the market condition is ultimately not met.

We account for forfeitures as they occur for all stock-based awards.

Restructuring

Personnel-related restructuring charges include severance and other separation costs associated with workforce realignment action plans. We accrue for these costs when it is probable that the benefits will be paid and the amount is reasonably estimable if the costs are associated with a substantive ongoing benefit arrangement, including amounts that are mandated pursuant to a contract or law. We evaluate and adjust the liabilities based on actual costs incurred or changes in estimates. We generally recognize a liability for one-time termination benefit costs based on its fair value at the communication date when management has committed to a termination plan and notified the affected employees.

Income Taxes

We account for income taxes using the asset and liability method. Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance to amounts that are more likely than not to be realized.

We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

Recently Adopted Accounting Pronouncement

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. We adopted this standard for our annual period beginning fiscal year 2025 on a retrospective basis to all periods presented. The adoption of this standard did not result in a significant change to our consolidated financial statement disclosures. Refer to Note 15—Segment Information and Geographic Areas for further information.

Recent Accounting Pronouncement Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires greater disaggregation of tax information in rate reconciliation and income taxes paid by jurisdiction. ASU 2023-09 will be effective for our fiscal year beginning February 3, 2025, with early adoption permitted. We are currently evaluating the impact of this standard on our financial statement disclosures.

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 new standard on our financial statement disclosures.

Note 3. Financial Instruments

Fair Value Measurements

We define fair value as the exchange price that would be received from sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We measure our financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Three levels of inputs may be used to measure fair value:

•Level 1 - Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities;

•Level 2 - Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments; and

•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs are based on our own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.

Cash Equivalents, Marketable Securities and Restricted Cash

We measure our cash equivalents, marketable securities and restricted cash at fair value on a recurring basis. We classify our cash equivalents, marketable securities and restricted cash within Level 1 or Level 2 because they are valued using either quoted market prices or inputs other than quoted prices which are directly or indirectly observable in the market, including readily-available pricing sources for the identical underlying security which may not be actively traded. Our fixed income available-for-sale securities consist of high quality, investment grade securities from diverse issuers. The valuation techniques used to measure the fair value of our marketable securities were derived from non-binding market consensus prices that are corroborated by observable market data or quoted market prices for similar instruments.

The following tables summarize our cash equivalents, marketable securities and restricted cash by significant investment categories and their classification within the fair value hierarchy at the end of fiscal 2024 and 2025 (in thousands):

At the End of Fiscal 2024

Level 1

Level 2

At the End of Fiscal 2025

Level 1

Level 2

The amortized cost and estimated fair value of our marketable securities are shown below by contractual maturity (in thousands):

At the End of Fiscal 2025

Amortized Cost Fair Value

Due in five to ten years 865 867

Unrealized losses on our marketable securities have not been recorded into income because we do not intend to sell nor is it more likely than not that we will be required to sell these investments prior to recovery of their amortized cost basis. The fair value of our marketable securities is impacted by the interest rate environment and related credit spreads. The credit ratings associated with our marketable securities are highly rated and the issuers continue to make timely principal and interest payments. As a result, there were no credit or non-credit impairment charges recorded in fiscal 2023, 2024, and 2025. The following table presents the fair values and gross unrealized losses for those investments that were in a continuous unrealized loss position at the end of fiscal 2024 and 2025, aggregated by investment category (in thousands):

At the End of Fiscal 2024

12 Months or less Greater than 12 months Total

Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss

At the End of Fiscal 2025

12 Months or less Greater than 12 months Total

Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss

Realized gains or losses on sale of marketable securities were not significant for all periods presented.

Strategic Investments

Strategic investments primarily include equity investments in privately-held companies, which do not have a readily determinable fair value. We deem our strategic investments as Level 3 in the fair value hierarchy as nonrecurring fair value measurements may include observable and unobservable inputs. At the end of fiscal 2024 and 2025, the carrying amount of our strategic investments was $5.0 million and $36.7 million that is included in other assets, non-current in our consolidated balance sheets. Adjustments made under the fair value measurement alternative were either none or not material during fiscal 2023, 2024 and 2025.

Other Financial Instruments

The investments held in our NQDC trust are considered trading securities that are measured at fair value using Level 1 inputs. The fair value of these investments was $3.2 million and $8.4 million at the end of fiscal 2024 and 2025.

Note 4. Balance Sheet Components

Inventory

Inventory consists of the following (in thousands):

At the End of Fiscal

Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):

At the End of Fiscal

Capitalized software development costs 36,474 65,824

Less: accumulated depreciation and amortization (480,248) (570,699)

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(1) Includes finance lease right-of-use assets. Refer to Note 8.

Depreciation and amortization expense related to property and equipment was $87.0 million, $112.6 million and $114.5 million for fiscal 2023, 2024 and 2025, respectively.

Intangible Assets, Net

Intangible assets, net consist of the following (in thousands):

At the End of Fiscal

Intangible assets amortization expense was $16.5 million, $16.2 million and $15.7 million for fiscal 2023, 2024 and 2025, respectively. At the end of fiscal 2025, the weighted-average remaining amortization period was 0.9 year for technology patents, 1.0 year for developed technology, and 2.7 years for customer relationships. We record amortization of technology patents in general and administrative expenses due to their defensive nature, developed technology in cost of product revenue, and customer relationships in sales and marketing expenses in the consolidated statements of operations.

At the end of fiscal 2025, future expected amortization expense for intangible assets is as follows (in thousands):

Fiscal Years Ending Future Expected AmortizationExpense

Goodwill

Goodwill was $361.4 million at the end of fiscal 2024 and 2025. There were no impairments to goodwill during fiscal 2023, 2024 and 2025.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following (in thousands):

At the End of Fiscal

Accrued service logistics and professional services 9,636 10,286

Finance lease liabilities, current 4,204 387

Customer deposits from contracts with customers 23,534 31,143

Total accrued expenses and other liabilities $ 135,755 $ 156,791

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(1) Primarily consists of subscription cloud services and outside services costs.

(2) Primarily consists of accruals related to our inventory and inventory purchase commitments with our contract manufacturers.

Note 5. Deferred Revenue and Commissions

Deferred Commissions

Changes in total deferred commissions during the periods presented are as follows (in thousands):

Fiscal Year Ended

During fiscal 2023, 2024 and 2025, we recognized sales commission expenses of $170.0 million, $172.7 million, and $179.7 million, respectively. Of the $328.6 million total deferred commissions balance at the end of fiscal 2025, we expect to recognize approximately 30% as sales commission expense over the next 12 months and the remainder thereafter.

There was no impairment related to capitalized commissions during fiscal 2023, 2024 or 2025.

Deferred Revenue

Changes in total deferred revenue during the periods presented are as follows (in thousands):

Fiscal Year Ended

During fiscal 2024 and 2025, we recognized approximately $721.0 million and $852.2 million, respectively, in revenue pertaining to deferred revenue as of the beginning of each period.

Remaining Performance Obligations

Total remaining performance obligations (RPO) which is contracted but not recognized revenue was $2.6 billion at the end of fiscal 2025. Total RPO includes $41.1 million in remaining non-cancelable product orders, of which $25.4 million relates to a lessor arrangement. RPO consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods. Product orders are generally cancelable until delivery has occurred, and as such, unfulfilled product orders that are cancelable are excluded from RPO. Of the $2.6 billion RPO at the end of fiscal 2025, we expect to recognize approximately 48% over the next 12 months, and the remainder thereafter.

Note 6. Debt

Revolving Credit Facility

Effective April 1, 2023, the Credit Facility was amended to transition LIBOR to the Secured Overnight Financing Rate (SOFR). The annual interest rates applicable to loans under the Credit Facility are, at our option, equal to either a base rate plus a margin ranging from 0.50% to 1.25% or term SOFR (based on one, three or six-month interest periods), subject to a floor of 0%, plus a margin ranging from 1.50% to 2.25%. Interest on revolving loans is payable quarterly in arrears with respect to loans based on the base rate and at the end of an interest period in the case of loans based on term SOFR (or at each three-month interval if the interest period is longer than three months). We are also required to pay a commitment fee on the unused portion of the commitments ranging from 0.25% to 0.40% per annum, payable quarterly in arrears.

We had $100.0 million outstanding under the Credit Facility at the end of fiscal 2024 and 2025. The outstanding borrowings bore weighted-average interest at an annual rate of approximately 1.61%, 6.73%, and 6.59% based on a one-month term LIBOR (or SOFR) period resulting in interest expense of $0.3 million, $5.5 million and $6.6 million during fiscal 2023, 2024 and 2025.

Borrowings under the Credit Facility are collateralized by substantially all of our assets and subject to certain restrictions and two financial ratios measured as of the last day of each fiscal quarter: a consolidated leverage ratio not to exceed 4.5:1 and an interest coverage ratio not to be less than 3:1. We were in compliance with all covenants under the Credit Facility at the end of fiscal 2025.

Convertible Senior Notes

In April 2023, we repaid the entire $575.0 million principal balance of our 0.125% convertible senior, unsecured notes (the Notes) that were issued in a private placement to qualified institutional buyers in April 2018.

Note 7. Commitments and Contingencies

Leases

At the end of fiscal 2025, we had various non-cancelable operating and finance lease commitments for office and data center facilities. Refer to Note 8—Leases for additional information regarding lease commitments.

Contractual Purchase Obligations

At the end of fiscal 2025, we had $540.1 million of non-cancelable contractual purchase obligations primarily related to inventory purchase commitments, software service contracts, and hosting arrangements. In order to manage future demand for our products, we enter into agreements with manufacturers and suppliers to procure inventory based upon our demand forecasts.

Letters of Credit

Legal Matters

From time to time, we have become involved in claims and other legal matters arising in the normal course of business. We investigate these claims as they arise. Although claims are inherently unpredictable, we currently are not aware of any matters that we expect to have a material adverse effect on our business, financial position, results of operations or cash flows. Accordingly, no material loss contingency has been recorded in our consolidated balance sheet as of the end of fiscal 2025.

Indemnification

Our arrangements generally include certain provisions for indemnifying customers against liabilities if our products or services infringe a third party’s intellectual property rights. Other guarantees or indemnification arrangements include guarantees of product and service performance and standby letters of credit for lease facilities. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, we have not incurred any material costs as a result of such obligations and have not accrued any liabilities related to such obligations in the consolidated financial statements. In addition, we indemnify our officers, directors and certain key employees while they are serving in good faith in their respective capacities. To date, there have been no claims under any indemnification provisions.

Note 8. Leases

We lease office and data center facilities under non-cancelable operating lease agreements expiring through July 2032. Our lease agreements do not contain any material residual value guarantees or restrictive covenants.

During the second quarter of fiscal 2024, we ceased use of our former corporate headquarters that resulted in certain impairment and abandonment charges during fiscal 2024 and 2025. Refer to Note 9—Restructuring and Impairment for further information.

We also lease certain engineering test equipment under financing agreements. These finance leases have a lease term of three years and contain a bargain purchase option that we have exercised or expect to exercise at the end of the respective lease terms.

The components of lease costs were as follows (in thousands):

Fiscal Year Ended

Finance lease cost:

Amortization of finance lease right-of-use assets 3,028 4,400 3,510

Interest on finance lease liabilities 330 406 144

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(1)Variable lease cost predominantly included common area maintenance charges.

Supplemental information related to leases is as follows (in thousands):

At the End of Fiscal

Operating leases:

Weighted-average remaining lease term (in years) 5.0 4.9

Weighted-average discount rate 7.1 % 7.4 %

Finance leases:

Finance lease right-of-use assets, net (1) $ 9,784 $ 5,555

Finance lease liabilities, current (2) $ 4,204 $ 387

Finance lease liabilities, non-current (3) 180 —

Total finance lease liabilities $ 4,384 $ 387

Weighted-average remaining lease term (in years) 2.4 1.0

Weighted-average discount rate 5.4 % 3.3 %

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(1) Included in the consolidated balance sheets within property and equipment, net.

(2) Included in the consolidated balance sheets within accrued expenses and other liabilities.

(3) Included in the consolidated balance sheets within other liabilities, non-current.

Supplemental cash flow information related to leases is as follows (in thousands):

Fiscal Year Ended

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash outflows for operating leases $ 40,704 $ 51,949

Financing cash outflows for finance leases $ 7,292 $ 5,155

Right-of-use assets obtained in exchange for lease liabilities:

Future lease payments under our non-cancelable leases at the end of fiscal 2025 are as follows (in thousands):

Fiscal Years Ending Operating Leases Finance Leases

Less: imputed interest (36,557) (3)

Present value of total lease liabilities $ 180,766 $ 387

Lessor Arrangement

During fiscal 2024 and 2025, we, as a lessor, entered into non-cancelable arrangements to lease our data storage solutions and subscription services. The arrangements include multiple seven-year leases that both commenced during fiscal 2025 and will commence in fiscal 2026 with total net consideration of $174.8 million. The arrangements provide an end-of-term option to purchase the leased assets for a pre-determined price.

We determined, at inception of the respective arrangements, that each of the leases include sales-type leases, an operating lease, and non-lease components. The non-lease components are comprised of subscription support services and professional services. The total net consideration for each lease was allocated to these components based on relative standalone selling price.

Total net consideration for the leases that commenced during fiscal 2025 was $134.8 million. We recognized $47.4 million in product revenue related to the sales-type lease components during fiscal 2025. The associated profit was $36.1 million, based on the product revenue recognized less certain costs, during fiscal 2025. Subscription services revenue related to the operating lease and non-lease components recognized during fiscal 2025 was $7.2 million.

Future minimum gross lease payments for the leases that commenced during fiscal 2025 allocated to the sales-type leases and operating lease components were as follows (in thousands). The remaining lease payments of $100.0 million allocated to the non-lease components, are excluded from the table below.

Fiscal Years Ending Sales-Type Leases Operating Leases

Total future lease payments to be received $ 79,395 $ 12,441

Note 9. Restructuring and Impairment

The following table summarizes our restructuring and impairment charges during fiscal 2024 and 2025 (in thousands):

Fiscal Year Ended

Severance and other termination benefit costs $ 16,846 $ 9,526

Lease impairment and abandonment charges 16,766 6,375

Total restructuring and impairment $ 33,612 $ 15,901

Workforce Realignment Plan

In February 2024, we approved a workforce realignment plan (the Plan) to better align our resources with our business strategy that reduced our headcount by nearly 250 employees globally. We recognized total restructuring costs of $27.9 million associated with one-time severance and other termination benefits, of which $18.0 million and $9.9 million was recognized in fiscal 2024 and 2025. The restructuring costs recognized included $1.2 million and $0.4 million in cost of revenue in our consolidated statement of operations for fiscal 2024 and 2025. The Plan was completed by the third quarter of fiscal 2025.

The following table summarizes the activity related to our liability associated with the Plan that is included within accrued compensation and benefits in our consolidated balance sheets (in thousands):

Severance and Other Termination Benefits

Restructuring charges 9,855

Balance at the end of fiscal 2025 $ —

Facilities Abandonment and Impairment

During the second quarter of fiscal 2024, we ceased use of our former corporate headquarters that resulted in the recognition of $16.8 million and $6.4 million in lease impairment and abandonment charges during fiscal 2024 and 2025. The impairment charges represent the amount that the carrying value of the underlying operating lease right-of-use assets exceeded their estimated fair values, which were determined by utilizing a discounted cash flow approach that incorporated a sublease assumption. The incremental impairment charge recognized during fiscal 2025 resulted from a revision to the underlying sublease assumptions.

Note 10. 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 fiscal 2025, 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 fiscal 2025, 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 fiscal 2025, 326.1 million shares of Class A common stock were issued and outstanding.

Common Stock Reserved for Issuance

At the end of fiscal 2025, we had reserved shares of common stock for future issuance as follows:

Shares underlying outstanding stock options 2,426,214

Shares underlying unvested restricted stock units (1) 25,093,925

Shares reserved for future equity awards 31,162,254

Shares reserved for future employee stock purchase plan awards 7,144,441

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(1) Includes performance-based and market-based awards.

Share Repurchase Program

In August 2019, our Board of Directors approved a share repurchase program to repurchase shares of our common stock. As of the end of fiscal 2025, our Board of Directors has authorized to repurchase up to $1.1 billion under our share repurchase program, of which $21.5 million remained available. Shares repurchases are funded from available working capital.

In February 2025, our Board of Directors authorized a $250.0 million increase to the share repurchase program, bringing the total remaining authorization for future share repurchases to $271.5 million. Repurchases may be made at management’s discretion from time to time on the open market, through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing. The share repurchase program does not obligate us to acquire any of our common stock, has no end date, and may be suspended or discontinued by us at any time without prior notice.

We record the difference between cash paid for stock repurchases and underlying par value as a reduction to additional paid-in capital, to the extent the repurchases do not cause this balance to be reduced below zero, at which point the difference would be recorded as a reduction to accumulated deficit.

The following table summarizes the stock repurchase activity for fiscal 2023, 2024 and 2025 (in thousands except for per share amounts):

Fiscal Year Ended

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(1) Excludes transaction costs that are included in the repurchases of common stock on the consolidated statements of cash flows.

Note 11. Equity Incentive Plans

Equity Incentive Plans

We maintain two equity incentive plans: the 2009 Equity Incentive Plan (the 2009 Plan) and the 2015 Equity Incentive Plan (the 2015 Plan). The 2015 Plan serves as the successor to our 2009 Plan and provides for grants of incentive stock options to our employees and non-statutory stock options, stock appreciation rights, restricted stock, 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 four year period and expire no later than ten years from the date of grant.

We initially reserved 27.0 million shares of our common stock for issuance under our 2015 Plan. The number of shares reserved for issuance under our 2015 Plan increases automatically on the first day of each fiscal year, for a period of not more than ten years, commencing on February 1, 2016, in an amount equal to 5% of the total number of shares of our capital stock outstanding as of the immediately preceding January 31 (the Evergreen Increase). In March 2022, our Board of Directors approved an amendment and restatement of the 2015 Plan to clarify the effect of our change to a 52/53 week fiscal year in September 2019 on the Evergreen Increase. The last Evergreen Increase occurred on February 3, 2025.

In June 2024, we extended the net-share settlement of equity awards to the majority of our employees by withholding shares upon vesting to satisfy tax withholding obligations whereas previously, shares were sold to cover such tax withholding obligations. Approximately 0.6 million, 0.9 million, and 3.5 million shares were withheld to cover $19.6 million, $30.0 million, and $208.8 million, respectively, in tax withholding obligations during fiscal 2023, 2024 and 2025. 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 consolidated statements of cash flows.

2015 Amended and Restated Employee Stock Purchase Plan

Our 2015 Employee Stock Purchase Plan was amended and restated in fiscal 2020 (2015 ESPP). A total of 3.5 million shares of common stock was initially reserved for issuance under the 2015 ESPP and an additional 5.0 million shares of common stock were added in connection with the amendment and restatement. The number of shares reserved for issuance under our 2015 ESPP increased automatically on the first day of February of each of 2016 through 2025, in an amount equal to the lesser of (i) 1% of the total number of shares of our capital stock outstanding as of the immediately preceding January 31, and (ii) 3.5 million shares of common stock.

Our Board of Directors (or a committee thereof) has the authority to establish the length and terms of the offering periods and purchase periods and the purchase price of the shares of common stock which may be purchased under the plan. The current offering terms allow eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 30% of their eligible compensation, subject to a cap of 3,000 shares on any purchase date, a dollar cap of $7,500 per purchase period, or $25,000 in any calendar year (as determined under applicable tax rules). The current terms also allow for a 24-month offering period beginning March 16th and September 16th of each year, with each offering period consisting of four6 month purchase periods, subject to a reset provision. Further, currently, on each purchase date, eligible employees may purchase our common stock at a price per share equal to 85% of the lesser of the fair market value of our common stock (1) on the first trading day of the applicable offering period or (2) the purchase date.

Under the reset provision currently authorized, if the closing stock price on the offering date of a new offering falls below the closing stock price on the offering date of an ongoing offering, the ongoing offering would terminate immediately following the purchase of ESPP shares on the purchase date immediately preceding the new offering and participants in the terminated offering would automatically be enrolled in the new offering (ESPP reset), resulting in a modification charge to be recognized over the new offering period. During fiscal 2023, 2024 and 2025, ESPP resets resulted in total modification charges of $10.4 million, $16.7 million and $1.2 million, respectively, to be recognized over their new offering periods.

During fiscal 2023, 2024 and 2025, we recognized $22.9 million, $27.4 million and $34.1 million, of stock-based compensation expense related to our 2015 ESPP. At the end of fiscal 2025, total unrecognized stock-based compensation cost related to our 2015 ESPP was $12.3 million, which is expected to be recognized over a weighted-average period of approximately 1.1 years.

Determination of Fair Value

The fair value of employees’ purchase rights under ESPP is estimated on the grant date using the Black-Scholes option pricing model. This valuation model for stock-based compensation expense requires us to make assumptions and judgments about the variables used in the calculation including the fair value of the underlying common stock, expected term, the expected volatility of the common stock, a risk-free interest rate and expected dividend yield. The assumptions used for the periods presented are as follows:

Fiscal Year Ended

Dividend rate — — —

The assumptions used in the Black-Scholes option pricing model were determined as follows.

Fair Value of Common Stock—We use the market closing price of our common stock as reported on the New York Stock Exchange to determine the fair value of our employees’ purchase rights at each grant date.

Expected Term—The expected term represents the term from the first day of an offering period to each of the four purchase dates within each offering period.

Expected Volatility—The expected volatility is based on the historical volatility of our common stock for a period equivalent to the expected term described above.

Risk-Free Interest Rate—The risk-free interest rate is based on the implied yield available for zero-coupon U.S. Treasury notes with maturities that approximate the expected term described above.

Dividend Rate—We have never declared or paid any cash dividends and do not plan to pay cash dividends in the foreseeable future, and, therefore, use an expected dividend yield of zero.

Stock Options

A summary of the stock option activity under our equity incentive plans and related information is as follows:

Options Outstanding

The aggregate intrinsic value of options vested and exercisable at the end of fiscal 2025 is calculated based on the difference between the exercise price and the closing price of $67.79 of our common stock on the last day of fiscal 2025. The aggregate intrinsic value of options exercised during fiscal 2023, 2024 and 2025 was $63.5 million, $124.0 million and $91.4 million.

The total grant date fair value of options vested during fiscal 2023, 2024 and 2025 was $7.0 million, $2.3 million and $0.3 million.

Stock-based compensation expense related to stock options has been fully recognized and was not material for any of the periods presented.

Restricted Stock Units (RSUs)

A summary of the RSU activity under our 2015 Plan and related information is as follows:

The aggregate fair value, as of the respective vesting dates, of RSUs that vested during fiscal 2023, 2024 and 2025 was $358.0 million, $415.4 million and $639.3 million.

During fiscal 2023, 2024 and 2025, we recognized $248.1 million, $268.2 million and $305.3 million in stock-based compensation expense related to RSUs. At the end of fiscal 2025, total unrecognized employee compensation cost related to unvested RSUs was $667.7 million, which is expected to be recognized over a weighted-average period of 2.6 years.

Performance-based Restricted Stock Units (PRSUs)

The number of shares that could be earned under our PRSU grants ranges from 0% to 200% of the target number granted depending on the achievement of certain performance conditions with any unearned shares canceled. Generally, the number of earned shares vest over three years from the date of grant subject to continuous service.

A summary of the PRSU activity under our 2015 Plan and related information is as follows:

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(1) Represents the number of shares that may be earned at the target percentage of 100% depending on the achievement of fiscal 2025 or certain other performance conditions.

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P · 10-K · period ended 2025-02-02

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Item 8. Financial Statements and Supplementary Data.

P US Equity☆

P · 10-K · period ended 2025-02-02

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Item 8. Financial Statements and Supplementary Data.

P US Equity