filings.toolsItem 8. Financial Statements and Supplementary Data
135K characters. Original on sec.gov · Markdown
Item 8. Financial Statements and Supplementary Data
DATADOG, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Datadog, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Datadog, Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 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 December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 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 December 31, 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 February 18, 2026, 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 separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.
Revenue Recognition — Identification of Performance Obligations – Refer to Note 2 of the Financial Statements
Critical Audit Matter Description
As described in Note 2 to the consolidated financial statements, the Company generates revenue from the sale of subscription services contracts to customers using its cloud-based platform. Subscription services contracts with certain of the Company’s customers may include non-standard terms and conditions and promises to transfer multiple services.
Contracts with customers that contain non-standard terms and conditions and promises to transfer multiple services require significant judgment by management to identify the distinct performance obligations in the arrangement. Distinct performance obligations will be accounted for as separate performance obligations, while non-distinct services are combined with others to form a single performance obligation.
Given the complexity of the Company’s subscription services contracts with certain customers, coupled with management’s judgments involved in identifying distinct performance obligations and non-standard terms and conditions, auditing the Company’s subscription services contracts with certain customers required a high degree of auditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s subscription contracts with certain customers included, among others:
◦We tested the effectiveness of management’s controls over revenue recognition. This includes management’s controls over the identification of performance obligations and non-standard terms and conditions in subscription contracts, as well as the allocation of revenue to each performance obligation.
◦We evaluated a sample of subscription contracts with customers to determine if all the promises referred to in the contract were properly identified by management and accounted for as distinct performance obligations by performing the following:
-
Obtained and read the subscription contract and independently assessed the terms of the contract to identify all promises and non-standard terms and conditions.
-
For each promise identified, we evaluated whether such promise represented a distinct “performance obligation”, as prescribed by Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.
-
We evaluated the completeness and accuracy of the performance obligations by comparing those identified by us to those identified by management.
/s/ Deloitte & Touche LLP
New York, New York
February 18, 2026
We have served as the Company's auditor since 2016.
DATADOG, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
| December 31, 2025 | December 31, 2024 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | 401,305 | $ | 1,246,983 | |||||||
| Marketable securities | 4,073,531 | 2,942,076 | |||||||||
| Accounts receivable, net of allowance for credit losses of $19,292 and $16,302 as of December 31, 2025 and 2024, respectively | 741,262 | 598,919 | |||||||||
| Deferred contract costs, current | 76,022 | 56,095 | |||||||||
| Prepaid expenses and other current assets | 90,160 | 67,042 | |||||||||
| Total current assets | 5,382,280 | 4,911,115 | |||||||||
| Property and equipment, net | 338,093 | 226,970 | |||||||||
| Operating lease assets | 214,674 | 172,512 | |||||||||
| Goodwill | 530,568 | 360,381 | |||||||||
| Intangible assets, net | 14,968 | 3,711 | |||||||||
| Deferred contract costs, non-current | 126,708 | 86,573 | |||||||||
| Other assets | 36,553 | 24,077 | |||||||||
| TOTAL ASSETS | $ | 6,643,844 | $ | 5,785,339 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Accounts payable | $ | 148,791 | $ | 107,731 | |||||||
| Accrued expenses and other current liabilities | 209,595 | 127,136 | |||||||||
| Operating lease liabilities, current | 39,369 | 31,970 | |||||||||
| Convertible senior notes, net, current | — | 634,023 | |||||||||
| Deferred revenue, current | 1,193,646 | 961,853 | |||||||||
| Total current liabilities | 1,591,401 | 1,862,713 | |||||||||
| Operating lease liabilities, non-current | 256,187 | 196,905 | |||||||||
| Convertible senior notes, net, non-current | 983,449 | 979,282 | |||||||||
| Deferred revenue, non-current | 68,711 | 22,693 | |||||||||
| Other liabilities | 11,890 | 9,383 | |||||||||
| Total liabilities | 2,911,638 | 3,070,976 | |||||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 9) | |||||||||||
| STOCKHOLDERS' EQUITY: | |||||||||||
| Class A common stock, $0.00001 par value per share; 2,000,000,000 shares authorized as of December 31, 2025 and 2024; 328,117,781 and 316,787,538 shares issued and outstanding as of December 31, 2025 and 2024, respectively | 3 | 3 | |||||||||
| Class B common stock, $0.00001 par value per share; 310,000,000 shares authorized as of December 31, 2025 and 2024; 24,408,190 and 25,331,244 shares issued and outstanding as of December 31, 2025 and 2024, respectively | — | — | |||||||||
| Additional paid-in capital | 3,579,010 | 2,689,013 | |||||||||
| Accumulated other comprehensive income (loss) | 15,404 | (4,701) | |||||||||
| Retained earnings | 137,789 | 30,048 | |||||||||
| Total stockholders’ equity | 3,732,206 | 2,714,363 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 6,643,844 | $ | 5,785,339 |
See accompanying notes to consolidated financial statements.
DATADOG, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Revenue | $ | 3,427,158 | $ | 2,684,275 | $ | 2,128,359 | |||||||||||
| Cost of revenue | 686,957 | 515,531 | 409,908 | ||||||||||||||
| Gross profit | 2,740,201 | 2,168,744 | 1,718,451 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | 1,548,451 | 1,152,703 | 962,447 | ||||||||||||||
| Sales and marketing | 956,423 | 756,605 | 609,276 | ||||||||||||||
| General and administrative | 279,700 | 205,152 | 180,192 | ||||||||||||||
| Total operating expenses | 2,784,574 | 2,114,460 | 1,751,915 | ||||||||||||||
| Operating (loss) income | (44,373) | 54,284 | (33,464) | ||||||||||||||
| Other income: | |||||||||||||||||
| Interest expense | (11,059) | (7,068) | (6,302) | ||||||||||||||
| Interest income and other income, net | 182,453 | 156,724 | 100,001 | ||||||||||||||
| Other income, net | 171,394 | 149,656 | 93,699 | ||||||||||||||
| Income before provision for income taxes | 127,021 | 203,940 | 60,235 | ||||||||||||||
| Provision for income taxes | 19,280 | 20,194 | 11,667 | ||||||||||||||
| Net income | $ | 107,741 | $ | 183,746 | $ | 48,568 | |||||||||||
| Net income attributable to common stockholders | $ | 107,741 | $ | 183,746 | $ | 48,568 | |||||||||||
| Basic net income per share | $ | 0.31 | $ | 0.55 | $ | 0.15 | |||||||||||
| Diluted net income per share | $ | 0.31 | $ | 0.52 | $ | 0.14 | |||||||||||
| Weighted average shares used in calculating basic net income per share: | 347,309 | 336,172 | 324,033 | ||||||||||||||
| Weighted average shares used in calculating diluted net income per share: | 363,472 | 358,636 | 350,292 |
See accompanying notes to consolidated financial statements.
DATADOG, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Net income | $ | 107,741 | $ | 183,746 | $ | 48,568 | |||||||||||
| Other comprehensive income (loss): | |||||||||||||||||
| Foreign currency translation adjustments | 13,178 | (5,153) | 1,050 | ||||||||||||||
| Unrealized gain on available-for-sale marketable securities | 6,927 | 2,670 | 9,154 | ||||||||||||||
| Other comprehensive income (loss) | 20,105 | (2,483) | 10,204 | ||||||||||||||
| Comprehensive income | $ | 127,846 | $ | 181,263 | $ | 58,772 |
See accompanying notes to consolidated financial statements.
DATADOG, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except per share data)
| Class A and Class B Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive (Loss) Income | (Accumulated Deficit) Retained Earnings | Total Stockholders' Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| BALANCE—December 31, 2022 | 319,189,843 | $ | 3 | $ | 1,625,190 | $ | (12,422) | $ | (202,266) | $ | 1,410,505 | ||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | 6,455,931 | — | 20,924 | — | — | 20,924 | |||||||||||||||||||||||||||||
| Vesting of restricted and performance stock units | 4,794,318 | — | — | — | — | — | |||||||||||||||||||||||||||||
| Issuance of restricted shares of common stock from acquisitions | 122,224 | — | 1,886 | — | — | 1,886 | |||||||||||||||||||||||||||||
| Issuance of common stock under the Employee Stock Purchase Plan | 517,430 | — | 37,370 | — | — | 37,370 | |||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 495,897 | — | — | 495,897 | |||||||||||||||||||||||||||||
| Change in accumulated other comprehensive income | — | — | — | 10,204 | — | 10,204 | |||||||||||||||||||||||||||||
| Net income | — | — | — | — | 48,568 | 48,568 | |||||||||||||||||||||||||||||
| BALANCE—December 31, 2023 | 331,079,746 | $ | 3 | $ | 2,181,267 | $ | (2,218) | $ | (153,698) | $ | 2,025,354 | ||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | 5,123,239 | — | 7,444 | — | — | 7,444 | |||||||||||||||||||||||||||||
| Vesting of restricted and performance stock units | 5,329,642 | — | — | — | — | — | |||||||||||||||||||||||||||||
| Issuance (retirement) of restricted shares of common stock from acquisitions | 136,906 | — | 3,705 | — | — | 3,705 | |||||||||||||||||||||||||||||
| Issuance of common stock under the Employee Stock Purchase Plan | 449,249 | — | 43,686 | — | — | 43,686 | |||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 583,488 | — | — | 583,488 | |||||||||||||||||||||||||||||
| Equity component of 2029 Convertible Senior Notes, net | — | — | (83,813) | — | — | (83,813) | |||||||||||||||||||||||||||||
| Purchases of capped calls related to 2029 Convertible Senior Notes | — | — | (100,900) | — | — | (100,900) | |||||||||||||||||||||||||||||
| Settlement of capped calls related to 2025 Convertible Senior Notes | — | — | 54,136 | — | — | 54,136 | |||||||||||||||||||||||||||||
| Change in accumulated other comprehensive loss | — | — | — | (2,483) | — | (2,483) | |||||||||||||||||||||||||||||
| Net income | — | — | — | — | 183,746 | 183,746 | |||||||||||||||||||||||||||||
| BALANCE—December 31, 2024 | 342,118,782 | $ | 3 | $ | 2,689,013 | $ | (4,701) | $ | 30,048 | $ | 2,714,363 | ||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | 3,478,500 | — | 6,175 | — | — | 6,175 | |||||||||||||||||||||||||||||
| Vesting of restricted and performance stock units | 5,595,469 | — | — | — | — | — | |||||||||||||||||||||||||||||
| Issuance (retirement) of restricted shares of common stock from acquisitions | 770,044 | — | 53,038 | — | — | 53,038 | |||||||||||||||||||||||||||||
| Issuance of common stock under the Employee Stock Purchase Plan | 569,345 | — | 56,816 | — | — | 56,816 | |||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 774,125 | — | — | 774,125 | |||||||||||||||||||||||||||||
| Settlement of capped calls related to 2025 Convertible Senior Notes | (6,169) | — | (157) | — | — | (157) | |||||||||||||||||||||||||||||
| Change in accumulated other comprehensive income | — | — | — | 20,105 | — | 20,105 | |||||||||||||||||||||||||||||
| Net income | — | — | — | — | 107,741 | 107,741 | |||||||||||||||||||||||||||||
| BALANCE—December 31, 2025 | 352,525,971 | $ | 3 | $ | 3,579,010 | $ | 15,404 | $ | 137,789 | $ | 3,732,206 |
See accompanying notes to consolidated financial statements.
DATADOG, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||
| Net income | $ | 107,741 | $ | 183,746 | $ | 48,568 | |||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
| Depreciation and amortization | 55,756 | 54,933 | 44,465 | ||||||||||||||
| Accretion of discounts on marketable securities | (44,516) | (51,932) | (41,621) | ||||||||||||||
| Amortization of issuance costs | 5,602 | 3,761 | 3,388 | ||||||||||||||
| Net loss on conversion inducement and capped call settlement | — | 599 | — | ||||||||||||||
| Amortization of deferred contract costs | 66,773 | 52,047 | 39,207 | ||||||||||||||
| Stock-based compensation, net of amounts capitalized | 750,671 | 570,336 | 482,300 | ||||||||||||||
| Non-cash lease expense | 35,451 | 27,263 | 26,382 | ||||||||||||||
| Allowance for credit losses on accounts receivable | 17,024 | 14,847 | 11,933 | ||||||||||||||
| Loss on disposal of property and equipment | 2,141 | 1,660 | 706 | ||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| Accounts receivable, net | (157,368) | (104,485) | (121,661) | ||||||||||||||
| Deferred contract costs | (126,836) | (76,048) | (69,481) | ||||||||||||||
| Prepaid expenses and other current assets | (21,299) | (26,654) | (13,508) | ||||||||||||||
| Other assets | (3,806) | (1,003) | 1,018 | ||||||||||||||
| Accounts payable | 36,628 | 25,610 | 57,773 | ||||||||||||||
| Accrued expenses and other liabilities | 52,889 | (1,626) | (40,489) | ||||||||||||||
| Deferred revenue | 273,284 | 197,549 | 230,974 | ||||||||||||||
| Net cash provided by operating activities | 1,050,135 | 870,603 | 659,954 | ||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||
| Purchases of marketable securities | (3,599,841) | (2,653,242) | (2,558,013) | ||||||||||||||
| Maturities of marketable securities | 2,487,657 | 2,018,832 | 1,864,557 | ||||||||||||||
| Proceeds from sale of marketable securities | 31,104 | 201 | 36,995 | ||||||||||||||
| Purchases of property and equipment | (49,578) | (34,719) | (27,586) | ||||||||||||||
| Capitalized software development costs | (85,840) | (60,781) | (34,820) | ||||||||||||||
| Cash paid for acquisition of businesses; net of cash acquired | (117,982) | (7,131) | (12,498) | ||||||||||||||
| Net cash used in investing activities | (1,334,480) | (736,840) | (731,365) | ||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||
| Proceeds from exercise of stock options | 6,438 | 7,444 | 20,909 | ||||||||||||||
| Proceeds from issuance of common stock under the employee stock purchase plan | 56,816 | 43,686 | 37,370 | ||||||||||||||
| Proceeds from issuance of 2029 Convertible Senior Notes, net of issuance costs | (190) | 978,881 | — | ||||||||||||||
| Proceeds from settlement of capped calls related to 2025 Convertible Senior Notes | — | 54,725 | — | ||||||||||||||
| Purchase of capped calls related to 2029 Convertible Senior Notes | — | (100,900) | — | ||||||||||||||
| Repayments of 2025 Convertible Senior Notes | (635,547) | (196,753) | — | ||||||||||||||
| Net cash (used in) provided by financing activities | (572,483) | 787,083 | 58,279 | ||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 11,150 | (4,202) | 1,183 | ||||||||||||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (845,678) | 916,644 | (11,949) | ||||||||||||||
| CASH AND CASH EQUIVALENTS—Beginning of period | 1,246,983 | 330,339 | 342,288 | ||||||||||||||
| CASH AND CASH EQUIVALENTS—End of period | $ | 401,305 | $ | 1,246,983 | $ | 330,339 | |||||||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |||||||||||||||||
| Cash paid for income taxes | $ | 17,649 | $ | 20,993 | $ | 16,505 | |||||||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||||||||
| Accrued property and equipment purchases | $ | 7,270 | $ | 4,922 | $ | 7,046 | |||||||||||
| Stock-based compensation included in capitalized software development costs | $ | 23,454 | $ | 13,152 | $ | 13,597 | |||||||||||
| Issuance of restricted shares of common stock for the acquisition of businesses | $ | 53,038 | $ | 3,705 | $ | 1,886 | |||||||||||
| Acquisition holdback | $ | 16,072 | $ | 3,148 | $ | 750 |
See accompanying notes to consolidated financial statements.
DATADOG, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
Description of Business
Datadog, Inc. (“Datadog” or the “Company”) was incorporated in the State of Delaware on June 4, 2010. The Company is the AI-powered observability and security platform for cloud applications. The Company’s SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, user experience monitoring, cloud security, service management, and many other capabilities to provide unified, real-time observability and security of its customers’ entire technology stack. The Company is headquartered in New York City and has various other global office locations.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Principles of Consolidation
The consolidated financial statements include the accounts of Datadog, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Segment Information
The Company has a single operating and reportable segment as well as one business activity, providing an observability and security platform for cloud applications. The Company’s chief operating decision maker ("CODM") is its Chief Executive Officer, who reviews net income presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. All required significant financial segment information can be found within the consolidated financial statements.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Such estimates include the fair value of marketable securities, the allowance for credit losses, the fair value of acquired assets and assumed liabilities from business combinations, useful lives of property, equipment, software, and finite lived intangibles, stock-based compensation, valuation of long-lived assets and their recoverability, including goodwill, the incremental borrowing rate for operating leases, estimated expected period of benefit for deferred contract costs, fair value of the liability component of the convertible debt, realization of deferred tax assets and uncertain tax positions, revenue recognition and the allocation of overhead costs between cost of revenue and operating expenses. The Company bases its estimates on historical experience and also on assumptions that management considers reasonable. The Company assesses these estimates on a regular basis; however, actual results could materially differ from these estimates.
Foreign Currency Translation
The reporting currency of the Company is the United States dollar (“USD”). The functional currency of the Company is USD, and the functional currency of the Company’s subsidiaries is generally the local currency of the jurisdiction in which the foreign subsidiary is located. The assets and liabilities of the Company’s subsidiaries are translated to USD at exchange rates in effect at the balance sheet date. All income statement accounts are translated at monthly average exchange rates. Resulting foreign currency translation adjustments are recorded directly in accumulated other comprehensive loss as a separate component of stockholders’ equity.
Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other income, net in the accompanying consolidated statements of operations when realized and have not been material for any of the periods presented.
Revenue Recognition
The Company generates revenue from the sale of subscriptions to customers using its cloud-based platform. The terms of the Company’s subscription agreements are primarily monthly, annual or multi-year. The Company’s customers can enter into (1) a subscription agreement for a committed contractual amount of usage that is apportioned ratably on a monthly basis over the term of the subscription period, (2) a subscription agreement for a committed contractual amount of usage that is delivered as used, or (3) a monthly subscription based on usage. The Company typically bills customers on an annual or multi-year subscription in advance, with any usage in excess of the committed contracted amount billed monthly in arrears. The Company typically bills customers on a monthly plan in arrears. Customers also have the option to purchase additional services priced at rates at or above the stand-alone selling price.
The Company accounts for revenue contracts with customers through the following steps:
(1)identify the contract with a customer;
(2)identify the performance obligations in the contract;
(3)determine the transaction price;
(4)allocate the transaction price to the performance obligations in the contract; and
(5)recognize revenue when or as the Company satisfies a performance obligation.
The Company’s revenue arrangements may include infrastructure monitoring, application performance monitoring, log management, synthetics monitoring, security monitoring, continuous profiling, serverless monitoring, network monitoring, real user monitoring and incident management as well as secondary services including custom metrics in dashboard monitoring, docker container monitoring, and indexed spans. The Company has identified each service as a separate performance obligation.
The transaction price is based on the fixed price for the contracted level of service plus variable consideration for additional optional purchases. Billing periods correspond to the periods over which services are performed and there are no discounts given on the purchase of future services.
The Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on a range of actual prices charged to customers.
Revenue is recognized when control of these services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those services. The Company determined an output method, recognition over time, to be the most appropriate measure of progress because it most faithfully represents when the value of the services is simultaneously received and consumed by the customer, and control is transferred.
For committed contractual amounts of usage, revenue is recognized ratably over the term of the subscription agreement generally beginning on the date that the platform is made available to a customer. For committed contractual amount of usage that is delivered as used, a monthly subscription based on usage, or usage in excess of a ratable subscription, the Company recognizes revenue as the product is used. Subscription revenue excludes sales and other indirect taxes.
The Company applied the practical expedient in Topic 606 and did not evaluate contracts of one year or less for the existence of a significant financing component.
Deferred Revenue and Remaining Performance Obligations
Certain of the Company’s customers pay in advance of satisfaction of performance obligations and other customers with monthly contract terms are billed in arrears on a monthly basis. The Company records contract liabilities to deferred revenue when customers are billed or when the Company receives customer payments in advance of the performance obligations being satisfied on the Company’s contracts.
Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligations include deferred revenue, multi-year contracts with future installment payments and certain unfulfilled orders against accepted customer contracts at the end of any given period.
Convertible Senior Notes
On December 12, 2024, the Company issued $1.0 billion aggregate principal amount of the “2029 Notes”.
The 2029 Notes are classified as non-current liabilities until the reporting period date is within one year of maturity of the 2029 Notes or when the Company has received a redemption request, but settlement will occur after the reporting period date.
Cost of Revenue
Cost of revenue consists primarily of costs related to providing subscription services to paying customers, including data center and networking expenses, employee compensation (including stock-based compensation) and other employee-related expenses for customer experience and technical operations staff, payments to outside service providers, payment processing fees, amortization of capitalized internally developed software costs and acquired developed technology, and allocated overhead costs.
Research and Development Costs
Research and development costs are expensed as incurred, with the exception of certain software development costs which are eligible for capitalization. Research and development costs consist of employee compensation (including stock-based compensation) and other employee-related expenses, materials and supplies, and allocated overhead costs such as rent and facilities costs.
Sales and Marketing Costs
Sales and marketing costs consist primarily of personnel costs for the Company’s sales and marketing organization, including stock-based compensation and commissions, costs of general marketing and promotional activities, including the free tier and introductory trials of the Company’s products, travel-related expenses, amortization of acquired customer relationships, and allocated overhead costs.
Advertising Costs
Advertising costs are expensed as incurred and were approximately $36.7 million, $30.0 million and $21.8 million for the years ended December 31, 2025, 2024 and 2023, respectively, and are included in sales and marketing expense in the accompanying consolidated statement of operations.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts for financial reporting and the tax bases of assets and liabilities. The deferred assets and liabilities are recorded at the statutorily enacted tax rates anticipated to be in effect when such temporary differences reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance is established; when based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company engages in transactions in which the tax consequences may be subject to uncertainty. The Company accounts for uncertain tax positions based on an evaluation as to whether it is more likely than not that a tax position will be sustained on audit, including resolution of any related appeals or litigation processes. This evaluation is based on all available evidence and assumes that the appropriate tax authorities have full knowledge of all relevant information concerning the tax position. The Company accounts for uncertain tax positions as non-current tax liabilities or through a reduction of a corresponding deferred tax asset. The tax benefit recognized is based on the largest amount that is greater than 50% likely of being realized upon ultimate settlement. The Company includes potential interest expense and penalties related to its uncertain tax positions in income tax expense.
Stock-Based Compensation
The Company recognizes and measures compensation expense for all stock-based payment awards granted to employees, directors, and nonemployees, including stock options, restricted stock units (“RSUs”), performance-based awards (“PSUs”), and the employee stock purchase plan (the “ESPP”) based on the fair value of the awards on the date of grant. The fair value of each stock option granted is estimated using the Black-Scholes option pricing model. The determination of the grant date fair value using an option-pricing model is affected by the estimated fair value of the Company’s Class A common stock as well as assumptions regarding a number of other complex and subjective variables. These variables include expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate for the expected term of the award and expected dividends. The fair value of RSUs and PSUs is determined by the closing price on the date of grant of the Company’s Class A common stock, as reported on The Nasdaq Global Select Market. The Company estimates the fair value of the rights to acquire stock under the ESPP using the Black-Scholes option pricing model. Stock-based compensation for stock options and RSUs is recognized on a straight-line basis over the requisite service period and account for forfeitures as they occur. Stock-based compensation for PSUs is amortized under the accelerated attribution method and may be adjusted over the vesting period based on interim estimates of performance against pre-set objectives. PSUs will vest upon achievement of specified performance targets and subject to continuous service through the applicable vesting dates. The compensation cost is recognized over the requisite service period when it is probable that the performance condition will be satisfied and the Company accounts for forfeitures as they occur.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents consist of money market funds, corporate debt securities, U.S. government treasury securities, and commercial paper.
Marketable Securities
The Company’s marketable securities consist of corporate debt securities, commercial paper, certificates of deposit, U.S. government treasury securities, and U.S. government agency securities. The Company determines the appropriate classification of its marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable securities as available-for-sale securities as the Company may sell these securities at any time for use in its current operations or for other purposes, even prior to maturity. As a result, the Company classifies its marketable securities within current assets on the consolidated balance sheet.
Available-for-sale securities are recorded at fair value each reporting period. Premiums and discounts are amortized or accreted over the life of the related available-for-sale security as an adjustment to yield using the effective interest method. Interest income is recognized when earned. Unrealized gains and losses on these marketable securities are presented net of tax and reported as a separate component of accumulated other comprehensive loss until realized. Realized gains and losses are determined based on the specific identification method and are reported in Interest income and other income, net in the consolidated statements of operations.
The Company periodically evaluates its marketable securities to assess whether an investment’s fair value is less than its amortized cost basis and if the decline in the fair value is attributable to a credit loss. Declines in fair value judged to be related to credit loss are reported in Interest income and other income, net in the consolidated statements of operations.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents, marketable securities and accounts receivable. Cash deposits may, at times, exceed amounts insured by the Federal Deposit Insurance Corporation (“FDIC”) and the Securities Investor Protection Corporation (“SIPC”). The Company has not experienced any losses on its deposits of cash and cash equivalents to date. For accounts receivable, the Company is exposed to credit risk in the event of nonpayment by customers to the extent of the amounts recorded on the accompanying consolidated balance sheets.
Geographical Information - Long-Lived Assets
As of December 31, 2025, and 2024, 80% and 76% of the Company’s long-lived assets were located in the United States and 20% and 24% were located outside of the United States, primarily in EMEA, respectively.
Fair Value of Financial Instruments
The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:
Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
The Company’s financial instruments consist of cash equivalents, marketable securities, accounts receivable, accounts payable and accrued expenses. Cash equivalents are stated at amortized cost, which approximates fair value at the balance sheet dates, due to the short period of time to maturity. Marketable securities are recorded at fair value. Accounts receivable, accounts payable, and accrued expenses are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable includes billed and unbilled receivables. Trade accounts receivable are recorded at invoiced amounts and do not bear interest. The expectation of collectability is based on a review of credit profiles of customers, contractual terms and conditions, current economic trends, and historical payment experience. The Company regularly reviews the adequacy of the allowance for credit losses by considering the age of each outstanding invoice and the collection history to determine the appropriate amount of allowance for credit losses. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified.
Unbilled accounts receivable represents revenue recognized on contracts for which billings have not yet been presented to customers because the amounts were earned but not contractually billable as of the balance sheet date, substantially all of which is expected to be billed and collected within one year.
Internal-Use Software Development Costs
The Company capitalizes qualifying internal-use software development costs related to its cloud platform. The costs consist of personnel costs (including related benefits and stock-based compensation) that are incurred during the application development stage. Capitalization of costs begins when two criteria are met: (1) the preliminary project stage is completed, (2) management with the relevant authority has authorized and committed to funding the project, and it is probable that the software will be completed and used for its intended function. Capitalization ceases when the software is substantially complete and ready for its intended use, including the completion of all significant testing. Costs related to preliminary project activities and post implementation operating activities are expensed as incurred.
Capitalized costs are included in property and equipment. These costs are amortized over the estimated useful life of the software, which is 3 years, on a straight-line basis, which represents the manner in which the expected benefit will be derived. In January 2025, the Company completed an assessment of the useful life of its capitalized software development costs, resulting in an increase in the estimated useful life of capitalized software development costs from two to three years. This change in accounting estimate was effective beginning fiscal year 2025. The amortization of costs related to the platform applications is included in cost of revenue and sales and marketing expense based on an allocation between paid customer accounts and free customer accounts not generating revenue.
Property and Equipment, Net
Property and equipment, net is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful life of the related asset. Expenses that improve an asset or extend its remaining useful life are capitalized. Costs of maintenance or repairs that do not extend the lives of the respective assets are charged to expenses as incurred.
Deferred Contract Costs
Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. There are no sales commissions earned on renewals. These costs are deferred and then amortized over a period of benefit which is determined to be four years. The Company determined the period of benefit by taking into consideration the length of terms in its customer contracts, life of the technology and other factors. Amounts expected to be recognized within one year of the balance sheet date are recorded as deferred contract costs, current; the remaining portion is recorded as deferred contract costs, non-current, in the consolidated balance sheets. Deferred contract costs are periodically analyzed for impairment. Amortization expense is included in sales and marketing expenses in the accompanying consolidated statements of operations.
Business Combinations
When the Company acquires a business, the purchase consideration is allocated to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated respective fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require the Company to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to other income, net in the consolidated statement of operations.
Accounting for Impairment of Long-Lived Assets (Including Goodwill and Intangibles)
Long-lived assets with finite lives include property and equipment, capitalized development software costs and acquired intangible assets. Long-lived assets are amortized over their estimated useful lives which are as follows:
| Computers and equipment | 3 years | ||||
| Furniture and fixtures | 5 years | ||||
| Leasehold improvements | Shorter of lease term or useful life of asset | ||||
| Capitalized software development costs | 3 years | ||||
| Developed technology | 3 years | ||||
| Customer relationships | 4 years |
The Company evaluates long lived assets, including acquired intangible assets and capitalized software development costs, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or the estimated useful life becomes shorter than originally estimated. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset exceeds these estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the assets exceeds the fair value of the asset or asset group, based on discounted cash flows.
Goodwill is not amortized but rather tested for impairment at least annually on October 1, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Goodwill impairment is recognized when the quantitative assessment results in the carrying value exceeding the fair value, in which case an impairment charge is recorded to the extent the carrying value exceeds the fair value. The Company did not recognize any impairment of goodwill during the years ended December 31, 2025, 2024 or 2023.
Operating Leases
The Company determines if an arrangement is a lease at inception. Operating lease assets and liabilities are reflected within operating lease assets, operating lease liabilities, current, and operating lease liabilities, non-current, on the consolidated balance sheets. For short-term leases (an initial term of 12 months or less), an operating lease asset and corresponding lease liability are not recorded and the Company records rent expense in its consolidated statements of operations on a straight-line basis over the lease term. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease assets also include any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately.
Net Income Per Share Attributable to Common Stockholders
Basic net income per share is computed by dividing net income by the weighted-average number of shares of Class A common stock and Class B common stock (together “common stock”) outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period giving effect to all potentially dilutive securities to the extent they are dilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share by application of the two-class method. During the periods when the Company is in a net loss position, the net loss attributable to common stockholders was not allocated to the unvested common stock under the two-class method as these securities do not have a contractual obligation to share in the Company’s losses.
Accounting Pronouncements Recently Adopted
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU No. 2023-09”), which intends to increase the transparency of income tax disclosures. Under the new guidance, entities must categorize and provide greater disaggregation of information in the rate reconciliation. They must also further disaggregate income taxes paid. For public business entities, it is effective for annual periods beginning after December 15, 2024, and interim periods beginning after December 15, 2025, with early adoption permitted. The Company adopted this standard on a prospective basis in its consolidated financial statements for the year ended December 31, 2025. Refer to Note 14, Income Taxes, to the consolidated financial statements for further details.
Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU No. 2024-03"), which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. For public business entities, it is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The amendments in this ASU should be applied prospectively, however, public business entities are permitted to apply the amendments in the ASU retrospectively, The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets ("ASU No. 2025-05"), which provides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. The practical expedient permits an entity to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. This guidance is effective for annual periods, including interim reporting periods, beginning after December 15, 2025, on a prospective basis. Early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software ("ASU No. 2025-06"), to modernize the accounting for software costs that are accounted for under Subtopic 350-40. The ASU removes all references to software development stages and allows software development costs to be capitalized once management commits to funding the project and it is probable that the project will be completed and used as intended. The ASU also introduces the concept of "significant development uncertainty," which, if present, prevents capitalization. The guidance is effective for annual reporting periods, including interim reporting periods, beginning after December 15, 2027. The guidance may be applied prospectively, retrospectively, or via a modified prospective transition method. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topics 270): Narrow-Scope Improvements ("ASU No. 2025-11"), which amends guidance related to interim financial reporting. The guidance is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
3. Marketable Securities
The following is a summary of available-for-sale marketable securities, excluding those securities classified within cash and cash equivalents on the consolidated balance sheet as of December 31, 2025 and 2024 (in thousands):
| December 31, 2025 | |||||||||||||||||||||||
| Amortized Cost | Unrealized Gain | Unrealized Losses | Fair Value | ||||||||||||||||||||
| Corporate debt securities | $ | 2,577,421 | $ | 6,103 | $ | (131) | $ | 2,583,393 | |||||||||||||||
| U.S. government treasury securities | 693,907 | 1,993 | (6) | 695,894 | |||||||||||||||||||
| Commercial paper | 599,663 | 304 | — | 599,967 | |||||||||||||||||||
| Certificates of deposit | 192,685 | 99 | — | 192,784 | |||||||||||||||||||
| U.S. government agency securities | 1,490 | 3 | — | 1,493 | |||||||||||||||||||
| Marketable securities | $ | 4,065,166 | $ | 8,502 | $ | (137) | $ | 4,073,531 |
| December 31, 2024 | |||||||||||||||||||||||
| Amortized Cost | Unrealized Gain | Unrealized Losses | Fair Value | ||||||||||||||||||||
| Corporate debt securities | $ | 1,893,599 | $ | 4,243 | $ | (1,801) | $ | 1,896,041 | |||||||||||||||
| U.S. government treasury securities | 466,765 | 484 | (789) | 466,460 | |||||||||||||||||||
| Commercial paper | 390,058 | 241 | (16) | 390,283 | |||||||||||||||||||
| Certificates of deposit | 187,711 | 113 | (22) | 187,802 | |||||||||||||||||||
| U.S. government agency securities | 1,490 | — | — | 1,490 | |||||||||||||||||||
| Marketable securities | $ | 2,939,623 | $ | 5,081 | $ | (2,628) | $ | 2,942,076 |
Interest receivable of $33.6 million and $26.8 million is included in prepaid expenses and other current assets on the consolidated balance sheets as of December 31, 2025 and 2024, respectively. The Company did not recognize an allowance for credit losses against interest receivable as of December 31, 2025 and 2024 because such potential losses were not material.
As of December 31, 2025, the fair values of available-for-sale marketable securities, by remaining contractual maturity, were as follows (in thousands):
| Due within one year | $ | 2,546,806 | |||
| Due in one year through five years | 1,526,725 | ||||
| Total | $ | 4,073,531 |
The Company does not believe that any unrealized losses are attributable to credit-related factors based on its evaluation of available evidence. To determine whether a decline in value is related to credit loss, the Company evaluates, among other factors: the extent to which the fair value is less than the amortized cost basis, changes to the rating of the security by a rating agency and any adverse conditions specifically related to an issuer of a security or its industry. Unrealized gains and losses on marketable securities are presented net of tax.
4. Fair Value Measurements
The following tables present information about the Company’s financial assets and liabilities that have been measured at fair value on a recurring basis as of December 31, 2025 and 2024, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):
| Fair Value Measurement as of December 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | 311,106 | $ | — | $ | — | $ | 311,106 | |||||||||||||||
| Commercial paper | — | 29,879 | — | 29,879 | |||||||||||||||||||
| Corporate debt securities | — | 1,524 | — | 1,524 | |||||||||||||||||||
| Marketable Securities: | |||||||||||||||||||||||
| Corporate debt securities | — | 2,583,393 | — | 2,583,393 | |||||||||||||||||||
| U.S. government treasury securities | — | 695,894 | — | 695,894 | |||||||||||||||||||
| Commercial paper | — | 599,967 | — | 599,967 | |||||||||||||||||||
| Certificates of deposit | — | 192,784 | — | 192,784 | |||||||||||||||||||
| U.S. government agency securities | — | 1,493 | — | 1,493 | |||||||||||||||||||
| Total financial assets | $ | 311,106 | $ | 4,104,934 | $ | — | $ | 4,416,040 |
| Fair Value Measurement as of December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | 1,193,927 | $ | — | $ | — | $ | 1,193,927 | |||||||||||||||
| Commercial paper | — | 9,088 | — | 9,088 | |||||||||||||||||||
| Corporate debt securities | — | 2,502 | — | 2,502 | |||||||||||||||||||
| Marketable Securities: | |||||||||||||||||||||||
| Corporate debt securities | — | 1,896,041 | — | 1,896,041 | |||||||||||||||||||
| U.S. government treasury securities | — | 466,460 | — | 466,460 | |||||||||||||||||||
| Commercial paper | — | 390,283 | — | 390,283 | |||||||||||||||||||
| Certificates of deposit | — | 187,802 | — | 187,802 | |||||||||||||||||||
| U.S. government agency securities | — | 1,490 | — | 1,490 | |||||||||||||||||||
| Total financial assets | $ | 1,193,927 | $ | 2,953,666 | $ | — | $ | 4,147,593 |
The Company considers all highly liquid investments, including money market funds with an original maturity of three months or less at the date of purchase, to be cash equivalents. The Company uses quoted prices in active markets for assets to determine the fair value of its Level 1 investments in money market funds. The Company classifies its commercial paper, corporate debt securities, certificates of deposit, U.S. government treasury securities, and Non-U.S. government securities within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which may not be actively traded.
In addition to its cash equivalents and marketable securities, the Company measures the fair value of its outstanding convertible senior notes on a quarterly basis for disclosure purposes. The Company considers the fair value of the convertible senior notes to be a Level 2 measurement due to limited trading activity of the convertible senior notes. Refer to Note 8, Convertible Senior Notes, to the consolidated financial statements for further details.
5. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Computers and equipment | $ | 63,146 | $ | 46,155 | |||||||
| Furniture and fixtures | 28,319 | 20,752 | |||||||||
| Leasehold improvements | 99,009 | 67,855 | |||||||||
| Capitalized software development costs | 329,117 | 285,015 | |||||||||
| Total property and equipment | $ | 519,591 | $ | 419,777 | |||||||
| Less: accumulated depreciation and amortization | (181,498) | (192,807) | |||||||||
| Total property and equipment, net | $ | 338,093 | $ | 226,970 |
As discussed in Note 2, Basis of Presentation and Summary of Significant Accounting Policies—Internal-Use Software Development Costs, the Company capitalizes costs related to the development of computer software for internal-use and is included in capitalized software development costs within property and equipment, net.
Depreciation and amortization expense was approximately $49.2 million, $48.5 million, and $35.6 million for the years ended December 31, 2025, 2024 and 2023, respectively.
6. Acquisitions, Intangible Assets and Goodwill
2025 Acquisitions
During the year ended December 31, 2025, the Company entered into three purchase agreements for acquisitions of businesses, each of which was accounted for as a business combination in accordance with ASC 805, Business Combinations. The Company does not consider the acquisitions to be material, individually or in aggregate. The total purchase price in aggregate of $178.4 million consisted of $109.3 million in cash payments, net of cash acquired, $16.1 million of deferred acquisition holdback payments and the issuance of 770,044 restricted shares of Class A common stock. The total purchase price was allocated to intangible assets in the amount of $17.6 million and goodwill in the amount of $163.1 million based on the respective estimated fair values. The purchase price allocations are preliminary. The Company continues to collect information with regard to its estimates and assumptions, including potential liabilities and contingencies. The Company will record adjustments to the fair value of the assets acquired, liabilities assumed and goodwill within the 12 month measurement period, if necessary. The resulting goodwill from the agreements is not deductible for income tax purposes. Pro forma results of operations from the acquisitions have not been presented because they were not material to the consolidated results of operations.
2024 Acquisitions
During the year ended December 31, 2024, the Company entered into one purchase agreement for an acquisition of a business, which was accounted for as a business combination in accordance with ASC 805, Business Combinations. The Company does not consider this acquisition to be material. The total purchase price was allocated to intangible assets in the amount of $0.7 million and goodwill in the amount of $10.2 million based on the respective estimated fair values. The resulting goodwill from the agreements is not deductible for income tax purposes. Pro forma results of operations from the acquisition have not been presented because they were not material to the consolidated results of operations.
2023 Acquisitions
During the year ended December 31, 2023, the Company entered into three purchase agreements for acquisitions of businesses, each of which were accounted for as business combinations in accordance with ASC 805, Business Combinations. The Company does not consider these acquisitions to be material, individually or in aggregate. The total purchase price was allocated to intangible assets in the amount of $2.1 million and goodwill in the amount of $3.5 million based on the respective estimated fair values. The resulting goodwill from each of the agreements is not deductible for income tax purposes. Pro forma results of operations from these acquisitions have not been presented because they were not material to the consolidated results of operations.
Intangible Assets
Intangible assets, net consisted of the following (in thousands):
| December 31, 2025 | |||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Amortization Period | ||||||||||||||||||||
| Developed technology | $ | 14,539 | $ | (4,420) | $ | 10,119 | 3 years | ||||||||||||||||
| Customer relationships | 5,800 | (951) | 4,849 | 4 years | |||||||||||||||||||
| Total | $ | 20,339 | $ | (5,371) | $ | 14,968 |
| December 31, 2024 | |||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Amortization Period | ||||||||||||||||||||
| Developed technology | $ | 10,918 | $ | (7,432) | $ | 3,486 | 3 years | ||||||||||||||||
| Customer relationships | 3,300 | (3,075) | 225 | 4 years | |||||||||||||||||||
| Total | $ | 14,218 | $ | (10,507) | $ | 3,711 |
Intangible amortization expense was approximately $6.5 million, $6.4 million and $8.9 million for the years ended December 31, 2025, 2024 and 2023, respectively. Amortization of developed technology and customer relationships are included in cost of revenue and sales and marketing expense, respectively, on the Company’s consolidated statement of operations.
As of December 31, 2025, future amortization expense by year is expected to be as follows (in thousands):
| Amount | |||||
| 2026 | $ | 6,128 | |||
| 2027 | 5,583 | ||||
| 2028 | 2,758 | ||||
| 2029 | 499 | ||||
| Total | $ | 14,968 |
Goodwill
The changes in the carrying amount of goodwill were as follows (in thousands):
| Amount | |||||
| Balance as of December 31, 2024 | $ | 360,381 | |||
| 2025 Acquisitions | 163,102 | ||||
| Foreign currency translation adjustments | 7,085 | ||||
| Balance as of December 31, 2025 | $ | 530,568 |
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Accrued compensation and commissions | $ | 109,765 | $ | 71,746 | |||||||
| Other tax liability and sales tax | 52,934 | 28,639 | |||||||||
| Other accrued expenses | 46,896 | 26,751 | |||||||||
| Total accrued expenses and other current liabilities | $ | 209,595 | $ | 127,136 |
Due to the timing of when invoices are received, payables for cloud hosting and infrastructure expenses are included within accounts payable on the consolidated balance sheets, amounting to $122.7 million and $93.4 million as of December 31, 2025 and 2024, respectively.
8. Convertible Senior Notes
2****025 Convertible Senior Notes
On June 2, 2020, the Company issued $747.5 million aggregate principal amount of the “2025 Notes” in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (“Securities Act”). The total net proceeds from the sale of the 2025 Notes, after deducting the initial purchasers’ discounts and debt issuance costs, were approximately $730.2 million. The 2025 Notes bore interest at a rate of 0.125% per year, payable semiannually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020. The 2025 Notes matured on June 15, 2025.
Holders of the 2025 Notes had the option to convert all or any portion of their 2025 Notes, in integral multiples of $1,000 principal amount, at the option of the holder at any time on or after March 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date for the 2025 Notes. The conversion rate for the 2025 Notes was initially 10.8338 shares of Class A common stock per $1,000 principal amount of 2025 Notes (equivalent to an initial conversion price for the 2025 Notes of approximately $92.30 per share of Class A common stock), subject to adjustment as set forth in the indenture governing the 2025 Notes (the “2025 Indenture”).
The remaining $634.1 million aggregate principal amount of the 2025 Notes were converted prior to maturity and in connection with such conversions, the Company delivered $634.1 million in cash and issued 1,354,569 shares of the Company's Class A common stock to converting note holders.
2029 Convertible Senior Notes
On December 12, 2024, the Company issued $1.0 billion aggregate principal amount of 0.00% Convertible Senior Notes due 2029 (the “2029 Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The total net proceeds from the sale of the 2029 Notes, after deducting the initial purchasers’ discounts and debt issuance costs, were approximately $979.1 million. The 2029 Notes do not bear interest and the principal amount of the 2029 Notes will not accrete. The 2029 Notes will mature on December 1, 2029, unless earlier converted, redeemed or repurchased.
Holders may convert their 2029 Notes at their option at any time prior to the close of business on the business day immediately preceding September 1, 2029 only under the following circumstances:
(1)during any calendar quarter commencing after the calendar quarter ending on March 31, 2025 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the 2029 Notes on each applicable trading day;
(2)during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2029 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day;
(3)if the Company calls such 2029 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
(4)upon the occurrence of specified corporate events, as set forth in the indenture governing the 2029 Notes (the “2029 Indenture”).
On or after September 1, 2029 until the close of business on the second scheduled trading day immediately preceding the maturity date for the 2029 Notes, holders may convert all or any portion of their 2029 Notes, in integral multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. The conversion rate for the 2029 Notes is initially 4.5955 shares of Class A common stock per $1,000 principal amount of 2029 Notes (equivalent to an initial conversion price for the 2029 Notes of approximately $217.60 per share of Class A common stock), subject to adjustment as set forth in the 2029 Indenture. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at the Company’s election. If the Company satisfies its conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of Class A common stock, the amount of cash and shares of Class A common stock, if any, due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 20 trading day observation period as described in the 2029 Indenture. In addition, if specific corporate events occur prior to the applicable maturity date for the 2029 Notes, or if the Company elects to redeem the 2029 Notes, the Company will increase the conversion rate for the 2029 Notes for a holder who elects to convert their 2029 Notes in connection with such a corporate event or redemption in certain circumstances.
During the three months ended December 31, 2025, the conditional conversion features of the 2029 Notes were not triggered. Therefore the 2029 Notes are not convertible, in whole or in part, at the option of the holders between January 1, 2026 through March 31, 2026. As of December 31, 2025, the 2029 Notes were classified as non-current liabilities on the Company's consolidated balance sheet.
The Company may not redeem the 2029 Notes prior to December 6, 2027. The Company may redeem for cash all or any portion of the 2029 Notes, at its option, on or after December 6, 2027 if the last reported sale price of its Class A common stock was at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the 2029 Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date.
The net carrying amount of the Notes was as follows (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| 2025 Notes: | |||||||||||
| Principal | $ | — | $ | 635,448 | |||||||
| Unamortized debt issuance costs | — | (1,425) | |||||||||
| Net carrying amount | $ | — | $ | 634,023 | |||||||
| 2029 Notes: | |||||||||||
| Principal | $ | 1,000,000 | $ | 1,000,000 | |||||||
| Unamortized debt issuance costs | (16,551) | (20,718) | |||||||||
| Net carrying amount | $ | 983,449 | $ | 979,282 |
As of December 31, 2025, the total estimated fair value of the 2029 Notes was approximately $1.0 billion. The fair value was determined based on the closing trading price or quoted market price per $100 of the 2029 Notes as of the last day of trading for the period. The fair value of the 2029 Notes is primarily affected by the trading price of the Company’s Class A common stock and market interest rates and has been classified as level 2 in the fair value hierarchy.
Issuance costs were amortized to interest expense over the contractual terms of the 2025 Notes at an effective interest rate of 0.59%. Issuance costs are being amortized to interest expense over the contractual terms of the 2029 Notes at an effective interest rate of 0.43%.
The following table sets forth the interest expense related to the 2025 Notes and the 2029 Notes for the years ended December 31, 2025, 2024, and 2023 (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Contractual interest expense | $ | — | $ | 926 | $ | 934 | |||||||||||
| Amortization of issuance costs | 5,602 | 3,761 | 3,388 | ||||||||||||||
| Total | $ | 5,602 | $ | 4,687 | $ | 4,322 |
Capped Calls
In connection with the pricing of the 2025 Notes and the 2029 Notes, the Company entered into privately negotiated capped call transactions with certain option counterparties (the “Capped Calls”). The initial strike price of each of the Capped Calls corresponds to the initial conversion price of each of the Notes. The Capped Calls are expected to partially offset the potential dilution to the Company’s Class A common stock upon any conversion of the relevant Notes, with such offset subject to a cap based on the cap price. For accounting purposes, the Capped Calls are separate transactions, and not part of the Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders’ equity and are not accounted for as derivatives. The cost incurred to purchase the Capped Calls was recorded as a reduction to additional paid-in capital and will not be remeasured.
The following table sets forth key terms and costs incurred for the Capped Calls related to each of the Notes (in millions, except per share amounts):
| 2025 Notes | 2029 Notes | ||||||||||
| Initial strike price per share, subject to certain adjustments | $ | 92.30 | $ | 217.60 | |||||||
| Initial cap price per share, subject to certain adjustments | $ | 151.40 | $ | 322.38 | |||||||
| Net cost incurred | $ | 89.6 | $ | 100.9 | |||||||
| Common stock covered, subject to anti-dilution adjustments | 8.1 | 4.6 |
In connection with the maturity of the 2025 Notes, the Company issued 1,354,569 shares to holders of the 2025 Notes that converted prior to maturity and received 1,360,738 shares from the relevant option counterparties upon settlement of the Capped Calls relating to the 2025 Notes.
9. Commitments and Contingencies
The Company enters into non-cancelable purchase commitments and operating leases in the normal course of business. Non-cancelable purchase commitments for business operations and operating lease obligations total $1.4 billion and $375.2 million, respectively, as of December 31, 2025, due primarily over the next 5 years. Purchase commitments for business operations are primarily related to cloud hosting and other software-based services.
The Company also issued long-term debt to finance the business. The principal payments related to the 2029 Notes are $1.0 billion.
401(k) Plan—The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees. The Company is responsible for administrative costs of the 401(k) plan and makes matching contributions to the 401(k) plan. For the years ended December 31, 2025, 2024, and 2023, the Company incurred expense of $9.3 million, $8.5 million, and $6.3 million for matching contributions, respectively.
Legal Matters—The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that none of its current legal proceedings will have a material adverse effect on its financial position or results of operations.
Indemnification—The Company enters into indemnification provisions under some agreements with other parties in the ordinary course of business, including business partners, investors, contractors, customers, and the Company’s officers, directors and certain employees. The Company has agreed to indemnify and defend the indemnified party claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claim because of the Company’s activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior
indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recorded in the Company’s consolidated statements of operations in connection with the indemnification provisions have not been material.
10. Leases
The Company has entered into various non-cancelable operating leases for its facilities expiring through 2036. Certain lease agreements contain an option for the Company to renew a lease for a term of up to three years or an option to terminate a lease early within one year. The Company considers these options, which may be elected at the Company’s sole discretion, in determining the lease term on a lease-by-lease basis.
Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred.
Rent expense for the years ended December 31, 2025, 2024 and 2023 was $68.2 million, $49.5 million, and $43.5 million, respectively.
Sub-lease income is recorded as a credit to rent expense. The Company recorded an immaterial amount of sub-lease income for the years ended December 31, 2025, 2024 and 2023.
The components of lease cost recognized within the Company’s consolidated statements of operations were as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Operating lease cost (1) | $ | 54,607 | $ | 42,855 | $ | 34,670 | |||||||||||
| Short-term lease cost | 13,591 | 6,624 | 8,797 |
1)Includes non-cash lease expense of $35.5 million, $27.3 million, and $26.4 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Supplemental cash flow information and non-cash activity related to the Company’s operating leases are as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Cash paid for amounts included in measurement of lease liabilities | $ | 33,818 | $ | 18,538 | $ | 13,273 | |||||||||||
| Operating lease assets obtained in exchange for new lease liabilities | 75,254 | 75,177 | 61,594 |
Maturities of lease liabilities by fiscal year for the Company’s operating leases are as follows (in thousands):
| Amount | |||||
| 2026 | $ | 57,189 | |||
| 2027 | 58,543 | ||||
| 2028 | 49,567 | ||||
| 2029 | 46,516 | ||||
| 2030 | 46,964 | ||||
| Thereafter | 116,461 | ||||
| Total lease payments | $ | 375,240 | |||
| Less: imputed interest | (79,684) | ||||
| Present value of lease liabilities | $ | 295,556 |
As of December 31, 2025, the Company had various operating leases that had not yet commenced, which are excluded from the table above. The operating leases will commence between fiscal years 2026 and 2027 with total undiscounted future payments of $245.6 million and a weighted-average lease term of 9.1 years.
Weighted average remaining lease term and discount rate for the Company’s operating leases are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Weighted average remaining lease term (years) | 6.9 | 6.8 | |||||||||
| Weighted average discount rate | 6.61% | 6.69% |
11. Revenue
Geographical Information
Revenue by location is determined by the billing address of the customer. The following table sets forth revenue by geographic area (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| North America (1) | $ | 2,433,083 | $ | 1,874,321 | $ | 1,487,319 | |||||||||||
| International | 994,075 | 809,954 | 641,040 | ||||||||||||||
| Total | $ | 3,427,158 | $ | 2,684,275 | $ | 2,128,359 |
1)Includes revenue from the United States of $2,320.3 million, $1,785.5 million, and $1,411.0 million for the years ended December 31, 2025, 2024, and 2023, respectively.
Other than the United States, no other individual country accounted for 10% or more of total revenue for the years ended December 31, 2025, 2024, or 2023.
Accounts Receivable
As of December 31, 2025 and 2024, unbilled accounts receivable of approximately $127.0 million and $77.0 million, respectively, was included in accounts receivable on the Company’s consolidated balance sheets.
During the years ended December 31, 2025 and 2024, the Company charged $14.1 million and $9.3 million, respectively, of accounts receivable deemed uncollectible against the allowance for credit losses.
Deferred Revenue and Remaining Performance Obligations
Revenue recognized during the years ended December 31, 2025, 2024 and 2023 which was included in the deferred revenue balances at the beginning of each respective period, was $953.1 million, $759.7 million, and $525.5 million.
As of December 31, 2025, and 2024, the aggregate transaction price allocated to remaining performance obligations was $3,461.2 million and $2,273.1 million, respectively. There is uncertainty in the timing of revenues associated with the Company’s drawdown contracts, as future revenue can often vary significantly from past revenue. However, the Company expects to recognize substantially all of the remaining performance obligations over the next 24 months.
Deferred Contract Costs
Deferred contract costs on the Company’s consolidated balance sheets were $202.7 million and $142.7 million as of December 31, 2025 and 2024, respectively. Amortization expense was $66.8 million, $52.0 million and $39.2 million for the years ended December 31, 2025, 2024 and 2023, respectively.
12. Stockholders’ Equity
Class A and Class B Common Stock
The Company has two classes of common stock, Class A and Class B. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Shares of Class B
common stock may be converted into Class A common stock at any time at the option of the stockholder and are automatically converted to Class A common stock upon sale or transfer, subject to certain limited exceptions.
During the year ended December 31, 2025, 2,223,914 shares of Class B common stock were converted into Class A common stock.
As of December 31, 2025, the Company had authorized 2,000,000,000 shares of Class A common stock and 310,000,000 shares of Class B common stock, each at a par value per share of $0.00001, of which 328,117,781 shares of Class A common stock and 24,408,190 shares of Class B common stock were issued and outstanding.
As of December 31, 2025 and 2024, the Company had reserved shares of common stock for future issuance as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Options, RSUs and PSUs outstanding | 20,174,662 | 20,759,819 | |||||||||
| Shares available for future grants | 92,889,210 | 84,272,083 | |||||||||
| Shares subject to the employee stock purchase plan | 23,194,449 | 20,342,607 | |||||||||
| Total shares of common stock reserved for future issuance | 136,258,321 | 125,374,509 |
Equity Incentive Plans
The Company has two equity incentive plans, the 2012 Equity Incentive Plan (the “2012 Plan”) and the 2019 Equity Incentive Plan (the “2019 Plan”). In connection with the Company's initial public offering (“the IPO”), the Company ceased granting awards under the 2012 Plan, and all shares that remained available for issuance under the 2012 Plan at that time were transferred to the 2019 Plan. Additionally, as of December 31, 2025, there were 3,460,167 shares of Class A common stock issuable upon conversion of Class B common stock underlying options outstanding under the 2012 Plan. Under the 2019 Plan, the Board and any other committee or subcommittee of the Board may grant stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), and performance stock units (“PSUs”) and other awards, each equity award valued or based on the Company’s Class A common stock, to employees, directors, consultants, and advisors of the Company. As of December 31, 2025, there were 92,889,210 shares available for grant under the 2019 Plan.
Stock Options
The following table summarizes the Company's stock option activity and weighted-average exercise prices:
| Number of Options Outstanding | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (in Years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||
| Balance—December 31, 2024 | 6,953,119 | $ | 4.55 | 3.0 | $ | 961,910 | |||||||||||||||||
| Options granted | — | — | |||||||||||||||||||||
| Options exercised | (3,478,500) | 1.84 | |||||||||||||||||||||
| Options forfeited or expired | — | — | |||||||||||||||||||||
| Balance—December 31, 2025 | 3,474,619 | $ | 7.26 | 3.0 | $ | 447,294 | |||||||||||||||||
| Exercisable—December 31, 2025 | 3,474,619 | $ | 7.26 | 3.0 | $ | 447,294 |
As of December 31, 2025, there were 14,452 shares of Class A common stock and 3,460,167 shares of Class B common stock issuable upon the exercise of options outstanding. As of December 31, 2024, there were 17,795 shares of Class A common stock and 6,935,324 shares of Class B common stock issuable upon the exercise of options outstanding.
Approximately all compensation cost related to unvested stock options was recognized as of December 31, 2025 and December 31, 2024.
There were no options granted during the years ended December 31, 2025, 2024 and 2023. The Company received approximately $6.4 million, $7.4 million and $20.9 million in cash proceeds from options exercised during the years ended December 31, 2025, 2024 and 2023, respectively. The intrinsic value of options exercised during the years ended
December 31, 2025, 2024 and 2023 was approximately $429.8 million, $628.8 million and $565.9 million, respectively. The aggregate fair value of options vested was insignificant for the years ended December 31, 2025 and 2024, and was $12.5 million for the year ended December 31, 2023.
Restricted Stock Units, Restricted Stock and Performance Stock Units
The following table summarizes the activity for the Company’s unvested RSUs and PSUs:
| Shares | Weighted-Average Fair Value | Aggregate Intrinsic Value (in thousands) | |||||||||||||||
| Unvested and outstanding balance as of December 31, 2024 | 13,806,700 | $ | 116.09 | $ | 1,972,839 | ||||||||||||
| Awarded | 9,951,174 | 128.13 | |||||||||||||||
| Vested | (5,595,469) | 113.50 | |||||||||||||||
| Forfeited/canceled | (1,462,362) | 116.34 | |||||||||||||||
| Unvested and outstanding balance as of December 31, 2025 | 16,700,043 | $ | 124.10 | $ | 2,271,039 |
The Company issued a total of 770,044 shares of restricted Class A common stock in connection with acquisitions, net of shares retired, during the year ended December 31, 2025, which are subject to service-based vesting conditions which do not exceed four years from the respective grant dates.
Total compensation cost related to unvested RSUs and restricted shares of common stock not yet recognized was approximately $1,717.2 million and $1,378.1 million as of December 31, 2025 and December 31, 2024, respectively. The weighted-average period over which the unvested RSUs and restricted shares of common stock will be recognized is 2.8 years as of December 31, 2025 and December 31, 2024.
Total compensation cost related to unvested PSUs not yet recognized was approximately $82.8 million and $52.3 million as of December 31, 2025, and December 31, 2024, respectively. The weighted-average period over which the unvested PSUs will be recognized is 1.3 years and 1.3 years as of December 31, 2025, and December 31, 2024, respectively.
Stock-Based Compensation
Stock-based compensation was included in the consolidated statement of operations as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Cost of revenue | $ | 29,729 | $ | 26,221 | $ | 17,578 | |||||||||||
| Research and development | 469,526 | 363,301 | 313,096 | ||||||||||||||
| Sales and marketing | 156,472 | 122,079 | 101,937 | ||||||||||||||
| General and administrative | 94,944 | 58,735 | 49,689 | ||||||||||||||
| Stock-based compensation, net of amounts capitalized | 750,671 | 570,336 | 482,300 | ||||||||||||||
| Capitalized stock-based compensation | 23,454 | 13,152 | 13,597 | ||||||||||||||
| Total stock-based compensation | $ | 774,125 | $ | 583,488 | $ | 495,897 |
Employee Stock Purchase Plan
In September 2019, the Board adopted and approved the 2019 ESPP, which became effective on the date of the final prospectus for the Company’s IPO.
The ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of the Company’s Class A common stock on specified dates during such offerings. Under the ESPP, the Company may specify offerings with durations of not more than 27 months and may specify shorter purchase periods within each offering. Historically offering periods have been approximately 6 months. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s Class A common stock on the first trading day of the offering period, or (2) the fair market value of the Company’s Class A common stock on the purchase date, as defined in the ESPP.
The Company recognized $20.8 million, $15.3 million, and $16.0 million of stock-based compensation expense related to the ESPP during the years ended December 31, 2025, 2024, and 2023, respectively.
As of December 31, 2025 and 2024, $11.9 million and $8.3 million, respectively, has been withheld on behalf of employees for a future purchase under the ESPP due to the timing of payroll deductions.
During the years ended December 31, 2025, 2024, and 2023, the Company issued 569,345, 449,249, and 517,430 shares of Class A common stock under the ESPP, respectively. As of December 31, 2025, 23,194,449 shares of Class A common stock remain available for grant under the ESPP.
Total compensation cost related to the ESPP not yet recognized was approximately $11.3 million and $7.0 million as of December 31, 2025 and 2024, respectively. The weighted average period over which this compensation cost will be recognized is 0.4 years as of December 31, 2025 and 2024, respectively.
13. Interest Income and Other Income, Net
Interest income and other income, net consist of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Interest income | $ | 194,424 | $ | 155,321 | $ | 103,459 | |||||||||||
| Other (loss) income, net | (11,971) | 1,403 | (3,458) | ||||||||||||||
| Interest income and other income, net | $ | 182,453 | $ | 156,724 | $ | 100,001 |
14. Income Taxes
Income Taxes—For financial reporting purposes, income before income taxes, includes the following components (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 88,617 | $ | 178,694 | $ | 42,811 | |||||||||||
| Foreign | 38,404 | 25,246 | 17,424 | ||||||||||||||
| Income before income taxes | $ | 127,021 | $ | 203,940 | $ | 60,235 |
Total income taxes allocated to operations for the years ended December 31, 2025, 2024 and 2023 were as follows (in thousands):
| 2025 | Current | Deferred | Total | ||||||||||||||
| Federal | $ | (2,938) | $ | — | $ | (2,938) | |||||||||||
| State | 408 | — | 408 | ||||||||||||||
| Foreign | 23,050 | (1,240) | 21,810 | ||||||||||||||
| Total | $ | 20,520 | $ | (1,240) | $ | 19,280 |
| 2024 | Current | Deferred | Total | ||||||||||||||
| Federal | $ | 4,690 | $ | — | $ | 4,690 | |||||||||||
| State | 3,321 | — | 3,321 | ||||||||||||||
| Foreign | 14,586 | (2,403) | 12,183 | ||||||||||||||
| Total | $ | 22,597 | $ | (2,403) | $ | 20,194 |
| 2023 | Current | Deferred | Total | ||||||||||||||
| Federal | $ | (261) | $ | — | $ | (261) | |||||||||||
| State | 2,551 | — | 2,551 | ||||||||||||||
| Foreign | 10,262 | (885) | 9,377 | ||||||||||||||
| Total | $ | 12,552 | $ | (885) | $ | 11,667 |
Tax Rate Reconciliation—Income tax expense was $19.3 million for the year ended December 31, 2025, and differed from the amount computed by applying the U.S. federal statutory income tax rate of 21% to pretax income from operations. The reconciliation of these amounts is presented in the table below, which has been prepared in accordance with the disclosure guidance of ASU 2023-09 (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| Amount | Percent | ||||||||||
| U.S. Federal Statutory Tax Rate | $ | 26,674 | 21.00 | % | |||||||
| State and Local Income Taxes, Net of Federal Income Tax Effect(1) | 323 | 0.25 | % | ||||||||
| Foreign Tax Effects | |||||||||||
| Brazil | |||||||||||
| Income tax from withholding | 10,077 | 7.93 | % | ||||||||
| Other | 3,092 | 2.43 | % | ||||||||
| Effect of Cross-Border Tax Laws | |||||||||||
| Global intangible low-taxed income (GILTI) | 2,131 | 1.68 | % | ||||||||
| Other | 1,010 | 0.80 | % | ||||||||
| Tax Credits | |||||||||||
| U.S. R&D tax credits | (24,537) | (19.32) | % | ||||||||
| U.S. Foreign tax credits | (19,019) | (14.97) | % | ||||||||
| Changes in Valuation Allowances | 66,813 | 52.60 | % | ||||||||
| Nontaxable or Nondeductible items | |||||||||||
| Section 162(m) adjustment | 16,680 | 13.13 | % | ||||||||
| Share-based compensation | |||||||||||
| Other non-deductible share-based payments | 4,802 | 3.78 | % | ||||||||
| Non-US share-based payment disallowance | 30,902 | 24.33 | % | ||||||||
| Deductible share based-payments | (100,215) | (78.90) | % | ||||||||
| Meals and entertainment | 3,182 | 2.51 | % | ||||||||
| Other | 593 | 0.47 | % | ||||||||
| Other Adjustments | (3,228) | (2.54) | % | ||||||||
| Effective Tax Rate | $ | 19,280 | 15.18 | % | |||||||
| (1)MN & TX state taxes contribute to the majority (greater than 50 percent) of the tax effect in this category for 2025 |
The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09:
| Year Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Income tax expense at federal statutory rate | $ | 42,827 | $ | 12,650 | ||||||||||
| Meals and entertainment | 2,782 | 1,957 | ||||||||||||
| State taxes (net of federal benefit) | 2,644 | 1,090 | ||||||||||||
| Net change in valuation allowance | 86,556 | 68,770 | ||||||||||||
| Uncertain tax positions | (60) | (94) | ||||||||||||
| U.S. tax costs on international operations | (4,729) | (1,920) | ||||||||||||
| Prior year NOL balance adjustment | 2,433 | — | ||||||||||||
| Foreign taxes | 6,280 | 5,106 | ||||||||||||
| Share based compensation deductions | (123,773) | (80,119) | ||||||||||||
| Section 162(m) adjustment | 17,435 | 10,335 | ||||||||||||
| Return to provision | (27) | (3,335) | ||||||||||||
| U.S. R&D tax credits | (14,119) | (2,973) | ||||||||||||
| Other | 1,945 | 200 | ||||||||||||
| Total | $ | 20,194 | $ | 11,667 |
Income Tax Payments
Disclosed below is a summary of income taxes, net of refunds, paid by individual jurisdictions equaling 5% or more of the total for the year ended December 31, 2025, presented in accordance with the disclosure requirements of ASU 2023-09 (in thousands):
| Income taxes paid | ||||||||||||||
| United States - Federal | $ | 4,049 | ||||||||||||
| United States - State and local | 1,797 | |||||||||||||
| Foreign | ||||||||||||||
| Brazil | 5,949 | |||||||||||||
| Netherlands | 968 | |||||||||||||
| Other | 4,886 | |||||||||||||
| Total income taxes paid | $ | 17,649 |
For the year ended December 31, 2025, the Company has evaluated the available evidence supporting the realization of its deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the United States. Due to uncertainties surrounding the realization of the deferred tax assets, the Company recorded a full valuation allowance against substantially all of its net deferred tax assets. When the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets would have the effect of increasing net income in the period such determination is made.
The Company is subject to tax laws in the United States and numerous foreign jurisdictions. The United States and many international legislative and regulatory bodies continually propose and enact legislation that could significantly impact how U.S. multinational corporations are taxed. The Company is closely monitoring proposed legislation and its potential impact.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA permanently extends certain provisions of the Tax Cuts and Jobs Act, including 100% bonus depreciation for certain qualified property, and reverses the requirement to capitalize and amortize domestic research and experimentation (“R&E”) expenses. As a result, for tax years beginning after December 31, 2024, taxpayers may deduct such expenses in the year incurred. The legislation also introduced an election to accelerate any unamortized domestic R&E expenditures over a one- or two-year period beginning with the 2025 tax year and includes modifications to the international tax framework. The OBBBA also includes modifications to the international tax framework. Future guidance from the Internal Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects thereof could be repealed or modified in future legislation. In accordance with ASC 740, Accounting for Income Taxes, the Company has reflected the effects of the OBBBA in its financial statements for the year ended December 31, 2025. The enactment of the OBBBA reduced the Company’s U.S. income tax expense for 2025. The legislation did not impact the Company’s U.S. net deferred tax assets or liabilities, as a full valuation allowance continues to be maintained against those balances.
Components of Deferred Taxes—The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are presented below (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating losses | $ | 115,543 | $ | 22,804 | |||||||
| U.S. R&D tax credits net of uncertain tax positions | 131,656 | 102,903 | |||||||||
| Stock-based compensation | 68,230 | 55,275 | |||||||||
| Section 174 capitalization | 220,486 | 285,198 | |||||||||
| Lease liability | 58,239 | 45,865 | |||||||||
| Other | 61,311 | 57,042 | |||||||||
| Total deferred tax assets | $ | 655,465 | $ | 569,087 | |||||||
| Less: valuation allowance | (543,147) | (488,866) | |||||||||
| Deferred tax assets, net of valuation allowance | $ | 112,318 | $ | 80,221 | |||||||
| Deferred tax liabilities: | |||||||||||
| Commissions | (50,111) | (35,593) | |||||||||
| Right of use asset | (39,814) | (33,554) | |||||||||
| Fixed Assets | (16,742) | (7,261) | |||||||||
| Total deferred tax liabilities | $ | (106,667) | $ | (76,408) | |||||||
| Deferred tax assets, net | $ | 5,651 | $ | 3,813 |
The Company accounts for income taxes using an asset and liability method and deferred income tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled. The Company’s deferred tax assets and liabilities consist primarily of basis differences for financial reporting and tax purposes of certain assets and liabilities as well as income tax attributes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based upon the weight of all available evidence, which includes the historical operating performance and the Company's cumulative losses when considering permanent tax adjustments, management does not believe as of December 31, 2025 and 2024 that it is more likely than not that the Company will realize its U.S. deferred tax assets. As a result, a valuation allowance of $543.1 million and $488.9 million has been provided at December 31, 2025 and 2024, respectively. The valuation allowance changed by $54.3 million and $167.3 million at December 31, 2025 and 2024, respectively.
At December 31, 2025, the Company has net operating loss carryforwards for federal tax purposes of approximately $340.2 million, which is available to offset federal taxable income. For the year ending December 31, 2024, the Company utilized all of its net operating loss carryforwards for federal tax purposes except for acquired losses, offset against its federal taxable income for the year. The Company also has historically acquired losses for which it is evaluating the feasibility of future utilization under IRC section 382. U.S. Federal net operating losses generated after December 31, 2017 have an indefinite carryforward period but are subject to an 80% of taxable income limitation after December 31, 2020. The Company has approximately $474.2 million and $263.0 million of net operating loss carryforwards as of December 31, 2025 and 2024, respectively for various state tax purposes. The state net operating loss carryforwards will begin to expire in 2028, if not utilized.
Generally, the utilization of net operating losses may be subject to an annual limitation provided for in the Internal Revenue Code of 1986, as amended, under Section 382 and similar state codes. The Company has prepared an analysis to determine whether its net operating losses may be limited under such provisions. It has been determined that any annual limitation would not result in the expiration of net operating loss carryforwards before utilization.
In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. Historically, the Company has not made a provision for U.S. income tax with respect to accumulated earnings of foreign subsidiaries where the foreign investment of such earnings is essentially permanent in duration. Generally, such amounts would become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. The Company has not provided U.S. taxes on unremitted earnings of its foreign subsidiaries as it asserts permanent reinvestment on any accumulated earnings and profits.
Consistent with the provisions of ASC 740, Income Taxes, the Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
The following table shows the changes in the gross amount of unrecognized tax benefits as of December 31, 2025, 2024 and 2023 (in thousands):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | 25,729 | $ | 59 | $ | 106 | |||||||||||
| Increase of current year tax positions | 18,156 | 25,729 | — | ||||||||||||||
| (Decrease) of prior year tax positions due to lapse of statute of limitations | — | (59) | (47) | ||||||||||||||
| Ending balance | $ | 43,885 | $ | 25,729 | $ | 59 |
The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate would be $0.0 million for the year ended December 31, 2025 due to the excess of deferred tax attributes.
The Company’s policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such items in income tax expense. The total amount of interest and penalties associated with unrecognized income tax benefits is $0.0 million and $0.0 million for the years ended December 31, 2025 and 2024.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and in various international jurisdictions. Tax years 2022 and forward generally remain open for examination for federal and state tax purposes. To the extent utilized in future years’ tax returns, net operating loss carryforwards generated in 2025 will remain subject to examination until the respective tax year is closed.
15. Net Income Per Share
Basic and diluted net income per common share is presented in conformity with the two-class method required for participating securities. Immediately prior to the consummation of the Company’s IPO in September 2019, all outstanding shares of convertible preferred stock and common stock were converted into shares of Class B common stock. As a result, Class A and Class B common stock are the only outstanding equity in the Company.
Basic and diluted net income per share is computed using the weighted-average number of shares of common stock outstanding during the period. The undistributed earnings are allocated based on the contractual participation rights of the Class A and Class B common stock as if the earnings for the year have been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. Further, as the conversion of Class B common stock is assumed in the computation of the diluted net income per share of Class A common stock, the undistributed earnings are equal to net income for that computation.
The following table presents the calculation of basic and diluted net income per share (in thousands, except per share data):
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Class A | Class B | Class A | Class B | Class A | Class B | ||||||||||||||||||||||||||||||
| Basic net income per share: | |||||||||||||||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||||||||||||||
| Net income | $ | 99,843 | $ | 7,898 | $ | 169,503 | $ | 14,243 | $ | 44,684 | $ | 3,884 | |||||||||||||||||||||||
| Denominator: | |||||||||||||||||||||||||||||||||||
| Weighted average shares used in calculating net income per share, basic | 321,848 | 25,461 | 310,113 | 26,059 | 298,116 | 25,918 | |||||||||||||||||||||||||||||
| Basic net income per share | $ | 0.31 | $ | 0.31 | $ | 0.55 | $ | 0.55 | $ | 0.15 | $ | 0.15 | |||||||||||||||||||||||
| Diluted net income per share: | |||||||||||||||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||||||||||||||
| Allocation of distributed income, net of interest expense and related tax | $ | 103,313 | $ | 8,173 | $ | 173,585 | $ | 14,586 | $ | 44,684 | $ | 3,884 | |||||||||||||||||||||||
| Reallocation of undistributed income as a result of conversion of Class B to Class A shares | 8,173 | — | 14,586 | — | 3,884 | — | |||||||||||||||||||||||||||||
| Allocation of undistributed income | $ | 111,486 | $ | 8,173 | $ | 188,171 | $ | 14,586 | $ | 48,568 | $ | 3,884 | |||||||||||||||||||||||
| Denominator: | |||||||||||||||||||||||||||||||||||
| Number of shares used in basic calculation | 321,848 | 25,461 | 310,113 | 26,059 | 298,116 | 25,918 | |||||||||||||||||||||||||||||
| Weighted average effect of diluted securities: | |||||||||||||||||||||||||||||||||||
| Conversion of Class B to Class A common shares outstanding | 25,461 | — | 26,059 | — | 25,918 | — | |||||||||||||||||||||||||||||
| Employee stock options | 4,432 | — | 9,128 | — | 14,828 | — | |||||||||||||||||||||||||||||
| Employee stock purchase plan | 44 | — | 25 | — | 15 | — | |||||||||||||||||||||||||||||
| Restricted stock units and performance stock units | 5,071 | — | 4,701 | — | 2,731 | — | |||||||||||||||||||||||||||||
| Unvested restricted stock in connection with acquisitions | 383 | — | 327 | — | 586 | — | |||||||||||||||||||||||||||||
| Shares issuable upon conversion of the 2025 Notes | 1,637 | — | 8,032 | — | 8,098 | — | |||||||||||||||||||||||||||||
| Shares issuable upon conversion of the 2029 Notes | 4,596 | — | 251 | — | — | — | |||||||||||||||||||||||||||||
| Number of shares used in diluted calculation | 363,472 | 25,461 | 358,636 | 26,059 | 350,292 | 25,918 | |||||||||||||||||||||||||||||
| Diluted net income per share | $ | 0.31 | $ | 0.32 | $ | 0.52 | $ | 0.56 | $ | 0.14 | $ | 0.15 |
Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Shares subject to outstanding stock options and RSUs | 648 | 350 | 2,248 | ||||||||||||||
| Unvested early exercised stock options and restricted shares of common stock | — | — | 31 | ||||||||||||||
| Shares subject to the employee stock purchase plan | — | 15 | — | ||||||||||||||
| Total | 648 | 365 | 2,279 |
The Company uses the if-converted method for calculating any potential dilutive effect of the conversion options embedded in the Notes on diluted net income per share.
The Company entered into Capped Calls in connection with the issuance of the Notes. The effect of the Capped Calls was excluded from the calculation of diluted net income per share as the effect of the Capped Calls would have been anti-dilutive. The Capped Calls are expected to partially offset the potential dilution to the Company’s Class A common stock upon any conversion of the Notes.
Previous: Item 7A. Quantitative and Qualitative Disclosures About Market Risk. · Next: Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure