Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

Workday, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)


	October 31, 2023		January 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	1,563,939	$	1,886,311
Marketable securities	5,316,045		4,235,083
Trade and other receivables, net	1,224,818		1,570,086
Deferred costs	207,566		191,054
Prepaid expenses and other current assets	261,795		225,690
Total current assets	8,574,163		8,108,224
Property and equipment, net	1,206,564		1,201,254
Operating lease right-of-use assets	265,963		249,278
Deferred costs, noncurrent	432,275		420,988
Acquisition-related intangible assets, net	249,242		305,465
Goodwill	2,846,464		2,840,044
Other assets	351,262		360,985
Total assets	$	13,925,933	$	13,486,238
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	79,333	$	153,751
Accrued expenses and other current liabilities	234,906		260,131
Accrued compensation	420,178		563,548
Unearned revenue	3,196,648		3,559,393
Operating lease liabilities	98,325		91,343

Total current liabilities	4,029,390		4,628,166
Debt, noncurrent	2,978,800		2,975,934
Unearned revenue, noncurrent	62,148		74,540
Operating lease liabilities, noncurrent	198,843		181,799
Other liabilities	31,835		40,231
Total liabilities	7,301,016		7,900,670
Stockholders’ equity:
Common stock	264		259
Additional paid-in capital	9,981,756		8,828,639
Treasury stock	(471,481)		(185,047)
Accumulated other comprehensive income (loss)	33,207		53,051
Accumulated deficit	(2,918,829)		(3,111,334)
Total stockholders’ equity	6,624,917		5,585,568
Total liabilities and stockholders’ equity	$	13,925,933	$	13,486,238

See Notes to Condensed Consolidated Financial Statements

Workday, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Revenues:
Subscription services	$	1,691,116	$	1,432,393	$	4,842,964	$	4,071,804
Professional services	174,559		166,710		493,789		497,754
Total revenues	1,865,675		1,599,103		5,336,753		4,569,558
Costs and expenses (1):
Costs of subscription services	263,840		259,397		758,551		737,301
Costs of professional services	181,400		176,396		552,233		524,398
Product development	618,736		565,727		1,828,870		1,655,071
Sales and marketing	537,816		470,196		1,580,639		1,358,198
General and administrative	176,028		153,708		512,148		427,832
Total costs and expenses	1,777,820		1,625,424		5,232,441		4,702,800
Operating income (loss)	87,855		(26,321)		104,312		(133,242)
Other income (expense), net	41,388		4,163		113,652		(48,789)
Income (loss) before provision for (benefit from) income taxes	129,243		(22,158)		217,964		(182,031)
Provision for (benefit from) income taxes	15,534		52,563		25,459		59,021
Net income (loss)	$	113,709	$	(74,721)	$	192,505	$	(241,052)
Net income (loss) per share, basic	$	0.43	$	(0.29)	$	0.74	$	(0.95)
Net income (loss) per share, diluted	$	0.43	$	(0.29)	$	0.73	$	(0.95)
Weighted-average shares used to compute net income (loss) per share, basic	262,153		255,753		260,747		253,975
Weighted-average shares used to compute net income (loss) per share, diluted	266,377		255,753		264,087		253,975


(1) Costs and expenses include share-based compensation expenses as follows:
	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Costs of subscription services	$	30,543	$	25,598	$	89,793	$	76,918
Costs of professional services	28,738		26,577		87,532		79,999
Product development	162,025		149,279		493,934		449,764
Sales and marketing	64,805		61,186		211,560		180,233
General and administrative	63,146		51,556		187,810		146,795
Total share-based compensation expenses	$	349,257	$	314,196	$	1,070,629	$	933,709

See Notes to Condensed Consolidated Financial Statements

Workday, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Net income (loss)	$	113,709	$	(74,721)	$	192,505	$	(241,052)
Other comprehensive income (loss):
Net change in foreign currency translation adjustment	(3,851)		(3,098)		(3,317)		(6,005)
Net change in unrealized gains (losses) on available-for-sale debt securities	(4,634)		(13,232)		(16,204)		(23,513)
Net change in unrealized gains (losses) on cash flow hedges, net of tax provision of $2,388, $0, $3,942, and $0, respectively	48,472		57,483		(323)		125,923
Other comprehensive income (loss)	39,987		41,153		(19,844)		96,405
Comprehensive income (loss)	$	153,696	$	(33,568)	$	172,661	$	(144,647)

See Notes to Condensed Consolidated Financial Statements

Workday, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Common stock:
Balance, beginning of period	$	263	$	255	$	259	$	251
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes	1		1		5		5
Settlement of convertible senior notes	—		1		—		1
Balance, end of period	264		257		264		257
Additional paid-in capital:
Balance, beginning of period	9,637,303		7,988,096		8,828,639		7,284,174
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes	(4,804)		709		82,488		84,997
Share-based compensation	349,257		314,196		1,070,629		933,709


Exercise of convertible senior notes hedges	—		97,794		—		97,916
Settlement of convertible senior notes	—		(39)		—		(40)

Balance, end of period	9,981,756		8,400,756		9,981,756		8,400,756
Treasury stock:
Balance, beginning of period	(323,695)		(12,588)		(185,047)		(12,467)

Exercise of convertible senior notes hedges	—		(97,794)		—		(97,915)


Common stock repurchases under share repurchase program	(147,786)		—		(286,434)		—
Balance, end of period	(471,481)		(110,382)		(471,481)		(110,382)
Accumulated other comprehensive income (loss):
Balance, beginning of period	(6,780)		62,961		53,051		7,709
Other comprehensive income (loss)	39,987		41,153		(19,844)		96,405
Balance, end of period	33,207		104,114		33,207		104,114
Accumulated deficit:
Balance, beginning of period	(3,032,538)		(2,910,916)		(3,111,334)		(2,744,585)
Net income (loss)	113,709		(74,721)		192,505		(241,052)


Balance, end of period	(2,918,829)		(2,985,637)		(2,918,829)		(2,985,637)
Total stockholders’ equity	$	6,624,917	$	5,409,108	$	6,624,917	$	5,409,108


	Three Months Ended October 31,		Nine Months Ended October 31,
	2023	2022	2023	2022
Common stock (in shares):
Balance, beginning of period	261,858	255,485	257,991	251,209
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes	1,363	1,198	5,865	5,474

Settlement of convertible senior notes	—	634	—	635
Purchase of treasury stock from the exercise of convertible senior notes hedges	—	(634)	—	(635)
Common stock repurchased	(677)	—	(1,312)	—

Balance, end of period	262,544	256,683	262,544	256,683

See Notes to Condensed Consolidated Financial Statements

Workday, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Cash flows from operating activities:
Net income (loss)	$	113,709	$	(74,721)	$	192,505	$	(241,052)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	68,614		91,854		210,470		274,395
Share-based compensation expenses	349,257		314,196		1,070,629		933,709
Amortization of deferred costs	54,450		44,830		155,432		126,515
Non-cash lease expense	24,454		23,359		72,611		68,318
(Gains) losses on investments	9,488		(3,833)		16,764		20,746
Accretion of discounts on marketable debt securities, net	(39,379)		(13,121)		(111,180)		(15,797)
Other	(10,037)		16,372		(19,696)		31,170
Changes in operating assets and liabilities, net of business combinations:
Trade and other receivables, net	37,719		61,885		327,647		200,008
Deferred costs	(79,927)		(56,552)		(183,231)		(163,023)
Prepaid expenses and other assets	71,644		2,435		78,279		(31,447)
Accounts payable	(6,525)		18,116		(62,352)		20,884
Accrued expenses and other liabilities	(32,159)		47,061		(219,470)		41,253
Unearned revenue	(110,533)		(63,213)		(375,053)		(302,936)
Net cash provided by (used in) operating activities	450,775		408,668		1,153,355		962,743
Cash flows from investing activities:
Purchases of marketable securities	(1,272,864)		(2,310,915)		(4,746,086)		(5,651,005)
Maturities of marketable securities	1,124,276		2,181,147		3,595,718		3,767,509
Sales of marketable securities	45,690		19,988		93,368		53,355
Owned real estate projects	(1,424)		(181)		(3,112)		(446)
Capital expenditures, excluding owned real estate projects	(58,524)		(58,665)		(181,053)		(286,013)
Business combinations, net of cash acquired	(8,517)		—		(8,517)		—
Purchase of other intangible assets	(700)		(700)		(10,200)		(700)
Purchases of non-marketable equity and other investments	—		(3,250)		(10,500)		(20,173)
Sales and maturities of non-marketable equity and other investments	54		4,513		54		11,674

Net cash provided by (used in) investing activities	(172,009)		(168,063)		(1,270,328)		(2,125,799)
Cash flows from financing activities:
Proceeds from issuance of debt, net of debt discount	—		—		—		2,978,077
Repayments and extinguishment of debt	—		(1,149,622)		—		(1,843,605)
Payments for debt issuance costs	—		—		—		(7,220)
Repurchases of common stock	(144,686)		—		(283,333)		—
Proceeds from issuance of common stock from employee equity plans, net of taxes paid for shares withheld	(4,803)		710		82,493		85,002
Other	(69)		(161)		(474)		(538)
Net cash provided by (used in) financing activities	(149,558)		(1,149,073)		(201,314)		1,211,716
Effect of exchange rate changes	(787)		(920)		(698)		(1,750)
Net increase (decrease) in cash, cash equivalents, and restricted cash	128,421		(909,388)		(318,985)		46,910
Cash, cash equivalents, and restricted cash at the beginning of period	1,447,834		2,497,043		1,895,240		1,540,745
Cash, cash equivalents, and restricted cash at the end of period	$	1,576,255	$	1,587,655	$	1,576,255	$	1,587,655

See Notes to Condensed Consolidated Financial Statements


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Supplemental cash flow data:
Cash paid for interest	$	55,125	$	56,567	$	110,254	$	59,508
Cash paid for income taxes, net of refunds	3,214		2,093		35,007		9,863
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid	18,094		68,028		18,094		68,028


	As of October 31,
	2023		2022
Reconciliation of cash, cash equivalents, and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows:
Cash and cash equivalents	$	1,563,939	$	1,575,955
Restricted cash included in Prepaid expenses and other current assets	12,316		11,700

Total cash, cash equivalents, and restricted cash	$	1,576,255	$	1,587,655

See Notes to Condensed Consolidated Financial Statements

Workday, Inc.

Notes to Condensed Consolidated Financial Statements

As used in this report, the terms “Workday,” “registrant,” “we,” “us,” and “our” mean Workday, Inc. and its subsidiaries unless the context indicates otherwise.

Note 1. Overview and Basis of Presentation

Company and Background

Workday delivers applications for financial management, spend management, human capital management, planning, and analytics. With Workday, our customers have a unified system that can help them plan, execute, analyze, and extend to other applications and environments, thereby helping them continuously adapt how they manage their business and operations. We were originally incorporated in March 2005 in Nevada, and in June 2012, we reincorporated in Delaware.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated financial statements include the results of Workday, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of our management, the information contained herein reflects all adjustments necessary for a fair presentation of Workday’s financial position, results of operations, stockholders’ equity, and cash flows. All such adjustments are of a normal, recurring nature. The results of operations for the three and nine months ended October 31, 2023, shown in this report are not necessarily indicative of the results to be expected for the full fiscal year ending January 31, 2024. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed with the SEC on February 27, 2023.

Certain prior period amounts reported in our unaudited condensed consolidated financial statements and notes thereto have been reclassified to conform to current period presentation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates, judgements, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates, judgements, and assumptions include, but are not limited to, the identification of distinct performance obligations for revenue recognition, the determination of the period of benefit for deferred commissions, the fair value and useful lives of assets acquired and liabilities assumed through business combinations, and the valuation of non-marketable equity investments. Actual results could differ from those estimates, judgements, and assumptions, and such differences could be material to our condensed consolidated financial statements.

In February 2023, we completed an assessment of the useful lives of our data center equipment, including servers, network equipment, and integrated complete server and network racks. Due to advances in technology, as well as investments in software that increased efficiencies in how we operate our data center equipment, we determined we should increase the estimated useful lives of data center equipment from 3 years to 5 years. This change in accounting estimate was effective beginning fiscal 2024. Based on the carrying amount of data center equipment that was in-service as of January 31, 2023, this change decreased depreciation expense by $22 million and $77 million for the three and nine months ended October 31, 2023, respectively.

Segment Information

We operate in one operating segment, cloud applications. Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by a chief operating decision maker (“CODM”) in deciding how to allocate resources and assessing performance. For the nine months ended October 31, 2023, our co-chief executive officers together served as CODM for purposes of segment reporting. Our CODM allocates resources and assesses performance based upon discrete financial information at the consolidated level.

Note 2. Significant Accounting Policies and Accounting Standards

Significant Accounting Policies

There have been no material changes in our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023.

Concentrations of Risk and Significant Customers

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, debt securities, and trade and other receivables. Our deposits exceed federally insured limits.

No customer individually accounted for more than 10% of trade and other receivables, net as of October 31, 2023, or January 31, 2023. No customer individually accounted for more than 10% of total revenues during the three and nine months ended October 31, 2023, or 2022.

Other than the United States, no country individually accounted for more than 10% of total revenues during the three and nine months ended October 31, 2023, or 2022.

In order to reduce the risk of disruption of our cloud applications, we have established data centers in various geographic regions. We serve our customers and users from data center facilities operated by third parties, located in the United States, Canada, and Europe. We have internal procedures to restore services in the event of disaster at one of our data center facilities. Even with these procedures for disaster recovery in place, our cloud applications could be significantly interrupted during the implementation of the procedures to restore services.

In addition, we rely upon third-party hosted infrastructure partners globally, including Amazon Web Services (“AWS”), Google LLC, and Microsoft Corporation, to serve customers and operate certain aspects of our services. Given this, any disruption of or interference at our hosted infrastructure partners may impact our operations and our business could be adversely impacted.

We are also exposed to concentration of risk in our equity investments portfolio, which consists of marketable equity investments and non-marketable equity investments measured using the measurement alternative. As of both October 31, 2023, and January 31, 2023, we held one marketable equity investment with a carrying value that was individually greater than 10% of our total equity investments portfolio.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. We are currently evaluating the impacts of the new standard.

Note 3. Investments

Debt Securities

As of October 31, 2023, debt securities consisted of the following (in thousands):


	Amortized Cost		Unrealized Gains		Unrealized Losses		Aggregate Fair Value
U.S. treasury securities	$	2,307,535	$	51	$	(9,121)	$	2,298,465
U.S. agency obligations	787,767		254		(2,376)		785,645
Corporate bonds	1,771,472		355		(21,031)		1,750,796
Commercial paper	1,111,886		—		(1)		1,111,885
Total debt securities	$	5,978,660	$	660	$	(32,529)	$	5,946,791
Included in Cash and cash equivalents	$	659,919	$	—	$	—	$	659,919
Included in Marketable securities	$	5,318,741	$	660	$	(32,529)	$	5,286,872

As of January 31, 2023, debt securities consisted of the following (in thousands):


	Amortized Cost		Unrealized Gains		Unrealized Losses		Aggregate Fair Value
U.S. treasury securities	$	2,455,739	$	77	$	(6,765)	$	2,449,051
U.S. agency obligations	325,664		—		(3,874)		321,790
Corporate bonds	966,801		1,617		(6,715)		961,703
Commercial paper	1,016,641		—		(5)		1,016,636
Total debt securities	$	4,764,845	$	1,694	$	(17,359)	$	4,749,180
Included in Cash and cash equivalents	$	594,864	$	—	$	(1)	$	594,863
Included in Marketable securities	$	4,169,980	$	1,694	$	(17,357)	$	4,154,317

The contractual maturities of debt securities were as follows (in thousands):


	October 31, 2023
Due within 1 year	$	3,885,682
Due in 1 year through 5 years	2,061,109
Total debt securities	$	5,946,791

We classify our debt securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. We consider all debt securities as funds available for use in current operations, including those with maturity dates beyond one year, and therefore classify these securities as current assets on the Condensed Consolidated Balance Sheets. Debt securities included in Marketable securities on the Condensed Consolidated Balance Sheets consist of securities with original maturities at the time of purchase greater than three months, and the remaining securities are included in Cash and cash equivalents.

As of October 31, 2023, and January 31, 2023, the fair values of debt securities in an unrealized loss position were $4.3 billion and $3.1 billion, respectively, the majority of which had been in a continuous unrealized loss position for less than 12 months. We did not recognize any credit or non-credit related losses related to our debt securities during the periods presented.

We sold $24 million and $20 million of debt securities during the three months ended October 31, 2023, and 2022, respectively. We sold $42 million and $48 million of debt securities during the nine months ended October 31, 2023, and 2022, respectively. The realized gains and losses from the sales were immaterial.

Equity Investments

Equity investments consisted of the following (in thousands):


	Condensed Consolidated Balance Sheets Location	October 31, 2023		January 31, 2023
Money market funds	Cash and cash equivalents	$	675,910	$	902,226

Non-marketable equity investments measured using the measurement alternative	Other assets	250,311		261,922
Marketable equity investments	Marketable securities	29,173		80,766
Total equity investments		$	955,394	$	1,244,914

Total realized and unrealized gains and losses associated with our equity investments consisted of the following (in thousands):


	Three Months Ended October 31,						Nine Months Ended October 31,
2023			2022			2023			2022
Net realized gains (losses) recognized on equity investments sold (1)	$	(807)		$	4,514		$	1,984		$	(365)
Net unrealized gains (losses) recognized on equity investments held as of the end of the period	(13,562)			(155)			(23,529)			(19,121)
Total net gains (losses) recognized in Other income (expense), net	$	(14,369)		$	4,359		$	(21,545)		$	(19,486)

(1)Reflects the difference between the sale proceeds and the carrying value of the equity investments at the beginning of the period.

Non-Marketable Equity Investments Measured Using the Measurement Alternative

Non-marketable equity investments measured using the measurement alternative include investments in privately held companies without readily determinable fair values in which we do not own a controlling interest or exercise significant influence. These investments are recorded at cost and are adjusted for observable transactions for same or similar securities of the same issuer or impairment events. The carrying values for our non-marketable equity investments are summarized below (in thousands):


	October 31, 2023		January 31, 2023
Total initial cost	$	207,485	$	206,833
Cumulative net unrealized gains (losses)	42,826		55,089
Carrying value	$	250,311	$	261,922

During the three months ended October 31, 2023, we recorded impairment losses of $9 million to the carrying value of non-marketable equity investments. During the three months ended October 31, 2022, we recorded upward adjustments to the carrying value of non-marketable equity investments of $2 million, impairment losses of $2 million, and a gain of $4 million upon exiting a non-marketable equity investment.

During the nine months ended October 31, 2023, we recorded impairment losses of $22 million to the carrying value of non-marketable equity investments. During the nine months ended October 31, 2022, we recorded upward adjustments to the carrying value of non-marketable equity investments of $8 million, impairment losses of $10 million, and a net loss of $2 million upon exiting a non-marketable equity investment.

Marketable Equity Investments

We hold marketable equity investments with readily determinable fair values over which we do not own a controlling interest or exercise significant influence. The carrying values for our marketable equity investments are summarized below (in thousands):


	October 31, 2023		January 31, 2023
Total initial cost	$	14,817	$	38,449
Cumulative net unrealized gains (losses)	14,356		42,317
Carrying value	$	29,173	$	80,766

During the three months ended October 31, 2023, we sold marketable equity investments for proceeds of $22 million. We did not sell any marketable equity investments during the three months ended October 31, 2022. During the nine months ended October 31, 2023, and 2022, we sold marketable equity investments for proceeds of $52 million and $5 million, respectively. The realized gains and losses from the sales were immaterial.

For the marketable equity investments held as of the end of each period, we recorded unrealized net losses of $4 million during the three months ended October 31, 2023, no material unrealized net gains or losses during the three months ended October 31, 2022, and unrealized net losses of $2 million and $17 million during the nine months ended October 31, 2023, and 2022, respectively.

Note 4. Fair Value Measurements

We use a fair value hierarchy that requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Other inputs that are directly or indirectly observable in the marketplace.

Level 3 — Unobservable inputs that are supported by little or no market activity.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of October 31, 2023 (in thousands):


	Level 1		Level 2		Level 3		Total
U.S. treasury securities	$	2,298,465	$	—	$	—	$	2,298,465
U.S. agency obligations	—		785,645		—		785,645
Corporate bonds	—		1,750,796		—		1,750,796
Commercial paper	—		1,111,885		—		1,111,885
Money market funds	675,910		—		—		675,910
Marketable equity investments	29,173		—		—		29,173
Foreign currency derivative assets	—		90,536		—		90,536
Total assets	$	3,003,548	$	3,738,862	$	—	$	6,742,410
Foreign currency derivative liabilities	$	—	$	20,268	$	—	$	20,268
Total liabilities	$	—	$	20,268	$	—	$	20,268


	Level 1		Level 2		Level 3		Total
U.S. treasury securities	$	2,449,051	$	—	$	—	$	2,449,051
U.S. agency obligations	—		321,790		—		321,790
Corporate bonds	—		961,703		—		961,703
Commercial paper	—		1,016,636		—		1,016,636
Money market funds	902,226		—		—		902,226
Marketable equity investments	80,766		—		—		80,766
Foreign currency derivative assets	—		64,824		—		64,824
Total assets	$	3,432,043	$	2,364,953	$	—	$	5,796,996
Foreign currency derivative liabilities	$	—	$	33,972	$	—	$	33,972
Total liabilities	$	—	$	33,972	$	—	$	33,972

Non-Marketable Equity Investments Measured at Fair Value on a Non-Recurring Basis

Non-marketable equity investments that have been remeasured due to an observable event or impairment are classified within Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the investments we hold. For further information, see Note 3, Investments.

Fair Value Measurements of Other Financial Instruments

We carry our debt at face value less unamortized debt discount and issuance costs on our Condensed Consolidated Balance Sheets and present the fair value for disclosure purposes only. All of our debt obligations are categorized as Level 2 financial instruments. For further information on the fair values of our debt and the inputs used in the calculations, see Note 10, Debt.

Note 5. Deferred Costs

Deferred costs, which consist of deferred sales commissions, were $640 million and $612 million as of October 31, 2023, and January 31, 2023, respectively. Amortization expense for the deferred costs was $54 million and $45 million for the three months ended October 31, 2023, and 2022, respectively, and $155 million and $127 million for the nine months ended October 31, 2023, and 2022, respectively. There was no impairment loss in relation to the costs capitalized for the periods presented.

Note 6. Property and Equipment, Net

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


	October 31, 2023		January 31, 2023
Computers, equipment, and software	$	1,348,381	$	1,286,540
Buildings	723,164		719,966
Leasehold improvements	216,138		202,101
Furniture, fixtures, and transportation equipment	92,938		90,816
Land and land improvements	81,067		81,083
Property and equipment, gross	2,461,688		2,380,506
Less accumulated depreciation and amortization	(1,255,124)		(1,179,252)
Property and equipment, net	$	1,206,564	$	1,201,254

Depreciation expense totaled $52 million and $69 million for the three months ended October 31, 2023, and 2022, respectively, and $149 million and $207 million for the nine months ended October 31, 2023, and 2022, respectively.

Note 7. Acquisition-Related Intangible Assets, Net

Acquisition-related intangible assets, net consisted of the following (in thousands):


	October 31, 2023		January 31, 2023
Developed technology	$	326,800	$	342,700
Customer relationships	311,100		311,100
Backlog	15,000		15,000
Trade name	12,500		12,500
Acquisition-related intangible assets, gross	665,400		681,300
Less accumulated amortization	(416,158)		(375,835)
Acquisition-related intangible assets, net	$	249,242	$	305,465

Amortization expense related to acquisition-related intangible assets was $16 million and $21 million for the three months ended October 31, 2023, and 2022, respectively, and $58 million and $64 million for the nine months ended October 31, 2023, and 2022, respectively.

As of October 31, 2023, our future estimated amortization expense related to acquisition-related intangible assets was as follows (in thousands):


Fiscal Period:
Remainder of 2024	$	16,088
2025	62,198
2026	56,283
2027	31,712
2028	27,346
Thereafter	55,615
Total	$	249,242

Note 8. Other Noncurrent Assets

Other noncurrent assets consisted of the following (in thousands):


	October 31, 2023		January 31, 2023
Non-marketable equity and other investments	$	250,311	$	263,485
Derivative assets	37,725		21,757
Technology patents and other intangible assets, net	27,175		20,534
Prepayments for goods and services	16,463		23,466
Net deferred tax assets	7,105		12,650
Deposits	6,038		5,819

Other	6,445		13,274
Total other assets	$	351,262	$	360,985

Technology patents and other intangible assets with estimable useful lives are amortized on a straight-line basis. As of October 31, 2023, the future estimated amortization expense was as follows (in thousands):


Fiscal Period:
Remainder of 2024	$	1,059
2025	3,715
2026	3,366
2027	3,018
2028	2,774
Thereafter	13,243
Total	$	27,175

Note 9. Derivative Instruments

We conduct business on a global basis in multiple foreign currencies, subjecting Workday to foreign currency exchange risk. To mitigate this risk, we utilize derivative hedging contracts as described below. We do not enter into any derivatives for trading or speculative purposes.

Our foreign currency contracts are classified within Level 2 of the fair value hierarchy because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.

Cash Flow Hedges

We enter into foreign currency forward contracts to hedge a portion of our forecasted revenue and expense transactions (“cash flow hedges”). We designate these forward contracts as cash flow hedging instruments since the accounting criteria for such designation has been met.

Cash flow hedges are recorded on the Condensed Consolidated Balance Sheets at fair value. Cash flows from the settlement of these forward contracts are classified as operating activities on the Condensed Consolidated Statements of Cash Flows. Gains or losses resulting from changes in the fair value of these hedges are recorded in Accumulated other comprehensive income (loss) (“AOCI”) on the Condensed Consolidated Balance Sheets and are subsequently reclassified to the same line item as the hedged transaction on the Condensed Consolidated Statements of Operations in the same period that the hedged transaction affects earnings. As of October 31, 2023, we estimate that $33 million of net gains recorded in AOCI related to our cash flow hedges will be reclassified into income within the next 12 months.

As of October 31, 2023, and January 31, 2023, the notional values of the cash flow hedges that we held to buy U.S. dollars in exchange for other currencies were $2.2 billion and $1.7 billion, respectively. The notional values of the cash flow hedges that we held to sell U.S. dollars in exchange for other currencies were $369 million and $324 million as of October 31, 2023, and January 31, 2023, respectively. All contracts had maturities of less than 48 months.

Non-Designated Hedges

We also enter into foreign currency forward contracts to hedge a portion of our net outstanding monetary assets and liabilities (“non-designated hedges”). These forward contracts are intended to offset foreign currency gains or losses associated with the underlying monetary assets and liabilities and are recorded on the Condensed Consolidated Balance Sheets at fair value. These forward contracts are not designated as hedging instruments under applicable accounting guidance, and therefore all changes in the fair value of these forward contracts are recorded in Other income (expense), net on the Condensed Consolidated Statements of Operations. Cash flows from the settlement of these forward contracts are classified as operating activities on the Condensed Consolidated Statements of Cash Flows.

As of October 31, 2023, and January 31, 2023, the notional values of the non-designated hedges that we held to buy U.S. dollars in exchange for other currencies were $125 million and $235 million, respectively, and the notional values of the non-designated hedges that we held to sell U.S. dollars in exchange for other currencies were $1 million and $2 million, respectively.

The fair values of outstanding derivative instruments were as follows (in thousands):


	Condensed Consolidated Balance Sheets Location	October 31, 2023		January 31, 2023
Derivative assets:
Cash flow hedges	Prepaid expenses and other current assets	$	52,123	$	42,968
Cash flow hedges	Other assets	37,725		21,757
Non-designated hedges	Prepaid expenses and other current assets	688		99

Total derivative assets		$	90,536	$	64,824
Derivative liabilities:
Cash flow hedges	Accrued expenses and other current liabilities	$	16,644	$	13,231
Cash flow hedges	Other liabilities	3,425		15,496
Non-designated hedges	Accrued expenses and other current liabilities	199		5,244
Non-designated hedges	Other liabilities	—		1
Total derivative liabilities		$	20,268	$	33,972

The effect of cash flow hedges on the Condensed Consolidated Statements of Operations was as follows (in thousands):


	Three Months Ended October 31,
Condensed Consolidated Statements of Operations Location	2023				2022
	Total		Gains (losses) related to cash flow hedges		Total		Gains (losses) related to cash flow hedges
Revenues	$	1,865,675	$	15,625	$	1,599,103	$	5,647
Costs and expenses	1,777,820		839		1,625,424		(11,852)
Provision for (benefit from) income taxes	15,534		—		52,563		(3,220)


	Nine Months Ended October 31,
Condensed Consolidated Statements of Operations Location	2023				2022
	Total		Gains (losses) related to cash flow hedges		Total		Gains (losses) related to cash flow hedges
Revenues	$	5,336,753	$	49,217	$	4,569,558	$	5,985
Costs and expenses	5,232,441		1,781		4,702,800		(18,636)
Provision for (benefit from) income taxes	25,459		—		59,021		(3,220)

Pre-tax gains (losses) associated with cash flow hedges were as follows (in thousands):


	Condensed Consolidated Statements of Operations and Statements of Comprehensive Income (Loss) Locations		Three Months Ended October 31,						Nine Months Ended October 31,
		2023			2022			2023			2022
Gains (losses) recognized in OCI	Net change in unrealized gains (losses) on cash flow hedges		$	67,324		$	48,058		$	54,617		$	110,052
Gains (losses) reclassified from AOCI into income (effective portion)	Revenues		15,625			5,647			49,217			5,985
Gains (losses) reclassified from AOCI into income (effective portion)	Costs and expenses		839			(11,852)			1,781			(18,636)
Gains (losses) reclassified from AOCI into income (effective portion)	Provision for (benefit from) income taxes		—			(3,220)			—			(3,220)

Gains (losses) associated with non-designated hedges were as follows (in thousands):


	Condensed Consolidated Statements of Operations Location		Three Months Ended October 31,						Nine Months Ended October 31,
		2023			2022			2023			2022
Gains (losses) related to non-designated hedges	Other income (expense), net		$	6,425		$	7,187		$	7,857		$	13,288

We are subject to netting agreements with all of the counterparties of the foreign exchange contracts, under which we are permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. It is our policy to present the derivatives gross on the Condensed Consolidated Balance Sheets. Our foreign currency forward contracts are not subject to any credit contingent features or collateral requirements. We manage our exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring outstanding positions.

As of October 31, 2023, information related to these offsetting arrangements was as follows (in thousands):


	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Condensed Consolidated Balance Sheets			Net Amounts of Assets Presented on the Condensed Consolidated Balance Sheets			Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets				Net Assets Exposed
					Financial Instruments			Cash Collateral Received
Derivative assets:
Counterparty A	$	25,461	$	—		$	25,461		$	(1,856)	$	—	$	23,605
Counterparty B	20,486		—			20,486			(9,009)		—		11,477
Counterparty C	2,015		—			2,015			(228)		—		1,787
Counterparty D	37,367		—			37,367			(8,323)		—		29,044
Counterparty E	5,207		—			5,207			(852)		—		4,355
Total	$	90,536	$	—		$	90,536		$	(20,268)	$	—	$	70,268


	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Condensed Consolidated Balance Sheets			Net Amounts of Liabilities Presented on the Condensed Consolidated Balance Sheets			Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets				Net Liabilities Exposed
					Financial Instruments			Cash Collateral Pledged
Derivative liabilities:
Counterparty A	$	1,856	$	—		$	1,856		$	(1,856)	$	—	$	—
Counterparty B	9,009		—			9,009			(9,009)		—		—
Counterparty C	228		—			228			(228)		—		—
Counterparty D	8,323		—			8,323			(8,323)		—		—
Counterparty E	852		—			852			(852)		—		—
Total	$	20,268	$	—		$	20,268		$	(20,268)	$	—	$	—

Note 10. Debt

Outstanding debt consisted of the following (in thousands):


	October 31, 2023		January 31, 2023
2027 Notes	$	1,000,000	$	1,000,000
2029 Notes	750,000		750,000
2032 Notes	1,250,000		1,250,000

Total principal amount	3,000,000		3,000,000
Less: unamortized debt discount and issuance costs	(21,200)		(24,066)
Net carrying amount	2,978,800		2,975,934

Debt, noncurrent	$	2,978,800	$	2,975,934

As of October 31, 2023, the future principal payments for the outstanding debt were as follows (in thousands):


Fiscal Period:
Remainder of 2024	$	—
2025	—
2026	—
2027	—
2028	1,000,000
Thereafter	2,000,000
Total principal amount	$	3,000,000

Senior Notes

In April 2022, we issued $3.0 billion aggregate principal amount of senior notes, consisting of $1.0 billion aggregate principal amount of 3.500% notes due April 1, 2027 (“2027 Notes”), $750 million aggregate principal amount of 3.700% notes due April 1, 2029 (“2029 Notes”), and $1.25 billion aggregate principal amount of 3.800% notes due April 1, 2032 (“2032 Notes,” and together with the 2027 Notes and the 2029 Notes, “Senior Notes”). Interest is payable semi-annually in arrears on April 1 and October 1 of each year, which commenced in October 2022.

The Senior Notes are unsecured obligations and rank equally with all existing and future unsecured and unsubordinated indebtedness of Workday. We may redeem the Senior Notes in whole or in part at any time or from time to time, at specified redemption dates and prices. In addition, upon the occurrence of certain change of control triggering events, we may be required to repurchase the Senior Notes under specified terms. The indenture governing the Senior Notes also includes covenants (including certain limited covenants restricting our ability to incur certain liens and enter into certain sale and leaseback transactions), events of default, and other customary provisions. As of October 31, 2023, we were in compliance with all covenants associated with the Senior Notes.

We incurred debt discount and issuance costs of approximately $27 million in connection with the Senior Notes offering, which were allocated on a pro rata basis to the 2027 Notes, 2029 Notes, and 2032 Notes. The debt discount and issuance costs are amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the contractual term of each arrangement. The effective interest rates on the 2027 Notes, 2029 Notes, and 2032 Notes, which are calculated as the contractual interest rates adjusted for the debt discount and issuance costs, are 3.67%, 3.82%, and 3.90%, respectively.

As of October 31, 2023, the total estimated fair value of the Senior Notes was $2.6 billion. The estimated fair values of the Senior Notes, which we have classified as Level 2 financial instruments, were determined based on quoted bid prices in an over-the-counter market on the last trading day of the reporting period.

Credit Agreement

In April 2022, we entered into a credit agreement (“2022 Credit Agreement”) which provides for a revolving credit facility in an aggregate principal amount of $1.0 billion. The 2022 Credit Agreement replaced our prior credit agreement entered into in April 2020 (“2020 Credit Agreement”), which provided for a term loan facility in an aggregate original principal amount of $750 million and a revolving credit facility in an aggregate principal amount of $750 million. Concurrently with entering into the 2022 Credit Agreement, we paid off the remaining principal balance of $694 million on the term loan under the 2020 Credit Agreement and terminated the revolving credit facility under the 2020 Credit Agreement, which had no outstanding balance. The modification to our revolving credit facility and extinguishment of the term loan under the 2020 Credit Agreement did not have a material impact to our Condensed Consolidated Statements of Operations for fiscal 2023.

As of October 31, 2023, we had no outstanding revolving loans under the 2022 Credit Agreement. The revolving loans under the 2022 Credit Agreement may be borrowed, repaid, and reborrowed until April 6, 2027, at which time all amounts borrowed must be repaid. The revolving loans under the 2022 Credit Agreement will bear interest, at our option, at a base rate plus a margin of 0.000% to 0.500% or a secured overnight financing rate (“SOFR”) plus 10 basis points, plus a margin of 0.750% to 1.500%, with such margin being determined based on our consolidated leverage ratio or debt rating. We are also obligated to pay an ongoing commitment fee on undrawn amounts.

The 2022 Credit Agreement contains customary representations, warranties, and affirmative and negative covenants, including a financial covenant, events of default, and indemnification provisions in favor of the lenders. The negative covenants include restrictions on the incurrence of liens and indebtedness, certain merger transactions, and other matters, all subject to certain exceptions. The financial covenant, based on a quarterly financial test, requires that we do not exceed a maximum leverage ratio of 3.50:1.00, subject to a step-up to 4.50:1.00 at our election for a certain period following an acquisition. As of October 31, 2023, we were in compliance with all covenants included in the 2022 Credit Agreement.

Convertible Senior Notes

In September 2017, we issued 0.25% convertible senior notes due October 1, 2022, with a principal amount of $1.15 billion (“2022 Notes”). The 2022 Notes were unsecured, unsubordinated obligations, and interest was payable in cash in arrears at a fixed rate of 0.25% on April 1 and October 1 of each year. During the third quarter of fiscal 2023, the 2022 Notes were converted by note holders, and we repaid the $1.15 billion principal balance in cash. We also distributed approximately 0.6 million shares of our Class A common stock to note holders during fiscal 2023, which represented the conversion value in excess of the principal amount.

Notes Hedges

In connection with the issuance of the 2022 Notes, we entered into convertible note hedge transactions (“Purchased Options”) which gave us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2022 Notes, approximately 7.8 million shares of our Class A common stock for $147.10 per share. During the third quarter of fiscal 2023, we received approximately 0.6 million shares of our Class A common stock from the exercise of the Purchased Options, which offset the economic dilution to our Class A common stock upon conversion of the 2022 Notes. These shares were recorded as Treasury stock on the Condensed Consolidated Balance Sheets. The Purchased Options were separate transactions and were not part of the terms of the 2022 Notes, and expired on October 1, 2022.

Warrants

In connection with the issuance of the 2022 Notes, we also entered into warrant transactions to sell warrants (“Warrants”) to acquire, subject to anti-dilution adjustments, up to approximately 7.8 million shares of our Class A common stock over 60 scheduled trading days beginning in January 2023 at an exercise price of $213.96 per share. During the first quarter of fiscal 2024, the Warrants fully expired without exercise.

Interest Expense on Debt

The following table sets forth total interest expense recognized related to our debt (in thousands):


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Contractual interest expense	$	27,562	$	28,036	$	82,688	$	67,702
Interest cost related to amortization and write-off of debt discount and issuance costs	955		1,557		2,866		6,000
Total interest expense	$	28,517	$	29,593	$	85,554	$	73,702

Note 11. Leases

We have entered into operating lease agreements for our office space, data centers, and other property and equipment. Operating lease right-of-use assets were $266 million and $249 million as of October 31, 2023, and January 31, 2023, respectively, and operating lease liabilities were $297 million and $273 million as of October 31, 2023, and January 31, 2023, respectively. We have also entered into finance lease agreements for other property and equipment. As of October 31, 2023, and January 31, 2023, finance leases were not material.

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


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Operating lease cost	$	26,925	$	25,404	$	82,005	$	73,821
Short-term lease cost	737		854		2,379		3,001
Variable lease cost	11,871		12,787		33,869		32,970
Total operating lease cost	$	39,533	$	39,045	$	118,253	$	109,792

Supplemental cash flow information related to our operating leases was as follows (in thousands):


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Cash paid for operating lease liabilities	$	25,197	$	23,190	$	79,006	$	68,386
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities	30,073		6,611		93,828		93,091

Other information related to our operating leases was as follows:


	October 31, 2023		January 31, 2023
Weighted average remaining lease term (in years)	5		5
Weighted average discount rate	3.55	%	2.79	%

As of October 31, 2023, maturities of operating lease liabilities were as follows (in thousands):


Fiscal Period:
Remainder of 2024	$	28,398
2025	100,927
2026	69,886
2027	50,292
2028	36,115
Thereafter	46,296
Total lease payments	331,914
Less imputed interest	(34,746)
Total operating lease liabilities	$	297,168

As of October 31, 2023, we have additional operating leases for data centers and office space that had not yet commenced with total undiscounted lease payments of $71 million. These operating leases will commence between fiscal 2024 and fiscal 2026, with lease terms ranging from approximately three to six years.

Note 12. Commitments and Contingencies

Purchase Obligations

Our purchase obligations are primarily related to agreements for third-party hosted infrastructure platforms, data center equipment and software, business technology software and support, and sales and marketing activities. During the nine months ended October 31, 2023, there were no material changes outside the ordinary course of business to our non-cancelable purchase obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023.

Legal Matters

We are a party to various legal proceedings and claims that arise in the ordinary course of business. We make a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter. In our opinion, as of October 31, 2023, there was not at least a reasonable possibility that we had incurred a material loss, or a material loss in excess of a recorded accrual, with respect to such loss contingencies.

Note 13. Stockholders’ Equity

Common Stock

As of October 31, 2023, there were 209 million shares of Class A common stock, net of treasury stock, and 54 million shares of Class B common stock outstanding. The rights of the holders of Class A common stock 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 10 votes per share. Each share of Class B common stock can be converted into a share of Class A common stock at any time at the option of the holder.

Share Repurchase Program

In November 2022, our Board of Directors authorized the repurchase of up to $500 million of our outstanding shares of Class A common stock (the “Share Repurchase Program”). We may repurchase shares of Class A common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in accordance with applicable securities laws and other restrictions. The timing and total amount of stock repurchases will depend upon business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The Share Repurchase Program has a term of 18 months, may be suspended or discontinued at any time, and does not obligate us to acquire any amount of Class A common stock.

During the three and nine months ended October 31, 2023, we repurchased approximately 0.7 million and 1 million shares of Class A common stock for approximately $148 million and $286 million, at an average price per share of $218.35 and $218.34, respectively. All repurchases were made in open market transactions. As of October 31, 2023, we were authorized to purchase a remaining $139 million of our outstanding shares of Class A common stock under the Share Repurchase Program.

Employee Equity Plans

In June 2022, our stockholders approved the 2022 Equity Incentive Plan (“2022 Plan”), with a reserve of 30 million shares for issuance. The 2022 Plan serves as the successor to our 2012 Equity Incentive Plan (“2012 Plan” and, together with the 2022 Plan, “Stock Plans”). Awards that are granted on or after the effective date of the 2022 Plan will be granted pursuant to and subject to the terms and provisions of the 2022 Plan. Prior awards granted under the 2012 Plan continue to be subject to the terms and provisions of the 2012 Plan. As of October 31, 2023, we had 21 million shares of Class A common stock available for future grants.

In June 2022, our stockholders approved the Amended and Restated 2012 Employee Stock Purchase Plan (“ESPP”). Under the ESPP, eligible employees are granted options to purchase shares at the lower of 85% of the fair market value of the stock at the time of grant or 85% of the fair market value at the time of exercise. Options to purchase shares are granted twice yearly on or about June 1 and December 1, and are exercisable on or about the succeeding November 30 and May 31, respectively. As of October 31, 2023, 4 million shares of Class A common stock were available for issuance under the ESPP.

Restricted Stock Units

The Stock Plans provide for the issuance of restricted stock units (“RSUs”) to employees and non-employees. RSUs generally vest over four years. RSU activity during the nine months ended October 31, 2023, was as follows (in thousands, except per share data):


	Number of Shares	Weighted-Average Grant Date Fair Value
Balance as of January 31, 2023	14,099	$	206.38
RSUs granted	8,472	193.86
RSUs vested	(5,179)	202.76
RSUs forfeited	(1,269)	203.10
Balance as of October 31, 2023	16,123	201.22

As of October 31, 2023, there was a total of $2.5 billion in unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately three years.

Market-Based Restricted Stock Units

In December 2022, 0.3 million shares of market-based RSUs were granted to our newly appointed Co-CEO that vest based on appreciation of the price of our Class A common stock over a multi-year period and upon continued service (“PVU Award”). We estimated the fair value of the PVU Award on the grant date using the Monte Carlo simulation model with the following assumptions: (i) expected volatility of 40%, (ii) risk-free interest rate of 4%, and (iii) total performance period of six years. The weighted-average grant date fair value of the PVU Award was $124.80 per share. We recognize expense for the PVU Award over the requisite service period of five years using the accelerated attribution method. Provided that the requisite service is rendered, the total fair value of the PVU Award at the date of grant is recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can vary significantly with the achievement of the specified market criteria.

As of October 31, 2023, there was a total of $23 million in unrecognized compensation cost related to the PVU Award, which is expected to be recognized over approximately four years.

Stock Options

The Stock Plans provide for the issuance of incentive and nonstatutory stock options to employees and non-employees. Stock options issued under the Stock Plans generally are exercisable for periods not to exceed ten years and generally vest over five years. Stock option activity during the nine months ended October 31, 2023, was as follows (in thousands, except aggregate intrinsic value, which is reflected in millions, and per share data):


	Outstanding Stock Options	Weighted-Average Exercise Price		Aggregate Intrinsic Value
Balance as of January 31, 2023	115	$	30.36	$	17

Stock options exercised	(17)	35.03
Stock options canceled	—	—
Balance as of October 31, 2023	98	29.58		18
Vested and expected to vest as of October 31, 2023	98	29.58		18
Exercisable as of October 31, 2023	98	29.58		18

As of October 31, 2023, all stock options were fully vested with no remaining unrecognized compensation cost.

Note 14. Unearned Revenue and Performance Obligations

Unearned Revenue

Unearned revenue primarily consists of amounts we have the right to invoice in advance of performance under a customer contract. Total unearned revenue was $3.3 billion and $3.6 billion as of October 31, 2023, and January 31, 2023, respectively. Included in this balance are amounts related to professional services that are subject to cancellation and pro-rated refund rights of $70 million and $68 million as of October 31, 2023, and January 31, 2023, respectively.

Subscription services revenues of $1.4 billion and $1.2 billion were recognized during the three months ended October 31, 2023, and 2022, respectively, that were included in the unearned revenue balances as of July 31, 2023, and 2022, respectively. Subscription services revenues of $3.0 billion and $2.7 billion were recognized during the nine months ended October 31, 2023, and 2022, respectively, that were included in the unearned revenue balances as of January 31, 2023, and 2022, respectively. Professional services revenues recognized in the same periods from unearned revenue balances at the beginning of the respective periods were not material.

Transaction Price Allocated to the Remaining Performance Obligations

As of October 31, 2023, approximately $18.4 billion of revenues are expected to be recognized from remaining performance obligations for subscription contracts. We expect to recognize revenues on approximately $6.0 billion and $10.6 billion of these remaining performance obligations over the next 12 and 24 months, respectively, with the balance recognized thereafter. Revenues from remaining performance obligations for professional services contracts as of October 31, 2023, were not material.

Note 15. Other Income (Expense), Net

Other income (expense), net consisted of the following (in thousands):


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Interest income	$	80,004	$	31,252	$	214,268	$	50,473
Interest expense (1)	(28,535)		(29,626)		(85,617)		(73,804)
Other (2)	(10,081)		2,537		(14,999)		(25,458)
Total other income (expense), net	$	41,388	$	4,163	$	113,652	$	(48,789)

(1)Interest expense primarily includes the contractual interest expense of our debt obligations, and the related non-cash interest expense attributable to amortization of the debt discount and issuance costs. For further information, see Note 10, Debt.

(2)Other primarily includes the net gains (losses) from our equity investments. For further information, see Note 3, Investments.

Note 16. Income Taxes

We reported an income tax provision of $25 million and $59 million for the nine months ended October 31, 2023, and 2022, respectively. The income tax provision for the nine months ended October 31, 2023, was primarily attributable to income tax expenses in profitable foreign jurisdictions and an increase in U.S. taxes due to capitalized research and development expenditures. The income tax provision for the nine months ended October 31, 2022, was primarily attributable to a taxable gain recognized from integrating intellectual property, income tax expenses in profitable foreign jurisdictions, and an increase in state taxes due to capitalized research and development expenditures.

We are subject to income tax audits in the U.S. and foreign jurisdictions. We record liabilities related to uncertain tax positions and believe that we have provided adequate reserves for income tax uncertainties in all open tax years. Due to our history of tax losses, all years remain open to tax audit.

We periodically evaluate the realizability of our deferred tax assets based on all available evidence, both positive and negative. The realization of the net deferred tax assets is dependent on our ability to generate sufficient future taxable income during the periods prior to the expiration of tax attributes to fully utilize these assets. Given our current and anticipated future earnings, we may release a significant portion of our valuation allowance if there is sufficient positive evidence that outweighs the negative evidence. The release of the valuation allowance would result in the recognition of certain deferred tax assets and a corresponding decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance to be released is uncertain. As of October 31, 2023, we continue to maintain a full valuation allowance on our deferred tax assets in certain jurisdictions.

Note 17. Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period, net of treasury stock. Diluted net income (loss) per share is computed by giving effect to all potentially dilutive shares of common stock, including our convertible senior notes, outstanding warrants related to the issuance of the convertible senior notes, and outstanding share-based awards consisting primarily of unvested RSUs and ESPP obligations. We determine the dilutive effect of outstanding share-based awards and warrants using the treasury stock method, and the dilutive effect of shares underlying our convertible senior notes using the if-converted method.

The net income (loss) per share is allocated based on the contractual participation rights of the Class A common shares and Class B common shares as if the income (loss) for the period had been distributed. As the liquidation and dividend rights are identical, the net income (loss) is allocated on a proportionate basis.

Basic and diluted net loss per share was the same for the three and nine months ended October 31, 2022, as the inclusion of potentially outstanding weighted-average shares of common stock would have been anti-dilutive due to the incurrence of net loss during these periods.

The following table presents the calculation of basic and diluted net income (loss) per share (in thousands, except per share data):


	Three Months Ended October 31,								Nine Months Ended October 31,
	2023				2022				2023				2022
	Class A		Class B		Class A		Class B		Class A		Class B		Class A		Class B
Net income (loss) per share, basic:
Numerator:
Net income (loss)	$	90,101	$	23,608	$	(58,648)	$	(16,073)	$	152,222	$	40,283	$	(188,757)	$	(52,295)
Denominator:
Weighted-average shares outstanding, basic	207,726		54,427		200,740		55,013		206,184		54,563		198,876		55,099
Net income (loss) per share, basic	$	0.43	$	0.43	$	(0.29)	$	(0.29)	$	0.74	$	0.74	$	(0.95)	$	(0.95)
Net income (loss) per share, diluted:
Numerator:
Net income (loss)	$	90,101	$	23,608	$	(58,648)	$	(16,073)	$	152,222	$	40,283	$	(188,757)	$	(52,295)
Reallocation of net income as a result of conversion of Class B to Class A common stock	23,608		—		—		—		40,283		—		—		—
Reallocation of net income to Class B common stock	—		(374)		—		—		—		(509)		—		—
Net income (loss) for diluted calculation	113,709		23,234		(58,648)		(16,073)		192,505		39,774		(188,757)		(52,295)
Denominator:
Weighted-average shares outstanding, basic	207,726		54,427		200,740		55,013		206,184		54,563		198,876		55,099
Conversion of Class B to Class A common stock	54,427		—		—		—		54,563		—		—		—
Dilutive effect of share-based awards	4,224		—		—		—		3,340		—		—		—
Weighted-average shares outstanding, diluted	266,377		54,427		200,740		55,013		264,087		54,563		198,876		55,099
Net income (loss) per share, diluted	$	0.43	$	0.43	$	(0.29)	$	(0.29)	$	0.73	$	0.73	$	(0.95)	$	(0.95)

The computation of diluted net income (loss) per share does not include the effect of the following potentially outstanding weighted-average shares of common stock. The effects of these potentially outstanding shares were not included in the calculation of diluted net income (loss) per share because the effect would have been anti-dilutive (in thousands):


	Three Months Ended October 31,		Nine Months Ended October 31,
	2023	2022	2023	2022
Shares related to outstanding share-based awards	1,882	16,105	2,774	15,453
Shares related to the convertible senior notes	—	5,182	—	6,928
Shares subject to warrants related to the issuance of convertible senior notes	—	7,818	—	7,818
Total	1,882	29,105	2,774	30,199

Note 18. Geographic Information

Revenues

We sell our subscription contracts and related services in two primary geographical markets: to customers located in the United States and to customers located outside of the United States. Revenues by geography are generally based on the address of the customer as specified in our customer subscription agreement. The following table sets forth revenues by geographic area (in thousands):


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
United States	$	1,404,124	$	1,204,842	$	4,012,660	$	3,432,249
Other countries	461,551		394,261		1,324,093		1,137,309
Total revenues	$	1,865,675	$	1,599,103	$	5,336,753	$	4,569,558

Long-Lived Assets

Our long-lived assets, which primarily consist of property and equipment and operating lease right-of-use assets, are attributed to a country based on the physical location of the assets. Aggregate Property and equipment, net and Operating lease right-of-use assets by geographic area was as follows (in thousands):


	October 31, 2023		January 31, 2023
United States	$	1,175,275	$	1,206,486
Ireland	205,470		159,337
Other countries	91,782		84,709
Total long-lived assets	$	1,472,527	$	1,450,532

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements, which are subject to safe harbor protection under the Private Securities Litigation Reform Act of 1995. All statements contained in this report other than statements of historical fact, including statements regarding our future financial condition and operating results, business strategy and plans, and objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “seek,” “plan,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations, beliefs, and projections about future events, conditions, and trends that we believe may affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, assumptions, and changes in circumstances that are difficult to predict and many of which are outside of our control, such as those arising from the impact of recent macroeconomic events, including inflation, increased interest rates, instability in the global banking system, and the remaining effects of the coronavirus (“COVID-19”) pandemic, as well as those described in the “Risk Factors” section, which we encourage you to read carefully. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.

In light of these risks, uncertainties, assumptions, and potential changes in circumstances, the future events, conditions, and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied by the forward-looking statements. Accordingly, you should not rely upon any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activities, performance, or achievements. We are under no duty to update any of these forward-looking statements after the date of this report or to conform these statements to actual results or revised expectations, except as required by applicable law. If we do update any forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

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