Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

Workday, Inc.

Condensed Consolidated Balance Sheets

(in millions)

(unaudited)


	July 31, 2024		January 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	1,635	$	2,012
Marketable securities	5,738		5,801
Trade and other receivables, net	1,292		1,639
Deferred costs	237		232
Prepaid expenses and other current assets	298		255
Total current assets	9,200		9,939
Property and equipment, net	1,259		1,234
Operating lease right-of-use assets	339		289
Deferred costs, noncurrent	487		509
Acquisition-related intangible assets, net	331		233
Deferred tax assets	1,022		1,065
Goodwill	3,257		2,846
Other assets	339		337
Total assets	$	16,234	$	16,452
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	87	$	78
Accrued expenses and other current liabilities	292		287
Accrued compensation	487		544
Unearned revenue	3,549		4,057
Operating lease liabilities	98		89

Total current liabilities	4,513		5,055
Debt, noncurrent	2,982		2,980
Unearned revenue, noncurrent	62		70
Operating lease liabilities, noncurrent	284		227
Other liabilities	48		38
Total liabilities	7,889		8,370
Stockholders’ equity:
Common stock	0		0
Additional paid-in capital	10,869		10,400
Treasury stock	(1,051)		(608)
Accumulated other comprehensive income (loss)	19		21
Accumulated deficit	(1,492)		(1,731)
Total stockholders’ equity	8,345		8,082
Total liabilities and stockholders’ equity	$	16,234	$	16,452

See Notes to Condensed Consolidated Financial Statements

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Workday, Inc.

Condensed Consolidated Statements of Operations

(in millions, except number of shares which are reflected in thousands and per share data)

(unaudited)


	Three Months Ended July 31,	Six Months Ended July 31,
		2024		2023		2024		2023
Revenues:
Subscription services		$	1,903	$	1,624	$	3,719	$	3,152
Professional services		182		163		356		319
Total revenues		2,085		1,787		4,075		3,471
Costs and expenses (1):
Costs of subscription services		304		256		594		495
Costs of professional services		207		192		406		371
Product development		649		610		1,305		1,210
Sales and marketing		611		524		1,184		1,043
General and administrative		203		169		411		336
Total costs and expenses		1,974		1,751		3,900		3,455
Operating income (loss)		111		36		175		16
Other income (expense), net		57		46		116		73
Income (loss) before provision for (benefit from) income taxes		168		82		291		89
Provision for (benefit from) income taxes		36		3		52		10
Net income (loss)		$	132	$	79	$	239	$	79
Net income (loss) per share, basic		$	0.50	$	0.30	$	0.90	$	0.30
Net income (loss) per share, diluted		$	0.49	$	0.30	$	0.89	$	0.30
Weighted-average shares used to compute net income (loss) per share, basic		265,317		261,191		264,885		260,026
Weighted-average shares used to compute net income (loss) per share, diluted		267,949		264,435		269,128		262,923


(1) Costs and expenses include share-based compensation expenses as follows:
	Three Months Ended July 31,	Six Months Ended July 31,
		2024		2023		2024		2023
Costs of subscription services		$	35	$	30	$	73	$	59
Costs of professional services		28		29		59		59
Product development		163		162		336		332
Sales and marketing		77		67		149		147
General and administrative		67		64		138		125
Total share-based compensation expenses		$	370	$	352	$	755	$	722

See Notes to Condensed Consolidated Financial Statements

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Workday, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in millions)

(unaudited)


	Three Months Ended July 31,	Six Months Ended July 31,
		2024		2023		2024		2023
Net income (loss)		$	132	$	79	$	239	$	79
Other comprehensive income (loss), net of tax:
Net change in foreign currency translation adjustment		(1)		1		(3)		1
Net change in unrealized gains (losses) on available-for-sale debt securities, net of tax provision (benefit) of $10, $0, $1, and $0, respectively		27		(18)		2		(12)
Net change in unrealized gains (losses) on cash flow hedges, net of tax provision of $(1), $(1), $0, and $2, respectively		(24)		(33)		(1)		(49)
Other comprehensive income (loss), net of tax		2		(50)		(2)		(60)
Comprehensive income (loss)		$	134	$	29	$	237	$	19

See Notes to Condensed Consolidated Financial Statements

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Workday, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in millions, except number of shares which are reflected in thousands)

(unaudited)


	Three Months Ended July 31,	Six Months Ended July 31,
		2024		2023		2024		2023
Common stock:
Balance, beginning of period		$	0	$	0	$	0	$	0
Issuance of common stock under employee equity plans		0		0		0		0
Shares withheld related to net share settlement of equity awards		0		0		0		0

Balance, end of period		0		0		0		0
Additional paid-in capital:
Balance, beginning of period		10,512		9,196		10,400		8,829
Issuance of common stock under employee equity plans		106		95		106		95
Shares withheld related to net share settlement of equity awards		(121)		(5)		(395)		(8)
Share-based compensation		372		352		758		722





Balance, end of period		10,869		9,638		10,869		9,638
Treasury stock:
Balance, beginning of period		(742)		(185)		(608)		(185)




Common stock repurchases under share repurchase programs		(309)		(139)		(443)		(139)
Balance, end of period		(1,051)		(324)		(1,051)		(324)
Accumulated other comprehensive income (loss):
Balance, beginning of period		17		43		21		53
Other comprehensive income (loss)		2		(50)		(2)		(60)
Balance, end of period		19		(7)		19		(7)
Accumulated deficit:
Balance, beginning of period		(1,624)		(3,112)		(1,731)		(3,112)
Net income (loss)		132		79		239		79


Balance, end of period		(1,492)		(3,033)		(1,492)		(3,033)
Total stockholders’ equity		$	8,345	$	6,274	$	8,345	$	6,274


	Three Months Ended July 31,	Six Months Ended July 31,
		2024	2023	2024	2023
Common stock shares:
Balance, beginning of period		265,218	260,408	263,862	257,991
Issuance of common stock under employee equity plans		1,959	2,109	4,835	4,543



Shares withheld related to net share settlement of equity awards		(530)	(24)	(1,548)	(41)
Common stock repurchased		(1,387)	(635)	(1,889)	(635)
Balance, end of period		265,260	261,858	265,260	261,858

See Notes to Condensed Consolidated Financial Statements

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Workday, Inc.

Condensed Consolidated Statements of Cash Flows

(in millions)

(unaudited)


	Three Months Ended July 31,	Six Months Ended July 31,
		2024		2023		2024		2023
Cash flows from operating activities:
Net income (loss)		$	132	$	79	$	239	$	79
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		79		71		154		142
Share-based compensation expenses		370		352		755		722
Amortization of deferred costs		62		52		121		101
Non-cash lease expense		25		24		51		48
(Gains) losses on investments		3		(1)		10		7
Accretion of discounts on marketable debt securities, net		(29)		(38)		(62)		(72)
Deferred income taxes		27		0		33		2
Other		9		(6)		11		(12)
Changes in operating assets and liabilities, net of business combinations:
Trade and other receivables, net		(157)		(183)		351		290
Deferred costs		(64)		(68)		(104)		(103)
Prepaid expenses and other assets		46		25		24		7
Accounts payable		2		2		12		(56)
Accrued expenses and other liabilities		69		36		(124)		(187)
Unearned revenue		(3)		80		(528)		(265)
Net cash provided by (used in) operating activities		571		425		943		703
Cash flows from investing activities:
Purchases of marketable securities		(1,365)		(1,585)		(2,143)		(3,473)
Maturities of marketable securities		1,035		1,240		2,132		2,471
Sales of marketable securities		51		25		68		48
Capital expenditures		(55)		(65)		(136)		(124)
Business combinations, net of cash acquired		(10)		0		(522)		0
Purchase of other intangible assets		0		0		0		(9)
Purchases of non-marketable equity and other investments		(7)		0		(7)		(11)
Sales and maturities of non-marketable equity and other investments		5		0		5		0

Net cash provided by (used in) investing activities		(346)		(385)		(603)		(1,098)
Cash flows from financing activities:



Repurchases of common stock		(312)		(139)		(440)		(139)
Proceeds from issuance of common stock from employee equity plans		106		95		106		95
Taxes paid related to net share settlement of equity awards		(141)		(5)		(381)		(8)

Net cash provided by (used in) financing activities		(347)		(49)		(715)		(52)
Effect of exchange rate changes		0		1		0		0
Net increase (decrease) in cash, cash equivalents, and restricted cash		(122)		(8)		(375)		(447)
Cash, cash equivalents, and restricted cash at the beginning of period		1,771		1,456		2,024		1,895
Cash, cash equivalents, and restricted cash at the end of period		$	1,649	$	1,448	$	1,649	$	1,448

See Notes to Condensed Consolidated Financial Statements

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	Three Months Ended July 31,	Six Months Ended July 31,
		2024		2023		2024		2023
Supplemental cash flow data:
Cash paid for interest		$	0	$	0	$	55	$	55
Cash paid for income taxes, net of refunds		29		21		35		32
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid		56		41		56		41
Accrued taxes related to net share settlement of equity awards		14		0		14		0


	As of July 31,
		2024		2023
Reconciliation of cash, cash equivalents, and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows:
Cash and cash equivalents		$	1,635	$	1,436
Restricted cash included in Prepaid expenses and other current assets		14		12

Total cash, cash equivalents, and restricted cash		$	1,649	$	1,448

See Notes to Condensed Consolidated Financial Statements

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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.

Amounts in this report may not recalculate due to rounding. Year-over-year comparisons, operating margin, and net income (loss) per share are calculated using unrounded data.

Note 1. Overview and Basis of Presentation

Description of the Business

Workday is a leading provider of cloud-based applications for financial management, human capital management (“HCM”), planning, spend management, and analytics. With Workday, our customers have a unified platform with artificial intelligence (“AI”) built into its core that helps them manage their two most important assets – their people and money.

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 six months ended July 31, 2024, shown in this report are not necessarily indicative of the results to be expected for the full fiscal year ending January 31, 2025. 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, 2024, filed with the SEC on March 8, 2024.

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, judgments, 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, judgments, 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 realizability of deferred tax assets, the measurement of uncertain tax positions, 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, judgments, and assumptions, and such differences could be material to our condensed consolidated financial statements.

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 the chief operating decision maker (“CODM”) in deciding how to allocate resources and assessing performance. Our CODM, the Chief Executive Officer, 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, 2024.

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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, derivative instruments, 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 July 31, 2024, or January 31, 2024. No customer individually accounted for more than 10% of total revenues during the three and six months ended July 31, 2024, or 2023.

Other than the United States, no country individually accounted for more than 10% of total revenues during the three and six months ended July 31, 2024, or 2023.

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 North America and Europe. We have internal procedures to restore services in the event of disruption 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”) and Google LLC, 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.

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, with early adoption permitted. The standard requires retrospective application to all prior periods presented in the financial statements. We do not intend to early adopt, and are currently evaluating the impacts of the new standard.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The standard allows for adoption on a prospective basis, with a retrospective option. We do not intend to early adopt, and are currently evaluating the impacts of the new standard.

Note 3. Investments

Debt Securities

As of July 31, 2024, debt securities consisted of the following (in millions):


	Amortized Cost		Unrealized Gains		Unrealized Losses		Aggregate Fair Value
U.S. treasury securities	$	1,615	$	3	$	(1)	$	1,617
U.S. agency obligations	599		1		0		600
Corporate bonds	3,016		11		(4)		3,023
Commercial paper	1,029		0		0		1,029
Total debt securities	$	6,259	$	15	$	(5)	$	6,269
Included in Cash and cash equivalents	$	531	$	0	$	0	$	531
Included in Marketable securities	$	5,728	$	15	$	(5)	$	5,738

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As of January 31, 2024, debt securities consisted of the following (in millions):


	Amortized Cost		Unrealized Gains		Unrealized Losses		Aggregate Fair Value
U.S. treasury securities	$	2,072	$	4	$	(2)	$	2,074
U.S. agency obligations	753		2		(1)		754
Corporate bonds	2,496		9		(5)		2,500
Commercial paper	1,232		0		0		1,232
Total debt securities	$	6,553	$	15	$	(8)	$	6,560
Included in Cash and cash equivalents	$	759	$	0	$	0	$	759
Included in Marketable securities	$	5,794	$	15	$	(8)	$	5,801

The fair values of debt securities, by remaining contractual maturity, were as follows (in millions):


	July 31, 2024
Due within 1 year	$	3,206
Due in 1 year through 5 years	3,063
Total debt securities	$	6,269

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.

Interest receivable of $44 million and $35 million is included in Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets as of July 31, 2024, and January 31, 2024, respectively.

The following tables summarize the aggregate fair value and gross unrealized losses for all debt securities in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in millions):


	As of July 31, 2024
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. treasury securities	$	581	$	(1)	$	303	$	0	$	884	$	(1)
U.S. agency obligations	214		0		40		0		254		0
Corporate bonds	561		(1)		588		(3)		1,149		(4)
Commercial paper	20		0		0		0		20		0
Total	$	1,376	$	(2)	$	931	$	(3)	$	2,307	$	(5)


	As of January 31, 2024
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. treasury securities	$	921	$	(2)	$	78	$	(1)	$	999	$	(3)
U.S. agency obligations	234		0		100		(1)		334		(1)
Corporate bonds	921		(3)		171		(1)		1,092		(4)
Commercial paper	5		0		0		0		5		0
Total	$	2,081	$	(5)	$	349	$	(3)	$	2,430	$	(8)

Unrealized losses on debt securities primarily resulted from changes in market interest rates. We do not intend to sell these debt securities and it is not more likely than not that we will be required to sell the debt securities before recovery of their amortized cost bases, which may be at maturity. We did not recognize any credit or non-credit related losses related to our debt securities during the periods presented.

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We sold $53 million and $6 million of debt securities during the three months ended July 31, 2024, and 2023, respectively. We sold $70 million and $18 million of debt securities during the six months ended July 31, 2024, and 2023, respectively. The realized gains and losses from the sales were immaterial.

Equity Investments

Equity investments consisted of the following (in millions):


	Condensed Consolidated Balance Sheets Location	July 31, 2024		January 31, 2024
Money market funds	Cash and cash equivalents	$	756	$	1,017

Non-marketable equity investments measured using the measurement alternative	Other assets	237		248

Total equity investments		$	993	$	1,265

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


	Three Months Ended July 31,		Six Months Ended July 31,
		2024			2023			2024			2023
Net realized gains (losses) recognized on equity investments sold (1)			$	(3)		$	2		$	(3)		$	1
Net unrealized gains (losses) recognized on equity investments held as of the end of the period			0			(1)			(7)			(8)
Total net gains (losses) recognized in Other income (expense), net			$	(3)		$	1		$	(10)		$	(7)

(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 millions):


	July 31, 2024		January 31, 2024
Total initial cost	$	207	$	213
Cumulative net unrealized gains (losses)	30		35
Carrying value	$	237	$	248

During the three months ended July 31, 2024, we recorded a loss of $3 million upon exit of a non-marketable equity investment. During the three months ended July 31, 2023, we recorded impairment losses of $10 million to the carrying value of non-marketable equity investments.

During the six months ended July 31, 2024, we recorded losses of $10 million related to impairments and exits of non-marketable equity investments. During the six months ended July 31, 2023, we recorded impairment losses of $12 million.

Marketable Equity Investments

We may hold marketable equity investments with readily determinable fair values over which we do not own a controlling interest or exercise significant influence. As of July 31, 2024, and January 31, 2024, we did not hold any such investments.

During the three and six months ended July 31, 2023, we recorded unrealized net gains of $8 million and $4 million, respectively, on our marketable equity investment balance held as of the end of the period of $56 million. Additionally, during the three and six months ended July 31, 2023, we sold marketable equity investments for proceeds of $20 million and $30 million, respectively, with immaterial corresponding realized gains.

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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 July 31, 2024 (in millions):


	Level 1		Level 2		Level 3		Total
U.S. treasury securities	$	1,617	$	0	$	0	$	1,617
U.S. agency obligations	0		600		0		600
Corporate bonds	0		3,023		0		3,023
Commercial paper	0		1,029		0		1,029
Money market funds	756		0		0		756

Foreign currency derivative assets	0		44		0		44
Total assets	$	2,373	$	4,696	$	0	$	7,069
Foreign currency derivative liabilities	$	0	$	28	$	0	$	28
Total liabilities	$	0	$	28	$	0	$	28


	Level 1		Level 2		Level 3		Total
U.S. treasury securities	$	2,074	$	0	$	0	$	2,074
U.S. agency obligations	0		754		0		754
Corporate bonds	0		2,500		0		2,500
Commercial paper	0		1,232		0		1,232
Money market funds	1,017		0		0		1,017

Foreign currency derivative assets	0		46		0		46
Total assets	$	3,091	$	4,532	$	0	$	7,623
Foreign currency derivative liabilities	$	0	$	27	$	0	$	27
Total liabilities	$	0	$	27	$	0	$	27

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. The fair values of 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 11, Debt.

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Note 5. Deferred Costs

Deferred costs, which consist of deferred sales commissions, were $724 million and $741 million as of July 31, 2024, and January 31, 2024, respectively. Amortization expense for the deferred costs was $62 million and $52 million for the three months ended July 31, 2024, and 2023, respectively, and $121 million and $101 million for the six months ended July 31, 2024, and 2023, 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 millions):


	July 31, 2024		January 31, 2024
Computers, equipment, and software	$	1,390	$	1,387
Buildings	727		726
Leasehold improvements	231		213
Furniture, fixtures, and transportation equipment	104		99
Land and land improvements	81		81
Property and equipment, gross	2,533		2,506
Less accumulated depreciation and amortization	(1,274)		(1,272)
Property and equipment, net	$	1,259	$	1,234

Depreciation expense totaled $58 million and $49 million for the three months ended July 31, 2024, and 2023, respectively, and $115 million and $97 million for the six months ended July 31, 2024, and 2023, respectively.

Note 7. Business Combination

HiredScore Acquisition

On March 29, 2024, we acquired all outstanding stock of HiredScore, Inc. (“HiredScore”), a provider of AI-powered talent orchestration solutions. With HiredScore, Workday provides customers with a comprehensive, transparent, and intelligent talent acquisition and internal mobility offering, helping them better address their ever-evolving people needs. We have included the financial results of HiredScore in our condensed consolidated financial statements from the date of acquisition.

The total acquisition-date fair value of the purchase consideration was $530 million, which was paid in cash. The purchase consideration was preliminarily allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess recorded to goodwill. The fair values of assets acquired and liabilities assumed may be subject to change over the measurement period as additional information is received and certain tax matters are finalized. The primary areas that are subject to change include income taxes payable and deferred taxes. The measurement period will end no later than one year from the acquisition date. The preliminary fair values of the assets acquired and liabilities assumed as of the date of acquisition were as follows (in millions):


Cash	$	11
Acquisition-related intangible assets	135
Goodwill	411
Other assets	11

Other liabilities	(38)
Total	$	530

The fair values and weighted-average useful lives of the acquired intangible assets by category were as follows (in millions, except years):


	Estimated Fair Values		Weighted-Average Useful Lives (in Years)
Developed technology	$	111	8
Customer relationships	23		14
Trade name	1		1
Total acquisition-related intangible assets	$	135	9

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The goodwill recognized was primarily attributable to the assembled workforce and the expected synergies from integrating HiredScore’s technology into our product portfolio. The goodwill is not deductible for income tax purposes.

Separate operating results and pro forma results of operations for HiredScore have not been presented as the effect of this acquisition was not material to our financial results.

Note 8. Acquisition-Related Intangible Assets, Net

Acquisition-related intangible assets, net consisted of the following as of July 31, 2024 (in millions):


	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Developed technology	$	429	$	(278)	$	151
Customer relationships	334		(155)		179
Backlog	15		(15)		0
Trade name	14		(13)		1
Total	$	792	$	(461)	$	331

Acquisition-related intangible assets, net consisted of the following as of January 31, 2024 (in millions):


	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Developed technology	$	318	$	(256)	$	62
Customer relationships	311		(140)		171
Backlog	15		(15)		0
Trade name	13		(13)		0
Total	$	657	$	(424)	$	233

Amortization expense related to acquisition-related intangible assets was $20 million and $21 million for the three months ended July 31, 2024, and 2023, respectively, and $37 million and $42 million for the six months ended July 31, 2024, and 2023, respectively.

As of July 31, 2024, the future estimated amortization expense related to acquisition-related intangible assets was as follows (in millions):


Fiscal Period:
Remainder of 2025	$	39
2026	72
2027	47
2028	43
2029	33
Thereafter	97
Total	$	331

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Note 9. Other Assets

Other assets consisted of the following (in millions):


	July 31, 2024		January 31, 2024
Non-marketable equity and other investments	$	239	$	248
Technology patents and other intangible assets, net	26		26
Contract assets	24		21
Prepayments for goods and services	16		14
Derivative assets	15		14
Deposits	8		8

Other	11		6
Total other assets	$	339	$	337

Technology patents and other intangible assets with estimable useful lives are amortized on a straight-line basis. As of July 31, 2024, the future estimated amortization expense was as follows (in millions):


Fiscal Period:
Remainder of 2025	$	2
2026	4
2027	3
2028	3
2029	3
Thereafter	11
Total	$	26

Note 10. 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 July 31, 2024, we estimate that $25 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 July 31, 2024, and January 31, 2024, the notional values of the cash flow hedges that we held to buy U.S. dollars in exchange for other currencies were $2.7 billion and $2.5 billion, respectively. The notional values of the cash flow hedges that we held to sell U.S. dollars in exchange for other currencies were $399 million as of both July 31, 2024, and January 31, 2024. All contracts had maturities of less than 60 months.

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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 July 31, 2024, and January 31, 2024, the notional values of the non-designated hedges that we held to buy U.S. dollars in exchange for other currencies were $131 million and, $237 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 $22 million and $11 million, respectively.

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


	Condensed Consolidated Balance Sheets Location	July 31, 2024		January 31, 2024
Derivative assets:
Cash flow hedges	Prepaid expenses and other current assets	$	29	$	30
Cash flow hedges	Other assets	15		14
Non-designated hedges	Prepaid expenses and other current assets	0		2

Total derivative assets		$	44	$	46
Derivative liabilities:
Cash flow hedges	Accrued expenses and other current liabilities	$	14	$	14
Cash flow hedges	Other liabilities	12		12
Non-designated hedges	Accrued expenses and other current liabilities	2		1

Total derivative liabilities		$	28	$	27

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


	Three Months Ended July 31,
Condensed Consolidated Statements of Operations Location		2024	2023
			Total		Gains (losses) related to cash flow hedges		Total		Gains (losses) related to cash flow hedges
Revenues			$	2,085	$	8	$	1,787	$	17
Costs and expenses			1,974		(3)		1,751		2


	Six Months Ended July 31,
Condensed Consolidated Statements of Operations Location		2024	2023
			Total		Gains (losses) related to cash flow hedges		Total		Gains (losses) related to cash flow hedges
Revenues			$	4,075	$	16	$	3,471	$	33
Costs and expenses			3,900		(4)		3,455		1

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


	Condensed Consolidated Statements of Operations and Statements of Comprehensive Income (Loss) Locations	Three Months Ended July 31,		Six Months Ended July 31,
			2024			2023			2024			2023
Gains (losses) recognized in OCI	Net change in unrealized gains (losses) on cash flow hedges			$	(20)		$	(15)		$	11		$	(13)
Gains (losses) reclassified from AOCI into income (effective portion)	Revenues			8			17			16			33
Gains (losses) reclassified from AOCI into income (effective portion)	Costs and expenses			(3)			2			(4)			1

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


	Condensed Consolidated Statements of Operations Location	Three Months Ended July 31,		Six Months Ended July 31,
			2024			2023			2024			2023
Gains (losses) related to non-designated hedges	Other income (expense), net			$	(3)		$	(1)		$	(1)		$	1

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 July 31, 2024, information related to these offsetting arrangements was as follows (in millions):


	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			$	14		$	0	$	14	$	(4)	$	0	$	10
Counterparty B			8			0		8		(8)		0		0
Counterparty C			2			0		2		(2)		0		0
Counterparty D			17			0		17		(13)		0		4
Counterparty E			2			0		2		0		0		2
Counterparty F			1			0		1		(1)		0		0
Total			$	44		$	0	$	44	$	(28)	$	0	$	16


	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			$	4		$	0	$	4	$	(4)	$	0	$	0
Counterparty B			8			0		8		(8)		0		0
Counterparty C			2			0		2		(2)		0		0
Counterparty D			13			0		13		(13)		0		0
Counterparty E			0			0		0		0		0		0
Counterparty F			1			0		1		(1)		0		0
Total			$	28		$	0	$	28	$	(28)	$	0	$	0

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Note 11. Debt

Outstanding debt consisted of the following (in millions):


	July 31, 2024		January 31, 2024
2027 Notes	$	1,000	$	1,000
2029 Notes	750		750
2032 Notes	1,250		1,250

Total principal amount	3,000		3,000
Less: unamortized debt discount and issuance costs	(18)		(20)


Debt, noncurrent	$	2,982	$	2,980

As of July 31, 2024, the future principal payments for the outstanding debt were as follows (in millions):


Fiscal Period:
Remainder of 2025	$	0
2026	0
2027	0
2028	1,000
2029	0
Thereafter	2,000
Total principal amount	$	3,000

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.

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 July 31, 2024, and January 31, 2024, 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 both July 31, 2024, and January 31, 2024, the total estimated fair value of the Senior Notes was $2.8 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. As of July 31, 2024, 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.

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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 July 31, 2024, and January 31, 2024, we were in compliance with all covenants included in the 2022 Credit Agreement.

Interest Expense on Debt

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


	Three Months Ended July 31,	Six Months Ended July 31,
		2024		2023		2024		2023
Contractual interest expense		$	28	$	28	$	55	$	55
Interest cost related to amortization of debt discount and issuance costs		1		1		2		2
Total interest expense		$	29	$	29	$	57	$	57

Note 12. 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 $339 million and $289 million as of July 31, 2024, and January 31, 2024, respectively, and operating lease liabilities were $382 million and $316 million as of July 31, 2024, and January 31, 2024, respectively.

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


	Three Months Ended July 31,	Six Months Ended July 31,
		2024		2023		2024		2023
Operating lease cost		$	29	$	27	$	58	$	55
Short-term lease cost		0		1		1		2
Variable lease cost		15		10		24		22
Total operating lease cost		$	44	$	38	$	83	$	79

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


	Three Months Ended July 31,	Six Months Ended July 31,
		2024		2023		2024		2023
Cash paid for operating lease liabilities		$	28	$	25	$	51	$	54
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities		41		32		101		64

Other information related to our operating leases was as follows:


	July 31, 2024		January 31, 2024
Weighted average remaining lease term (in years)	5		5
Weighted average discount rate	4.01	%	3.95	%

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As of July 31, 2024, maturities of operating lease liabilities were as follows (in millions):


Fiscal Period:
Remainder of 2025	$	55
2026	102
2027	83
2028	73
2029	47
Thereafter	74
Total lease payments	434
Less imputed interest	(52)
Total operating lease liabilities	$	382

As of July 31, 2024, we have additional operating leases for data centers and office space that had not yet commenced with total undiscounted lease payments of $42 million. These operating leases will commence in fiscal 2025 and fiscal 2026, with lease terms ranging from approximately five to seven years.

Note 13. 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 six months ended July 31, 2024, 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, 2024.

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 July 31, 2024, 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 14. Stockholders’ Equity

Common Stock

As of July 31, 2024, there were 213 million shares of Class A common stock, net of treasury stock, and 53 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 Programs

In November 2022, our Board of Directors authorized the repurchase of up to $500 million of our outstanding shares of Class A common stock (“2022 Share Repurchase Program”). We completed the purchase authorization under this program during the first quarter of fiscal 2025.

In February 2024, our Board of Directors authorized a new program under which we may repurchase up to an additional $500 million of our outstanding shares of Class A common stock (“February 2024 Share Repurchase Program”). We may repurchase shares of Class A common stock from time to time through open market purchases, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in privately negotiated transactions, or by other means, in accordance with applicable securities laws and other restrictions. The timing and total amount of share repurchases under this program will depend upon business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The February 2024 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.

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During the three months ended July 31, 2024, and 2023, we repurchased a total of approximately 1.4 million and 0.6 million shares of Class A common stock for approximately $309 million and $139 million at an average price per share of $223.10 and $218.33, respectively. During the six months ended July 31, 2024, and 2023, we repurchased a total of approximately 1.9 million and 0.6 million shares of Class A common stock for approximately $443 million and $139 million at an average price per share of $234.78 and $218.33, respectively. All repurchases were made in open market transactions. As of July 31, 2024, we were authorized to repurchase a remaining $59 million of our outstanding shares of Class A common stock under the February 2024 Share Repurchase Program.

In August 2024, our Board of Directors authorized the August 2024 Share Repurchase Program, under which we may repurchase up to an additional $1.0 billion of our outstanding shares of Class A common stock. For further information, see Note 20, Subsequent Events.

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. Shares that are withheld in connection with the net share settlement of RSUs or forfeited are added to the reserves of the 2022 Plan. As of July 31, 2024, we had 17 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 July 31, 2024, 3 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 six months ended July 31, 2024, was as follows (in thousands, except per share data):


	Number of Shares	Weighted-Average Grant Date Fair Value
Outstanding balance as of January 31, 2024	15,020	$	203.94
RSUs granted	6,148	253.13
RSUs vested	(2,668)	200.45
RSUs forfeited and canceled (1)	(2,046)	203.77
Outstanding balance as of July 31, 2024	16,454	222.91

(1)Includes shares withheld in connection with the net share settlement of RSUs.

As of July 31, 2024, there was a total of $2.8 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 Mr. Eschenbach in connection with his appointment as 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.

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As of July 31, 2024, there was a total of $14 million in unrecognized compensation cost related to the PVU Award, which is expected to be recognized over approximately three 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.

As of July 31, 2024, there were 0.1 million options outstanding and exercisable with a weighted-average exercise price of $29.28, and an aggregate intrinsic value of $16 million. All stock options were fully vested, with no remaining unrecognized compensation cost.

Note 15. Contract Balances and Performance Obligations

Contract Balances

Contract assets and unearned revenue balances were as follows (in millions):


	Condensed Consolidated Balance Sheets Location	July 31, 2024		January 31, 2024
Contract assets:
Contract assets, current	Trade and other receivables, net	$	316	$	240
Contract assets, noncurrent	Other assets	24		21
Total contract assets		$	340	$	261
Unearned revenue (1):
Unearned revenue, current	Unearned revenue	$	3,549	$	4,057
Unearned revenue, noncurrent	Unearned revenue, noncurrent	62		70
Total unearned revenue		$	3,611	$	4,127

(1)Included in the unearned revenue balance are amounts related to professional services that are subject to cancellation and pro-rated refund rights of $84 million and $76 million as of July 31, 2024, and January 31, 2024, respectively.

Revenues of $1.6 billion and $1.4 billion were recognized during the three months ended July 31, 2024, and 2023, respectively, that were included in the unearned revenue balances as of April 30, 2024, and 2023, respectively. Revenues of $2.8 billion and $2.4 billion were recognized during the six months ended July 31, 2024, and 2023, respectively, that were included in the unearned revenue balances as of January 31, 2024, and 2023, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of July 31, 2024, approximately $21.6 billion of revenues are expected to be recognized from remaining performance obligations for subscription contracts. We expect to recognize revenues on approximately $6.8 billion and $12.0 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 July 31, 2024, were not material.

Note 16. Other Income (Expense), Net

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


	Three Months Ended July 31,	Six Months Ended July 31,
		2024		2023		2024		2023
Interest income		$	88	$	72	$	181	$	134
Interest expense (1)		(28)		(29)		(57)		(57)
Other (2)		(3)		3		(8)		(4)
Total other income (expense), net		$	57	$	46	$	116	$	73

(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 11, Debt.

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

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Note 17. Income Taxes

We reported an income tax provision of $52 million and $10 million for the six months ended July 31, 2024, and 2023, respectively. The income tax provision for the six months ended July 31, 2024, was primarily attributable to earnings in the U.S. and profitable foreign jurisdictions, offset by the excess tax benefit from stock-based compensation. The income tax provision for the six months ended July 31, 2023, was primarily attributable to income tax expenses in profitable foreign jurisdictions and capitalized research and development expenditures in the U.S.

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 net deferred tax assets based on all available evidence, both positive and negative. The realization of net deferred tax assets is dependent on our ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets. As of July 31, 2024, we continue to maintain valuation allowances related to tax credits in certain state jurisdictions and net operating loss in certain foreign jurisdictions. We will continue to evaluate the need for valuation allowances for our deferred tax assets.

Note 18. 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 outstanding share-based awards consisting primarily of unvested RSUs and ESPP obligations and outstanding warrants related to the issuance of convertible senior notes. We determine the dilutive effect of outstanding share-based awards and warrants using the treasury stock 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. The computation of the diluted net income per share of Class A common stock assumes the conversion of our Class B common stock to Class A common stock, while the diluted net income (loss) per share of Class B common stock does not assume the conversion of those shares.

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The following table presents the calculation of basic and diluted net income (loss) per share (in millions, except number of shares, which are reflected in thousands, and per share data):


	Three Months Ended July 31,		Six Months Ended July 31,
		2024	2023	2024				2023
				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)				$	106	$	26	$	62	$	17	$	191	$	48	$	62	$	17
Denominator:
Weighted-average shares outstanding, basic				212,612		52,705		206,559		54,632		211,998		52,887		205,393		54,633
Net income (loss) per share, basic				$	0.50	$	0.50	$	0.30	$	0.30	$	0.90	$	0.90	$	0.30	$	0.30
Net income (loss) per share, diluted:
Numerator:
Net income (loss)				$	106	$	26	$	62	$	17	$	191	$	48	$	62	$	17
Reallocation of net income as a result of conversion of Class B to Class A common stock				26		0		17		0		48		0		17		0
Reallocation of net income to Class B common stock				0		0		0		(1)		0		(1)		0		(1)
Net income (loss) for diluted calculation				132		26		79		16		239		47		79		16
Denominator:
Weighted-average shares outstanding, basic				212,612		52,705		206,559		54,632		211,998		52,887		205,393		54,633
Conversion of Class B to Class A common stock				52,705		0		54,632		0		52,887		0		54,633		0
Dilutive effect of share-based awards				2,632		0		3,244		0		4,243		0		2,897		0
Weighted-average shares outstanding, diluted				267,949		52,705		264,435		54,632		269,128		52,887		262,923		54,633
Net income (loss) per share, diluted				$	0.49	$	0.49	$	0.30	$	0.30	$	0.89	$	0.89	$	0.30	$	0.30

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 July 31,	Six Months Ended July 31,
		2024	2023	2024	2023
Total shares related to outstanding share-based awards		6,321	2,531	3,196	3,220

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Note 19. 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 millions):


	Three Months Ended July 31,	Six Months Ended July 31,
		2024		2023		2024		2023
United States		$	1,561	$	1,345	$	3,054	$	2,609
Other countries		524		442		1,021		862
Total revenues		$	2,085	$	1,787	$	4,075	$	3,471

Long-Lived Assets

Our long-lived assets are attributed to a country based on the physical location of the assets. We define long-lived assets as property and equipment and operating lease right-of-use assets because many of these assets cannot be readily moved and are relatively illiquid, subjecting them to geographic risk. None of our other assets are subject to significant geographic risk. Aggregate Property and equipment, net and Operating lease right-of-use assets by geographic area was as follows (in millions):


	July 31, 2024		January 31, 2024
United States	$	1,212	$	1,199
Ireland	246		213
Other countries	140		111
Total long-lived assets	$	1,598	$	1,523

Note 20. Subsequent Events

August 2024 Share Repurchase Program

In August 2024, our Board of Directors authorized the August 2024 Share Repurchase Program, under which we may purchase up to $1.0 billion of our outstanding shares of Class A common stock. 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 Securities Exchange Act of 1934, as amended, 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 August 2024 Share Repurchase Program has no expiration date, but may be suspended or discontinued at any time, and does not obligate us to acquire any amount of Class A common stock.

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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, fluctuating interest rates, and geopolitical factors, 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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