Zoom Communications Inc.
02/27/2026 | Press release | Distributed by Public on 02/27/2026 16:18
Annual Report for Fiscal Year Ending January 31, 2026 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the section titled "Risk Factors" and in other parts of this Annual Report on Form 10-K.
Overview
Zoom provides the AI-first, open work platform built for human connection and purposefully designed to move conversations to completion. Zoom enables customers to seamlessly collaborate, communicate, and drive outcomes across meetings, chat, phone, contact center, events, and more - all with the built-in assistance of Zoom AI Companion.
We strive to simplify the workday with AI-first tools that drive meaningful team collaboration and customer engagement. Zoom Workplace supports businesses by providing a secure, scalable solution for communication and collaboration. In addition, Zoom is further helping businesses foster stronger customer and employee relationships through Zoom Business Services, which includes Zoom Contact Center, Zoom Revenue Accelerator, as well as Zoom Events, which empowers sales, marketing, and customer experience teams.
AI is core to Zoom's product innovation. During fiscal year 2026, Zoom has continued to invest in AI, expanding its agentic AI skills, agents, and models, focusing on three key areas: supporting individual productivity, powering better collaboration, and helping customer-facing teams get more done, do better work, and strengthen relationships with AI Companion. Our federated approach to AI dynamically leverages multiple Large Language Models ("LLMs") (including those from OpenAI, Anthropic, and Meta), as well as Small Language Models ("SLMs"), making AI more accessible and affordable so that more people can incorporate it in their day-to-day workflows. In line with our commitment to responsible AI, Zoom does not use customer audio, video, chat, screen sharing, attachments, or other communications-like customer content (such as poll results, whiteboard, and reactions) to train Zoom's or its third-party AI models.
Zoom's platform prioritizes security and privacy, with 20 co-located data centers globally as of January 31, 2026 and robust encryption options. We are committed to delivering high-quality, real-time video, even in low-bandwidth conditions, while safeguarding our customers' data.
Revenue is driven by subscriptions to Zoom Workplace and Zoom Business Services. Our core offerings include Zoom Workplace Pro, Business, and Enterprise bundles, with vertical-specific plans for Education, Healthcare, and Government. We also offer Zoom Phone, with regional and global calling plans, and Zoom Contact Center, providing advanced customer experience solutions designed to meet diverse customer needs.
Our revenue was $4,868.8 million, $4,665.4 million, and $4,527.2 million for the fiscal years ended January 31, 2026, 2025, and 2024, respectively, representing year-over-year growth of 4.4% and 3.1%, respectively. We had net income of $1,900.1 million, $1,010.2 million, and $637.5 million for the fiscal years ended January 31, 2026, 2025, and 2024, respectively. Net cash provided by operating activities was $1,989.0 million, $1,945.3 million, and $1,598.8 million for the fiscal years ended January 31, 2026, 2025, and 2024, respectively.
Macroeconomic Conditions and Other Factors
The macroeconomic environment, including geopolitical and trade uncertainties, changing monetary policy, and ongoing foreign currency exchange rate volatility, has created and may continue to create uncertainty in demand for subscriptions to our open work platform. Although headline inflation in many major economies has moderated compared with prior years and moved closer to central bank targets, cost pressures remain uneven across regions, and uncertainties around interest rates, policy actions, and global growth continue to influence corporate spending patterns. These dynamics, together with shifts in customers' internal priorities, including budget realignment toward digital transformation and AI initiatives, have contributed to elongated sales cycles and continued caution in enterprise spending, potentially affecting customer upsell, downsell, or renewal activity.
We continue to monitor the potential effects of these circumstances as well as the overall global economy and geopolitical landscape on our business and financial results. The implications of macroeconomic conditions on our business, results of operations, and overall financial position, particularly over the long term, remain uncertain.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted, introducing several significant corporate income tax provisions, including the option to immediately deduct domestic research and development expenses or continue to capitalize and amortize such expenses for tax years beginning after December 31, 2024, the permanent extension of 100% bonus depreciation for qualified property placed in service after January 19, 2025, and modifications to international tax rules
such as future changes to the calculation of Global Intangible Low-Taxed Income (GILTI) and the Foreign-Derived Intangible Income (FDII) deduction. The impacts of OBBBA on our financial statements for the fiscal year ended January 31, 2026 were not material; however, OBBBA resulted in a favorable impact on cash taxes and an increase in our effective tax rate. As our business operations or financial results change, or as additional regulations and administrative guidance are issued, we will evaluate any further impacts to our consolidated financial statements.
Refer to "Part I, Item 1A. Risk Factors" of this Annual Report on Form 10-K for further discussions of the potential impacts of the current macroeconomic conditions on our business.
Key Business Metrics and Factors Affecting Our Performance
We review the following key business metrics and strategic factors to measure our performance, identify trends, formulate financial projections, and make strategic decisions, including evaluating our ability to grow the number of customers who use Zoom Workplace and Zoom Business Services. Our operating results and growth prospects will depend, in part, on our ability to attract new customers. While we believe there is a significant market opportunity that our platform addresses, it is difficult to predict customer adoption rates or the future growth rate and size of the market for our platform. We will need to continue to invest in sales and marketing in order to address this opportunity by hiring, developing, and retaining talented sales personnel who are able to achieve desired productivity levels in a reasonable period of time.
Large Enterprise Customers - Customers Contributing More Than $100,000 of Trailing 12 Months Revenue
We focus on growing the number of customers who contribute more than $100,000 of trailing 12 months revenue since it is a measure of our ability to scale with our customers and attract larger organizations to Zoom. Revenue from these customers represented 32.8%, 31.0%, and 29.2% of total revenue for the fiscal years ended January 31, 2026, 2025, and 2024, respectively. As of January 31, 2026, 2025, and 2024, we had 4,468, 4,088, and 3,810 customers, respectively, that contributed more than $100,000 of trailing 12 months revenue, demonstrating our penetration of larger organizations, including enterprises. These customers are a subset of Enterprise customers, as defined in the following section.
Expansion of Zoom Across Existing Enterprise Customers - Net Dollar Expansion Rate
We believe that there is a large opportunity for growth with many of our existing customers. Historically, customers have increased the size of their subscriptions as they have expanded their use of our platform across their operations. Over the past few years, macroeconomic headwinds have resulted in slower hiring and higher seat count downsells from our existing Enterprise customers in key markets, which have impacted the rate of expansion and have caused our net dollar expansion rate for Enterprise customers to drop below one hundred percent. Despite the decline, we believe there are still opportunities for future growth with our existing customers as we innovate our platform with additional product offerings and the use of AI. This expansion in the use of our platform also provides us with opportunities to market and sell additional products to our customers, such as Zoom Phone, Zoom Contact Center, and Workvivo. To address this opportunity and expand the use of our products with our existing customers, we will need to maintain the reliability of our platform and produce new features and functionality that are responsive to our customers' requirements for enterprise-grade solutions.
We quantify our expansion across existing Enterprise customers through our net dollar expansion rate. We define Enterprise customers as distinct business units who have been engaged by either our direct sales team, resellers, or strategic partners. Revenue from Enterprise customers represented 60.3%, 59.0% and 57.9% of total revenue for the fiscal years ended January 31, 2026, 2025, and 2024, respectively. Our net dollar expansion rate includes the increase in user adoption within our Enterprise customers, as our subscription revenue is primarily driven by the number of paid licenses within a customer and the purchase of additional products, and compares our subscription revenue from the same set of Enterprise customers across comparable periods. We calculate net dollar expansion rate as of a period end by starting with the annual recurring revenue ("ARR") from all Enterprise customers as of 12 months prior ("Prior Period ARR"). We define ARR as the annualized revenue run rate of subscription agreements from all customers at a point in time. We calculate ARR by taking the monthly recurring revenue ("MRR") and multiplying it by 12. MRR is defined as the recurring revenue run-rate of subscription agreements from all Enterprise customers for the last month of the period, including revenue from monthly subscribers who have not provided any indication that they intend to cancel their subscriptions. We then calculate the ARR from these Enterprise customers as of the current period end ("Current Period ARR"), which includes any upsells, contractions, and attrition. We divide the Current Period ARR by the Prior Period ARR to arrive at the net dollar expansion rate. For the trailing 12 months calculation, we take an average of the net dollar expansion rate over the trailing 12 months. Our net dollar expansion rate may fluctuate as a result of a number of factors, including the level of penetration within our customer base, expansion of products and features, and our ability to retain our Enterprise customers. Our trailing 12 month net dollar expansion rate for Enterprise customers was 98%, 98%, and 101% as of January 31, 2026, 2025, and 2024, respectively.
Retention of Online Customers - Average Monthly Churn Rate & Percentage of MRR from ≥16-Month Customers
In addition to Enterprise customers, we also have a significant number of customers who subscribe to our services directly through our website ("Online customers" or "Online business"). Online customers represent a diverse customer base, ranging from individual consumers to solopreneurs to small and medium-size businesses. We continue to focus on acquisition and retention of our Online customer base through various strategies to improve the features and functionalities of our products and services. Revenue from Online customers represented 39.7%, 41.0%, and 42.1% of total revenue for the fiscal years ended January 31, 2026, 2025, and 2024, respectively. The ability to retain these Online customers will have an impact on our future revenue. The online monthly average churn for our Online customers was 2.8%, 2.9%, and 3.1% per month for the fiscal years ended January 31, 2026, 2025, and 2024, respectively. One of the dynamics in the Online portion of our business is the MRR contribution from customers who have retained Zoom services for a certain portion of time as these customers tend to maintain their subscriptions and contribute meaningfully to the Online business. As of January 31, 2026, 2025, and 2024 the percentage of total Online MRR from Online customers with a continual term of service of at least 16 months was 74.9%, 75.1% and 74.2% respectively.
We calculate our online average monthly churn by starting with the Online customer MRR as of the beginning of the applicable quarter ("Entry MRR"). We define Entry MRR as the recurring revenue run-rate of subscription agreements from all Online customers except for subscriptions that we recorded as churn in a previous quarter based on the customers' earlier indication to us of their intention to cancel that subscription. We then determine the MRR related to customers who canceled or downgraded their subscription or notified us of that intention during the applicable quarter ("Applicable Quarter MRR Churn") and divide the Applicable Quarter MRR Churn by the applicable quarter Entry MRR to arrive at the MRR churn rate for Online customers. We then divided that amount by three to calculate the Online average monthly churn for the applicable quarter.
Innovation and Expansion of Our Platform
We continue to invest and enhance the capabilities of Zoom Workplace and Zoom Business Services, including ongoing investments in AI, with a focus on expanding agentic AI skills, agents, and models.
During fiscal year 2026, we launched several new products and enhancements across Zoom Workplace and Zoom Business Services. These included Zoom Tasks, which helps users manage and complete tasks; Zoom Workplace for Frontline Workers, an AI-first mobile solution to improve on-shift communication and task management; Zoom Workplace for Clinicians, which automates clinical workflows and reduces documentation overhead; and a next-generation Zoom Virtual Agent, which uses agentic AI to autonomously handle customer support issues across chat and voice channels. These offerings expand our agentic AI capabilities across collaboration, customer support, recruiting, and industry-specific workflows through new integrations and platform enhancements. We also acquired BrightHire, Inc. to strengthen recruiting and candidate engagement capabilities.
At Zoomtopia 2025, our annual user conference held in September, we announced several strategic platform innovations, including AI Companion 3.0, which we launched in December 2025 for all paid Zoom Workplace users at no additional cost. AI Companion 3.0 introduces more proactive assistance with tasks, such as meeting prioritization, agenda creation, and "catch me up" summaries, along with unified, context-aware search across internal and external data sources, enhanced report generation and research tools, and an expanded workspace designed to improve productivity.
We also enhanced the Custom AI Companion add-on, enabling users to create and deploy custom AI assistants with broader context and integration across applications. The add-on provides low-code tools, templates, and libraries to help organizations build tailored AI workflows. In addition, Zoom Business Services announced updates to Zoom Virtual Agent, featuring new use cases and branded voice customization to support more consistent customer interactions.
Zoom is an open platform, and third-party developers are a key component of our strategy for platform innovation to make it easier for customers and developers to extend our product portfolio with new functionalities. We believe that as more developers and other third parties use our platform to integrate major third-party applications, we will become the ubiquitous platform for communications and collaboration. We will need to expend additional resources to continue introducing new products, features, and functionality, and supporting the efforts of third parties to enhance the value of our platform with their own applications.
International Opportunity
Our platform addresses the communications and collaboration needs of users worldwide, and international expansion remains a meaningful component of our long-term growth strategy. Our revenue outside of the Americas (APAC and EMEA) represented 27.9%, 28.2%, and 28.7% of our total revenue for the fiscal years ended January 31, 2026, 2025, and 2024, respectively. We use strategic partners and resellers to sell in certain international markets where we have limited or no direct sales presence. While we believe global demand for our platform will continue to increase as international market awareness of Zoom grows, our ability to conduct our operations internationally will require considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal and regulatory systems, alternative dispute systems, and commercial markets.
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe that free cash flow ("FCF") is a non-GAAP financial measure that is useful in evaluating our liquidity.
Free Cash Flow
We define FCF as GAAP net cash provided by operating activities less purchases of property and equipment. We believe that FCF is a useful indicator of liquidity that provides information to management and investors about the amount of cash generated from our operations that, after investments in property and equipment, can be used for future growth. FCF is presented for supplemental informational purposes only and has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities. It is important to note that other companies, including companies in our industry, may not use this metric, may calculate this metric differently, or may use other financial measures to evaluate their liquidity, all of which could reduce the usefulness of this non-GAAP metric as a comparative measure.
The following table presents a summary of our cash flows for the fiscal years presented and a reconciliation of FCF to net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP:
| Year Ended January 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Net cash provided by operating activities | $ | 1,989,048 | $ | 1,945,308 | $ | 1,598,836 | |||||||||||
| Less: purchases of property and equipment | (64,961) | (136,560) | (126,953) | ||||||||||||||
| Free cash flow (non-GAAP) | $ | 1,924,087 | $ | 1,808,748 | $ | 1,471,883 | |||||||||||
| Net cash used in investing activities | $ | (278,898) | $ | (1,106,024) | $ | (1,183,689) | |||||||||||
| Net cash (used in) provided by financing activities | $ | (1,805,358) | $ | (1,028,077) | $ | 60,186 | |||||||||||
Components of Results of Operations
Revenue
We derive our revenue from subscription agreements with customers for access to our AI-first, open work platform. Our customers generally do not have the ability to take possession of our software. We also provide services, which include professional services, consulting services, and online event hosting, which are generally considered distinct from the access to our AI-first, open work platform. The amount of revenue recognized reflects the consideration that we expect to receive in exchange for these services over the contract term, which can include a free period discount.
Cost of Revenue
Cost of revenue primarily consists of costs related to hosting our AI-first, open work platform and providing general operating support services to our customers. These costs are related to our co-located data centers, third-party cloud hosting, integrated third-party PSTN services, personnel-related expenses, amortization of capitalized software development and acquired intangible assets, royalty payments, and allocated overhead.
Operating Expenses
Research and Development
Research and development expenses primarily consist of personnel-related expenses directly associated with our research and development organization, depreciation of equipment used in research and development, and allocated overhead. Research and development costs are expensed as incurred.
Sales and Marketing
Sales and marketing expenses primarily consist of personnel-related expenses directly associated with our sales and marketing organization. Other sales and marketing expenses include advertising and promotional events to promote our brand, such as awareness programs, digital programs, public relations, tradeshows, and our user conference, Zoomtopia, and allocated overhead. Sales and marketing expenses also include credit card processing fees related to sales and amortization of deferred contract acquisition costs.
General and Administrative
General and administrative expenses primarily consist of personnel-related expenses associated with our finance, legal, and other organizations; professional fees for external legal, accounting, and other consulting services; expected credit losses; insurance; certain indirect taxes; litigation settlements; corporate security and regulatory expenses; and allocated overhead.
Gains on Strategic Investments, Net
Gains on strategic investments, net consist primarily of remeasurement gains or losses on our equity investments.
Other Income, Net
Other income, net consists primarily of interest income and net accretion on our marketable securities and effect of changes in foreign currency exchange rates.
Provision for Income Taxes
Provision for income taxes consists primarily of income taxes related to federal, state, and foreign jurisdictions where we conduct business.
Results of Operations
The following tables set forth selected consolidated statements of operations data and such data as a percentage of revenue for each of the fiscal years indicated:
| Year Ended January 31, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Revenue | $ | 4,868,769 | $ | 4,665,433 | $ | 4,527,224 | ||||||||||||||
|
Cost of revenue (1)
|
1,119,036 | 1,129,627 | 1,077,801 | |||||||||||||||||
| Gross profit | 3,749,733 | 3,535,806 | 3,449,423 | |||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
|
Research and development (1)
|
844,875 | 852,415 | 803,187 | |||||||||||||||||
|
Sales and marketing(1)
|
1,388,297 | 1,427,384 | 1,541,307 | |||||||||||||||||
|
General and administrative(1)
|
392,928 | 442,712 | 579,650 | |||||||||||||||||
| Total operating expenses | 2,626,100 | 2,722,511 | 2,924,144 | |||||||||||||||||
| Income from operations | 1,123,633 | 813,295 | 525,279 | |||||||||||||||||
|
Gains on strategic investments, net
|
969,822 | 177,142 | 109,770 | |||||||||||||||||
| Other income, net | 328,830 | 325,147 | 197,263 | |||||||||||||||||
|
Income before provision for income taxes
|
2,422,285 | 1,315,584 | 832,312 | |||||||||||||||||
|
Provision for income taxes
|
522,137 | 305,346 | 194,850 | |||||||||||||||||
| Net income | $ | 1,900,148 | $ | 1,010,238 | $ | 637,462 | ||||||||||||||
|
(1)Includes stock-based compensation expense as follows:
|
||||||||||||||||||||
| Cost of revenue | $ | 96,273 | $ | 124,561 | $ | 143,798 | ||||||||||||||
| Research and development | 287,172 | 333,767 | 336,309 | |||||||||||||||||
| Sales and marketing | 254,976 | 319,631 | 381,298 | |||||||||||||||||
| General and administrative | 122,355 | 153,350 | 195,756 | |||||||||||||||||
| Total stock-based compensation expense | $ | 760,776 | $ | 931,309 | $ | 1,057,161 | ||||||||||||||
| Year Ended January 31, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| (as a percentage of revenue) | ||||||||||||||||||||
| Revenue | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||
| Cost of revenue | 23.0 | % | 24.2 | % | 23.8 | % | ||||||||||||||
| Gross profit | 77.0 | % | 75.8 | % | 76.2 | % | ||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Research and development | 17.4 | % | 18.3 | % | 17.7 | % | ||||||||||||||
| Sales and marketing | 28.5 | % | 30.6 | % | 34.0 | % | ||||||||||||||
| General and administrative | 8.1 | % | 9.5 | % | 12.9 | % | ||||||||||||||
| Total operating expenses | 53.9 | % | 58.4 | % | 64.6 | % | ||||||||||||||
| Income from operations | 23.1 | % | 17.4 | % | 11.6 | % | ||||||||||||||
|
Gains on strategic investments, net
|
19.9 | % | 3.8 | % | 2.4 | % | ||||||||||||||
| Other income, net | 6.8 | % | 7.0 | % | 4.4 | % | ||||||||||||||
|
Income before provision for income taxes
|
49.8 | % | 28.2 | % | 18.4 | % | ||||||||||||||
|
Provision for income taxes
|
10.7 | % | 6.5 | % | 4.3 | % | ||||||||||||||
| Net income | 39.0 | % | 21.7 | % | 14.1 | % | ||||||||||||||
Comparison of Fiscal Years Ended January 31, 2026 and 2025
Revenue
| Year Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Revenue | $ | 4,868,769 | $ | 4,665,433 | $ | 203,336 | 4.4 | % | |||||||||||||||
Revenue for the fiscal year ended January 31, 2026 increased by $203.3 million, or 4.4%, compared to the fiscal year ended January 31, 2025. The increase primarily reflects higher product expansion and usage among existing Enterprise customers and continued growth of our customer base. Revenue from Enterprise subscription services grew 6.5% year over year, with 68.4% of the increase attributable to existing customers and 31.6% to new customers. Revenue from Online customers increased by 1.2%.
Cost of Revenue
| Year Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Cost of revenue | $ | 1,119,036 | $ | 1,129,627 | $ | (10,591) | (0.9) | % | |||||||||||||||
| Gross profit | 3,749,733 | 3,535,806 | 213,927 | 6.1 | % | ||||||||||||||||||
| Gross margin | 77.0 | % | 75.8 | % | |||||||||||||||||||
Cost of revenue for the fiscal year ended January 31, 2026, decreased by $10.6 million, or 0.9%, compared to the fiscal year ended January 31, 2025. The decline primarily reflects a $28.3 million reductionin stock-based compensation, partially offset by $18.2 millionin asset impairments. The decrease in stock-based compensation resulted from changes to our equity program.
Gross margin increased to 77.0% for the fiscal year ended January 31, 2026 from 75.8% for the fiscal year ended January 31, 2025. The increase in gross margin was driven by the decrease in stock-based compensation as well as other operational efficiencies.
Operating Expenses
Research and Development
| Year Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Research and development | $ | 844,875 | $ | 852,415 | $ | (7,540) | (0.9) | % | |||||||||||||||
Research and development expense for the fiscal year ended January 31, 2026, decreased by $7.5 million, or 0.9%, compared to the fiscal year ended January 31, 2025. The decrease primarily reflects a $46.6 million reduction in stock-based compensation resulting from changes to our equity programs, largely offset by continued investment in AI innovation. The offsetting increase was driven by an additional $33.4 million of personnel-related expenses from higher headcount and costs associated with AI-focused software and facilities.
Sales and Marketing
| Year Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Sales and marketing | $ | 1,388,297 | $ | 1,427,384 | $ | (39,087) | (2.7) | % | |||||||||||||||
Sales and marketing expense for the fiscal year ended January 31, 2026, decreased by $39.1 million, or 2.7%, compared to the fiscal year ended January 31, 2025. The decrease was primarily driven by a $64.7 million decrease in stock-based
compensation resulting from changes in our equity programs, partially offset by continued investments supporting customer acquisition, retention, and expansion initiatives.
General and Administrative
| Year Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| General and administrative | $ | 392,928 | $ | 442,712 | $ | (49,784) | (11.2) | % | |||||||||||||||
General and administrative expense for the fiscal year ended January 31, 2026, decreased by $49.8 million, or 11.2%, compared to the fiscal year ended January 31, 2025. The decrease primarily reflects a $36.0 million change related to an SEC investigation accrual recorded in the prior year and reversed in the current year, along with a $31.0 million reduction in stock-based compensation resulting from changes in our equity programs. These decreases were partially offset by a $20.9 million expense for the charitable donation of shares contributed to a donor advised fund.
Gains on Strategic Investments, Net
| Year Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
|
Gains on strategic investments, net
|
$ | 969,822 | $ | 177,142 | $ | 792,680 | NM | ||||||||||||||||
Gains on strategic investments, net, were $969.8 million and $177.1 million for the fiscal years ended January 31, 2026 and 2025, respectively, which were both primarily driven by changes in the fair value of our privately held securities.
Other Income, Net
| Year Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Other income, net | $ | 328,830 | $ | 325,147 | $ | 3,683 | 1.1 | % | |||||||||||||||
Other income, net for the fiscal year ended January 31, 2026 increased by $3.7 million, or 1.1%, compared to the fiscal year ended January 31, 2025. The increase was mainly driven by a $23.8 million favorable impact from changes in foreign currency exchange rates, largely offset by a $23.4 million decrease in interest income from cash and marketable securities.
Provision for Income Taxes
| Year Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Provision for income taxes | $ | 522,137 | $ | 305,346 | $ | 216,791 | 71.0 | % | |||||||||||||||
Provision for income taxes for the fiscal year ended January 31, 2026 increased by $216.8 million, or 71.0%, compared to the fiscal year ended January 31, 2025. The change in income taxes was primarily due to an increase in income before taxes partially offset by a decrease in tax shortfalls and an increase in tax benefits on stock-based compensation for the fiscal year ended January 31, 2026. See Part II, Item 8, Note 11 "Income Taxes" to the consolidated financial statements in this Annual Report for further information.
For a discussion of the fiscal year ended January 31, 2025 compared to the fiscal year ended January 31, 2024, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.
Liquidity and Capital Resources
As of January 31, 2026, our principal sources of liquidity were cash, cash equivalents, and marketable securities of $7.8 billion, which were held for working capital purposes and for investment in growth opportunities. Our marketable securities generally consist of high-grade commercial paper, corporate bonds, agency bonds, corporate and other debt securities, U.S. government agency securities, and treasury bills.
We finance our operations primarily through income from operations. Cash from operations may also be affected by various risks and uncertainties, including, but not limited to, macroeconomic factors, such as geopolitical conflicts, tariffs and trade tensions, inflationary pressures, interest rate fluctuations, and the fluctuations in foreign currency exchange rates. These factors and other risks detailed in Part I, Item 1A, "Risk Factors" of this Annual Report on Form 10-K could impact the timing of cash collections from our customers. However, based on our current business plan and revenue prospects, we believe our existing cash, cash equivalents, and marketable securities, together with net cash provided by operations, will be sufficient to meet our needs for at least the next 12 months and allow us to capitalize on growth opportunities. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities and available cash balances. Our future capital requirements will depend on many factors, including our revenue growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support further sales and marketing and research and development efforts, as well as expenses associated with our international expansion, and the timing and extent of additional capital expenditures to invest in existing and new office spaces as well as data center infrastructure. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may choose or be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to enter into debt agreements on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be materially and adversely affected.
Our material cash requirements from known contractual and other obligations primarily relate to our leases for office space and equipment, as well as non-cancelable purchase obligations. Expected timing of those payments are as follows:
| Payments Due by Period | ||||||||||||||||||||||||||||||||
| Total |
Less Than 1 Year |
1 - 3 Years |
3 - 5 Years |
More Than 5 Years |
||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| Operating lease obligations | $ | 62,319 | $ | 26,585 | $ | 31,303 | $ | 4,431 | $ | - | ||||||||||||||||||||||
| Non-cancelable purchase obligations | 444,193 | 241,268 | 144,730 | 58,195 | - | |||||||||||||||||||||||||||
| Total contractual obligations | $ | 506,512 | $ | 267,853 | $ | 176,033 | $ | 62,626 | $ | - | ||||||||||||||||||||||
The contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding. Obligations under contracts that we can cancel without a significant penalty are not included in the table above. Refer to the "Future minimum lease payments" table in Note 7, "Operating Leases" and "Non-cancelable Purchase Obligations" in Note 9, "Commitments and Contingencies" to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more details.
We have not provided a detailed estimate of the payment timing of unrecognized tax benefits due to the uncertainty of when the related tax settlements will become due. See Part II, Item 8, Note 11, "Income Taxes" to the consolidated financial statements in this Annual Report for a discussion of income taxes.
Cash Flows
The following table summarizes our cash flows for the periods presented:
| Year Ended January 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Net cash provided by operating activities | $ | 1,989,048 | $ | 1,945,308 | $ | 1,598,836 | |||||||||||
| Net cash used in investing activities | $ | (278,898) | $ | (1,106,024) | $ | (1,183,689) | |||||||||||
| Net cash (used in) provided by financing activities | $ | (1,805,358) | $ | (1,028,077) | $ | 60,186 | |||||||||||
Operating Activities
Our largest source of operating cash is cash collections from our customers for subscriptions to our AI-first, open work platform. Our primary uses of cash from operating activities are for employee-related expenditures, costs related to hosting our platform, and marketing expenses. Net cash provided by operating activities is impacted by our net income adjusted for certain non-cash items, such as stock-based compensation expense, depreciation and amortization expenses, as well as the effect of changes in operating assets and liabilities.
Net cash provided by operating activities was $1,989.0 million for the fiscal year ended January 31, 2026, compared to $1,945.3 million for the fiscal year ended January 31, 2025. The increase in operating cash flow was mainly due to higher collections driven by revenue growth.
Investing Activities
Net cash used in investing activities of $278.9 million for the fiscal year ended January 31, 2026 was primarily due to cash paid for acquisitions, net of cash acquired, of $119.8 million, net purchases of marketable securities of $75.8 million, purchases of property and equipment of $65.0 million, and purchases of strategic investments of $98.2 million, partially offset by proceeds from the sale of strategic investments of $80.4 million.
Net cash used in investing activities of $1,106.0 million for the fiscal year ended January 31, 2025 was due to net purchases of marketable securities of $964.3 million, purchases of property and equipment of $136.6 million, and purchases of strategic investments of $18.5 million, partially offset by proceeds from the sale of strategic investments of $13.4 million.
Financing Activities
Net cash used in financing activities of $1,805.4 million for the fiscal year ended January 31, 2026 was primarily due to cash paid for repurchases of common stock of $1,620.7 million and taxes paid related to net share settlement of equity awards of $247.8 million, partially offset by proceeds from issuance of common stock pursuant to our employee stock purchase plan ("ESPP") of $61.2 million and proceeds from the exercise of stock options of $2.5 million.
Net cash used in financing activities of $1,028.1 million for the fiscal year ended January 31, 2025 was due to cash paid for repurchases of common stock of $1,093.9 million, partially offset by proceeds from issuance of common stock pursuant to our ESPP of $54.0 million, proceeds from employee equity transactions to be remitted to employees and tax authorities, net, of $7.2 million, and proceeds from the exercise of stock options of $4.6 million.
For a discussion of the fiscal year ended January 31, 2024, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.
Stock Repurchase Program
In February 2024, our Board of Directors authorized a stock repurchase program of up to $1.5 billion of our Class A common stock. In November 2024, our Board of Directors authorized the repurchase of an additional $1.2 billion of our outstanding Class A common stock. In November 2025, our Board of Directors authorized the repurchase of an additional $1.0 billion of our outstanding Class A common stock. Repurchases of our Class A common stock may be effected, from time to time, either on the open market (including pre-set trading plans), in privately negotiated transactions, and other transactions in accordance with applicable securities laws.
The timing and the amount of any repurchased Class A common stock will be determined by our management based on its evaluation of market conditions and other factors. The repurchase program will be funded using our working capital. Any repurchased shares of Class A common stock will be retired. The repurchase program does not obligate us to acquire any particular amount of Class A common stock, and the repurchase program may be suspended or discontinued at any time at our discretion.
During the fiscal year ended January 31, 2026, we repurchased and subsequently retired 20,385,361 shares of our Class A common stock for an aggregate amount of $1.6 billion. As of January 31, 2026, $1.0 billion of the repurchase
authorization remained available.
Critical Accounting Estimates
Critical accounting estimates are those accounting estimates that require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates are developed based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Critical accounting estimates are accounting estimates where the nature of the estimates are material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and the impact of the estimates on financial condition or operating performance is material.
We believe that of our significant accounting policies, which are described in Part II, Item 8, Note 1 "Summary of Business and Significant Accounting Policies" to the consolidated financial statements in this Annual Report, the following critical estimates involve a greater degree of judgment and complexity.
Revenue Recognition
We derive our revenue primarily from subscription agreements with customers for access to our unified communications and collaboration platform and services. We also provide other services, which include professional services, consulting services, and online event hosting, which were immaterial to our consolidated financial statements. Revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration that we expect to receive in exchange for these services over the contract term which can include a free period discount. We apply judgment during the identification of a contract to determine the customer's ability and intent to pay, which is based on a variety of factors, including the customer's historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer. The transaction price is determined based on the consideration to which we expect to be entitled in exchange for transferring services to the customer. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue recognized under the contract will not occur.
Cost to Obtain a Contract
We primarily capitalize sales commissions and associated payroll taxes paid to internal sales personnel that are incremental costs from the acquisition of customer contracts. These costs are recorded as deferred contract acquisition costs in the consolidated balance sheets. We determine whether costs should be deferred based on our sales compensation plans and if the commissions are incremental and would not have occurred absent the customer contract.
Sales commissions paid upon the initial acquisition of a customer contract were historically amortized over an estimated period of benefit of three years. Significant judgment is required in arriving at this estimated period of benefit. We determine the period of benefit for commissions paid for the acquisition of the initial customer contract by taking into consideration the initial estimated customer life and the technological life of our unified communications and collaboration platform and related significant features. Sales commission is generally not paid upon contract renewal. Amortization is recognized on a straight-line basis commensurate with the pattern of revenue recognition.
We periodically review these deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit. At the end of fiscal 2026, we completed a re-assessment of the estimated period of benefit for deferred contract acquisition costs and determined that we should increase the amortization period from three years to five years. The impact of the change in the accounting estimate is reflected in the consolidated balance sheet as of January 31, 2026, and is accounted for prospectively from that date. The change in amortization period did not impact sales and marketing expenses for the fiscal year ended January 31, 2026. The change in estimate will impact future periods, with an estimated reduction in sales and marketing expenses in the range of $90.0 million to $95.0 million for the fiscal year ending January 31, 2027.
Business Combinations and Valuation of Goodwill and Intangible Assets
We account for our business combinations using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date. The excess of the fair value of purchase consideration over the values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, we make estimates and assumptions, especially with respect to intangible assets. Significant judgment is required, including assumptions about future cash flows, discount rates, and customer attrition. Our estimates of fair value are
based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, not to exceed one year from the date of acquisition, we may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances that existed as of the acquisition date. After the measurement period, any subsequent adjustments are reflected in the consolidated statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred.
Goodwill amounts are not amortized, but rather tested for impairment at least annually, in the fourth quarter of each fiscal year, or more often if circumstances indicate that the carrying value may not be recoverable. Indicators of potential impairment may include adverse market or economic conditions or deterioration in operating performance. As of January 31, 2026, no impairment of goodwill has been identified.
Intangible assets consist of acquired identifiable intangible assets resulting from business combinations, as well as other intangible assets purchased outside of a business combination. Finite-lived intangible assets are initially recorded at fair value and are amortized on a straight-line basis over their estimated useful lives. We routinely evaluate the estimated remaining useful lives of our finite-lived intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. We also consider potential changes in market or competitive conditions that could affect recoverability. Indefinite-lived intangible assets are recorded at fair value and are not amortized. We review the useful lives of indefinite-lived intangible assets each reporting period to determine whether events and circumstances continue to support the indefinite useful life classification. If we determine that the life of an intangible asset is no longer indefinite, that asset would be tested for impairment and amortized prospectively over its estimated remaining useful life. We have not recorded any impairment charges during the fiscal years presented.
Strategic Investments
Accounting for strategic investments in privately held debt and equity securities in which we do not have a controlling interest or significant influence requires us to make significant estimates and assumptions.
Valuations of privately held securities are inherently complex and require judgment due to the lack of readily available market data. Privately held debt and equity securities are valued using significant unobservable inputs or data in an inactive market. The valuation requires our judgment due to the absence of market prices and inherent lack of liquidity. The carrying values of our privately held equity securities are adjusted if there are observable price changes in a same or similar security from the same issuer or if there are identified events or changes in circumstances that may indicate impairment, as discussed below. In determining the estimated fair value of our strategic investments in privately held companies, we utilize the most recent data available, as adjusted to reflect the specific rights and preferences of those securities we hold.
We assess our privately held debt and equity securities strategic investment portfolio quarterly for indicators of impairment. Our impairment analysis encompasses a qualitative assessment that evaluates key factors including but not limited to the investee's financial metrics, market acceptance of the product or technology, and the rate at which the investee is using its cash. If the investment is considered to be impaired, we record the investment at fair value by recognizing an impairment through the consolidated statement of operations and establishing a new carrying value for the investment.
The privately held debt and equity securities we hold, and their rights and preferences relative to those of other securities within the capital structure, may impact the magnitude by which our investment value moves in relation to movement of the total enterprise value of the company. As a result, our investment value in a specific company may move by more or less than any change in the value of that overall company.
Income Taxes
We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized based on the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. We make assumptions, judgments and estimates to determine the current income tax provision (benefit), deferred tax assets and liabilities and valuation allowance recorded against a deferred tax asset. The assumptions, judgments and estimates relative to the current income tax provision (benefit) take into account current tax laws, their interpretation and possible results of foreign and domestic tax audits. Changes in tax law, their interpretation and resolution of tax audits could significantly impact the income taxes provided in our consolidated financial statements. Assumptions, judgments and estimates relative to the amount of deferred income taxes take into account future taxable income. Any of the assumptions, judgments and estimates mentioned above could cause the actual income tax obligations to differ from our estimates.
Critical accounting estimates and the related assumptions are evaluated periodically as conditions warrant, and changes to such estimates are recorded as new information or changed conditions require.
Recent Accounting Pronouncements
See "Summary of Business and Significant Accounting Policies" in Note 1 to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.
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