v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes
15. Income Taxes
The components of loss before income taxes were as follows (in thousands):
Year Ended December 31,
202520242023
Domestic
$(1,068,357)$(935,487)$(1,151,493)
Foreign
332 (1,013)(6,990)
Loss before income taxes
$(1,068,025)$(936,500)$(1,158,483)
The components of the provision for/(benefit from) income taxes were as follows (in thousands):
Year Ended December 31,
202520242023
Current provision for/(benefit from) income taxes:
Federal
$— $— $(144)
State
1,578 2,007 (561)
Foreign
3,355 2,691 1,255 
Current provision
4,933 4,698 550 
Deferred benefit from income taxes:
Foreign
(1,340)(584)(96)
Deferred benefit
(1,340)(584)(96)
Total provision for/(benefit from) income taxes:
Federal
— — (144)
State
1,578 2,007 (561)
Foreign
2,015 2,107 1,159 
Provision for/(benefit from) income taxes
$3,593 $4,114 $454 
The provision for/(benefit from) income taxes differs from the statutory tax rate, expressed as a percentage of loss before income taxes, as follows (in thousands, except percentages):
Year Ended December 31,
202520242023
U.S. federal statutory tax rate
$(224,286)21.0 %$(196,666)21.0 %$(243,281)21.0 %
State and local income taxes, net of federal income tax effect (1)
1,578 (0.1)%2,007 (0.2)%(561)0.1 %
Foreign tax effects1,630 (0.2)%599 0.0 %2,263 (0.2)%
Tax credits:
Research and development credits(113,450)10.6 %(51,706)5.5 %(44,131)3.8 %
Change in valuation allowance635,965 (59.5)%271,618 (29.0)%260,156 (22.5)%
Nontaxable or nondeductible items:
Stock-based compensation(302,618)28.3 %(25,719)2.7 %23,192 (2.0)%
Other3,865 (0.4)%2,911 (0.3)%2,380 (0.2)%
Changes in unrecognized tax benefits
315 0.0 %1,721 (0.2)%364 0.0 %
Other adjustments
594 0.0 %(651)0.1 %72 0.0 %
Provision for/(benefit from) income taxes
$3,593 (0.3)%$4,114 (0.4)%$454 0.0 %
(1)In 2025 and 2024, state and local income taxes in Texas made up the majority (greater than 50 percent) of the tax effect in this category. In 2023, state and local income taxes in Illinois and Texas made up the majority (greater than 50 percent) of the tax effect in this category.
Net cash paid for income taxes/(refunds received) is as follows (in thousands):
Year Ended December 31,
202520242023
U.S. federal$— $— $7 
U.S. state and local:
   Illinois(850)*1,141 
   Pennsylvania*(621)*
   Texas1,119 909 754 
   Virginia607 *301 
   Other478 (487)168 
Subtotal1,354 (199)2,364 
Foreign:
   Canada307 *391 
   India520 **
   Japan*963 *
   Netherlands657 **
   Other280 377 383 
Subtotal1,764 1,340 774 
Total income taxes paid (net of refunds)
$3,118 $1,141 $3,145 
* The amount of income taxes paid (net of refunds) during the year does not meet the 5% disaggregation threshold or is immaterial.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table presents the components of the Company’s deferred tax assets/(liabilities) for the periods presented (in thousands):
As of December 31,
20252024
Deferred tax assets:
Accrued expenses
$26,621 $17,730 
Intangible assets
6,028 2,050 
Deferred revenue
348,089 285,033 
Net operating loss carryforwards
800,321 599,380 
Tax credit carryforwards
422,107 234,868 
Stock-based compensation
31,983 31,089 
Operating lease liabilities183,443 186,229 
Capitalized research and development979,811 605,278 
Other
2,257 5,650 
Total gross deferred tax asset
2,800,660 1,967,307 
Less: valuation allowance
(2,319,702)(1,551,700)
Net deferred tax assets
480,958 415,607 
Deferred tax liabilities:
Fixed assets
(34,745)(40,178)
Operating lease right-of-use assets(149,883)(155,121)
Deferred cost of revenue(294,550)(219,859)
Total deferred tax liabilities
(479,178)(415,158)
Net deferred tax assets/(liabilities)
$1,780 $449 
The Company has not provided U.S. income taxes or foreign withholding taxes on the undistributed earnings of its profitable foreign subsidiaries because it intends to permanently reinvest such earnings in foreign operations. As of December 31, 2025 and 2024, the amount of unrecognized deferred tax liability is not material.
The Company accounts for deferred taxes under ASC 740, Income Taxes, which requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the ASC 740 more-likely-than-not realization threshold criterion. This assessment considers matters such as future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. The evaluation of the recoverability of the deferred tax assets requires that the Company weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. Due to the Company’s lack of U.S. earnings history, the net U.S. deferred tax assets have been fully offset by a valuation allowance. There are valuation allowances on net deferred tax assets in certain foreign jurisdictions. The deferred tax assets and deferred tax liabilities in other foreign jurisdictions without valuation allowances are immaterial.
The Company’s valuation allowance increased by $768.0 million, $329.5 million, and $315.0 million, in the years ended December 31, 2025, 2024, and 2023, respectively. The increase in the valuation allowance for the years ended December 31, 2025, 2024, and 2023 were primarily due to U.S. federal, state, and certain foreign net operating losses, as well as an increase in U.S. tax credit carryforward and capitalized research and development deferred tax assets that, in management’s judgment, are not more likely than not to be realized.
As of December 31, 2025, the Company had federal net operating loss carryforwards of $3,241.5 million, which do not expire, federal net operating loss carryforwards of $32.8 million, which begin to expire in 2037, state net operating loss carryforwards of $1,717.7 million, which begin to expire in 2028, and foreign net operating loss carryforwards of $61.9 million, which begin to expire in 2026.
As of December 31, 2025, the Company had U.S. federal and California research and development tax credits of approximately $466.9 million and $343.4 million, respectively. The federal research and development credits begin to expire in 2030, while California credits do not expire.
Under Internal Revenue Code Section 382 (“Section 382”), an ownership change generally occurs if one or more stockholders or groups of stockholders who own at least 5% of the stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. The Company did experience one or more ownership changes in financial periods ending on or before December 31, 2025. In this regard, the Company has determined that based on the timing of the ownership change and the corresponding Section 382 limitations, none of its net operating losses or other tax attributes appear to expire subject to such limitation.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):
Year Ended December 31,
202520242023
Unrecognized tax benefits at beginning of year
$261,155 $172,389 $96,372 
Increases related to current year tax positions
88,821 89,881 59,917 
Increases related to prior year tax positions
275 61 16,100 
Decreases related to prior year tax positions
— (1,176)— 
Unrecognized tax benefits at end of year
$350,251 $261,155 $172,389 
The Company classifies uncertain tax positions as non-current liabilities unless expected to be paid within one year or otherwise directly related to an existing deferred tax asset, in which case the uncertain tax position is recorded as an offset to the deferred tax asset on the consolidated balance sheets. As of December 31, 2025, the Company had gross unrecognized tax benefits of approximately $350.3 million, of which $3.5 million would impact income tax expense if recognized. As of December 31, 2024, the Company had gross unrecognized tax benefits of approximately $261.2 million.
The Company accrued interest and penalties of $1.0 million, $0.7 million, and $0.4 million in the years ended December 31, 2025, 2024 and 2023, respectively.
The Company is subject to taxation in the United States, various states, and foreign jurisdictions. All tax years for U.S. federal and California tax returns currently remain open for examination by the tax authorities. As of December 31, 2025, the Company is no longer subject to foreign examinations by tax authorities for years before 2019. As of December 31, 2025, the Company is not under examination by the Internal Revenue Service or any state tax jurisdictions.