v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of loss before income taxes were as follows (in thousands):
Year Ended December 31,
202520242023
Domestic$(334,547)$(357,558)$(428,346)
Foreign33,859 22,897 21,672 
Loss before income taxes$(300,688)$(334,661)$(406,674)
The components of (benefit from) provision for income taxes were as follows (in thousands):
Year Ended December 31,
202520242023
Current
Federal$(671)$646 $— 
State200 536 371 
Foreign13,757 9,938 33,812 
Total13,286 11,120 34,183 
Deferred
Federal20 (807)2 
State5 (164)1 
Foreign(18,724)255 1,886 
Total(18,699)(716)1,889 
(Benefit from) provision for income taxes$(5,413)$10,404 $36,072 
During the year ended December 31, 2025, the Company adopted ASU 2023-09 on a prospective basis to enhance the income taxes disclosures regarding the rate reconciliation and income taxes paid. The following tables provide the updated requirements of ASU 2023-09 for the year ended December 31, 2025. See Note 2, Basis of Presentation and Summary of Significant Accounting Policies, for additional details on the adoption of ASU 2023-09.
The effective income tax rate for the year ended December 31, 2025 differs from the statutory federal income tax rate as follows (in thousands, except percentages):
Year Ended December 31, 2025
Loss before income taxes$(300,688)
U.S. federal statutory tax rate
(63,145)21.0 %
State and local income taxes, net of federal income tax effect(1)
172 (0.1)
Foreign tax effects
United Kingdom
Change in valuation allowance
(18,006)6.0 
Other
(1,676)0.6 
Other foreign jurisdictions
7,956 (2.7)
Tax credits
Research and development credits
(12,055)4.0 
Change in valuation allowance
59,899 (19.9)
Nontaxable or nondeductible items
Stock-based compensation expense
13,624 (4.5)
Acquisition-related costs
6,260 (2.1)
Other
1,558 (0.5)
Effective tax rate
$(5,413)1.8 %
(1) The state that contributes to the majority (greater than 50%) of the tax effect in this category is Texas.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the Company’s effective tax rate substantially differed from the federal statutory tax rate of 21% partially due to the election to waive certain deductions subject to the Base Erosion and Anti-Abuse Tax (“BEAT”), and the completed intra-group transfer of acquired intellectual property related to the acquisition of immerok GmbH. The reconciliation of the income tax benefit computed at the federal statutory tax rate to the Company’s provision for income taxes was as follows (in thousands):
Year Ended December 31,
20242023
Income tax benefit computed at federal statutory rate$(70,279)$(85,401)
Foreign rate differential5,539 2,107 
Stock-based compensation expense4,897 88 
Change in valuation allowance69,814 97,923 
Research and development credits(17,895)(13,049)
Intra-group transfer of acquired intellectual property— 26,358 
BEAT waiver election13,125 — 
Non-deductible expenses5,662 4,495 
Other(459)3,551 
Provision for income taxes$10,404 $36,072 
The income taxes paid by the Company are as follows (in thousands):
Year Ended December 31, 2025
Federal
$— 
State
909 
Foreign
Germany
3,844 
India
3,611 
Singapore
1,764 
Saudi Arabia
881 
Other
4,702 
Total foreign income taxes paid
14,802 
Total income taxes paid
$15,711 
The significant components of net deferred tax balances were as follows (in thousands):
December 31,
20252024
Deferred tax assets:
Net operating loss carryforwards$394,935 $356,996 
Capitalized research and development costs204,136 187,955 
Tax credit carryforwards97,595 87,616 
Intangible assets37,633 37,729 
Stock-based compensation expense17,746 26,314 
Accruals and reserves7,119 13,465 
Other20,960 12,345 
Total deferred tax assets780,124 722,420 
Less: Valuation allowance(706,349)(671,718)
Deferred tax assets, net of valuation allowance73,775 50,702 
Deferred tax liabilities:
Deferred contract acquisition costs(30,320)(28,152)
Property and equipment(20,589)(17,912)
Other(5,618)(6,090)
Total deferred tax liabilities(56,527)(52,154)
Net deferred tax assets (liabilities)$17,248 $(1,452)
The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of the available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. As of March 31, 2025, the Company achieved cumulative U.K. income during the prior twelve quarters when considering pre-tax income adjusted for permanent differences and other comprehensive losses. Based on all available positive and negative evidence, having demonstrated sustained profitability, which is objective and verifiable, and taking into account anticipated future earnings, the Company concluded it is more likely than not that its U.K. deferred tax assets will be realizable and released $18.0 million of the valuation allowance during the year ended December 31, 2025.
Due to historical losses in the United States, the Company continues to maintain a full valuation allowance on its U.S. deferred tax assets. The U.S. valuation allowance was $706.3 million as of December 31, 2025 and increased by $51.8 million during the year ended December 31, 2025 primarily due to increased capitalized research and development costs, tax credit carryforwards, and capitalized intangible asset costs. The Company will release the valuation allowance when there is sufficient positive evidence to support the conclusion that it is more likely than not the U.S. deferred tax assets will be realized.
As of December 31, 2025, the Company has accrued $3.3 million of deferred foreign withholding taxes on amounts of non-U.S. earnings that the Company plans to repatriate. For the non-U.S. earnings the Company intends to indefinitely reinvest, the estimated amount of any incremental tax associated with such earnings is immaterial.
As of December 31, 2025, the Company had $1,588.8 million of federal net operating loss carryforwards and $812.6 million of state net operating loss carryforwards. The vast majority of the federal net operating loss carryforwards can be carried forward indefinitely, but are limited to 80% of annual taxable income. The state net operating loss carryforwards will begin to expire in 2026.
As of December 31, 2025, the Company had U.S. federal and state research tax credit carryforwards of $102.6 million and $45.0 million, respectively. The U.S. federal research tax credit carryforwards will begin to expire in 2036. The California research tax credit carryforwards can be carried forward indefinitely, while the research tax credit carryforwards for other states will begin to expire in 2026.
As of December 31, 2025, the Company had $60.5 million of foreign net operating loss carryforwards. These foreign net operating loss carryforwards have an indefinite life and do not expire.
Under Section 382 of the Internal Revenue Code of 1986, as amended, and similar provisions of state law, utilization of net operating loss and tax credit carryforwards may be subject to an annual limitation due to an ownership change. As of December 31, 2025, the Company assessed that its net operating loss and tax credit carryforwards will not expire solely due to Section 382 limitations.
A reconciliation of the beginning and ending balances of total unrecognized tax benefits is as follows (in thousands):
Year Ended December 31,
202520242023
Beginning balance$38,118 $27,309 $18,914 
Gross increase for prior year tax positions36 280 439 
Gross decrease for prior year tax positions(1,651)(252)(5)
Gross increase for current year tax positions7,833 10,781 7,961 
Ending balance$44,336 $38,118 $27,309 
As of December 31, 2025, the total amount of unrecognized tax benefits, if recognized, would not affect the Company’s effective tax rate due to the existence of carryforwards and the valuation allowance in the United States and applicable U.S. state jurisdictions.
The Company does not expect its gross unrecognized tax benefits to change significantly within the next 12 months. It is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next 12 months due to tax examination changes, settlement activities, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities.
The Company recognizes interest and penalties related to uncertain tax positions in benefit from income taxes in the consolidated statements of operations. There were no interest and penalties associated with unrecognized income tax benefits for the years ended December 31, 2025, 2024, and 2023.
The Company’s tax years from inception in 2014 through December 31, 2025 remain subject to examination by various jurisdictions.
On July 4, 2025, the One Big Beautiful Bill (“OBBBA”) was signed into law. The OBBBA includes a broad range of U.S. tax reform measures, including, among other provisions, the immediate expensing of U.S. research and development expenditures. In accordance with ASC 740, the Company has recognized the effects of the new tax law in the period of enactment. As the Company maintains a full valuation allowance on its U.S. deferred tax assets, the legislation does not have a material impact on its consolidated financial statements.