Income Taxes |
9 Months Ended | ||||||||||||||||||
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Apr. 30, 2026 | |||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||
| Income Taxes |
We compute our provision for or benefit from income taxes by applying the estimated annual effective tax rate to income or loss from recurring operations and adding the effects of any discrete income tax items specific to the period. For the three months ended April 30, 2026, we recognized tax shortfalls on share-based compensation of $11 million in our provision for income taxes. For the nine months ended April 30, 2026, we recognized excess tax benefits on share-based compensation of $40 million in our provision for income taxes. For the three and nine months ended April 30, 2025, we recognized excess tax benefits on share-based compensation of $18 million and $75 million, respectively, in our provision for income taxes. Our effective tax rates for the three and nine months ended April 30, 2026 were approximately 24% and 23%, respectively. Excluding discrete tax items primarily related to share-based compensation, our effective tax rate for both periods was approximately 24%. The difference from the federal statutory rate of 21% was primarily due to state income taxes and non-deductible share-based compensation, which were partially offset by the tax benefit we received from the federal research and experimentation credit. Our effective tax rates for the three and nine months ended April 30, 2025 were approximately 23% and 22%, respectively. Excluding discrete tax items primarily related to share-based compensation, our effective tax rate for both periods was approximately 24%. The difference from the federal statutory rate of 21% was primarily due to state income taxes and non-deductible share-based compensation, which were partially offset by the tax benefit we received from the federal research and experimentation credit. On July 4, 2025, the U.S. federal government enacted the One Big Beautiful Bill Act (OBBBA), which includes significant tax law changes, most notably the reinstatement of the immediate expensing of domestic research and developmental expenditures, effective in fiscal 2026. While this provision is not expected to have a material impact on our fiscal 2026 effective tax rate, we expect our fiscal 2026 cash tax payments and related deferred tax asset positions to decrease significantly compared to fiscal 2025. In the current global tax policy environment, the U.S. and other domestic and foreign governments continue to consider, and in some cases enact, changes in corporate tax laws. As changes occur, we account for finalized legislation in the period of enactment.
The total amount of our unrecognized tax benefits at July 31, 2025 was $394 million. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $276 million. There were no material changes to these amounts during the nine months ended April 30, 2026. We offset a $126 million and $61 million long-term liability for uncertain tax positions against our long-term income tax receivable at each of the reporting periods ended April 30, 2026 and July 31, 2025, respectively. The long-term income tax receivable as of April 30, 2026 was primarily related to fiscal 2026 federal research and experimentation credits carried back to fiscal 2025 and the government’s approval of a method of accounting change request for fiscal 2018. The long-term income tax receivable as of July 31, 2025 was primarily related to the government’s approval of a method of accounting change request for fiscal 2018.
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