v3.26.1
Income Taxes
 12 Months Ended
Jul. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following table presents the components of income before income taxes (in millions):
Year Ended July 31,
202620252024
United States$466 $1,125 $669 
Foreign70 471 319 
Total$536 $1,596 $988 
The following table summarizes our provision for (benefit from) income taxes (in millions):
Year Ended July 31,
202620252024
Federal:
Current$95 $517 $213 
Deferred(165)(300)312 
State:
Current53 108 101 
Deferred(6)(44)(173)
Foreign:
Current132 186 130 
Deferred120 (5)(2,173)
Total$229 $462 $(1,590)
For the year ended July 31, 2026, our provision for income taxes was $229 million, which represented a $233 million decrease from prior year, primarily due to a one-time deferred tax provision of $219 million recorded during during the year ended July 31, 2025 arising from the remeasurement of our basis difference associated with the U.S. tax effects of foreign deferred tax assets.
We adopted the new income tax disclosures guidance effective in our year ended July 31, 2026 on a prospective basis. The following table presents a reconciliation from the federal statutory tax amount and rate to our provision for incomes taxes and effective tax rate under the requirements of the newly adopted income tax disclosures guidance (dollars in millions):
Year Ended July 31, 2026
AmountRate
Federal statutory tax$113 21.0 %
State taxes(1)(2)
41 7.7 
Foreign tax effects:
Israel:
Statutory rate differential(10)(1.9)
Reduced statutory rate on qualifying income93 17.3 
Nondeductible expenses22 4.1 
Intercompany legal entity restructuring(2)
48 9.0 
United Kingdom:
Statutory rate differential20 3.7 
Other jurisdictions54 10.2 
Effect of cross-border tax laws:
Global intangible low-taxed income(2)
(195)(36.4)
Subpart F income22 4.1 
U.S. branch income (loss)(2)
(117)(21.9)
Other(23)(4.1)
Tax credits:
Research and development tax credits(58)(10.8)
Changes in valuation allowance(2)(0.4)
Nontaxable or nondeductible items:
Shared-based compensation49 9.1 
Change in fair value of convertible senior notes and Capped Calls118 22.0 
Other7 1.3 
Changes in unrecognized tax benefits86 16.0 
Other:
Intercompany legal entity restructuring(2)
(39)(7.3)
Total$229 42.7 %
(1)The state and local jurisdictions that contribute to the majority of the tax effect in this category include California, District of Columbia, Maryland, the state and city of New York, and Pennsylvania.
(2)These categories include impacts of an intercompany legal entity restructuring completed Q4 fiscal 2026 with a total impact of $45 million income tax benefit.
Prior to the adoption of the new income tax disclosure guidance, the following table presents a reconciliation from the federal statutory income tax rate to our effective tax rate:
Year Ended July 31,
20252024
Federal statutory rate21.0%21.0%
Effect of:
State taxes, net of federal tax benefit3.8 3.1 
Non-U.S. operations
2.2 9.5 
Change in valuation allowance1.1 (341.9)
U.S. effect of foreign deferred tax assets
11.2 175.8 
Share-based compensation(5.5)(16.9)
Tax credits(6.2)(13.4)
Non-deductible expenses1.2 1.5 
Other, net0.1 0.5 
Total28.9 %(160.8)%
The following table presents the components of our deferred tax assets and liabilities as of July 31, 2026 and 2025 (in millions):
July 31,
20262025
Deferred tax assets:
Accruals and reserves$176 $132 
Operating lease liabilities233 127 
Deferred revenue1,385 1,266 
Net operating loss carryforwards776 620 
Tax credits286 222 
Capitalized research expenditures879 895 
Share-based compensation148 106 
Fixed assets and intangible assets921 1,561 
Gross deferred tax assets4,804 4,929 
Valuation allowance(321)(278)
Total deferred tax assets4,483 4,651 
Deferred tax liabilities:
U.S. effect of foreign deferred tax assets
(1,789)(1,922)
Operating lease right-of-use assets(208)(108)
Deferred contract costs(258)(212)
Other deferred tax liabilities(36)(74)
Total deferred tax liabilities(2,291)(2,316)
Net deferred tax assets$2,192 $2,335 
We regularly assess the need for a valuation allowance on our deferred tax assets. In making this assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all the deferred tax assets will not be realized. The assessment requires significant judgment and is performed for each of the applicable jurisdictions. Due to a law change during the year ended July 31, 2026, we released a portion of the valuation allowance for our California deferred tax assets due to these assets becoming “more likely than not” to be realized in the future; however, we still expect future research and development tax credit generation in California to exceed our ability to use the existing tax credits.
As of July 31, 2026, we had federal, state, and foreign net operating loss carryforwards of approximately $474 million, $746 million, and $3.0 billion, respectively, as reported on our tax returns, available to reduce future taxable income, if any. If not utilized, our federal and state net operating loss carryforwards will expire in various amounts at various dates beginning in the years ending July 31, 2034 and July 31, 2030, respectively. Our foreign net operating loss will carry forward indefinitely.
As of July 31, 2026, we had federal and state research and development tax credit carryforwards of approximately $7 million and $382 million, respectively, as reported on our tax returns. If not utilized, the federal credit carryforwards will expire in various amounts at various dates beginning in the year ending July 31, 2040. The state credit carryforwards have no expiration.
As of July 31, 2026, we had foreign tax credit carryforwards of $46 million as reported on our tax returns. If not utilized, the foreign tax credit carryforwards will expire in various amounts at various dates beginning in the year ending July 31, 2029.
As of July 31, 2026, we had $719 million of unrecognized tax benefits, $393 million of which would affect income tax expense if recognized. As of July 31, 2025, we had $572 million of unrecognized tax benefits, $275 million of which would affect income tax expense if recognized.
We file federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitations. Generally, all years remain subject to adjustment due to our net operating loss and credit carryforwards. We currently have ongoing tax audits in various jurisdictions and at various times. The primary focus of these audits is, generally, profit allocation. The ultimate amount and timing of any future settlements cannot be predicted with reasonable certainty.
We recognize both interest and penalties associated with uncertain tax positions as a component of income tax expense. During the years ended July 31, 2026, 2025, and 2024, we recognized income tax expense of $59 million, $42 million, and $6 million related to interest and penalties, respectively. We had accrued interest and penalties on our consolidated balance sheets related to unrecognized tax benefits of $113 million and $53 million as of July 31, 2026 and 2025, respectively.
The following table presents a reconciliation of the beginning and ending amount of our gross unrecognized tax benefits (in millions):
Year Ended July 31,
202620252024
Unrecognized tax benefits at the beginning of the period$572 $454 $360 
Additions for tax positions taken in prior years13 10 2 
Reductions for tax positions taken in prior years(1)(11)(20)
Additions for tax positions taken in the current year140 119 112 
Reduction relating to audit settlement(5)— — 
Unrecognized tax benefits at the end of the period$719 $572 $454 
As part of the acquisition of CyberArk, we executed an intercompany transaction to repatriate $3.5 billion of foreign earnings, resulting in immaterial income tax expense related to state and other taxes. Our remaining unremitted earnings are indefinitely reinvested.
Pursuant to adoption of the new income tax disclosures guidance, the following table presents the income taxes paid, net of refunds (in millions):
Year Ended July 31, 2026
Federal$40 
State
California18 
All Others51 
Foreign
Israel24 
Netherlands13 
India16 
All Others37 
Total$199