v3.26.1
Income Taxes
 12 Months Ended
Jul. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company recognized an income tax expense of $24.8 million for the fiscal year ended July 31, 2026 compared to an income tax benefit of $20.4 million for the fiscal year ended July 31, 2025. The change in income tax for fiscal year 2026, compared to the same period a year ago, was primarily due to the significant increase in pre-tax income in the U.S., a decrease in deductions from stock-based compensation, and a decrease in the FDII deduction and research and development credits due to U.S. tax law changes under H.R. 1 enacted on July 4, 2025, partially offset by non-deductible debt retirement expense that did not recur in fiscal year 2026.
The effective tax rate differs from the statutory U.S. Federal income tax rate of 21% mainly due to tax deductions for stock-based compensation, research and development credits, foreign earnings taxed in the U.S., the FDII deduction, and certain non-deductible expenses, including executive compensation limitation.
The Company’s income (loss) before provision for (benefit from) income taxes is as follows (in thousands):
Fiscal years ended July 31,
202620252024
Domestic$142,569 $24,752 $(44,280)
International21,548 24,643 17,442 
Income (loss) before provision for (benefit from) income taxes$164,117 $49,395 $(26,838)
The provision for (benefit from) income taxes consisted of the following (in thousands):
Fiscal years ended July 31,
202620252024
Current:
U.S. federal$4,719 $2,050 $738 
State2,878 2,567 1,710 
Foreign3,762 4,656 3,563 
Total current11,359 9,273 6,011 
Deferred:
U.S. federal12,673 (26,188)(22,856)
State186 (3,729)(3,396)
Foreign616 235 (494)
Total deferred13,475 (29,682)(26,746)
Total provision for (benefit from) income taxes $24,834 $(20,409)$(20,735)
The Company adopted ASU 2023-09 on a prospective basis beginning with the fiscal year ended July 31, 2026. The following table reconciles differences between income taxes calculated using the statutory federal income tax rate of 21% and the provision for income taxes (in thousands):
Fiscal years ended July 31, 2026
Amount%
U.S. federal income tax$34,465 21.0 %
State and local taxes, net of federal benefit(1)
3,064 1.9 %
Tax credits
(8,959)(5.5)%
Nontaxable or nondeductible items
Stock-based compensation(20,908)(12.7)%
Non-deductible officers’ compensation14,187 8.6 %
Other permanent differences2,386 1.5 %
Cross-border tax laws
Foreign earnings taxed in the U.S.3,064 1.9 %
FDII(1,714)(1.0)%
Foreign tax credits(5,670)(3.5)%
Other604 0.4 %
Foreign Tax Effects
Other foreign jurisdictions(19)— %
Withholding taxes
Argentina2,911 1.8 %
Other foreign jurisdictions1,304 0.8 %
Change in valuation allowance768 0.5 %
Other adjustments$(649)(0.4)%
Total provision for (benefit from) income taxes
$24,834 15.1 %
(1) State taxes in Illinois, New Hampshire, New Jersey, and New York made up the majority (greater than 50 percent) of the tax effect in this category.
Differences between income taxes calculated using the statutory federal income tax rate in 2025 and 2024, respectively, and the provision for income taxes, are as follows (in thousands):
Fiscal years ended July 31,
20252024
U.S. federal income tax$10,375 $(5,634)
State taxes, net of federal benefit(1,200)(1,702)
Stock-based compensation(28,474)(4,415)
Non-deductible officers' compensation10,882 4,996 
Foreign income taxed at different rates(2,023)(960)
Research tax credits(14,884)(12,067)
BEAT3 (3,091)
Foreign earnings taxed in the U.S.3,366 2,390 
Non-deductible acquisition costs— 30 
Permanent differences and others1,434 1,254 
Change in valuation allowance(5,682)491 
FDII(5,429)(2,027)
Debt Retirement Expense11,223 — 
Total provision for (benefit from) income taxes$(20,409)$(20,735)
The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities are as follows (in thousands):
As of July 31,
20262025
Accruals and reserves$36,022 $26,083 
Stock-based compensation12,401 10,174 
Deferred revenue252 1,284 
Capitalized research and development152,144 168,266 
Property and equipment720 398 
Lease liabilities6,735 8,612 
Convertible debt9,475 12,086 
Net operating loss carryforwards18,788 19,385 
Tax credits170,169 158,257 
Total deferred tax assets406,706 404,545 
Less valuation allowance75,058 66,295 
Net deferred tax assets331,648 338,250 
Less deferred tax liabilities:
Intangible assets20,407 16,859 
Operating lease assets5,932 7,782 
Unremitted foreign earnings2,502 1,759 
Capitalized commissions22,435 18,831 
Total deferred tax liabilities51,276 45,231 
Total net deferred tax assets$280,372 $293,019 
Disclosed below is a summary of income taxes paid by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 (in thousands):
July 31, 2026
U.S. federal
$800 
U.S. state and local
New York
773 
Other
2,116 
Total U.S. state and Local2,889 
Foreign
India2,496 
Australia663 
Aggregated withholding taxes4,215 
Other2,108 
Total Foreign9,482 
Net cash paid (refunds received) for income taxes$13,171 
As previously disclosed for the fiscal years ended July 31, 2025 and 2024, prior to the adoption of ASU 2023-09, the cash paid for income taxes, net of refunds received was $7.6 million and $8.9 million, respectively.
The Company considered both positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, differences between prior book and tax profits/losses, and results of future operations, and determined that a valuation allowance was not required for a significant portion of its deferred tax assets. A valuation allowance of $75.1 million and $66.3 million remained as of July 31, 2026 and 2025, respectively, primarily related to California, U.S. Federal, and Canada deferred tax assets. The increase of $8.8 million in the valuation allowance in the current fiscal year relates primarily to net operating losses and income tax credits in certain tax jurisdictions for which no tax benefit is expected to be recognized.
As of July 31, 2026, the Company had U.S. Federal, California, and other states net operating loss (“NOL”) carryforwards of $14.2 million, $62.8 million and $128.4 million, respectively. The U.S. Federal and California NOL carryforwards will start to expire in 2032 and 2027, respectively. The NOL carryforwards in other states will primarily start to expire in various years between 2027 and 2034.
As of July 31, 2026, the Company had U.S. Federal and California research and development tax credit (“R&D credit”) carryforwards of $106.8 million and $78.1 million, respectively.
U.S. Federal R&D credit carryforwards start expiring in 2031. California R&D tax credits do not expire.
Federal and California laws impose restrictions on the utilization of NOL carryforwards and R&D credit carryforwards in the event of a change in ownership of the Company, as defined by Internal Revenue Code 382 and 383. The Company experienced an ownership change in the past that does not materially impact the availability of its carryforwards. However, should there be an ownership change in the future, the Company’s ability to utilize existing carryforwards could be substantially restricted.
As of July 31, 2026, the Company has recorded a provisional estimate for foreign withholding taxes on undistributed earnings from foreign subsidiaries of $2.5 million. The Company may repatriate foreign earnings in the future to the extent that the repatriation is not restricted by local laws or there are no substantial incremental costs associated with such repatriation.
In the U.S., on July 4, 2025, H.R. 1 was signed into law. Among other provisions, the legislation reinstated immediate expensing for domestic research and experimental expenditures, extended 100% bonus depreciation for qualified property placed in service beginning January 20, 2025, and made certain other provisions of the Tax Cuts and Jobs Act permanent. The legislation has multiple effective dates, with certain provisions effective in fiscal year 2026 and others effective in fiscal year 2027. The immediate expensing of U.S. R&D expenditures had a favorable impact to the Company’s domestic tax liability. The Company has evaluated and recognized the impacts of H.R. 1 on the Company’s consolidated financial statements.
Unrecognized Tax Benefits
Activity related to unrecognized tax benefits is as follows (in thousands):
Fiscal years ended July 31,
202620252024
Unrecognized tax benefits - beginning of period$25,740 $21,520 $20,518 
Gross increases - prior period tax positions— 2 231 
Gross decreases - prior period tax positions(1,043)(134)(2,664)
Gross increases - current period tax positions4,209 4,352 3,435 
Unrecognized tax benefits - end of period$28,906 $25,740 $21,520 
During the year ended July 31, 2026, the Company’s unrecognized tax benefits increased by $3.2 million. As of July 31, 2026, the Company had unrecognized tax benefits of $18.7 million that, if recognized, would affect the Company’s effective tax rate. The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense in its consolidated statements of operations. As of July 31, 2026, the total interest and penalties related to unrecognized tax benefits was not material.
The Company, or one of its subsidiaries, files income taxes in the U.S. Federal jurisdiction and various state and foreign jurisdictions. If the Company utilizes NOL carryforwards or tax credits in future years, the U.S. Federal, state and local, and non-U.S. tax authorities may examine the tax returns covering the period in which the net operating losses and tax credits arose. As a result, the Company’s tax returns in the U.S. and California remain open to examination from fiscal years 2002 through 2026.
In January 2026, the Organization for Economic Co-operation and Development introduced new guidance including a “side-by-side safe harbor” which, if elected, exempts U.S. parented groups from certain provisions of Pillar 2. However, the election does not relieve foreign subsidiaries from certain jurisdiction-specific minimum taxes. The guidance will need to be incorporated into local tax legislation to be effective.