ZS 10-K & 10-Q changes, risk factors and insider trading

•servicingrepayment of our debt may require a significant amount of cash, and we may not have sufficient cash flow from our business or the ability to raise funds to pay our substantial debt; and

We have incurred net losses in all annual periods since our inception, and we expect we will continue to incur annual net losses for the foreseeable future. We experienced net losses of $41.5$63.2 million, $57.7$41.5 million and $202.3$57.7 million for fiscal 2025,2026, fiscal 20242025 and fiscal 2023,2024, respectively. As of July 31, 2025,2026, we had an accumulated deficit of $1,189.6$1,252.7 million. Because the market for our cloud platform is rapidly evolving and cloud-based security solutions haveare notstill yetin reachedthe widespreadprocess adoption,of being widely adopted, it is difficult for us to predict our future results of operations. We expect our operating expenses to increase significantly over the next several years as we continue to hire additional personnel, particularly in research and development and sales and marketing, expand our operations and infrastructure, both domestically and internationally, and continue to develop our platform. If we fail to increase our revenue to offset the increases in our operating expenses, we may not achieve or sustain profitability in the future.

Cloud security technologies are still evolving, and it remains difficult to predict customer demand and adoption rates for our solutions. We believe that our cloud platform offers superior protection to our customers, who are moving their applications and data to the cloud and embracing AI applications and agents. We also believe that our cloud platform represents a major shift from on-premises appliance-based security solutions. While cloud-based security solutions have seen increased adoption, traditional on-premises security appliances continue to be entrenched in the infrastructure of many of our potential customers, particularly large enterprises, because of their prior investment in and the familiarity of their IT personnel with on-premises appliance-based solutions. As a result, our sales process often involves extensive efforts to educate our customers on the benefits and capabilities of our cloud platform, particularly as we continue to pursue customer relationships with large organizations. Even with these efforts, we cannot predict long-term market acceptance of our cloud platform, or the adoption of competing products, services or technologies. If we fail to achieve or maintain broad market acceptance of our cloud platform or are unable to keep pace with industry changes, particularly as a result of AI, our ability to grow our business and our operating results will be materially and adversely affected.

In addition, numerous other factors, many of which are out of our control, have impactedimpacted, and may in the future impactimpact, our ability to add new customers, including:

•competition from hybridhybrid, cloud or cloudlegacy security products;

As a result of challenging orand uncertain macroeconomic conditions,conditions and the other challenges described in these risk factors, we have experiencedexperienced, and may experience in the futurefuture, increased scrutiny and a longer approval process for initial purchases by new customers, particularly for larger transactions. We cannot predict how challenging orand uncertain macroeconomic conditions or other challenges will impact potential customers' purchasing decisions and whether potential customers may decide to delay purchases, decrease the size of purchases or entirely forego purchasing our services.

In order for us to maintain or improve our results of operations, it is important that our customers renew their subscriptions for our services when existing contract terms expire, and that we expand our commercial relationships with our existing customers. Our customers have no obligation to renew their subscriptions for our services after the expiration of their contractual subscription period, which is typically one to threefive years, and in the normal course of business, some customers have elected not to renew. In addition, in certain cases, including under the new EU Data Act, customers may cancel their subscriptions without cause either at any time or upon advance written notice (commonly ranging from 30 days to 60 days), typically subject to an early termination penalty for unused services. In addition, our customers may renew for fewer users, elect not to renew non-user-based services, renew for shorter contract lengths or switch to a lower-cost product suite. If our customers do not renew their subscription services,subscriptions, we could incur impairment losses related to our deferred contract acquisition costs. It is difficult to accurately predict long-term customer retention because of our varied customer base and given the length of our subscription contracts. Our customer retention and expansion may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our services, our prices and pricing plans, our customers’ spending levels, decreases in the number of services purchased and/or the users to which our customers deploy our solutions, new laws and regulations impacting service contract terms, mergers and acquisitions involving our customers, competitioncompetition, our customers' increasing use of AI to automate tasks traditionally performed by human workers and deteriorating or uncertain general economic conditions,conditions. whichAny of these factors may result in reductionsour incustomers and potential customers reducing their IT budgets andor lowerlowering employee headcounts.headcounts, which could negatively impact our business.

Our future success also depends in part on the rate at which our current customers add additional users or services to their subscriptions, which is driven by a number of factors, including customer satisfaction with our services, customer security and networking issues and requirements, general economic conditions and customer reaction to the price per additional user or of additional services. In addition, as our customers increasingly deploy AI agents, our success will increasingly depend on our ability to monetize the increasing prevalence of non-user-based traffic. If our efforts to expand our relationships with our existing customers are not successful, our business may materially suffer.

We have experienced rapid growth in revenue, operations and employee headcount in recent periods. In addition, the number of customers, usersusers, services and internet traffic on our cloud platform has increased rapidly in recent years.years, and we anticipate that the increasing adoption and deployment of AI technologies by our customers will result in significant increases in traffic on and usage of our platform. Our growth may not be sustainable and may not be sufficient to achieve and sustain profitability, as we also expect our costs to increase in future periods as we expand our operations and significantly increase our headcount. In addition, we expect our recent revenue growth rates will decline in the future as the size of our revenue base increases. As a result, we believe that historical comparisons of our revenue may not be meaningful and should not be relied upon as an indication of future performance. Accordingly, you should not rely on our revenue and other growth for any prior quarter or fiscal year as an indication of our future revenue or revenue growth.

In addition, we believe that our corporate culture has been a contributor to our success, which we believe fosters innovation, teamwork and an emphasis on customer-focused results. We also believe that our culture creates an environment that drives and perpetuates our strategy and cost-effective distribution approach. In the past we have, and in the future we may, restructure or reduce our workforce to align people, roles and projects to our strategic priorities. Any restructuring, reduction or realignment in the workforce has the potential to negatively impact employee morale or make it more difficult to attract and retain talent. As we continue to grow, we may find it difficult to maintain our corporate culture. Preservation of our corporate culture is also made more difficult following the implementation of our hybrid work environment, and many of our employees continue to work from home on a full timefull-time or part timepart-time basis. Any failure to preserve our culture could harm our future success, including our ability to retain and recruit personnel, innovate and operate effectively and execute on our business strategy. If we experience any of these effects in connection with future growth, it could materially impair our ability to attract new customers, support and retain existing customers and expand their use of our platform, all of which would materially and adversely affect our business, financial condition and results of operations.

Any one or more of the factors above may result in significant fluctuations in our results of operations. We also intend to continue to invest significantly to grow our business in the near future rather than optimizing for profitability or cash flows. In addition, we generally experience seasonality in terms of when we enter into agreements with customers. We typically enter into a higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in the second half of our fiscal year. This seasonality is reflected to a much lesser extent, and sometimes is not immediately apparent, in revenue, due to the fact that we recognize subscription revenue ratably over the term of the subscription, which is generally one to threefive years. We expect that seasonality will continue to affect our operating results in the future and may reduce our ability to predict cash flow and optimize the timing of our operating expenses.

We currently derive most of our revenue from sales through our channel partner network, and we expect for the foreseeable future most of our future revenue growth will also be driven through this network. Not only does our joint sales approach require additional investment to grow and train our sales force, but we believe that continued growth in our business is dependent upon identifying, developing and maintaining strategic relationships with our existing and potential channel partners, including global systems integrators and regional telecommunications service providers that will in turn drive substantial revenue and provide additional value-added services to our customers. Our agreements with our channel partners are generally non-exclusive, meaning our channel partners may offer customers the products of several different companies, including products that compete with our cloud platform. Our channel partners may also cease marketing or reselling our platform with limited or no notice and without penalty. If our channel partners do not effectively market and sell subscriptions to our cloud platform, choose to promote our competitors’ products or fail to meet the needs of our customers, our ability to grow our business and sell subscriptions to our cloud platform may be adversely affected. For example, sales through our top five channel partners and their affiliates, in aggregate, represented 31% of our revenue for fiscal 2026, 28% of our revenue for fiscal 2025,2025 and 25% of our revenue for fiscal 2024 and 26% of our revenue for fiscal 2023.2024. In addition, our channel partner structure could subject us to lawsuits or reputational harm if, for example, a channel partner misrepresents the functionality of our cloud platform to customers or violates applicable laws or our corporate policies. Moreover, our channel partners' operations may be negatively impacted by events including pandemics, international conflicts, changes to applicable trade laws and regulations (including tariffs,tariffs), inflation and other events affecting the global economy in general. For example, these events could increase credit risk of end customers and create uncertainty in credit markets. Our ability to achieve revenue growth in the future will depend in large part on our success in maintaining successful relationships with our channel partners, identifying additional channel partners and training our channel partners to independently sell and deploy our platform. If we are unable to maintain our relationships with our existing channel partners or develop successful relationships with new channel partners or if our channel partners fail to perform, our business, financial position and results of operations could be materially and adversely affected.

•large networkingnetworking, cloud service and other vendors, which offer security appliances and/or incorporate security capabilities in their networkingproducts, productsplatforms and other services;

•companies with point solutions that compete with some of the features of our cloud platform, such as proxy, firewall, CASB, sandboxing and advanced threat protection, AI security, dataDLP, lossDSPM, prevention,browser encryption,security, MDR, SecOps, load balancing and VPN; and

•other providers of IT security services that offer, or may leverage related technologiestechnologies, including AI, to introduce,introduce products that compete with or are alternatives to our cloud platform.

Our competitors may be successful in convincing IT decision makers that legacy appliance-based security products orproducts, hybrid security cloud solutions based on legacyoutdated technology or newly developed cloud-delivered and/or AI-based security services are sufficient to meet their security needs and provide security performance that competes with our cloud platform. In addition, our competitors have and may develop cloud-based solutions with architectures similar to our products. Further, many organizations have invested substantial personnel and financial resources to design and operate their appliance-based networks and have established deep relationships with applianceour vendors.competitors. As a result, these organizations may prefer to purchase from their existing suppliers rather than add or switch to a new supplier.

Conditions in our market change rapidly and significantly as a result of technological advancements,advancements (particularly as a result of AI), partnering or acquisitions by our competitors or continuing market consolidation. Start-up companies that innovate and large competitors that are making significant investments in research and development may introduce similar or superior products, services and technologies that compete with our cloud platform. In addition, largeLarge companies with substantial communications infrastructure, such as global telecommunications services provider partnersproviders or public cloud providers, have entered or could choose to enter the security solutions market. Some of our current or potential competitors have made or could make acquisitions of businesses or establish cooperative relationships that may allow them to offer more directly competitive and comprehensive solutions than were previously offered and adapt more quickly to new technologies and customer needs.

In addition, AI technologies may lower barriers to entry for new competitors, including large AI providers and hyperscalers, and enable faster development of alternative solutions. These competitive pressures in our market or our failure to compete effectively may result in price reductions, fewer orders, reduced revenue and gross margins, increased net losses and loss of market share. Any failure to meet and address these factors could materially harm our business and operating results.

Any interruption or delay in the delivery of our services will negatively impact our customers. Our solutions enable secure connections to cloud-based applications and other destinations via the internet, by directing our customers’ internet traffic through our cloud platform. In addition, in certain local jurisdictions, we enable select third parties to host our services and cloud platform via their owned and controlled data centers to align with local requirements. Our customers depend on the continuous availability of our cloud platform to access the internet, and our services are designed to operate without interruption in accordance with our service level commitments. However, our platform is complex and may contain defects or errors that are not detected until after deployment. If we fail to timely detect defects or errors before deployment, or if our entire platform were to fail, customers and users could lose access to critical services and applications until the disruption is resolved or customers deploy our disaster recovery solution that allows them to bypass our cloud platform to access the internet. The adverse effects of any service interruptions on our reputation and financial condition may be disproportionately heightened due to the nature of our business and the fact that our customers expect continuous and uninterrupted internet access and have a low tolerance for interruptions of any duration. While we do not consider them to have been material, we have experienced, and may in the future experience, service disruptions and other performance problems due to a variety of factors.

The following factors, many of which are beyond our control, can affect the delivery and availability of our services and the performance of our cloudcloud, whether delivered by us or select third-party providers:

•the occurrence of earthquakes, floods, fires, pandemics, power loss, system failures, physical or electronic break-ins, acts of war, international conflicts (such as the current conflicts between Russia and Ukraine and in the Middle EastEast, including recent conflicts related to Iran) or terrorism, human error or interference (including by disgruntled or negligent, current or former employees or contractors) and other catastrophic events;

•government action to limit access to the internet or internet infrastructure;

•the actual or potential implementation of export controls,controls tariffsor tariffs, or retaliatory measures in response to such actions, on the sales of our products in countries where our customers or potential customers are located.

The occurrence of any of these factors, or if we are unable to efficiently and cost-effectively fix such errors or other problems that may be identified, could damage our reputation, negatively impact our relationship with our customers or otherwise materially harm our business, results of operations and financial condition. In addition, powerful new AI models have accelerated our ability to discover vulnerabilities in our software and third-party components we incorporate into our software. As a result, we are identifying more vulnerabilities, and any failure to timely remediate any significant vulnerability may result in issues that could disrupt the continuity or security of our services.

In addition, weWe provide our services through a cloud-based inline proxy, and some governments, third-party products, websites or services may block proxy-based traffic under certain circumstances. For example, vendors may attempt to block traffic from our cloud platform or blacklist our IP addresses because they cannot identify the source of the proxy-based traffic. Our competitors may use this as an excuse to block traffic from their solutions or blacklist our IP addresses, which may result in our customers’ traffic being blocked from our platform. If our customers experience significant instances of traffic blockages, they will experience reduced functionality or other inefficiencies, which would reduce customer satisfaction with our services and likelihood of renewal.

If we fail to develop or introduce new enhancements to our cloud platformplatform, including AI enhancements, on a timely basis, our ability to attract and retain customers, remain competitive and grow our business could be impaired.

We currently host our cloud platform and serve our customers from a global network of over 160200 public exchangesdata centers globally and thousands of private exchangessites at the edge. While we have electronic access to the components and infrastructure of our cloud platform that are hosted by third parties, we do not control the operation of these facilities. Consequently, we may be subject to service disruptions as well as a lack of adequate support for our data center operations due to reasons that are outside of our control. Our data centers are hosted in third-party locations, which are vulnerable to damage and connections to our data centers may be interrupted by a variety of sources, including earthquakes, floods, fires, power loss, system or infrastructure failures, computer viruses, physical or electronic break-ins, human error or interference (including by disgruntled or negligent, current or former employees or contractors) and other catastrophic events. Our data centers may also be subject to national or local administrative actions, changes in government regulations, including, for example, the impact of global economic and other sanctions like those levied in response to the current conflict between Russia and Ukraine, changes to legal or permitting requirements and litigation to stop, limit or delay operations. Despite precautions taken at these facilities, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in interruptions or delays in our services, impede our ability to scale our operations or have other adverse impacts upon our business. In addition, if we do not accurately plan for our infrastructure capacity requirements or experience significant strains on our data center capacity,resources, or if data center capacity is unavailable or unavailable at acceptable terms, we may experience delays and additional expenses in arrangingestablishing new data centers, and our customers could experience performance degradation or service outages that may subject us to financial liabilities, result in customer losses and materially harm our business.

It is virtually impossible for us to entirely mitigate the risk of breaches of our cloud platform or other security incidents affecting our cloud platform or our internal systems, networks or data. In addition, the functionality of our platform may be disrupted, either intentionally or due to negligence, including by disgruntled or negligent, current or former employees or contractors. The security measures we use internally and have integrated into our cloud platform, which are designed to detect unauthorized activity and prevent or minimize security breaches, and include our own newly developed products and services, may not function as expected or may not be sufficient to identify or protect against certain attacks. Enterprises are subject to a wide variety of attacks on their networks and systems, and techniques used to sabotage or to obtain unauthorized access to networks in which data is stored or through which data is transmitted change frequently and generally are not recognized until launched against a target. Further, the development of AI and ML and the proliferation of AI and ML tools used to identify and exploit vulnerabilities create additional risks of attacks and of impactful security breaches and incidents. The growth in state sponsored cyber activity, including those actions taken in connection with therecent currentglobal conflict between Russiaconflicts and Ukraine,geopolitical showcasetensions, showcases the increasing sophistication of cyber threats. As a result, we may be unable to anticipate these techniques or implement adequate measures to prevent an electronic intrusion into our customers through our cloud platform or to prevent breaches and other security incidents affecting our cloud platform, internal networks, systems or data. Further, once identified, we may be unable to remediate or otherwise respond to a breach or other incident in a timely manner. Actual, perceived or purported security breaches of our cloud platform could result in actual, perceived or purported breaches of our customers’ networks and systems.

Further, our vendors and service providers have been, and may in the future be, the targets of cyberattacks, and their systems and networks have been, and may in the future be, breached or may contain exploitable defects or bugs that could result in a breach of or disruption to their or our systems and networks. Our ability to monitor our vendors’ and service providers’ data security is limited, and, in any event, third parties may be able to circumvent their security measures, resulting in the unauthorized access to, misuse, disclosure, loss, alteration, or destruction of our data, including confidential, sensitive, and other information about individuals. Geo-political factors including international conflicts, such as between Russia and Ukraine and in the Middle East, including recent conflicts related to Iran, may increase the risk of such cyberattacks.

To increase the number of customers and increase the market acceptance of our platform, we will need to expand our sales and marketing operations, including our domestic and international sales force. Although we have a channel sales model, our sales representatives typicallyoften engage in direct interaction with our prospective customers. Therefore, we continue to be substantially dependent on our sales force to obtain new customers. Increasing our customer base and achieving broader market acceptance of our cloud platform will depend, to a significant extent, on our ability to expand and further invest in our sales and marketing operations and activities. There is significant competition for sales personnel with the advanced sales skills and technical knowledge we need. We believe that selling a cloud-based security solution requires particularly talented sales personnel with the ability to communicate the transformative potential of our cloud platform. Our ability to achieve significant growth in revenue in the future will depend, in large part, on our success in recruiting, training and retaining enough talented sales personnel in both the U.S. and international markets.

New hires require significant training and may take significant time before they achieve full productivity. As a result, our new hires and planned hires may not become as productive as we would like, and we may be unable to hire or retain enough qualified individuals in the future. As a result of our rapid headcount growth, a large percentage of our sales and marketing team is new to our company and selling our solutions, and therefore this team may be less effective than our more seasoned employees. Furthermore, hiring sales personnel in new countries, or expanding our existing presence, requires upfront and ongoing expenditures that we may not recover if the sales personnel fail to achieve full productivity. We cannot predict whether, or to what extent, our sales will increase as we expand our sales force or how long it will take for sales personnel to become productive. The effectiveness of our sales and marketing has also varied over time and, together with the effectiveness of any partners or resellers we may engage, may vary in the future. Our business and operating results may be harmed if our efforts do not generate a correspondingly significant increase in revenue. We may not achieve anticipated revenue growth from expanding our sales force if we are unable to hire, develop and retain talented sales personnel, if our new sales personnel are unable to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective.

Our sales force develops relationships directly with our customers, and together with our channel account teams, works with our channel partners on account penetration, account coordination, sales and overall market development. We spend substantial time and resources on our sales efforts without any assurance that our efforts will produce a sale. Platform purchases are frequently subject to budget constraints, multiple approvals and unanticipated administrative, processing and other delays. As a result, it is difficult to predict whether and when a sale will be completed and when revenue from a sale will be recognized.

Sales to larger customers involve risks that may not be present, or that are present to a lesser extent, with sales to smaller customers, which can act as a disincentive to our sales team to pursue these larger customers. These risks include:

We generally recognize revenue from customers ratably over the terms of their subscriptions, which are typically one to threefive years. As a result, a substantial portion of the revenue we report in each period is attributable to the recognition of deferred revenue relating to agreements that we entered into during previous periods. Consequently, any increase or decline in new sales or renewals in any one period may not be immediately reflected in our revenue for that period. Any change, however, may affect our revenue in future periods. Additionally, subscriptions that are invoiced annually in advance or multi-year in advance contribute significantly to our short-term and long-term deferred revenue. Accordingly, the effect of downturns or upturns in new sales and potential changes in our rate of renewals may not be fully reflected in our results of operations until future periods. We may also be unable to reduce our cost structure in line with a significant deterioration in sales or renewals. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers must be recognized over the applicable subscription term.

If we do not provide superior support to our customers, our ability to renew subscriptions, increase the number of users and sell additional services to customers may be adversely affected. We believe that successfully delivering our cloud solution requires a highly skilled level of customer support and engagement. We or our channel partners must assist our customers to deploy our cloud platform, resolve performance issues, address interoperability challenges with a customer’s existing network and security infrastructure and respond to security threats and cyberattacks. Many enterprises, particularly large organizations, have very complex networks and require high levels of focused support, including premium support offerings, to fully realize the benefits of our cloud platform. Any failure by us to maintain the expected level of support could reduce customer satisfaction and hurt our customer retention, particularly with respect to our large enterprise customers. Additionally, if our channel partners do not provide support to the satisfaction of our customers, we may be required to provide this level of support to those customers, which would require us to hire additional personnel and to invest in additional resources, including the possible use of AI support agents. We may not be able to hire or deploy such resources fast enough to keep up with demand, particularly if the sales of our platform exceed our internal forecasts. We may also not be successful in our efforts to fully onboard new hires and provide adequate training to our employees, many of whom continue to work remotely. To the extent that we or our channel partners are unsuccessful in hiring, training, retaining or deploying adequate support resources, our ability and the ability of our channel partners to provide adequate and timely support to our customers will be negatively impacted, and our customers’ satisfaction with our cloud platform could be adversely affected. We currently rely in part on contractors provided by third-party service providers internationally to provide support services to our customers, and we expect to expand our international customer service support team to other countries. Any failure to properly train or oversee such contractors could result in a poor customer experience and an adverse impact on our reputation and ability to renew subscriptions or engage new customers. Furthermore, as we sell our solutions internationally, our support organization faces additional challenges, including those associated with delivering support, training and documentation in languages other than English.globally. Any failure to maintain high-quality customer support, or a market perception that we do not maintain high-quality support, could materially harm our reputation, adversely affect our ability to sell our solutions to existing and prospective customers and could harm our business, financial condition and results of operations.

Our future success is substantially dependent on our ability to attract, retain and motivate the members of our management team and other key employees throughout our organization. In particular, we are highly dependent on the services of Jay Chaudhry, our Chief Executive Officer and chairman of our board of directors, who is critical to our future vision and strategic direction. We rely on our leadership team in the areas of operations, security, marketing, sales, support and general and administrative functions, and on individual contributors on our research and development team. Although we have entered into employment agreements with our key personnel, these agreements have no specific duration and constitute at-will employment. We do not maintain key person life insurance policies on any of our employees. The loss of one or more of our executive officers or key employees could seriously harm our business. We have addedexperienced, severaland newmay in the future experience, significant change in senior managementmanagement. employeesFor inexample, recenttwo years,sales includingleaders ourrecently Chiefdeparted Financialthe Officer.Company. Any significant leadership change or senior management transition involves risk, especially nearly simultaneous changes involving so many leaders and employees,risk and any failure to transition effectively or to retain these new leaders could hinder our strategic planning, business execution and future performance.

To execute our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel in the San Francisco Bay Area, where our headquarters are located, and in other locations where we operate, is often intense, especially for experienced sales professionals and for engineers experienced in designing and developing cloud applications, security software and AI and ML solutions. In addition, the United States and other regions in which we operate have in the past and may again in the future experience acute workforce shortages for highly skilled workers, which in turn, can create hyper-competitive wage environments that may impact our ability to attract and retain employees. We have from time to time experienced, and we may continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. For example, in recent years, recruiting, hiring and retaining employees with expertise in the cybersecurity industryand AI/ML has become increasingly difficult as the demand for cybersecurity and AI/ML professionals has increased as a result of the ongoing cybersecurity attacks on global corporations and governments.increased. Many of the companies with which we compete for experienced personnel have greater resources than we have. In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. Volatility or lack of performance in our stock price may also affect our ability to attract and retain our key employees.

•U.S. or other government requirements relating to the formation, administration and performance of contracts with the public sectorsector, including the requirement to maintain facilities and other security clearances, affect how we and our channel partners do business with governmental agencies;

•U.S. or other government certification requirements applicable to our cloud platform, including the Federal Risk and Authorization Management Program (FedRAMP),Program, are often difficult and costly to obtain and maintain and failure to do so will restrict our ability to sell to government customers;

•changes in government policy positions, including applicable tariffs and other trade regulations, or the threat of such changes; spending priorities or reductions in government employees or programs, which result in a reduction of government spending in general or on technology and cybersecurity products in particular.

Historically, we have derived a significant portion of our revenue from outside the United States. We derived approximately 49%,47%, 50%49% and 50% of our revenue from our international customers in fiscal 2025,2026, fiscal 20242025 and fiscal 2023,2024, respectively. As of July 31, 2025,2026, approximately 63%60% of our full-time employees were located outside of the United States. We are continuing to adapt toto, and develop strategies to addressaddress, international markets and our growth strategy includes continued expansion into target geographies, but there is no guarantee that such efforts will be successful. We expect that our international activities will continue to grow in the future, as we continue to pursue opportunities in international markets. These international operations will require significant management attention and financial resources and are subject to substantial risks, including:

•political, economic and social uncertainty or international conflict, such as the current conflicts between Russia and Ukraine and in the Middle EastEast, including recent conflicts related to Iran;

•greater risk of unexpected changes inin, or increased costs associated with, regulatory practices or enforcement policies, trade regulations including tariffs and tax laws and treaties;

•greater risk of a failure of foreign employees, partners, distributors and resellers to comply with both U.S. and foreign laws, including antitrust regulations, anti-bribery laws, export and import control laws, tradesanctions and economic sanctions andother applicable trade laws and regulations;

•requirements to comply with foreign privacy, data protection, cybersecurityprotection and information securitycybersecurity laws and regulations and the risksneed andto costsoffer ofdata noncompliancesovereignty solutions to satisfy some customers' demands;

•increased expenses incurred in providing customer support services to our global customer base and establishing and maintaining office space and equipment for our international operations;

Our business strategy includes acquiring other complementary solutions, technologies or businesses. We have in the past acquired, and expect in the future to acquire, businesses that we believe will complement or augment our existing business. In order toTo expand our security offerings and features, we also may enter into relationships with other businesses, which could involve preferred or exclusive licenses, additional channels of distribution or investments in other companies. Negotiating these transactions can be time-consuming, difficult and costly, and our ability to close these transactions may be subject to third-party approvals, such as government regulatory approvals, which are beyond our control. Consequently, we cannot assure you that these transactions, once undertaken and announced, will close.

We believe that our significant presence in India provides important advantages for our business, such as direct access to a large pool of skilled professionals. However, it also creates certain risks that we must effectively manage. As of July 31, 2026, 36% of our global workforce is based in India and is comprised mostly of R&D, finance and operations professionals. Wage costs in India for skilled professionals are currently lower than in the United States for comparably skilled professionals. However, wages and benefit costs in India are increasing at a faster rate than in the United States, which could result in us incurring increased costs for technical professionals. There is intense competition in India for skilled technical professionals, and we expect such competition to increase. As a result, we may be unable to retain our current employee base in India or hire additional new talent or do so cost-effectively. In addition, India has experienced natural disasters, civil unrest and terrorism and, in the past, has been and may again be involved in conflicts with neighboring countries, such as the recent conflict with Pakistan.countries. If we are unable to effectively manage any of the foregoing risks related to our India operations, our development efforts and operations could be impaired, which could materially and negatively impact our growth and operating results.

We expect that our existing cash, cash equivalents and short-term investments will be sufficient to meet our anticipated cash needs for working capital, capital expenditures and 2028 Notes repayment requirements for at least the next 12 months. We may, however, need to raise additional funds to fund our operating expenses, make capital purchases, acquire or invest in business or technology, and we may not be able to obtain those funds on favorable terms, or at all. If we raise additional equity financing, our stockholders may experience significant dilution of their ownership interests and the per share value of our common stock could decline. Furthermore, if we engage in additional debt financing, the holders of our debt would have priority over the holders of our common stock, and we may be required to accept terms that restrict our ability to incur additional indebtedness or our ability to pay any dividends on our common stock, though we do not intend to pay dividends in the foreseeable future. We may also be required to take other actions, any of which could harm our business and operating results. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all. If we are unable to obtain adequate financing, or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, and our business, operating results, financial condition and prospects could be materially and adversely affected.

Risks Related to Artificial Intelligence, Information Technology, Intellectual Property, Data Security and Privacy

In addition, the techniques used by cyber threat actors, including state sponsored actors, to access or sabotage networks and other systems change frequently and generally are not recognized until launched against a target. As a result, there is a risk that a cyber threat could emerge that our services are unable to detect or prevent until after some of our customers are impacted. The growth in state sponsored cyber activity showcases the increasing sophistication of cyber threats and dramatically expands the global threat landscape. Moreover, as our services are adopted by an increasing number of enterprises, it is possible that the individuals and organizations behind cyber threats will focus on finding ways to defeat our services or to target our systems. If this happens, our cloud platform could be targeted by attacks specifically designed to disrupt our business and create the perception that our cloud platform is not capable of providing superior security, which, in turn, could have a serious impact on our reputation as a provider of security solutions. Further, high profile security breaches or incidents, in particular those of cloud-based service providers, may cause our customers and potential customers to lose trust in cloud solutions generally, and with respect to security in particular, which could materially and adversely impact our ability to retain existing customers or attract new customers.

Increasingly, enterprises are subject to a wide variety of attacks on their networks and systems, including traditional threat actors, malicious code (such as viruses and worms), social engineering attacks (such as deep fakes), targeted phishing attacks, distributed denial-of-service attacks, advanced attacks conducted or sponsored by nation-states, AI enabled attacks or attacks targeting and exploiting AI and ML systems and applications, advanced persistent threat intrusions, ransomware and other malware, attacks on their vendors and supply chains, and theft or misuse of intellectual property or business or personal data, including by disgruntled or negligent, current or former employees or contractors. No security solution, including our cloud platform, can address all possible security threats, which are becoming increasingly frequent and sophisticated with the development of AI and ML,ML and the proliferation of AI and ML tools used to identify and exploit vulnerabilities, or block all methods of penetrating a network or otherwise perpetrating a security breach or incident. Our customers typically rely on complex network and security infrastructures, which include products and services from multiple vendors, to secure their networks. If any ofcustomer's our customersnetwork becomes infected with malware or experiences a security breach or incident, they could be disappointed with our services, regardless of whether our services are intended to block the attack or would have blocked the attack if the customer had properly configured our cloud platform. Additionally, if any enterprises that are publicly known to use our services are the subject of a cyberattack that becomes publicized, our current or potential customers may look to our competitors for alternatives to our services.

Issues in the development, use and execution of AI and ML, combined with an uncertain regulatory environment,environment and evolving market expectations, may harm our business.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. As discussed in the section titled "Special Note Regarding Forward-Looking Statements," the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such difference include, but are not limited to, those identified below and those discussed in the section titled "Risk Factors" and elsewhere in this Annual Report on Form 10-K. Our fiscal year end is July 31, and our fiscal quarters end on October 31, January 31, April 30 and July 31. Our fiscal yearyears ended July 31, 2025,2026, July 31, 20242025 and July 31, 20232024 are referred to as fiscal 2025,2026, fiscal 20242025 and fiscal 2023,2024, respectively.

We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services. We also generate an immaterial amount of revenue from professional and other services, which consist primarily of fees associated with mapping, implementation, network design and training. Our subscription pricing is primarily calculated on a per-user and metered-usage basis. We recognize subscription and support revenue ratably over the life of thecustomer contract,contracts, which is generally one to threefive years. As of July 31, 2025,2026, we had expanded our operations to overapproximately 9,40011,000 customers across major industries, with users in over 185 countries. Government agencies and someMany of the world's largest enterprises inand thegovernment worldagencies rely on usour cloud platform to support theirenable secure digital transformation.

We operate our business as one reportable segment. Our revenue has experienced significant growth in recent periods. For fiscal 2025,2026, fiscal 20242025 and fiscal 2023,2024, our revenue was $2,673.1$3,352.5 million, $2,167.8$2,673.1 million and $1,617.0$2,167.8 million, respectively. We have incurred net losses in all annual periods since our inception. For fiscal 2025,2026, fiscal 20242025 and fiscal 2023,2024, our net loss was $41.5$63.2 million, $57.7$41.5 million and $202.3$57.7 million, respectively. We expect we will continue to incur net losses for the foreseeable future, as we continue to invest in our sales and marketing organization to maximize our market opportunity, to invest in research and development efforts to enhance the functionality of our cloud platform, and to address any legal matters and related accruals, as further described in Note 12, Commitments and Contingencies, of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Changes in macroeconomic and geopolitical conditionsconditions, including but not limited to global conflicts, inflation and responses to inflation, tariffs or retaliatory measures due to tariffs, supply chain disruptions, energy shortages and the emergence of AI, can cause uncertainty in our business. WeIn continueresponse to uncertain economic conditions, we see customer scrutiny ofof, and elongatedcomplex approval processes forfor, transactions, particularly larger deals, as customers continue to carefully consider purchasing decisions and are requiringrequire multiple approvals for large expendituresexpenditures. inAs responsea toresult, the uncertain economic environment. Macroeconomicmacroeconomic conditions may impact the future demand for subscriptions of our cloud platform.

We define non-GAAP income from operations as GAAP loss from operationsoperations, excluding stock-based compensation expense and related payroll taxes, amortization expense of acquired intangible assets, restructuring and other charges and acquisition-related expenses. We define non-GAAP operating margin as non-GAAP income from operations as a percentage of revenue.

Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less purchases of property, equipment and other assets and capitalized internal-use software. Free cash flow margin is calculated as free cash flow divided by revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our operationsoperations. that,This amount, after the investments in property, equipment and other assets and capitalized internal-use software, can be used for strategic initiatives, including investing in our business,business and strengthening our financial position.

We generate revenue from contracts with typical durations ranging from one to threefive years. We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. We recognize revenue ratably over the life of the contract. Amounts that have been invoiced are recorded in deferred revenue,revenue or they are recorded in revenuerevenue, if the revenue recognition criteria have been met. Subscriptions that are invoiced annually in advance or multi-year in advance represent a significant portion of our short-term and long-term deferred revenue in comparison to invoices issued quarterly in advance or monthly in advance. We cannot predict the mix of invoicing schedules in any given period.

We generally experience seasonality in terms of when we enter into agreements with our customers. We typically enter into a higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in ourthe second half of our fiscal year. However, because we recognize revenue ratably over the terms of our subscription contracts, a substantial portion of the revenue that we report in each period is attributable to the recognition of deferred revenue relating to agreements that we entered into during previous periods. Consequently, increases or decreases in new sales or renewals in any one period may not be immediately reflected as revenue for that period. Accordingly, the effect of downturns in sales and market acceptance of our platform,platform and potential changes in our rate of renewals, may not be fully reflected in our results of operations until future periods.

As our customers expand and increase the use of our cloud platformplatform, driven by additional applicationsusers, applications, workloads, AI agents, and connected devices, our cost of revenue will increase due to higher bandwidth and data center expenses. Our cost of revenue may also increase as a result of higher market prices for data center equipment supporting our cloud platform. However, we expect to continue to benefit from economies of scale as our customers increase the use of our cloud platform. We intend to continue to invest additional resources in our cloud platform and our customer support organizations as we grow our business. The level and timing of investment in these areas could affect our cost of revenue in the future.

Gross profit, or revenue less cost of revenue, and gross margin, or gross profit as a percentage of revenue, have been and will continue to be affected by various factors,factors. includingThese include the timing of our acquisition of new customers and our renewals of and follow-on sales to existing customers, the average sales price of our services, the mix of services offered in our solutions, including new product introductions, the data center and bandwidth costs associated with operating our cloud platform,platform to support additional users, applications, workloads, AI agents, and connected devices, the extent to which we expand our customer support and cloud operations organizations and the extent to which we can increase the efficiency of our technology, infrastructure and data centers through technological improvements. WeAlthough we expect our gross profit to increase in absolute dollars and our gross margin to increaseremain slightlyrelatively over the long term, althoughconsistent, our gross profit and gross margin could fluctuate from period to period depending on the interplay of all of the above factors.

Our operating expenses consist of sales and marketing expenses, research and development expenses and general and administrative expenses. Personnel expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation expense and, with respect to sales and marketing expenses, sales commissions that are recognized as expenses over the period of benefit. Operating expenses also include overhead expensesexpenses, forwhich primarily consists of facilities, IT, depreciation expense and amortization expense.

Sales and marketing expenses consist primarily of employee compensation and related expenses, including salaries, bonuses and benefits for our sales and marketing employees, sales commissions that are recognized as expenses over the period of benefit, stock-based compensation expense, marketing programs, travel and entertainment expenses, expenses for conferences and events, amortization of intangible assets acquired through our business acquisitions and allocated overhead expenses.expenses which primarily consists of facilities, IT, depreciation expense and amortization expense. We capitalize our sales commissions and associated payroll taxes that are incremental to the acquisition of customer contracts and recognize them as expenses over the estimated period of benefit. The amount recognized in our sales and marketing expenses reflects the amortization of expenses previously deferred as attributable to each period presented in this Annual Report on Form 10-K, as described below under "Critical Accounting Policies and Estimates."

General and administrative expenses consist primarily of employee-related expenses, including salaries and bonuses, stock-based compensation expense and employee benefit expenses for our finance, legal, human resources and administrative personnel, as well as professional fees for external legal services (including certain litigation-related expenses), accounting and other related consulting services. The litigation-related expenses include professional fees and related expenses incurred by us in defending or settling significant claims that we deem not to be in the ordinary course of our business and, if applicable, accruals related to estimated losses in connection with these claims. We expect our general and administrative expenses to increase in absolute dollars for the foreseeable future as we increase the size of our general and administrative organizations, incur additional costs to support our business growth and due to any legal matters and related accruals, as further described in Note 12, Commitments and Contingencies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. However, we expect our general and administrative expenses to decrease as a percentage of our revenue over the long term, although our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses. In particular, litigation-related expenses related to significant litigation claims may result in significant fluctuations from period to period, as they are inherently subject to change and difficult to estimate.

Interest expense consists primarily of amortization of debt issuance costs, recognition of contractual interest expense related to the 2025 andconvertible 2028senior Notes,notes, and gains and losses related to changes in the fair value of interest rate swaps. For further information refer to Note 8, Derivative Instruments and Note 10, Convertible Senior Notes, of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

(3) Includes restructuring and other charges, excluding stock-based compensation expensecharges:

Revenue increased by $505.3$679.4 million, or 23%,25%, in fiscal 2025,2026, compared to fiscal 2024.2025. The change in revenue was driven primarily by an increase in users and sales of additional subscriptions to existing customers, which contributed $434.0$474.6 million in additional revenue. The remainder of the increase was primarily attributable to the addition of new customers,customers contributed the remaining $204.8 million in additional revenue, driven by acquisition and organic customer growth, as we increasedgrew our customer base by 9%16% from fiscal 20242025 to fiscal 2025.2026.

Cost of revenue increased by $141.0$159.5 million, or 30%,26%, in fiscal 2025,2026, compared to fiscal 2024.2025. The overall increase in cost of revenue was driven primarily by the expanded use of our cloud platform by existing and new customers, which led to an increase of $76.1$103.1 million for data center and equipment-related costs for hosting and operating our cloud platform. Additionally, our employee-related expenses increased by $49.4 million, inclusive of an increase of $17.3 million in stock-based compensation expense, driven primarily by an increase in headcount in our customer support and cloud operations organizations. The remainder of the increase was primarily attributable to $7.0employee-related expenses of $37.8 million, inclusive of an increase of $18.4 million in additionalstock-based hardwarecompensation costsexpense, relatedhigher toamortization aof one-timeacquired largeintangible privateassets cloudof deployment$12.9 and $5.4 million for facility and IT services.million.

We have incurred net losses in all annual periods since our inception, and we expect we will continue to incur net losses for the foreseeable future. We experienced net losses of $41.5 million, $57.7 million and $202.3 million for fiscal 2025, fiscal 2024 and fiscal 2023, respectively. As of JanuaryApril 31,30, 2026, we had an accumulated deficit of $1,235.5$1,249.4 million. Because the market for our cloud platform is rapidly evolving and cloud-based security solutions haveare notstill yetin reachedthe widespreadprocess adoption,of being widely adopted, it is difficult for us to predict our future results of operations. We expect our operating expenses to increase significantly over the next several years as we continue to hire additional personnel, particularly in research and development and sales and marketing, expand our operations and infrastructure, both domestically and internationally, and continue to develop our platform. If we fail to increase our revenue to offset the increases in our operating expenses, we may not achieve or sustain profitability in the future.

Cloud security technologies are still evolving, and it remains difficult to predict customer demand and adoption rates for our solutions. We believe that our cloud platform offers superior protection to our customers, who are moving their applications and data to the cloud and embracing AI applications and agents. We also believe that our cloud platform represents a major shift from on-premises appliance-based security solutions. While cloud-based security solutions have seen increased adoption, traditional on-premises security appliances continue to be entrenched in the infrastructure of many of our potential customers, particularly large enterprises, because of their prior investment in and the familiarity of their IT personnel with on-premises appliance-based solutions. As a result, our sales process often involves extensive efforts to educate our customers on the benefits and capabilities of our cloud platform, particularly as we continue to pursue customer relationships with large organizations. Even with these efforts, we cannot predict long-term market acceptance of our cloud platform, or the adoption of competing products, services or technologies. If we fail to achieve or maintain broad market acceptance of our cloud platform or are unable to keep pace with industry changes, particularly as a result of artificial intelligence,AI, our ability to grow our business and our operating results will be materially and adversely affected.

In addition, numerous other factors, many of which are out of our control, have impactedimpacted, and may in the future impactimpact, our ability to add new customers, including:

As a result of challenging orand uncertain macroeconomic conditions,conditions and the other challenges described in these risk factors, we have experiencedexperienced, and may experience in the futurefuture, increased scrutiny and a longer approval process for initial purchases by new customers, particularly for larger transactions. We cannot predict how challenging orand uncertain macroeconomic conditions or other challenges will impact potential customers' purchasing decisions and whether potential customers may decide to delay purchases, decrease the size of purchases or entirely forego purchasing our services.

In order for us to maintain or improve our results of operations, it is important that our customers renew their subscriptions for our services when existing contract terms expire, and that we expand our commercial relationships with our existing customers. Our customers have no obligation to renew their subscriptions for our services after the expiration of their contractual subscription period, which is typically one to three years, and in the normal course of business, some customers have elected not to renew. In addition, in certain cases, including under the EU Data Act, customers may cancel their subscriptions without cause either at any time or upon advance written notice (commonly ranging from 30 days to 60 days), typically subject to an early termination penalty for unused services. In addition, our customers may renew for fewer users, elect not to renew non-user basednon-user-based services, renew for shorter contract lengths or switch to a lower-cost product suite. If our customers do not renew their subscription services,subscriptions, we could incur impairment losses related to our deferred contract acquisition costs. It is difficult to accurately predict long-term customer retention because of our varied customer base and given the length of our subscription contracts. Our customer retention and expansion may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our services, our prices and pricing plans, our customers’ spending levels, decreases in the number of services purchased and/or the users to which our customers deploy our solutions, new laws and regulations impacting service contract terms, mergers and acquisitions involving our customers, competitioncompetition, our customers' increasing use of AI to automate tasks traditionally performed by human workers and deteriorating or uncertain general economic conditions,conditions. whichAny of these factors may result in reductionsour incustomers and potential customers reducing their IT budgets andor lowerlowering employee headcounts.headcounts, which could negatively impact our business.

Our future success also depends in part on the rate at which our current customers add additional users or services to their subscriptions, which is driven by a number of factors, including customer satisfaction with our services, customer security and networking issues and requirements, general economic conditions and customer reaction to the price per additional user or of additional services. In addition, as our customers increasingly deploy AI agents, our success will increasingly depend on our ability to monetize the increasing prevalence of non-user-based traffic. If our efforts to expand our relationships with our existing customers are not successful, our business may materially suffer.

We currently derive most of our revenue from sales through our channel partner network, and we expect for the foreseeable future most of our future revenue growth will also be driven through this network. Not only does our joint sales approach require additional investment to grow and train our sales force, but we believe that continued growth in our business is dependent upon identifying, developing and maintaining strategic relationships with our existing and potential channel partners, including global systems integrators and regional telecommunications service providers that will in turn drive substantial revenue and provide additional value-added services to our customers. Our agreements with our channel partners are generally non-exclusive, meaning our channel partners may offer customers the products of several different companies, including products that compete with our cloud platform. Our channel partners may also cease marketing or reselling our platform with limited or no notice and without penalty. If our channel partners do not effectively market and sell subscriptions to our cloud platform, choose to promote our competitors’ products or fail to meet the needs of our customers, our ability to grow our business and sell subscriptions to our cloud platform may be adversely affected. For example, sales through our top five channel partners and their affiliates, in aggregate, represented 28% of our revenue for fiscal 2025, 25% of our revenue for fiscal 2024 and 26% of our revenue for fiscal 2023, and 30% and 27% of our revenue for the sixnine months ended JanuaryApril 31,30, 2026 and 2025, respectively. In addition, our channel partner structure could subject us to lawsuits or reputational harm if, for example, a channel partner misrepresents the functionality of our cloud platform to customers or violates applicable laws or our corporate policies. Moreover, our channel partners' operations may be negatively impacted by events including pandemics, international conflicts, trade regulations including tariffs, inflation and other events affecting the global economy in general. For example, these events could increase credit risk of end customers and create uncertainty in credit markets. Our ability to achieve revenue growth in the future will depend in large part on our success in maintaining successful relationships with our channel partners, identifying additional channel partners and training our channel partners to independently sell and deploy our platform. If we are unable to maintain our relationships with our existing channel partners or develop successful relationships with new channel partners or if our channel partners fail to perform, our business, financial position and results of operations could be materially and adversely affected.

Conditions in our market change rapidly and significantly as a result of technological advancements (particularly as a result of artificial intelligenceAI), partnering or acquisitions by our competitors or continuing market consolidation. Start-up companies that innovate and large competitors that are making significant investments in research and development may introduce similar or superior products, services and technologies that compete with our cloud platform. Large companies with substantial communications infrastructure, such as global telecommunications services providers or public cloud providers, have entered or could choose to enter the security solutions market. Some of our current or potential competitors have made or could make acquisitions of businesses or establish cooperative relationships that may allow them to offer more directly competitive and comprehensive solutions than were previously offered and adapt more quickly to new technologies and customer needs. In addition, AI technologies may lower barriers to entry for new competitors, including large AI providers, and enable faster development of alternative solutions. These competitive pressures in our market or our failure to compete effectively may result in price reductions, fewer orders, reduced revenue and gross margins, increased net losses and loss of market share. Any failure to meet and address these factors could materially harm our business and operating results.

Any interruption or delay in the delivery of our services will negatively impact our customers. Our solutions enable secure connections to cloud-based applications and other destinations via the internet, by directing our customers’ internet traffic through our cloud platform. Our customers depend on the continuous availability of our cloud platform to access the internet, and our services are designed to operate without interruption in accordance with our service level commitments. However, our platform is complex and may contain defects or errors that are not detected until after deployment. If we fail to timely detect defects or errors before deployment, or if our entire platform were to fail, customers and users could lose access to critical services and applications until the disruption is resolved or customers deploy our disaster recovery solution that allows them to bypass our cloud platform to access the internet. The adverse effects of any service interruptions on our reputation and financial condition may be disproportionately heightened due to the nature of our business and the fact that our customers expect continuous and uninterrupted internet access and have a low tolerance for interruptions of any duration. While we do not consider them to have been material, we have experienced, and may in the future experience, service disruptions and other performance problems due to a variety of factors.

•the occurrence of earthquakes, floods, fires, pandemics, power loss, system failures, physical or electronic break-ins, acts of war, international conflicts (such as the current conflicts between Russia and Ukraine and in the Middle EastEast, including recent conflicts related to Iran) or terrorism, human error or interference (including by disgruntled or negligent, current or former employees or contractors) and other catastrophic events;

•the potential implementation of export controls,controls tariffsor tariffs, or retaliatory measures in response to such actions, on the sales of our products in countries where our customers or potential customers are located.

The occurrence of any of these factors, or if we are unable to efficiently and cost-effectively fix such errors or other problems that may be identified, could damage our reputation, negatively impact our relationship with our customers or otherwise materially harm our business, results of operations and financial condition. In addition, powerful new AI models have accelerated our ability to discover vulnerabilities in our software and third-party components we incorporate into our software. As a result, we are identifying more vulnerabilities, and any failure to timely remediate any significant vulnerability may result in issues that could disrupt the continuity or security of our services.

In addition, weWe provide our services through a cloud-based inline proxy, and some governments, third-party products, websites or services may block proxy-based traffic under certain circumstances. For example, vendors may attempt to block traffic from our cloud platform or blacklist our IP addresses because they cannot identify the source of the proxy-based traffic. Our competitors may use this as an excuse to block traffic from their solutions or blacklist our IP addresses, which may result in our customers’ traffic being blocked from our platform. If our customers experience significant instances of traffic blockages, they will experience reduced functionality or other inefficiencies, which would reduce customer satisfaction with our services and likelihood of renewal.

If we fail to develop or introduce new enhancements to our cloud platformplatform, including AI enhancements, on a timely basis, our ability to attract and retain customers, remain competitive and grow our business could be impaired.

If our global network of data centers,exchanges, which deliver our services, was damaged or otherwise failed to meet the requirements of our business, our ability to provide services to our customers and maintain the performance of our cloud platform could be negatively impacted, which could cause our business to suffer.

We currently host our cloud platform and serve our customers from a global network of over 160 public exchanges globally and thousands of private exchanges at the edge. While we have electronic access to the components and infrastructure of our cloud platform that are hosted by third parties, we do not control the operation of these facilities. Consequently, we may be subject to service disruptions as well as a lack of adequate support for our data center operations due to reasons that are outside of our control. Our exchanges are hosted in third-party data centers which are vulnerable to damage and connections to our data centersexchanges may be interrupted by a variety of sources, including earthquakes, floods, fires, power loss, system or infrastructure failures, computer viruses, physical or electronic break-ins, human error or interference (including by disgruntled or negligent, current or former employees or contractors) and other catastrophic events. Our data centersexchanges may also be subject to national or local administrative actions, changes in government regulations, including, for example, the impact of global economic and other sanctions like those levied in response to the current conflict between Russia and Ukraine, changes to legal or permitting requirements and litigation to stop, limit or delay operations. Despite precautions taken at these facilities, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in interruptions or delays in our services, impede our ability to scale our operations or have other adverse impacts upon our business. In addition, if we do not accurately plan for our infrastructure capacity requirements or experience significant strains on our data center resources, or if data center capacity is unavailable or unavailable at acceptable terms, we may experience delays and additional expenses in arranging new data centers,exchanges, and our customers could experience performance degradation or service outages that may subject us to financial liabilities, result in customer losses and materially harm our business.

It is virtually impossible for us to entirely mitigate the risk of breaches of our cloud platform or other security incidents affecting our cloud platform or our internal systems, networks or data. In addition, the functionality of our platform may be disrupted, either intentionally or due to negligence, including by disgruntled or negligent current or former employees or contractors. The security measures we use internally and have integrated into our cloud platform, which are designed to detect unauthorized activity and prevent or minimize security breaches, may not function as expected or may not be sufficient to identify or protect against certain attacks. Enterprises are subject to a wide variety of attacks on their networks and systems, and techniques used to sabotage or to obtain unauthorized access to networks in which data is stored or through which data is transmitted change frequently and generally are not recognized until launched against a target. The growth in state sponsored cyber activity, including those actions taken in connection with therecent currentglobal conflict between Russiaconflicts and Ukraine,geopolitical tensions, showcase the increasing sophistication of cyber threats. As a result, we may be unable to anticipate these techniques or implement adequate measures to prevent an electronic intrusion into our customers through our cloud platform or to prevent breaches and other security incidents affecting our cloud platform, internal networks, systems or data. Further, once identified, we may be unable to remediate or otherwise respond to a breach or other incident in a timely manner. Actual, perceived or purported security breaches of our cloud platform could result in actual, perceived or purported breaches of our customers’ networks and systems.

Further, our vendors and service providers have been, and may in the future be, the targets of cyberattacks, and their systems and networks have been, and may in the future be, breached or may contain exploitable defects or bugs that could result in a breach of or disruption to their or our systems and networks. Our ability to monitor our vendors’ and service providers’ data security is limited, and, in any event, third parties may be able to circumvent their security measures, resulting in the unauthorized access to, misuse, disclosure, loss, alteration, or destruction of our data, including confidential, sensitive, and other information about individuals. Geo-political factors including international conflicts, such as between Russia and Ukraine and in the Middle East, including recent conflicts related to Iran, may increase the risk of such cyberattacks.

If we do not provide superior support to our customers, our ability to renew subscriptions, increase the number of users and sell additional services to customers may be adversely affected. We believe that successfully delivering our cloud solution requires a highly skilled level of customer support and engagement. We or our channel partners must assist our customers to deploy our cloud platform, resolve performance issues, address interoperability challenges with a customer’s existing network and security infrastructure and respond to security threats and cyberattacks. Many enterprises, particularly large organizations, have very complex networks and require high levels of focused support, including premium support offerings, to fully realize the benefits of our cloud platform. Any failure by us to maintain the expected level of support could reduce customer satisfaction and hurt our customer retention, particularly with respect to our large enterprise customers. Additionally, if our channel partners do not provide support to the satisfaction of our customers, we may be required to provide this level of support to those customers, which would require us to hire additional personnel and to invest in additional resources, including the possible use of AI support agents. We may not be able to hire or deploy such resources fast enough to keep up with demand, particularly if the sales of our platform exceed our internal forecasts. We may also not be successful in our efforts to fully onboard new hires and provide adequate training to our employees, many of whom continue to work remotely. To the extent that we or our channel partners are unsuccessful in hiring, training, retaining or deploying adequate support resources, our ability and the ability of our channel partners to provide adequate and timely support to our customers will be negatively impacted, and our customers’ satisfaction with our cloud platform could be adversely affected. We currently rely in part on contractors provided by third-party service providers internationally to provide support services to our customers, and we expect to expand our international customer service support team to other countries. Any failure to properly train or oversee such contractors could result in a poor customer experience and an adverse impact on our reputation and ability to renew subscriptions or engage new customers. Furthermore, as we sell our solutions internationally, our support organization faces additional challenges, including those associated with delivering support, training and documentation in languages other than English. Any failure to maintain high-quality customer support, or a market perception that we do not maintain high-quality support, could materially harm our reputation, adversely affect our ability to sell our solutions to existing and prospective customers and could harm our business, financial condition and results of operations.

Our future success is substantially dependent on our ability to attract, retain and motivate the members of our management team and other key employees throughout our organization. In particular, we are highly dependent on the services of Jay Chaudhry, our Chief Executive Officer and chairman of our board of directors, who is critical to our future vision and strategic direction. We rely on our leadership team in the areas of operations, security, marketing, sales, support and general and administrative functions, and on individual contributors on our research and development team. Although we have entered into employment agreements with our key personnel, these agreements have no specific duration and constitute at-will employment. We do not maintain key person life insurance policies on any of our employees. The loss of one or more of our executive officers or key employees could seriously harm our business. We have experienced, and may in the future experience, significant change in senior management,management. includingFor example, two sales leaders recently departed the recent hirings of our Chief Marketing Officer and Executive Vice President, Agentic AI Security Engineering.Company. Any significant leadership change or senior management transition involves risk, especially nearly simultaneous changes involving so many leaders and employees,risk and any failure to transition effectively or to retain these new leaders could hinder our strategic planning, business execution and future performance.

•political, economic and social uncertainty or international conflict, such as the current conflicts between Russia and Ukraine and in the Middle EastEast, including recent conflicts related to Iran;

Our business strategy includes acquiring other complementary solutions, technologies or businesses. We have in the past acquired, and expect in the future to acquire, businesses that we believe will complement or augment our existing business. In order toTo expand our security offerings and features, we also may enter into relationships with other businesses, which could involve preferred or exclusive licenses, additional channels of distribution or investments in other companies. Negotiating these transactions can be time-consuming, difficult and costly, and our ability to close these transactions may be subject to third-party approvals, such as government regulatory approvals, which are beyond our control. Consequently, we cannot assure you that these transactions, once undertaken and announced, will close.

We believe that our significant presence in India provides important advantages for our business, such as direct access to a large pool of skilled professionals. However, it also creates certain risks that we must effectively manage. As of July 31, 2025, 37% of our global work force is based in India and is comprised mostly of R&D, finance and operations professionals. Wage costs in India for skilled professionals are currently lower than in the United States for comparably skilled professionals. However, wages and benefit costs in India are increasing at a faster rate than in the United States, which could result in us incurring increased costs for technical professionals. There is intense competition in India for skilled technical professionals, and we expect such competition to increase. As a result, we may be unable to retain our current employee base in India or hire additional new talent or do so cost-effectively. In addition, India has experienced natural disasters, civil unrest and terrorism and, in the past, has been and may again be involved in conflicts with neighboring countries, such as the recent conflict with Pakistan.countries. If we are unable to effectively manage any of the foregoing risks related to our India operations, our development efforts and operations could be impaired, which could materially and negatively impact our growth and operating results.

In addition, the techniques used by cyber threat actors, including state sponsored actors, to access or sabotage networks and other systems change frequently, generally are not recognized until launched against a target and are becoming increasingly sophisticated, prevalent and automated, as a result of the exploitation of AI technology. As a result, there is a risk that a cyber threat could emerge that our services are unable to detect or prevent until after some of our customers are impacted. The growth in state sponsored and AI enabled cyber activity showcases the increasing sophistication of cyber threats and dramatically expands the global threat landscape. Moreover, as our services are adopted by an increasing number of enterprises, it is possible that the individuals and organizations behind cyber threats will focus on finding ways to defeat our services or to target our systems. If this happens, our cloud platform could be targeted by attacks specifically designed to disrupt our business and create the perception that our cloud platform is not capable of providing superior security, which, in turn, could have a serious impact on our reputation as a provider of security solutions. Further, high profile security breaches or incidents, in particular those of cloud-based service providers, may cause our customers and potential customers to lose trust in cloud solutions generally, and with respect to security in particular, which could materially and adversely impact our ability to retain existing customers or attract new customers.

Increasingly, enterprises are subject to a wide variety of attacks on their networks and systems, including traditional threat actors, malicious code (such as viruses and worms), social engineering attacks (such as deep fakes), targeted phishing attacks, distributed denial-of-service attacks, advanced attacks conducted or sponsored by nation-states, AI enabled attacks or attacks targeting and exploiting AI and ML systems and applications, advanced persistent threat intrusions, ransomware and other malware, attacks on their vendors and supply chains, and theft or misuse of intellectual property or business or personal data, including by disgruntled or negligent, current or former employees or contractors. No security solution, including our cloud platform, can address all possible security threats, which are becoming increasingly frequent and sophisticated with the development of AI and ML, or block all methods of penetrating a network or otherwise perpetrating a security breach or incident. Our customers typically rely on complex network and security infrastructures, which include products and services from multiple vendors, to secure their networks. If any of our customers becomesbecome infected with malware or experiences a security breach or incident, they could be disappointed with our services, regardless of whether our services are intended to block the attack or would have blocked the attack if the customer had properly configured our cloud platform. Additionally, if any enterprises that are publicly known to use our services are the subject of a cyberattack that becomes publicized, our current or potential customers may look to our competitors for alternatives to our services.

Further, a quickly evolving legal and regulatory environment may cause us to incur increased research and development costs, or divert resources from other development efforts, to address social and ethical issues related to AI and ML. As the regulatory landscape for AI and ML evolves, including through new frameworks such as the EU AI Act, we must develop and maintain robust internal policies and standards that clarify functional roles and responsibilities for the responsible and compliant development, deployment and use of AI technologies in our internal operations and product offerings. The use of AI technologies presents ethical issues that could become controversial and failure, or perceived failure, to establish or enforce such policies and clear lines of accountability could increase our risk of noncompliance, operational errors orerrors, reputational harm. As a result of theseharm and other challenges associated with our use, implementation and training of AI and ML, or misunderstandings or misrepresentations by third parties about the type of data that we use to train AI or ML, we may in the future be subject to legal liability, competitive harm, negative media coverage or regulatory action, including new proposed, and in certain cases enacted, rules and legislation regulating AI, new applications of existing data protection, privacy, cybersecurity, information security, intellectual property and other laws, and brand or reputational harm.penalties.

We rely on a limited number of suppliers for several components of our cloud platform and the systems we use to operate our business and provide services to our customers, including sole or limited sourced hardware, software and SaaS services. Some of our suppliers also temporarily hold a portion of our assets for us. Our reliance on these suppliers exposes us to risks, including reduced control over production costs, constraints based on the then-current availability, terms and pricing of these components and potential loss of assets. For example, we generally purchase equipment or the components of equipment on a purchase order basis, and do not have long-term contracts guaranteeing supply. We also rely on sole or limited sourced SaaS vendors to provide critical services that we use to operate our business. In addition, the technology industry has experienced component shortages, delivery delays, price increases (including memory, storage and processor price increases) and service interruptions in the past, and we have experienced and may continue to experience shortages, delays, materially increased costs or service interruptions, including as a result of natural disasters, acts of war or international conflicts, epidemics or global pandemics, increased demand in the industry, increased demand for components or services used to support AI development, including from large AI providers, or if our suppliers do not have sufficient rights to supply the components in all jurisdictions in which we may host our services. While globalGlobal economic conditions haveare not yet had a material impact onincreasing our supply chain, these conditions have increased ourchain costs in the past and could result in further increased costs and disruptions and delays for components in the future. Additionally, changes to existing international trade agreements, tariffs, export controls or other trade measures and regulations that impact our sourcing partners or us may lead to increased costs to operate our business and to disruptions in our supply chain, which could limit our ability to support our customers. For instance, current geopolitical, diplomatic and other developments affecting the relationship between China and Taiwan may materially and negatively impact the availability of certain critical components that we use in our data centers, which we source from overseas. If our supply of certain components is disrupted, delayed or becomes significantly more expensive, there can be no assurance that available alternatives can serve as adequate replacements for the existing components or that alternatives will be available on terms that are favorable to us, if at all, as it may take several months or longer to identify, qualify and engage a new supplier or integrator. Any disruption or delay in access to components may materially increase our costs, require us to increase costs to our customers, delay opening new data centers,exchanges, delay increasing capacity or replacing defective equipment at existing data centers, cause other constraints on our operations that could damage our channel partner or customer relationships or otherwise have a material adverse impact on our business and operating results.

A number of companies in our industry hold a large number of patents and also protect their copyright, trade secret and other intellectual property rights, and companies in the networking and security industry frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights. In addition, patent holding companies seek to monetize patents they previously developed, have purchased or otherwise obtained. Many companies, including our competitors, may now, and in the future, have significantly larger and more mature patent, copyright, trademark and trade secret portfolios than we have, which they may use to assert claims of infringement, misappropriation and other violations of intellectual property rights against us. In addition, intellectual property litigation may involve non-practicing entities or other patent owners who have no relevant product offerings or revenue and against whom our own patents may therefore provide little or no deterrence or protection. As we face increasing competition and gain an increasingly higher profile the possibility of intellectual property rights claims against us grows. Third parties have asserted in the past and may in the future assert claims of infringement of intellectual property rights against us and these claims, even without merit, could harm our business, including by increasing our costs, reducing our revenue, creating customer concerns that result in delayed or reduced sales, distracting our management from the running of our business and requiring us to cease use of important intellectual property. In addition, because patent applications can take years to issue and are often afforded confidentiality for some period of time, there may currently be pending applications, unknown to us, that later result in issued patents that could cover one or more of our services. Moreover, inIn a patent infringement claim against us, we may assert, as a defense, that we do not infringe the relevant patent claims, that the patent is invalid or both. The strength of our defenses will depend on the patents asserted, the interpretation of these patents, and our ability to invalidate the asserted patents. However, we could be unsuccessful in advancing non-infringement and/or invalidity arguments in our defense. In the United States, issued patents enjoy a presumption of validity, and the party challenging the validity of a patent claim must present clear and convincing evidence of invalidity, which is a high burden of proof. Conversely, the patent owner need only prove infringement by a preponderance of the evidence, which is a lower burden of proof. Furthermore, because of the substantial amount of discovery required in connection with patent and other intellectual property rights litigation, there is a risk that some of our confidential information could be compromised by the discovery process.

The United States and the global economy have recently experienced historically high levels of inflation. The existence of inflation in the U.S. and global economy, the pricing pressure created by rising inflation in prior periods and changes to trade regulations including tariffs may result in high interest rates and capital costs, high shipping costs, supply shortages, increased costs of labor, weakening exchange ratesrates, reduced demand, and other similar effects. Elevated inflation rates can affect our expenses, especially employee compensation. In addition, rising interest rates could adversely affect the value of our investments and cash on hand and increase our borrowing costs. Further, the recent conflict in the Middle East has disrupted global energy markets, causing actual or perceived energy shortages and increased energy costs. Inflation and related increases in interest ratesrates, elevated energy costs and energy shortages could also increase our customers' operating costs,costs and disrupt their operations, which could result in reduced IT budgets, less demand for our solutions or delays in new orders, renewals or payments due to us.

Artificial intelligenceAI laws and regulations, such as the European Union's AI Act, impose compliance obligations on AI systems that process personal data. Such laws and regulations may, among other things, require risk assessments specific to AI, changes to data governance practices and enhancing transparency disclosures that supplement existing data protection requirements. The AI regulatory landscape is fragmented and uncertain, with various countries considering or enacting differing AI-specific laws and regulations to govern the emerging technology. This creates significant regulatory uncertainty about which compliance standards will ultimately govern our operations and solutions.

We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection, cybersecurity, information security and telecommunications services in the jurisdictions in which we operate or may operate, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. Needing to address new obligations and changes in the interpretation of existing obligations could require us to modify our solutions, restrict our business operations, increase our costs and impair our ability to maintain and grow our customer base and increase our revenue. New and evolving requirements may increase compliance costs, lead to increased regulatory scrutiny or liability, may require additional contractual negotiations and may adversely impact our business, financial condition and operating results. Any failure or perceived failure by us to comply with applicable laws, regulations, standards or actual or asserted obligations, or any actual, perceived or purported security breach or other security incident, whether or not resulting in unauthorized access to, or acquisition, release or transfer ofof, information relating to individuals or other data, may result in governmental investigations, enforcement actions and other proceedings, private claims and litigation, fines and penalties or adverse publicity, and could cause our customers and prospective customers to lose trust in us, which could have an adverse effect on our reputation and business.

Our business activities are subject to various restrictions under U.S. export and similar laws and regulations, including the U.S. Department of Commerce's Export Administration Regulations and various economic and trade sanctions regulations administered by the U.S. Department of the Treasury's Office of Foreign Assets Control. U.S. export controls and trade and economic sanctions include restrictions or prohibitions on the sale or supply of certain products and services to U.S. embargoed or sanctioned countries and governments of these countries, as well as other persons and entities. For example, the U.S. and other countries have implementedcontinued to implement increased economic and other sanctions, as well as increased export controls in response to the current conflict between Russia and Ukraine.Ukraine Theseand measuresother havegeopolitical continued to increase.conflicts. These export controls and sanctions and any additional restrictions may impact our ability to operate in Russia and other affected regions. In addition, various countries regulate the import of certain technology and have enacted or could enact laws that could limit our ability to provide our services and software and operate our cloud platform or could limit our customers’ ability to access or use our services or software in those countries.

Although we take precautions to prevent our services and software from being provided in violation of such laws, our services and software may have been in the past, and could in the future be, provided inadvertently in violation of such laws, despite the precautions we take. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to civil or criminal penalties, including the possible loss of export privileges and fines. We may also be materially and adversely affected through penalties, reputational harm, loss of access to certain markets,markets or otherwise. Obtaining the necessary authorizations, including any required licenses, for a particular transaction may be costly or time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities.

In addition, changes in our platform; export, sanctions and import laws and regulations; or tariffs and other trade regulations could delay the introduction of our products andproducts, reduce the sale of subscriptions to our platform in international markets, prevent users in certain countries from accessing our services or, in some cases, prevent the provision of our services to certain countries, governments, persons or entities altogether. Any change or threatened change in export or import regulations, tariffs, economic sanctions or related laws, shift in the enforcement or scope of existing regulations or change in the countries, governments, persons or technologies targeted by such regulations could decrease or eliminate our ability to sell subscriptions to our platform or provide software to existing customers or potential new customers with international operations. Any decreaselimitation in our ability to sell subscriptions to our platform or provide software could materially and adversely affect our business, results of operations and financial condition.

Many countries are beginning to implement legislation and other guidance to align their international tax rules with the OECD's Base Erosion and Profit Shifting recommendations and action plan that aim to standardize and modernize global corporate tax policy, including changes to cross-border tax, transfer pricing documentation rules and nexus-based tax incentive practices. The OECD is also continuing discussions surrounding fundamental changes in the allocation of profits among tax jurisdictions in which companies do business, as well as the implementation of a global minimum tax (namely the “Pillar One” and “Pillar Two” proposals). ManyOn January 5, 2026, the OECD announced a side-by-side elective safe harbor that would exempt electing U.S.-parented multinationals from certain provisions of Pillar Two for fiscal years beginning on or after January 1, 2026. However, this safe harbor does not provide an exemption from the "qualified domestic minimum top-up taxes" that many countries have enacted or begun the process of enacting laws based on Pillar Two proposals, which may adversely impact our provision for income taxes, net income and cash flows.

As of July 31, 2025, we also had U.S. federal, California, and foreign research and development and other tax credit carryforwards of $192.8 million, $102.6 million,million and $2.1 million, respectively. If not utilized, the federal research and development tax credit carryforwards will begin expiring at different periods beginning in 2037. Our California research and development tax credits may be carried forward indefinitely. Foreign tax credits will begin to expire in the fiscal year ending July 31, 2033. Realization of these net operating loss and research and development tax credit carryforwards depends on future income, and there is a risk that a portion of our existing carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could materially and adversely affect our results of operations.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an "ownership change," generally defined as a greater than 50% change (by value) in its equity ownership by "5% shareholders" over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research and development tax credits, to offset its post-change income may be limited. As a result, in the event that it is determined that we have in the past experienced an ownership change, or if we experience one or more ownership changes in the future as a result of subsequent shifts in our stock ownership, our ability to use our pre-change net operating loss carryforwards and other pre-change tax attributes to offset our U.S. federal taxabletax liability may be subject to limitations, which could potentially result in increased future tax liability to us. Furthermore, our state carryforwards may be subject to similar and additional limitations.

As of JanuaryApril 31,30, 2026, our executive officers, directors, current 5% or greater stockholders and affiliated entities together beneficially owned approximately 42.3%34.9% of our common stock outstanding with Jay Chaudhry, our Chief Executive Officer and chairman of our board of directors, and his affiliates beneficially owning approximately 16.7%16.6% of our common stock. As a result, these stockholders, acting together, will have significant control over most matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. Corporate action might be taken even if other stockholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of us that other stockholders may view as beneficial.

On July 3, 2025, we issued $1,725 million in aggregate principal amount of our 0.0% Convertible Senior Notes due 2028, which mature on July 15, 2028. Prior to April 15, 2028, the 2028 Notes are convertible at the option of the holders only under certain conditions or upon the occurrence of certain events. During the quarter ended JulyApril 31,30, 2025,2026, the conditions allowing holders of the 2028 Notes to convert were not met. After April 15, 2028, holders may convert all or any portion of their 2028 Notes at their option at any time. If one or more holders elect to convert their 2028 Notes when eligible, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the 2028 Notes being converted.

Our corporate headquarters are located in the San Francisco Bay Area, a region known for seismic activity. A significant natural disaster, such as an earthquake, fire, flood or public health emergency, occurring at our headquarters, in India, where we have significant facilities, or where a key channel partner, vendor or data centerexchange is located could adversely affect our business, results of operations and financial condition. Further, if a natural disaster or man-made problem were to affect our component suppliers or other third-party providers, including our network bandwidth and SaaS solution providers, this could materially and adversely affect our ability to provide services in a timely or cost-effective manner.

In addition, natural disasters, acts of war, international conflicts, such as the current conflicts between Russia and Ukraine and in the Middle East, including recent conflicts related to Iran, terrorism and other geopolitical unrest or health issues, such as an outbreak of a pandemic or epidemic disease, or fear of such events, could cause disruptions in our or our customers’ businesses, national economies or the world economy as a whole. In addition, computer malware, viruses and computer hacking, fraudulent use attempts and phishing attacks have become more prevalent in our industry and may become more frequent and effective through the use of AI. As a result, our internal systems may be victimized by such attacks. Although we maintain incident management and disaster response plans, in the event of a major disruption caused by a natural disaster or man-made problem, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our development activities, lengthy interruptions in service, security breaches and incidents and loss of critical data. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security and availability of our platform to the satisfaction of our users may materially harm our reputation and our ability to retain existing customers and attract new customers.

We operate our business as one reportable segment. Our revenue has experienced significant growth in recent periods. For the sixnine months ended JanuaryApril 31,30, 2026 and 2025, our revenue was $1,603.9$2,454.3 million and $1,275.9$1,953.9 million, respectively. We have incurred net losses in all annual periods since our inception. For the sixnine months ended JanuaryApril 31,30, 2026 and 2025, our net loss was $45.9$59.8 million and $19.8$23.9 million, respectively. We expect we will continue to incur net losses for the foreseeable future, as we continue to invest in our sales and marketing organization to maximize our market opportunity, to invest in research and development efforts to enhance the functionality of our cloud platform and to address any legal matters and related accruals, as further described in Note 12, Commitments and Contingencies, of the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Changes in macroeconomic and geopolitical conditionsconditions, including but not limited to global conflicts, inflation and responses to inflation, tariffs or retaliatory measures due to tariffs, supply chain disruptions, energy shortages and the emergence of AI, can cause uncertainty in our business. We continue to see customer scrutiny of and elongated approval processes for transactions, particularly larger deals, as customers continue to carefully consider purchasing decisions and are requiring multiple approvals for large expenditures in response to the uncertain economic environment. Macroeconomic conditions may impact the future demand for subscriptions of our cloud platform.

Free cash flow includes the cyclical impact of inflows and outflows resulting from contributions to our employee stock purchase plan for which the purchase period of approximately six months ends in each of our second and fourth fiscal quarters. Payroll contributions accrued as of JanuaryApril 31,30, 2026 will be used to purchase shares at the end of the current ESPP purchase period ending on June 15, 2026. Payroll contributions ultimately used to purchase shares are reclassified to stockholders' equity on the purchase date.

ARR is a non-GAAP financial measure that we believe is a key metric to measure our periodic performance. ARR refers to the next 12 months of revenue from subscription contracts as of the measurement date. To establish ARR for a customer, we assume that any contract expiring during the next 12 months will be renewed under the existing terms, excluding Red Canary's subscription contracts expiring in fiscal year 2026. ARR as of JanuaryApril 31,30, 2026 and 2025 was $3,359$3,525 million and $2,683$2,817 million, respectively.

We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services. Subscription and related support services accounted for approximately 98% of our revenue for the three and six months ended January 31, 2026, respectively, and 98% and 97%each of our revenue for the three and sixnine months ended JanuaryApril 31,30, 2026 and 2025, respectively. Our contracts with our customers do not at any time provide the customer with the right to take possession of the software that runs our cloud platform. Our customers may also purchase professional services, such as mapping, implementation, network design and training. Professional services account for an immaterial portion of our revenue.

As our customers expand and increase the use of our cloud platform, driven by additional applicationsapplications, workloads, AI agents, and connected devices, our cost of revenue will increase due to higher bandwidth and data center expenses. Our cost of revenue may also increase as a result of higher market prices for data center equipment supporting our cloud platform. However, we expect to continue to benefit from economies of scale as our customers increase the use of our cloud platform. We intend to continue to invest additional resources in our cloud platform and our customer support organizations as we grow our business. The level and timing of investment in these areas could affect our cost of revenue in the future.

Gross profit, or revenue less cost of revenue, and gross margin, or gross profit as a percentage of revenue, have been and will continue to be affected by various factors,factors. includingThese include the timing of our acquisition of new customers and our renewals of and follow-on sales to existing customers, the average sales price of our services, the mix of services offered in our solutions, including new product introductions, the data center and bandwidth costs associated with operating our cloud platform,platform to support additional applications, workloads, AI agents, and connected devices, the extent to which we expand our customer support and cloud operations organizations and the extent to which we can increase the efficiency of our technology, infrastructure and data centers through technological improvements. WeAlthough we expect our gross profit to increase in absolute dollars and our gross margin to increaseremain slightlyrelatively over the long term, althoughconsistent, our gross profit and gross margin could fluctuate from period to period depending on the interplay of the above factors.

Provision For (Benefit From) Income Taxes

Provision for (benefit from) income taxes consists of state income taxes in the United States ("U.S."), foreign income taxes, and withholding taxes related to customer payments in certain foreign jurisdictions in which we conduct business. We weigh all available positive and negative evidence, including but not limited to our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies and the nature of each deferred tax assets in assessing the extent to which a valuation allowance should be applied against our U.S. and foreign deferred tax assets.

(6) During the three and nine months ended JanuaryApril 31,30, 2025, we recognized a tax benefit of $17.2$0.2 million and $17.4 million, respectively attributable to the release of the valuation allowance on United Kingdom (U.K.) deferred tax assets.

Comparison of the Three Months Ended JanuaryApril 31,30, 2026 and 2025

Revenue increased by $167.9$172.4 million, or 26%,25%, for the three months ended JanuaryApril 31,30, 2026, compared to the three months ended JanuaryApril 31,30, 2025. The change in revenue was driven primarily by sales of additional subscriptions to existing customers, which contributed $96.9$102.7 million in additional revenue. The remainder of the increase was primarily attributable to the addition of new customers, as we increased our customer base by 15%17% from JanuaryApril 31,30, 2025 to JanuaryApril 31,30, 2026.

Cost of revenue increased by $42.8$36.7 million, or 29%,24%, for the three months ended JanuaryApril 31,30, 2026, compared to the three months ended JanuaryApril 31,30, 2025. The overall increase in cost of revenue was driven primarily by the expanded use of our cloud platform by existing and new customers, which led to an increase of $26.9$26.4 million for data center and equipment-related costs for hosting and operating our cloud platform. The remainder of the increase was primarily attributable to employee-related expenses of $12.4$6.9 million, inclusive of an increase of $5.6$3.7 million in stock-based compensation expense, driven primarily by an increase in headcount, and higher amortization of acquired intangible assets of $3.1$3.4 million.

Gross margin remained flat fromat 77% for the three months ended JanuaryApril 31,30, 2026, compared to the three months ended JanuaryApril 31,30, 2025.

Sales and marketing expenses increased by $61.1$57.3 million, or 20%,18%, for the three months ended JanuaryApril 31,30, 2026, compared to the three months ended JanuaryApril 31,30, 2025. The change was driven primarily by an increase of $48.6$46.2 million in employee-related expenses, inclusive of an increase of $11.6$11.1 million in sales commissions expense and $8.9 million in stock-based compensation expense and $9.2 million in sales commissions expense. The increase in employee-related expenses wasexpense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to $5.6$6.2 million in facilityfacility, relatedsoftware expenses,and equipment-related expenses and $3.8 million in amortization of acquired intangible assets and $2.9 million in travel expenses.assets.

Research and development expenses increased by $58.3$62.5 million, or 34%,37%, for the three months ended JanuaryApril 31,30, 2026, compared to the three months ended JanuaryApril 31,30, 2025, as we continue to develop and enhance the functionality of our cloud platform and integrate technologies acquired through our business acquisitions.technologies. The change was driven primarily by an increase of $40.6$46.8 million in employee-related expenses, inclusive of an increase of $19.1$25.3 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $13.7$16.2 million in facility, cloud hosting, software and equipment-related expenses to support our growth and lower capitalized internal-use software development costs of $3.8 million.growth.

General and administrative expenses increased by $17.4$20.1 million, or 29%,32%, for the three months ended JanuaryApril 31,30, 2026, compared to the three months ended JanuaryApril 31,30, 2025. The change was driven primarily by an increase of $13.0$13.4 million in employee-related expenses, inclusive of an increase of $8.2$7.9 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $1.2$1.8 million in acquisition-related expenses and the rise of miscellaneous expenses to support the growth of our business.

Interest income increased by $3.0$2.8 million, or 10%,9%, for the three months ended JanuaryApril 31,30, 2026, compared to the three months ended JanuaryApril 31,30, 2025. The change was driven primarily by our increased balance of cash equivalents and short-term investments.

Interest expense increased by $1.9$0.7 million for the three months ended JanuaryApril 31,30, 2026, compared to the three months ended JanuaryApril 31,30, 2025. The change was driven primarily by higher amortization of debt issuance costs.

Other income (expense), net increased by $5.7$4.8 million for the three months ended JanuaryApril 31,30, 2026 compared to the three months ended JanuaryApril 31,30, 2025. The change was driven primarily by fluctuations in foreign currency transactions gains and losses.

Provision For (Benefit From) Income Taxes

Our provision for (benefit from) income taxes increased by $21.8$2.8 million for the three months ended JanuaryApril 31,30, 2026, compared to the three months ended JanuaryApril 31,30, 2025. The change is primarily attributabledriven toby the priorincrease year'sin non-recurringour releasepre-tax ofincome valuationin allowancenon-U.S. onjurisdictions Unitedin Kingdomwhich deferredwe taxconduct assets.business.

Our provision for (benefit from) income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each fiscal quarter, we update our estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, we make a cumulative adjustment in such period.

Our quarterly tax provision for (benefit from),for, and estimate ofof, our annual effective tax rate, is subject to variation due to several factors, including variability in pre-tax income (or loss), the mix of jurisdictions to which such income relates, changes in our business operations and changes in tax laws. Our estimated annual effective tax rate for the year differs from the U.S. statutory rate of 21% as a result of our U.S. losses for which no tax benefit will be realized, as well as our foreign operations which are subject to tax rates that differ from those in the United States.

Many non-U.S. countries are beginning to implement legislation and other guidance to align their international tax rules with the Organization for Economic Cooperation and Development’s (“OECD”) Base Erosion and Profit Shifting recommendations, an action plan that aims to standardize and modernize global corporate tax policy, including changes to cross-border tax, transfer pricing documentation rules and nexus-based tax incentive practices. The OECD is also continuing discussions surrounding fundamental changes in allocation of profits among tax jurisdictions in which companies do business, as well as the implementation of “Pillar Two”, a global minimum tax. We have analyzed the impact of the enacted tax laws regarding Pillar Two and have determined there is an immaterial impact on the income tax provision for the three months ended JanuaryApril 31,30, 2026.

Comparison of the SixNine Months Ended JanuaryApril 31,30, 2026 and 2025

Revenue increased by $328.0$500.4 million, or 26%, for the sixnine months ended JanuaryApril 31,30, 2026, compared to the sixnine months ended JanuaryApril 31,30, 2025. The change in revenue was driven primarily by sales of additional subscriptions to existing customers, which contributed $195.8$321.2 million in additional revenue. The remainder of the increase was primarily attributable to the addition of new customers, as we increased our customer base by 15%17% from JanuaryApril 31,30, 2025 to JanuaryApril 31,30, 2026.

Cost of revenue increased by $86.1$122.7 million, or 30%,28%, for the sixnine months ended JanuaryApril 31,30, 2026, compared to the sixnine months ended JanuaryApril 31,30, 2025. The overall increase in cost of revenue was driven primarily by the expanded use of our cloud platform by existing and new customers, which led to an increase of $53.8$80.2 million for data center and equipment-related costs for hosting and operating our cloud platform. The remainder of the increase was primarily attributable to employee-related expenses of $23.8$30.7 million, inclusive of an increase of $10.3$13.9 million in stock-based compensation expense, driven primarily by an increase in headcount, higher amortization of acquired intangible assets of $5.1$8.5 million and facility related expenses of $2.2$3.4 million.

Gross margin remained flat fromat 77% for the sixnine months ended JanuaryApril 31,30, 2026, compared to the sixnine months ended JanuaryApril 31,30, 2025.

Sales and marketing expenses increased by $128.5$185.9 million, or 21%,20%, for the sixnine months ended JanuaryApril 31,30, 2026, compared to the sixnine months ended JanuaryApril 31,30, 2025. The change was driven primarily by an increase of $87.3$133.5 million in employee-related expenses, inclusive of an increase of $18.8$30.0 million in sales commissions expense and $17.1$25.9 million in stock-based compensation expense. The increase in employee-related expenses wasexpense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to $12.6$18.8 million in facilityfacility, relatedsoftware and equipment-related expenses, $10.2$12.7 million in marketing and advertisement expenses, $9.7 million in travel expenses and $6.3$10.1 million in amortization of acquired intangible assets.assets, $8.9 million in travel expenses and $4.1 million in professional services.

Research and development expenses increased by $104.5$167.0 million, or 32%,34%, for the sixnine months ended JanuaryApril 31,30, 2026, compared to the sixnine months ended JanuaryApril 31,30, 2025, as we continue to develop and enhance the functionality of our cloud platform and integrate technologies acquired through our business acquisitions. The change was driven primarily by an increase of $69.6$116.4 million in employee-related expenses, inclusive of an increase of $34.6$59.9 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $24.2$40.4 million in facility, cloud hosting, software and equipment-related expenses to support our growth and lower capitalized internal-use software development costs of $8.6$8.3 million.

General and administrative expenses increased by $26.2$46.4 million, or 22%,26%, for the sixnine months ended JanuaryApril 31,30, 2026, compared to the sixnine months ended JanuaryApril 31,30, 2025. The change was driven primarily by an increase of $21.2$34.6 million in employee-related expenses, inclusive of an increase of $14.0$21.9 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $2.3$4.1 million in acquisition-related expenses, $2.8 million in facility-related expenses and the rise of miscellaneous expenses to support the growth of our business.

Interest income increased by $6.1$8.9 million, or 10%, for the sixnine months ended JanuaryApril 31,30, 2026, compared to the sixnine months ended JanuaryApril 31,30, 2025. The change was driven primarily by our increased balance of cash equivalents and short-term investments.

Interest expense increased by $0.9$1.6 million for the sixnine months ended JanuaryApril 31,30, 2026, compared to the sixnine months ended JanuaryApril 31,30, 2025. The change was driven primarily by higher amortization of debt issuance costs.

Other expense, net decreasedincreased by $3.4$1.4 million for the sixnine months ended JanuaryApril 31,30, 2026 compared to the sixnine months ended JanuaryApril 31,30, 2025. The change was driven primarily by fluctuations in foreign currency transactions gains and losses.

Provision For (Benefit From) Income Taxes

Our provision for (benefit from) income taxes increased by $17.4$20.3 million for the sixnine months ended JanuaryApril 31,30, 2026, compared to the sixnine months ended JanuaryApril 31,30, 2025. The change is primarily attributable to the prior year's non-recurring release of valuation allowance on United Kingdom deferred tax assets.

Our provision for (benefit from) income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each fiscal quarter, we update our estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, we make a cumulative adjustment in such period.

Our quarterly tax provision for (benefit from),for, and estimate ofof, our annual effective tax rate, is subject to variation due to several factors, including variability in pre-tax income (or loss), the mix of jurisdictions to which such income relates, changes in our business operations and changes in tax laws. Our estimated annual effective tax rate for the year differs from the U.S. statutory rate of 21% as a result of our U.S. losses for which no tax benefit will be realized, as well as our foreign operations which are subject to tax rates that differ from those in United States.

Many non-U.S. countries are beginning to implement legislation and other guidance to align their international tax rules with the Organization for Economic Cooperation and Development’s (“OECD”) Base Erosion and Profit Shifting recommendations, an action plan that aims to standardize and modernize global corporate tax policy, including changes to cross-border tax, transfer pricing documentation rules and nexus-based tax incentive practices. The OECD is also continuing discussions surrounding fundamental changes in allocation of profits among tax jurisdictions in which companies do business, as well as the implementation of “Pillar Two”, a global minimum tax. We have analyzed the impact of the enacted tax laws regarding Pillar Two and have determined there is an immaterial impact on the income tax provision for the sixnine months ended JanuaryApril 31,30, 2026.

As of JanuaryApril 31,30, 2026, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $3,512.8$3,539.1 million, which were held for working capital and general corporate purposes. Our cash equivalents and investments consist of highly liquid investments in money market funds, U.S. treasury securities, U.S. government agency securities, certificates of deposit, corporate debt securities, asset-backed securities and asset-backednon-U.S. government securities.

We have generated significant losses from operations, as reflected in our accumulated deficit of $1,235.5$1,249.4 million as of JanuaryApril 31,30, 2026. We expect to continue to incur operating losses and have in the past and may in the future generate negative cash flows due to expected investments to grow our business, including potential business acquisitions and other strategic transactions.

We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. Therefore, a substantial source of our cash is from such prepayments, which are included on our consolidated balance sheets as a contract liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is subsequently recognized as revenue in accordance with our revenue recognition policy. As of JanuaryApril 31,30, 2026, we had deferred revenue of $2,355.4$2,477.2 million, of which $1,983.6$2,097.1 million was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met. Subscriptions that are invoiced annually in advance or multi-year in advance contribute significantly to our short-term and long-term deferred revenue in comparison to our invoices issued quarterly in advance or monthly in advance.

As of JanuaryApril 31,30, 2026, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Net cash provided by operating activities during the sixnine months ended JanuaryApril 31,30, 20252026 was $510.8$850.4 million, which resultedwas fromdriven by a net loss of $19.8$59.8 million, adjusted for non-cash charges of $473.3$965.0 million and net cash inflowsoutflows of $57.3$54.8 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $329.3$610.3 million for stock-based compensation expense, $79.2$149.7 million for amortization of deferred contract acquisition costs, $45.9$105.6 million for depreciation and amortization expense, $31.6$60.4 million for non-cash operating lease costscosts, and $8.5$31.2 million for amortization expense of acquired intangible assetsassets, and unrealized$6.1 lossesmillion onin hedging transactionsamortization of $3.0debt million.issuance Non-cashcosts. These non-cash charges were partially offset primarily by deferred income taxes of $17.4$4.6 million and anin accretion of investments purchased at a discount of $10.1 million.discount. Net cash inflowsoutflows from changes in operating assets and liabilities were primarily the result of $222.0 million in accounts receivable. Net cash inflows were partially offset by cash outflows resultingattributable from an increase of $74.2$184.7 million in deferred contract acquisition costs, a decrease of $30.2$65.9 million in deferred revenue, a decrease of $44.0 million in operating lease liabilities, a decrease of $20.4 million in accrued compensation, a decrease of $16.5 million in deferred revenue, an increase of $12.1$29.1 million in prepaid expenses, other current and noncurrent assetsassets, a decrease of $20.0 million in accounts payable and a decrease of $11.5$9.4 million in accrued expenses.compensation. Net outflows were partially offset by cash inflows resulting from decrease in accounts receivable, primarily due to the timing of billings and collections of $280.0 million as well as an $18.2 million increase in accrued expenses and other current and noncurrent liabilities.

Net cash used in investing activities during the sixnine months ended JanuaryApril 31,30, 2026, totaled $1,863.1$2,281.8 million. This was primarily driven by purchases of short-term investments of $1,401.5$1,971.7 million, payments for business acquisitions, net of cash acquired, of $672.8$770.0 million and capital expenditures of $69.9$132.0 million to support the growth and expansion of our cloud platform.platform and expenditures on strategic investments of $4.2 million. These outflows were partially offset by proceeds of $283.1$596.2 million from sales and maturities of short-term investments.

Net cash used in investing activities during the sixnine months ended JanuaryApril 31,30, 2025 of $201.1$179.4 million was primarily attributable to purchases of short-term investments of $729.1$886.6 million and capital expenditures of $75.5$167.1 million to support the growth and expansion of our cloud platform. These activities were partially offset by proceeds from maturities of short-term investments of $605.0$875.9 million.

Net cash provided by financing activities of $24.5 million during the sixnine months ended JanuaryApril 31,30, 2026 was primarily attributable to $21.5 million in proceeds from the issuance of common stock under the ESPP and $4.0 million was attributable to proceeds from the exercise of stock options.

Net cash provided by financing activities of $25.8$25.4 million during the sixnine months ended JanuaryApril 31,30, 2025 was primarily attributable to $22.3 million in proceeds from the issuance of common stock under the ESPP and $3.5 million was attributable to proceeds from the exercise of stock options.

During the sixnine months ended JanuaryApril 31,30, 2026, there have been no material changes outside the ordinary course of business to our contractual obligations and commitments from those disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7, of our Fiscal 2025 Form 10-K.

Our significant accounting policies are described in the Fiscal 2025 Form 10-K. There have been no significant changes to these policies that have had a material impact on the condensed consolidated financial statements and related notes for the sixnine months ended JanuaryApril 31,30, 2026.