XML 33 R19.htm IDEA: XBRL DOCUMENT v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income before provision (benefit) for income taxes included the following components for the years ended December 31, (in thousands):
202520242023
United States$(8,227)$357,484 $134,509 
Foreign27,201 24,020 22,552 
Total$18,974 $381,504 $157,061 
Significant components of the provision (benefit) for income taxes were as follows for the years ended December 31, (in thousands):
202520242023
Current:
Federal$(34,249)$67,944 $35,831 
State5,402 18,234 12,400 
Foreign5,844 3,388 5,544 
Total current(23,003)89,566 53,775 
Deferred:
Federal(63,999)(63,603)(60,674)
State(15,600)(19,678)(9,172)
Foreign(3,080)(1,815)(2,651)
Total deferred(82,679)(85,096)(72,497)
Provision for (benefit from) income taxes$(105,682)$4,470 $(18,722)

The table below provides the updated requirements of ASU 2023-09 for the year ended December 31, 2025. Refer to Note 1 for additional details regarding the adoption of ASU 2023-09.
The effective income tax rate for the year ended December 31, 2025 differs from the statutory federal income tax rate as follows (in thousands, except percentages):
Year Ended December 31, 2025
$%
U.S. federal statutory tax rate$3,985 21.0 %
State and local income taxes, net of federal benefit (1)
(11,735)(61.8)
Foreign tax effects
United Kingdom
Excess stock-based compensation benefit(4,282)(22.6)
Other(626)(3.3)
Other foreign jurisdictions1,960 10.3 
Effect of cross-border tax laws4,180 22.0 
Tax credits
R&D credits(49,380)(260.2)
Valuation allowances540 2.8 
Non-taxable or non-deductible items
Excess stock-based compensation benefit(124,081)(653.9)
Executive compensation limitation48,781 257.1 
Other permanent differences5,711 30.1 
Unrecognized tax benefits19,556 103.1 
Other adjustments(291)(1.6)
Total tax benefit and effective tax rate$(105,682)(557.0)%
(1)    State taxes in Arizona, Massachusetts, Illinois, New York, Florida and Pennsylvania comprise greater than 50 percent of the tax effect in this category
A reconciliation of our effective income tax rate to the federal statutory rate for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09 and as previously disclosed, is as follows (in thousands):
20242023
Federal income tax at the statutory rate$80,120 $32,983 
Excess stock-based compensation benefit(83,748)(106,522)
Executive compensation limitation51,858 77,350 
R&D credits(36,571)(26,204)
Nontaxable gain on investments(19,727)— 
Change in unrecognized tax benefits7,356 4,351 
Other permanent differences
5,176 1,201 
Global intangible low-taxed income3,081 1,890 
Foreign derived intangible income deduction(2,558)(961)
Foreign tax credit(1,914)(1,922)
State income taxes, net of federal benefit1,713 3,730 
Change in valuation allowance(903)(4,695)
Tax effects of intercompany transactions(222)(2,033)
Difference between statutory and foreign tax rates801 1,013 
Other8 1,097 
Provision for (benefit from) income taxes$4,470 $(18,722)
Effective tax rate1.2 %(11.9)%
Cash payments of U.S. federal, state and foreign income taxes, net of refunds, were as follows (in thousands):

Year Ended December 31, 2025
Federal$31,720
State12,650
Foreign6,751
Total$51,121
Significant components of our deferred income tax assets and liabilities are as follows at December 31, 2025 and December 31, 2024 (in thousands):
20252024
Deferred income tax assets:
R&D capitalization, net$162,715 $193,265 
Deferred revenue82,760 66,948 
Stock-based compensation69,703 51,088 
Net operating loss carryforward54,614 17,824 
Reserves and accruals43,289 33,523 
R&D tax credit carryforward27,105 19,100 
Lease liabilities25,695 11,966 
Other22,635 10,027 
Convertible debt, net2,601 31,603 
Total deferred income tax assets491,117 435,344 
Valuation allowance(32,594)(23,054)
Total deferred income tax assets, net of valuation allowance458,523 412,290 
Deferred income tax liabilities:
Amortization(40,502)(36,185)
Depreciation(28,249)(16,739)
Right-of-use assets(25,250)(10,639)
Other(5,847)(4,557)
Strategic investments(515)(42,260)
Total deferred income tax liabilities(100,363)(110,380)
Net deferred income tax assets358,160 301,910 
Deferred taxes are reflected in the consolidated balance sheet as follows:
Non-current tax assets (included in deferred tax asset, net)359,803 304,282 
Non-current tax liabilities (included in other long-term liabilities)(1,643)(2,372)
Total$358,160 $301,910 
The following table presents the valuation allowance activity for the years ended December 31, 2025, 2024, and 2023 (in thousands):
202520242023
Balance, beginning of period$23,054 $21,600 $26,368 
Tax provision (benefit)8,726 (576)(4,262)
Deductions charged to tax provision / benefit(411)(327)(505)
Additions (reversals) to other accounts1,225 2,357 (1)
Balance, end of period$32,594 $23,054 $21,600 
As of December 31, 2025, we have recorded a net tax benefit totaling $58.4 million for U.S. federal, state, and foreign net operating loss carryforwards (“NOLs”). As of December 31, 2025, $53.9 million of NOLs may be carried forward indefinitely while the remaining $4.5 million will begin to expire at various times from 2029 through 2055. As of December 31, 2025, we have a total of $54.6 million U.S. federal and state (net of federal benefit) R&D credit carryforwards available to offset future income taxes. A total of $24.4 million of the R&D credits may be carried forward indefinitely while the remaining $30.2 million will begin to expire at various times from 2026 through 2045.
As of December 31, 2025, we anticipate sufficient future pre-tax book income to realize a significant portion of our deferred tax assets. However, as we have various state R&D tax credits expiring unutilized each year, operating losses and unrealized investment losses for which realization is uncertain, and specific identified intangibles with an indefinite life, we have recorded a $32.6 million valuation allowance against these specific deferred tax assets as of December 31, 2025.
The net change in total valuation allowance for the years ended December 31, 2025 and 2024 was an increase of $9.5 million and $1.5 million, respectively. The valuation allowance changes are driven primarily by certain state R&D tax credits for which realization is uncertain, acquired state NOLs, and movement in deferred tax assets associated with unrealized investment losses and transaction costs incurred in connection with certain investments that are not more likely than not to be realized. Of the net change in the valuation allowance for the years ended December 31, 2025 and 2024, an increase of $8.3 million and decrease of $0.9 million, respectively, was recorded to tax expense and an increase of $1.2 million and $2.4 million, respectively, was recorded through the consolidated balance sheets.
We consider the undistributed earnings of certain non-U.S. subsidiaries to be indefinitely reinvested outside of the United States based on estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. We project that our foreign earnings will be utilized offshore for working capital and future foreign growth and we have not made a provision for U.S. or additional foreign withholding taxes of the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. It is not practicable to estimate the tax effects of a remittance of such earnings. If we decide to repatriate the undistributed foreign earnings, we will recognize the income tax effects in the period we change our assertion on indefinite reinvestment.
We complete R&D tax credit studies for each year that an R&D tax credit is claimed for federal and state income tax purposes. We have made the determination that it is not more likely than not that the full benefit of the R&D tax credit will be sustained on examination. As such, we recorded a liability for unrecognized tax benefits of $56.2 million as of December 31, 2025. Should the unrecognized benefit of $56.2 million be recognized, our effective tax rate would be favorably impacted.
The following table presents a roll-forward of our liability for unrecognized tax benefits, exclusive of accrued interest, as of December 31, (in thousands):
202520242023
Balance, beginning of year$32,726$25,754$21,492
Increase (decrease) in previous year tax positions237 501 (215)
Increase in current year tax positions23,2937,3136,963
Decrease due to lapse of statute of limitations(49)(842)(2,486)
Balance, end of year$56,207$32,726$25,754
Federal income tax returns for 2022 through 2024 remain open to examination by the U.S. Internal Revenue Service, while state and local income tax returns for 2021 through 2024 also generally remain open to examination by state taxing authorities. The foreign tax returns for 2020 through 2024 also generally remain open to examination, although some foreign jurisdictions can audit returns up to ten years.
We have recognized expense, before federal tax impact, related to interest of $1.4 million, $1.2 million, and $0.3 million for the years ended December 31, 2025, 2024 and 2023 respectively. As of December 31, 2025 and December 31, 2024, we had accrued interest of $3.3 million and $1.8 million, respectively.
As part of the OECD global minimum tax framework, certain jurisdictions in which we operate have enacted or are in the process of implementing top-up tax provisions under Pillar Two. We have assessed the impact of these regulations on our tax position and included an immaterial adjustment in our income tax provision as of December 31, 2025. We continue to monitor legislative developments and will assess potential future impacts as additional guidance and implementation details become available.