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Income Taxes
 12 Months Ended
Jan. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Our loss before provision for income taxes for fiscal 2025, 2024 and 2023 consisted of the following (in thousands):
Year Ended January 31,
202520242023
Domestic$(383,904)$(406,151)$(432,235)
Foreign102,297 73,317 47,944 
Loss before provision for income taxes$(281,607)$(332,834)$(384,291)
The components of provision for income taxes for fiscal 2025, 2024 and 2023 consisted of the following (in thousands):
Year Ended January 31,
202520242023
Current:
State$178 $150 $53 
Foreign4,021 5,168 3,661 
Total current4,199 5,318 3,714 
Deferred:
Federal— — (6,754)
State— — (2,913)
Foreign2,635 541 340 
Total deferred2,635 541 (9,327)
Total provision for income taxes$6,834 $5,859 $(5,613)
A reconciliation of the expected provision for (benefit from) income taxes at the statutory federal income tax rate to our recorded provision for income taxes consisted of the following (in thousands):
Year Ended January 31,
202520242023
Benefit from income taxes at U.S. federal statutory rate
$(59,137)$(69,895)$(80,701)
State taxes, net of federal benefit178 150 53 
Foreign tax rate differential30,950 23,179 10,140 
Stock-based compensation6,689 12,367 2,734 
Non-deductible expenses468 1,390 1,780 
Research and development credits(2,987)(2,251)(688)
Change in valuation allowance30,584 40,525 60,145 
Other89 394 924 
Total provision for (benefit from) income taxes$6,834 $5,859 $(5,613)
Significant components of our net deferred tax assets and liabilities as of January 31, 2025 and 2024 consisted of the following (in thousands):
As of January 31,
20252024
Deferred tax assets:
Net operating loss carryforwards$207,838 $226,971 
Research and development expenses148,728 106,257 
Deferred revenue42,537 36,199 
Accruals and reserves11,042 9,265 
Operating lease liabilities5,349 7,492 
Stock-based compensation17,388 14,300 
Other11,495 7,111 
Gross deferred tax assets444,377 407,595 
Valuation allowance(381,956)(340,951)
Total deferred tax assets62,421 66,644 
Deferred tax liabilities:
Acquired intangibles, property and equipment(24,373)(28,652)
Deferred contract acquisition costs(36,313)(30,423)
Operating lease right-of-use assets(4,602)(6,582)
Other(563)(1,782)
Total deferred tax liabilities(65,851)(67,439)
Net deferred tax liabilities
$(3,430)$(795)
Based upon available objective evidence, we believe it is more likely than not that the U.S. and Israel net deferred tax assets will not be fully realizable. Accordingly, we have established a valuation allowance for the U.S. and Israel gross deferred tax assets. As of January 31, 2025 and 2024, we had a valuation allowance of $382.0 million and $341.0 million, respectively, against our deferred tax assets. During fiscal 2025 and 2024, total valuation allowance increased by $41.0 million and $49.2 million, respectively, primarily due to additional net operating losses and capitalized research and development.
As of January 31, 2025, we had federal net operating loss carryforwards of $772.4 million, which will begin to expire in 2031, and state net operating loss carryforwards of $447.9 million, which will begin to expire in 2027. We also had foreign net operating loss carryforwards of $93.3 million, which do not expire.
In addition, we had federal research and development credit carryforwards of $9.9 million, which will begin to expire in 2037, and state research and development credit carryforwards of $4.3 million, which do not expire.
Federal and state tax laws impose substantial restrictions on the utilization of the net operating loss carryforwards and tax credit carryforwards in the event of an ownership change as defined in Section 382 of the Internal Revenue Code of 1986, as amended. Accordingly, our ability to utilize these carryforwards may be limited as a result of such ownership change. Such a limitation could result in the expiration of carryforwards before they are utilized. The carryforwards are currently subject to a valuation allowance.
Foreign withholding taxes have not been provided for the cumulative undistributed earnings of certain foreign subsidiaries of ours as of January 31, 2025 and 2024 due to our intention to permanently reinvest such earnings. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.
We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Our tax years generally remain open and subject to examination by federal, state, or foreign tax authorities. We are currently under examination by the Israel Tax Authorities for the 2017 through 2021 tax years. We are not currently under audit in any other tax jurisdictions.
The changes in the gross amount of unrecognized tax benefits consisted of the following (in thousands):
As of January 31,
202520242023
Balance at beginning of year$2,197 $1,013 $566 
Gross increases for tax positions of current year1,540 1,027 447 
Gross increases for tax positions of prior year263 157 — 
Balance at end of year$4,000 $2,197 $1,013 
We recognize interests and penalties related to income tax matters as a component of income tax expense. We do not anticipate that its total unrecognized tax benefits will significantly change during the next 12 months.
The Organization for Economic Co-Operation and Development (OECD) introduced Base Erosion and Profit Shifting (BEPS) Pillar Two rules that impose a global minimum tax rate of 15% on multi-national corporations. The rules are effective for the Company’s financial year beginning February 1, 2024. Numerous countries have enacted or substantively enacted legislation to implement these rules. While we did not have an impact from Pillar Two on our tax provision or effective tax rate as of the year ended January 31, 2025, we continue to monitor evolving Pillar Two and other tax legislation in the jurisdictions in which we operate.
In 2022, we began negotiating a bilateral Advance Pricing Agreement (APA) with the United States Internal Revenue Service and the Israeli Tax Authorities (ITA), covering various transfer pricing matters for intercompany transactions, with the primary issue relating to the valuation of the intergroup utilization of our Israeli subsidiary’s intellectual property. The proposed APA would cover our fiscal years ended or ending January 31, 2022 through January 31, 2026. An APA, if obtained, would provide us with a more predictable future business operating model, ensure certainty to timing and amounts of cash tax payments, and preclude the relevant tax authorities from making certain transfer pricing adjustments within the scope of these agreements. While this effort is ongoing, the process of negotiating has been lengthy and may take more time to resolve. As of January 31, 2025, the APA remains an ongoing process with no framework for a settlement or resolution yet to be finalized. By its nature, a concluded APA is a tri-party agreement between the two competent tax authorities and the taxpayer, and therefore, a successful resolution of such requires compromise by all three parties in order to achieve such aforementioned certainty and conclusion, and accordingly there can be no assurance that the APA process will be successful. Alternatively, the APA process could be terminated without an agreed upon resolution. In such case, the ITA may initiate an audit of these agreements and transactions, the result of which could be a potential tax assessment. In this case, we intend to exhaust all administrative and judicial remedies necessary to resolve the matter, as necessary, which could be another lengthy process.
We believe that the tax positions we have taken on our Israeli filed tax returns related to these intercompany transactions are sustainable and meet the more likely than not criteria for recognition and measurement, prescribed by ASC Topic 740, Accounting for Income Taxes. We believe that our transfer pricing for these intercompany transactions are on arm’s-length terms, our assumptions, judgements, and estimates are reasonable, and the transactions are characterized appropriately based upon U.S. and OECD guidance and Israeli law. As such, we have not recorded any reserves for this matter as of January 31, 2025. There can be no assurance that this matter will be resolved in our favor, and any taxes, penalties, settlements or adverse judgments relating to this matter could materially and adversely impact our business, operating results, financial condition, and cash flows.