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Fair Value Measurements

3 Months Ended

Apr. 30, 2022

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The following table presents the fair value hierarchy for the Company’s assets measured at fair value on a recurring basis as of April 30, 2022 (in thousands):


	Level 1		Level 2		Total

Cash equivalents:
Money market funds	$	744,931	$	—	$	744,931
Commercial paper	—		98,839		98,839


Corporate notes and bonds	—		13,543		13,543
Short-term investments:
Corporate notes and bonds	—		1,621,164		1,621,164
Commercial paper	—		773,623		773,623
U.S. government and agency securities	—		206,221		206,221
Certificates of deposit	—		150,671		150,671

Long-term investments:
Corporate notes and bonds	—		829,568		829,568
U.S. government and agency securities	—		382,414		382,414
Certificates of deposit	—		396		396


Total	$	744,931	$	4,076,439	$	4,821,370

The following table presents the fair value hierarchy for the Company’s assets measured at fair value on a recurring basis as of January 31, 2022 (in thousands):


	Level 1		Level 2		Total

Cash equivalents:
Money market funds	$	722,492	$	—	$	722,492
Commercial paper	—		77,794		77,794
U.S. government securities	—		36,995		36,995

Corporate notes and bonds	—		7,949		7,949
Short-term investments:
Corporate notes and bonds	—		1,662,436		1,662,436
Commercial paper	—		883,636		883,636
U.S. government and agency securities	—		116,712		116,712
Certificates of deposit	—		103,580		103,580
Long-term investments:
Corporate notes and bonds	—		935,603		935,603
U.S. government and agency securities	—		320,207		320,207
Certificates of deposit	—		397		397

Total	$	722,492	$	4,145,309	$	4,867,801

The Company determines the fair value of its security holdings based on pricing from the Company’s service providers and market prices from industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs), such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.

Strategic Investments

The tables above do not include the Company’s strategic investments in non-marketable equity securities, which are recorded at fair value on a non-recurring basis using the Measurement Alternative, or the Company's strategic investments in marketable equity securities and non-marketable debt securities, which are recorded at fair value on a recurring basis.

The non-marketable equity and debt securities that the Company holds are valued using significant unobservable inputs or data in an inactive market. As a result, the Company classifies these assets as Level 3 within the fair value hierarchy. The estimation of fair value for the Company’s non-marketable equity securities requires the use of an observable transaction price and other unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds. The marketable equity securities that the Company holds are valued using the quoted market price and are classified as Level 1 within the fair value hierarchy.

The following table presents the fair value hierarchy for the Company’s strategic investments measured at fair value as of April 30, 2022 (in thousands):


	Level 1		Level 3		Total

Equity securities:
Non-marketable equity securities	$	—	$	192,860	$	192,860
Marketable equity securities	25,787		—		25,787
Debt securities:
Non-marketable debt securities	—		2,250		2,250
Total strategic investments—included in other assets	$	25,787	$	195,110	$	220,897

The following table presents the fair value hierarchy for the Company’s strategic investments measured at fair value as of January 31, 2022 (in thousands):


	Level 1		Level 3		Total

Equity securities:
Non-marketable equity securities	$	—	$	170,860	$	170,860
Marketable equity securities	34,646		—		34,646
Debt securities:
Non-marketable debt securities	—		2,250		2,250
Total strategic investments—included in other assets	$	34,646	$	173,110	$	207,756

As of April 30, 2022, the cumulative amount of upward adjustments recognized on the Company’s strategic investments in non-marketable equity securities was $33.0 million. For each of the three months ended April 30, 2022 and 2021, there were no impairments, or upward or downward adjustments recorded related to these securities.

For the three months ended April 30, 2022, the Company recognized net unrealized losses of $8.9 million on its strategic investments in marketable equity securities. The Company did not have any strategic investments in marketable securities during the three months ended April 30, 2021.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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