Income Taxes

12 Months Ended

Jan. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of loss before income taxes were as follows (in thousands):

	Fiscal Year Ended January 31,
	2023		2022		2021
U.S.	$	(851,538)	$	(717,208)	$	(544,700)
Foreign	35,545		40,248		7,660
Loss before income taxes	$	(815,993)	$	(676,960)	$	(537,040)

The provision for (benefit from) income taxes consists of the following (in thousands):

	Fiscal Year Ended January 31,
	2023		2022		2021
Current provision:
State	$	626	$	288	$	704
Foreign	7,571		3,417		1,388
Deferred benefit:
Federal	(21,647)		—		(28)
State	(4,410)		—		(2)
Foreign	(607)		(717)		—
Provision for (benefit from) income taxes	$	(18,467)	$	2,988	$	2,062

The effective income tax rate differs from the federal statutory income tax rate applied to the loss before income taxes due to the following (in thousands):

	Fiscal Year Ended January 31,
	2023		2022		2021
Income tax benefit computed at federal statutory rate	$	(171,359)	$	(142,162)	$	(112,778)
State taxes, net of federal benefit	14,948		35,360		14,818
Research and development credits	(58,136)		(142,544)		(56,633)
Stock-based compensation	(71,295)		(898,234)		(246,363)
Change in valuation allowance	213,532		1,159,276		391,659
IRC Section 59A waived deductions	49,476		—		—
Other	4,367		(8,708)		11,359
Provision for (benefit from) income taxes	$	(18,467)	$	2,988	$	2,062

A valuation allowance has been recognized to offset the Company’s deferred tax assets, as necessary, by the amount of any tax benefits that, based on evidence, are not expected to be realized. As of January 31, 2023 and 2022, the Company believes it is more likely than not that its U.S. and U.K. deferred tax assets will not be fully realizable and continues to maintain a full valuation allowance against these net deferred tax assets.

Significant components of the Company’s deferred tax assets and deferred tax liabilities are shown below (in thousands):

	January 31, 2023		January 31, 2022
Deferred tax assets:
Net operating losses carryforwards	$	1,567,135	$	1,522,969
Tax credit carryforwards	274,690		215,934
Capitalized research and development	147,328		—
Stock-based compensation	123,408		88,743
Operating lease liabilities	55,079		48,682
Net unrealized losses on strategic investments	5,669		—
Other	46,361		79,141
Total deferred tax assets	2,219,670		1,955,469
Less: valuation allowance	(2,100,594)		(1,858,730)
Net deferred tax assets	119,076		96,739
Deferred tax liabilities:
Deferred commissions	(31,940)		(28,368)
Intangible assets	(39,426)		(15,692)
Operating lease right-of-use assets	(53,829)		(48,307)
Net unrealized gains on strategic investments	—		(6,399)
Other	(2,358)		—
Total deferred tax liabilities	(127,553)		(98,766)
Net deferred tax liabilities	$	(8,477)	$	(2,027)

The valuation allowance was $2.1 billion and $1.9 billion as of January 31, 2023 and 2022, respectively, primarily relating to U.S. federal and state net operating loss carryforwards and tax credit carryforwards. The valuation allowance increased $241.9 million during the fiscal year ended January 31, 2023, primarily due to increased U.S. federal and state net operating loss carryforwards, tax credit carryforwards, capitalized research and development, and stock-based compensation. The valuation allowance increased $1.3 billion and $434.5 million during the fiscal years ended January 31, 2022 and 2021, respectively, primarily due to increased U.S. federal and state net operating loss carryforwards, tax credit carryforwards, deferred revenue, and stock-based compensation.

As of January 31, 2023, the Company had U.S. federal, state, and foreign net operating loss carryforwards of $5.8 billion, $5.1 billion, and $159.0 million, respectively. Of the $5.8 billion U.S. federal net operating loss carryforwards, $5.7 billion may be carried forward indefinitely with utilization limited to 80% of taxable income, and the remaining $0.1 billion will begin to expire in 2032. The state net operating loss carryforwards begin to expire in 2023. Of the $159.0 million foreign net operating loss carryforwards, $150.2 million may be carried forward indefinitely, and the remaining $8.8 million will begin to expire in 2027. As of January 31, 2023, the Company also had federal and state tax credits of $254.5 million and $112.5 million, respectively. The federal tax credit carryforwards will expire beginning in 2032 if not utilized. The state tax credit carryforwards do not expire. Utilization of the Company’s net operating loss and tax credit carryforwards may be subject to annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss and tax credit carryforwards before utilization.

Foreign withholding taxes have not been provided for the cumulative undistributed earnings of the Company’s foreign subsidiaries as of January 31, 2023 due to the Company’s intention to permanently reinvest such earnings. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

The following table shows the changes in the gross amount of unrecognized tax benefits (in thousands):

	Fiscal Year Ended January 31,
	2023		2022		2021
Beginning balance	$	57,715	$	19,349	$	4,057
Increases based on tax positions during the prior period	1,816		20		35
Increases based on tax positions during the current period	15,649		38,346		15,257
Ending balance	$	75,180	$	57,715	$	19,349

There were no interest and penalties associated with unrecognized income tax benefits for each of the fiscal years ended January 31, 2023, 2022, and 2021.

Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next 12 months due to tax examination changes, settlement activities, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, the Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months.

The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and in various international jurisdictions. Tax years 2012 and forward generally remain open for examination for federal and state tax purposes. Tax years 2017 and forward generally remain open for examination for foreign tax purposes. To the extent utilized in future years’ tax returns, net operating loss carryforwards at January 31, 2023 and 2022 will remain subject to examination until the respective tax year is closed.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the Inflation Act) into law. The Inflation Act contains certain tax measures, including a corporate alternative minimum tax of 15% on some large corporations and an excise tax of 1% on share repurchases. The Company is currently evaluating the various provisions of the Inflation Act and does not anticipate the impact, if any, will be material to the Company, including in connection with the Company’s stock repurchase program.