Fair Value Measurements

3 Months Ended

Apr. 30, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

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 and liabilities measured at fair value on a recurring basis as of April 30, 2024 (in thousands):

	Level 1		Level 2		Total
Assets:
Cash equivalents:
Money market funds	$	492,568	$	—	$	492,568
U.S. government securities	—		367,493		367,493
Time deposits	—		58,145		58,145
Commercial paper	—		53,735		53,735
Corporate notes and bonds	—		34,411		34,411
Short-term investments:
Corporate notes and bonds	—		834,770		834,770
Commercial paper	—		528,048		528,048
U.S. government and agency securities	—		518,716		518,716
Certificates of deposit	—		319,401		319,401
Long-term investments:
Corporate notes and bonds	—		655,893		655,893
U.S. government and agency securities	—		260,402		260,402
Certificates of deposit	—		11,686		11,686
Derivative assets:
Foreign currency forward contracts	—		1,041		1,041
Total assets	$	492,568	$	3,643,741	$	4,136,309
Liabilities:
Derivative liabilities:
Foreign currency forward contracts	$	—	$	(1,512)	$	(1,512)
Total liabilities	$	—	$	(1,512)	$	(1,512)

The following table presents the fair value hierarchy for the Company’s assets and liabilities measured at fair value on a recurring basis as of January 31, 2024 (in thousands):

	Level 1		Level 2		Total
Assets:
Cash equivalents:
U.S. government securities	$	—	$	742,234	$	742,234
Money market funds	533,211		—		533,211
Time deposits	—		56,263		56,263
Short-term investments:
Corporate notes and bonds	—		939,727		939,727
U.S. government and agency securities	—		573,780		573,780
Commercial paper	—		353,548		353,548
Certificates of deposit	—		216,444		216,444
Long-term investments:
Corporate notes and bonds	—		607,989		607,989
U.S. government and agency securities	—		299,637		299,637
Certificates of deposit	—		8,681		8,681
Derivative assets:
Foreign currency forward contracts	—		60		60
Total assets	$	533,211	$	3,798,363	$	4,331,574
Liabilities:
Derivative liabilities:
Foreign currency forward contracts	$	—	$	(745)	$	(745)
Total liabilities	$	—	$	(745)	$	(745)

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, which consist primarily of (i) non-marketable equity securities recorded at cost minus impairment, if any, and adjusted for observable transactions for the same or similar investments of the same issuer (referred to as the Measurement Alternative), and (ii) marketable equity securities.

The Company’s non-marketable equity securities accounted for using the Measurement Alternative are recorded at fair value on a non-recurring basis and classified within Level 3 of the fair value hierarchy because significant unobservable inputs or data in an inactive market are used in estimating their fair value. The estimation of fair value for these assets requires the use of an observable transaction price or other unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds. The Company’s marketable equity securities are recorded at fair value on a recurring basis and classified within Level 1 of the fair value hierarchy because they are valued using the quoted market price.

The following table presents the Company’s strategic investments by type (in thousands):

	April 30, 2024		January 31, 2024
Equity securities:
Non-marketable equity securities under Measurement Alternative	$	198,579	$	190,238
Non-marketable equity securities under equity method	5,388		5,307
Marketable equity securities	12,606		37,320
Debt securities:
Non-marketable debt securities	1,985		1,500
Total strategic investments—included in other assets	$	218,558	$	234,365

The following table summarizes the gains and losses associated with the Company’s strategic investments in equity securities (in thousands):

	Three Months Ended April 30,
	2024		2023
Unrealized losses on non-marketable equity securities under Measurement Alternative:
Impairments	$	(18,753)	$	—
Net unrealized losses on marketable equity securities	(3,655)		(2,414)
Net unrealized losses on strategic investments in equity securities	(22,408)		(2,414)
Net realized gains on marketable equity securities sold(1)	1,713		—
Total—included in other expense, net	$	(20,695)	$	(2,414)

________________

(1)Represents the difference between the sale proceeds and the carrying value of the security at the beginning of the period or the purchase date, if later.

The cumulative upward adjustments and the cumulative impairments to the carrying value of the non-marketable equity securities accounted for using the Measurement Alternative held by the Company as of April 30, 2024 were $37.1 million and $59.9 million, respectively.