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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One)
☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended April 30, 2023
OR
☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to .
Commission File Number: 001-32224
 
Salesforce, Inc.
(Exact name of Registrant as specified in its charter)
 
Delaware 94-3320693
(State or other jurisdiction of
incorporation or organization)		 (IRS Employer
Identification No.)
Salesforce Tower
415 Mission Street, 3rd Fl
San Francisco, California 94105
(Address of principal executive offices)
Telephone Number: (415) 901-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share CRM New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x   No  ¨
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes  x   No  ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐   No  x
As of May 30, 2023, there were approximately 974 million shares of the Registrant’s Common Stock outstanding.

1

INDEX
 
    Page No.
   
Item 1.
3
4
5
6
7
9
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Salesforce, Inc.
Condensed Consolidated Balance Sheets
(in millions)
April 30, 2023 January 31, 2023
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 9,155  $ 7,016 
Marketable securities 4,822  5,492 
Accounts receivable, net 4,632  10,755 
Costs capitalized to obtain revenue contracts, net 1,772  1,776 
Prepaid expenses and other current assets 1,600  1,356 
Total current assets 21,981  26,395 
Property and equipment, net 3,695  3,702 
Operating lease right-of-use assets, net 2,646  2,890 
Noncurrent costs capitalized to obtain revenue contracts, net 2,506  2,697 
Strategic investments 4,633  4,672 
Goodwill 48,567  48,568 
Intangible assets acquired through business combinations, net 6,654  7,125 
Deferred tax assets and other assets, net 2,859  2,800 
Total assets $ 93,541  $ 98,849 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued expenses and other liabilities
 $ 5,733  $ 6,743 
Operating lease liabilities, current
 591  590 
Unearned revenue
 15,121  17,376 
Debt, current 181  1,182 
Total current liabilities 21,626  25,891 
Noncurrent debt 9,421  9,419 
Noncurrent operating lease liabilities 2,880  2,897 
Other noncurrent liabilities 2,202  2,283 
Total liabilities 36,129  40,490 
Stockholders’ equity:
Common stock 1  1 
Treasury stock, at cost (6,144) (4,000)
Additional paid-in capital 56,026  55,047 
Accumulated other comprehensive loss (255) (274)
Retained earnings 7,784  7,585 
Total stockholders’ equity 57,412  58,359 
Total liabilities and stockholders’ equity $ 93,541  $ 98,849 









See accompanying Notes.
3
Salesforce, Inc.
Condensed Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)

1 Three Months Ended April 30,
  2023 2022
Revenues:
Subscription and support $ 7,642  $ 6,856 
Professional services and other 605  555 
Total revenues 8,247  7,411 
Cost of revenues (1)(2):
Subscription and support 1,510  1,440 
Professional services and other 615  605 
Total cost of revenues 2,125  2,045 
Gross profit 6,122  5,366 
Operating expenses (1)(2):
Research and development 1,207  1,318 
Marketing and sales 3,154  3,372 
General and administrative 638  656 
Restructuring 711  0 
Total operating expenses 5,710  5,346 
Income from operations 412  20 
Gains (losses) on strategic investments, net (141) 7 
Other income (expense) 55  (56)
Income (loss) before benefit from (provision for) income taxes 326  (29)
Benefit from (provision for) income taxes (127) 57 
Net income $ 199  $ 28 
Basic net income per share $ 0.20  $ 0.03 
Diluted net income per share $ 0.20  $ 0.03 
Shares used in computing basic net income per share 980  991 
Shares used in computing diluted net income per share 988  1,001 
(1) Amounts include amortization of intangible assets acquired through business combinations, as follows:
Three Months Ended April 30,
2023 2022
Cost of revenues $ 248  $ 275 
Marketing and sales 223  237 
(2) Amounts include stock-based compensation expense, as follows:
  Three Months Ended April 30,
  2023 2022
Cost of revenues $ 103  $ 112 
Research and development 241  279 
Marketing and sales 263  291 
General and administrative 73  94 
Restructuring 16  0 



See accompanying Notes.
4
Salesforce, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in millions)
(unaudited)

1 Three Months Ended April 30,
2023 2022
Net income $ 199  $ 28 
Other comprehensive income (loss), net of reclassification adjustments:
Foreign currency translation and other gains (losses) 6  (69)
Unrealized gains (losses) on marketable securities and privately held debt securities 16  (96)
Other comprehensive income (loss), before tax 22  (165)
Tax effect (3) 21 
Other comprehensive income (loss), net 19  (144)
Comprehensive income (loss) $ 218  $ (116)
































See accompanying Notes.
5
Salesforce, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in millions)
(unaudited)
Three Months Ended April 30, 2023
  Common Stock Treasury Stock Additional
Paid-in
Capital		 Accumulated Other Comprehensive Loss Retained Earnings Total
Stockholders’
Equity
  Shares Amount Shares Amount
Balance at January 31, 2023 1,009  $ 1  (28) $ (4,000) $ 55,047  $ (274) $ 7,585  $ 58,359 
Common stock issued 7  0  0  0  283  0  0  283 
Common stock repurchased 0  0  (11) (2,144) 0  0  0  (2,144)
Stock-based compensation expense 0  0  0  0  696  0  0  696 
Other comprehensive income, net of tax 0  0  0  0  0  19  0  19 
Net income 0  0  0  0  0  0  199  199 
Balance at April 30, 2023 1,016  $ 1  (39) $ (6,144) $ 56,026  $ (255) $ 7,784  $ 57,412 
Three Months Ended April 30, 2022
Common Stock Additional
Paid-in
Capital		 Accumulated Other Comprehensive Loss Retained Earnings Total
Stockholders’
Equity
Shares Amount
Balance at January 31, 2022 989  $ 1  $ 50,919  $ (166) $ 7,377  $ 58,131 
Common stock issued 5  0  85  0  0  85 
Stock-based compensation expense 0  0  776  0  0  776 
Other comprehensive loss, net of tax 0  0  0  (144) 0  (144)
Net income 0  0  0  0  28  28 
Balance at April 30, 2022 994  $ 1  $ 51,780  $ (310) $ 7,405  $ 58,876 
























See accompanying Notes.
6
Salesforce, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)

1 Three Months Ended April 30,
2023 2022
Operating activities:
Net income $ 199  $ 28 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (1) 1,254  906 
Amortization of costs capitalized to obtain revenue contracts, net 470  394 
Stock-based compensation expense 696  776 
(Gains) losses on strategic investments, net 141  (7)
Changes in assets and liabilities, net of business combinations:
Accounts receivable, net 6,123  5,805 
Costs capitalized to obtain revenue contracts, net (275) (399)
Prepaid expenses and other current assets and other assets (291) (409)
Accounts payable and accrued expenses and other liabilities (1,403) (1,222)
Operating lease liabilities (168) (202)
Unearned revenue (2,255) (1,994)
Net cash provided by operating activities 4,491  3,676 
Investing activities:
Business combinations, net of cash acquired 0  (414)
Purchases of strategic investments (105) (223)
Sales of strategic investments 9  45 
Purchases of marketable securities (368) (2,572)
Sales of marketable securities 269  441 
Maturities of marketable securities 785  445 
Capital expenditures (243) (179)
Net cash provided by (used in) investing activities 347  (2,457)
Financing activities:
Repurchases of common stock (2,054) 0 
Proceeds from employee stock plans 449  274 
Principal payments on financing obligations (110) (72)
Repayments of debt (1,001) (1)
Net cash provided by (used in) financing activities (2,716) 201 
Effect of exchange rate changes 17  (25)
Net increase in cash and cash equivalents 2,139  1,395 
Cash and cash equivalents, beginning of period 7,016  5,464 
Cash and cash equivalents, end of period $ 9,155  $ 6,859 

(1)    Includes amortization of intangible assets acquired through business combinations, depreciation of fixed assets and amortization and impairment of right-of-use assets.



See accompanying Notes.
7
Salesforce, Inc.
Condensed Consolidated Statements of Cash Flows
Supplemental Cash Flow Disclosure
(in millions)
  Three Months Ended April 30,
  2023 2022
Supplemental cash flow disclosure:
Cash paid during the period for:
Interest $ 46  $ 46 
Income taxes, net of tax refunds $ 122  $ 181 














































See accompanying Notes.
8
Salesforce, Inc.
Notes to Condensed Consolidated Financial Statements
1. Summary of Business and Significant Accounting Policies
Description of Business
Salesforce, Inc. (the “Company”) is a global leader in customer relationship management technology that brings companies and customers together. With the Customer 360 platform, the Company delivers a single source of truth, connecting customer data across systems, apps and devices to help companies sell, service, market and conduct commerce from anywhere. Since its founding in 1999, Salesforce has pioneered innovations in cloud, mobile, social, analytics and artificial intelligence, enabling companies of every size and industry to transform their businesses in the all-digital, work-from-anywhere era.
Fiscal Year
The Company’s fiscal year ends on January 31. References to fiscal 2024, for example, refer to the fiscal year ending January 31, 2024.
Basis of Presentation
The accompanying condensed consolidated balance sheet as of April 30, 2023 and the condensed consolidated statements of operations, condensed consolidated statements of comprehensive income (loss), condensed consolidated statements of stockholders' equity and condensed consolidated statements of cash flows for the three months ended April 30, 2023 and 2022, respectively, are unaudited.
These financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the financial information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s balance sheet as of April 30, 2023, and its results of operations, including its comprehensive income (loss), stockholders' equity and its cash flows for the three months ended April 30, 2023 and 2022. All adjustments are of a normal recurring nature. The results for the three months ended April 30, 2023 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending January 31, 2024.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on March 8, 2023.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in the Company’s condensed consolidated financial statements and notes thereto.
Significant estimates and assumptions made by management include the determination of:
•the fair value of assets acquired and liabilities assumed for business combinations;
•the standalone selling price (“SSP”) of performance obligations for revenue contracts with multiple performance obligations;
•the valuation of privately-held strategic investments, including impairments;
•the recognition, measurement and valuation of current and deferred income taxes and uncertain tax positions;
•the average period of benefit associated with costs capitalized to obtain revenue contracts;
•the useful lives of intangible assets; and
•the fair value of certain stock awards issued.
Actual results could differ materially from those estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, which forms the basis for making judgments about the carrying values of assets and liabilities as well as income and expenses to be recognized.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
9
Segments
The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and assess performance. Over the past few years, the Company has completed a number of acquisitions which have allowed the Company to expand its offerings, presence and reach in various market segments of the enterprise cloud computing market. While the Company has offerings in multiple enterprise cloud computing market segments, including as a result of the Company's acquisitions, and operates in multiple countries, the Company’s business operates in one operating segment because most of the Company's service offerings operate on the Customer 360 Platform and are deployed in a nearly identical manner, and the Company’s CODM evaluates the Company’s financial information and resources, and assesses the performance of these resources, on a consolidated basis.
Concentrations of Credit Risk, Significant Customers and Investments
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities and accounts receivable. The Company’s investment portfolio consists primarily of investment-grade securities, and the Company’s policies limit the amount of credit exposure to any one issuer. The Company monitors and manages the overall exposure of its cash balances to individual financial institutions on an ongoing basis. The Company does not require collateral for accounts receivable. The Company maintains an allowance for its doubtful accounts receivable due to estimated credit losses. This allowance is based upon historical loss patterns, the number of days that billings are past due, an evaluation of the potential risk of loss associated with delinquent accounts and current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss patterns. The Company records the allowance against bad debt expense through the condensed consolidated statements of operations, included in general and administrative expense, up to the amount of revenues recognized to date. Any incremental allowance is recorded as an offset to unearned revenue on the condensed consolidated balance sheets. Receivables are written off and charged against the recorded allowance when the Company has exhausted collection efforts without success.
No single customer accounted for more than five percent of accounts receivable at April 30, 2023 and January 31, 2023. No single customer accounted for five percent or more of total revenue during the three months ended April 30, 2023 and 2022. As of April 30, 2023 and January 31, 2023, assets located outside the Americas were 14 percent and 15 percent of total assets, respectively. As of April 30, 2023 and January 31, 2023, assets located in the United States were 84 percent and 83 percent of total assets, respectively.
The Company is also exposed to concentrations of risk in its strategic investment portfolio, including within specific industries, as the Company primarily invests in enterprise cloud companies, technology startups and system integrators. As of April 30, 2023, the Company held two investments, both privately held, with carrying values that were individually greater than five percent of its total strategic investments portfolio and represented 16 percent of the portfolio in aggregate. As of January 31, 2023, the Company held two investments, both privately held, with carrying values that were individually greater than five percent of its strategic investment portfolio and represented 16 percent of the portfolio in aggregate.
Revenue Recognition
The Company derives its revenues from two sources: subscription and support revenues and professional services and other revenues. Subscription and support revenues include subscription fees from customers accessing the Company’s enterprise cloud computing services (collectively, “Cloud Services”), software license revenues from the sales of term and perpetual licenses and support revenues from the sales of support and updates beyond the basic subscription fees or related to the sales of software licenses. Professional services and other revenues include professional and advisory services for process mapping, project management and implementation services and training services.
Revenue is recognized upon transfer of control of promised products and services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. If the consideration promised in a contract includes a variable amount, for example, overage fees, contingent fees or service level penalties, the Company includes an estimate of the amount it expects to receive for the total transaction price if it is probable that a significant reversal of cumulative revenue recognized will not occur.
The Company determines the amount of revenue to be recognized through the application of the following steps:
•identification of the contract, or contracts, with a customer;
•identification of the performance obligations in the contract;
•determination of the transaction price;
•allocation of the transaction price to the performance obligations in the contract; and
•recognition of revenue when or as the Company satisfies the performance obligations.
10
Subscription and Support Revenues
Subscription and support revenues are comprised of fees that provide customers with access to Cloud Services, software licenses and related support and updates during the term of the arrangement.
Cloud Services allow customers to use the Company's multi-tenant software without taking possession of the software. Revenue is generally recognized ratably over the contract term. Substantially all of the Company’s subscription service arrangements are non-cancelable and do not contain refund-type provisions.
Subscription and support revenues also include revenues associated with term and perpetual software licenses that provide the customer with a right to use the software as it exists when made available. Revenues from term and perpetual software licenses are generally recognized at the point in time when the software is made available to the customer. Revenue from software support and updates is recognized as the support and updates are provided, which is generally ratably over the contract term.
The Company typically invoices its customers annually and its payment terms provide that customers pay within 30 days of invoice. Amounts that have been invoiced are recorded in accounts receivable and in unearned revenue or revenue, depending on whether transfer of control to customers has occurred.
Professional Services and Other Revenues
The Company’s professional services contracts are either on a time and materials, fixed price or subscription basis. These revenues are recognized as the services are rendered for time and materials contracts, on a proportional performance basis for fixed price contracts or ratably over the contract term for subscription professional services contracts. Other revenues consist primarily of training revenues recognized as such services are performed.
Significant Judgments - Contracts with Multiple Performance Obligations
The Company enters into contracts with its customers that may include promises to transfer multiple performance obligations such as Cloud Services, software licenses, support and updates and professional services. A performance obligation is a promise in a contract with a customer to transfer products or services that are concluded to be distinct. Determining whether products and services are distinct performance obligations that should be accounted for separately or combined as one unit of accounting may require significant judgment.
Cloud Services, software licenses and support and updates services are generally concluded to be distinct because such offerings are often sold separately. In determining whether professional services are distinct, the Company considers the following factors for each professional services agreement: availability of the services from other vendors, the nature of the professional services, the timing of when the professional services contract was signed in comparison to the subscription start date and the contractual dependence of the service on the customer’s satisfaction with the professional services work. To date, the Company has concluded that professional services included in contracts with multiple performance obligations are distinct.
The Company allocates the transaction price to each performance obligation on a relative SSP basis. The SSP is the price at which the Company would sell a promised product or service separately to a customer. Judgment is required to determine the SSP for each distinct performance obligation.
The Company determines SSP by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration include the Company’s discounting practices, the size and volume of the Company’s transactions, the customer demographic, the geographic area where services are sold, price lists, the Company's go-to-market strategy, historical and current sales and contract prices. In instances where the Company does not sell or price a product or service separately, the Company determines SSP using information that may include market conditions or other observable inputs. As the Company’s go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes to SSP.
In certain cases, the Company is able to establish SSP based on observable prices of products or services sold or priced separately in comparable circumstances to similar customers. The Company uses a single amount to estimate SSP when indicated by the distribution of its observable prices.
Alternatively, the Company uses a range of amounts to estimate SSP when the pricing practices or distribution of the observable prices is highly variable. The Company typically has more than one SSP for individual products and services due to the stratification of those products and services by customer size and geography.
Costs Capitalized to Obtain Revenue Contracts
The Company capitalizes incremental costs of obtaining revenue contracts related to non-cancelable Cloud Services subscription, ongoing Cloud Services support and license support and updates. For contracts with on-premises software licenses where revenue is recognized upfront when the software is made available to the customer, costs allocable to those licenses are expensed as they are incurred. Capitalized amounts consist primarily of sales commissions paid to the Company’s direct sales
11
force. Capitalized amounts also include (1) amounts paid to employees other than the direct sales force who earn incentive payouts under annual compensation plans that are tied to the value of contracts acquired, (2) commissions paid to employees upon renewals of subscription and support contracts, (3) the associated payroll taxes and fringe benefit costs associated with the payments to the Company’s employees and (4) to a lesser extent, success fees paid to partners in emerging markets where the Company has a limited presence.
Costs capitalized related to new revenue contracts are amortized on a straight-line basis over four years, which is longer than the typical initial contract period, but reflects the estimated average period of benefit, including expected contract renewals. In arriving at this average period of benefit, the Company evaluates both qualitative and quantitative factors which included the estimated life cycles of its offerings and its customer attrition. Additionally, the Company amortizes capitalized costs for renewals and success fees paid to partners over two years.
The capitalized amounts are recoverable through future revenue streams under all non-cancelable customer contracts. The Company periodically evaluates whether there have been any changes in its business, the market conditions in which it operates or other events which would indicate that its amortization period should be changed or if there are potential indicators of impairment.
Amortization of capitalized costs to obtain revenue contracts is included in marketing and sales expense in the accompanying condensed consolidated statements of operations. There were no impairments of costs to obtain revenue contracts for the three months ended April 30, 2023 and 2022.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents are stated at fair value.
Marketable Securities
The Company considers all of its marketable debt securities as available for use in current operations, including those with maturity dates beyond one year, and therefore classifies these securities within current assets on the condensed consolidated balance sheets. Securities are classified as available for sale and are carried at fair value, with the change in unrealized gains and losses, net of tax, reported as a separate component on the condensed consolidated statements of comprehensive income until realized. Fair value is determined based on quoted market rates when observable or utilizing data points that are observable, such as quoted prices, interest rates and yield curves. Securities with an amortized cost basis in excess of estimated fair value are assessed to determine what amount of the excess, if any, is caused by expected credit losses. Expected credit losses on securities are recognized in other expense, net on the condensed consolidated statements of operations, and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive loss in stockholders' equity. For the purposes of computing realized and unrealized gains and losses, the cost of securities sold is based on the specific-identification method. Interest on securities classified as available for sale is included as a component of investment income within other expense on the condensed consolidated statements of operations.
Strategic Investments
The Company holds strategic investments in privately held debt and equity securities and publicly held equity securities in which the Company does not have a controlling interest.
Privately held equity securities where the Company does not have a controlling financial interest in but does exercise significant influence over the investee are accounted for under the equity method. Privately held equity securities not accounted for under the equity method are recorded at cost and adjusted only for observable transactions for same or similar investments of the same issuer or impairment events (referred to as the measurement alternative). All gains and losses on privately held equity securities, realized and unrealized, are recorded through gains (losses) on strategic investments, net on the condensed consolidated statements of operations. Privately held debt securities are recorded at fair value with changes in fair value recorded through accumulated other comprehensive loss on the condensed consolidated balance sheet.
Valuations of privately held securities are inherently complex and require judgment due to the lack of readily available market data. In determining the estimated fair value of its strategic investments in privately held companies, the Company utilizes the most recent data available to the Company. The Company assesses its privately held debt and equity securities in its strategic investment portfolio at least quarterly for impairment. The Company’s impairment analysis encompasses an assessment of both qualitative and quantitative factors, including the investee's financial metrics, market acceptance of the investee's product or technology and the rate at which the investee is using its cash. If the investment is considered impaired, the Company estimates the fair value of the investment and recognizes any resulting impairment through the condensed consolidated statements of operations.
Publicly held equity securities are measured at fair value with changes recorded through gains on strategic investments, net on the condensed consolidated statements of operations.
12
The Company may enter into strategic investments or other investments that are considered variable interest entities (“VIEs”). If the Company is a primary beneficiary of a VIE, it is required to consolidate the entity. To determine if the Company is the primary beneficiary of a VIE, the Company evaluates whether it has (1) the power to direct the activities that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The assessment of whether the Company is the primary beneficiary of its VIE investments requires significant assumptions and judgments. VIEs that are not consolidated are accounted for under the measurement alternative, equity method, amortized cost, or other appropriate methodology based on the nature of the interest held.
Fair Value Measurement
The Company measures its cash and cash equivalents, marketable securities, publicly held equity securities and foreign currency derivative contracts at fair value. In addition, the Company measures certain of its strategic investments, including its privately held debt securities and privately held equity securities, at fair value on a nonrecurring basis when there has been an observable price change in a same or similar security or an impairment. The additional disclosures regarding the Company’s fair value measurements are included in Note 4 “Fair Value Measurement.”
Derivative Financial Instruments
The Company enters into foreign currency derivative contracts with financial institutions to reduce foreign exchange risk associated with intercompany transactions and other monetary assets or liabilities denominated in currencies other than the functional currency of a subsidiary. The Company uses forward currency derivative contracts, which are not designated as hedging instruments, to minimize the Company’s exposure to balances primarily denominated in the Euro, British Pound Sterling, Canadian Dollar, Australian Dollar, Brazilian Real and Japanese Yen. The Company’s derivative financial instruments program is not designated for trading or speculative purposes. The Company generally enters into master netting arrangements with the financial institutions with which it contracts for such derivatives, which permit net settlement of transactions with the same counterparty, thereby reducing risk of credit-related losses from a financial institutions' nonperformance. While the contract or notional amount is often used to express the volume of foreign currency derivative contracts, the amounts potentially subject to credit risk are generally limited to the amounts, if any, by which the counterparties’ obligations under the agreements exceed the obligations of the Company to the counterparties. The notional amount of foreign currency derivative contracts as of April 30, 2023 and January 31, 2023 was $5.7 billion and $6.0 billion, respectively.
Outstanding foreign currency derivative contracts are recorded at fair value on the condensed consolidated balance sheets. Unrealized gains or losses due to changes in the fair value of these derivative contracts, as well as realized gains or losses from their net settlement, are recognized as other expense consistent with the offsetting gains or losses resulting from the remeasurement or settlement of the underlying foreign currency denominated receivables and payables.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of those assets as follows:
Buildings and building improvements
10 to 40 years
Computers, equipment and software
3 to 5 years
Furniture and fixtures 5 years
Leasehold improvements
Shorter of the estimated lease term or 10 years
The Company estimates the useful lives of property and equipment upon initial recognition and periodically evaluates the useful lives and whether events or changes in circumstances warrant a revision to the useful lives.
When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from their respective accounts and any loss on such retirement is reflected in operating expenses.
Leases
The Company determines if an arrangement is a lease at inception and classifies its leases at commencement. Operating leases are included in operating lease right-of-use (“ROU”) assets and current and noncurrent operating lease liabilities on the Company’s condensed consolidated balance sheets. Assets (also referred to as ROU assets) and liabilities recognized from finance leases are included in property and equipment, accrued expenses and other liabilities and other noncurrent liabilities, respectively, on the Company’s condensed consolidated balance sheets. ROU assets represent the Company's right to use an underlying asset for the lease term. The corresponding lease liabilities represent its obligation to make lease payments arising from the lease. The Company does not recognize ROU assets or lease liabilities for leases with a term of 12 months or less for any asset classes.
13
Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement, net of any future tenant incentives. The Company has lease agreements which contain both lease and non-lease components, which it has elected to combine for all asset classes. As such, minimum lease payments include fixed payments for non-lease components within a lease agreement, but exclude variable lease payments not dependent on an index or rate, such as common area maintenance, operating expenses, utilities, or other costs that are subject to fluctuation from period to period. The Company’s lease terms may include options to extend or terminate the lease. Periods beyond the noncancellable term of the lease are included in the measurement of the lease liability only when it is reasonably certain that the Company will exercise the associated extension option or waive the termination option. The Company reassesses the lease term if and when a significant event or change in circumstances occurs within the control of the Company. As most of the Company’s leases do not provide an implicit rate, the net present value of future minimum lease payments is determined using the Company’s incremental borrowing rate. The Company's incremental borrowing rate is an estimate of the interest rate the Company would have to pay to borrow on a collateralized basis with similar terms and payments, in the economic environment where the leased asset is located.
The lease ROU asset is recognized based on the lease liability, adjusted for any rent payments or initial direct costs incurred or tenant incentives received prior to commencement.
Lease expense for operating leases, which includes amortization expense of ROU assets, is recognized on a straight-line basis over the lease term. Amortization expense of finance lease ROU assets is recognized on a straight-line basis over the lease term, and interest expense for finance lease liabilities is recognized based on the incremental borrowing rate. Expense for variable lease payments are recognized as incurred.
On the lease commencement date, the Company also establishes assets and liabilities for the present value of estimated future costs to retire long-lived assets at the termination or expiration of a lease. Such assets are included in property and equipment, net and are amortized over the lease term.
The Company has entered into subleases or has made decisions and taken actions to exit and sublease certain unoccupied leased office space. Similar to other long-lived assets discussed below, management tests ROU assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. For leased assets, such circumstances would include the decision to leave a leased facility prior to the end of the minimum lease term or subleases for which estimated cash flows do not fully cover the costs of the associated lease.
Intangible Assets Acquired through Business Combinations
Intangible assets are amortized over their estimated useful lives. Each period, the Company evaluates the estimated remaining useful life of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization.
Impairment Assessment
The Company evaluates intangible assets and other long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. This includes but is not limited to significant adverse changes in business climate, market conditions or other events that indicate an asset's carrying amount may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate. If the undiscounted cash flows used in the test for recoverability are less than the carrying amount of these assets, the carrying amount of such assets is reduced to fair value.
The Company evaluates and tests the recoverability of its goodwill for impairment at least annually during its fourth quarter of each fiscal year or more often if and when circumstances indicate that goodwill may not be recoverable.
Business Combinations
The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions, tax-related valuation allowances and pre-acquisition contingencies are initially recorded in connection with a business combination as of the acquisition date. The Company continues to collect information and reevaluates these estimates and assumptions quarterly and records any adjustments to the Company’s preliminary estimates to goodwill provided that the Company is within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s condensed consolidated statements of operations.
In the event the Company acquires an entity with which the Company has a preexisting relationship, the Company will generally recognize a gain or loss to settle that relationship as of the acquisition date within operating income on the condensed
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consolidated statements of operations. In the event that the Company acquires an entity in which the Company previously held a strategic investment, the difference between the fair value of the shares as of the date of the acquisition and the carrying value of the strategic investment is recorded as a gain or loss and recorded within net gains (losses) on strategic investments in the condensed consolidated statements of operations.
Restructuring
The Company generally recognizes employee severance costs when payments are probable and amounts are estimable or when notification occurs, depending on the region an employee works. Costs related to contracts without future benefit or contract termination are recognized at the earlier of the contract termination or the cease-use dates. Other exit-related costs are recognized as incurred.
Stock-Based Compensation Expense
Stock-based compensation expense is measured based on grant date at fair value using the Black-Scholes option pricing model for stock options and the grant date closing stock price for restricted stock awards. The Company recognizes stock-based compensation expense related to stock options and restricted stock awards on a straight-line basis, net of estimated forfeitures, over the requisite service period of the awards, which is generally the vesting term of four years. The estimated forfeiture rate applied is based on historical forfeiture rates.
Stock-based compensation expense related to the Company’s Amended and Restated 2004 Employee Stock Purchase Plan (“ESPP” or “2004 Employee Stock Purchase Plan”) is measured based on grant date at fair value using the Black-Scholes option pricing model. The Company recognizes stock-based compensation expense related to shares issued pursuant to the 2004 Employee Stock Purchase Plan on a straight-line basis over the offering period, which is 12 months. The ESPP allows employees to purchase shares of the Company's common stock at a 15 percent discount from the lower of the Company’s stock price on (i) the first day of the offering period or on (ii) the last day of the purchase period and also allows employees to reduce their percentage election once during a six-month purchase period (December 15 and June 15 of each fiscal year), but not to increase that election until the next one-year offering period. The ESPP also includes a reset provision for the purchase price if the stock price on the purchase date is less than the stock price on the offering date.
The Company, at times, grants performance share awards to executive officers and other members of senior management, which may include a market condition or performance condition, or both. Stock-based compensation expense related to awards with a market condition are measured at fair value using a Monte Carlo simulation model and stock-based compensation expense related to these awards is recognized on a straight-line basis, net of estimated forfeitures, over the requisite service period of the awards, which is generally the vesting term. Stock-based compensation expense related to awards with a performance condition are measured based on the grant date closing stock price and stock-based compensation expense related to these awards is recognized based on the requisite service period elapsed, as well as the probability of achievement and estimated attainment of the performance condition as of the end of our reporting period.
The Company, at times, grants unvested restricted shares to employee stockholders of certain acquired companies in lieu of cash consideration. These awards are generally subject to continued post-acquisition employment. Therefore, the Company accounts for them as post-acquisition stock-based compensation expense. The Company recognizes stock-based compensation expense equal to the grant date fair value of the restricted stock awards, based on the closing stock price on grant date, on a straight-line basis over the requisite service period of the awards, which is generally four years. 
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax laws is recognized in the condensed consolidated statements of operations in the period that includes the enactment date.
The Company’s tax positions are subject to income tax audits by multiple tax jurisdictions throughout the world. The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, solely based on its technical merits. The tax benefit recognized is measured as the largest amount of benefit which is greater than 50 percent likely to be realized upon settlement with the taxing authority. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in the income tax provision.
Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more likely than not expected to be realized based on the weighting of positive and negative evidence. Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character (for example, ordinary income or capital gain) within the carryback or carryforward periods available under the applicable tax law. The Company regularly reviews the deferred tax assets for recoverability based on historical taxable income, projected future taxable income,
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the expected timing of the reversals of existing temporary differences and tax planning strategies. The Company’s judgments regarding future profitability may change due to many factors, including future market conditions and the ability to successfully execute its business plans. Should there be a change in the ability to recover deferred tax assets, the tax provision would increase or decrease in the period in which the assessment is changed.
Foreign Currency Translation
The functional currency of the Company’s major foreign subsidiaries is generally the local currency. All assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenues and expenses are translated at the average exchange rate during the period. Equity transactions are translated using historical exchange rates. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are recorded as a separate component on the condensed consolidated statements of comprehensive income. Foreign currency transaction gains and losses are included in other income in the condensed consolidated statements of operations for the period.
Warranties and Indemnification
The Company’s enterprise cloud computing services are typically warranted to perform in a manner consistent with general industry standards that are reasonably applicable and materially in accordance with the Company’s online help documentation under normal use and circumstances.
The Company’s arrangements generally include certain provisions for indemnifying customers against liabilities if its products or services infringe a third party’s intellectual property rights. To date, the Company has not incurred any material costs as a result of such obligations and has not accrued any material liabilities related to such obligations in the accompanying condensed consolidated financial statements.
The Company has also agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as the Company’s director or officer or that person’s services provided to any other company or enterprise at the Company’s request. The Company maintains director and officer insurance coverage that would generally enable the Company to recover a portion of any future amounts paid. The Company may also be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.
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2. Revenues
Disaggregation of Revenue
Subscription and Support Revenue by the Company's Service Offerings
Subscription and support revenues consisted of the following (in millions):
  Three Months Ended April 30,
  2023 2022
Sales $ 1,810  $ 1,632 
Service 1,964  1,761 
Platform and Other 1,567  1,419 
Marketing and Commerce 1,170  1,089 
Data 1,131  955 
$ 7,642  $ 6,856 
Total Revenue by Geographic Locations
Revenues by geographical region consisted of the following (in millions):
  Three Months Ended April 30,
  2023 2022
Americas $ 5,482  $ 4,971 
Europe 1,951  1,738 
Asia Pacific 814  702 
$ 8,247  $ 7,411 
Revenues by geography are determined based on the region of the Company's contracting entity, which may be different than the region of the customer. Americas revenue attributed to the United States was approximately 93 percent during the three months ended April 30, 2023 and 2022. No other country represented more than ten percent of total revenue during the three months ended April 30, 2023 and 2022.
Contract Balances
Contract Assets
The Company records a contract asset when revenue recognized on a contract exceeds the billings. Contract assets were $704 million as of April 30, 2023 as compared to $648 million as of January 31, 2023, and are included in prepaid expenses and other current assets and deferred tax assets and other assets, net on the condensed consolidated balance sheets.
Unearned Revenue
Unearned revenue represents amounts that have been invoiced in advance of revenue recognition and is recognized as revenue when transfer of control to customers has occurred or services have been provided. The unearned revenue balance does not represent the total contract value of annual or multi-year, non-cancelable subscription agreements. The unearned revenue balance is influenced by several factors, including seasonality, the compounding effects of renewals, invoice duration, invoice timing, dollar size and new business linearity within the quarter.
The change in unearned revenue was as follows (in millions):
Three Months Ended April 30,
2023 2022
Unearned revenue, beginning of period $ 17,376  $ 15,628 
Billings and other (1) 5,937  5,328 
Contribution from contract asset 55  89 
Revenue recognized over time (7,837) (7,056)
Revenue recognized at a point in time (410) (355)
Unearned revenue from business combinations 0  2 
Unearned revenue, end of period $ 15,121  $ 13,636 
(1) Other includes, for example, the impact of foreign currency translation.
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The majority of revenue recognized for these services is from the beginning of period unearned revenue balance.
Revenue recognized over time primarily includes Cloud Services subscription and support revenue, which is generally recognized ratably over time, and professional services and other revenue, which is generally recognized ratably or as delivered.
Revenue recognized at a point in time substantially consists of on-premises software licenses.
Remaining Performance Obligation
Remaining performance obligation represents contracted revenue that has not yet been recognized and includes unearned revenue and unbilled amounts that will be recognized as revenue in future periods. Transaction price allocated to the remaining performance obligation is based on SSP. Remaining performance obligation is influenced by several factors, including seasonality, the timing of renewals, the timing of software license deliveries, average contract terms and foreign currency exchange rates. Remaining performance obligation is also impacted by acquisitions. Unbilled portions of the remaining performance obligation denominated in foreign currencies are revalued each period based on the period end exchange rates. Remaining performance obligation is subject to future economic risks, including bankruptcies, regulatory changes and other market factors.
The Company excludes amounts related to performance obligations from professional services contracts that are billed and recognized on a time and materials basis.
The majority of the Company's noncurrent remaining performance obligation is expected to be recognized in the next 13 to 36 months.
Remaining performance obligation consisted of the following (in billions):
  Current Noncurrent Total
As of April 30, 2023 $ 24.1  $ 22.6  $ 46.7 
As of January 31, 2023 $ 24.6  $ 24.0  $ 48.6 

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3. Investments
Marketable Securities
At April 30, 2023, marketable securities consisted of the following (in millions):
Amortized
Cost		 Unrealized
Gains		 Unrealized
Losses		 Fair Value
Corporate notes and obligations $ 3,015  $ 3  $ (83) $ 2,935 
U.S. treasury securities 391  0  (10) 381 
Mortgage-backed obligations 210  0  (11) 199 
Asset-backed securities 966  1  (16) 951 
Municipal securities 160  0  (5) 155 
Commercial paper 0  0  0  0 
Covered bonds 76  0  (4) 72 
Other 131  0  (2) 129 
Total marketable securities $ 4,949  $ 4  $ (131) $ 4,822 
At January 31, 2023, marketable securities consisted of the following (in millions):
Amortized
Cost		 Unrealized
Gains		 Unrealized
Losses		 Fair Value
Corporate notes and obligations $ 3,442  $ 4  $ (92) $ 3,354 
U.S. treasury securities 381  0  (11) 370 
Mortgage-backed obligations 190  0  (12) 178 
Asset-backed securities 1,004  1  (20) 985 
Municipal securities 175  0  (6) 169 
Commercial paper 278  0  0  278 
Covered bonds 105  0  (4) 101 
Other 59  0  (2) 57 
Total marketable securities $ 5,634  $ 5  $ (147) $ 5,492 
The contractual maturities of the investments classified as marketable securities were as follows (in millions):
  As of
  April 30, 2023 January 31, 2023
Due within 1 year $ 1,856  $ 2,380 
Due in 1 year through 5 years 2,885  3,104 
Due in 5 years through 10 years 81  8 
$ 4,822  $ 5,492 
Strategic Investments
Strategic investments by form and measurement category as of April 30, 2023 were as follows (in millions):
  Measurement Category
  Fair Value Measurement Alternative Other Total
Equity securities $ 42  $ 4,420  $ 90  $ 4,552 
Debt securities and other investments 0  0  81  81 
Balance as of April 30, 2023
 $ 42  $ 4,420  $ 171  $ 4,633 

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Strategic investments by form and measurement category as of January 31, 2023 were as follows (in millions):
  Measurement Category
  Fair Value Measurement Alternative Other Total
Equity securities $ 48  $ 4,479  $ 76  $ 4,603 
Debt securities and other investments 0  0  69  69 
Balance as of January 31, 2023
 $ 48  $ 4,479  $ 145  $ 4,672 

The Company holds investments in, or management agreements with, VIEs which the Company does not consolidate because it is not considered the primary beneficiary of these entities. The carrying value of VIEs within strategic investments was $363 million and $354 million, as of April 30, 2023 and January 31, 2023, respectively.
Gains (Losses) on Strategic Investments, Net
The components of gains and losses on strategic investments were as follows (in millions):
1 Three Months Ended April 30,
2023 2022
Unrealized gains (losses) recognized on publicly traded equity securities, net $ 0  $ (74)
Unrealized gains recognized on privately held equity securities, net 38  57 
Impairments on privately held equity and debt securities (177) (11)
Unrealized losses, net (139) (28)
Realized gains (losses) on sales of securities, net (2) 35 
Gains (losses) on strategic investments, net $ (141) $ 7 

Unrealized gains and losses recognized on privately held equity securities, net includes upward and downward adjustments from equity securities accounted for under the measurement alternative, as well as gains and losses from private equity securities in other measurement categories. For privately held securities accounted for under the measurement alternative, the Company recorded upward adjustments of $46 million and $78 million and impairments and downward adjustments of $175 million and $10 million for the three months ended April 30, 2023 and 2022, respectively.
Realized gains on sales of securities, net reflects 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.
4. Fair Value Measurement
The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1.    Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2.    Significant other inputs that are directly or indirectly observable in the marketplace.
Level 3.    Significant unobservable inputs which are supported by little or no market activity.
All of the Company’s cash equivalents, marketable securities and foreign currency derivative contracts are classified within Level 1 or Level 2 because the Company’s cash equivalents, marketable securities and foreign currency derivative contracts are valued using quoted market prices or alternative pricing sources and models utilizing observable market inputs.
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The following table presents information about the Company’s assets and liabilities that were measured at fair value as of April 30, 2023 and indicates the fair value hierarchy of the valuation (in millions):
Description Quoted Prices in
Active Markets
for Identical Assets
(Level 1)		 Significant Other
Observable
Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)		 Fair Value
Cash equivalents (1):
Time deposits $ 0  $ 996  $ 0  $ 996 
Money market mutual funds 4,656  0  0  4,656 
Cash equivalent securities 0  1,303  0  1,303 
Marketable securities:
Corporate notes and obligations 0  2,935  0  2,935 
U.S. treasury securities 0  381  0  381 
Mortgage-backed obligations 0  199  0  199 
Asset-backed securities 0  951  0  951 
Municipal securities 0  155  0  155 
Commercial paper 0  0  0  0 
Covered bonds 0  72  0  72 
Other 0  129  0  129 
Strategic investments:
Equity securities 42  0  0  42 
Total assets $ 4,698  $ 7,121  $ 0  $ 11,819 
(1) Included in “cash and cash equivalents” in the accompanying condensed consolidated balance sheets in addition to $2.2 billion of cash, as of April 30, 2023.
The following table presents information about the Company’s assets and liabilities that were measured at fair value as of January 31, 2023 and indicates the fair value hierarchy of the valuation (in millions):
Description Quoted Prices in
Active Markets
for Identical Assets
(Level 1)		 Significant Other
Observable Inputs (Level 2)		 Significant
Unobservable
Inputs
(Level 3)		 Fair Value
Cash equivalents (1):
Time deposits $ 0  $ 1,877  $ 0  $ 1,877 
Money market mutual funds 1,795  0  0  1,795 
Cash equivalent securities 0  794  0  794 
Marketable securities:
Corporate notes and obligations 0  3,354  0  3,354 
U.S. treasury securities 0  370  0  370 
Mortgage-backed obligations 0  178  0  178 
Asset-backed securities 0  985  0  985 
Municipal securities 0  169  0  169 
Commercial paper 0  278  0  278 
Covered bonds 0  101  0  101 
Other 0  57  0  57 
Strategic investments:
Equity securities 48  0  0  48 
Total assets $ 1,843  $ 8,163  $ 0  $ 10,006 
(1) Included in “cash and cash equivalents” in the accompanying condensed consolidated balance sheets in addition to $2.6 billion of cash, as of January 31, 2023.
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Strategic Investments Measured and Recorded at Fair Value on a Non-Recurring Basis
Substantially all of the Company's privately held debt and equity securities and other investments are recorded at fair value on a non-recurring basis. The estimation of fair value for these investments requires the use of significant unobservable inputs, and as a result, the Company deems these assets as Level 3 within the fair value measurement framework. For investments without a readily determinable fair value, the Company applies valuation methods based on information available, including the market approach and option pricing models (“OPM”). Observable transactions, such as the issuance of new equity by an investee, are indicators of investee enterprise value and are used to estimate the fair value of the Company’s investments. An OPM may be utilized to allocate value to the various classes of securities of the investee, including classes owned by the Company. Such information, available to the Company from investee companies, is supplemented with estimates such as volatility, expected time to liquidity and the rights and obligations of the securities the Company holds. When indicators of impairment are observed, the Company generally uses the market approach to estimate the fair value of its investment, giving consideration to the latest observable transactions, as well as the investee's current and projected financial performance and other significant inputs and assumptions, including estimated time to exit, selection and analysis of guideline public companies and the rights and obligations of the securities the Company holds. The Company's privately held debt and equity securities and other investments amounted to $4.6 billion as of April 30, 2023 and January 31, 2023.
5. Leases and Other Commitments
Leases
The Company has operating leases for corporate offices, data centers and equipment under non-cancelable operating leases with various expiration dates.
Total operating lease costs were $469 million and $233 million for the three months ended April 30, 2023 and 2022, respectively.
As of April 30, 2023, the maturities of lease liabilities under non-cancelable operating and finance leases were as follows (in millions):
Operating Leases Finance Leases
Fiscal Period:
Remaining nine months of fiscal 2024 $ 500  $ 218 
Fiscal 2025 569  289 
Fiscal 2026 570  223 
Fiscal 2027 502  109 
Fiscal 2028 447  2 
Thereafter 1,292  0 
Total minimum lease payments 3,880  841 
Less: Imputed interest (409) (31)
Total $ 3,471  $ 810 
As of April 30, 2023, the Company has additional operating leases that have not yet commenced totaling $408 million and therefore, are not reflected on the condensed consolidated balance sheets and tables above. These leases include agreements for office facilities pending commencement. These operating leases will commence between fiscal year 2024 and fiscal year 2025 with lease terms of 4 to 17 years.
Other Balance Sheet Accounts
Accounts payable, accrued expenses and other liabilities as of April 30, 2023 included approximately $2.0 billion of accrued compensation as compared to $2.6 billion as of January 31, 2023.
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6. Intangible Assets Acquired Through Business Combinations and Goodwill
Intangible Assets Acquired Through Business Combinations
Intangible assets acquired through business combinations were as follows (in millions):
Intangible Assets, Gross Accumulated Amortization Intangible Assets, Net Weighted
Average
Remaining Useful Life (Years)
January 31, 2023 Additions and retirements, net April 30, 2023 January 31, 2023 Expense and retirements, net April 30, 2023 January 31, 2023 April 30, 2023 April 30, 2023
Acquired developed technology $ 4,844  $ 0  $ 4,844  $ (2,471) $ (248) $ (2,719) $ 2,373  $ 2,125  2.6
Customer relationships 6,691  0  6,691  (2,162) (210) (2,372) 4,529  4,319  5.5
Other (1) 303  0  303  (80) (13) (93) 223  210  4.2
Total $ 11,838  $ 0  $ 11,838  $ (4,713) $ (471) $ (5,184) $ 7,125  $ 6,654  4.5
(1) Included in other are in-place leases, trade names, trademarks and territory rights.
Amortization of intangible assets resulting from business combinations for the three months ended April 30, 2023 and 2022 was $471 million and $512 million, respectively.
The expected future amortization expense for intangible assets as of April 30, 2023 was as follows (in millions):
Fiscal Period:
Remaining nine months of fiscal 2024 $ 1,397 
Fiscal 2025 1,597 
Fiscal 2026 1,355 
Fiscal 2027 990 
Fiscal 2028 616 
Thereafter 699 
Total amortization expense $ 6,654 
Goodwill
Goodwill represents the excess of the purchase price in a business combination over the fair value of net assets acquired.
The changes in the carrying amounts of goodwill, which is generally not deductible for tax purposes, were as follows (in millions):
Balance as of January 31, 2023 $ 48,568 
Adjustments (1) (1)
Balance as of April 30, 2023 $ 48,567 
(1) Adjustments include the effect of foreign currency translation.
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7. Debt
The carrying values of the Company's borrowings were as follows (in millions):
Instrument Date of Issuance Maturity Date Contractual Interest Rate
Outstanding Principal as of April 30, 2023
 April 30, 2023 January 31, 2023
2023 Senior Notes (1) April 2018 April 2023 3.25  % $ 0  $ 0  $ 1,000 
Loan assumed on 50 Fremont February 2015 June 2023 3.75  181  181  182 
2024 Senior Notes July 2021 July 2024 0.625  1,000  998  998 
2028 Senior Notes April 2018 April 2028 3.70  1,500  1,494  1,493 
2028 Senior Sustainability Notes July 2021 July 2028 1.50  1,000  993  992 
2031 Senior Notes July 2021 July 2031 1.95  1,500  1,489  1,489 
2041 Senior Notes July 2021 July 2041 2.70  1,250  1,235  1,235 
2051 Senior Notes July 2021 July 2051 2.90  2,000  1,977  1,977 
2061 Senior Notes July 2021 July 2061 3.05  1,250  1,235  1,235 
Total carrying value of debt $ 9,681  9,602  10,601 
Less current portion of debt (181) (1,182)
Total noncurrent debt $ 9,421  $ 9,419 
(1) The Company repaid in full the 2023 Senior Notes in the first quarter of fiscal 2023.
The Company was in compliance with all debt covenants as of April 30, 2023.
The total estimated fair value of the Company's outstanding senior unsecured notes (the “Senior Notes”) above was $7.8 billion and $8.8 billion as of April 30, 2023 and January 31, 2023, respectively. The fair value was determined based on the closing trading price per $100 of the Senior Notes as of the last day of trading of the first quarter of fiscal 2024 and the last day of trading of fiscal 2023, respectively, and are deemed Level 2 liabilities within the fair value measurement framework.
The contractual future principal payments for all borrowings as of April 30, 2023 were as follows (in millions):
Fiscal Period:
Remaining nine months of fiscal 2024 $ 181 
Fiscal 2025 1,000 
Fiscal 2026 0 
Fiscal 2027 0 
Fiscal 2028 0 
Thereafter 8,500 
Total principal outstanding $ 9,681 
Revolving Credit Facility
In December 2020, the Company entered into a Credit Agreement with Citibank, N.A., as administrative agent, and certain other institutional lenders (the “Revolving Loan Credit Agreement”) that provides for a $3.0 billion unsecured revolving credit facility (“Credit Facility”) and matures in December 2025. The Company may use the proceeds of future borrowings under the Credit Facility for general corporate purposes, which may include, without limitation, financing the consideration for, fees, costs and expenses related to any acquisition. In April 2022, the Company amended the Revolving Loan Credit Agreement to reflect certain administrative changes.
There were no outstanding borrowings under the Credit Facility as of April 30, 2023. The Company continues to pay a commitment fee on the available amount of the Credit Facility, which is included within other expense in the Company's condensed consolidated statements of operations.
8. Restructuring
In January 2023, the Company announced a restructuring plan (the “Restructuring Plan”) intended to reduce operating costs, improve operating margins, and continue advancing the Company’s ongoing commitment to profitable growth. The Restructuring Plan includes a reduction of the Company’s workforce and select real estate exits and office space reductions within certain markets. The actions associated with the employee restructuring under the Restructuring Plan are expected to be substantially complete by the end of the Company’s fiscal 2024, subject to local law and consultation requirements. The actions
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associated with the real estate restructuring under the Restructuring Plan are expected to be fully complete in fiscal 2026. The Company incurred approximately $711 million in charges in connection with the Restructuring Plan in the three months ended April 30, 2023, which consists of $344 million in charges related to employee transition, severance payments, employee benefits and share-based compensation and $367 million in exit charges associated with the office space reductions.
The following table summarizes the activities related to the restructuring for the three months ended April 30, 2023 (in millions):
Workforce reduction Office space reductions Total
Liability as of January 31, 2023 $ 607  $ 0  $ 607 
Charges 344  367  711 
Payments (320) 0  (320)
Non-cash items (17) (367) (384)
Liability as of April 30, 2023 $ 614  $ 0  $ 614 
The liability as of April 30, 2023 for restructuring charges, which is related to workforce reduction, is included in accounts payable, accrued expenses and other liabilities on the condensed consolidated balance sheet.
9. Stockholders’ Equity
Stock option activity for the three months ended April 30, 2023 was as follows:
  Options Outstanding
  Outstanding
Stock
Options
(in millions)		 Weighted-
Average
Exercise Price		 Aggregate
Intrinsic Value (in millions)
Balance as of January 31, 2023 23  $ 175.23 
Exercised (2) 129.35 
Plan shares expired or canceled (1) 200.83 
Balance as of April 30, 2023 20  $ 178.87  $ 2,559 
Vested or expected to vest 20  $ 177.48  $ 2,459 
Exercisable as of April 30, 2023 12  $ 162.97  $ 1,651 
Restricted stock activity for the three months ended April 30, 2023 was as follows:
  Restricted Stock Outstanding
  Outstanding
(in millions)		 Weighted-Average Grant Date Fair Value Aggregate
Intrinsic
Value (in millions)
Balance as of January 31, 2023 29  $ 204.62 
Granted - restricted stock units and awards 12  192.11 
Granted - performance-based stock units 1  192.55 
Canceled (2) 206.82 
Vested and converted to shares (5) 208.02 
Balance as of April 30, 2023 35  $ 199.29  $ 6,939 
Expected to vest 29  $ 5,809 

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The aggregate expected stock-based compensation expense remaining to be recognized as of April 30, 2023 was as follows (in millions):
Fiscal Period:
Remaining nine months of fiscal 2024 $ 2,299 
Fiscal 2025 2,301 
Fiscal 2026 1,646 
Fiscal 2027 770 
Thereafter 126 
Total stock-based compensation expense $ 7,142 
The aggregate expected stock-based compensation expense remaining to be recognized reflects only outstanding stock awards as of April 30, 2023 and assumes no forfeiture activity and no changes in the expected level of attainment of performance share grants based on the Company’s financial performance relative to certain targets.
Share Repurchase Program
In August 2022, the Board of Directors authorized a program to repurchase up to $10.0 billion of the Company’s common stock (the “Share Repurchase Program”). In February 2023, the Board of Directors authorized an additional $10.0 billion in repurchases under the Share Repurchase Program for an aggregate total authorization of $20.0 billion. The Share Repurchase Program does not have a fixed expiration date and does not obligate the Company to acquire any specific number of shares. Under the Share Repurchase Program, shares of common stock may be repurchased using a variety of methods, including privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as part of accelerated share repurchases and other methods. The timing, manner, price and amount of any repurchases are determined by the Company in its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions.
The Company accounts for treasury stock under the cost method.
During the three months ended April 30, 2023, the Company repurchased approximately 11 million shares of its common stock for approximately $2.1 billion at an average price per share of $188.17. All repurchases were made in open market transactions. As of April 30, 2023, the Company was authorized to purchase a remaining $13.9 billion of its common stock under the Share Repurchase Program.
10. Income Taxes
Effective Tax Rate
The Company computes its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pretax income or loss and adjusts the provision for discrete tax items recorded in the period. For the three months ended April 30, 2023, the Company reported a tax provision of $127 million on pretax income of $326 million, which resulted in an effective tax rate of 39 percent. The Company’s effective tax rate differs from the U.S. statutory rate of 21 percent primarily due to profitable jurisdictions outside of the United States subject to tax rates greater than 21 percent and withholding taxes.
For the three months ended April 30, 2022, the Company reported a tax benefit of $57 million on a pretax loss of $29 million, which resulted in an effective tax rate of 197 percent. The Company’s effective tax rate differs from the U.S. statutory rate of 21 percent primarily due to favorable discrete tax items, including excess tax benefits from stock-based compensation, and certain adjustments resulting from a transfer pricing agreement with a major tax jurisdiction.
Unrecognized Tax Benefits and Other Considerations
The Company records liabilities related to its uncertain tax positions. Tax positions for the Company and its subsidiaries are subject to income tax audits by multiple tax jurisdictions throughout the world. Certain prior year tax returns are currently being examined by various taxing authorities in countries including the United States, Germany, and Israel. The Company believes that it has provided adequate reserves for its income tax uncertainties in all open tax years. As the outcome of the tax audits cannot be predicted with certainty, if any issues arising in the Company’s tax audits progress in a manner inconsistent with management's expectations, the Company could adjust its provision for income taxes in the future. In addition, the Company anticipates it is reasonably possible that an inconsequential decrease of its unrecognized tax benefits may occur in the next 12 months, as the applicable statutes of limitations lapse, ongoing examinations are completed, or tax positions meet the conditions of being effectively settled.
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11. Net Income Per Share
Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding for the fiscal period. Diluted earnings per share is computed by giving effect to all potential weighted average dilutive common stock, including options and restricted stock units. The dilutive effect of outstanding awards is reflected in diluted earnings per share by application of the treasury stock method.
A reconciliation of the denominator used in the calculation of basic and diluted earnings per share is as follows (in millions):
1 Three Months Ended April 30,
  2023 2022
Numerator:
Net income $ 199  $ 28 
Denominator:
Weighted-average shares outstanding for basic earnings per share 980  991 
Effect of dilutive securities:
Employee stock awards 8  10 
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share 988  1,001 
The weighted-average number of shares outstanding used in the computation of diluted earnings per share does not include the effect of the following potentially outstanding common stock. The effects of these potentially outstanding shares were not included in the calculation of diluted earnings per share because the effect would have been anti-dilutive (in millions):
  Three Months Ended April 30,
  2023 2022
Employee stock awards 23  22 
12. Legal Proceedings and Claims
In the ordinary course of business, the Company is or may be involved in various legal or regulatory proceedings, claims or purported class actions related to alleged infringement of third-party patents and other intellectual property rights, commercial, corporate and securities, labor and employment, wage and hour and other claims. The Company has been, and may in the future be put on notice or sued by third parties for alleged infringement of their proprietary rights, including patent infringement.
In general, the resolution of a legal matter could prevent the Company from offering its service to others, could be material to the Company’s financial condition or cash flows, or both, or could otherwise adversely affect the Company’s reputation and future operating results.
The Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. The outcomes of legal proceedings and other contingencies are, however, inherently unpredictable and subject to significant uncertainties. At this time, the Company is not able to reasonably estimate the amount or range of possible losses in excess of any amounts accrued, including losses that could arise as a result of application of non-monetary remedies, with respect to the contingencies it faces, and the Company’s estimates may not prove to be accurate.
In management’s opinion, resolution of all current matters, including all those described below, is not expected to have a material adverse impact on the Company’s financial statements. However, depending on the nature and timing of any such dispute, payment or other contingency, the resolution of a matter could materially affect the Company’s current or future results of operations or cash flows, or both, in a particular quarter.
Slack Litigation
Beginning in September 2019, seven purported class action lawsuits were filed against Slack, its directors, certain of its officers and certain investment funds associated with certain of its directors, each alleging violations of securities laws in connection with Slack’s registration statement on Form S-1 (the “Registration Statement”) filed with the SEC. All but one of these actions were filed in the Superior Court of California for the County of San Mateo, though one plaintiff originally filed in the County of San Francisco before refiling in the County of San Mateo (and the original San Francisco action was dismissed). The remaining action was filed in the U.S. District Court for the Northern District of California (the “Federal Action”). In the Federal Action, captioned Dennee v. Slack Technologies, Inc., Case No. 3:19-CV-05857-SI, Slack and the other defendants
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filed a motion to dismiss the complaint in January 2020. In April 2020, the court granted in part and denied in part the motion to dismiss. In May 2020, Slack and the other defendants filed a motion to certify the court’s order for interlocutory appeal, which the court granted. Slack and the other defendants filed a petition for permission to appeal the district court’s order to the Ninth Circuit Court of Appeals, which was granted in July 2020. Oral argument was heard in May 2021. On September 20, 2021, the Ninth Circuit affirmed the district court’s ruling. Slack filed a petition for rehearing with the Ninth Circuit on November 3, 2021, which was denied on May 2, 2022. Slack filed a petition for a writ of certiorari with the U.S. Supreme Court on August 31, 2022, which was granted on December 13, 2022. Oral argument was held on April 17, 2023, and the Supreme Court’s decision remains pending. The state court actions were consolidated in November 2019, and the consolidated action is captioned In re Slack Technologies, Inc. Shareholder Litigation, Lead Case No. 19CIV05370 (the “State Court Action”). An additional state court action was filed in San Mateo County in June 2020 but was consolidated with the State Court Action in July 2020. Slack and the other defendants filed demurrers to the complaint in the State Court Action in February 2020. In August 2020, the court sustained in part and overruled in part the demurrers, and granted plaintiffs leave to file an amended complaint, which they filed in October 2020. Slack and the other defendants answered the complaint in November 2020. Plaintiffs filed a motion for class certification on October 21, 2021, which remains pending. On October 26, 2022, the court stayed the State Court Action pending resolution of Slack’s petition for a writ of certiorari in the Federal Action. The State Court Action remains stayed pending the Supreme Court’s decision in the Federal Action. The Federal Action and the State Court Action seek unspecified monetary damages and other relief on behalf of investors who purchased Slack’s Class A common stock issued pursuant and/or traceable to the Registration Statement.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Words such as “expects,” “anticipates,” “aims,” “projects,” “intends,” “plans,” “believes,” “estimates,” “seeks,” “assumes,” “may,” “should,” “could,” “would,” “foresees,” “forecasts,” “predicts,” “targets” and “commitments,” and variations of such words and similar expressions are intended to identify such forward-looking statements, which may consist of, among other things, trend analyses and statements regarding future events, future financial performance, anticipated growth, and industry prospects. These forward-looking statements are based on current expectations, estimates and forecasts, as well as the beliefs and assumptions of our management, and are subject to risks and uncertainties that are difficult to predict, including: the impact of, and actions we may take in response to, the COVID-19 pandemic, related public health measures and resulting economic downturn and market volatility; our ability to maintain security levels and service performance that meet the expectations of our customers, and the resources and costs required to avoid unanticipated downtime and prevent, detect and remediate performance degradation and security breaches; the expenses associated with our data centers and third-party infrastructure providers; our ability to secure additional data center capacity; our reliance on third-party hardware, software and platform providers; the effect of evolving domestic and foreign government regulations, including those related to the provision of services on the Internet, those related to accessing the Internet, and those addressing data privacy, cross-border data transfers and import and export controls; current and potential litigation involving us or our industry, including litigation involving acquired entities such as Slack Technologies, Inc., and the resolution or settlement thereof; regulatory developments and regulatory investigations involving us or affecting our industry; our ability to successfully introduce new services and product features, including any efforts to expand our services; the success of our strategy of acquiring or making investments in complementary businesses, joint ventures, services, technologies and intellectual property rights; our ability to complete, on a timely basis or at all, announced transactions; our ability to realize the benefits from acquisitions, strategic partnerships, joint ventures and investments, and successfully integrate acquired businesses and technologies; our ability to compete in the markets in which we participate; the success of our business strategy and our plan to build our business, including our strategy to be a leading provider of enterprise cloud computing applications and platforms; our ability to execute our business plans; our ability to continue to grow unearned revenue and remaining performance obligation; the pace of change and innovation in enterprise cloud computing services; the seasonal nature of our sales cycles; our ability to limit customer attrition and costs related to those efforts; the success of our international expansion strategy; the demands on our personnel and infrastructure resulting from significant growth in our customer base and operations, including as a result of acquisitions; our ability to preserve our workplace culture, including as a result of our decisions regarding our current and future office environments or work-from-home policies; our dependency on the development and maintenance of the infrastructure of the Internet; our real estate and office facilities strategy and related costs and uncertainties; fluctuations in, and our ability to predict, our operating results and cash flows; the variability in our results arising from the accounting for term license revenue products; the performance and fair value of our investments in complementary businesses through our strategic investment portfolio; the impact of future gains or losses from our strategic investment portfolio, including gains or losses from overall market conditions that may affect the publicly traded companies within our strategic investment portfolio; our ability to protect our intellectual property rights; our ability to maintain and enhance our brands; the impact of foreign currency exchange rate and interest rate fluctuations on our results; the valuation of our deferred tax assets and the release of related valuation allowances; the potential availability of additional tax assets in the future; the impact of new accounting pronouncements and tax laws; uncertainties affecting our ability to estimate our tax rate; uncertainties regarding our tax obligations in connection with potential jurisdictional transfers of intellectual property, including the tax rate, the timing of transfers and the value of such transferred intellectual property; uncertainties regarding the effect of general economic, business and market conditions, including inflationary pressures, general economic downturn or recession, market volatility, increasing interest rates and changes in monetary policy; the potential impact of financial institution instability; the impact of geopolitical events, including the recent conflict in Europe; uncertainties regarding the impact of expensing stock options and other equity awards; the sufficiency of our capital resources; our ability to execute our share repurchase program; our ability to comply with our debt covenants and lease obligations; the impact of climate change, natural disasters and actual or threatened public health emergencies the expected benefits of and timing of completion of the restructuring plan and the expected costs and charges of the restructuring plan, including, among other things, the risk that the restructuring costs and charges may be greater than we anticipate, the risk that our restructuring efforts may adversely affect our internal programs and our ability to recruit and retain skilled and motivated personnel, and may be distracting to employees and management, the risk that our restructuring efforts may negatively impact our business operations and reputation with or ability to serve customers, and the risk that our restructuring efforts may not generate their intended benefits to the extent or as quickly as anticipated; and our ability to achieve our aspirations, goals and projections related to our environmental, social and governance initiatives.
These and other risks and uncertainties may cause our actual results or outcomes to differ materially and adversely from those expressed in our forward-looking statements. Readers are directed to risks and uncertainties identified below under “Risk Factors” and elsewhere in this report for additional detail regarding factors that may cause actual results or outcomes to be different than those expressed in our forward-looking statements. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason.
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Overview
Salesforce, Inc. is a global leader in customer relationship management (“CRM”) technology that brings companies and customers together in the digital age. Founded in 1999, we enable companies of every size and industry to take advantage of powerful technologies to connect to their customers in a whole new way and help them transform their businesses around the customer in this digital-first world.
Our Customer 360 platform unites sales, service, marketing, commerce and IT teams by connecting customer data across systems, apps and devices to create a complete view of customers. With this single source of customer truth, teams can be more responsive, productive and efficient, deliver intelligent, personalized experiences across every channel and increase productivity. With Slack, we provide a digital headquarters where companies, employees, governments and stakeholders can create success from anywhere. We are investing in generative artificial intelligence across all products that will change how our customers help their customers.
We continue to focus on several key growth levers, including driving multiple service offering adoption, increasing our penetration with enterprise and international customers and expanding our industry-specific reach with more vertical software solutions. These growth levers often require a more sophisticated go-to-market approach and, as a result, we may incur additional costs upfront to obtain new customers and expand our relationships with existing customers, including additional sales and marketing expenses specific to subscription and support revenue. As a result, we have seen that customers with many of these characteristics drive higher annual revenues and have lower attrition rates than our company average.
In addition to our focus on top line growth levers, we are also focused on reducing our operating expenses to improve our operating margin. For example, in January 2023, we announced a restructuring plan (the “Restructuring Plan”) intended to reduce operating costs, improve operating margins, and continue advancing our ongoing commitment to profitable growth. The Restructuring Plan includes a reduction of our workforce by approximately 10 percent and office space reductions within certain markets, which was largely completed as of April 30, 2023. In addition to the Restructuring Plan, we continue to focus on evaluating and operationalizing future programs to further our transformational efforts. We have started to see and expect to continue to see improvements in our operating expenses across all operating categories, with the most opportunity in sales and marketing expense and general and administrative expenses. We plan to continue to grow and innovate our business and service offerings and expand our leadership role in the cloud computing industry.
Highlights from the First Quarter of Fiscal 2024
•Revenue: For the three months ended April 30, 2023, revenue was $8.2 billion, an increase of 11 percent year-over-year.
•Earnings per Share: For the three months ended April 30, 2023, diluted earnings per share was $0.20 as compared to diluted earnings per share of $0.03 from a year ago.
•Cash: Cash provided by operations for the three months ended April 30, 2023 was $4.5 billion, an increase of 22 percent year-over-year. Total cash, cash equivalents and marketable securities as of April 30, 2023 was $14.0 billion.
•Remaining Performance Obligation: Total remaining performance obligation as of April 30, 2023 was approximately $46.7 billion, an increase of 11 percent year-over-year. Current remaining performance obligation as of April 30, 2023 was approximately $24.1 billion, an increase of 12 percent year-over-year.
•Share Repurchase Program: During the three months ended April 30, 2023, we repurchased approximately 11 million shares of our common stock for approximately $2.1 billion.
•Restructuring: For the three months ended April 30, 2023, we incurred approximately $711 million in costs related to the Restructuring Plan.
We continue to see the impact of macroeconomic factors and the more measured buying behavior of our customers on our business and our customers’ businesses in ways that are difficult to isolate and quantify. We continued to experience elongated sales cycles, additional deal approval layers, and deal compression in the first quarter of fiscal 2024. Slower growth in new and renewal business, particularly if sustained, impacts our remaining performance obligation, revenues and our ability to meet financial guidance and long-term targets.
In addition, the expanding global scope of our business and the heightened volatility of global markets, expose us to the risk of fluctuations in foreign currency markets. Foreign currency fluctuations negatively impacted revenues by approximately two percent in the three months ended April 30, 2023 and positively impacted our current remaining performance obligation by less than one percent as of April 30, 2023 compared to what we would have reported as of April 30, 2022 using constant currency rates. During fiscal 2023, the United States Dollar strengthened significantly against certain foreign currencies in the markets in which we operate, particularly against the Euro, British Pound Sterling and Japanese Yen. The impact of foreign currency fluctuations could impact our near-term results and ability to accurately predict our future results and earnings. The
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impact of these fluctuations can also be compounded by the seasonality of our business in which our fourth quarter has historically been our strongest quarter for new business and renewals.
Fiscal Year
Our fiscal year ends on January 31. References to fiscal 2024, for example, refer to the fiscal year ending January 31, 2024.
Operating Segments
We operate as one segment. See Note 1 “Summary of Business and Significant Accounting Policies” to the condensed consolidated financial statements for a discussion about our segments.
Sources of Revenues
We derive our revenues from two sources: subscription and support revenues and professional services and other revenues. Subscription and support revenues accounted for approximately 93 percent of our total revenues for the three months ended April 30, 2023.
Subscription and support revenues include subscription fees from customers accessing our enterprise cloud computing services (collectively, "Cloud Services"), software license revenues from the sales of term and perpetual licenses, and support revenues from the sale of support and updates beyond the basic subscription fees or related to the sales of software licenses. Our Cloud Services allow customers to use our multi-tenant software without taking possession of the software. Revenue is generally recognized ratably over the contract term. Subscription and support revenues also include revenues associated with term and perpetual software licenses that provide the customer with a right to use the software as it exists when made available. Revenues from software licenses are generally recognized at the point in time when the software is made available to the customer. Revenue from support and updates is recognized as such support and updates are provided, which is generally ratably over the contract term. Changes in contract duration for multi-year licenses can impact the amount of revenues recognized upfront. Revenues from software licenses represent less than ten percent of total subscription and support revenue for the three months ended April 30, 2023.
The revenue growth rates of each of our service offerings, as described below in “Results of Operations,” fluctuate from quarter to quarter and over time. Additionally, we manage the total balanced product portfolio to deliver solutions to our customers and, as a result, the revenue result for each offering is not necessarily indicative of the results to be expected for any subsequent quarter. In addition, some of our Cloud Service offerings have similar features and functions. For example, customers may use our Sales, Service or Platform service offerings to record account and contact information, which are similar features across these service offerings. Depending on a customer’s actual and projected business requirements, more than one service offering may satisfy the customer’s current and future needs. We record revenue based on the individual products ordered by a customer, not according to the customer’s business requirements and usage.
Our growth in revenues is also impacted by attrition. Attrition represents the reduction or loss of the annualized value of our contracts with customers. We calculate our attrition rate at a point in time on a trailing twelve-month basis as of the end of each month. Beginning in the first quarter of fiscal 2024, we began including Mulesoft and Tableau in our attrition calculation. As of April 30, 2023, our attrition rate, excluding Slack, was approximately 8.0 percent.
We continue to maintain a variety of customer programs and initiatives, which, along with increasing enterprise adoption, have helped keep our attrition rate consistent as compared to the prior year. Consistent attrition rates play a role in our ability to maintain growth in our subscription and support revenues.
Seasonal Nature of Unearned Revenue, Accounts Receivable and Operating Cash Flow
Unearned revenue primarily consists of billings to customers for our subscription service. Over 90 percent of the value of our billings to customers is for our subscription and support service. We generally invoice our customers in advance, in annual installments, and typical payment terms provide that our customers pay us within 30 days of invoice. Amounts that have been invoiced are recorded in accounts receivable and in unearned revenue or in revenue depending on whether transfer of control to customers has occurred. In general, we collect our billings in advance of the subscription service period. We typically issue renewal invoices in advance of the renewal service period, and depending on timing, the initial invoice for the subscription and services contract and the subsequent renewal invoice may occur in different quarters. There is a disproportionate weighting toward annual billings in the fourth quarter, primarily as a result of large enterprise account buying patterns. Our fourth quarter has historically been our strongest quarter for new business and renewals. The year-on-year compounding effect of this seasonality in both billing patterns and overall new and renewal business causes the value of invoices that we generate in the fourth quarter for both new business and renewals to increase as a proportion of our total annual billings. Accordingly, because of this billing activity, our first quarter is typically our largest collections and operating cash flow quarter. Generally, our third quarter has historically been our smallest operating cash flow quarter. Unearned revenues, accounts receivable and operating
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cash flow may also be impacted by acquisitions. For example, operating cash flows may be adversely impacted by acquisitions due to transaction costs, financing costs such as interest expense and lower operating cash flows from the acquired entity.
Remaining Performance Obligation
Our remaining performance obligation represents all future revenue under contract that has not yet been recognized as revenue and includes unearned revenue and unbilled amounts. Our current remaining performance obligation represents future revenue under contract that is expected to be recognized as revenue in the next 12 months.
Remaining performance obligation is not necessarily indicative of future revenue growth and is influenced by several factors, including seasonality, the timing of renewals, average contract terms, foreign currency exchange rates and fluctuations in new business growth. Remaining performance obligation is also impacted by acquisitions. Unbilled portions of the remaining performance obligation denominated in foreign currencies are revalued each period based on the period end exchange rates. For multi-year subscription agreements billed annually, the associated unbilled balance and corresponding remaining performance obligation are typically high at the beginning of the contract period, zero just prior to renewal, and increase if the agreement is renewed. Low remaining performance obligation attributable to a particular subscription agreement is often associated with an impending renewal but may not be an indicator of the likelihood of renewal or future revenue from such customer. Changes in contract duration or the timing of delivery of professional services can impact remaining performance obligation as well as the allocation between current and non-current remaining performance obligation.
Cost of Revenues and Operating Expenses
Cost of Revenues
Cost of subscription and support revenues primarily consists of expenses related to delivering our service and providing support, including the costs of data center capacity, certain fees paid to various third parties for the use of their technology, services and data, employee-related costs such as salaries and benefits, and allocated overhead. Our cost of subscription and support revenues also includes amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company’s research and development efforts. Also included in the cost of subscription and support revenues are expenses incurred supporting the free user base of Slack, including third-party hosting costs and employee-related costs, including stock-based compensation expense, specific to customer experience and technical operations.
Cost of professional services and other revenues consists primarily of employee-related costs associated with these services, including stock-based compensation expense, the cost of subcontractors, certain third-party fees and allocated overhead. We believe that our professional services organization facilitates the adoption of our service offerings, helps us to secure larger subscription revenue contracts and supports our customers’ success. The cost of professional services may exceed revenues from professional services in future fiscal periods.
Research and Development
Research and development expenses consist primarily of salaries and related expenses, including stock-based compensation expense and allocated overhead.
Marketing and Sales 
Marketing and sales expenses make up the majority of our operating expenses and consist primarily of salaries and related expenses, including stock-based compensation expense and commissions, for our sales and marketing staff, as well as payments to partners, marketing programs and allocated overhead. Marketing programs consist of advertising, events, corporate communications, brand building and product marketing activities. We capitalize certain costs to obtain customer contracts, such as commissions, and amortize these costs on a straight-line basis. As such, the timing of expense recognition for these commissions is not consistent with the timing of the associated cash payment.
Our marketing and sales expenses include amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company’s trade names, customer lists and customer relationships.
General and Administrative 
General and administrative expenses consist primarily of salaries and related expenses, including stock-based compensation expense, for finance and accounting, legal, internal audit, human resources and management information systems personnel, professional services fees and allocated overhead.
We allocate overhead such as information technology infrastructure, rent and occupancy charges based on headcount. Employee benefit costs and taxes are allocated based upon a percentage of total compensation expense. As such, these types of expenses are reflected in each cost of revenue and operating expense category.
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Restructuring
Restructuring, related to the Restructuring Plan, consist primarily of charges related to employee transition, severance payments, employee benefits and share-based compensation as well as exit charges associated with office space reductions. The actions associated with the employee restructuring under the Restructuring Plan are expected to be substantially complete by the end of our fiscal 2024, subject to local law and consultation requirements. The actions associated with the real estate restructuring under the Restructuring Plan are expected to be fully complete in fiscal 2026. Restructuring excludes allocated overhead.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
We believe that of our significant accounting policies, which are described in Note 1 “Summary of Business and Significant Accounting Policies” to our condensed consolidated financial statements, the following accounting policies and specific estimates involve a greater degree of judgment and complexity. Accordingly, these are the policies and estimates we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations:
•the fair value of assets acquired and liabilities assumed for business combinations;
•the standalone selling price (SSP) of performance obligations for revenue contracts with multiple performance obligations;
•the valuation of privately held strategic investments, including impairment considerations;
•the recognition, measurement and valuation of current and deferred income taxes and uncertain tax positions; and
•the average period of benefit associated with costs capitalized to obtain revenue contracts.
These estimates may change, as new events occur and additional information is obtained, and such changes will be recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from these estimates and any such differences may be material to our financial statements.
Additionally, refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2023 for further discussion with respect to these policies and estimates.
Recent Accounting Pronouncements
See Note 1 “Summary of Business and Significant Accounting Policies” to the condensed consolidated financial statements for our discussion about new accounting pronouncements adopted.
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Results of Operations
The following tables set forth selected data for each of the periods indicated (in millions):
1 Three Months Ended April 30,
  2023 % of Total Revenues 2022 % of Total Revenues
Revenues:
Subscription and support $ 7,642  93  % $ 6,856  93  %
Professional services and other 605  7  555  7 
Total revenues 8,247  100  7,411  100 
Cost of revenues (1)(2):
Subscription and support 1,510  18  1,440  20 
Professional services and other 615  8  605  8 
Total cost of revenues 2,125  26  2,045  28 
Gross profit 6,122  74  5,366  72 
Operating expenses (1)(2):
Research and development 1,207  15  1,318  18 
Marketing and sales 3,154  38  3,372  45 
General and administrative 638  8  656  9 
Restructuring 711  8  0  0 
Total operating expenses 5,710  69  5,346  72 
Income from operations 412  5  20  0 
Gains (losses) on strategic investments, net (141) (2) 7  0 
Other income (expense) 55  1  (56) 0 
Income (loss) before benefit from (provision for) income taxes 326  4  (29) 0 
Benefit from (provision for) income taxes (127) (2) 57  0 
Net income $ 199  2  % $ 28  0  %
(1) Amounts related to amortization of intangible assets acquired through business combinations, as follows (in millions):
  Three Months Ended April 30,
  2023 % of Total Revenues 2022 % of Total Revenues
Cost of revenues $ 248  3  % $ 275  4  %
Marketing and sales 223  3  237  3 
(2) Amounts related to stock-based compensation expense, as follows (in millions):
  Three Months Ended April 30,
  2023 % of Total Revenues 2022 % of Total Revenues
Cost of revenues $ 103  1  % $ 112  1  %
Research and development 241  3  279  4 
Marketing and sales 263  3  291  4 
General and administrative 73  1  94  1 
Restructuring 16  0  0  0 

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The following table sets forth selected balance sheet data and other metrics for each of the periods indicated (in millions, except remaining performance obligation, which is presented in billions):
As of
April 30, 2023
 January 31, 2023
Cash, cash equivalents and marketable securities $ 13,977  $ 12,508 
Unearned revenue 15,121  17,376 
Remaining performance obligation 46.7  48.6 
Principal due on our outstanding debt obligations (1) 9,681  10,682 
(1) Amounts do not include operating or financing lease obligations.
Remaining performance obligation represents contracted revenue that has not yet been recognized, which includes unearned revenue and unbilled amounts that will be recognized as revenue in future periods.
Revenues
  Three Months Ended April 30, Variance
(in millions) 2023 2022 Dollars Percent
Subscription and support $ 7,642  $ 6,856  $ 786  11  %
Professional services and other 605  555  50  9 
Total revenues $ 8,247  $ 7,411  $ 836  11  %
The increase in subscription and support revenues for the three months ended April 30, 2023 was primarily caused by volume-driven increases from new business, which includes new customers, upgrades and additional subscriptions from existing customers. Pricing was not a significant driver of the increase in revenues for either period. Revenues from term and perpetual software licenses, which are recognized at a point in time, represent approximately five percent of total subscription and support revenues for the three months ended April 30, 2023 and 2022. Subscription and support revenues accounted for approximately 93 percent of our total revenues for the three months ended April 30, 2023 and 2022.
The increase in professional services and other revenues was due primarily to the higher demand for services from an increased number of customers. In the first quarter of fiscal 2024, we started to see less demand for larger, multi-year transformation engagements and, in some cases, delayed projects, and these trends may continue in the near term.
Subscription and Support Revenues by Service Offering
Subscription and support revenues consisted of the following (in millions):
  Three Months Ended April 30,
  2023 As a % of Total Subscription and Support Revenues 2022 As a % of Total Subscription and Support Revenues Growth Rate
Sales $ 1,810  24  % $ 1,632  24  % 11  %
Service 1,964  26  1,761  25  12 
Platform and Other 1,567  20  1,419  21  10 
Marketing and Commerce 1,170  15  1,089  16  7 
Data 1,131  15  955  14  18 
Total $ 7,642  100  % $ 6,856  100  % 11  %
Our Industry Offerings revenue is included in one of the above service offerings depending on the primary service purchased.
Data subscription and support revenues include revenues from term and perpetual software licenses, which are recognized at the point in time when the software is made available to the customer. Therefore, we expect Data to experience greater volatility in revenues period to period compared to our other service offerings. Additionally, as we transition customers within the Data offering from perpetual and term software licenses to subscription based services, revenue associated with such customers will generally be recognized ratably over the contract term, resulting in potentially less revenue in the period the customer transitions but potentially increasing revenues over the remaining term.
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Revenues by Geography
  Three Months Ended April 30,
(in millions) 2023 As a % of Total Revenues 2022 As a % of Total Revenues Growth Rate
Americas $ 5,482  66  % $ 4,971  67  % 10  %
Europe 1,951  24  1,738  23  12 
Asia Pacific 814  10  702  10  16 
Total $ 8,247  100  % $ 7,411