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Income Taxes
 6 Months Ended
Jan. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes
9. Income Taxes
Effective Tax Rate
We compute our provision for or benefit from income taxes by applying the estimated annual effective tax rate to income or loss from recurring operations and adding the effects of any discrete income tax items specific to the period.
For the three and six months ended January 31, 2026, we recognized excess tax benefits on share-based compensation of $21 million and $51 million, respectively, in our provision for income taxes. For the three and six months ended January 31, 2025, we recognized excess tax benefits on share-based compensation of $29 million and $57 million, respectively, in our provision for income taxes.
Our effective tax rate for the three and six months ended January 31, 2026 was approximately 20%. Excluding discrete tax items primarily related to share-based compensation tax benefits including those mentioned above, our effective tax rate for both periods was approximately 24%. The difference from the federal statutory rate of 21% was primarily due to state income taxes and non-deductible share-based compensation, which were partially offset by the tax benefit we received from the federal research and experimentation credit.
Our effective tax rates for the three and six months ended January 31, 2025 were approximately 17% and 15%, respectively. Excluding discrete tax items primarily related to share-based compensation tax benefits including those mentioned above, our effective tax rate for both periods was approximately 24%. The difference from the federal statutory rate of 21% was primarily due to state income taxes and non-deductible share-based compensation, which were partially offset by the tax benefit we received from the federal research and experimentation credit.
On July 4, 2025, the U.S. federal government enacted the One Big Beautiful Bill Act (OBBBA), which includes significant tax law changes, most notably the reinstatement of the immediate expensing of domestic research and developmental expenditures, effective in fiscal 2026. While this provision is not expected to have a material impact on our fiscal 2026 effective
tax rate, we expect our fiscal 2026 cash tax payments and related deferred tax asset positions to decrease significantly compared to fiscal 2025.
In the current global tax policy environment, the U.S. and other domestic and foreign governments continue to consider, and in some cases enact, changes in corporate tax laws. As changes occur, we account for finalized legislation in the period of enactment.
Unrecognized Tax Benefits and Other Considerations
The total amount of our unrecognized tax benefits at July 31, 2025 was $394 million. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $276 million. There were no material changes to these amounts during the six months ended January 31, 2026.
We offset a $61 million long-term liability for uncertain tax positions against our long-term income tax receivable at each of the reporting periods ended January 31, 2026 and July 31, 2025, respectively. The long-term income tax receivable for both periods was primarily related to the government’s approval of a method of accounting change request for fiscal 2018.