Fair Value Measurements

3 Months Ended

Apr. 30, 2024

The carrying amounts of accounts receivable and other current assets, accounts payable, and accrued liabilities approximate their fair value due to their short-term nature.

Financial assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities, are as follows:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Financial assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires management to make judgments and considers factors specific to the asset or liability.

The following table presents the fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of April 30, 2024 (in thousands):


	Level 1		Level 2		Total
Assets
Cash equivalents:
Money market funds	$	292,069	$	—	$	292,069

U.S. Treasury securities	—		67,891		67,891
Commercial paper	—		35,543		35,543


Short-term investments:
Certificates of deposit	—		98,618		98,618
Asset-backed securities	—		656,355		656,355
Commercial paper	—		284,018		284,018
Corporate notes and bonds	—		1,707,067		1,707,067
Foreign government bonds	—		54,378		54,378
Municipal securities	—		76,348		76,348
U.S. agency obligations	—		55,709		55,709
U.S. Treasury securities	—		635,348		635,348
Foreign currency derivative contracts	—		108		108
Total financial assets	$	292,069	$	3,671,383	$	3,963,452
Liabilities
Foreign currency derivative contracts	$	—	$	(806)	$	(806)
Total financial liabilities	$	—	$	(806)	$	(806)

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


	Level 1		Level 2		Total
Assets
Cash equivalents:
Money market funds	$	73,197	$	—	$	73,197
U.S. Treasury securities	—		9,969		9,969

Short-term investments:
Certificates of deposit	—		94,283		94,283
Asset-backed securities	—		606,981		606,981
Commercial paper	—		144,245		144,245
Corporate notes and bonds	—		1,585,029		1,585,029
Foreign government bonds	—		50,206		50,206
Municipal securities	—		79,474		79,474
U.S. agency obligations	—		49,592		49,592
U.S. Treasury securities	—		714,459		714,459
Foreign currency derivative contracts	—		616		616
Total financial assets	$	73,197	$	3,334,854	$	3,408,051
Liabilities
Foreign currency derivative contracts	—		$	(232)	(232)
Total financial liabilities	$	—	$	(232)	$	(232)

We determine the fair value of our security holdings based on pricing from our service providers and market prices from industry-standard independent data providers. The valuation techniques used to measure the fair value of financial instruments having Level 2 inputs were derived from non-binding consensus prices that are corroborated by observable market data or quoted market prices for similar instruments. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs).

Balance Sheet Hedges

We enter into foreign currency forward contracts in order to hedge our foreign currency exposure. These forward contracts are not designated as hedging instruments under applicable accounting guidance, and therefore, we account for them at fair value with changes in the fair value recorded as a component of other income, net in our condensed consolidated statements of comprehensive income. Cash flows from such forward contracts are classified as operating activities. The realized foreign currency gains were not material for both the three months ended April 30, 2024 and 2023.

The fair value of our outstanding derivative instruments is summarized below (in thousands):


	April 30, 2024		January 31, 2024
Notional amount of foreign currency derivative contracts	$	133,096	$	201,407
Fair value of foreign currency derivative contracts	133,909		201,024

- Definition

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

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