Nutanix, Inc. Income Taxes Disclosure

NOTE 12. INCOME TAXES

Income Taxes

(Loss) income before provision for income taxes by fiscal year consisted of the following:

During the fiscal years ended July 31, 2023, 2024 and 2025, our provision for income taxes was primarily attributable to foreign tax provisions in certain foreign jurisdictions in which we conduct business.

Management believes that based on available evidence, both positive and negative, it is more likely than not that the U.S. deferred tax assets will not be utilized and as such, a full valuation allowance has been recorded.

The valuation allowance for deferred tax assets was $1.3 billion as of July 31, 2025. The net increase in the total valuation allowance for the fiscal years ended July 31, 2024 and 2025 was $127.4 million and $112.3 million, respectively.

As of July 31, 2025, we had approximately $1.8 billion of federal net operating loss carryforwards and $1.5 billion of state net operating loss carryforwards available to reduce future taxable income, which will begin to expire in fiscal 2026. In addition, we had approximately $219.0 million of federal research credit carryforwards, $160.2 million of state research credit carryforwards and $63.6 million of foreign tax credit carryforwards available to reduce future tax liability. The federal credits will begin to expire in fiscal 2035 and the state credits can be carried forward indefinitely. The foreign credits will begin to expire in fiscal 2029.

Utilization of the net operating loss and tax credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. Any annual limitation may result in the expiration of net operating losses and credits before utilization. If an ownership change occurred, utilization of the net operating loss and tax credit carryforwards could be significantly reduced.

As of July 31, 2025, we held an aggregate of $331.2 million in cash and cash equivalents in our foreign subsidiaries, of which $156.8 million was denominated in U.S. dollars. We attribute net revenue, costs and expenses to domestic and foreign components based on the terms of our agreements with our subsidiaries. We do not provide for federal income taxes on the undistributed earnings of our foreign subsidiaries, as such earnings are to be reinvested offshore indefinitely. It is not practicable to estimate the withholding tax liability if these earnings were to be repatriated.

We recognize uncertain tax positions in our financial statements if that position will more likely than not be sustained on audit, based on the technical merits of the position. A reconciliation of our unrecognized tax benefits, excluding accrued interest and penalties, is as follows:

During the fiscal year ended July 31, 2025, the net increase in unrecognized tax positions was primarily attributable to federal and state research and development credits and intercompany charges.

As of July 31, 2025, if uncertain tax positions are fully recognized in the future, it would result in a $17.5 million impact to our effective tax rate, primarily relating to positions in foreign jurisdictions, and the remaining amount would result in adjustments to deferred tax assets and corresponding adjustments to the valuation allowance.

We recognize interest and/or penalties related to income tax matters as a component of income tax expense. As of July 31, 2025, we had recognized $7.8 million of accrued interest and penalties related to uncertain tax positions.

We file income tax returns in the U.S. federal jurisdiction as well as various U.S. states and foreign jurisdictions. The tax years 2009 and forward remain open to examination by the major jurisdictions in which we are subject to tax. These fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized. We are subject to the continuous examination of income tax returns by various tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of the provision for income taxes. We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations. We do not anticipate a significant impact to the gross unrecognized tax benefits within the next 12 months related to these years.

The Organisation for Economic Co-operation and Development has established a framework for a global minimum corporate tax of 15%, known as Pillar Two, which will be applied on a country-by-country basis to companies with global revenues and profits above certain thresholds. Although the United States has not enacted legislation to adopt Pillar Two, and its future adoption is uncertain, several countries where we operate have enacted such legislation, and others are in the process of doing so. We do not expect Pillar Two to have a material impact on our effective tax rate or our financial condition and results of operations.

The One Big Beautiful Bill Act ("OBBBA") includes significant changes to U.S. income tax laws, including the repeal of mandatory capitalization of domestic research and development expenditures, extensions of bonus depreciation, and modifications to the international tax regimes. We are currently evaluating the potential impact of OBBBA on our consolidated financial statements for future periods.