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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2022
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 No. 000-17948
ELECTRONIC ARTS INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2838567
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
209 Redwood Shores Parkway
94065
Redwood City California
(Address of principal executive offices) (Zip Code)
(650) 628-1500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class    Trading Symbol Name of Each Exchange on Which Registered
Common Stock, $0.01 par value    EA NASDAQ Global Select Market
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 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      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      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  
As of February 3, 2022, there were 274,227,596 shares of the Registrant’s Common Stock, par value $0.01 per share, outstanding.
1


ELECTRONIC ARTS INC.
FORM 10-Q
FOR THE PERIOD ENDED DECEMBER 31, 2022
Table of Contents
 
    Page
Item 1.
3
4
5
6
7
8
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 6.
2


PART I – FINANCIAL INFORMATION

Item 1.Condensed Consolidated Financial Statements (Unaudited)

ELECTRONIC ARTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except par value data)
December 31, 2022
March 31, 2022 (a)
ASSETS
Current assets:
Cash and cash equivalents $ 2,202  $ 2,732 
Short-term investments 351  330 
Receivables, net 836  650 
Other current assets 453  439 
Total current assets 3,842  4,151 
Property and equipment, net 553  550 
Goodwill 5,380  5,387 
Acquisition-related intangibles, net 735  962 
Deferred income taxes, net 2,443  2,243 
Other assets 517  507 
TOTAL ASSETS $ 13,470  $ 13,800 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 62  $ 101 
Accrued and other current liabilities 1,243  1,388 
Deferred net revenue (online-enabled games) 1,808  2,024 
Total current liabilities 3,113  3,513 
Senior notes, net 1,879  1,878 
Income tax obligations 525  386 
Deferred income taxes, net
Other liabilities 401  397 
Total liabilities 5,919  6,175 
Commitments and contingencies (See Note 11)
Stockholders’ equity:
Common stock, $0.01 par value. 1,000 shares authorized; 275 and 280 shares issued and outstanding, respectively
Additional paid-in capital —  — 
Retained earnings 7,585  7,607 
Accumulated other comprehensive income (loss) (37) 15 
Total stockholders’ equity 7,551  7,625 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 13,470  $ 13,800 

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited).
(a) Derived from audited Consolidated Financial Statements.
3


ELECTRONIC ARTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Three Months Ended
December 31,
Nine Months Ended
December 31,
(In millions, except per share data) 2022 2021 2022 2021
Net revenue $ 1,881  $ 1,789  $ 5,552  $ 5,166 
Cost of revenue 568  631  1,344  1,440 
Gross profit 1,313  1,158  4,208  3,726 
Operating expenses:
Research and development 556  539  1,693  1,607 
Marketing and sales 256  293  723  716 
General and administrative 162  163  503  508 
Amortization and impairment of intangibles 50  61  132  131 
Total operating expenses 1,024  1,056  3,051  2,962 
Operating income 289  102  1,157  764 
Interest and other income (expense), net (7) (11) (12) (39)
Income before provision for income taxes 282  91  1,145  725 
Provision for income taxes 78  25  331  161 
Net income $ 204  $ 66  $ 814  $ 564 
Earnings per share:
Basic $ 0.74  $ 0.23  $ 2.93  $ 1.99 
Diluted $ 0.73  $ 0.23  $ 2.92  $ 1.97 
Number of shares used in computation:
Basic 276  283  278  284 
Diluted 278  285  279  287 

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

4


ELECTRONIC ARTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) Three Months Ended
December 31,
Nine Months Ended
December 31,
(In millions) 2022 2021 2022 2021
Net income $ 204  $ 66  $ 814  $ 564 
Other comprehensive income (loss), net of tax:
Net gains (losses) on available-for-sale securities (1) (1)
Net gains (losses) on derivative instruments (199) 10  —  66 
Foreign currency translation adjustments 23  (1) (53) (9)
Total other comprehensive income (loss), net of tax (174) (52) 56 
Total comprehensive income $ 30  $ 74  $ 762  $ 620 

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited).
5


ELECTRONIC ARTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
 Common Stock
Additional Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (loss)
Total
Stockholders’
Equity
(In millions, except share data in thousands) Shares Amount
Balances as of March 31, 2022
280,051  $ $ —  $ 7,607  $ 15  $ 7,625 
Total comprehensive income —  —  —  311  56  367 
Stock-based compensation —  —  125  —  —  125 
Issuance of common stock 1,413  —  (103) —  —  (103)
Repurchase and retirement of common stock (2,512) —  (22) (298) —  (320)
Cash dividends declared ($0.19 per common share)
—  —  —  (53) —  (53)
Balances as of June 30, 2022 278,952  $ $ —  $ 7,567  $ 71  $ 7,641 
Total comprehensive income —  —  —  299  66  365 
Stock-based compensation —  —  140  —  —  140 
Issuance of common stock 641  —  30  —  —  30 
Repurchase and retirement of common stock (2,569) —  (170) (155) —  (325)
Cash dividends declared ($0.19 per common share) —  —  —  (53) —  (53)
Balances as of September 30, 2022 277,024  $ $ —  $ 7,658  $ 137  $ 7,798 
Total comprehensive income —  —  —  204  (174) 30 
Stock-based compensation —  —  141  —  —  141 
Issuance of common stock 705  —  (41) —  —  (41)
Repurchase and retirement of common stock (2,593) —  (100) (225) —  (325)
Cash dividends declared ($0.19 per common share) —  —  —  (52) —  (52)
Balances as of December 31, 2022 275,136  $ $ —  $ 7,585  $ (37) $ 7,551 
(Unaudited)
 Common Stock
Additional Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (loss)
Total
Stockholders’
Equity
(In millions, except share data in thousands) Shares Amount
Balances as of March 31, 2021
286,465  $ $ —  $ 7,887  $ (50) $ 7,840 
Total comprehensive income —  —  —  204  15  219 
Stock-based compensation —  —  125  —  —  125 
Awards assumed upon acquisition —  —  23  —  —  23 
Issuance of common stock 1,209  —  (105) —  —  (105)
Repurchase and retirement of common stock (2,292) —  (43) (282) —  (325)
Cash dividends declared ($0.17 per common share)
—  —  —  (49) —  (49)
Balances as of June 30, 2021 285,382  $ $ —  $ 7,760  $ (35) $ 7,728 
Total comprehensive income —  —  —  294  33  327 
Stock-based compensation —  —  149  —  —  149 
Issuance of common stock 602  —  25  —  —  25 
Repurchase and retirement of common stock (2,318) —  (174) (151) —  (325)
Cash dividends declared ($0.17 per common share) —  —  —  (48) —  (48)
Balances as of September 30, 2021 283,666  $ $ —  $ 7,855  $ (2) $ 7,856 
Total comprehensive income —  —  —  66  74 
Stock-based compensation —  —  129  —  —  129 
Issuance of common stock 866  —  (69) —  —  (69)
Repurchase and retirement of common stock (2,415) —  (60) (265) —  (325)
Cash dividends declared ($0.17 per common share) —  —  —  (48) —  (48)
Balances as of December 31, 2021 282,117  $ $ —  $ 7,608  $ $ 7,617 

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited).
6


ELECTRONIC ARTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Nine Months Ended
December 31,
(In millions) 2022 2021
OPERATING ACTIVITIES
Net income $ 814  $ 564 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, accretion and impairment 363  345 
Stock-based compensation 406  403 
Change in assets and liabilities:
Receivables, net (186) (390)
Other assets (53) (75)
Accounts payable (21) (9)
Accrued and other liabilities 28  183 
Deferred income taxes, net (203) (140)
Deferred net revenue (online-enabled games) (215) 574 
Net cash provided by operating activities 933  1,455 
INVESTING ACTIVITIES
Capital expenditures (160) (135)
Proceeds from maturities and sales of short-term investments 243  1,193 
Purchase of short-term investments (263) (438)
Acquisitions, net of cash acquired —  (3,391)
Net cash used in investing activities (180) (2,771)
FINANCING ACTIVITIES
Proceeds from issuance of common stock 47  44 
Cash dividends paid (158) (145)
Cash paid to taxing authorities for shares withheld from employees (161) (193)
Repurchase and retirement of common stock (970) (975)
Net cash used in financing activities (1,242) (1,269)
Effect of foreign exchange on cash and cash equivalents (41) (5)
Increase (decrease) in cash and cash equivalents (530) (2,590)
Beginning cash and cash equivalents 2,732  5,260 
Ending cash and cash equivalents $ 2,202  $ 2,670 
Supplemental cash flow information:
Cash paid during the period for income taxes, net $ 457  $ 374 
Cash paid during the period for interest 28  28 

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited).
7


ELECTRONIC ARTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Electronic Arts is a global leader in digital interactive entertainment. We develop, market, publish and deliver games, content and services that can be experienced on game consoles, PCs, mobile phones and tablets. At our core is a portfolio of intellectual property from which we create innovative games and content that enable us to build on-going and meaningful relationships with a community of players, creators and viewers. Our portfolio includes brands that we either wholly own (such as Apex Legends, Battlefield, and The Sims) or license from others (such as Madden, Star Wars, and the 300+ licenses within our global football ecosystem). Through our live services offerings, we offer our players high-quality experiences designed to provide value to players and extend and enhance gameplay. These live services include extra content, subscription offerings and other revenue generated in addition to the sale of our base games and free-to-play games. In addition, we are focused on reaching more players whenever and wherever they want to play. We believe that we can add value to our network by making it easier for players to connect to a world of play by offering choice of business model, distribution channel and device.
Our fiscal year is reported on a 52- or 53-week period that ends on the Saturday nearest March 31. Our results of operations for the fiscal year ending March 31, 2023 contains 52 weeks and ends on April 1, 2023. Our results of operations for the fiscal year ended March 31, 2022 contained 52 weeks and ended on April 2, 2022. Our results of operations for the three and nine months ended December 31, 2022 contained 13 weeks and 39 weeks, respectively, and ended on December 31, 2022. Our results of operations for the three and nine months ended December 31, 2021 contained 13 weeks and 39 weeks, respectively, and ended on January 1, 2022. For simplicity of disclosure, all fiscal periods are referred to as ending on a calendar month end.
The Condensed Consolidated Financial Statements are unaudited and reflect all adjustments (consisting only of normal recurring accruals unless otherwise indicated) that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the amounts reported in these Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ materially from those estimates. The results of operations for the current interim periods are not necessarily indicative of results to be expected for the current year or any other period.
These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, as filed with the United States Securities and Exchange Commission (“SEC”) on May 25, 2022.
Recently Adopted Accounting Standards
In November 2021, the FASB issued ASU 2021-10, Disclosures by Business Entities about Government Assistance (Topic 832). The amendments in this update establish Topic 832 and require additional disclosures regarding government grants and money contributions when entities accounted for transactions with a government by analogizing to a grant or contribution accounting model. We adopted ASU 2021-10 in the first quarter of fiscal year 2023 and elected to apply the amendments prospectively to all transactions within the scope of the amendment that are reflected in the financial statements at the date of adoption. The adoption did not have a material impact on our Condensed Consolidated Financial Statements and related disclosures.

Other Recently Issued Accounting Standards
In October 2021, the FASB issued ASU 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805). The amendments in this update require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. This update is effective for us beginning in the first quarter of fiscal year 2024. Early adoption is permitted. We are currently evaluating the timing of adoption and impact of this new standard on our Condensed Consolidated Financial Statements and related disclosures.


8


(2) FAIR VALUE MEASUREMENTS
There are various valuation techniques used to estimate fair value, the primary one being the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability. We measure certain financial and nonfinancial assets and liabilities at fair value on a recurring and nonrecurring basis.
Fair Value Hierarchy
The three levels of inputs that may be used to measure fair value are as follows:
Level 1. Quoted prices in active markets for identical assets or liabilities.
Level 2. Observable inputs other than quoted prices included within Level 1, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities.
Level 3. Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
As of December 31, 2022 and March 31, 2022, our assets and liabilities that were measured and recorded at fair value on a recurring basis were as follows (in millions):
    Fair Value Measurements at Reporting Date Using   
 
As of
December 31, 2022
Quoted Prices in
Active Markets 
for Identical
Financial
Instruments
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Balance Sheet 
Classification
  (Level 1) (Level 2) (Level 3)
Assets
Bank and time deposits $ 56  $ 56  $ —  $ —  Cash equivalents
Money market funds —  —  Cash equivalents
Available-for-sale securities:
Corporate bonds 135  —  135  —  Short-term investments and cash equivalents
U.S. Treasury securities 84  84  —  —  Short-term investments
U.S. agency securities —  —  Short-term investments
Commercial paper 50  —  50  —  Short-term investments
Foreign government securities 15  —  15  —  Short-term investments
Asset-backed securities 40  —  40  —  Short-term investments
Certificates of deposit 19  —  19  —  Short-term investments
Foreign currency derivatives 53  —  53  —  Other current assets and other assets
Deferred compensation plan assets (a)
24  24  —  —  Other assets
Total assets at fair value $ 489  $ 169  $ 320  $ — 
Liabilities
Foreign currency derivatives $ 66  $ —  $ 66  $ —  Accrued and other current liabilities and other liabilities
Deferred compensation plan liabilities (a)
24  24  —  —  Other liabilities
Total liabilities at fair value $ 90  $ 24  $ 66  $ — 
9


    Fair Value Measurements at Reporting Date Using  
 
As of
March 31, 2022
Quoted Prices in
Active Markets for Identical
Financial Instruments
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Balance Sheet 
Classification
  (Level 1) (Level 2) (Level 3)
Assets
Bank and time deposits $ 55  $ 55  $ —  $ —  Cash equivalents
Money market funds 257  257  —  —  Cash equivalents
Available-for-sale securities:
Corporate bonds 116  —  116  —  Short-term investments
U.S. Treasury securities 104  104  —  —  Short-term investments and cash equivalents
Commercial paper 51  —  51  —  Short-term investments and cash equivalents
Foreign government securities 17  —  17  —  Short-term investments
Asset-backed securities 38  —  38  —  Short-term investments
Certificates of deposit 18  —  18  —  Short-term investments
Foreign currency derivatives 63  —  63  —  Other current assets and other assets
Deferred compensation plan assets (a)
21  21  —  —  Other assets
Total assets at fair value $ 740  $ 437  $ 303  $ — 
Liabilities
Foreign currency derivatives $ 14  $ —  $ 14  $ —  Accrued and other current liabilities and other liabilities
Deferred compensation plan liabilities (a)
22  22  —  —  Other liabilities
Total liabilities at fair value $ 36  $ 22  $ 14  $ — 

(a)The Deferred Compensation Plan assets consist of various mutual funds. See Note 15 in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, for additional information regarding our Deferred Compensation Plan.


(3) FINANCIAL INSTRUMENTS
Cash and Cash Equivalents
As of December 31, 2022 and March 31, 2022, our cash and cash equivalents were $2,202 million and $2,732 million, respectively. Cash equivalents were valued using quoted market prices or other readily available market information.
10


Short-Term Investments
Short-term investments consisted of the following as of December 31, 2022 and March 31, 2022 (in millions):
 
As of December 31, 2022
As of March 31, 2022
  Cost or
Amortized
Cost
Gross Unrealized Fair
Value
Cost or
Amortized
Cost
Gross Unrealized Fair
Value
  Gains Losses Gains Losses
Corporate bonds $ 136  $ —  $ (1) $ 135  $ 117  $ —  $ (1) $ 116 
U.S. Treasury securities 85  —  (1) 84  103  —  (1) 102 
U.S. agency securities —  —  —  —  —  — 
Commercial paper 50  —  —  50  39  —  —  39 
Foreign government securities 15  —  —  15  17  —  —  17 
Asset-backed securities 40  —  —  40  38  —  —  38 
Certificates of deposit 19  —  —  19  18  —  —  18 
Short-term investments $ 353  $ —  $ (2) $ 351  $ 332  $ —  $ (2) $ 330 
The following table summarizes the amortized cost and fair value of our short-term investments, classified by stated maturity as of December 31, 2022 and March 31, 2022 (in millions):
 
As of December 31, 2022
As of March 31, 2022
  Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Short-term investments
Due within 1 year $ 277  $ 276  $ 250  $ 249 
Due 1 year through 5 years 70  69  77  76 
Due after 5 years
Short-term investments $ 353  $ 351  $ 332  $ 330 

(4) DERIVATIVE FINANCIAL INSTRUMENTS
Assets or liabilities associated with our derivative instruments and hedging activities are recorded at fair value in other current assets/other assets, or accrued and other current liabilities/other liabilities, respectively, on our Condensed Consolidated Balance Sheets. As discussed below, the accounting for gains and losses resulting from changes in fair value depends on the use of the derivative instrument and whether it is designated and qualifies for hedge accounting.
We transact business in various foreign currencies and have significant international sales and expenses denominated in foreign currencies, subjecting us to foreign currency risk. We purchase foreign currency forward contracts, generally with maturities of 18 months or less, to reduce the volatility of cash flows primarily related to forecasted revenue and expenses denominated in certain foreign currencies. Our cash flow risks are primarily related to fluctuations in the Euro, British pound sterling, Canadian dollar, Swedish krona, Australian dollar, Japanese yen, Chinese yuan, South Korean won and Polish zloty. In addition, we utilize foreign currency forward contracts to mitigate foreign currency exchange risk associated with foreign-currency-denominated monetary assets and liabilities, primarily intercompany receivables and payables. The foreign currency forward contracts not designated as hedging instruments generally have a contractual term of approximately three months or less and are transacted near month-end. We do not use foreign currency forward contracts for speculative trading purposes.
11


Cash Flow Hedging Activities
Certain of our forward contracts are designated and qualify as cash flow hedges. To qualify for hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedges and must be highly effective in offsetting changes to future cash flows on hedged transactions. The derivative assets or liabilities associated with our hedging activities are recorded at fair value in other current assets/other assets, or accrued and other current liabilities/other liabilities, respectively, on our Condensed Consolidated Balance Sheets. The gains or losses resulting from changes in the fair value of these hedges is initially reported, net of tax, as a component of accumulated other comprehensive income (loss) in stockholders’ equity. The gains or losses resulting from changes in the fair value of these hedges are subsequently reclassified into net revenue or research and development expenses, as appropriate, in the period when the forecasted transaction is recognized in our Condensed Consolidated Statements of Operations. In the event that the underlying forecasted transactions do not occur, or it becomes remote that they will occur within the defined hedge period, the gains or losses on the related cash flow hedges are reclassified from accumulated other comprehensive income (loss) to net revenue or research and development expenses, in our Condensed Consolidated Statements of Operations.Total gross notional amounts and fair values for currency derivatives with cash flow hedge accounting designation are as follows (in millions):
As of December 31, 2022
As of March 31, 2022
Notional Amount Fair Value Notional Amount Fair Value
Asset Liability Asset Liability
Forward contracts to purchase $ 282  $ $ 12  $ 375  $ $
Forward contracts to sell $ 1,729  $ 47  $ 49  $ 1,829  $ 52  $
The effects of cash flow hedge accounting in our Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2022 and 2021 are as follows (in millions):
Three Months Ended December 31, Nine Months Ended December 31,
2022 2021 2022 2021
Net revenue Research and development Net revenue Research and development Net revenue Research and development Net revenue Research and development
Total amounts presented in our Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $ 1,881  $ 556  $ 1,789  $ 539  $ 5,552  $ 1,693  $ 5,166  $ 1,607 
Gains (losses) on foreign currency forward contracts designated as cash flow hedges $ 67  $ (6) $ 12  $ $ 147  $ (14) $ (25) $ 14 
Balance Sheet Hedging Activities
Our foreign currency forward contracts that are not designated as hedging instruments are accounted for as derivatives whereby the fair value of the contracts are reported as other current assets or accrued and other current liabilities on our Condensed Consolidated Balance Sheets, and gains and losses resulting from changes in the fair value are reported in interest and other income (expense), net, in our Condensed Consolidated Statements of Operations. The gains and losses on these foreign currency forward contracts generally offset the gains and losses in the underlying foreign-currency-denominated monetary assets and liabilities, which are also reported in interest and other income (expense), net, in our Condensed Consolidated Statements of Operations.
Total gross notional amounts and fair values for currency derivatives that are not designated as hedging instruments are accounted for as follows (in millions):
As of December 31, 2022
As of March 31, 2022
Notional Amount Fair Value Notional Amount Fair Value
Asset Liability Asset Liability
Forward contracts to purchase $ 883  $ $ $ 496  $ $ — 
Forward contracts to sell $ 1,125  $ $ —  $ 400  $ $
12


The effect of foreign currency forward contracts not designated as hedging instruments in our Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2022 and 2021 was as follows (in millions):
  Three Months Ended
December 31,
Nine Months Ended
December 31,
  2022 2021 2022 2021
Interest and other income (expense), net
Total amounts presented in our Condensed Consolidated Statements of Operations in which the effects of balance sheet hedges are recorded $ (7) $ (11) $ (12) $ (39)
Gains (losses) on foreign currency forward contracts not designated as hedging instruments $ (53) $ 19  $ (26) $ 16 

(5) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The changes in accumulated other comprehensive income (loss) by component, net of tax, for the three months ended December 31, 2022 and 2021 are as follows (in millions):
Unrealized Net Gains (Losses) on Available-for-Sale Securities Unrealized Net Gains (Losses) on Derivative Instruments Foreign Currency Translation Adjustments Total
Balances as of September 30, 2022 $ (4) $ 246  $ (105) $ 137 
Other comprehensive income (loss) before reclassifications (137) 23  (113)
Amounts reclassified from accumulated other comprehensive income (loss) (62) —  (61)
Total other comprehensive income (loss), net of tax
(199) 23  (174)
Balances as of December 31, 2022 $ (2) $ 47  $ (82) $ (37)
Unrealized Net Gains (Losses) on Available-for-Sale Securities Unrealized Net Gains (Losses) on Derivative Instruments Foreign Currency Translation Adjustments Total
Balances as of September 30, 2021 $ —  $ 27  $ (29) $ (2)
Other comprehensive income (loss) before reclassifications (1) 24  (1) 22 
Amounts reclassified from accumulated other comprehensive income (loss) —  (14) —  (14)
Total other comprehensive income (loss), net of tax
(1) 10  (1)
Balances as of December 31, 2021 $ (1) $ 37  $ (30) $
13


The changes in accumulated other comprehensive income (loss) by component, net of tax, for the nine months ended December 31, 2022 and 2021 are as follows (in millions):
Unrealized Net Gains (Losses) on Available-for-Sale Securities Unrealized Net Gains (Losses) on Derivative Instruments Foreign Currency Translation Adjustments Total
Balances as of March 31, 2022 $ (3) $ 47  $ (29) $ 15 
Other comprehensive income (loss) before reclassifications —  134  (53) 81 
Amounts reclassified from accumulated other comprehensive income (loss) (134) —  (133)
Total other comprehensive income (loss), net of tax
—  (53) (52)
Balances as of December 31, 2022 $ (2) $ 47  $ (82) $ (37)
Unrealized Net Gains (Losses) on Available-for-Sale Securities Unrealized Net Gains (Losses) on Derivative Instruments Foreign Currency Translation Adjustments Total
Balances as of March 31, 2021 $ —  $ (29) $ (21) $ (50)
Other comprehensive income (loss) before reclassifications (1) 55  (9) 45 
Amounts reclassified from accumulated other comprehensive income (loss) —  11  —  11 
Total other comprehensive income (loss), net of tax
(1) 66  (9) 56 
Balances as of December 31, 2021 $ (1) $ 37  $ (30) $
The effects on net income of amounts reclassified from accumulated other comprehensive income (loss) for the three and nine months ended December 31, 2022 were as follows (in millions):
  Amount Reclassified From Accumulated Other Comprehensive Income (Loss)
Statement of Operations Classification
Three Months Ended
December 31, 2022
Nine Months Ended
December 31, 2022
(Gains) losses on foreign currency forward contracts designated as cash flow hedges
Net revenue $ (67) $ (147)
Research and development 14 
Total net (gain) loss reclassified, net of tax $ (61) $ (133)
The effects on net income of amounts reclassified from accumulated other comprehensive income (loss) for the three and nine months ended December 31, 2021 were as follows (in millions):
  Amount Reclassified From Accumulated Other Comprehensive Income (Loss)
Statement of Operations Classification
Three Months Ended
December 31, 2021
Nine Months Ended
December 31, 2021
(Gains) losses on foreign currency forward contracts designated as cash flow hedges
Net revenue $ (12) $ 25 
Research and development (2) (14)
Total net (gain) loss reclassified, net of tax $ (14) $ 11 

14


(6) GOODWILL AND ACQUISITION-RELATED INTANGIBLES, NET
The changes in the carrying amount of goodwill for the nine months ended December 31, 2022 are as follows (in millions):
As of
March 31, 2022
Activity Effects of Foreign Currency Translation
As of
December 31, 2022
Goodwill $ 5,755  $ —  $ (7) $ 5,748 
Accumulated impairment (368) —  —  (368)
Total $ 5,387  $ —  $ (7) $ 5,380 
Acquisition-related intangibles consisted of the following (in millions):
 
As of December 31, 2022
As of March 31, 2022
  Gross
Carrying
Amount
Accumulated
Amortization
Acquisition-
Related
Intangibles, Net
Gross
Carrying
Amount
Accumulated
Amortization
Acquisition-
Related
Intangibles, Net
Finite-lived acquisition-related intangibles
Developed and core technology $ 1,051  $ (723) $ 328  $ 1,102  $ (643) $ 459 
Trade names and trademarks 596  (268) 328  609  (212) 397 
Registered user base and other intangibles 56  (47) 56  (30) 26 
Total finite-lived acquisition-related intangibles $ 1,703  $ (1,038) $ 665  $ 1,767  $ (885) $ 882 
Indefinite-lived acquisition-related intangibles
In-process research and development
$ 70  $ —  $ 70  $ 80  $ —  $ 80 
Total acquisition-related intangibles, net $ 1,773  $ (1,038) $ 735  $ 1,847  $ (885) $ 962 
Amortization of intangibles, including impairments for the three and nine months ended December 31, 2022 and 2021 are classified in the Condensed Consolidated Statements of Operations as follows (in millions):
Three Months Ended
December 31,
Nine Months Ended
December 31,
2022 2021 2022 2021
Cost of revenue $ 26  $ 44  $ 95  $ 88 
Operating expenses 50  61  132  131 
Total $ 76  $ 105  $ 227  $ 219 
During the three months ended December 31, 2022, we recorded impairment charges of $22 million for acquisition-related intangible assets within operating expenses. During the nine months ended December 31, 2022, we recorded impairment charges of $40 million for acquisition-related intangible assets, of which $12 million was recorded within cost of revenue and $28 million was recorded within operating expenses.
During the three and nine months ended December 31, 2021, we recorded impairment charges of $14 million and $26 million, respectively, for acquisition-related intangible assets, which were recorded within operating expenses.
Acquisition-related intangible assets are generally amortized using the straight-line method over the lesser of their estimated useful lives or the agreement terms, currently ranging from 2 to 7 years. As of December 31, 2022 and March 31, 2022, the weighted-average remaining useful life for acquisition-related intangible assets was approximately 4.9 and 5.2 years, respectively.
15


As of December 31, 2022, future amortization of finite-lived acquisition-related intangibles that will be recorded in the Condensed Consolidated Statements of Operations is estimated as follows (in millions):
Fiscal Year Ending March 31,  
2023 (remaining three months) $ 51 
2024 150 
2025 122 
2026 118 
2027 99 
2028 96 
2029 and thereafter 29 
Total $ 665 

(7) ROYALTIES AND LICENSES
Our royalty expenses consist of payments to (1) content licensors, (2) independent software developers, and (3) co-publishing and distribution affiliates. Content license royalties consist of payments made to celebrities, professional sports organizations, movie studios and other organizations for our use of their trademarks, copyrights, personal publicity rights, content and/or other intellectual property. Royalty payments to independent software developers are payments for the development of intellectual property related to our games. Co-publishing and distribution royalties are payments made to third parties for the delivery of products.
During the three and nine months ended December 31, 2022 and 2021, we did not recognize any material losses or impairment charges on royalty-based commitments.
The current and long-term portions of prepaid royalties and minimum guaranteed royalty-related assets, included in other current assets and other assets, consisted of (in millions):
As of
December 31, 2022
As of
March 31, 2022
Other current assets $ 45  $ 35 
Other assets 28  28 
Royalty-related assets $ 73  $ 63 
At any given time, depending on the timing of our payments to our co-publishing and/or distribution affiliates, content licensors, and/or independent software developers, we classify any recognized unpaid royalty amounts due to these parties as accrued liabilities. The current and long-term portions of accrued royalties, included in accrued and other current liabilities and other liabilities, consisted of (in millions):
As of
December 31, 2022
As of
March 31, 2022
Accrued royalties $ 222  $ 203 
Other liabilities — 
Royalty-related liabilities $ 222  $ 206 
As of December 31, 2022, we were committed to pay approximately $1,844 million to content licensors, independent software developers, and co-publishing and/or distribution affiliates, but performance remained with the counterparty (i.e., delivery of the product or content or other factors) and such commitments were therefore not recorded in our Condensed Consolidated Financial Statements. See Note 11 for further information on our developer and licensor commitments.

16


(8) BALANCE SHEET DETAILS
Property and Equipment, Net
Property and equipment, net, as of December 31, 2022 and March 31, 2022 consisted of (in millions):
As of
December 31, 2022
As of
March 31, 2022
Computer, equipment and software $ 907  $ 853 
Buildings 367  375 
Leasehold improvements 189  202 
Equipment, furniture and fixtures, and other 90  95 
Land 66  66 
Construction in progress 12  30 
1,631  1,621 
Less: accumulated depreciation (1,078) (1,071)
Property and equipment, net $ 553  $ 550 
Depreciation expense associated with property and equipment was $46 million and $135 million for the three and nine months ended December 31, 2022, respectively.
Depreciation expense associated with property and equipment was $41 million and $120 million for the three and nine months ended December 31, 2021, respectively.
Accrued and Other Current Liabilities
Accrued and other current liabilities as of December 31, 2022 and March 31, 2022 consisted of (in millions):
As of
December 31, 2022
As of
March 31, 2022
Other accrued expenses $ 378  $ 304 
Accrued compensation and benefits 342  500 
Accrued royalties 222  203 
Sales returns and price protection reserves 123  144 
Deferred net revenue (other) 105  156 
Operating lease liabilities 73  81 
Accrued and other current liabilities $ 1,243  $ 1,388 
Deferred net revenue (other) includes the deferral of licensing arrangements, subscription revenue, and other revenue for which revenue recognition criteria has not been met.
Deferred net revenue
Deferred net revenue as of December 31, 2022 and March 31, 2022 consisted of (in millions):
As of
December 31, 2022
As of
March 31, 2022
Deferred net revenue (online-enabled games) $ 1,808  $ 2,024 
Deferred net revenue (other) 105  156 
Deferred net revenue (noncurrent) 48  68 
Total deferred net revenue $ 1,961  $ 2,248 
During the nine months ended December 31, 2022 and 2021, we recognized $2,124 million and $1,607 million of revenue, respectively, that were included in the deferred net revenue balance at the beginning of the period.
17


Remaining Performance Obligations
As of December 31, 2022, revenue allocated to remaining performance obligations consists of our deferred revenue balance of $1,961 million. These balances exclude any estimates for future variable consideration as we have elected the optional exemption to exclude sales-based royalty revenue. We expect to recognize substantially all of these balances as revenue over the next 12 months.

(9) INCOME TAXES
The provision for income taxes for the three and nine months ended December 31, 2022 is based on our projected annual effective tax rate for fiscal year 2023, adjusted for specific items that are required to be recognized in the period in which they are incurred. Our effective tax rate for the three and nine months ended December 31, 2022 was 28 percent and 29 percent, respectively, as compared to 27 percent and 22 percent, respectively, for the same period in fiscal year 2022. The rate for the nine months ended December 31, 2022 was higher than the same period in the prior year due to the Codemasters intra-entity sale of intellectual property rights to our U.S. and Swiss intellectual property owners completed during the nine months ended December 31, 2021, which resulted in a step-up of the U.S. and Swiss tax-deductible basis in the transferred intellectual property rights, and we recognized a $60 million net tax benefit for the current and deferred tax impacts of the sale. Excluding the Codemasters intra-entity sale, the effective tax rate for nine months ended December 31, 2021 would have been 30 percent.

We are subject to income tax examinations in various jurisdictions with respect to fiscal years after 2013. The timing and potential resolution of income tax examinations is highly uncertain. The gross unrecognized tax benefits as of December 31, 2022 were $788 million.

While we continue to measure our uncertain tax positions, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued. For example, in the period ended June 30, 2020, the decision of the Ninth Circuit Court of Appeals in Altera Corp. v Commissioner (“the Altera opinion”) resulted in a partial decrease of our unrecognized tax benefits. A complete resolution and settlement of the matters underlying the Altera opinion is reasonably possible within the next 12 months, which would result in an additional reduction of our gross unrecognized tax benefits. However, it is uncertain whether a complete resolution and settlement of such matters would also result in resolution of all related and unrelated U.S. positions for all applicable years. Therefore, it is not possible to provide a range of potential outcomes associated with a reversal of our gross unrecognized tax benefits. We expect changes in unrecognized tax benefits unrelated to the Altera opinion which may occur within the next twelve months to be insignificant.

On February 7, 2023, the Swiss Federal Tax Administration published an updated safe harbor interest rate, and we expect the higher rate to materially increase the valuation allowance against our Swiss deferred tax assets. We will recognize the impact to the income tax provision and the valuation allowance during the quarterly period ending March 31, 2023.



(10) FINANCING ARRANGEMENTS
Senior Notes
In February 2021, we issued $750 million aggregate principal amount of 1.85% Senior Notes due February 15, 2031 (the “2031 Notes”) and $750 million aggregate principal amount of 2.95% Senior Notes due February 15, 2051 (the “2051 Notes”). Our proceeds were $1,478 million, net of discount of $6 million and issuance costs of $16 million. Both the discount and issuance costs are being amortized to interest expense over the respective terms of the 2031 Notes and the 2051 Notes using the effective interest rate method. The effective interest rate is 1.98% for the 2031 Notes and 3.04% for the 2051 Notes. Interest is payable semiannually in arrears, on February 15 and August 15 of each year.
In February 2016, we issued $400 million aggregate principal amount of 4.80% Senior Notes due March 1, 2026 (the “2026 Notes”). Our proceeds were $395 million, net of discount of $1 million and issuance costs of $4 million. Both the discount and issuance costs are being amortized to interest expense over the term of the 2026 Notes using the effective interest rate method. The effective interest rate was 4.97%. Interest is payable semiannually in arrears, on March 1 and September 1 of each year.
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The carrying and fair values of the Senior Notes are as follows (in millions):
  
As of
December 31, 2022
As of
March 31, 2022
Senior Notes:
4.80% Senior Notes due 2026 $ 400  $ 400 
1.85% Senior Notes due 2031 750  750 
2.95% Senior Notes due 2051 750  750 
Total principal amount $ 1,900  $ 1,900 
Unaccreted discount (6) (6)
Unamortized debt issuance costs (15) (16)
Net carrying value of Senior Notes $ 1,879  $ 1,878 
Fair value of Senior Notes (Level 2) $ 1,477  $ 1,711 
As of December 31, 2022, the remaining life of the 2026 Notes, 2031 Notes and 2051 Notes is approximately 3.2 years, 8.1 years, and 28.1 years, respectively.
The Senior Notes are senior unsecured obligations and rank equally with all our other existing and future unsubordinated obligations and any indebtedness that we may incur from time to time under our Credit Facility.
The 2026 Notes, 2031 Notes and 2051 Notes are redeemable at our option at any time prior to December 1, 2025, November 15, 2030, and August 15, 2050, respectively, subject to a make-whole premium. After such dates, we may redeem each such series of Notes, respectively, at a redemption price equal to 100% of the aggregate principal amount plus accrued and unpaid interest. In addition, upon the occurrence of a change of control repurchase event, the holders of each such series of Notes may require us to repurchase all or a portion of these Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. Each such series of Notes also include covenants that limit our ability to incur liens on assets and to enter into sale and leaseback transactions, subject to certain allowances.
Credit Facility
On August 29, 2019, we entered into a $500 million unsecured revolving credit facility (as amended, the “Credit Facility”) with a syndicate of banks which was amended on October 18, 2022. The Credit Facility terminates on August 29, 2024 unless the maturity is extended in accordance with its terms. The Credit Facility contains an option to arrange with existing lenders and/or new lenders to provide up to an aggregate of $500 million in additional commitments for revolving loans. Proceeds of loans made under the Credit Facility may be used for general corporate purposes.
The credit agreement contains customary affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, incur subsidiary indebtedness, grant liens, and dispose of all or substantially all assets, in each case subject to customary exceptions for a credit facility of this size and type. We are also required to maintain compliance with a debt to EBITDA ratio. As of December 31, 2022, we were in compliance with the debt to EBITDA ratio.
As of December 31, 2022, no amounts were outstanding under the Credit Facility. $2 million of debt issuance costs that were paid in connection with obtaining this credit facility are being amortized to interest expense over the 5-year term of the Credit Facility.
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Interest Expense
The following table summarizes our interest expense recognized for the three and nine months ended December 31, 2022 and 2021 that is included in interest and other income (expense), net on our Condensed Consolidated Statements of Operations (in millions):
Three Months Ended
December 31,
Nine Months Ended
December 31,
2022 2021 2022 2021
Amortization of debt issuance costs (1) (1) (2) (2)
Coupon interest expense (13) (13) (41) (41)
Total interest expense $ (14) $ (14) $ (43) $ (43)

(11) COMMITMENTS AND CONTINGENCIES
Development, Celebrity, League and Content Licenses: Payments and Commitments
The products we produce in our studios are designed and created by our employee designers, artists, software programmers and by non-employee software developers (“independent artists” or “third-party developers”). We typically advance development funds to the independent artists and third-party developers during development of our games, usually in installment payments made upon the completion of specified development milestones. Contractually, these payments are generally considered advances against subsequent royalties on the sales of the products. These terms are set forth in written agreements entered into with the independent artists and third-party developers.
In addition, we have certain celebrity, league and content license contracts that contain minimum guarantee payments and marketing commitments to promote the games we publish that may not be dependent on any deliverables. These developer and content license commitments represent the sum of (1) the cash payments due under non-royalty-bearing licenses and services agreements and (2) the minimum guaranteed payments and advances against royalties due under royalty-bearing licenses and services agreements, the majority of which are conditional upon performance by the counterparty. These minimum guarantee payments and any related marketing commitments are included in the table below.
The following table summarizes our minimum contractual obligations as of December 31, 2022 (in millions):
Fiscal Years Ending March 31,
2023
(Remaining
Total three mos.) 2024 2025 2026 2027 2028 Thereafter
Unrecognized commitments
Developer/licensor commitments $ 1,844  $ 41  $ 421  $ 504  $ 422  $ 120  $ 114  $ 222 
Marketing commitments 888  48  232  228  184  80  65  51 
Senior Notes interest 794  55  55  54  36  36  551 
Operating lease imputed interest 47  10  11 
Operating leases not yet commenced (a)
98  —  —  71 
Other purchase obligations 219  25  132  46  10  — 
Total unrecognized commitments 3,890  124  850  844  684  253  229  906 
Recognized commitments
Senior Notes principal and interest 1,920  20  —  —  400  —  —  1,500 
Operating leases 369  17  66  63  53  38  28  104 
Transition Tax and other taxes 17  —  —  — 
Total recognized commitments 2,306  37  70  69  460  38  28  1,604 
Total Commitments $ 6,196  $ 161  $ 920  $ 913  $ 1,144  $ 291  $ 257  $ 2,510 
(a)As of December 31, 2022, we have entered into an office lease that has not yet commenced with aggregate future lease payments of approximately $98 million. This lease is expected to commence in fiscal year 2024, and will have a lease term of 12 years.
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The unrecognized amounts represented in the table above reflect our minimum cash obligations for the respective fiscal years, but do not necessarily represent the periods in which they will be recognized and expensed in our Condensed Consolidated Financial Statements. In addition, the amounts in the table above are presented based on the dates the amounts are contractually due as of December 31, 2022; however, certain payment obligations may be accelerated depending on the performance of our operating results.
In addition to the amounts included in the table above, as of December 31, 2022, we had a net liability for unrecognized tax benefits and an accrual for the payment of related interest totaling $512 million, of which we are unable to make a reasonably reliable estimate of when cash settlement with a taxing authority will occur.
Legal Proceedings
We are subject to claims and litigation arising in the ordinary course of business. We do not believe that any liability from any reasonably foreseeable disposition of such claims and litigation, individually or in the aggregate, would have a material adverse effect on our Condensed Consolidated Financial Statements.


(12)  STOCK-BASED COMPENSATION
Valuation Assumptions
We recognize compensation cost for stock-based awards to employees based on the awards’ estimated grant-date fair value using a straight-line approach over the service period for which such awards are expected to vest. We account for forfeitures as they occur.
The estimation of the fair value of market-based restricted stock units, stock options and ESPP purchase rights is affected by assumptions regarding subjective and complex variables. Generally, our assumptions are based on historical information and judgment is required to determine if historical trends may be indicators of future outcomes. We estimate the fair value of our stock-based awards as follows:
Restricted Stock Units and Performance-Based Restricted Stock Units. The fair value of restricted stock units and performance-based restricted stock units (other than market-based restricted stock units) is determined based on the quoted market price of our common stock on the date of grant.
Market-Based Restricted Stock Units. Market-based restricted stock units consist of grants of performance-based restricted stock units to certain members of executive management that vest contingent upon the achievement of pre-determined market and service conditions (referred to herein as “market-based restricted stock units”). The fair value of our market-based restricted stock units is estimated using a Monte-Carlo simulation model. Key assumptions for the Monte-Carlo simulation model are the risk-free interest rate, expected volatility, expected dividends and correlation coefficient.
Stock Options and Employee Stock Purchase Plan. The fair value of stock options and stock purchase rights granted pursuant to our equity incentive plans and our 2000 Employee Stock Purchase Plan, as amended (“ESPP”), respectively, is estimated using the Black-Scholes valuation model based on the multiple-award valuation method. Key assumptions of the Black-Scholes valuation model are the risk-free interest rate, expected volatility, expected term and expected dividends. The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant for the expected term of the option. Expected volatility is based on a combination of historical stock price volatility and implied volatility of publicly-traded options on our common stock. An expected term is estimated based on historical exercise behavior, post-vesting termination patterns, options outstanding and future expected exercise behavior.
There were an insignificant number of stock options granted during the three and nine months ended December 31, 2022 and 2021.
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Stock Options
The following table summarizes our stock option activity for the nine months ended December 31, 2022:
Options
(in thousands)
Weighted-
Average
Exercise Prices
Weighted-
Average
Remaining
Contractual
Term  (in years)
Aggregate
Intrinsic Value
(in millions)
Outstanding as of March 31, 2022
286  $ 39.28 
Granted 125.55 
Exercised (164) 39.47 
Forfeited, cancelled or expired (1) 64.95 
Outstanding as of December 31, 2022
123  $ 40.69  2.21 $ 10 
Vested and expected to vest 123  $ 40.69  2.21 $ 10 
Exercisable as of December 31, 2022
122  $ 40.04  2.16 $ 10 
The aggregate intrinsic value represents the total pre-tax intrinsic value based on our closing stock price as of December 31, 2022, which would have been received by the option holders had all the option holders exercised their options as of that date. We issue new common stock from our authorized shares upon the exercise of stock options.
Restricted Stock Units
The following table summarizes our restricted stock units activity for the nine months ended December 31, 2022:
Restricted
Stock Units
(in thousands)
Weighted-
Average Grant
Date Fair Values
Outstanding as of March 31, 2022 6,682  $ 129.57 
Granted 4,970  127.44 
Vested (3,332) 126.20 
Forfeited or cancelled (695) 131.78 
Outstanding as of December 31, 2022 7,625  $ 129.45 
Performance-Based Restricted Stock Units
Our performance-based restricted stock units vest upon the achievement of pre-determined performance-based milestones, including, but not limited to, management reporting milestones of net bookings and operating income metrics, as well as service conditions. If these performance-based milestones are not met but service conditions are met, the performance-based restricted stock units will not vest, in which case any compensation expense we have recognized to date will be reversed. Generally, the measurement periods of our performance-based restricted stock units are 3 to 4 years, with awards vesting after each annual measurement period or cliff-vesting after the completion of the total aggregate measurement period.
Each quarter, we update our assessment of the probability that the performance milestones will be achieved. We amortize the fair values of performance-based restricted stock units over the requisite service period. The performance-based restricted stock units contain threshold, target and maximum milestones for each performance-based milestone. The number of shares of common stock to be issued at vesting will range from zero to 200 percent of the target number of performance-based restricted stock units attributable to each performance-based milestone based on the company’s performance as compared to these threshold, target and maximum performance-based milestones. Each performance-based milestone is weighted evenly and the number of shares that vest based on each performance-based milestone is independent from the other.
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The following table summarizes our performance-based restricted stock unit activity, presented with the maximum number of shares that could potentially vest, for the nine months ended December 31, 2022:
Performance-
Based Restricted
Stock Units
(in thousands)
Weighted-
Average Grant
Date Fair Value
Outstanding as of March 31, 2022 190  $ 142.60 
Granted 509  127.98 
Vested (73) 142.60 
Forfeited or cancelled (69) 136.28 
Outstanding as of December 31, 2022 557  $ 130.03 
Market-Based Restricted Stock Units
Our market-based restricted stock units vest contingent upon the achievement of pre-determined market and service conditions. If these market conditions are not met but service conditions are met, the market-based restricted stock units will not vest; however, any compensation expense we have recognized to date will not be reversed. The number of shares of common stock to be issued at vesting will range from zero to 200 percent of the target number of market-based restricted stock units based on our total stockholder return (“TSR”) relative to the performance of companies in the Nasdaq-100 Index for each measurement period, over either a one-year, two-year cumulative, and three-year cumulative period, a two-year and four-year cumulative period or a three-year period.
The following table summarizes our market-based restricted stock unit activity, presented with the maximum number of shares that could potentially vest, for the nine months ended December 31, 2022:
Market-Based
Restricted  Stock
Units
(in thousands)
Weighted-
Average  Grant
Date Fair Value
Outstanding as of March 31, 2022 1,321  $ 134.69 
Granted 178  176.70 
Vested (95) 114.97 
Forfeited or cancelled (582) 129.16 
Outstanding as of December 31, 2022 822  $ 149.98 
Stock-Based Compensation Expense
The following table summarizes stock-based compensation expense resulting from stock options, restricted stock units, market-based restricted stock units, performance-based restricted stock units, and the ESPP purchase rights included in our Condensed Consolidated Statements of Operations (in millions):
  Three Months Ended
December 31,
Nine Months Ended
December 31,
  2022 2021 2022 2021
Cost of revenue $ $ $ $
Research and development 95  86  271  272 
Marketing and sales 15  14  44  41 
General and administrative 29  28  86  86 
Stock-based compensation expense $ 141  $ 129  $ 406  $ 403 
During the three and nine months ended December 31, 2022, we recognized $11 million and $56 million, respectively, of deferred income tax benefit related to our stock-based compensation expense. During the three and nine months ended December 31, 2021, we recognized $3 million and $54 million, respectively, of deferred income tax benefit related to our stock-based compensation expense.
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As of December 31, 2022, our total unrecognized compensation cost related to stock options, restricted stock units, market-based restricted stock units, and performance-based restricted stock units was $856 million and is expected to be recognized over a weighted-average service period of 2.0 years. Of the $856 million of unrecognized compensation cost, $817 million relates to restricted stock units, $26 million relates to market-based restricted stock units, $13 million relates to performance-based restricted stock units.
Stock Repurchase Program
In November 2020, our Board of Directors authorized a program to repurchase up to $2.6 billion of our common stock. Repurchases under the November 2020 program were completed in October 2022.

In August 2022, our Board of Directors authorized a program to repurchase up to $2.6 billion of our common stock. This stock repurchase program expires on November 4, 2024. Under this program, we may purchase stock in the open market or through privately negotiated transactions in accordance with applicable securities laws, including pursuant to pre-arranged stock trading plans. The timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, alternative investment opportunities and other market conditions. We are not obligated to repurchase a specific number of shares under this program and it may be modified, suspended or discontinued at any time. Upon completion of the November 2020 program in October 2022, we began repurchasing shares under the current program.

The following table summarizes total shares repurchased during the three and nine months ended December 31, 2022 and 2021:
November 2020 Program August 2022 Program Total
(In millions) Shares Amount Shares Amount Shares Amount
Three months ended December 31, 2022
—  $ 2.6  $ 320  2.6  $ 325 
Nine months ended December 31, 2022
5.1 $ 650  2.6  $ 320  7.7  $ 970 
Three months ended December 31, 2021
2.4 $ 325  —  $ —  2.4  $ 325 
Nine months ended December 31, 2021
7.0 $ 975  —  $ —  7.0  $ 975 

(13) EARNINGS PER SHARE
The following table summarizes the computations of basic earnings per share (“Basic EPS”) and diluted earnings per share (“Diluted EPS”). Basic EPS is computed as net income divided by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock-based compensation plans including stock options, restricted stock units, market-based restricted stock units, performance-based restricted stock units, and ESPP purchase rights using the treasury stock method.
  Three Months Ended
December 31,
Nine Months Ended
December 31,
(In millions, except per share amounts) 2022 2021 2022 2021
Net income $ 204  $ 66  $ 814  $ 564 
Shares used to compute earnings per share:
Weighted-average common stock outstanding — basic 276  283  278  284 
Dilutive potential common shares related to stock award plans
Weighted-average common stock outstanding — diluted 278  285  279  287 
Earnings per share:
Basic $ 0.74  $ 0.23  $ 2.93  $ 1.99 
Diluted $ 0.73  $ 0.23  $ 2.92  $ 1.97 
Certain restricted stock units, market-based restricted stock units and performance-based restricted stock units were excluded from the treasury stock method computation of diluted shares as their inclusion would have had an antidilutive effect. For both the three and nine months ended December 31, 2022, one million such shares were excluded. For both the three and nine months ended December 31, 2021, one million such shares were excluded.
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(14) SEGMENT AND REVENUE INFORMATION
Our reporting segment is based upon: our internal organizational structure; the manner in which our operations are managed; the criteria used by our Chief Executive Officer, our Chief Operating Decision Maker (“CODM”), to evaluate segment performance; the availability of separate financial information; and overall materiality considerations. Our CODM currently reviews total company operating results to assess overall performance and allocate resources. As of December 31, 2022, we have only one reportable segment, which represents our only operating segment.
Information about our total net revenue by timing of recognition for the three and nine months ended December 31, 2022 and 2021 is presented below (in millions):
Three Months Ended
December 31,
Nine Months Ended
December 31,
2022 2021 2022 2021
Net revenue by timing of recognition
Revenue recognized at a point in time