Investors and others should note that we announce material financial information to our investors using our investor relations website, press releases, SEC filings and public conference calls and webcasts. We also use the following social media channels as a means of disclosing information about the company, our products, our planned financial and other announcements and attendance at upcoming investor and industry conferences, and other matters, and for complying with our disclosure obligations under Regulation FD: 

In addition, investors and others can view NVIDIA videos on YouTube (https://www.YouTube.com/nvidia).

The information we post through these social media channels may be deemed material. Accordingly, investors should monitor these accounts and the blog, in addition to following our press releases, SEC filings and public conference calls and webcasts. This list may be updated from time to time. The information we post through these channels is not a part of this Quarterly Report on Form 10-Q. These channels may be updated from time to time on NVIDIA's investor relations website.

There have been no material changes to our significant accounting policies disclosed in Note 1 - Organization and Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021.

We operate on a 52- or 53-week year, ending on the last Sunday in January. Fiscal year 2022 is a 52-week year and fiscal year 2021 was a 53-week year. The secondthird quarters of fiscal years 2022 and 2021 were both 13-week quarters.

Certain prior fiscal year balances have been reclassified to conform to the current fiscal year presentation.

Our condensed consolidated financial statements include the accounts of NVIDIA Corporation and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from our estimates. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, cash equivalents and marketable securities, accounts receivable, inventories, income taxes, goodwill, stock-based compensation, litigation, investigation and settlement costs, restructuring and other charges, and other contingencies. The inputs into our judgments and estimates consider the economic implications of COVID-19. These estimates are based on historical facts and various other assumptions that we believe are reasonable.

On September 13, 2020, we entered into a Share Purchase Agreement, or the Purchase Agreement, with Arm Limited, or Arm, and SoftBank Group Capital Limited and SVF Holdco (UK) Limited, or together, SoftBank, for us to acquire, from SoftBank, all allotted and issued ordinary shares of Arm in a transaction valued at $40 billion. We paid $2 billion in cash at signing, or the Signing Consideration, and will pay upon closing of the acquisition $10 billion in cash and issue to SoftBank 177.5 million shares of our common stock, which had an aggregate value of $21.5 billion as of the date of the Purchase Agreement.Agreement, and was valued at $56.2 billion as of November 18, 2021. The transaction includes a potential earn out, which is contingent on the achievement of certain financial performance targets by Arm during the fiscal year ending March 31, 2022. If the financial targets are achieved, SoftBank can elect to receive either up to an additional $5 billion in cash or up to an additional 41.3 million shares of our common stock.stock, which was valued at $13.1 billion as of November 18, 2021. We will issue up to $1.5 billion in restricted stock units to Arm employees after closing. The $2 billion paid upon signingSigning Consideration was allocated between advanced consideration for the acquisition of $1.36 billion and the prepayment of intellectual property licenses from Arm of $0.17 billion and royalties of $0.47 billion, both with a 20-year term. The Signing Consideration was allocated on a fair value basis and any refund of the Signing Consideration will use stated values in the Purchase Agreement. The Purchase Agreement can be terminated by either party if the transaction has not closed by September 2022, subject to certain qualifications. If the transaction does not close due to failure to receive regulatory approval, and all other covenants have been met, we will not be refunded $1.25 billion of the advanced consideration for the acquisition we paid at signing.

The closing of the acquisition is subject to customary closing conditions, including receipt of specified governmental and regulatory consents and approvals and the expiration of any related mandatory waiting period, and Arm's implementation of the reorganization and distribution of Arm’s IoT Services Group and certain other assets and liabilities.

We are working through theseeking regulatory processapproval in the United States, the United Kingdom, the European Union, China and other jurisdictions. Regulators at the United States Federal Trade Commission, or the FTC, have expressed concerns regarding the transaction, and we are engaged in discussions with the FTC regarding remedies to address those concerns. The transaction has been under the review of China’s antitrust authority, pending the formal case initiation. Regulators in the United Kingdom and the European Union declined to approve the transaction in Phase 1 of their review processes, expressed numerous concerns, began a more in-depth Phase 2 review on the transaction’s impact on competition, and, in the United Kingdom, a Phase 2 review of the impact on the United Kingdom’s national security interests. Although regulators and some Arm licensees have expressed concerns or objected to the transaction, and discussions with regulators are taking longer than initially thought, we are confidentcontinue to believe in the deal rationalemerits and that regulators should recognize the benefits of the acquisition to Arm, its licensees, and the industry. If the Purchase Agreement is terminated under certain circumstances, we will be refunded $1.25 billion of the Signing Consideration. The Signing Consideration was allocated on a fair value basis and any refund of the Signing Consideration will use stated values in the Purchase Agreement.

On April 27, 2020, we completed the acquisition of all outstanding shares of Mellanox for a total purchase consideration of $7.13 billion. Mellanox is a supplier of high-performance interconnect products for computing, storage and communications applications. We acquired Mellanox to optimize data center workloads to scale across the entire computing, networking, and storage stack.

The following unaudited pro forma financial information summarizes the combined results of operations for NVIDIA and Mellanox as if the companies were combined as of the beginning of fiscal year 2020:

The unaudited pro forma information includes adjustments related to amortization of acquired intangible assets, adjustments to stock-based compensation expense, fair value of acquired inventory, and transaction costs. The unaudited pro forma information presented above is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition occurred at the beginning of fiscal year 2020 or of the results of our future operations of the combined businesses.

The pro forma results reflectexclude the inventory step-up expense of $161 million infor the first half of fiscal year 2020 and was excluded from the pro forma results for the second quarter and first halfnine months of fiscal year 2021. There were no other material nonrecurring adjustments.

Operating lease expenses were $42$44 million and $35$37 million for the secondthird quarter of fiscal years 2022 and 2021, respectively, and $81$125 million and $67$104 million for the first halfnine months of fiscal years 2022 and 2021, respectively.

Short-term and variable lease expenses for the secondthird quarter and first halfnine months of fiscal years 2022 and 2021 were not significant.

Other information related to leases was as follows:

Our stock-based compensation expense is associated with restricted stock units, or RSUs, performance stock units that are based on our corporate financial performance targets, or PSUs, performance stock units that are based on market conditions, or market-based PSUs, and our employee stock purchase plan, or ESPP.

Our Condensed Consolidated Statements of Income include stock-based compensation expense, net of amounts allocated to inventory, as follows:

As of August 1,October 31, 2021, there was $5.35$5.16 billion of aggregate unearned stock-based compensation expense, net of forfeitures. This amount is expected to be recognized over a weighted average period of 2.72.6 years for RSUs, PSUs, and market-based PSUs, and 1 year for ESPP.

The following is a reconciliation of the denominator of the basic and diluted net income per share computations for the periods presented:

We recognized an income tax expense of $20$174 million and $153$327 million for the secondthird quarter and first halfnine months of fiscal year 2022, respectively, and an income tax benefitexpense of $13$12 million and an income tax expense of $52$64 million for the secondthird quarter and first halfnine months of fiscal year 2021, respectively. The income tax expense as a percentage of income before income tax was 0.9%6.6% and 3.4%4.6% for the secondthird quarter and first halfnine months of fiscal year 2022, respectively, and 3.3%0.9% and 2.2% for the third quarter and first halfnine months of fiscal year 2021. The income tax benefit as a percentage of income before income tax was 2.0% for the second quarter of fiscal year 2021.2021, respectively.

On June 28, 2021, we simplified our corporate structure by repatriating the economic rights of certain non-U.S. intellectual property to the United States via domestication of a foreign subsidiary, or the Domestication. The Domestication more closely aligns our corporate structure to our operating structure in accordance with the Organization for Economic Cooperation and Development’s Base Erosion and Profit Shifting conclusions and changes to U.S. and European tax laws. The impact of the Domestication, which is regarded as a change in tax status, resulted in a discrete benefit primarily from re-valuing certain deferred tax assets, net of deferred tax liabilities, of $252 million in the second quarter of fiscal year 2022.

The increase in our effective tax rate for the secondthird quarter and first halfnine months of fiscal year 2022 as compared to the same periods of fiscal year 2021 was primarily due to an increase in the amount of earnings subject to U.S. tax, and a decreased impact of tax benefits from stock-based compensation and the U.S. federal research tax credit, and an increase inpartially offset, for the amount of earnings subject to U.S. tax, partially offsetfirst nine months, by the discrete benefit of the Domestication.

Our effective tax rate for the first halfnine months of fiscal year 2021 was lower than the U.S. federal statutory rate of 21% due to income earned in jurisdictions that isare subject to taxes lower than the U.S. federal statutory tax rate, tax benefits related to stock-based compensation, and the benefit of the U.S. federal research tax credit.credit, and tax benefits related to stock-based compensation.

Our effective tax rate for the first halfnine months of fiscal year 2022 was lower than the U.S. federal statutory rate of 21% due to tax benefits from the foreign-derived intangible income deduction, income earned in jurisdictions that are subject to taxes lower than the U.S. federal statutory tax rate, the discrete benefit of the Domestication, and tax benefits related to stock-based compensation and the foreign-derived intangible income deduction, incomeU.S. federal research tax credit.

For the first halfnine months of fiscal year 2022, there have been no material changes to our tax years that remain subject to examination by major tax jurisdictions. We are currently under examination by the Internal Revenue Service for our fiscal years 2018 and 2019. Additionally, there have been no material changes to our unrecognized tax benefits and any related interest or penalties since the fiscal year ended January 31, 2021.

While we believe that we have adequately provided for all uncertain tax positions, or tax positions where we believe it is not more-likely-than-not that the position will be sustained upon review, amounts asserted by tax authorities could be greater or less than our accrued position. Accordingly, our provisions on federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made or the underlying matters are settled or otherwise resolved with the respective tax authorities. As of August 1,October 31, 2021, we do not believe that our estimates, as otherwise provided for, on such tax positions will significantly increase or decrease within the next 12 months.

Our cash equivalents and marketable securities related to debt securities are classified as “available-for-sale” debt securities.

The following is a summary of cash equivalents and marketable securities as of August 1,October 31, 2021 and January 31, 2021: