ANET 10-K & 10-Q changes, risk factors and insider trading

•seasonality and industry cyclicality may cause fluctuations in our revenue;

•failure to raise additional capital on favorable terms couldsatisfactory harmto our business.us.

•sales of our switchesswitching and routing platforms generate most of our product revenue;

•inability to offer high quality support and services offerings could adversely affect our business;

•declines in maintenance renewals and support contracts by customers could harm our business;

•defects, errors or vulnerabilities in our products, failureservices ofand ourexternal products to detect security breachesfacing or incidents,internal network systems, or the misuse of our products or risksservices, or those of productthird liabilityparties on which we rely, could harmlead to cybersecurity incidents or a failure to detect cybersecurity incidents, or otherwise negatively impact our business;

•failure to comply with government laws and regulationsregulations, including privacy laws, environmental laws and export controls could harm our business; and

•any future decisions to reduce or discontinue repurchasing our common stock pursuant to our stock repurchase programprograms could cause the market price of our common stock to decline;

•earthquakes,natural fire,disasters, powersocial outages,unrest, floods,violent healthconflicts, epidemicssystemic failures, and other catastrophic events could harm our business; and

Historically, largeLarge purchases by a relatively limited number of customers have accounted for a significant portion of our revenue. For example, sales to one end customer represented 16%, 15%, and 21% of our total revenue, and sales to the other end customer represented 26%, 20%, and 18% of our total revenue for the years ended December 31, 2025, 2024, and 2023, respectively. We have experienced unpredictability in the timing of orders from theseour large customers primarily due to the time it takes these customers to evaluate, test, qualify and accept our products, the overall complexity of these large orders and changes in demand patterns specific to these customers, including reductions in or changes in the mix of capital expenditures by these customers and the impact of cost reduction and other efficiency efforts by these customers. ForIn example, sales to our end customer Microsoft represented 20%, 18% and 16% of our total revenue foraddition, the years ended 2024, 2023 and 2022 respectively. And sales to our end customer Meta Platforms represented 15%, 21% and 26% of our total revenue, respectively for the years ended 2024, 2023 and 2022. This variability in customer concentration has beenis linked to the timing of new product deployments, and spending cycles with these customers, as well as the time it takes these customers to evaluate, test, qualify and accept our products and services, and we expect continued variability in our customer concentration and timing of sales on a quarterly and annual basis. In addition, we typically provide pricingmore discountsfavorable terms and conditions to large customers, than we typically do to other customers, including pricing discounts, bundled upgrades, extended warranties, acceptance terms, indemnification terms, and other rights, which reducesmay reduce gross margins for the period in which such sales occur.

As a consequence of the concentrated nature of our customer base and their purchasing behavior, our quarterly revenue and results of operations have fluctuated from quarter to quarter and are difficult to estimate and we expect the fluctuations to continue. Changes in the business requirements or focus, upgrade cycles, vendor selection, project prioritization, mannerassignment in whichof spending allocations are assigned among multiple vendors based upon specific network roles or projects, financial prospects, lack of growth of our large customers, capital resources and expenditures or purchasing behavior and deceleration in spending of these customers could significantly decrease our sales to such customers or could lead to delays, reductions or cancellations of planned purchases of our products or services. In addition, an increased focus on the deployment of AI enabledAI-enabled solutions by these customers has accelerated the need for advanced technology offeringsofferings, including some offerings from potential new market entrants. This prioritization of AI related infrastructure investment has at times come in conjunction with the announcement of various cost reduction measures by such customers, including optimization and increased efficiency in non-AI related capital expenditures.expenditures, which could negatively impact our revenue. In addition, although the focus on deployment of AI enabledAI-enabled solutions has driven increased demand for networking, the long-term trajectory isremains unknown. As such, demand estimates for our new products are difficult to forecast and can create volatility in our revenue. In some instances, such measuresfactors have had, and may continue to have, an impact on certain current or future projects and have reducedreduce our visibility to customer demand and may result in a reduction or uncertainty in the timing of orders from these large customers, which may negatively impact our revenue and increase the risk of excess and obsolescenceobsolete inventory charges on our products. In addition, fiscal 2024 was marked by a year of new product introductions and expanded use cases, particularly in the AI Ethernet market, and we expect this to continue into fiscal 2025. This has resulted in increased customer trials and contracts with acceptance periods, and an increase in the volatility and magnitude of our product deferred revenue balances, which in turn may create variability in our revenue results on a quarterly and annual basis. In addition, if we are not able to satisfy the requirements under customer trials or contracts with acceptance periods, we may be required to accept product returns from our customers, which would prevent us from recognizing revenue on such transactions and may result in the write-down of inventory.

Moreover, because our sales are based primarily on purchase orders, some of our customers have previously and could continue to cancel, delay, reduce or otherwise modify their purchase commitments with little or no notice to us. For example, due to manufacturing and supply chain disruptions resulting in increased lead times, customers have, and may continue to place orders based on longer planning horizons. These customers may decide to delay or cancel such orders for any reason, including changes in their IT investment priorities, if economic conditions worsen or their financial performance, condition or prospects deteriorate.reason. This limited visibility regarding our customers’ product needs or changes in those needs, the timing and quantity of which could vary significantly, requires us to rely on estimated demand forecasts to determine how much material to purchase and product to manufacture. ExtendedFurther, extended supplier lead times on some newer technologies can create greater pressure on our ability to forecast future demand, which can lead to excess inventory or product shortages and to delays in fulfilling current and future purchase orders that can impede production by our customers and harm our customer relationships. Further, if we are unable to reduce our lead times, customers may also cancel existing orders or reduce future orders. In the event of any cancellations or reductions of orders, or any reductions in future demand, we may not have enough time to reduce operating expenses to mitigate the effect of the lost revenue on our business, and in addition, could incur increased excess and obsolete inventory-related charges, all of which could materially affect our operating results.

WeIf any of the factors discussed above drive some of our large customers to cancel all or portion of their business relationships with us, the growth in our business and the ability to meet our current and long-term financial forecasts may be materially impacted. As a result, we may be unable to sustain or increase our revenue from our large customers, grow revenue with new or other existing customers at the rate we anticipate or at all, or offset a decline or discontinuation of concentrated purchases by our larger customers with purchases by new or existing customers. These customers could reduce their spending levels or otherwise could choose to divert all or a portion of their business with us to one of our competitors, re-assign spending allocations, increase their adoption of "white box" solutions and open-source network operating systems, demand pricing concessions for our services, or require us to provide enhanced services that increase our costs. Moreover, the AI market is new and customers continue to evaluate their opportunity in this market, recent advances in network architecture may result in increased efficiencies and lowering of infrastructure spending and the potential demand for our AI Ethernet switches may not develop as anticipated or at all. If these factors drive some of our large customers to cancel all or a portion of their business relationships with us, the growth in our business and the ability to meet our current and long-term financial forecasts may be materially impacted. We expect that such concentrated purchases will continue to contribute materially to our revenue for the foreseeable future and that our results of operations may fluctuate materially as a result of such larger customers’ buying patterns. In addition, we may see consolidation of our customer base, such as among Internet companies and cloud service providers, which could result in the loss of customers. The loss of such customers, or a significant delay or reduction in their purchases, including reductions or delays due to customer departures from recent buying patterns, or an unfavorable change in competitive or economic conditions could materially harm our business, financial condition, results of operations and prospects.

Our business depends on the overall demand for information technology, network connectivity and access to data and applications. Weak domestic or global economic conditions and continuing economic uncertainty, fear or anticipation of such conditions, a recession, geopolitical pressures, including international trade disputes, changes in tariff policies, global pandemics such as the COVID-19 pandemic, orpandemics, a reduction in information technology and network infrastructure spending or a deterioration of the financial performance, condition or prospects of our customers, could adversely affect our business, financial condition, results of operations and prospects in a number of ways, including longer sales cycles, reduced demand or lower prices for our products and services, higher default rates among our channel partners, reduced unit sales and lower or no growth. In addition, the global macroeconomic environment has been negatively affected by, among other things, the uncertainty in the global banking and financial services markets, epidemics, instability in global economic markets, thechanges newin U.S.government presidentialadministration administration,and policy positions, increased uncertainty associated with recent scheduled, threatened and/or scheduledanticipated increases in U.S. trade tariffs in the context of escalated and unresolved trade disputes and tensions between the U.S., China, Mexico, Canada and other countries,trade barriers, inflationary pressures, higher interest rates, instability in the global credit markets, the impact and uncertainty regarding global central bank monetary policy, instabilityinstability, tension and conflict in the geopolitical environment, the Russia-Ukraine and Israel-Hamas conflicts, political tensions between Taiwan and China, political demonstrations, and foreign governmental debt concerns which have caused, and are likely to continue to cause, uncertainty and instability in local economies and in global financial markets. WhileIn someaddition, of our customers may be adversely affected by negative macroeconomic conditions, the impact may be particularly significant in our enterprise market where we are seeking to increase our penetration into this market. Aa government shutdown or a default by the U.S. government on its debt obligations, or related credit-rating downgrades could also have adverse effects on the broader global economy and contribute to, or worsen, an economic recession. We believe that any extended or renewed economic disruptions or deterioration in the global economy could have an adverse impact to our liquidity or to our current and projected business operations, financial condition or results of operations. For example, if banks or other financial institutions with whom we have banking relationships or whose corporate bonds are held in our marketable securities investment portfolio, enter receivership or become insolvent in the future, we may be unable to access, and we may lose some of our existing cash, cash equivalents and investments to the extent those funds are not insured or otherwise protected by the FDIC. In addition, in such circumstances we might not be able to timely pay key vendors and others. We regularly maintain cash balances that are not insured or are in excess of the FDIC’s insurance limit. Any delay in our ability to access our cash, cash equivalents and investments (or the loss of such funds) or to timely pay key vendors and others could have a material adverse effect on our operations and cause us to need to seek additional capital sooner than planned.

In addition, business disruptions and supply chain and manufacturing disruptions may result in customers delaying or canceling or reprioritizing capital expenditures on information technology and network infrastructure, which may affect the overall demand for our products. Customers may also be placing orders based on longer planning horizons to ensure supply. We also believe that our customers continue to assess the impact of these macroeconomic factors on their businessesbusiness and future investment plans, resulting in business uncertainty and a more constrained approach to forecasts and orders.uncertainty. Continuing or worsening economic instability or the deterioration of the financial performance, condition or prospects of our customers could result in a cancellation of, or defaults in the payments for, such orders or otherwise adversely affect spending for IT, network infrastructure, systems and tools, and limit our ability to forecast future demand for our products, which could reduce expected revenue or result in a write-down of excess or obsolete inventory. A downturn or a recession may also significantly affect financing markets, the availability of capital and the terms and conditions of any financing arrangements, including the overall cost of financing as well as the financial health or creditworthiness of our customers. Circumstances may arise in which we need, or desire, to raise additional capital, and such capital may not be available on commercially reasonable terms, or at all.

Generally, we do not have guaranteed supply contracts with our component suppliers,suppliers. and ourOur suppliers have, or in the future could continue to, suffer shortages, require longer lead times, delay shipments, prioritize shipments to other vendors, rejectreject, orders,or decommit orders, increase prices, impose expedite fees or cease manufacturing suchtheir products or selling them to us at any time. Supply of these components worldwide was and could continue to be adversely affected by supply constraints, including as wella asresult of industry consolidation and geopolitical conditions such as international trade warsrestrictions and increased political tensions. SuchFor example, we see tightening supply conditions in the memory market. Although we have taken steps to mitigate these constraints, resulting shortages, increased component lead times, reduced allocationscomponent of componentsallocations, and/or rejections ororder decommitments of orders have resulted in and may continue to result in increased component prices, fewer sourcing options, unpredictability of supply, prolonged manufacturing disruptions and increased product lead times, which has impacted and may in the futurestill adversely impact our revenue and gross margins.

Although we have entered into significant purchase commitments to support long-term customer demand, if we are unable to obtain sufficient quantities of any of these components on commercially reasonable terms or in a timely manner, or if we are unable to obtain alternative sources for these components, shipments of our products could be delayed or halted entirely, or we may be required to redesign our products. Any of these events could result in the cancellation of orders, lost sales, reduced gross margins or damage to our customer relationships, which would adversely impact our business, financial condition, results of operations and prospects. Additionally, if our suppliers do not meet their commitments, customers cancel orders or actual demand is less than our demand forecasts, it could result in excess or obsolete inventory, which we would be required to write down to its estimated realizable value, which in turn could impact our cash flows and result in lower gross margins and operating income. Our operating cash flows have also been and may in the future be negatively impacted by an increase of component inventories on hand or at our contract manufacturers.

In the event of a shortage or supply interruption from our component suppliers, we may not be able to develop alternate or second sources in a timely manner. Further, long-term supply and maintenance obligations to customers increase the duration for which specific components are required, which may increase the risk of component shortages or the cost of carrying inventory. In addition, our component suppliers change their selling prices frequently in response to market trends, including industry-wide increases in demand,demand such as has occurred in the market for memory, or charge additional fees to expedite orders, and because we do not have contracts with these suppliers or guaranteed pricing, we are susceptible to availability or price fluctuations related to raw materials and components. If we are unable to pass component price increases along to our customers or maintain stable pricing, our gross margins could be adversely affected and our business, financial condition, results of operations and prospects could suffer.

Our revenue and our revenue growth rates are volatile and may decline or not meet our or our investors' expectations.

Our revenue growth rates in previous periods may not be indicative of our future performance. We have experienced annual revenue growth rates of 28.6%, 19.5%, 33.8%, 48.6%,and 48.6% in 2025, 2024, 2023 and 27.2% in 2024, 2023, 2022 and 2021,2022, respectively. In the future, our revenue growth rates will continue to be volatile due to cyclical trends in our business, and as we become more penetratedembedded inwith our existing customer base and product markets and look to enter and expand into new markets. Our growth strategy relies on maintaining our agility and increasing our investment in research and development to deliver market-leading features to enhance the functionality of existing cloud networking platform, expand our product offerings and build upon our technology leadership. We must continue to expand our product offerings and build upon our technology leadership. In addition,addition we must continue to expand our global sales force and deepen our channel partnerships to reach new customers more effectively and increase sales to existing customers. An increase in customer trials and contracts with acceptance provisions, and an increase in the volatility and magnitude of our product deferred revenue balances, have created variability in our revenue. Any delays in acceptance, or rejection, or any return, of those products could further negatively impact our revenue. We have also previously experienced supply constraints that have resulted in manufacturing and shipment delays, which have negatively affected the timing of revenue recognition. If these manufacturing and supply chain disruptions recur and/or if we are unable to reduce our lead times it could also result in the cancellation of orders by customers, reduce demand from existing customers in future periods, and increase difficulty in adding new customers. Other factors may also contribute to declines in our revenue growth rates, including changes in demand for our products and services, particularly from our large customers, the deterioration of the financial performance, condition or prospects of our large customers, changes in capital spending by our large customers, increased competition, price sensitivities from our customers to increases in our pricing, our ability to successfully manage our expansion or continue to capitalize on growth opportunities, the maturation of our business, geopolitical pressures, macroeconomic conditions, recession risks and monetary policy shifts, and our ability to be successful in the AI market and adjacent markets, such as campus switching, Wi-Fi networking markets and network security markets. Recent technologies, such as generative and agentic AI models, have emerged, and while they have driven increased demand for networking, the long-term trajectory of such technologies is unknown and it is difficult for us to predict the demand for such new technologies. Customers may overestimate demand for their AI build outs and cancel, delay, reduce or otherwise modify their purchase commitments with little or no notice to us. In addition, customerCustomers may also implement changes to their network architecture to improve efficiencies and reduce demand for our products. As such, demand estimates for our new products are difficult to forecast and create volatility in our revenue. In addition, given the timing and prioritization of customer orders and shipment patterns, near termnear-term revenue trends may not be reflective of current demand levels. Furthermore, any prolonged economic disruptions or deterioration in the global economy could have a negative impact on demand from our customers in future periods, particularly in the enterprise market where we are continuing to expand our penetration. which may result in reductions in overall demand from these customers in future periods and negatively impact our revenue, financial condition, business or prospects. You should not rely on our revenue for any prior quarterly or annual period as an indication of our future revenue or revenue growth. If we are unable to maintain consistent revenue or revenue growth, our business, financial condition, results of operations and prospects could be materially adversely affected, and our stock price could be volatile.

Our results of operations have historically varied from period to period, and we expect that this trend will continue.continue, which could cause the market price of our common stock to be volatile. As a result, you should not rely upon our past financial results for any period as indicators of future performance. Our results of operations in any given period have been and could continue to be influenced by a number of factors, many of which are outside of our control and may be difficult to predict, including:

•general economic conditions, both domestically and in foreign markets, and disruptions in our business due to general economic and themarket marketsconditions, duesuch to, among other things,as recessionary risks and a global economic downturn, international trade tensions and tariff policies, higher interest rates, monetary policy shifts, inflationary pressures, supply chain and labor shortages, thechanges newin U.S. presidentialgovernment administration, the recent banking crisis, and geopolitical pressures;

•our inability to fulfill our customers’ orders,orders or the deferral, reduction or cancellation of orders ordue to the delaydelays in shipment of our products for any reason;

•changes in the growth raterates of existing or new customers orand the networking market the deterioration of the financial performance, condition or prospects of existing or new customers, including large customers and service providers, changes in end-customer, distributor or reseller requirements or market needs, and changes in growth rates of the networking market;

TheArista Company’sestablished currentitself portfolioas a market leader with platforms, products, and people to enable some of products,these serviceshyperscalers’ andmost technologiesconsequential arenetworks. groupedOur intonetwork-as-a-service theapproach followingnow empowers customers of all sizes to seamlessly leverage their data through offerings spanning three key categories: Core (DataAI, Center, CloudCloud, and AIData Center Networking), Cognitive Adjacencies (Campus and Routing), and Cognitive NetworkNetworks (Software and Services). The percentage of revenue derived from these product categories during the current fiscal year was approximately 65% from Core, 18% from Cognitive Adjacencies, and 17% from Networking softwareSoftware and services.Services. OurWith world-class engineering expertise and platform innovation, our customers includegain companiesthe ofpredictable all sizesperformance and spanoperational simplicity required to turn data into a rangesustainable ofcompetitive industriesadvantage andin geographiesa andmodern, areAI-driven grouped into the following categories: Cloud and AI Titans, Enterprise and Providers. The percentage of revenue derived from these customers during the current fiscal year was approximately 48% from Cloud and AI Titans, 35% from Enterprise and 17% from Providers.world.

We believe an increased focus on the deployment of AI enabledAI-enabled solutions by our large customers has accelerated the need for advanced technology offeringsofferings, including some offerings from potential new market entrants. This prioritization and acceleration of AI related infrastructure investment hashas, at timestimes, come in conjunction with a reduction or changes in the mix of previously planned purchases and various cost reduction measures by these customers, including optimization and increased efficiency in non-AI related capital expenditures. In addition, although the focus on deployment of AI enabledAI-enabled solutions has driven increased demand for networking, the long-term trajectory is unknown. As such, demand estimates for our new products are difficult to forecast and can create volatility in our revenue. InWe some instances, such measures have had, and may continue to have, an impact on certain current or future projects and have reduced our visibility to customer demand and may resultremain in a reduction or uncertainty in the timing of orders from these large customers and increase the risk of charges for excess and obsolete inventory. Fiscal 2024 was marked by a yearperiod of new product introductions and expanded use cases, particularly in the AI Ethernet market, and we expect this to continue into fiscal 2025.market. This has resulted in increased customer trials and contracts with acceptance periods, and an increase in the volatility and magnitude of our product deferred revenue balances, which in turn may create variability in our revenue results on a quarterly and annual basis. In addition, if we are not able to satisfy the requirements under customer trials or contracts with acceptance periods, we may be required to accept product returns from our customers, which would prevent us from recognizing revenue on such transactions and may result in the write-down of inventory.

Global economic and business activities continue to face widespread macroeconomic uncertainties, including the effects of, among other things, inflation, monetary policy shifts, recession risks, potential supply chain disruptions, changes in thegovernment U.S.administration administration,policy positions, and geopolitical pressurespressures, andincluding escalating international trade measures.measures and tariff uncertainty.

Revenue, Cost of Revenue and Gross Margin (in thousands,millions, except percentages)

Revenue by Geography (in thousands,millions, except percentages)

Product revenue primarily consists of sales of our switching and routing products, and related network applications. Service revenue is primarily derived from sales of PCS contracts, which are typically purchased in conjunction with our products, and subsequent renewals of those contracts. We expect our revenue may vary from period to period based on, among other things, industry and customer cyclicality, the timing, size, and complexity of orders, especially with respect to our large customers.customers, and the time it takes for customers to evaluate, test, qualify and accept our products and services.

Product revenue increased by $854.5$1.7 million,billion, or 17.0%,28.8%, for the year ended December 31, 20242025 compared to 2023.2024. This increase reflects healthy customer demand and higher shipments of our switching and routing platforms, with strong contributions across our customer base. In addition, service revenue increased by $288.5$309.7 million, or 34.7%,27.7%, for the year ended December 31, 20242025 compared to 2023,2024, as a result of continued growth in initial and renewal support contracts as our customer installed base has continued to expand. InternationalNon - Americas revenues as a percentage of our total revenues decreasedincreased from 20.6% in 2023 to 18.2% in 2024,2024 to 20.9% in 2025, which was primarily driven by changes in the geographic mix of sales to our large global customers.

Cost of revenue increased by $282.0$725.2 million, or 12.6%28.9% for the year ended December 31, 20242025 compared to 2023.2024. These increases were driven by a corresponding increase in product and service revenues, partially offset by reductions of $180.4 million in net excess/obsolete inventory and supplier liability charges for the year ended December 31, 2024 compared to 2023.revenues.

Gross margin, or gross profit as a percentage of revenue, has been and will continue to be affected by a variety of factors, including pricing pressure on our products and services due to competition, the mix of sales to large customers who generally receive lower pricing, the mix of products sold, manufacturing-related costs, including costs associated with our manufacturing operations personnel, inflationary pressure and scarcity of materials in our supply chain sourcing activities,chain, merchant silicon costs, and excess/obsolete inventory and supplier liability charges. For example, in order to meet customer lead times, we have, and may continue to expedite the supply of components and make incremental investments in our supply chain to increase our capacity for manufacturing products, which increases our product costs and negatively impacts our gross margin. We expect our gross margin to fluctuate over time, depending on the factors described above.

Operating Expenses (in thousands,millions, except percentages)

Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. The largest component of our operating expenses is personnel costs and new product introduction costs. Personnel costs consist of wages, benefits, bonuses and, with respect to sales and marketing expenses, sales commissions.incentive compensation. Personnel costs also include stock-based compensation and travel-related expenses. New product introduction costs are primarily comprised of third-party engineering and prototype expenses.

Research and development expenses consist primarily of personnel costs, prototypenew expenses,product third-partyintroduction engineering costs,costs and an allocated portion of facility and IT costs. Our research and development efforts are focused on new product development and maintaining and developing additional functionality for our existing products, including new releases and upgrades to our EOS software and applications. We expect our research and development expenses to increase in absolute dollars as we continue to invest in softwareresearch and development in order to expand the capabilities of our cloud networking platform, introduce new products and features, and continue to invest in our technology.

Research and development expenses increased by $141.8$240.6 million, or 16.6%,24.1%, for the year ended December 31, 20242025 compared to 2023.2024. The increase was primarily due to a $64.9$95.6 million increase in personnel costs driven by an increase in headcount, and a $52.3$78.6 million increase in new product introduction costs, including non-recurringthird-party engineering costs and prototype expenses as we expand our product portfolio.

Sales and marketing expenses increased by $28.2$106.1 million, or 7.1%,24.8%, for the year ended December 31, 20242025 compared to 20232024 primarily due to an increase in personnel costs.costs driven by an increase in headcount.

Other Income, Net (in thousands,millions, except percentages)

Provision for Income Taxes (in thousands,millions, except percentages)

•we have enteredenter into significant purchase commitments and are susceptible to supply shortages, extended lead times or supply changes;

•key component supplySupply chain constraints and inventory managementimbalances could adversely affect our revenue and gross margins;

Our products are primarily manufactured in Malaysia, Vietnam, and Mexico, and we also procure a limited number of products originating from China, Taiwan, Thailand and the Philippines. In addition, our contract manufacturing partners procure some components from China for use in the manufacturing of our products. Because our products are primarily manufactured internationally, the import of our products into the U.S. has been and may continuecontinues to be affected by applicable tariff policies.

Over the last decade, and especially under the current administration, the U.S. government has enacted various new and increased tariffs affecting the import of various items from various countries. For example, since 2018, the U.S. government has enacted various tariffs on products from China under Section 301 trade authorities, including on communications equipment products and components manufactured and imported from China. Since February 2025, the U.S. has also imposed additional country-specificglobal, tariffs on most trading partners, including China,country-specific, as well as additional commodity-specific tariffs on certain imported items, in both instances pursuant to executive orders issued under various trade authorities, including the International Emergency Economic Powers Act and Section 232 of the Trade Expansion Act of 1962 (“IEEPA”), Sections 122 and 301 of the Trade Act of 1974, and Section 232 of the Trade Expansion Act of 1962. In February 2026, the U.S. Supreme Court held that the tariffs imposed under IEEPA were invalid.

An increase in trade-related costs associated with these tariff actions may affect our cost of production, impair the profitability of our international production, affect our ability to procure certain items, strain our suppliers’ ability to provide inputs necessary to produce certain items, and otherwise affect our manufacturing partners’ ability to provide our products at previously contracted prices. We also may not be able to pass on the full burden of the increase in trade-related costs to our partners and/or customers which could impact our profitability and/or our competitiveness. We are leveraging exclusion, participating in government refund programs and adjusting our supply chain and manufacturing practices to minimize the impact of the tariffs and any impact on the supply chain of components sourced from affected countries, but these efforts may not be sufficient. In addition, there can be no assurance that we will not experience a disruption in our business related to these or other changes in trade practices, and the process of changing suppliers in order to mitigate any such tariff costs could be complicated, time-consuming, and costly.

Although we have enteredenter into significant purchase commitments to support long-term customer demand, if we are unable to obtain sufficient quantities of any of these components on commercially reasonable terms or in a timely manner, or if we are unable to obtain alternative sources for these components, shipments of our products could be delayed or halted entirely, or we may be required to redesign our products. Any of these events could result in the cancellation of orders, lost sales, reduced gross margins or damage to our customer relationships, which would adversely impact our business, financial condition, results of operations and prospects. Additionally, if our suppliers do not meet their commitments, customers cancel orders or actual demand is less than our demand forecasts, it could result in excess or obsolete inventory, which we would be required to write down to its estimated realizable value, which in turn could impact our cash flows and result in lower gross margins and operating income.

In the event of an ongoing shortage or supply constraints from our component suppliers, we may not be able to develop alternate or second sources in a timely manner. Further, long-term supply and maintenance obligations to customers increase the duration for which specific components are required, which may increase the risk of component shortages or the cost of carrying inventory. In addition, our component suppliers change their selling prices frequently in response to market trends, including industry-wide increases in demand such as has occurred in the market for memory and silicon, or charge additional fees to expedite orders, and because we do not have contractsguaranteed pricing with these suppliers or guaranteed pricing,suppliers, we are susceptible to availability or price fluctuations related to raw materials and components. IfDue to volatility in component prices, we expect to experience timing mismatches between when component prices increase and if, or when we are unableable to pass componentthose pricecosts increases alongthrough to ourcustomers. customersThis potential inability to fully or maintaintimely stableadjust pricing,our pricing could adversely impact our gross margins could be adversely affected and our business, financial condition, results of operations and prospects could suffer.condition.

The data center and campus networking markets have been historically dominated by Cisco, with competition also coming from other large network equipment and system vendors, including Dell/EMC, Extreme Networks, Hewlett Packard Enterprise, Huawei, Nvidia and white box networking vendors utilizing open-source operating systems. Most of our competitors and some strategic alliance partners have made acquisitions and/or have entered into, or extended, partnerships or other strategic relationships to offer more comprehensive product lines, including cloud networking solutions and network security. For example, Cisco acquired Acacia Communications, Broadcom acquired Brocade Communications and VMware, Dell acquired Force10 Networks, Hewlett Packard Enterprise acquired Juniper Networks, and Nvidia has made significant investment in several AI Neoclouds. Moreover, large system vendors are increasingly seeking to deliver vertically integrated cloud networking solutions to customers that combine cloud-focusedor bundle hardware and software solutions as an alternative to our products. We expect this trend to continue as companies attempt to strengthen their market positions in an evolving industry and as companies are acquired or are unable to continue operations. Industry consolidation may result in stronger competitors that are better able to compete with us, and this could lead to more variability in our results of operations and could have a material adverse effect on our business, the pricing of our solutions, financial condition, results of operations and prospects.

We also face competition from other companies and new market entrants, including current technology partners, suppliers and customers or other cloud service providers who may acquire or develop network switches and cloud service solutions for internal use and/or to broaden their portfolio of products to market and sell to customers. Some of these competitors are developing "white box" networking products based on open-source network operating systems that may be provided for free and off-the-shelf or commoditized hardware technology, or “white box” hardware, while other competitors may adopt a disaggregated approach to the procurement of hardware and their proprietary software. Customers may also increase their adoption of networking solutions based upon open-source network operating systems that may be provided for free and used either on “white box” or proprietary hardware. As new markets emerge like AI, we expect the field to remain intensely competitive as our competitors have made significant investments in such new markets. In addition, we have not established broad market awareness or acceptance of our AI Ethernet products that will compete against more established InfiniBand products or against the AI Ethernet products of other competitors. Furthermore, the entrance of new competitors into our markets or the increased adoption of these new technology solutions or consumption models may cause downward pricing pressures, result in lost sales or otherwise have a material adverse effect on our business, prospects, financial condition and operating results.

We haveperiodically notintroduce yetenhanced established broad market awareness and/or acceptance ofnew products and services that weare havenot introducedyet incommercially the AI Ethernet, campus workspace and network security markets.established. Market awareness of our value proposition and products and services will be essential to our continued growth and our success, particularly for the service provider and broader enterprise markets. Additionally, because we are introducing new products in markets such as the AI Ethernet market, some products are subject to trials, testing, qualification and acceptance periods. If our marketing efforts are unsuccessful in creating market awareness of our company and our products and services or in gaining access to new customer markets, or if these new products and services are not accepted by customers, then our business, financial condition, results of operations and prospects will be adversely affected, and we will not be able to achieve sustained growth.

Most of our contracts with customers are on an open credit basis, with standard payment terms of 30 to 90 days. WeFrom time to time, we also grant extended payment terms with certain large customers. These arrangements may expose us to credit risk and upfront working capital requirements. Although we monitor individual end-customer payment capability in granting such openarrangements, credit arrangements,we seek to limit such open credit to amounts we believe the customers can pay and maintain reserves we believe are adequate to cover exposure for doubtful accounts. WeHowever, areour unableexposure to recognizecredit revenuerisks fromcan shipmentsbe untilnegatively theimpacted collectionby downturns in our customer's business, a global economic downturn, or periods of thoseeconomic amounts becomes reasonably assured.uncertainty. Any significant delay or default in the collection of significant accounts receivablereceivables could result in an increased need for us to obtain working capital from other sources, possibly on worse terms than we could have negotiated if we had established such working capital resources prior to such delays or defaults. AnyThere significantis no assurance that our customers will be able to pay us and our customers could default on their obligations to us, which could adversely affect our results of operations, liquidity,financial condition, and delay our ability to recognize revenue.liquidity.

Key component supplySupply chain constraints and inventory management and the time to manufacture our products may result in lost sales opportunities or delayed revenue, while excess inventory may harm our gross margins.

In order to reduce lead times in our supply chain and plan for adequate component supply, we have issued and expect to continue to issue purchase orders for components and products that are non-cancellable and non-returnable, including purchase commitments for semiconductors as disclosed in Note 5. Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q. We expect inventory and purchase commitments to remain elevated and subject to volatility. This variability is driven by new product introductions, shifts in customer demand, and fluctuations in supplier lead times. In particular, we havecontinue increasedto increase our purchase commitments to respond to the rapid deployment of AI networks and to navigate the tightening supply within the memory and silicon markets and reduce overall lead times, which will increase our working capital requirements. These constraints, in addition to supply chain inflation and material scarcity, may prevent us from shipping customer orders on time, cost-effectively, or at all, which could result in the loss of sales, damage customer relationships, negatively impact our revenue and continue to put pressure on our gross margins. There is no guarantee that suppliers will meet their commitments or that actual customer demand will not be lower than our demand forecasts. Additionally, certain customers have and may continue to engage in cost reduction measures including reductions in capital expenditures and other efficiency efforts, which may result in a cancellation of orders or reduce demand for our products. We establish a liability for non-cancellable, non-returnable purchase commitments with our component inventory suppliers for quantities in excess of our demand forecasts, or for products that are considered obsolete. In addition, we establish a liability and reimburse our contract manufacturer for component inventory purchased on our behalf that has been rendered excess or obsolete due to manufacturing and engineering change orders, or in cases where inventory levels greatly exceed our demand forecasts. The magnitude of these balances, combined with shifting product priorities, has resulted in increased risk that we may not be able to sell all of this inventory, which in turn has resulted, and may in the future result, in additional excess and obsolete inventory-related charges. Our non-cancellable commitments and the cash deposits to secure our purchases with our contract manufacturers are disclosed in Note 5. Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q. If we ultimately determine that we have excess or obsolete inventory, we may have to reduce our prices and write down inventory to its estimated realizable value, which in turn could result in lower gross margins. If we are unable to effectively manage our supply and inventory, our business, financial condition, results of operations and prospects could be adversely affected.

We and our contract manufacturers procure components and build our products based on our forecasts. These forecasts are based on estimates of future demand for our products, which are in turn based on historical trends and analysis from our sales and marketing organizations, adjusted for overall market conditions and other factors. In order to address customer demand and extended lead times, we have entered, and may continue to enter, into significant purchase commitments with our contract manufacturers and suppliers, with issuance of non-cancellable purchase orders for such commitments. In particular, we have increased our purchase commitments to respond to the rapid deployment of AI networks and reduce overall lead times which will increase our working capital requirements. We may also needcontinue to increase our purchase commitments in response to the tightening of supply conditions in the memory and silicon markets. There is no guarantee that suppliers will meet their commitments or that actual customer demand will directly match our demand forecasts. If our forecasts materially change from our initial projections, customers' orders are cancelled or if we otherwise do not need such inventory, we may under- or over-procure inventory, which could materially and adversely affect our business, financial condition and results of operations.

Although we monitor our use of open-source software to avoid subjecting our products to conditions we do not intend, the terms of many open source licenses have not been interpreted by U.S. courts, and these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our products. Moreover, we cannot assure you that our processes for controlling our use of open-source software in our products will be effective. If we are held to have breached the terms of an open source software license, we could be required to seek licenses from third parties to continue offering our products on terms that are not economically feasible, to re-engineer our products, to discontinue the sale of our products if re-engineering could not be accomplished on a timely basis or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, financial condition, results of operations and prospects.

We, or third parties on which we rely, could experience disruptions, cybersecurity breaches, and other cybersecurity incidents with many different types of causes, including phishing schemes and other social engineering methods, fraud and other malfeasance, denial of service attacks, vulnerabilities or defects in design or manufacture, unintended technical errors, misconfigurations, “bugs,” viruses, ransomware and other malware, mishandling of data or other mistakes by employees or other insiders, and attacks by insiders or external parties. Sophisticated, or even unsophisticated, persons or organizations may attempt to compromise our systems, or third party systems on which we rely, and access, use, destroy, impair, or obtain confidential, personal, or otherwise sensitive or proprietary information and could compromise our systems, products, services and networks, or those of third parties on which we rely. Geopolitical tensions and conflicts, such as the Russia-Ukraine conflict, and deteriorating U.S.-China relations,conflicts may create a greater risk of cyberattacks against our company and our manufacturers, suppliers, logistics providers, banks and other business partners. Our acquisition of Awake Security and our provision of its NDR platform may result in us being a more attractive target for such attacks. We may also face increased risks of cybersecurity incidents in connection with personnel working remotely.

We may experience cybersecurity incidents that we do not detect, or that we do not detect for extended periods of time. The techniques used to carry out attacks are constantly evolving, and it may be more difficult to detect attacks involving techniques that we are not aware of or have not anticipated. The emergence and maturation of AI capabilities may also lead to security breaches and incidents, and more frequent and intense attacks, owing to new and/or more sophisticated methods of attack.attack, new means of identifying and exploiting vulnerabilities or other new or enhanced capabilities.

Over the past several years, the U.S. government has enacted a series of enhanced international trade restrictions affecting China and other countries which have included additional export controls and sanctions, import regulations and foreign investment regulations. For example, the U.S. has added additional entities, from China and elsewhere, to restricted party lists impacting the ability of U.S. companies to provide products, and in certain cases services, to these entities and, in some cases, receive products or services from these entities. Beginning in October 2022, the U.S. expanded controls restricting the ability to send certain products and technology related to semiconductors, semiconductor manufacturing, and supercomputing. Although prior to the scheduled compliance date the administration announced its intention to rescind, and nonenforcement posture for, new regulations introduced in January 2025 further expanding the controls to impose a worldwide licensing requirement on certain ICs and computing resources that are used for training of AI modelsmodels. were rescinded prior to the scheduled compliance date, we expect theThe U.S. government may issue new controls on similar technologies in the future. The U.S. government also expanded the scope of restrictions on the development or production of advanced ICs and certain semiconductor manufacturing equipment, and the restrictions on supercomputing, though certain U.S. export controls have been partially relaxed pursuant to the bilateral trade negotiations between the U.S. and China since May 2025. Further changes to any of these policies are possible.

Taxation of earnings inside and outside of the U.S. may have adverse effects on our operating results and could impact the tax treatment of our earnings and cash and cash equivalent balances we currently maintain. ForOn example,January on5, July 4, 2025,2026, the U.S. enacted tax legislation commonly referred to as the One Big Beautiful Bill Act ("OBBB Act"), which includes changes to the deductibility of certain domestic expenses effective for tax years starting after December 31, 2024 and modifications to the international tax framework effective for tax years starting on or after December 31, 2025. The Organization for Economic Cooperation and Development (“"OECD”"), has introduced a global minimum tax initiative (“Pillar Two”), which many countries, including members of the EU, have adopted or are considering implementing through domestic legislation. On January 5, 2026, the OECD announced its “side-by-side” elective safe harbor package that would exempt U.S.-parented multinational entities from certain provisions of Pillar Two legislation previously enacted across the EU and other OECD member countries for fiscal years beginning on or after January 1, 2026. And, in June 2026, California enacted Senate Bill 122, which extends the $5 million limitation on the use of business tax credits through 2029 and establishes a permanent credit cap starting in 2030 at the greater of $5 million or 70% of tax liability. We have assessed the impacts of these new laws domestically and on countries that we operate in and do not currently anticipate any material impacts on our effective tax rate. However, we cannot provide any assurance that there will not be a material impact to our effective tax rate in the future because of these developments or other proposed tax law changes.

Additionally, the U.S. government continues to expand controls enacted in October 2022 restricting the ability to export, reexport and transfer certain products and technology related to semiconductors, semiconductor manufacturing, and supercomputing. Although newprior regulationsto introducedthe inenforcement date, the administration announced its intention to rescind the January 2025 whichregulations furtherand stated that it would not enforce them, those regulations had expanded the export controls toby imposeimposing a worldwide licensing requirement on certain integrated circuits and computing resources that are used for training of AI modelsmodels. were rescinded prior to the scheduled compliance date, we expect theThe U.S. government may issue new controls on similar technologies in the future. The U.S. government also expanded the scope of restrictions on the development or production of advanced integrated circuits and certain semiconductor manufacturing equipment and the restrictions on supercomputing in China and other countries. Other foreign governments may in turn impose similar or more restrictive controls. These controls or any additional restrictions may impact our ability to export certain products to China or other countries, prohibit us from selling our products to certain of our customers, restrict our ability to use certain ICs in our products, or impact our suppliers who may utilize facilities or equipment described in these controls. However, certain U.S. export controls have been the subject of bilateral trade negotiations between the U.S. and China and have been partially relaxed since May 2025, with further changes possible.

Although our board of directors has authorized stock repurchase programs, any determination to execute stock repurchases will be subject to, among other things, our financial position and results of operations, available cash and cash flow, capital requirements, market and business conditions, stock price, acquisition opportunities and other factors, as well as our board of director’s continuing determination that the repurchase programs are in the best interests of our shareholders and is in compliance with all laws and agreements applicable to the repurchase programs. Our current stock repurchase programsprogram dodoes not oblige us to acquire any common stock. If we fail to meet any expectations related to stock repurchases, the market price of our common stock could decline, and could have a material adverse impact on investor confidence. Additionally, price volatility of our common stock over a given period may cause the average price at which we repurchase our common stock to exceed the stock’s market price at a given point in time.

Our directors, executive officers and each of our stockholders who own greater than 10% of our outstanding common stock together with their affiliates, in the aggregate, beneficially own approximately 17.2%17.0% of the outstanding shares of our common stock, based on shares outstanding as of MarchJune 31,30, 2026. As a result, these stockholders, if acting together, could exercise a significant level of influence over matters requiring approval by our stockholders, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be averse to your interests. This concentration of ownership may also discourage a potential investor from acquiring our common stock due to the limited voting power of such stock or otherwise may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock. In addition, sales by such stockholders could negatively affect our stock price.

Our strategic differentiation enables us to deliver a comprehensive suite of products and services toon a global scale. Through our network-as-a-service approach, we empower customers to seamlessly leverage their data across our entire platform. By combining world-class engineering with continuous innovation, we provide the predictable performance and simplicity needed to turn data into a sustainable competitive advantage in today’s AI-driven world.

We believe an increased focus on the deployment of AI-enabled solutions by our large customers has accelerated the need for advanced technology offerings, including some offerings from potential new market entrants. This prioritization and acceleration of AI related infrastructure investment has, at times, come in conjunction with a reduction or changes in the mix of previously planned purchases and various cost reduction measures by these customers, including optimization and increased efficiency in non-AI related capital expenditures. In addition, although the focus on deployment of AI-enabled solutions has driven increased demand for networking, the long-term trajectory is unknown. As such, demand estimates for our new products are difficult to forecast and can create volatility in our revenue. We remain in a period of new product introductions and expanded use cases, particularly in the AI Ethernet market. This has resulted in increased customer trials and contracts with acceptance periods, and an increase in the volatility and magnitude of our evaluation inventory and product deferred revenue balances, which in turn may create variability in our revenue results on a quarterly and annual basis. In addition, if we are not able to satisfy the requirements under customer trials or contracts with acceptance periods, we may be required to accept product returns from our customers, which would prevent us from recognizing revenue on such transactions and may result in the write-down of inventory.

In addition, we expect inventory and purchase commitments to remain elevated and subject to volatility as a result of new product introductions, shifts in customer demand, tightening supply conditions and fluctuations in supplier lead times. This volatility creates a heightened risk of excess or obsolete inventory and supplier liability charges. Simultaneously, supply chain inflation and material scarcity, such as the tightening of supply conditions in the memory and silicon markets, have continued to put pressure on our gross margin. If tariff or non-tariff measures escalate, and/or if supply conditions worsen and we are unable to pass on these costs to customers, our gross margins could be further impacted. Additionally, broader macroeconomic instability could negatively affect demand. Given these unpredictable factors, current financial conditions discussed herein may not be indicative of future operating results and trends.

Three and Six Months Ended MarchJune 31,30, 2026 Compared to Three and Six Months Ended MarchJune 31,30, 2025

Product revenue increased by $618.8$728.2 million, or 36.6%38.8%, and $1,347.0 million, or 37.7% for the three and six months ended MarchJune 31,30, 2026, compared to the same periodperiods in 2025. This increase reflects healthy customer demand and higher shipments of our switching and routing platforms across our customer base. In addition, service revenue increased by $85.4$102.7 million, or 27.3%31.3%, and $188.1 million, or 29.4% for the three and six months ended MarchJune 31,30, 2026, compared to the same periodperiods in 2025, as a result of continued growth in initial and renewal support contracts as our customer installed base has continued to expand. Non-Americas revenue represented 15.5%23.0% and 19.4% of total revenue for the three and six months ended MarchJune 31,30, 2026, decreasingcompared fromto 20.3%21.8% and 21.0% for the same periodperiods in the prior year,year. whichThese wasfluctuations are primarily influenceddriven by changes in the geographic mix of sales to our large global customers.customers across our Non-Americas regions.

Cost of revenue increased by $303.5$359.2 million, or 41.6%46.9%, and $662.7 million, or 44.3% for the three and six months ended MarchJune 31,30, 2026, compared to the same periodperiods in 2025. These increases were primarily driven by a corresponding increase in product and service revenues.

Gross margin decreased from 63.7% to 61.9%62.9% and 62.4% for the three and six months ended MarchJune 31,30, 2026, compared to 65.2% and 64.5% for the same periodperiods in 2025. The decrease was primarily driven by an increased proportion of our sales to large end customers who generally receive higher discounts.

Research and development expenses increased by $77.3$51.7 million, or 29.0%17.4%, and $129.0 million, or 22.9% for the three and six months ended MarchJune 31,30, 2026, compared to the same periodperiods in 2025. The increase for the three and six months periods was primarily driven by a $10.9 million increase inincreased personnel costs dueof to$33.3 headcount growth,million and a$59.4 $52.1million, millionas well as an increase in new product introduction costs.costs of $8.3 million and $58.8 million.

Sales and marketing expenses increased by $25.0$23.8 million, or 21.4%18.8%, and $48.8 million, or 20.1 for the three and six months ended MarchJune 31,30, 2026, compared to the same periodperiods in 2025, which was primarily driven by increased personnel costs due to headcount growth.

General and administrative expenses decreasedincreased slightly by $0.6$4.4 million, or 1.7%15.0%, and $3.8 million, or 6.0% for the three and six months ended MarchJune 31,30, 2026, compared to the same periodperiods in 2025.

The favorable movement in other income (expense), net, during the three and six months ended MarchJune 31,30, 2026, compared to the same periodperiods in 2025 was primarily driven by increased interest income of $19.0$32.0 million and $50.9 million due to an increase in our cash and marketable securities balances.

The increase in the effective tax rate in the three and six months ended MarchJune 31,30, 2026, as compared to the same periodperiods in 2025, was primarily due to a decrease in tax benefits attributable to equity-based compensation.

Our principal sources of liquidity are cash, cash equivalents, marketable securities, and cash generated from operations. As of MarchJune 31,30, 2026, our total balance of cash, cash equivalents and marketable securities was approximately $12.4$13.3 billion, of which approximately $377.0$0.5 millionbillion was held outside the U.S. in our foreign subsidiaries.

Our cash, cash equivalents and marketable securities are held for general business purposes, including the funding of working capital. Our marketable securities investment portfolio is primarily invested in highly-rated securities, with the primary objective of minimizing the potential risk of principal loss. We plan to continue to invest for long-term growth. We believe that our existing balances of cash, cash equivalents and marketable securities, together with cash generated from operations, will be sufficient to meet our working capital requirements and our growth strategies for at least the next 12 months and thereafter for the foreseeable future. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities, the introduction of new and enhanced product and service offerings, our costs associated with supply chain activities, including access to outsourced manufacturing, our costs related to investing in or acquiring complementary or strategic businesses and technologies, the continued market acceptance of our products, stock repurchases, and capital expenditures, including the ongoing construction of a building for office, lab and data center space. InAdditionally, addition,our working capital and operating cash flows may experience timing differences as a result of certain large customer arrangements that include extended payment terms. Furthermore, we expect that our inventory and purchase commitments to remain elevated and subject to volatility as we ramp new product introductions. In particular, we have increased our purchase commitments to respond to the rapid deployment of AI networks, and to navigate the tightening supply within the memory and silicon markets and reduce overall lead times, which will increase our working capital requirements in the future. We regularly review our liquidity and funding sources to support our long-term growth and capital needs.

During the threesix months ended MarchJune 31,30, 2026, cash provided by operating activities was $1.7$2.8 billion, consisting of net income of $1.0$2.2 billion, a net decrease of $634.7$476.4 million in working capital requirements, and favorable non-cash adjustments to net income of $35.9$64.3 million. The decreasereduction in working capital requirements primarily consisted of an increase in deferred revenue of $826.2$1.5 millionbillion primarily resulting from an increase in customer PCS contracts and an increase in product deferred revenue related to customer contracts with acceptance terms,terms and an increase in customer PCS contracts, and a $352.9$198.4 million increase in income tax payables related to timing of payments. These cash inflows were partially offset by a $298.7$619.7 million increase in other assets driven by increased deferred cost of sales associated with higher product revenue deferrals, an increase in accounts receivable of $379.3 million due to increased product and service billings, and a $133.0$288.2 million increase in inventory. The non-cash adjustments to net income were driven by stock-based compensation of $120.9$241.3 million, and offset by a $104.9$213.1 million increase in deferred taxes primarily due to the increase in deferred revenue.

During the threesix months ended MarchJune 31,30, 2026, cash used in investing activities was $0.9$2.4 billion, consisting of purchases of marketable securities of $1.9$4.3 billion. These amounts were partially offset by proceeds from maturities and sales of marketable securities of $1.1$2.0 billion.

During the threesix months ended MarchJune 31,30, 2025, cash used in investing activities was $765.9$1.4 million,billion, consisting of purchases of marketable securities of $1,545.5$2.7 million.billion and $300.0 million for the acquisition of VeloCloud. These amounts were partially offset by proceeds from maturities and sales of marketable securities of $808.0$1.7 million.billion.

During the threesix months ended MarchJune 31,30, 2026, net cash used in financing activities was negligible$1.5 asmillion, consisting of proceeds from the issuance of stock under equity incentive plansplans, was whollyand offset by taxes paid under equity incentive and stock repurchase plans.

During the threesix months ended MarchJune 31,30, 2025, cash used in financing activities was $793.8$991.0 million, consisting of payments for repurchases of our common stock from the open market of $787.1$983.0 million.

From time to time, we repurchase shares of our common stock pursuant to repurchase programs that are funded from working capital. In May 2025, our board of directors authorized a $1.5 billion stock repurchase program (the "Repurchase Program"). The Repurchase Program does not obligate us to acquire any of our common stock and may be suspended or discontinued by the Company at any time without prior notice. We did not repurchase any shares during the threesix months ended MarchJune 31,30, 2026. As of MarchJune 31,30, 2026, the remaining authorized amount for repurchases under the Repurchase Program was $817.9 million. Refer to Note 6. Stockholders' Equity and Stock-Based Compensation of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q for further discussion.

We outsource most of our manufacturing and supply chain management operations to third-party contract manufacturers, who procure components and assemble products on our behalf. A significant portion of our purchase orders for finished goods and strategic components, including integrated circuits consigned to contract manufacturers, consists of non-cancellable commitments. Our purchase obligations also encompass software and technology licenses, property and equipment, and other corporate goods and services. As of MarchJune 31,30, 2026, we had $8.9$9.7 billion of such purchase obligations, of which $7.6$9.4 billion are expected to be received within one year, and $1.3$0.3 billion are expected to be received after one year. These open purchase orders are considered enforceable and legally binding, and while we may have some limited ability to reschedule and adjust our requirements based on our business needs prior to the delivery of goods or performance of services, this can only occur with the agreement of the related supplier.

In 2021, we purchased land and the improvements thereon in Santa Clara, California to construct a building for office, lab and data center space. As of MarchJune 31,30, 2026, the estimated remaining capital expenditures related to this project are expected to be approximately $130.0$110.0 million to $150.0$135.0 million through the end of fiscal 2026 when we expect construction to be completed.

As of MarchJune 31,30, 2026, we did not have any relationships with any unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.