What changed in this filing

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Item 1. Financial Statements

2024-07-31 compared with 2024-05-08 · 120 added, 117 removed, 433 unchanged (35% of the section changed)

3 unchanged sentences

(In thousands, except par value)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

CURRENT ASSETS:

24 unchanged sentences

STOCKHOLDERS’ EQUITY:

Preferred stock, $ 0.0001 par value— 100,000 shares authorized and no shares issued and outstanding as of March 31, 2024 and December 31, 2023

Common stock, $ 0.0001 par value— 1,000,000 shares authorized as of March 31, 2024 and December 31, 2023;

313,601 and 312,245 shares issued and outstanding as of March 31, 2024 and December 31, 2023

Preferred stock, $ 0.0001 par value— 100,000 shares authorized and no shares issued and outstanding as of June 30, 2024 and December 31, 2023

Common stock, $ 0.0001 par value— 1,000,000 shares authorized as of June 30, 2024 and December 31, 2023;

314,086 and 312,245 shares issued and outstanding as of June 30, 2024 and December 31, 2023

Additional paid-in capital 2,263,356 2,108,331

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(Unaudited, in thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2024 2023 2024 2023

Product $ 1,423,271 $ 1,261,537 $ 2,752,116 $ 2,433,631

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(Unaudited, in thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net income $ 665,428 $ 491,885 $ 1,303,120 $ 928,358

10 unchanged sentences

(Unaudited, in thousands)

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024 Six Months Ended June 30, 2024

Common Stock Additional

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Comprehensive

Stockholders’ Equity

Shares Amount

Stockholders’ Equity Common Stock Additional

Paid-In Capital Retained

Earnings Accumulated

Comprehensive

Stockholders’

Shares Amount Shares Amount

Balance at beginning of period 313,601 $ 31 $ 2,185,149 $ 5,689,064 $ ( 11,929 ) $ 7,862,315 312,245 $ 31 $ 2,108,331 $ 5,114,025 $ ( 3,328 ) $ 7,219,059

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Balance at end of period 314,086 $ 31 $ 2,263,356 $ 6,182,479 $ ( 15,058 ) $ 8,430,808 314,086 $ 31 $ 2,263,356 $ 6,182,479 $ ( 15,058 ) $ 8,430,808

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

Common Stock Additional

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Comprehensive

Stockholders’ Equity Common Stock Additional

Paid-In Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Stockholders’ Equity

Shares Amount

Stockholders’

Shares Amount Shares Amount

Balance at beginning of period 308,098 $ 31 $ 1,857,467 $ 3,493,181 $ ( 21,505 ) $ 5,329,174 306,890 $ 31 $ 1,780,714 $ 3,138,983 $ ( 33,908 ) $ 4,885,820

Net income — — — 491,885 — 491,885 — — — 928,358 — 928,358

Other comprehensive income, net of tax — — — — 12,403 12,403

Other comprehensive income (loss), net of tax — — — — ( 3,703 ) ( 3,703 ) — — — — 8,700 8,700

Stock-based compensation — — 67,127 — — 67,127 — — 130,008 — — 130,008

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Tax withholding paid for net share settlement of equity awards ( 44 ) — ( 6,542 ) — — ( 6,542 ) ( 113 ) — ( 15,766 ) — — ( 15,766 )

Common stock issued for business acquisition 32 $ — $ 2,331 $ — $ — 2,331 32 $ — $ 2,331 $ — $ — 2,331

Balance at end of period 309,355 $ 31 $ 1,927,697 $ 3,955,062 $ ( 25,208 ) $ 5,857,582 309,355 $ 31 $ 1,927,697 $ 3,955,062 $ ( 25,208 ) $ 5,857,582

3 unchanged sentences

(Unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Deferred income taxes ( 228,460 ) ( 130,287 )

Loss on strategic investments — 5,571

Gain on strategic investments — ( 19,172 )

Amortization (accretion) of investment premiums (discounts) ( 27,843 ) ( 11,998 )

14 unchanged sentences

Purchases of property and equipment ( 12,555 ) ( 17,212 )

Cash paid for business combinations, net of cash acquired — 1,799

Investments in notes and privately-held companies ( 1,000 ) ( 4,250 )

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Property and equipment included in accounts payable and accrued liabilities 4,391 5,653

Common stock issued for business acquisition — 2,331

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

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Securities and Exchange Commission (the “SEC”) for interim reporting.

As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted.

As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted.

In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial information.

The results for the three months ended March 31, 2024, are not necessarily indicative of the results expected for the full fiscal year.

The results for the three and six months ended June 30, 2024, are not necessarily indicative of the results expected for the full fiscal year.

The condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements.

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Risks and Uncertainties

Global economic and business activities continue to face widespread macroeconomic uncertainties, including inflation, monetary policy shifts, recession risks, and potential supply chain and other disruptions such as the Russia-Ukraine and Israel-Hamas conflicts, the Houthi attacks on marine vessels in the Red Sea and the U.S.

trade war with China.

trade war with China and the outcome of the upcoming U.S.

presidential election.

Our business is emerging from a period of unprecedented global supply chain disruptions.

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As a result, some shipments against these previously committed demand/deployment plans have extended into 2024.

As the global supply chain has experienced some improvements and as customer lead times have been reduced from their peak, we have seen and expect to continue to see a commensurate reduction in visibility to customer demand and a gradual return to shorter demand-planning horizons resulting in lower demand levels.

Given these shipment and order patterns, near

term revenue trends may not be solely reflective of current demand levels, but as discussed above will benefit from demand/deployment plans that had been previously committed.

While inventory and working capital levels may remain elevated in the near term, we expect that purchase commitments will begin to level off as supplier lead times shorten, but will remain volatile as we ramp new product introductions.

The larger magnitude of these balances, combined with a reduction in customer demand-planning horizons and shifting customer 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 and supplier liability charges.

In addition, inflation pressure in our supply chain, scarcity of some materials needed to build our products and disruptions to our manufacturing process have increased our cost of revenue and have impacted, and may continue to negatively impact, our gross margin.

Our operating cash-flows have also been and may continue to be negatively impacted by significant component inventories on hand or at our contract manufacturers.

return to shorter demand-planning horizons.

Given these shipment and order patterns, near term revenue trends may not be solely reflective of current demand levels, but as discussed above will benefit from demand/deployment plans that had been previously committed.

We expect that inventory and purchase commitments will begin to stabilize in the near term, but will remain volatile as we ramp new product introductions.

The magnitude of these balances, combined with a reduction in customer demand-planning horizons and shifting customer product priorities, has resulted in increased risk that we may not be able to sell all of this inventory, which in turn has resulted in additional excess and obsolete inventory and supplier liability charges.

In addition, inflation pressure in our supply chain and scarcity of some materials needed to build our products have increased our cost of revenue and have impacted, and may continue to negatively impact our gross margin.

While we have seen improvements in our supply chain and manufacturing operations, any remaining or new supply chain and manufacturing related constraints could negatively impact our business in future periods.

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In addition, any continued or renewed disruption in manufacturing and supply resulting from these factors could negatively impact our business.

We also believe that some of our customers, following a year of elevated purchases, must now consider changing technology roadmaps and priorities, including the need for the deployment of AI and related technologies, resulting in some uncertainty as to future investment plans and a more constrained approach to some forecasts and orders in the near term.

We also believe that some of our customers must now consider changing technology roadmaps and priorities, including the need for the deployment of AI and related technologies, resulting in some uncertainty as to future investment plans and a more constrained approach to some forecasts and orders in the near term.

In addition, any prolonged economic disruptions or further 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.

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The amendments should be applied on a prospective basis although retrospective application is permitted.

As of March 31, 2024, we have not early adopted ASU 2023-09 and we are currently evaluating the impact of future adoption on our financial disclosures.

As of June 30, 2024 , we have not early adopted ASU 2023-09 and we are currently evaluating the impact of future adoption on our financial disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)-Improvements to Reportable Segment Disclosures.

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Early adoption is permitted.

As of March 31, 2024, we have not early adopted ASU 2023-07 and we are currently evaluating the impact of future adoption on our financial disclosures.

As of June 30, 2024, we have not early adopted ASU 2023-07 and we are currently evaluating the impact of future adoption on our financial disclosures.

Fair Value Measurements

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The following tables summarize the fair value of these financial assets by significant investment category and their levels within the fair value hierarchy (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Level I Level II Level III Total Level I Level II Level III Total

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government notes 390,148 — — 390,148 — — — —

Agency securities — 4,953 — 4,953 — — — —

1,699,252 23,498 — 1,722,750 1,015,705 1,999 — 1,017,704

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(1) As of December 31, 2023, all of our certificates of deposits were domestic deposits.

During the three months ended March 31, 2024, the Company did not make any transfers between the levels of the fair value hierarchy.

Marketable debt securities

During the three and six months ended June 30, 2024, the Company did not make any transfers between the levels of the fair value hierarchy.

The following table summarizes the amortized cost, unrealized gains and losses, and fair value of our debt securities measured at fair value on a recurring basis (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Amortized Cost Unrealized Gains Unrealized Losses Fair Value Amortized Cost Unrealized Gains Unrealized Losses Fair Value

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therefore, we did not recognize any credit losses or non-credit-related impairments related to

such securities for the three months ended March 31, 2024.

such securities for the three and six months ended June 30, 2024.

All unrealized losses were recognized in other comprehensive income (loss).

Realized gains or losses were immaterial for the three months ended March 31, 2024.

The following table is an analysis of our marketable debt securities in unrealized loss positions (in thousands):

March 31, 2024

Realized gains or losses were immaterial for the three and six months ended June 30, 2024.

The following table is an analysis of our debt securities in unrealized loss positions (in thousands):

June 30, 2024

Unrealized Losses within 12 months Unrealized Losses 12 months or greater Total

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Total $ 3,192,848 $ ( 8,244 ) $ 524,573 $ ( 1,998 ) $ 3,717,421 $ ( 10,242 )

As of March 31, 2024, we had no marketable debt securities with contractual maturities that exceeded 24 months.

The fair values of marketable debt securities, by remaining contractual maturities, are as follows (in thousands):

March 31, 2024

As of June 30, 2024, we had no marketable securities with contractual maturities that exceeded 24 months.

The fair values of marketable securities by remaining contractual maturities, are as follows (in thousands):

June 30, 2024

Due in 1 year or less $ 2,196,729

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Total debt securities $ 3,844,923

The weighted-average remaining duration of our marketable debt securities is approximately 0.9 years as of March 31, 2024.

As we view these marketable debt securities as available to support current operations, we classify marketable debt securities with maturities beyond 12 months as current assets under the caption "Marketable securities" on the condensed consolidated balance sheets.

The weighted-average remaining duration of our marketable securities is approximately 0.9 years as of June 30, 2024.

As we view these marketable securities as available to support current operations, we classify marketable securities with maturities beyond 12 months as current assets under the caption "Marketable securities" on the condensed consolidated balance sheets.

Assets measured at fair value on a non-recurring basis

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In addition, the valuation requires management judgment due to the absence of market price and lack of liquidity.

We did not record any realized or unrealized gains, or realized losses for our non-marketable equity securities during the three months ended March 31, 2024 and March 31, 2023, and w e recorded nil and an immaterial amount of unrealized losses for the three months ended March 31, 2024 and March 31, 2023, respectively .

We did not record any realized gains or losses for our non-marketable equity securities during the three and six months ended June 30, 2024 and June 30, 2023, and w e recorded nil and immaterial amounts of unrealized gains or losses for the three and six months ended June 30, 2024 and June 30, 2023, respectively .

We evaluate our non-marketable equity securities for impairment at each reporting period via a qualitative assessment with various potential impairment indicators, including, but not limited to, an assessment of a significant adverse change in the economic environment, significant adverse changes in the general market condition of the geographies and industries in which our investees operate, and other publicly-available information that affected the value of the non-marketable equity securities .

The following table summarizes the activity related to our non-marketable equity securities as of March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024 December 31, 2023

The following table summarizes the activity related to our non-marketable equity securities as of June 30, 2024 and December 31, 2023 (in thousands):

June 30, 2024 December 31, 2023

Cost of investments $ 32,656 $ 31,656

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The reconciliation of cash, cash equivalents and restricted cash reported on the unaudited condensed consolidated balance sheets to the total of the same such amounts in the unaudited condensed consolidated statements of cash flows is as follows (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Cash and cash equivalents $ 2,429,031 $ 1,938,606

3 unchanged sentences

Accounts receivable, net consists of the following (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Accounts receivable $ 1,237,629 $ 1,034,480

2 unchanged sentences

Inventories consist of the following (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Raw materials $ 771,354 $ 930,777

3 unchanged sentences

Property and equipment, net consists of the following (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Land $ 45,883 $ 44,645

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Property and equipment, net $ 96,282 $ 101,580

Depreciation expense was $ 8.6 million and $ 7.1 million for the three months ended March 31, 2024 and 2023, respectively.

Depreciation expense was $ 8.5 million and $ 7.8 million for the three months ended June 30, 2024 and 2023, respectively, and $ 17.1 million and $ 14.9 million for the six months ended June 30, 2024 and 2023, respectively.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Accrued compensation-related costs $ 103,312 $ 134,225

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The following table summarizes the activity related to our contract liabilities (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Contract liabilities, beginning balance $ 139,618 $ 105,047 $ 133,239 $ 103,448

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Contract liabilities, ending balance $ 144,130 $ 110,097 $ 144,130 $ 110,097

As of March 31, 2024 and December 31, 2023, $ 59.4 million and $ 59.2 million of our contract liabilities, respectively, were included in "Other current liabilities" with the remaining balances included in "Other long-term liabilities" on the condensed consolidated balance sheets.

As of June 30, 2024 and December 31, 2023, contract liabilities included in "Other current liabilities" were $ 59.2 million for each period, with the remaining balances included in "Other long-term liabilities" on the condensed consolidated balance sheets.

Deferred Revenue

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The following table summarizes the activity related to our deferred revenue (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Deferred revenue, beginning balance

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Other Performance Obligations

Other performance obligations totaling $ 809.0 million as of March 31, 2024 include unbilled multi-year PCS and service contract amounts of $ 543.5 million and $ 265.5 million of binding contractual agreements with certain customers that are primarily related to future product shipments.

Other performance obligations totaling $ 688.1 million as of June 30, 2024 include unbilled multi-year PCS and service contract amounts of $ 513.0 million and $ 175.1 million of binding contractual agreements with certain customers that are primarily related to future product shipments.

Revenue from Total Remaining Performance Obligations

T otal revenue from our contract liabilities, deferred revenue and other performance obligations that is expected to be recognized in future periods amounts to $ 2.6 billion as of March 31, 2024.

T otal revenue from our contract liabilities, deferred revenue and other performance obligations that is expected to be recognized in future periods was $ 3.0 billion as of June 30, 2024 .

A pproximately 81 % of this future revenue is expected to be recognized over the next two years and the remaining 19 % is expected to be recognized during the third to the fifth year.

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Other income (expense), net consists of the following (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Interest income $ 71,448 $ 32,206 $ 135,271 $ 54,715

2 unchanged sentences

Total $ 70,863 $ 56,339 $ 133,483 $ 68,485

Acquisition, Goodwill and Acquisition-Related Intangible Assets

We had no business acquisitions during the three months ended March 31, 2024 and 2023.

No changes were made to the carrying values of goodwill for the three months ended March 31, 2024 and 2023.

Goodwill and Acquisition-Related Intangible Assets

Acquisition-Related Intangible Assets

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December 31, 2023

Additions March 31, 2024 December 31, 2023

Amortization March 31, 2024 December 31, 2023

March 31, 2024

Additions June 30, 2024 December 31, 2023

Amortization June 30, 2024 December 31, 2023

June 30, 2024

Developed technology $ 154,930 $ — $ 154,930 $ ( 102,493 ) $ ( 8,390 ) $ ( 110,883 ) $ 52,437 $ 44,047 3.7

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Total $ 221,940 $ — $ 221,940 $ ( 133,172 ) $ ( 13,380 ) $ ( 146,552 ) $ 88,768 $ 75,388 3.8

Amortization expense related to acquisition-related intangible assets was $ 6.7 million and $ 9.3 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, future estimated amortization expense related to the acquisition-related intangible assets is as follows (in thousands):

Amortization expense related to acquisition-related intangible assets was $ 6.7 million and $ 9.3 million for the three months ended June 30, 2024 and 2023, respectively, and $ 13.4 million and $ 18.6 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, future estimated amortization expense related to the acquisition-related intangible assets is as follows (in thousands):

Future Amortization Expense

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We have operating lease arrangements for office space, data center, equipment and other corporate assets.

As of March 31, 2024, we had lease payment obligations, net of immaterial sublease income, of $ 65.9 million, with $ 23.7 million payable within one year.

As of June 30, 2024, we had lease payment obligations, net of immaterial sublease income, of $ 61.6 million, with $ 23.5 million payable within one year.

Purchase Commitments

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In addition, we purchase strategic component inventory from certain suppliers under non-cancellable purchase commitments, including integrated circuits, which are consigned to our contract manufacturers.

As of March 31, 2024, we had non-cancellable purchase commitments not recorded on our balance sheet of $ 1,457.7 million, of which $ 1,425.1 million have expected receipt dates within 12 months, and $ 32.6 million have expected receipt dates greater than 12 months.

As of June 30, 2024, we had non-cancellable purchase commitments not recorded on our balance sheet of $ 2.1 billion, of which $ 1.7 billion have expected receipt dates within 12 months, and $ 0.4 billion have expected receipt dates greater than 12 months.

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.

We also had deposits to our contract manufacturers to secure our purchase commitments in the amount of $ 131.8 million and $ 133.3 million as of March 31, 2024 and December 31, 2023, respectively, which were recorded within prepaid expenses and other current assets, as well as other assets in the condensed consolidated balance sheets.

We also had deposits to our contract manufacturers to secure our purchase commitments in the amount of $ 128.0 million and $ 133.3 million as of June 30, 2024 and December 31, 2023, respectively, which were recorded within prepaid expenses and other current assets, as well as other assets in the condensed consolidated balance sheets.

We have entered into agreements with some of our direct customers and channel partners that contain indemnification provisions relating to potential situations where claims could be alleged that our products infringe the intellectual property rights of a third party.

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We record a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

As of March 31, 2024, provisions recorded for contingent losses related to other claims

As of June 30, 2024, provisions recorded for contingent losses related to other claims

and matters have not been significant.

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Stock Repurchase Program

In October 2021, our board of directors authorized a $ 1.0 billion stock repurchase program (the “Existing Repurchase Program”).

This authorization allows us to repurchase shares of our common stock that will be funded from working capital and expires in October 2024.

In April 2024 we completed repurchases under our previous $ 1.0 billion stock repurchase program (the “Prior Repurchase Program”).

In May 2024, our board of directors authorized a new $ 1.2 billion stock repurchase program (the “New Repurchase Program” and together with the Prior Repurchase Program, the "Repurchase Programs"), which commenced in May 2024 and expires in May 2027.

This authorization allows us to repurchase shares of our common stock that will be funded from working capital.

Repurchases may be made at management's discretion from time to time on the open market, through privately negotiated transactions, transactions structured through investment banking institutions, block purchases, trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or a combination of the foregoing.

The Existing 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.

As of March 31, 2024, the remaining authorized amount for stock repurchases under the Existing Repurchase Program was approximately $ 82.0 million.

In April 2024, we repurchased the remaining $ 82.0 million of our common stock authorized under the Existing Repurchase Program.

A summary of the stock repurchase activity under the Existing Repurchase Program for the three months ended March 31, 2024 is as follows (in thousands, except per share amounts):

Three Months Ended

March 31, 2024

The New 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.

During the three months ended June 30, 2024, we repurchase d a total of $ 82.0 million of our common stock under our Prior Repurchase Program and $ 90.0 million of our common stock under our New Repurchase Program.

As of June 30, 2024, the remaining authorized amount for stock repurchases under the New Repurchase Program was approximately $ 1.1 billion.

A summary of the stock repurchase activity under the Repurchase Programs for the three and six months ended June 30, 2024 is as follows (in thousands, except per share amounts):

Three Months Ended Six Months Ended

June 30, 2024 June 30, 2024

Aggregate purchase price $ 172,013 $ 234,666

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2014 Equity Incentive Plan

In April 2014, our board of directors and stockholders approved the 2014 Equity Incentive Plan (the “2014 Plan”), effective on the first day that our common stock was publicly traded, and simultaneously terminated the 2004 and 2011 equity plans as to future grants;

however, these plans will continue to govern the terms and conditions of the outstanding options previously granted thereunder.

Awards granted under the 2014 Plan could be in the form of Incentive Stock Options (“ISOs”), Nonstatutory Stock Options (“NSOs”), Restricted Stock Units (“RSUs”), Restricted Stock Awards (“RSAs”) or Stock Appreciation Rights (“SARs”).

The number of shares available for grant and issuance under the 2014 Plan increases automatically on January 1 of each year commencing with 2016 by the number of shares equal to 3 % of the outstanding shares of our common stock on the immediately preceding December 31, but not to exceed 50 million shares, unless our board of directors, in its discretion, determines to make a smaller increase.

As of March 31, 2024, there remained approximately 84.8 million shares available for grant under the 2014 Plan.

The 2014 Plan (the “Existing Plan”) expired on April 17, 2024, and our board of directors have approved the amendment, restatement and extension of the 2014 Plan (the “Restated Plan”), reducing the number of shares available for future grants, subject to the approval of our stockholders at our 2024 Annual Meeting of Stockholders on June 7, 2024.

Refer to Note 10 Subsequent Events of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10Q for future discussion.

On April 16, 2024, our board of directors adopted an amended and restated Arista Networks, Inc.

2014 Equity Plan (the "Restated Plan"), effective April 17, 2024 (the "Effective Date") subject to the approval of our stockholders, which wa s approved at the 2024 Annual Meeting of Stockholders on June 7, 2024.

The Restated Plan provides for the grant of equity-based awards, including stock options, restricted stock units, restricted stock, stock appreciation rights, and performance awards.

The share pool available under the prior version of the Company's 2014 Equity Incentive Plan (the "Prior Plan") was extinguished, and the Restated Plan provides for a new share pool not to exceed (i) 13,200,000 shares of our Common Stock (“Shares”), plus (ii) any Shares subject to awards under the Prior Plan that, on or after the Effective Date, expired or otherwise terminated without having been exercised in full, or that were forfeited to or repurchased by us, including net settlement of Shares subject to restricted stock units, with the maximum number of Shares to be added to the Restated Plan as a result of clause (ii) equal to 10,039,657 Shares.

The Restated Plan’s terms are substantially similar to the Prior Plan’s terms, including with respect to treatment of equity awards in the event of a “change in control” as defined under the Restated Plan, but with certain modifications, including the elimination of the automatic “evergreen” share reserve increase provided for under the Prior Plan.

As of June 30, 2024, there remained approximately 13.1 million shares available for grant under the Restated Plan.

2014 Employee Stock Purchase Plan

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The ESPP became effective on the first day that our common stock was publicly traded.

The number of shares reserved for issuance under the ESPP increases automatically on January 1 of each year by the number of shares equal to 1 % of our shares outstanding on the immediately preceding December 31, but not to exceed 10 million shares, unless our board of directors, in its discretion, determines to make a smaller increase.

directors, in its discretion, determines to make a smaller increase.

Effective January 1, 2024, our board of directors authorized an increase of 3.1 million shares to the shares available for issuance under the ESPP.

During the three months ended March 31,

2024, we issued 140,162 shares at a weighted-average purchase price of $ 114.40 per share under the ESPP.

As of March 31, 2024, there remained approximately 26.4 million shares available for issuance under the ESPP.

During the six months ended June 30, 2024, we issued 140,162 shares at a weighted-average purchase price of $ 114.40 per share under the ESPP.

As of June 30, 2024, there remained approximately 26.4 million shares available for issuance under the ESPP.

Stock Option Activities

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Options canceled ( 24 ) 20.07

Balance—March 31, 2024 1,754 $ 22.32 1.8 $ 469,404

Vested and exercisable—March 31, 2024 1,629 $ 20.98 1.6 $ 438,107

Balance—June 30, 2024 1,281 $ 23.24 1.6 $ 419,222

Vested and exercisable—June 30, 2024 1,202 $ 22.04 1.5 $ 394,687

Restricted Stock Unit (RSU) Activities

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RSUs and PRSUs forfeited/canceled ( 295 ) 124.10

Unvested balance—March 31, 2024 7,358 $ 125.15

Unvested balance—June 30, 2024 8,249 $ 157.18

Stock-Based Compensation Expense

The following table summarizes the stock-based compensation expense related to our equity awards (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Cost of revenue $ 3,983 $ 2,824 $ 7,433 $ 5,799

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Total stock-based compensation $ 79,292 $ 67,127 $ 156,507 $ 130,008

As of March 31, 2024, there were $ 746.0 million of unamortized compensation costs related to all unvested awards.

As of June 30, 2024, there were $ 1,083.3 million of unamortized compensation costs related to all unvested awards.

The unamortized compensation costs are expected to be recognized over a weighted-average period of approximately 4.9 years.

5 unchanged sentences

The following table sets forth the computation of our basic and diluted net income per share (in thousands, except per share amounts):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2022

Net income $ 665,428 $ 491,885 $ 1,303,120 $ 928,358

7 unchanged sentences

The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net income per share for the periods presented because their effect would have been anti-dilutive for the periods presented (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2022

Employee equity awards 26 625 96 498

Income Taxes (in thousands, except percentages)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Income before income taxes $ 770,436 $ 586,401 $ 1,493,197 $ 1,083,125

1 unchanged sentence

Effective tax rate 13.6 % 16.1 % 12.7 % 14.3 %

The decrease in the effective tax rates in the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a favorable change in the jurisdictional mix of earnings.

The decrease in the effective tax rates in the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to an increase in tax benefits attributable to stock-based compensation.

Geographical Information

1 unchanged sentence

The following table represents revenue based on customers’ shipping addresses (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

$ 1,374,257 $ 1,154,509 $ 2,629,648 $ 2,269,520

Europe, Middle East and Africa 178,800 167,623 320,354 295,939

2 unchanged sentences

(1) Includes $ 1,362.7 million and $ 1,121.7 million revenue generated from the U.S.

for the three months ended March 31, 2024 and March 31, 2023, respectively.

for the three months ended June 30, 2024 and June 30, 2023, respectively, and $ 2,595.5 million and $ 2,216.3 million for the six months ended June 30, 2024 and June 30, 2023, respectively.

Long-lived assets, net, excluding intercompany receivables, investments in subsidiaries, privately-held equity investments and deferred tax assets, by location are summarized as follows (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

United States $ 77,935 $ 79,728

1 unchanged sentence

Total $ 96,282 $ 101,580

Subsequent Events

Stock Repurchases

On May 3, 2024, our board of directors authorized a new $ 1.2 billion stock repurchase program (the “New Repurchase Program”, together with the “Existing Repurchase Program,” the “Repurchase Programs”), which commences in May 2024 and expires in May 2027.

This authorization allows us to repurchase shares of our common stock that will be funded from working capital.

In April 2024, we repurchased an additional $ 82.0 million shares of our common stock which completed our repurchases under the Existing Repurchase Program.

The Repurchase Programs do not obligate Arista to acquire any of its common stock, and may be suspended or discontinued by the company at any time without prior notice.

Equity Incentive Plan

On April 17, 2024, our board of directors, acting upon the recommendation of the Compensation Committee of our board of directors, adopted an amendment, restatement and extension of the Arista Networks, Inc.

2014 Equity Incentive Plan (the “Restated Plan”), effective April 17, 2024 (the “Effective Date”), subject to approval of our stockholders at our 2024 Annual Meeting of Stockholders.

The Restated Plan provides for the grant of equity-based awards, including stock options, restricted stock units, restricted stock, stock appreciation rights, and performance awards.

The share pool available under the prior version of our 2014 Equity Incentive Plan (the “Prior Plan”) was extinguished as of the Effective Date, and the Restated Plan provides for a new share pool not to exceed (i) 13,200,000 shares of our Common Stock (“Shares”), plus (ii) any Shares subject to awards under the Prior Plan that, on or after the Effective Date, expire or otherwise terminate without having been exercised in full, or that are forfeited to or repurchased by us, including net settlement of Shares subject to restricted stock units, with the maximum number of Shares to be added to the Restated Plan as a result of clause (ii) equal to 10,039,657 Shares.

The Restated Plan will be subject to approval of our stockholders at the 2024 Annual Meeting of Stockholders.

If stockholder approval of the Restated Plan is not obtained at the 2024 Annual Meeting of Stockholders, then any award granted under the Restated Plan will be forfeited.

In accordance with New York Stock Exchange Listing Rule 303A.08, no Shares underlying awards granted on or after the Effective Date shall be issued until stockholder approval is obtained.

The foregoing description of the Restated Plan is not complete and is qualified in its entirety by reference to the full text thereof, a copy of which is attached as Exhibit 3.1 to our Current Report on Form 8-K filed on April 23, 2024 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements