What changed in this filing

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Item 1A. Risk Factors

2025-08-06 compared with 2025-05-07 · 111 added, 115 removed, 943 unchanged (19% of the section changed)

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• escalated or escalating U.S.

tariffs as well as countermeasures taken by affected countries, may have a negative effect on global economic conditions, financial markets and our business;

tariffs as well as countermeasures taken by affected countries, may have a negative effect on global economic conditions, financial markets and our business, as may retaliatory actions by other countries, including China, in response to these U.S.

• large purchases by a limited number of customers represent a substantial portion of our revenue;

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Risks Related to Cybersecurity and Data Privacy

• defects, errors or vulnerabilities in our products, failure of our products to detect security breaches or incidents, misuse of our products or risks of product liability could harm our business;

• breaches of our cybersecurity systems or other security breaches could degrade our ability to conduct our business operations and deliver products and services to our customers, cause vulnerabilities in our products and services or

subject us to regulatory enforcement actions and or fines or liabilities for damages incurred by our customers or partners.

• our products, services and internal network systems could experience cybersecurity incidents, and defects, errors or vulnerabilities in our products, failure of our products to detect security breaches or incidents, misuse of our products or risks of product liability could harm our business;

• breaches of our cybersecurity systems or other security breaches could degrade our ability to conduct our business operations, or those of our suppliers, service providers, or other third parties, impact our ability to deliver products and services to our customers, cause vulnerabilities in our products and services or subject us to regulatory enforcement actions and or fines or liabilities for damages incurred by our customers or partners.

Risks Related to Accounting, Compliance, Regulation and Tax

• foreign investment laws and regulations, and other trade or regulatory barriers, may have a negative effect on global economic conditions, financial markets and our business;

• enhanced import/export restrictions, such as enhanced export controls the United States has adopted targeting trade with China, as well as countermeasures taken by affected countries may negatively affect our business;

• enhanced import/export restrictions, such as enhanced export controls the United States (the "U.S") has adopted targeting trade with China, as well as countermeasures taken by affected countries may negatively affect our business;

• failure to maintain effective internal control over financial reporting could adversely affect the accuracy and timing of our financial reporting;

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Escalated or escalating U.S.

tariffs, as well as countermeasures taken by affected countries, may have a negative effect on global economic conditions, financial markets and our business.

Our products are primarily manufactured in Malaysia, Vietnam, and Mexico, and we also procure a limited number of products directly from China.

tariffs, as well as countermeasures taken by affected countries, may have a negative effect on global economic conditions, financial markets and our business, as may retaliatory actions by other countries, including China, in response to these U.S.

Our products are primarily manufactured in Malaysia, Vietnam, and Mexico, and we also procure a limited number of products with Country of Origin from China, Taiwan, Thailand and 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 United States may be affected by changes in applicable tariff policies.

In 2018, the Office of the U.S.

Trade Representative ("USTR") enacted various Section 301 tariffs of 7.5%, 10%, 15% and 25% on certain imports into the U.S.

Because our products are primarily manufactured internationally, the import of our products into the United States may be affected by applicable tariff policies.

The Office of the U.S.

Trade Representative has enacted various Section 301 tariffs on certain imports into the U.S.

from China, including communications equipment products and components manufactured and imported from China.

USTR has continued to expand these Section 301 tariffs, which now rise up to 100% on certain products.

In addition, since March 2025, the United States has imposed an additional 20% tariff on most products of China pursuant to an executive order.

In February 2025, the U.S.

government also scheduled 25% tariffs to be imposed on products of Canada and Mexico pursuant to a separate executive order, with lower tariffs applicable to energy, energy resources, and potash (the “Canada-Mexico Tariffs”), which took effect in March 2025.

These 25% tariffs currently do not apply to -United States-Mexico-Canada Agreement (“USMCA”) qualifying goods.

As of May 2025, our products manufactured in Mexico are primarily USMCA qualifying and are not impacted by the Canada-Mexico Tariffs.

Since April 2025, pursuant to additional executive orders, the U.S.

government imposed an additional 125% tariff on products of China (in addition to Section 310 tariffs and 20% tariffs listed above) and an additional 10% baseline tariff on products of U.S.

trading partners other than China, Canada, Mexico, or countries with which the U.S.

does not have normal trade relations (collectively, the “Reciprocal Tariffs”).

government scheduled Reciprocal Tariffs for these other U.S.

trading partners currently subject to the baseline tariffs based upon the trade imbalance between the U.S.

and such other U.S.

trading partners that, in many cases, are higher than the baseline 10%;

however, the U.S.

government paused these additional, higher Reciprocal Tariffs until July 2025 (except with respect to China).

Additionally, the Reciprocal Tariffs exempt some products, including certain semiconductors, computers, consumer electronics, and items covered under a Section 232 tariff order or which become covered under a Section 232 tariff order.

As of May 2025, most of our products manufactured in Malaysia and Vietnam are items currently excluded from the scope of the Reciprocal Tariffs and therefore not impacted by the tariffs levied in that order.

addition, since March 2025, the United States has imposed additional tariffs on most products of China pursuant to an executive order addressing the flow of fentanyl.

In March 2025, the U.S.

government also imposed new fentanyl-related tariffs on certain products of Canada and Mexico pursuant to a separate executive order (the “Canada-Mexico Tariffs”), and which exempt products qualifying for preferential treatment under the United States-Mexico-Canada Agreement ("USMCA").

Our products manufactured in Mexico, which generally qualify for preferential treatment under USMCA, have not been significantly impacted by the Canada-Mexico Tariffs.

government announced on July 31, 2025 that it would extend the current arrangement with respect to Mexico for a period of 90 days.

Since April 2025, pursuant to additional executive orders, including those reflecting trade agreements reached with various trading partners, the U.S.

government imposed additional reciprocal tariffs (in addition to Section 301 tariffs and fentanyl tariffs listed above) of 10% or more on virtually all other U.S.

trading partners (collectively, the “Reciprocal Tariffs”).

government has paused additional, higher Reciprocal Tariffs until August 7, 2025.

Additionally, the Reciprocal Tariffs currently exempt some products, including certain semiconductors, computers, consumer electronics, and items covered under a Section 232 tariff order or which become covered under a Section 232 tariff order.

Currently, most our products manufactured in Malaysia and Vietnam are items currently excluded from the scope of the Reciprocal Tariffs and therefore not impacted by the tariffs levied in the Reciprocal Tariff orders.

Other products may be impacted by the Reciprocal Tariffs.

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once these investigations are complete, the U.S.

government may place additional tariffs on these items.

government may place additional tariffs on these items which could result in higher costs to us and negatively affect our gross margins.

In response to these and other U.S.

measures, China, Canada, or other countries have taken a range of retaliatory measures.

measures, China, Canada, and other countries have taken a range of retaliatory measures.

These include the imposition of retaliatory tariffs on certain U.S.-origin goods;

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There is currently significant uncertainty about the future relationship between the United States, and various other countries, most significantly China, with respect to tariffs and trade policies.

The situation regarding these tariffs and trade policies has been fluid and tariffs are subject to further changes.

This risk may be particularly acute should the trade tensions between the U.S.

and other countries worsen.

The recent U.S.

government executive orders imposing these tariffs also include provisions allowing for further escalation of U.S.

tariffs in the event affected countries retaliate, and these provisions have already been invoked in response to retaliation taken by China.

Continued escalations could result in the imposition of extreme tariff or non-tariff measures, which may lead to a breakdown in international supply chains due to increased tariff costs and disruptions in the availability of goods.

The situation regarding these tariffs and trade policies has been fluid.

Continued escalations could result in the imposition of extreme tariff or non-tariff trade measures, which may lead to a breakdown in international supply chains due to increased tariff costs or disruptions in the availability of goods.

An increase in trade-related costs associated with these tariff actions may impair the profitability of such international production, may strain our suppliers’ ability to provide inputs necessary for the production of these items, and may 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 believe we can adjust our supply chain and manufacturing practices to partially mitigate the impact of the tariffs and any impact on the supply chain of components sourced from affected countries, but our efforts may not be successful, 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.

These trade measures may directly impair our business by increasing trade-related costs or disrupting established supply chains and may indirectly impair our business by causing a negative effect on global economic conditions and financial markets.

The ultimate impact of these trade measures is uncertain, and may be affected by various factors, including whether and when such trade measures are implemented, the timing when such measures may become effective, and the amount, scope, or nature of such trade measures.

We are 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 our efforts may not be successful.

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.

Tariffs may also cause customers to delay or to request an expedition for their orders as they evaluate where to take delivery of our products in connection with their efforts to mitigate their own tariff exposure.

Such delays or expeditions create forecasting difficulties for us and increase the risk that orders might be canceled or might never be placed.

Such delays or expeditions may create forecasting difficulties for us and increase the risk that orders might be canceled or might never be placed.

Current or future tariffs may also negatively impact our customers' sales, thereby causing an indirect negative impact on our own sales.

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For example, sales to our end customer Microsoft represented 20%, 18% and 16% of our total revenue for 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.

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 been linked to the timing of new product deployments, and spending cycles with these customers, and we expect continued variability in our customer concentration and timing of sales on a quarterly and annual basis.

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Moreover, because our sales are based prim arily 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.

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Further, if we are unable to reduce our lead times, customers may also cancel existing orders or reduce future orders.

I n 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.

A ny cancellations or reductions of orders, or any reductions in future demand, may adversely impact our business, and in addition, could lead to increased excess and obsolete inventory-related charges, all of which could materially affect our operating results.

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.

Moreover, the AI market is rapidly expanding 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.

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Weak domestic or global economic conditions and continuing economic uncertainty, fear or anticipation of such conditions, a recession, geopolitical pressures, including international trade disputes, tariff policies and changes in tariff policies, global pandemics, or 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, changes in government administration and policy positions, increased uncertainty associated with recent scheduled, and/or anticipated increases in trade tariffs in the context of escalated and unresolved trade disputes and tensions between the U.S., the European Union, China, Mexico, Canada and other countries where we manufacture our products including Malaysia and Vietnam, inflationary pressures, higher interest rates, instability in the global credit markets, the impact and uncertainty regarding global central bank monetary policy, instability 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.

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, changes in government administration and policy positions, increased uncertainty associated with recent scheduled, threatened and/or anticipated increases in trade tariffs in the context of escalated and unresolved trade disputes and tensions between the U.S., the European Union (the "EU"), China, Mexico, Canada and other countries where we manufacture our products including Malaysia and Vietnam, inflationary pressures, higher interest rates, instability in the global credit markets, the impact and uncertainty regarding global central bank monetary policy, instability in the geopolitical environment, the Russia-Ukraine and Israel-Hamas conflicts, political tensions between Taiwan and China, and among the U.S., China, Iran, Israel, Lebanon, Russia, Ukraine and other countries, 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.

While some 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.

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Supply of these components worldwide was and could continue to be adversely affected by supply constraints, as well as industry consolidation and geopolitical conditions such as international trade restrictions and increased political tensions.

Such shortages, increased component lead times, reduced allocations of components and rejections or 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 future adversely impact our revenue and gross margins.

Such shortages, increased component lead times, reduced allocations of components and rejections or 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 and may in the future 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.

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periods, and increase difficulty in adding new customers.

Other factors may also contribute to declines in our 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, 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 AI models, have emerged, and while they have driven increased demand for networking, the long-term trajectory is unknown and it is difficult for us to predict the demand for such new technologies.

Other factors may also contribute to declines in our 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 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.

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If we are unable to anticipate technological changes in our industry by introducing new or enhanced products and services in a timely and cost-effective manner or if we fail to introduce products and services that meet market demand, we may lose our competitive position, our products may become obsolete, and our business, financial condition or results of operations could be adversely affected.

For example, with our most recently introduced 800 GbE and AI focused Ethernet products, our ability to continue to maintain our competitive position with our customers will depend on our ability to deliver these new products in a timely manner, our customers' acceptance of these products and the growth of the markets that these products serve.

For example, with our most recently introduced 800 GbE, AI focused Ethernet products and AI-Driven Campus and Branch Networking Offerings, our ability to continue to maintain our competitive position with our customers will depend on our ability to deliver these new products in a timely manner, our customers' acceptance of these products and the growth of the markets that these products serve.

In addition, the evaluation, testing and qualification of our new products by our customers may be lengthy and may require increased customer trials and contracts with acceptance clauses, which delay revenue recognition may negatively impact our revenue.

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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 recently announced the acquisition of Juniper Networks.

For example, Cisco acquired Acacia Communications, Broadcom acquired Brocade Communications and VMware, Dell acquired Force10 Networks, Hewlett Packard Enterprise acquired Juniper Networks.

This industry consolidation may lead to increased competition and may harm our business.

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As part of our business strategy, we have made and could continue to make investments in complementary companies, products or technologies which could involve licenses, additional channels of distribution, discount pricing or investments in or acquisitions of other companies.

For example, we completed the acquisition of VeloCloud in June 2025 which required management to focus efforts on integrating the VeloCloud business with the Company.

In addition, the privately-held companies in which we invested are in the startup or development stages.

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We operate on December 31st year end and typically have lower sequential quarter over quarter revenue growth in the first quarter of each fiscal year, often followed by stronger sequential revenue growth in the ensuing quarters.

We believe that

this seasonality results from a number of factors, including the procurement, budgeting and deployment cycles of many of our customers.

The effects of recent supply chain disruptions and our rapid growth may have reduced the impact of seasonal or cyclical factors that might otherwise have influenced our business and broader industry performance.

We believe that this seasonality results from a number of factors, including the procurement, budgeting and deployment cycles of many of our customers.

The effects of supply chain disruptions and our rapid growth may have reduced the impact of seasonal or cyclical factors that might otherwise have influenced our business and broader industry performance.

If our growth rates slow, seasonal or cyclical variations in our operations may become more pronounced over time and may materially affect our business, financial condition, results of operations and prospects.

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End-customer orders often involve the purchase of multiple products.

These orders are complex and difficult to complete because prospective customers generally consider a number of factors over an extended period of time before committing to purchase the products and solutions we sell.

These orders are complex and difficult to complete because prospective customers generally consider a number of factors over an extended period of time before

committing to purchase the products and solutions we sell.

Customers, especially our large customers, often view the purchase of our products as a significant and strategic decision and require considerable time to evaluate, test and qualify our products prior to making a purchase decision and placing an order.

The length of time that customers devote to their evaluation, contract

negotiation and budgeting processes varies significantly.

The length of time that customers devote to their evaluation, contract negotiation and budgeting processes varies significantly.

In addition, customers may delay upgrades to their network infrastructure which extends the upgrade and sales cycle.

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Our exposure under these indemnification provisions is frequently limited to the total amount paid by our customer under the agreement.

However, certain agreements include indemnification provisions that could potentially expose us to losses

in excess of the amount received under the agreement.

However, certain agreements include indemnification provisions that could potentially expose us to losses in excess of the amount received under the agreement.

Any of these events, including claims for indemnification, could seriously harm our business, financial condition, results of operations and prospects.

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In the past several years, we have announced a number of new products and enhancements to our products and services, including new products in the AI Ethernet, campus workspace and network security markets.

The success of our new products depends on several factors including, but not limited to, appropriate new product definition, the development of

product features that sufficiently meet end-user requirements, our ability to manage the risks associated with new product production ramp-up issues, component costs, availability of components, timely completion and introduction of these products, prompt solution of any defects or bugs in these products, our ability to support these products, differentiation of new products from those of our competitors and market acceptance of these products.

The success of our new products depends on several factors including, but not limited to, appropriate new product definition, the development of product features that sufficiently meet end-user requirements, our ability to manage the risks associated with new product production ramp-up issues, component costs, availability of components, timely completion and introduction of these products, prompt solution of any defects or bugs in these products, our ability to support these products, differentiation of new products from those of our competitors and market acceptance of these products.

For example, our new product releases will require strong execution from our third-party merchant silicon chip suppliers to develop and release new merchant silicon chips that satisfy end-customer requirements, to meet expected release schedules and to provide sufficient quantities of these components.

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and China, Canada, Mexico, the European Union and other countries where we manufacturing our products including Malaysia and Vietnam, the Russia-Ukraine conflict and related economic sanctions against Russia, the Israel-Hamas conflict, and political tensions between China and Taiwan.

Global geopolitical and macroeconomic uncertainties have resulted in prolonged manufacturing and supply chain disruptions, including temporary closures of certain manufacturing and supplier facilities particularly within China and controls on certain supplies including China's restrictions in the use of Micron products and its controls on metals used in semiconductor manufacturing such as gallium and germanium which, in turn, have caused and may continue to cause shortages of, and extended lead times for, components used to manufacture our products, increases in the prices for such components, a reduction, unpredictability or interruption of supply, prioritization of component shipments to other vendors and

decommitments of orders.

In addition, China imposed additional export controls on critical metals including tungsten, tellurium, bismuth, molybdenum, and indium (and related compounds) in February 2025 and further increased the scope of its export controls in April 2025 as part of its response to the United States’s imposition of additional tariffs on products from China.

manufacturing such as gallium and germanium which, in turn, have caused and may continue to cause shortages of, and extended lead times for, components used to manufacture our products, increases in the prices for such components, a reduction, unpredictability or interruption of supply, prioritization of component shipments to other vendors and decommitments of orders.

Insufficient component supply, and increases in the time required to manufacture our products may lead to prolonged inventory shortages, manufacturing disruptions and increased customer lead times for our products that could result in increased cancellation of orders or loss of future sales opportunities altogether as potential customers turn to competitors’ products that are readily available.

In addition, 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 affects our gross margin.

In order to reduce manufacturing lead times 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.

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.

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There is no guarantee that suppliers will meet their commit ments or that actual customer demand will not be lower than our demand forecasts.

As customer lead times improve more broadly, we have seen and expect to continue to see a commensurate reduction in visibility to customer demand and a gradual return to a somewhat shorter demand-planning horizon.

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.

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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 a reduction in customer demand-planning horizons and 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.

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.

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Shelter in place orders, factory closures or reductions in staffing at our manufacturing sites would result in material disruptions, increased lead times and supply shortages of our products.

Due to their existence in foreign locations, our contract manufacturers may also be subject to or become subject to new or increased tariffs which, if sufficiently high, may affect the profitability of these operations and may require relocation to new locations, moves which may require bearing associated costs.

to new locations, moves which may require bearing associated costs.

There is no guarantee that any contract manufacturing location may not be targeted by tariffs or other trade measures imposed by the United States or another country.

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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 supply chain shortages 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 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.

There is no guarantee that suppliers will meet their commitments or that actual customer demand will directly match our demand forecasts.

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Patent and other intellectual property rights disputes are common in the network infrastructure, network security and Wi-Fi industries and have resulted in protracted and expensive litigation for many companies.

Many companies in the network

infrastructure, network security and Wi-Fi industries, including our competitors and other third parties, as well as non-practicing entities, own large numbers of patents, copyrights, trademarks, trade secrets and other intellectual property rights, which they may use to assert claims of infringement, misappropriation, or other violations of intellectual property rights against us.

Many companies in the network infrastructure, network security and Wi-Fi industries, including our competitors and other third parties, as well as non-practicing entities, own large numbers of patents, copyrights, trademarks, trade secrets and other intellectual property rights, which they may use to assert claims of infringement, misappropriation, or other violations of intellectual property rights against us.

From time to time, they have or may in the future also assert such claims against us, our customers or channel partners whom we typically indemnify against claims that our products infringe, misappropriate or otherwise violate the intellectual property rights of third parties.

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Any failure to effectively redesign our solutions or to obtain timely approval of those redesigns by a court or administrative body may cause a disruption to our product shipments and materially and adversely affect our business, prospects, reputation, results of operations, and financial condition.

For example, in two prior investigations brought by Cisco in the International Trade Commission (“ITC”), we were subjected to remedial orders that prohibited us from importing and selling after importation any products the ITC found to infringe Cisco’s patents.

As a result, we were required to redesign certain aspects of our products and

products the ITC found to infringe Cisco’s patents.

As a result, we were required to redesign certain aspects of our products and obtain U.S.

Customs and Border Protection’s approval of those redesigns before we could continue to import those products into the United States.

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Risks Related to Cybersecurity and Data Privacy

Defects, errors or vulnerabilities in our products, the failure of our products to detect security breaches or incidents, the misuse of our products or the risks of product liability could harm our reputation and adversely impact our operating results.

Our products, services and internal network systems could become a target for security attacks, including attacks specifically designed to disrupt our business and our customers and introduce malicious software and attacks by state sponsors.

Our products, services and internal network systems could experience cybersecurity incidents and defects, errors or vulnerabilities in our products, the failure of our products to detect security breaches or incidents, the misuse of our products or the risks of product liability could harm our reputation and adversely impact our operating results.

Our products, services, external facing and internal network systems could experience cybersecurity incidents or become a target for security attacks, including attacks specifically designed to disrupt our business and our customers and introduce malicious software and attacks by state sponsors.

If our products, services or internal networks, system or data are or are perceived to have been compromised, our reputation may be damaged and our financial results may be negatively affected.

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Any such false identification of important files or applications could result in damage to our reputation, negative publicity, loss of channel partners, end-customers and sales, increased costs to remedy any problem, and costly litigation.

Breaches of our cybersecurity systems, or other security or privacy breaches or incidents with respect to our products, services, networks, systems, or data, could degrade our ability to conduct our business operations and deliver products and services to our customers, cause vulnerabilities in our products and services, and subject us to regulatory enforcement actions and or fines or liabilities for damages incurred by our customers or partners, delay our ability to recognize revenue, compromise the integrity of our software products and our networks, systems, and data, result in significant data losses and the theft of our intellectual property, damage our reputation, expose us to liability to third parties and require us to incur significant additional costs to maintain the security of our networks and data.

Breaches of our cybersecurity systems, or other security or privacy breaches or incidents with respect to our products, services, networks, systems, or data, or those of our suppliers, service providers, or other third parties, could degrade our ability to conduct our business operations or those of our suppliers, service providers, or third parties, impact our ability to deliver products and services to our customers, cause vulnerabilities in our products and services, and subject us to regulatory enforcement actions and or fines or liabilities for damages incurred by our customers or partners, delay our ability to recognize revenue, compromise the integrity of our software products and our networks, systems, and data, result in significant data losses and the theft of our intellectual property, damage our reputation, expose us to liability to third parties and require us to incur significant additional costs to maintain the security of our networks and data.

We increasingly depend upon our IT systems to conduct virtually all of our business operations, ranging from our internal operations and product development activities to our marketing and sales efforts and communications with our customers and business partners.

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We also face risks of others gaining unauthorized access to our products and services and introducing malicious software, and such malicious software, defects, bugs or vulnerabilities, or other defects, bugs, or vulnerabilities in our products or services may result in failures or interruptions of our products or services or expose our end-customers' networks, leaving their networks unprotected against the latest security threats.

In addition, our systems, services and products are subject to risks of system outages and other cybersecurity incidents caused by unintended technical errors, which would occur even in the absence of unauthorized access or other malicious activity.

We have also outsourced some business functions to third parties, including our manufacturers, logistics providers, and cloud service providers, and our business operations also depend, in part, on the success of these third parties’ own cybersecurity measures.

Similarly, we rely upon distributors, resellers and system integrators to sell our products and our sales

operations depend, in part, on the reliability of their cybersecurity measures.

Similarly, we rely upon distributors, resellers and system integrators to sell our products and our sales operations depend, in part, on the reliability of their cybersecurity measures.

Additionally, we depend upon our employees to appropriately handle confidential, sensitive, and proprietary data and comply wit h the security measures we have instituted to prevent exposure of our networks and systems to security breaches and incidents, the unauthorized access to our products and the loss of data.

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Furthermore, our acquisition of Awake Security and our provision of its NDR platform may result in us being a more attractive target for such attacks.

Accordingly, if our cybersecurity systems and measures or those of any of the aforementioned third parties fail to protect against sophisticated cyber-attacks, other means of effectuating security breaches or incidents, interruptions or other disruptions of our or our third-party service providers’ systems, networks, products, or services, the mishandling of data by employees and contractors, the corruption, loss, or mishandling or other unauthorized processing of data by unauthorized persons, or any other means of unauthorized access to, or use of, our manufacturing process, products, services, networks, systems, or data that we or such third parties maintain, operate, or process, our ability to conduct our business effectively could be damaged in a number of ways, including:

Accordingly, if our cybersecurity systems and measures or those of any of the aforementioned third parties, or of any other third parties capable of introducing risks to our system or operations, fail to protect against sophisticated cyber-attacks, other means of effectuating security breaches or incidents, interruptions or other disruptions of our or our third-party service providers’ systems, networks, products, or services, the mishandling of data by employees and contractors, the corruption, loss, or mishandling or other unauthorized processing of data by unauthorized persons, or any other means of unauthorized access to, or use of, our manufacturing process, products, services, networks, systems, or data that we or such third parties maintain, operate, or process, our ability to conduct our business effectively could be damaged in a number of ways, including:

• sensitive data regarding our business or our customers, including intellectual property and other proprietary data, could be stolen or lost, modified, rendered unavailable, or otherwise assessed, used, or processed in authorized manners;

• our electronic communications systems, including email and other methods, or other systems, and access to or availability of data, could be disrupted or harmed, and our ability to conduct our business operations could be seriously damaged until such systems or data access and availability can be restored, which we may be unable to achieve in a prompt manner or at all;

• our systems, including email and other electronic communication methods, and access to or availability of data, could be disrupted or harmed, and our ability to conduct our business operations could be seriously damaged until such systems or data access and availability can be restored, which we may be unable to achieve in a prompt manner or at all;

• our ability to process customer orders and electronically deliver products and services could be degraded, and our distribution channels could be disrupted, resulting in delays in revenue recognition;

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government expanded the list of advanced integrated circuits ("ICs") subject to heightened export controls, including certain hardware containing these specified ICs, expanded the list of countries that require export authorization for such items, and added new restrictions based on the headquarters location of the parties involved.

Proposed Regulations further expanding the controls to impose a worldwide licensing requirement on certain ICs and computing resources that are used for training of AI models are currently in effect and have a scheduled compliance date of May 15, 2025, after which time companies may be subject to further enforcement;

as of May 2025, it is unclear whether or how the U.S.

government may amend these regulations.

government also continues to expand the scope of restrictions on the development or production of advanced ICs and certain semiconductor manufacturing equipment, and the restrictions on supercomputing, in China and other countries.

New regulations further expanding the controls to impose a worldwide licensing requirement on certain ICs and computing resources that are used for training of AI models were introduced in January 2025 with a scheduled compliance date of May 15, 2025, These regulations were rescinded prior to the scheduled compliance date though we expect the U.S.

government to issue new regulations regarding similar technologies in the future.

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.

Due to concerns with products and services from certain semiconductor, telecommunications and video providers based in China, U.S.

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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, impact our suppliers who may utilize facilities or equipment described in these controls, or impact the cost of components or inputs used to produce our products.

These measures may also increase in response to certain geopolitical events, such as the recent international trade tensions or if the relationship between the U.S.

These measures may also increase in response to certain geopolitical events, such as the

recent international trade tensions or if the relationship between the U.S.

and China or between China and Taiwan otherwise deteriorates.

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trade restrictions in ways that could impact our business.

For example, China has announced controls on both the use of Micron products and export license requirements on certain materials used, among other things, in the production of semiconductors, optical components,

and other electronic devices including germanium and gallium.

China also has announced a new export control regime.

These Chinese export controls have been the subject of bilateral trade negotiations between the U.S.

and China, and have been partially relaxed since May 2025, though further changes are possible.

Further, the Chinese government has responded to these U.S.

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changes in accounting principles;

changes in tax law and regulations, treaties, or interpretation thereof;

changes in tax law and

regulations, treaties, or interpretation thereof;

imposition of withholding or other taxes on payments by subsidiaries or customers;

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Changes in tax laws and regulations and interpretations of such laws and regulations, including taxation of earnings 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.

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.

Furthermore, due to shifting economic and political conditions, tax policies and rates in various jurisdictions, may be subject to significant change.

The government administration may pass tax reform, which may include laws to address certain provisions of the 2017 Tax Cuts and Jobs Act expiring at the end of 2025.

It is uncertain what proposals to reform U.S.

tax laws might pass and whether such laws could increase or decrease the U.S.

corporate tax rate or otherwise U.S.

taxation of non-U.S.

For example, on July 4, 2025, the U.S.

enacted tax legislation commonly referred to as the 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.

We are currently evaluating the full impact of the OBBB Act on us, including on our estimated annual effective tax rate and cash tax position.

The Organization for Economic Cooperation and Development (“OECD”), comprising 38 international member countries, has introduced a global minimum tax initiative (“Pillar Two”), which has been adopted by members of the European Union ("EU"), among other jurisdictions.

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Enactment of such tax laws could increase our tax obligations in countries where we do business or cause us to change the way we operate our business.

On June 28, 2025, the G7 released a joint statement announcing an understanding regarding a proposed “side-by-side” solution that that would exempt U.S.-parented multinational businesses from certain provisions of Pillar Two;

however, no agreement regarding implementation of the proposal has yet been reached.

We have assessed the impacts of these new laws 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.

Finally, we are subject to examination of our income tax returns by the Internal Revenue Service ("IRS") and other tax authorities.

Finally, we are subject to examination of our income tax returns by the Internal Revenue Service (the "IRS") and other tax authorities.

Audits by the IRS or other tax authorities are subject to inherent uncertainties and could result in unfavorable outcomes, including potential fines or penalties.

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Further, the UK has implemented legislation that substantially mirrors the GDPR, and which provides for fines of up to the greater of 17.5 million British Pounds or four percent of the previous year’s annual revenue, whichever is higher.

The relationship between the UK and the EU in relation to certain aspects of data protection law remains unclear following the UK’s exit from the EU, including with respect to regulation of data transfers between EU member states and the UK.

The relationship between the UK and the EU in relation to certain aspects

of data protection law remains unclear following the UK’s exit from the EU, including with respect to regulation of data transfers between EU member states and the UK.

The UK has issued new standard contractual clauses that, like the SCCs, are required to be implemented.

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Additionally, we and our customers may face a risk of enforcement actions by data protection authorities relating to personal data transfers to us and by us from the EEA, UK, or other regions.

Any such enforcement actions could result in substantial costs and diversion of

resources, distract management and technical personnel and negatively affect our business, operating results, and financial condition.

Several jurisdictions have passed new laws and regulations relating to privacy, data protection, and other matters, and other jurisdictions are considering imposing additional restrictions.

Any such enforcement actions could result in substantial costs and diversion of resources, distract management and technical personnel and negatively affect our business, operating results, and financial condition.

Many jurisdictions have passed new laws and regulations relating to privacy, data protection, and other matters, and other jurisdictions are considering imposing additional restrictions.

These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction.

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We maintain an employee and operational presence in India, and this act may require us to modify our policies and practices and incur increased costs in our efforts to comply.

We also expect laws, regulations, industry standards and other obligations worldwide relating to privacy, data protection and cybersecurity to continue to evolve, and that there will continue to be new, modified, and re-interpreted laws, regulations, standards, and other obligations in these areas.

For example, the Network and Information Security Directive II, or NIS2, adopted in 2023, aims to enhance cybersecurity across critical infrastructure and essential services in the EU.

It expands the scope of the 2016 NIS Directive to include additional sectors while enforcing stricter governance and accountability requirements.

NIS2 requires all 27 EU member states to issue implementing legislation by October 2024;

however, several EU member states have not finalized their respective legislation and guidance.

Additionally, the Digital Operational Resiliency Act, or DORA, became effective in January 2025, and aims to establish a universal framework for managing and mitigating information and communication technology risk that will apply to entities in the financial sector and their third-party cloud service providers.

In addition, some countries are considering or have enacted legislation requiring local storage and processing of data that could increase the cost and complexity of delivering our services.

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Laws and regulations applicable to AI continue to develop and may be inconsistent from jurisdiction to jurisdiction.

For example, the European Union has adopted on an Artificial Intelligence Act that, when effective, prohibits certain AI applications and systems and imposes additional requirements on the

use of certain applications or systems.

For example, the European Union has adopted on an Artificial Intelligence Act that, when effective, prohibits certain AI applications and systems and imposes additional requirements on the use of certain applications or systems.

Additionally, some U.S.

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Additionally, the U.S.

government continues to expand controls enacted in October 2022 restricting the ability to send certain products and technology related to semiconductors, semiconductor manufacturing, and supercomputing to China without an export license.

without an export license.

In 2023 and 2024, the U.S.

government expanded the list of advanced integrated circuits subject to heightened export controls, including certain hardware containing these specified integrated circuits, expanded the list of destinations requiring export authorization for such items, and added new restrictions based on the headquarters location of the parties involved.

Proposed Regulations further expanding the controls to impose a worldwide licensing requirement on certain integrated circuits and computing resources that are used for training of AI models are currently in effect and have a scheduled compliance date of May 15, 2025, after which time companies may be subject to further enforcement;

as of May 2025, it is unclear whether or how the U.S.

government may amend these regulations.

New regulations further expanding the controls to impose a worldwide licensing requirement on certain integrated circuits and computing resources that are used for training of AI models were introduced in January 2025 with a scheduled compliance date of May 15, 2025.

These regulations were rescinded prior to the scheduled compliance date though we expect the U.S.

government to issue new regulations regarding similar technologies in the future.

government also continues to expand 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.

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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.

It also is possible that the Chinese government will retaliate to these export controls in ways that could impact our business.

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China also has announced a new export control regime.

These Chinese export controls have been the subject of bilateral trade negotiations between the U.S.

and China and have been partially relaxed since May 2025, though further changes are possible.

Further, the Chinese government has responded to U.S.

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Any deterioration in relations between Taiwan and China could lead to additional sanctions or export controls on China, on specific individuals or entities, or otherwise in the region which could impact our ability to sell to certain of our customers, source components from China, or otherwise negatively impact our business.

The United States may also continue to leverage the use of “secondary tariffs” and/or “secondary sanctions” to achieve certain foreign policy goals, or increase its enforcement of such tools, which may directly or indirectly affect our business (see also the “Escalating U.S.

tax, tariff, import/export restrictions, and other trade or regulatory barriers, as well as countermeasures taken by affected countries, may have a negative effect on global economic conditions, financial markets and our business” risk factor above).

tax, tariff, as well as countermeasures taken by affected countries may have a negative effect on global economic conditions, financial markets and our business risk factor above).

Even though we take precautions to ensure that we and our channel partners comply with all relevant regulations, any failure by us or our channel partners to comply with such regulations could have negative consequences, including reputational harm, government investigations and penalties.

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The trading price of our common stock has historically been and is likely to continue to be volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.

These fluctuations could

cause you to lose all or part of your investment in our common stock.

These fluctuations could cause you to lose all or part of your investment in our common stock.

In addition, although the trading price of our common stock has increased significantly in recent years, it is uncertain to continue to increase at the same rate and it may decrease in the future.

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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.

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.

We may further increase or decrease the amount of repurchases of our common stock in the future.

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Insiders have substantial control over us, which could limit your ability to influence the outcome of key transactions, including a change of control.

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 17.9% of the outstanding shares of our

common stock, based on shares outstanding as of March 31, 2025.

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.

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In addition, a health epidemic could adversely affect the economies of many countries, resulting in an economic downturn that could affect demand for our products and likely impact our operating results.

In addition, acts of terrorism and war could cause disruptions in our business or the business of our manufacturers, logistics providers, partners or customers or the economy as a whole.

In addition, acts of terrorism and war could cause disruptions in our business or the business of our

manufacturers, logistics providers, partners or customers or the economy as a whole.

Given our typical concentration of sales at each quarter end, any disruption in the business of our manufacturers, logistics providers, partners or customers that affects sales at the end of our quarter could have a particularly significant adverse effect on our quarterly results.

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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 1A. Risk Factors