What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-02-17 compared with 2025-02-19 · 209 added, 272 removed, 676 unchanged (42% of the section changed)

31 unchanged sentences

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory Valuation and Contract Manufacturer/Supplier Liabilities

Inventory Valuation and Supplier Liabilities

Description of the Matter

As discussed in Note 1 of the consolidated financial statements, the Company’s inventories are stated at the lower of cost (computed using the first-in, first-out method) and net realizable value.

As discussed in Note 1 of the consolidated financial statements, the Company’s inventories are stated at the lower of cost or net realizable value.

Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis.

The Company’s inventory balance totaled $2.2 billion on December 31, 2025.

The Company records a provision when inventory is determined to be in excess of anticipated demand, or obsolete, to adjust inventory to its estimated realizable value.

The Company records a contract manufacturer/supplier liability and a corresponding charge for non-cancellable, non-returnable purchase commitments with contract manufacturers or suppliers for quantities in excess of the Company’s demand forecasts, or that are considered obsolete.

Auditing management’s assessment of net realizable value for inventory and contract manufacturer/supplier liabilities was complex and highly judgmental due to the assessment of management’s estimates of forecasted product demand, which can be impacted by changes in overall customer demand, changes in the timing of the introduction and customer adoption of new products, adjustments to manufacturing and engineering schedules, and overall general economic and market conditions.

The Company records a supplier liability and a corresponding charge for non-cancellable, non-returnable purchase commitments with suppliers for quantities in excess of the Company’s demand forecasts, or that are considered obsolete.

Auditing management’s assessment of net realizable value for inventory and supplier liability was complex and highly judgmental due to the assessment of management’s estimates of forecasted product demand, which can be impacted by changes in current and expected orders from customers, product development plans, and current sales levels.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s determination of the net realizable value of inventory and the contract manufacturer/supplier liability.

This included controls over the preparation of the demand and production forecasts, and the evaluation of the accuracy and completeness of the inventory provision and contract manufacturer/supplier liability.

To test the inventory provision and contract manufacturer/supplier liability, we performed audit procedures that included, among others, assessing the Company’s methodology over the computation of the provision and liability, testing the significant assumptions and the underlying inputs used by the Company in its analysis including historical sales trends, expectations regarding future sales, changes in the Company’s business, customer base and other relevant factors.

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s determination of the net realizable value of inventory and supplier liability.

This included controls over the preparation of the demand and production forecasts, and the evaluation of the accuracy and completeness of the inventory provision and supplier liability.

To test the inventory provision and supplier liability, we performed audit procedures that included, among others, assessing the Company’s methodology over the computation of the provision and supplier liability and testing the significant assumptions and underlying inputs used by the Company in its analysis, including current and expected orders from customers, product development plans and current sales levels.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2008.

San Mateo, California

San Jose, California

February 13, 2026

23 unchanged sentences

/s/ Ernst & Young LLP

San Mateo, California

San Jose, California

February 13, 2026

ARISTA NETWORKS, INC.

Consolidated Statements of Income

(In thousands, except per share amounts)

Year Ended December 31,

2024 2023 2022

Product $ 5,884,021 $ 5,029,493 $ 3,716,079

Service 1,119,125 830,675 665,231

Total revenue 7,003,146 5,860,168 4,381,310

Cost of revenue:

Product 2,299,063 2,061,167 1,573,629

Service 212,780 168,720 131,985

Total cost of revenue 2,511,843 2,229,887 1,705,614

Gross profit 4,491,303 3,630,281 2,675,696

Operating expenses:

Research and development 996,717 854,918 728,394

Sales and marketing 427,264 399,034 326,955

General and administrative 122,706 119,080 93,241

Total operating expenses 1,546,687 1,373,032 1,148,590

Income from operations 2,944,616 2,257,249 1,527,106

Other income, net 320,418 164,777 54,690

Income before income taxes 3,265,034 2,422,026 1,581,796

Provision for income taxes 412,980 334,705 229,350

Net income $ 2,852,054 $ 2,087,321 $ 1,352,446

Earnings per share (1):

Basic $ 2.27 $ 1.69 $ 1.10

Diluted $ 2.23 $ 1.65 $ 1.07

Weighted-average common shares outstanding (1) :

Basic 1,256,303 1,237,417 1,225,891

Diluted 1,281,077 1,268,538 1,265,835

(1) Prior period results have been adjusted to reflect the four -for-one stock split effected in December 2024.

See Note 1, Organization and Summary of Accounting Policies, for details.

The accompanying notes are an integral part of these consolidated financial statements.

ARISTA NETWORKS, INC.

Consolidated Balance Sheets

(In thousands, except par value)

(In millions, except par value)

CURRENT ASSETS:

6 unchanged sentences

Property and equipment, net 203.1 98.8

Goodwill and acquisition-related intangible assets, net 330,540 357,299

Goodwill 416.1 268.5

Deferred tax assets 1,773.6 1,440.4

17 unchanged sentences

Additional paid-in capital 2,911.8 2,465.4

2,465,409 2,108,237

Retained earnings 9,446.6 7,542.5

2 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 19,448.6 $ 14,043.9

(1) Prior period results have been adjusted to reflect the four -for-one stock split effected in December 2024.

See Note 1, Organization and Summary of Accounting Policies, for details.

The accompanying notes are an integral part of these consolidated financial statements.

ARISTA NETWORKS, INC.

Consolidated Statements of Income

(In millions, except per share amounts)

Year Ended December 31,

2025 2024 2023

Product $ 7,576.9 $ 5,884.0 $ 5,029.5

Service 1,428.8 1,119.1 830.7

Total revenue 9,005.7 7,003.1 5,860.2

Cost of revenue:

Product 2,978.7 2,299.0 2,061.2

Service 258.3 212.8 168.7

Total cost of revenue 3,237.0 2,511.8 2,229.9

Gross profit 5,768.7 4,491.3 3,630.3

Operating expenses:

Research and development 1,237.3 996.7 854.9

Sales and marketing 533.4 427.3 399.0

General and administrative 141.9 122.7 119.1

Total operating expenses 1,912.6 1,546.7 1,373.0

Income from operations 3,856.1 2,944.6 2,257.3

Other income, net 393.6 320.5 164.7

Income before income taxes 4,249.7 3,265.1 2,422.0

Provision for income taxes 738.3 413.0 334.7

Net income $ 3,511.4 $ 2,852.1 $ 2,087.3

Earnings per share :

Basic $ 2.79 $ 2.27 $ 1.69

Diluted $ 2.75 $ 2.23 $ 1.65

Weighted-average common shares outstanding:

Basic 1,258.0 1,256.3 1,237.4

Diluted 1,275.7 1,281.1 1,268.5

The accompanying notes are an integral part of these consolidated financial statements.

ARISTA NETWORKS, INC.

Consolidated Statements of Comprehensive Income

(In thousands)

(In millions)

Year Ended December 31,

11 unchanged sentences

Consolidated Statements of Stockholders’ Equity

(In thousands)

(In millions)

Common Stock Additional

1 unchanged sentence

Stockholders’

In Capital (1)

Earnings Comprehensive

Shares Amount In Capital Earnings Comprehensive

Income (Loss) Equity

1 unchanged sentence

Net income — — — 2,087.3 — 2,087.3

Other comprehensive loss, net of tax — — — — ( 25,608 ) ( 25,608 )

Other comprehensive income, net of tax — — — — 30.6 30.6

Stock-based compensation — — 296.8 — — 296.8

5 unchanged sentences

Net income — — — 2,852.1 — 2,852.1

Other comprehensive income, net of tax — — — — 30,580 30,580

Other comprehensive loss, net of tax — — — — ( 9.9 ) ( 9.9 )

Stock-based compensation — — 355.4 — — 355.4

2 unchanged sentences

Tax withholding paid for net share settlement of equity awards ( 0.8 ) — ( 58.4 ) — — ( 58.4 )

Common stock issued for business acquisition 128 — 2,331 — — 2,331

Balance—December 31, 2024 1,261.3 0.1 2,465.4 7,542.5 ( 13.2 ) 9,994.8

Net income — — — 3,511.4 — 3,511.4

Other comprehensive loss, net of tax — — — — ( 9,860 ) ( 9,860 )

Other comprehensive income, net of tax — — — — 25.2 25.2

Stock-based compensation — — 439.2 — — 439.2

4 unchanged sentences

_________________________________________

(1) Prior period results have been adjusted to reflect the four -for-one stock split effected in December 2024.

See Note 1, Organization and Summary of Accounting Policies, for details.

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

(In thousands)

(In millions)

Year Ended December 31,

6 unchanged sentences

Deferred income taxes ( 312.0 ) ( 492.9 ) ( 370.8 )

Amortization (accretion) of investment premiums (discount) ( 60,468 ) ( 33,518 ) 12,767

Other ( 27.1 ) ( 53.6 ) ( 34.0 )

14 unchanged sentences

Cash paid for business combination, net of cash acquired ( 300.0 ) — 1.8

Other Investing activities ( 6,628 ) ( 3,164 ) ( 12,691 )

Net cash provided by (used in) investing activities ( 2,457,354 ) ( 687,454 ) 216,327

Other 14.9 ( 6.6 ) ( 3.2 )

Net cash used in investing activities ( 3,576.2 ) ( 2,457.3 ) ( 687.5 )

CASH FLOWS FROM FINANCING ACTIVITIES:

4 unchanged sentences

Effect of exchange rate changes 1.7 ( 4.8 ) 0.8

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 824,304 1,263,486 50,928

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 798.5 ) 824.3 1,263.5

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —Beginning of period 2,763.8 1,939.5 676.0

24 unchanged sentences

We work closely with third-party contract manufacturers to manufacture our products.

As of December 31, 2024, we had four primary contract manufacturing partners, who provided the vast majority of our electronic manufacturing services.

As of December 31, 2025, we had three primary contract manufacturing partners, who provided the vast majority of our electronic manufacturing services.

Our contract manufacturing partners deliver our products to our third-party direct fulfillment facilities.

1 unchanged sentence

Our products rely on key components, including certain integrated circuit components and power supplies, some of which our contract manufacturing partners purchase on our behalf from a limited number of suppliers, including certain sole-source providers.

In addition, we rely heavily on a single merchant silicon supplier for our switching chips.

We generally do not have guaranteed supply contracts with our component suppliers, and our manufacturing partners could delay shipments or cease manufacturing such products or selling them to us at any time.

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We market and sell our products through both our direct sales force and our channel partners, including distributors, value-added resellers, system integrators and OEM partners, and in conjunction with various technology partners.

Significant customers are those that represent more than 10% of our total net revenue during the period or net accounts receivable balance at each respective balance sheet date.

As of December 31, 2024, we had two resellers who represented 26 % and 24 % of total accounts receivable.

As of December 31, 2023, we had two resellers who represented 28 % and 11 % of total accounts receivable.

Significant customers are those that represent more than 10% of our total revenue during the period.

There were two end customers who represented more than 10% of our total revenue for the years ended 2025, 2024 and 2023.

Sales to one end customer represented 15 %, 21 % and 26 % of our total revenue, and sales to the other end customer represented 20 %, 18 % and 16 % of our total revenue for the years ended 2024, 2023 and 2022, respectively.

Sales to one end customer represented 16 %, 15 % and 21 % of our total revenue, and sales to the other end customer represented 26 %, 20 % and 18 % of our total revenue for the years ended December 31, 2025, 2024 and 2023, respectively.

As of December 31, 2025, and 2024, our top two resellers accounted for 52 % and 50 % of total accounts receivable, respectively.

Cash and Cash Equivalents

42 unchanged sentences

Inventories primarily consist of finished goods, including evaluation inventory held at customers or partners, and strategic components, primarily integrated circuits.

Inventories are stated at the lower of cost (computed using the first-in, first-out method) and net realizable value.

Inventories are stated at the lower of cost or net realizable value.

Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis.

Evaluation inventory consists of new products and/or use cases at customer or partner sites for trial purposes.

4 unchanged sentences

Our contract manufacturers procure components and assemble products on our behalf and we procure strategic components from suppliers based on our forecasts.

We record a liability and a corresponding charge for non-cancellable, non-returnable purchase commitments with our contract manufacturers and suppliers for quantities in excess of our demand forecasts or that are considered obsolete due to manufacturing and engineering change orders resulting from design changes.

For the years ended December 31, 2023 and 2022, we recorded charges of $ 113.0 million and $ 43.7 million, respectively, within cost of product revenue for such liabilities with our contract manufacturers and suppliers.

For the year ended

December 31, 2024, we recorded a credit of $ 74.3 million within cost of product revenue related to such liabilities, which was driven by a reduction in the liability due to the receipt of excess components that were previously reserved.

We subsequently assessed the realizable value of such components upon inventory receipt.

For the year ended 2023, we recorded a charge of $ 113.0 million within cost of product revenue for such liabilities with our contract manufacturers and suppliers.

Such charges were not material for the years ended December 31, 2025 and 2024.

We use significant judgment in establishing our forecasts of future demand and obsolete material exposures.

These estimates depend on our assessment of current and expected orders from our customers, product development plans and current sales levels.

In addition, when industry-wide supply chain shortages resulted in extended lead times for components, we were required to extend the time horizon of our demand forecasts and increase our purchase commitments for long lead time components.

As customer lead times reduce more broadly, 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.

Although the global supply chain has shown improvement, we have had to invest in inventory to address forecast uncertainty and we expect that our inventory and purchase commitments will remain volatile as we ramp new product introductions.

Despite general improvements in the supply environment, fluctuations in supplier lead times and the persistence of some long-lead components require us to maintain elevated inventory levels and purchase commitments.

To manage this continued volatility, we maintain extended demand-planning horizons and strategic inventory buffers to ensure continuity of supply and address forecast uncertainty.

We expect inventory and purchase commitments to remain volatile due to new product introductions, fluctuating customer demand, and varying supplier lead times.

There is, however, no guarantee that all suppliers will meet their commitments in the time frame committed or that actual customer demand will directly match our demand forecasts.

6 unchanged sentences

Our leasehold improvements are depreciated over the shorter of the estimated useful lives of the improvements or the remaining lease term.

We lease office space, data centers, and equipment under non-cancellable operating leases with various expiration dates through 2031.

We determine if an arrangement contains a lease at inception.

Operating leases are recorded as right-of-use (“ROU”) assets and lease liabilities, and are included in other assets and other current and non-current liabilities in our consolidated balance sheets.

We do not have any finance leases in any of the periods presented.

ROU assets and lease liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term.

The interest rate implicit in our operating leases is not readily available, and therefore, an incremental borrowing rate is estimated based on a hypothetical interest rate on a collateralized basis with similar terms, payments, and economic environments.

ROU assets also include any prepaid lease payments and lease incentives.

Our operating lease agreements may contain rent concession, rent escalation, and option to renew provisions.

Lease expense is recognized on a straight-line basis over the lease term commencing on the date we have the right to use the leased property.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised.

In addition, certain of our operating lease agreements contain tenant improvement allowances from landlords.

These allowances are accounted for as lease incentives and decrease our right-of-use asset and reduce lease expense over the lease term.

Our lease agreements may contain lease and non-lease components, which are combined and accounted for as a single lease component.

We also have elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease liabilities are not recognized for leases with terms of 12 months or less.

Business Combinations

19 unchanged sentences

Acquisition, Goodwill and Acquisition-Related Intangible Assets for additional information.

Equity Investments in Privately-Held Companies

Our equity investments in privately-held companies without readily determinable fair values are measured using the measurement alternative, defined by ASC 321 - Investments-Equity Securities as cost, less impairments, and remeasured based on observable price changes from orderly transactions of identical or similar securities of the same issuer.

Any adjustments resulting from impairments and/or observable price changes are recorded within other income, net, in our consolidated statements of income.

This election is reassessed each reporting period to determine whether investments in privately-held companies have a readily determinable fair value, in which case they would no longer be eligible for this election.

The Company did not hold investments in privately-held companies whose fair value was readily determinable as of December 31, 2024 and 2023.

Impairment of Long-Lived Assets and Investments in Privately-Held Companies

1 unchanged sentence

Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate over its remaining life.

If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

If the asset is considered to be impaired, the amount of any impairment is measured as the difference between

the carrying value and the fair value of the impaired asset.

No impairment of any long-lived assets was identified for any of the periods presented in the consolidated financial statements.

21 unchanged sentences

PCS contracts generally have a term of one to three years .

We include billed but unearned PCS revenue in deferred revenue.

Contracts with Multiple Performance Obligations

7 unchanged sentences

We generally use a range of amounts to estimate SSP for individual products and services based on multiple factors including, but not limited to product category, actual and expected volume, discounting policies, and customer vertical and size.

We limit the amount of revenue recognition for contracts containing forms of variable consideration, such as future performance obligations, customer-specific returns, and acceptance or refund obligations.

In determining if control has transferred, we consider whether certain indicators of the transfer of control are present, such as the transfer of title, present right to payment, significant risks and rewards of ownership, and customer acceptance when

acceptance is not a formality.

Revenue from sales of hardware is recognized when control transfers to the customer, which is generally when the product is shipped.

We defer revenue recognition on customer contracts for new products or use cases, which contain customer-specified requirements that must be met prior to acceptance.

We limit the amount of revenue recognition for contracts containing forms of variable consideration, such as future performance obligations, customer-specific returns, and refund obligations.

We include some or all of an estimate of the related at-risk consideration in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recorded under each contract will not occur when the uncertainties surrounding the variable consideration are resolved.

4 unchanged sentences

We may occasionally accept returns to address customer satisfaction issues even though there is generally no contractual provision for such returns.

We estimate returns for sales to customers based on historical return rates applied against

current-period shipments.

We estimate returns for sales to customers based on historical return rates applied against current-period shipments.

Specific customer returns and allowances are considered when determining our sales return reserve estimate.

5 unchanged sentences

We include shipping charges billed to customers in revenue and the related shipping costs are included in cost of product revenue.

We account for customer sales rebates as a reduction to revenue and accrue for such rebates based on the amount that is earned and expected to be claimed by customers.

Contract Balances

3 unchanged sentences

Contract liabilities are included in other current liabilities and other long-term liabilities in the accompanying consolidated balance sheets

Deferred revenue is comprised mainly of unearned revenue related to product deferrals from contracts with acceptance clauses and, annual and multi-year PCS contracts.

Research and Development Expenses

Costs related to the research, design and development of our products are charged to research and development expenses as incurred.

Software development costs are capitalized beginning when a product’s technological feasibility has been established and ending when the product is available for general release to customers.

Generally, our products are released soon after technological feasibility has been established.

As a result, costs incurred subsequent to achieving technological feasibility have not been significant and accordingly, all software development costs have been expensed as incurred.

Segment Reporting

31 unchanged sentences

Recently Adopted Accounting Pronouncements

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

The ASU requires that an entity disclose significant segment expenses impacting profit and loss that are regularly provided to the chief operating decision maker.

The update is required to be applied retrospectively to prior periods presented, based on the significant segment expense categories identified and disclosed in the period of adoption.

The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2023.

Early adoption is permitted.

We have adopted ASU 2023-07 for the year ended December 31, 2024.

The adoption of this new standard did not have a material impact on our consolidated financial statements.

For more information regarding the adoption, see Note 9, Segment and Geographical Information for the inclusion of the new required disclosures.

Recent Accounting Pronouncements Not Yet Effective

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)-Improvements to Income Tax Disclosures.

1 unchanged sentence

Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid.

The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024.

Early adoption is permitted for annual financial statements that have not yet been issued.

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

not early adopted ASU 2023-09 for December 31, 2024.

We are currently evaluating the impact of future adoption on our financial disclosures.

In November 2024, the FASB issued ASU No.

2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40).

This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses.

The amendments in this ASU are required to be adopted

for fiscal years beginning after December 15, 2024.

We have adopted ASU 2023-09 for the year ended December 31, 2025 on a prospective basis.

See Note 8, Income Taxes for the inclusion of the new required disclosure.

Recent Accounting Pronouncements Not Yet Effective

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40).

The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions, and also requires disclosure of the total amount of selling expenses along with the definition of selling expenses.

The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

1 unchanged sentence

Early adoption is also permitted.

This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted.

This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.

We are currently evaluating the provisions of this ASU.

On December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) which is intended to streamline the guidance in ASC 270, Interim Reporting, and clarify when it applies.

Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP.

ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity.

ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, and early adoption is permitted.

We are currently evaluating the provisions of this ASU.

Fair Value Measurements

1 unchanged sentence

We measure and report our cash equivalents, restricted cash, and available-for-sale marketable securities at fair value on a recurring basis.

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):

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

December 31, 2025 December 31, 2024

4 unchanged sentences

Commercial paper — 29.8 — 29.8 — — — —

Corporate bonds — 6.6 — 6.6 — — — —

Agency securities — — — — — 3.0 — 3.0

3 unchanged sentences

Commercial paper — 83.0 — 83.0 — 48.8 — 48.8

Certificates of deposits (1)

— — — — — 5,000 — 5,000

government notes 2,854.3 — — 2,854.3 1,921.5 — — 1,921.5

Corporate bonds — 4,329.7 — 4,329.7 — 2,593.6 — 2,593.6

Municipal bonds — 14.5 14.5 — — — —

Agency securities — 1,497.6 — 1,497.6 — 977.2 — 977.2

3 unchanged sentences

Total Financial Assets $ 4,155.4 $ 5,961.2 $ — $ 10,116.6 $ 3,661.8 $ 3,622.6 $ — $ 7,284.4

______________________________________

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

During the year ended on December 31, 2025, 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):

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 millions):

December 31, 2025 December 31, 2024

3 unchanged sentences

Corporate bonds 4,321.2 16.0 ( 0.9 ) 4,336.3 2,595.7 4.4 ( 6.5 ) 2,593.6

Municipal bonds 14.5 — — 14.5 — — — —

Agency securities 1,495.5 2.7 ( 0.6 ) 1,497.6 981.0 1.6 ( 2.4 ) 980.2

3 unchanged sentences

The longer the duration of these marketable securities, the more susceptible they are to changes in market interest rates and bond yields.

Given the short-term and conservative nature of our portfolio, the unrealized losses are not subject to credit risk;

therefore, we did not recognize any credit losses or non-credit-related impairments related to our available-for-sale marketable debt securities for the years ended December 31, 2024, December 31, 2023 and December 31, 2022.

Given the short-term and conservative nature of our portfolio, our debt securities are exposed to minimal credit risk;

therefore, we did not recognize any credit losses or non-credit-related impairments related to our available-for-sale marketable debt securities for the years ended 2025, 2024 and 2023.

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

Realized losses were immaterial for the years ended December 31, 2024, December 31, 2023 and December 31, 2022.

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

Realized gains or losses were immaterial for the years ended 2025, 2024 and 2023.

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

December 31, 2025

1 unchanged sentence

Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

Commercial paper $ 9.9 $ — $ — $ — $ 9.9 $ —

government notes 260.8 $ — 15.0 — 275.8 —

Corporate bonds 857.7 ( 0.9 ) 29.9 — 887.6 ( 0.9 )

Municipal bonds 4.7 — — — 4.7 —

Agency securities 473.1 ( 0.6 ) — — 473.1 ( 0.6 )

1 unchanged sentence

As of December 31, 2025, we h ad no marketable debt securities with contractual maturities that exceed 36 months.

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

The fair values of marketable debt securities, by remaining contractual maturities, are as follows (i n millions):

December 31, 2025

3 unchanged sentences

The weighted-average remaining duration of our marketable debt securities is approximately 1.4 years as of December 31, 2025.

Assets measured at fair value on a non-recurring basis

Non-Marketable Equity Securities

We have non-marketable equity securities in privately-held companies that do not have readily-determinable fair values.

Their initial cost is adjusted to fair value on a non-recurring basis based on observable price changes from orderly transactions of identical or similar securities of the same issuer, or for impairment.

These investments are classified within Level III of the fair value hierarchy as we estimate the value based on valuation methods using the observable transaction price at the transaction date and other significant unobservable inputs, such as volatility, rights, and obligations related to these securities.

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

We did not record any realized gains for our non-marketable equity securities during the three years ended December 31, 2024, 2023 and 2022.

W e recorded immaterial amounts of unrealized gains, unrealized and realized losses during the three years ended December 31, 2024, 2023 and 2022.

The unrealized gains were recorded on investments that were re-measured to fair value as of the date observable transactions occurred.

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 may affect the value of the non-marketable equity securities.

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

December 31, 2024 December 31, 2023

Cost of investments $ 38,284 $ 31,656

Cumulative impairment and downward adjustments — —

Cumulative upward adjustments

43,032 30,632

Carrying amount of investments (included in other assets) $ 81,316 $ 62,288

Financial Statements Details

Inventories consist of the following (in thousands):

Inventories consist of the following (in millions):

Raw materials $ 611.2 $ 565.4

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Total inventories $ 2,247.1 $ 1,834.6

(1) The balance as of December 31, 2024 includes evaluation inventory held at customers or partners of $ 422.1 million.

Evaluation inventory as of December 31, 2023 was no t material.

(1) The balance includes evaluation inventory totaling $ 403.7 million and $ 422.1 million as of December 31, 2025 and December 31, 2024, respectively.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in millions):

Deferred cost of goods sold (1)

$ 1,197.0 $ 291.3

Other prepaid expenses and deposits 313.0 341.0

Total prepaid expenses and other current assets $ 1,510.0 $ 632.3

(1) The increase in 2025 was driven by a corresponding increase in deferred product revenue.

Property and Equipment, net

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

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

Land $ 47.3 $ 47.2

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Depreciation expense was $ 30.9 million, $ 34.0 million and $ 31.7 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

Accrued compensation-related costs $ 147,847 $ 134,225

Supplier liability 63,786 167,878

Accrued manufacturing costs 110,169 61,491

Other 113,475 43,708

Total accrued liabilities $ 435,277 $ 407,302

Contract Liabilities, Deferred Revenue and Other Performance Obligations

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A contract liability is recognized when we have received customer payments in advance of our satisfaction of a performance obligation under a cancellable contract.

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

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

Year Ended December 31,

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Revenue recognized from beginning balance ( 63.1 ) ( 58.3 )

Beginning balance reclassified to deferred revenue ( 3,772 ) ( 3,185 )

Contract liabilities recognized 152.4 85.9

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Deferred Revenue

Deferred revenue is comprised mainly of unearned service revenue related to annual and multi-year PCS contracts, and product deferrals related to contracts with acceptance clauses.

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

Deferred revenue is comprised mainly of unearned revenue related to product deferrals from contracts with acceptance clauses and, annual and multi-year PCS contracts.

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

Year Ended December 31,

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Other Income, Net

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

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

Year Ended December 31,

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Acquisition, Goodwill and Acquisition-Related Intangible Assets

Acquisitions and Goodwill

We had no material business acquisitions during the years ended December 31, 2024 and 2023.

There were no material changes to goodwill for the years ended December 31, 2024 and 2023.

The Company performed an annual qualitative test for goodwill impairment in the fourth quarter of fiscal years ended December 31, 2024 and 2023 and determined that goodwill was not impaired.

Acquisition and Goodwill

On June 30, 2025, we completed the acqu isition of the VeloCloud business ("VeloCloud") from Broadcom fo r total cash consideration of $ 300.0 million.

VeloCloud's secure, AI-optimized cloud WAN portfolio provides seamless connectivity to customer sites of any type, complementing Arista's leading data center and campus wired/wireless portfolio.

The preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date, included $ 268.4 million of intangible assets, $ 148.0 million of goodwill and $ 116.4 million of net tangible liabilities assumed as of June 30, 2025.

A portion of the goodwill is deductible for tax purposes.

The rest of the changes in the carrying value of goodwill for the year ended December 31, 2025 were not material.

Acquisition-Related Intangible Assets

The following table presents details of our acquisition-related intangible assets as of December 31, 2024 and 2023 (in thousands, except for years):

Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Useful Life (in years)

December 31, 2023 Additions December 31, 2024

December 31, 2023 Amortization December 31, 2024

Acquisition-related intangible assets, included in other assets, are subject to amortization on a straight-line basis over their estimated useful lives, as we believe this method most closely reflects the pattern in which the economic benefits of the assets will be consumed.

The following table presents details of our acquisition-related intangible assets as of December 31, 2025 and 2024 (in millions, except for years):

December 31, 2025 December 31, 2024

Weighted Average Remaining Useful Life (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Developed technology 4.0 $ 241.1 $ ( 139.0 ) $ 102.1 $ 154.9 $ ( 119.2 ) $ 35.7

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Amortization expense related to acquisition-related intangible assets was $ 41.6 million, $ 26.8 million and $ 33.4 million for the years ended December 31, 2025, 2024 and 2023, respectively.

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

As of December 31, 2025, future estimated amortization expense related to the acquired-related intangible assets is as follows (in millions):

Years Ending December 31, Future Amortization Expense

2025 $ 19,642

2029 and thereafter 116.1

Total $ 288.8

Commitments and Contingencies

Operating Leases

We lease various offices and data centers in North America, Europe, Asia and Australia under non-cancellable operating lease arrangements that expire on various dates through 2031.

Some of our leases include options to extend the term of such leases for a period from three months to up to 10 years and/or options to early terminate the leases.

As of December 31, 2024, we did not include any such options in determining the lease terms because we were not reasonably certain that we would exercise these options.

The following table summarizes the supplemental balance sheet information related to our operating leases (in thousands):

December 31, 2024 December 31, 2023

Right-of-use assets:

Operating lease right-of-use assets (included in other assets) $ 51,956 $ 55,890

Lease liabilities:

Operating lease liabilities, current (included in other current liabilities) 22,143 21,106

Operating lease liabilities, non-current (included in other long-term liabilities) 37,499 44,413

Total operating lease liabilities $ 59,642 $ 65,519

Maturities of operating lease liabilities as of December 31, 2024 are presented in the table below (in thousands):

Years ending December 31, Amount

2025 $ 24,704

2030 and thereafter 841

Total undiscounted operating lease payments (excluding non-lease components) 65,307

imputed interest ( 5,665 )

Present value of operating lease payments as of December 31, 2024 $ 59,642

Purchase Commitments

We outsource most of our manufacturing and supply chain management operations to third-party contract manufacturers, who procure components and assemble products on our behalf.

A significant portion of our purchase orders to our contract manufacturers for finished products consists of non-cancellable purchase commitments.

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.

A significant portion of our purchase orders for finished goods and strategic components, including integrated circuits consigned to contract manufacturers, consists of non-cancellable commitments.

Our purchase obligations also encompass software and technology licenses, property and equipment, and other corporate goods and services.

As of December 31, 2025, we had non-cancellable purchase commitments not recorded on our balance sheet of $ 6.8 billion, of wh ich $ 6.3 billion have confirmed receipt dates within 12 months, and $ 0.5 billion have confirmed receipt dates greater than 12 months .

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We also had deposits to our contract manufacturers to secure our purchase commitments in the amount of $ 53.0 million and $ 95.8 million as of December 31, 2025 and 2024, respectively, which were recorded within prepaid expenses and other current assets, as well as other assets in the consolidated balance sheets.

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

As of December 31, 2025, we had lease payment obligations, net of immaterial sublease income, of $ 90.5 million, with $ 22.1 million payable within 12 months.

Property project

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Legal Proceedings

WSOU Investments, LLC

On November 25, 2020, WSOU Investments LLC ("WSOU") filed a lawsuit against us in the Western District of Texas asserting that certain of our products infringe three WSOU patents.

WSOU's allegations are directed to certain features of our wireless and switching products.

WSOU seeks remedies including monetary damages, attorney's fees and costs.

On February 4, 2021, we filed an answer denying WSOU's allegations.

On November 5, 2021, the case was transferred to the Northern District of California.

On March 30, 2022, WSOU dismissed one of the patents with prejudice, removing Arista wireless products from those accused of infringement.

On July 1, 2022, the court stayed the case pending the resolution of an inter partes review of one of the patents-in-suit.

On May 30, 2023, the US Patent Trial and Appeal Board (“PTAB”) ruled all challenged claims in the inter partes review unpatentable.

The district court case remains stayed pending appeal and/or final resolution of the PTAB ruling.

We intend to vigorously defend against the claims brought against us by WSOU;

however, we cannot be certain that any of WSOU's claims will be resolved in our favor, regardless of the merits of those claims.

Any adverse litigation ruling could result in a significant damages award against us and injunctive relief.

With respect to the legal proceedings described above, it is our belief that while a loss is not probable, it may be reasonably possible.

Further, at this stage in the litigation, any possible loss or range of loss cannot be estimated;

however, the outcome of litigation is inherently uncertain.

Therefore, if this legal matter were resolved against us in a reporting period for a material amount, our consolidated financial statements for that reporting period could be materially adversely affected.

Other matters

In the ordinary course of business, we are a party to other claims and legal proceedings including matters relating to commercial, employee relations, business practices and intellectual property.

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Stock Repurchase Program

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 expires in May 2027.

In May 2025, we completed repurchases under the $ 1.2 billion Prior Repurchase Program and our board of directors authorized the $ 1.5 billion New Repurchase Program.

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 Repurchase Programs do 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 year ended December 31, 2024, we repurchased a total of $ 279.0 million of our common stock under our New Repurchase Program and $ 144.6 million of our common stock under our Prior Repurchase Program.

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 year ended December 31, 2025, we repurchased a total of $ 921.0 million of our common stock under our Prior Repurchase Program and $ 682.1 million of our common stock under our New Repurchase Program.

As of December 31, 2025, the remaining authorized amount for stock repurchases under the New Repurchase Program was approximately $ 817.9 million.

A summary of the stock repurchase activities for the years ended December 31, 2024 and 2023 is as follows, as adjusted to give effect to the Stock Split (in thousands, except per share amounts):

A summary of the stock repurchase activities for the years ended December 31, 2025 and 2024 is as follows (in millions, except per share amounts):

Year Ended December 31,

Aggregate purchase price (1)

$ 1,603.1 $ 423.6

Shares repurchased 15.9 5.5

Average price paid per share (1)

$ 100.63 $ 77.13

(1) Aggregate purchase price and average price paid per share for the year of 2025 include costs associated with the repurchases but exclude the 1% excise tax accrued on our share repurchases as a result of the Inflation Reduction Act of 2022.

The aggregate purchase price of repurchased shares of our common stock is recorded as a reduction to retained earnings in our consolidated statements of stockholders' equity.

All shares repurchased have been retired.

2014 Equity Incentive Plan

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

2014 Equity Plan ("Restated Plan"), effective April 17, 2024 ("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 ("Prior Plan") was extinguished, and the Restated Plan provides for a new share pool not to exceed (i) 52,800,000 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 40,158,628 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 December 31, 2024, there remained approximately 52.4 million shares available for grant under the Restated Plan, as adjusted to give effect to the Stock Split.

Equity Award Plan Activities

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 immediately preceding December 31, but not to exceed 40 million shares, unless the board of directors, in its discretion, determines to make a smaller increase.

Effective January 1, 2024, our board of directors authorized an increase of 12.5 million shares, as adjusted to give effect to the Stock Split, for future issuance under the ESPP.

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 as of the preceding December 31.

This annual increase is subject to a maximum of 40 million shares and may be reduced or waived at the discretion of the board of directors.

As of December 31, 2025, there remained 104.1 million shares available for issuance under the ESPP.

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Each offering period lasts approximately two years starting on the first trading date after February 15 and August 15 of each year, and includes purchase dates every six months on or after February 15 and August 15 of each year.

Participants may purchase shares

of common stock through payroll deductions up to 15 % of their eligible compensation, subject to Internal Revenue Service mandated purchase limits.

During the year ended December 31, 2024, we issued 1.12 million shares at an average purchase price of $ 29.08 per share under our ESPP, as adjusted to give effect to the Stock Split.

Participants may purchase shares of common stock through payroll deductions up to 15 % of their eligible compensation, subject to Internal Revenue Service mandated purchase limits.

During the year ended December 31, 2025, we issued 0.7 million shares at an average purchase price of $ 67.27 per share under our ESPP.

2014 Equity Incentive Plan

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

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 ("Prior Plan") was extinguished, and the Restated Plan provides for a new share pool not to exceed (i) 52.8 million 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 40.2 million Shares.

As of December 31, 2025, there remained approximately 45.0 million shares available for grant under the Restated Plan.

Stock Option Activities

The following table summarizes the option activities and related information, as adjusted to give effect to the Stock Split (in thousands, except years and per share amounts):

The following table summarizes the option activity under our stock plans and related information (in millions, except years and per share amounts):

Outstanding Options Weighted-

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The aggregate intrinsic value of options exercised during the years ended December 31, 2025, 2024 and 2023 was $ 211.0 million, $ 495.1 million and $ 525.3 million, respectively.

The total fair value of options vested for the years ended December 31, 2024, 2023 and 2022 was approximately $ 5.6 million, $ 8.7 million and $ 16.6 million, respectively.

The total fair value of options vested for the year ended December 31, 2025 was not material.

The total fair value of options vested for the years ended December 31, 2024 and 2023 was approximately $ 5.6 million and $ 8.7 million, respectively.

Restricted Stock Unit (RSU) Activities

The following table summarizes the RSU activities and related information, as adjusted to give effect to the Stock Split (in thousands, except per share amounts):

A summary of the RSU activity is presented below (in millions, except years and per share amounts):

Shares Weighted-

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Balance—December 31, 2024 28.6 $ 45.46

RSUs and PRSUs granted 10,142 72.61

RSUs and PRSUs vested ( 10,731 ) 23.75

RSUs and PRSUs forfeited/canceled ( 2,402 ) 36.11

RSUs granted 10.7 103.34

RSUs vested ( 8.6 ) 37.98

RSUs forfeited/canceled ( 2.6 ) 51.48

Unvested balance—December 31, 2025 28.1 $ 69.81

The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2024, 2023 and 2022 was $ 72.61 , $ 39.49 and $ 25.34 per share, respectively, as adjusted to give effect to the Stock Split.

The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2025, 2024 and 2023 was $ 103.34 , $ 72.61 and $ 39.49 per share, respectively.

The total fair value of RSUs vested for the years ended December 31, 2025, 2024 and 2023 was approximately $ 310.1 million, $ 251.8 million, and $ 225.5 million, respectively.

Stock-Based Compensation Expense

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

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

Year Ended December 31,

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Determination of Fair Value

We record stock-based compensation awards based on fair value as of the grant date.

We value RSUs at the market close price of our common stock on the grant date.

We record stock-based compensation on equity awards based on their fair value as of the grant date.

We value RSUs at the closing market price of our common stock on the grant date.

For option awards and ESPP offerings, we use the Black-Scholes option pricing model to determine fair value.

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Potential common shares whose effect would have been antidilutive are excluded from the computation of diluted net income per share.

The following table sets forth the computation of our basic and diluted net income per share attributable to common stockholders, as adjusted to give effect to the Stock Split (in thousands, except per share amounts):

Year Ended December 31,

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Add weighted-average effects of dilutive securities:

Stock options and RSUs 24,426 30,893 39,504

Employee stock purchase plan 348 228 440

Employee equity awards 17.7 24.8 31.1

Diluted weighted-average shares outstanding 1,275.7 1,281.1 1,268.5

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Diluted $ 2.75 $ 2.23 $ 1.65

The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net income per share attributable to common stockholders because their effects would have been anti-dilutive for the periods presented, as adjusted to give effect to the Stock Split (in thousands):

Year Ended December 31,

2025 2024 2023

Stock options and RSUs 242 579 1,209

Employee stock purchase plan 26 412 800

Total 268 991 2,009

The components of income before provision for income taxes are as follows (in thousands):

Employee equity awards 1.2 0.3 1.0

The components of income before provision for income taxes are as follows (in millions):

Year Ended December 31,

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Income before income taxes $ 4,249.7 $ 3,265.1 $ 2,422.0

The components of the provision for income taxes are as follows (in thousands):

The components of the provision for income taxes are as follows (in millions):

Year Ended December 31,

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Total provision for income taxes $ 738.3 $ 413.0 $ 334.7

The reconciliation of the statutory federal income tax rate and our effective income tax rate is as follows (in percentages):

We adopted ASU 2023-09 "Income Taxes (Topic 740):

Improvements to Income Tax Disclosures" on a prospective basis beginning with the year ended December 31, 2025.

The following table presents required disclosure pursuant to ASU

2023-09 and reconciles the U.S.

federal statutory income tax amount and rate to our total provision for income taxes amount and rate for the year ended December 31, 2025 (in millions except for percentages):

Year Ended December 31, 2025

2024 2023 2022

Amount Percent

federal statutory income tax rate $ 892.4 21.00 %

State tax, net of federal benefit 1

Foreign Tax Effects

Statutory tax rate difference between Ireland and US ( 45.4 ) ( 1.07 )

Other 12.6 0.30

Other jurisdictions ( 1.4 ) ( 0.03 )

Enactment of New Tax Laws 22.6 0.53

Effect of Cross Border Tax Laws

Net Controlled Foreign Corporation Tested Income ( 32.6 ) ( 0.77 )

Other 2.3 0.05

Research and Development Tax Credit ( 54.8 ) ( 1.29 )

Nontaxable or Nondeductible Items

Stock-Based Compensation ( 123.9 ) ( 2.91 )

Other 1.2 0.02

Changes in Unrecognized Tax Benefits ( 11.0 ) ( 0.26 )

Total Provision for Income Taxes $ 738.3 17.37 %

(1) State taxes in Georgia, Kentucky and Missouri for 2025 made up the majority (greater than 50 percent) of the tax effect in the state tax category.

The following table presents the required disclosures prior to our adoption of ASU 2023-09 and reconciles the U.S.

federal statutory income tax rate and our effective tax rate for the years ended December 31, 2024 and December 31, 2023 (in percentages):

Year Ended December 31,

federal statutory income tax rate 21.00 % 21.00 %

State tax, net of federal benefit 1.75 2.13

Taxes on foreign earnings differential ( 2.38 ) ( 1.96 )

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Stock-based compensation ( 4.96 ) ( 4.59 )

Acquisition and integration costs — 0.01 0.05

Other, net 0.03 ( 0.03 )

Effective tax rate 12.65 % 13.81 %

The change in our effective tax rate was due to a favorable change in state taxes and tax benefits attributable to stock-based compensation.

On July 4, 2025, the OBBB Act was signed into law in the U.S.

This legislation contains a broad range of tax reform provisions affecting businesses.

The full effects of the legislation on our annual effective tax rate and cash tax position are reflected in our twelve months ended December 31, 2025 period results.

Our provision for income taxes and effective tax rate increased for the year ended December 31, 2025, as compared to 2024.

The increase in our income taxes was primarily associated with a decrease in tax benefits attributable to equity-based compensation.

Excess tax benefits resulting from stock awards were $ 159.2 million, $ 212.3 million and $ 151.2 million for the years ended December 31, 2025, 2024 and 2023, respectively.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets (liabilities) are as follows (in thousands) :

The tax effects of temporary differences that give rise to significant portions of deferred tax assets (liabilities) are as follows (in millions) :

Deferred tax assets:

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Net deferred tax assets $ 1,773.6 $ 1,440.4

As of December 31, 2024 and 2023, $ 1.4 billion and $ 0.9 billion were recorded as deferred tax assets, non-current respectively.

We did not have any balance related to deferred tax liabilities as of December 31, 2024 and 2023.

The change in valuation allowance from December 31, 2024 to December 31, 2025 is substantially attributable to the uncertainty regarding the realizability of state deferred tax assets,

As of December 31, 2025, we had $ 210.1 million and $ 120.5 million of net operating loss carryforwards for federal and state income tax purposes, respectively, from acquisitions.

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federal income tax impact.

We have not provided for any remaining tax effect, if any, of limited outside basis differences of our foreign subsidiaries based upon plans of future reinvestment.

The determination of the future tax consequences of the remittance of these earnings is not practicable.

Income Taxes Paid

We have made tax payments and received refunds during the year ended December 31, 2025 as follows (in millions):

Year Ended December 31, 2025

Federal $ 808.0

Foreign subtotal:

Total cash paid for income taxes (net of refunds) $ 1,095.9

Uncertain Tax Positions

We recognize uncertain tax positions only to the extent that management believes that it is more likely than not that the position will be sustained.

The reconciliation of the beginning and ending amount of gross unrecognized tax benefits as of December 31, 2024, 2023 and 2022 is as follows (in thousands):

The reconciliation of the beginning and ending amount of gross unrecognized tax benefits as of December 31, 2025, 2024 and 2023 is as follows (in millions):

Year Ended December 31,

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Our foreign tax returns, where the statute of limitations have not yet lapsed, are open to audit in the respective foreign countries where the subsidiaries are located.

It is possible that the amount of existing gross unrecognized tax benefits may decrease within the next 12 months as a result of statute of limitation lapses or payments to tax authorities in certain jurisdictions.

However, any such changes are not anticipated to be material.

Segment and Geographical Information

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The CODM reviews the following significant segment expenses, which are presented separately on the Company’s consolidated statements of income:

cost of product, cost of services, selling and marketing expenses, general and administrative expenses, and research and development expenses.

cost of revenue and operating expenses.

Other segment items that are included in the calculation of the Company’s net income include other income (expense), net, which is further described in Note 3.

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Income Taxes.

Other segment disclosures such as depreciation and amortization and stock-based compensation are disclosure in the Consolidated Statements of Cash Flows.

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

Other segment disclosures such as depreciation and amortization and stock-based compensation are disclosed in the Consolidated Statements of Cash Flows.

The following table represents revenue based on customers' shipping addresses (in millions):

Year Ended December 31,

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for the three years ended December 31, 2025, 2024 and 2023 , respectively

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

United States $ 184.8 $ 83.5

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Total $ 203.1 $ 98.8

Post-Employment Benefits

We have a 401(k) Plan that covers substantially all of our employees in the U.S.

Effective January 1, 2017, we have elected to match 100 % of employees' contributions up to a maximum of 3 % of an employee's annual salary.

Matching contributions are immediately vested.

For the years ended December 31, 2024, 2023 and 2022, the amounts we contributed for the matching contributions were not material .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data