What changed in this filing

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Item 1A. Risk Factors

2026-08-28 compared with 2026-05-28 · 52 added, 43 removed, 829 unchanged (10% of the section changed)

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• risks related to our dependence on a few customers for a significant portion of our revenue, particularly as our major customers comprise an increasing percentage of our revenue, as well as risks related to a significant portion of our sales being concentrated in the data center end market, and risks related to the gain or loss of design wins with our key customers;

• risks related to our dependence on a limited number of suppliers of critical materials, including components, within our supply chain, and potential inability to obtain sufficient advance node wafers from Taiwan Semiconductor Manufacturing Company Limited (“TSMC”) as well as to obtain other critical components from other suppliers, to meet customer demand and our forecasts;

• risks related to changes in general macroeconomic conditions such as economic slowdowns, inflation, stagflation, high or rising interest rates, financial institution instability, and recessions, as well as risks related to global economic conditions such as the current armed conflict in Israel and the Middle East;

• risks related to the extension of lead time due to supply chain disruptions, component shortages that impact the costs and production of our products, and constrained availability from other electronic suppliers impacting our customers’ ability to ship their products, which in turn may adversely impact our sales to those customers;

• risks related to tariffs and trade restrictions with China and other foreign nations including risks related to the ability of our customers, particularly in jurisdictions such as China that may be subject to trade restrictions (including the need to obtain export licenses) to develop their own solutions, vertically integrate which may reduce the need for our products, or acquire fully developed solutions from third parties;

• risks related to the potential impact of AI on our business model and products;

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• risks related to our ability to successfully integrate and to realize anticipated benefits or synergies, on a timely basis or at all, in connection with our past, current, or any future acquisitions, divestitures, significant investments or strategic transactions;

• risks related to the extension of lead time due to supply chain disruptions, component shortages that impact the costs and production of our products and kitting process, and constrained availability from other electronic suppliers impacting our customers’ ability to ship their products, which in turn may adversely impact our sales to those customers;

• risks related to our ability to execute on changes in strategy and realize the expected benefits from restructuring activities;

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In addition, as a result of the fact that the markets for data center and communication products are still evolving, demand for these products may be unpredictable and may vary significantly from one period to another.

For example, AI-related data center deployment may happen more slowly than our customers or the market anticipate if developers face labor shortages, supply chain bottlenecks, power and water procurement constraints, permitting delays, and heightened community opposition to proposed data center projects.

Public resistance to data center siting has intensified as the scale of AI-era facilities has grown, with concerns centered on strain to local energy grids and water supplies, increased consumer utility rates, persistent industrial noise, diminished air quality, loss of open space or rural character, and limited local employment relative to the resources consumed.

These concerns have led to organized opposition, rezoning denials, litigation, and legislative action at the state and local levels.

Because our data center business depends in part on the timing and scale of our customers' AI infrastructure deployments, any delay, reduction, or geographic limitation in data center buildout resulting from these factors could delay or reduce demand for our products and adversely affect our revenue growth and results of operations.

In addition, these markets may not develop as anticipated if AI training and inference costs drop dramatically due to customer adoption of less expensive alternative technologies.

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AI systems may make unforeseen or unintended discoveries that may disrupt our customers’ existing products, services, or business strategy and potentially render some of our customers current offerings and products obsolete which may have a material adverse effect on our revenue and profitability.

In July 2026, bipartisan AI oversight legislation was introduced, which could establish U.S.

government oversight over “cutting-edge AI models” in a manner that may encompass our products.

See also, “Our sales are concentrated in a few large customers.

If we lose or experience a significant reduction in sales to any of these key customers, if any of these key customers experience a significant decline in market share, or if any of these customers experience significant financial difficulties, our revenue may decrease substantially and our results of operations and financial condition may be harmed.” See also, “Adverse changes in the political, regulatory and economic policies of governments in connection with trade with China and Chinese customers have reduced the demand for our products and damaged our business” for additional risks related to export restrictions that may impact certain customers in the data center and communications markets.

If we lose or experience a significant reduction in sales to any of these key customers, if any of these key customers experience a significant decline in market share, or if any of these customers experience significant financial difficulties, our revenue may decrease substantially and our results of operations and financial condition may be harmed.” See also, “Adverse changes in the political, regulatory and economic policies of governments in connection with trade with China and Chinese customers may reduce the demand for our products and damage our business” for additional risks related to export restrictions that may impact certain customers in the data center and communications markets.

Our sales are concentrated in a few large customers.

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and its trading partners, especially China, and the decoupling of global economies could result in a global economic slowdown and long-term changes to global trade.

See also, “Adverse changes in the political, regulatory and economic policies of governments in connection with trade with China and Chinese customers have reduced the demand for our products and damaged our business” and “ Changes to U.S.

See also, “Adverse changes in the political, regulatory and economic policies of governments in connection with trade with China and Chinese customers may reduce the demand for our products and damage our business” and “ Changes to U.S.

or foreign tax, trade policy, government incentives, tariff and import/export regulations may have a material adverse effect on our business, financial condition and results of operations.

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Moreover, the semiconductor industry has experienced increased consolidation over the past several years.

For example, AMD acquired Xilinx, Inc.

in February 2022 and Pensando Systems in May 2022, Qualcomm acquired Veonner in April 2022, and Broadcom acquired VMware in November 2023.

For example, Broadcom acquired VMware in November 2023 and in August 2026 AMD announced its intent to acquire Taalas Inc.

Consolidation among our competitors has led, and in the future could lead, to a changing competitive landscape, capabilities and market share, which could put us at a competitive disadvantage and harm our results of operations.

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Regional Concentration

Most of our products are manufactured by third-party foundries located in Taiwan, and other sources are located in China, Germany, South Korea, Singapore and the United States.

In addition, most of our third-party assembly, testing and packaging facilities are located in China, Malaysia, Singapore, Taiwan and Canada.

Because of the geographic concentration of most of these third-party foundries, as well as most of our assembly, testing and packaging subcontractors, we are exposed to the risk that their operations may be disrupted by regional events including, for example, droughts, earthquakes (particularly in Taiwan and elsewhere in the Pacific Rim close to fault lines), tsunamis or typhoons, severe storms, power outages, or by actual or threatened public health emergencies such as the COVID-19 pandemic and future pandemics, or by political, social or economic instability, or by geopolitical tensions and conflicts.

For example, we were impacted by COVID outbreaks in Asia in the first half of fiscal 2023 that resulted in closed factories, clogged ports and a shortage of workers as officials imposed lockdowns and mass testing requirements.

Taiwan Semiconductor Manufacturing Company Limited ("TSMC") is currently our sole source foundry for all of our advanced process-node wafers.

In addition, most of our third-party assembly, testing and packaging facilities are located in Malaysia, Singapore, Taiwan and Canada.

Because of the geographic concentration of most of these third-party business partners, including our dependence on TSMC in Taiwan, as well as most of our assembly, testing and packaging subcontractors, we are exposed to the risk that their operations may be disrupted by regional events including, for example, droughts, earthquakes (particularly in Taiwan and elsewhere in the Pacific Rim close to fault lines), tsunamis or typhoons, severe storms, power outages, or by actual or threatened public health emergencies, or by political, social or economic instability, or by geopolitical tensions and conflicts.

In the case of such an event, our revenue, cost of goods sold and results of operations may be negatively impacted.

In addition, there are limited numbers of alternative foundries capable of producing advanced technologies and identifying and implementing alternative manufacturing facilities would be time consuming.

Although there is a movement in the U.S.

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If we need to utilize alternate manufacturing facilities, either in Taiwan or elsewhere, we could experience significant expenses and delays in product shipments, which could harm our results of operations.

No Guarantee of Capacity or Supply

Supply Constraints

The ability of each of our manufacturing partners to provide us with materials and services is limited by its available capacity and existing obligations.

When demand is strong, availability of our partners’ capacity may be constrained or not available, and with certain exceptions our vendors are not obligated to perform services or supply products to us for any specific period, in any specific quantities, or at any specific price, except as may be provided in a particular purchase order.

We place our orders on the basis of our customers’ purchase orders or our forecast of customer demand, and most of our manufacturing partners can allocate capacity to the production of other companies’ products and reduce deliveries to us on short notice.

It is possible that their customers that are larger and better financed than we are or that have long-term agreements with our main foundries may induce them to reallocate capacity to those customers.

Most of our manufacturing partners may reallocate capacity to their customers offering them a better margin or rate of return than provided by us.

This reallocation could impair our ability to secure the supply of components that we need.

Currently, the demand for our products is strong, and availability of our partners’ to provide sufficient capacity, including advanced process node wafers, to meet customer demand is constrained.

With certain exceptions our partners are not obligated to perform services or supply products to us for any specific period, in any specific quantities, or at any specific price, except as may be provided in a particular purchase order.

It is possible that our manufacturing partners will prioritize and allocate additional supply to their customers who are larger than we are or that have long-term agreements with our main foundries may induce them to reallocate capacity to them.

Moreover, if any of our third-party manufacturing partners or other suppliers are unable to secure the necessary raw materials from their suppliers, lose benefits under material agreements, experience power outages or labor shortages, or lack sufficient capacity to manufacture our products, encounter financial difficulties or suffer any other disruption or reduction in efficiency, we may encounter supply delays or disruptions, which could harm our business or results of operations.

There are a very limited number of foundries and consolidation of the foundries that provide services to us or to the semiconductor industry due to bankruptcy or through business combinations, including mergers, asset acquisitions and strategic partnerships may adversely impact us.

There are a very limited number of foundries and consolidation of the foundries that provide services to us may adversely impact us.

A foundry, supplier or other manufacturing partner could become unavailable to us if it is acquired by a competitor or a large company that may change the scope of the offerings.

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Any disruption to our manufacturing partners could result in a material decline in our revenue, net income and cash flow.

While we attempt to create multiple sources for our products, most of our products are not manufactured at more than one foundry at any given time, and our products typically are designed to be manufactured in a specific process at only one of these foundries.

Accordingly, if one of our foundries is unable to provide us with components as needed, it would be difficult for us to transition the manufacture of our products to other foundries, and we could experience significant delays in securing sufficient supplies of those components.

Most of our products are not manufactured at more than one foundry at any given time, and our products typically are designed to be manufactured in a specific process at only one of these foundries.

In particular, TSMC is currently the sole wafer supplier for our advanced node products, including our 3nm products.

Accordingly, if one of our foundries, including TSMC, is unable to provide us with components as needed, it would be difficult for us to transition the manufacture of our products to other foundries, and we could experience significant delays in securing sufficient supplies of those components.

Any disruption to our foundry partners could result in a material decline in our revenue, net income and cash flow.

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In order to secure sufficient capacity when demand is high and to mitigate the risks described in the foregoing paragraph, we have entered into, and in the future may enter into, various arrangements with certain manufacturing partners or other suppliers that could be costly and harm our results of operations, such as nonrefundable deposits with, or loans to, such parties in exchange for capacity commitments, or contracts that commit us to purchase specified quantities of components over extended periods.

In particular, we have entered into a capacity reservation agreement with TSMC pursuant to which we agreed to make substantial advance payments in exchange for wafer capacity over a multi-year period.

Under this arrangement, we are required to purchase specified target quantities of wafers during the term, and if we do not meet such target quantities, we may forfeit a proportional portion of our advance payments.

We may not be able to make such arrangements in the future in a timely fashion or at all, and any arrangements may be costly, reduce our financial flexibility, and not be on terms favorable to us.

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These penalties may be expensive and could harm our financial results.

We have in the past and may in the future, experienced a number of industry-wide supply constraints.

These supply challenges have in the past, and may in the future, limited our ability to fully satisfy demand for some of our products.

For example, there has and continues to be a tight supply environment for AI related components and manufacturing resources, such as advanced wafer fabrication, advanced packaging, and large body substrates which have in the past and may continue to result in increased lead times, inability to meet demand, and increased costs.

Because of the geographic concentration of some of our suppliers, we are exposed to the risk that their operations may be disrupted by regional events including droughts, earthquakes (particularly in Taiwan and elsewhere in the Pacific Rim close to fault lines), tsunamis or typhoons, severe storms, power outages, or by actual or threatened public health emergencies such as the COVID-19 pandemic, or by political, social or economic instability.

In addition, while the Russian invasion of Ukraine has not had a direct material impact on us due to our limited sales to Russia and Ukraine, we are unable to predict the indirect impact this conflict will have on us due to impacts on the supply chain, global and domestic economies, interest rates and stock markets.

Moreover, while the current armed conflict in Israel and the Middle East is not currently expected to have a material impact on us, we are unable to predict the full impact this conflict will have on us or our operations in Israel due to impacts on the supply chain, global and domestic economies, interest rates and stock markets.

We are currently in a supply constrained environment.

These supply challenges have limited our ability to fully satisfy demand for some of our products.

For example, there continues to be a tight supply environment for AI related components and manufacturing resources, such as advanced wafer fabrication, advanced packaging, and large body substrates which results in increased lead times, inability to meet demand, and increased costs.

Uncertain Yields and Quality

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These transitions are imperative for us to be competitive with the rest of the industry and to target some of our product development in high growth areas to these advanced nodes, which has resulted in significant initial design and development costs.

After the Synopsys-Ansys merger, three companies are expected to control approximately 75% of the global EDA market and this concentration in EDA tools that we rely on for chip design may raise the risk of reduced vendor choice and increased pricing to us in connection with our design workflows.

We have been, and may continue to be, dependent on our relationships with our manufacturing partners to transition to smaller geometry processes successfully.

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WE OPERATE GLOBALLY AND ARE SUBJECT TO SIGNIFICANT RISKS IN MANY JURISDICTIONS

Adverse changes in the political, regulatory and economic policies of governments in connection with trade with China and Chinese customers have reduced the demand for our products and damaged our business.

Adverse changes in the political, regulatory and economic policies of governments in connection with trade with China and Chinese customers may reduce the demand for our products and damage our business.

Regulatory activity, such as tariffs, export controls, economic sanctions, and related laws have in the past and may continue to materially limit our ability to make sales to customers in China, which has in the past and may continue to harm our results of operations, reputation and financial condition.

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The BIS announcement creates uncertainty about what products, technologies, or software might be covered by future rules.

Export restrictions reducing our sales of products to China, have in the past and may in the future adversely impact our revenues, profits and results of operations.

In 2025, U.S.

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The scope of the investigation includes semiconductors, semiconductor manufacturing equipment, and their derivative products including semiconductor substrates and bare wafers, legacy chips, leading-edge chips, microelectronics, and other components.

While the results of this investigation are currently unknown, the investigation may result in additional tariffs and trade restrictions, which may adversely impact our business.

BIS transmitted its report to the President on December 22, 2025, concluding that imports of these products threaten U.S.

national security given that the U.S.

currently fully manufactures only approximately 10 percent of the chips it requires.

While the Secretary’s report has not been publicly released, the investigation may result in additional tariffs and trade restrictions, which may adversely impact our business.

In addition, the U.S.

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economy or certain sectors thereof, our industry and the global demand for our products, and as a result, could have a material adverse effect on our business, financial condition and results of operations.

We benefit from agreements with governmental agencies that incentivize investment within the jurisdictions through refunds or other credits associated with the investments.

Receipt of benefits under incentive agreements may depend on several factors, including but not limited to, our ability to fulfill commitments regarding employment of personnel, investment, or performance of specified activities in the applicable jurisdictions as well as changes in foreign laws.

In addition, changes in our business plans, including divestitures, as well as changes to applicable laws, regulations, or government interpretations and audits could result in loss of benefits and termination of or renegotiation of an agreement.

If our incentive agreement were terminated or renegotiated, or if our ultimate benefits received is less than we have recognized, results of operations and our financial position could be harmed.

If our incentive agreement were terminated or renegotiated, or if our ultimate benefits received are less than we have recognized, results of operations and our financial position could be harmed.

We face additional risks due to the extent of our global operations since a majority of our products, and those of many of our customers, are manufactured and sold outside of the United States.

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In addition, many of our customers have operations located outside of the United States, primarily in Asia, which further exposes us to foreign risks.

Sales shipped to customers with operations in Asia represented approximately 83% and 74% of our net revenue in the three months ended May 2, 2026 and May 3, 2025, respectively.

Sales shipped to customers with operations in Asia represented approximately 84% and 76% of our net revenue in the three months ended August 1, 2026 and August 2, 2025, respectively.

We also have substantial operations outside of the United States.

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These information technology systems are subject to damage or interruption from several potential sources, including, but not limited to, natural disasters, destructive or inadequate code, malware, power failures, cyber-attacks, nation state advanced persistent threats, misconfigurations, third-party cloud or SaaS outages, vendor errors causing operational interruptions, insider threats or other events.

Cyber-attacks may include phishing or other forms of social engineering attacks, exploits of code or system configurations, malicious code, such as viruses and worms, ransomware attacks, zero day vulnerabilities and undisclosed security flaws exploited by threat actors, nation-state cyber attacks, supply chain and third-party cyber-attacks, denial-of-service attacks and other actions granting unauthorized access to our technology infrastructure or information systems or those of our customers, suppliers and manufacturing and other business partners.

Cyber-attacks may include phishing, smishing, vishing or other forms of social engineering attacks, exploits of code or system configurations, malicious code, such as viruses and worms, ransomware attacks, zero day vulnerabilities and undisclosed security flaws exploited by threat actors, nation-state cyber attacks, supply chain and third-party cyber-attacks, denial-of-service attacks and other actions granting unauthorized access to our technology infrastructure or information systems or those of our customers, suppliers and manufacturing and other business partners.

In addition, we have in the past and may in the future be the target of email phishing attacks that attempt to acquire personal information or Company assets.

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These attacks could be crafted with an AI tool to directly attack information systems with increased speed and/or efficiency compared to a human threat actor, accelerate reconnaissance and exploit development, or create more effective phishing emails.

AI-generated or manipulated audio, video or other content may also be used to impersonate our employees, executives, customers, suppliers or other business partners, facilitate fraud or obtain unauthorized access to our systems or information.

In addition, a vulnerability could be introduced from the result of our or our customers and business partners incorporating the output of an AI tool, such as AI generated source code or configurations, that are insecure or contain malicious artifacts.

Our use, or unauthorized or inappropriate use, of AI tools may also expose confidential, proprietary, personal or other sensitive information.

AI systems may be susceptible to prompt injection, data or model poisoning or other manipulation that could cause them to disclose information, produce malicious or inaccurate outputs, or take unintended or unauthorized actions.

The use of remote working arrangements at the Company and our business partners may present additional operational risks and attack vectors to our IT Systems.

We have implemented cybersecurity processes taking guidance from recognized cybersecurity frameworks to mitigate risks;

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Data breaches, losses or other unauthorized access to or releases of confidential information have in the past occurred with these third parties and material data breaches, losses or other unauthorized access to, or releases of, our confidential information may in the future occur in connection with third-party breaches that could materially adversely affect our reputation, financial condition and operating results and could result in liability or penalties under data privacy laws.

In addition, we may be subject to losses of access to all or part of our systems because of our use of third-party services or software, which losses may not always be the result of malicious activity, and we cannot guarantee that any such future outages will not materially impact the Company.

In addition, we may be subject to losses of access to all or part of our systems because of our use of third-party services or software, including third-party AI services which losses may not always be the result of malicious activity, and we cannot guarantee that any such future outages will not materially impact the Company.

To the extent that any system failure, accident or security breach results in material disruptions or interruptions to our operations, or those of our customers, suppliers and manufacturing and other business partners, or the theft, loss or disclosure of, or damage to our data or confidential information, including our intellectual property, our reputation, business, results of operations and/or financial condition could be materially adversely affected.

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Our indebtedness could adversely affect our financial condition and our ability to raise additional capital to fund our operations and limit our ability to react to changes in the economy or our industry.

As of May 2, 2026, we had a total of $5.0 billion debt outstanding, which consisted of senior notes outstanding (the “Notes”).

As of August 1, 2026, we had a total of $5.0 billion debt outstanding, which consisted of senior notes outstanding (the “Notes”).

In addition, we may borrow up to $1.5 billion under our Revolving Credit Facility (the “2025 Revolving Credit Facility” or the “2025 Credit Agreement”).

As of May 2, 2026, the 2025 Revolving Credit Facility was undrawn.

As of August 1, 2026, the 2025 Revolving Credit Facility was undrawn.

Our indebtedness could have important consequences to us including:

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tax provisions applicable to Global Intangible Low Taxed Income (“GILTI”) regime (which has been recharacterized as the Net Controlled Foreign Corporation (“CFC”) Tested Income regime, beginning in fiscal 2027).

Our tax provision for the May 2, 2026 period includes the estimated impact of the 2025 Tax Act.

Our tax provision for the August 1, 2026 period includes the estimated impact of the 2025 Tax Act.

Our estimates concerning the impact of this legislation remain subject to developing interpretations of the provisions of the 2025 Tax Act, which may require further adjustments and changes in our estimates, and could significantly affect our future financial results, including our earnings and cash flows.

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corporations after December 31, 2022.

As a result of the accelerated share repurchase agreement (“ASR Agreement”), the Company anticipates paying $14.3 million in additional federal taxes in fiscal 2026, recorded as a reduction to stockholders’ equity, due to the 1% excise tax on net share repurchases.

As a result of the accelerated share repurchase agreement (“ASR Agreement”), the Company paid $14.3 million in additional federal taxes related to fiscal 2026, recorded as a reduction to stockholders’ equity, due to the 1% excise tax on net share repurchases.

While we are not generally subject to significant taxes under the IRA, it is possible that in the future they could significantly affect our financial results, including our earnings and cash flows.

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We will continue to monitor countries’ laws with respect to the OECD model rules and the Pillar Two global minimum tax.

In certain jurisdictions, local legislative action is needed to effectuate “side by side system” and cannot be considered in our accounting estimate until enactment.

In certain jurisdictions, local legislative action is needed to effectuate the “side by side system” and cannot be considered in our accounting estimate until enactment.

The effects of any future legislation in this area are not yet reasonably estimable, but if such legislation is enacted in the future could have a significant effect on our provision for income taxes, our financial results, and our earnings and cash flows.

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We are exposed to potential impairment charges on certain assets.

We had approximately $13.9 billion of goodwill and $2.6 billion of acquired intangible assets on our unaudited condensed consolidated balance sheets as of May 2, 2026.

We had approximately $13.9 billion of goodwill and $2.3 billion of acquired intangible assets on our unaudited condensed consolidated balance sheets as of August 1, 2026.

Under generally accepted accounting principles in the United States, we are required to review our intangible assets including goodwill for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable.

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We recognized $711.8 million of restructuring related charges during fiscal 2025.

See “Note 8 – Restructuring” in the Notes to Unaudited Condensed Consolidated Financial Statements for further information.

We have determined that our business operates as a single operating segment and has a single reporting unit for the purpose of goodwill impairment testing.

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A reduction in, a delay of, or elimination of our dividend payments or stock repurchases could have a negative effect on our stock price.

As of May 2, 2026, there was $5.3 billion remaining available for future stock repurchases under the prior authorization.

As of August 1, 2026, there was $5.1 billion remaining available for future stock repurchases under the prior authorization.

Our indemnification obligations and limitations of our director and officer liability insurance may have a material adverse effect on our financial condition, results of operations and cash flows.

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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