What changed in this filing

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Item 4. Controls and Procedures

2025-08-01 compared with 2025-05-02 · 51 added, 48 removed, 919 unchanged (10% of the section changed)

139 unchanged sentences

For example, as mentioned below in the risk factors “ If disruptions in our transportation network continue to occur or our shipping costs substantially increase again in the future, we may be unable to sell or timely deliver our products, and net revenue and our gross margin could decrease ” and “ We obtain several key components from limited or sole sources, and if these sources fail to satisfy our supply requirements or we are unable to properly manage our supply requirements with our third-party manufacturers, we may lose sales and experience increased component costs ”, we had previously experienced high freight costs and component costs and had issued price increases to our customers.

Our ability to maintain strong relationships with our principal customers is essential to our future performance.

Our ability to maintain strong relationships with

our principal customers is essential to our future performance.

If any of our major customers reduce their level of purchases or refuse to pay the prices that we set for our products, our net revenue and operating results could be harmed.

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As a result, we may be left with little choice but to accept such higher prices or other fees for key components in order to ensure continuity of supply.

This could affect our profitability or if we choose to push back against more onerous terms, could lead to inadequate supply, which could materially adversely affect our business.

could affect our profitability or if we choose to push back against more onerous terms, could lead to inadequate supply, which could materially adversely affect our business.

Our suppliers may also experience financial or other difficulties as a result of uncertain and weak worldwide economic, geopolitical conditions, trade disputes or public health issues.

Other factors which may affect our suppliers’ ability or willingness to supply components to us include internal management product allocation

decisions or reorganizational issues, such as roll-out of new equipment or disruptions to information infrastructure or power transmission or navigation miscalculations which may delay or disrupt supply of previously forecasted components, or industry consolidation and divestitures, which may result in changed business and product priorities among certain suppliers.

Other factors which may affect our suppliers’ ability or willingness to supply components to us include internal management product allocation decisions or reorganizational issues, such as roll-out of new equipment or disruptions to information infrastructure or power transmission or navigation miscalculations which may delay or disrupt supply of previously forecasted components, or industry consolidation and divestitures, which may result in changed business and product priorities among certain suppliers.

Also, many standardized components used broadly in electronic devices are manufactured in significant quantities in concentrated geographic regions, particularly in Greater China.

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Certain of our significant competitors also serve as key sales and marketing channels for our products, potentially giving these competitors a marketplace advantage based on their knowledge of our business activities and/or their ability to negatively influence our sales opportunities.

For example, Amazon

provides an important sales channel for our products, but it also competes with us in the mesh WiFi systems product category through its subsidiary Eero.

For example, Amazon provides an important sales channel for our products, but it also competes with us in the mesh WiFi systems product category through its subsidiary Eero.

In addition, certain competitors may have different business models, such as integrated manufacturing capabilities, that may allow them to achieve cost savings and to compete on the basis of price.

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Expanding our presence in the VAR channel may be difficult and expensive.

We compete with established companies that have longer operating histories and longstanding relationships with VARs that we would find highly desirable as sales channel partners.

We compete with established companies that have longer

operating histories and longstanding relationships with VARs that we would find highly desirable as sales channel partners.

In addition, our efforts to realign or consolidate our sales channels may cause temporary disruptions in our product sales and revenue, and these changes may not result in the expected longer-term benefits.

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Labor unrest in Southeast Asia, China or other locations where components and our products are manufactured may also affect our third-party manufacturers as workers may strike and cause production delays.

If our third-party manufacturers fail to maintain good relations with their employees or contractors, and production and manufacturing of our products is affected, then we may be

subject to shortages of products and quality of products delivered may be affected.

If our third-party manufacturers fail to maintain good relations with their employees or contractors, and production and manufacturing of our products is affected, then we may be subject to shortages of products and quality of products delivered may be affected.

Further, if our manufacturers or warehousing facilities are disrupted or destroyed, we would have no other readily available alternatives for manufacturing and assembling our products and our business would be significantly harmed.

4 unchanged sentences

International sales comprise a significant amount of our overall net revenue.

International sales were approximately 36% of overall net revenue in the first fiscal quarter of 2025 and 34% of overall net revenue in fiscal 2024.

International sales were approximately 34% of overall net revenue in the second fiscal quarter of 2025 and 34% of overall net revenue in fiscal 2024.

We continue to be committed to growing our international sales, and while we have committed resources to expanding our international operations and sales channels, these efforts may not be successful.

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In either event, we may lose some or all of the amounts we expended in trying to obtain business from the service provider, as well as lose the business opportunity altogether.

In addition, even if we have a product which a service provider customer may wish to purchase, we may choose not to supply products to the potential service provider customer if the contract requirements, such as service level requirements, penalties, and liability provisions, are too onerous.

In addition, even if we have a product which a service provider customer may wish to purchase, we may choose not to supply products to the potential service provider customer if

the contract requirements, such as service level requirements, penalties, and liability provisions, are too onerous.

Accordingly, our business may be harmed and our revenues may be reduced.

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In response, certain foreign governments have announced or implemented retaliatory tariffs and other protectionist measures.

These developments have

created a dynamic and unpredictable trade landscape.

While the tariffs as currently implemented do not have a material impact on our business, we expect that additional tariffs will be announced or implemented that could adversely impact our business.

These developments have created a dynamic and unpredictable trade landscape.

While the tariffs as currently implemented do not have a material impact on our business, specifics regarding the scope and application of recently announced tariffs have not yet been announced and we expect that additional tariffs will be announced or implemented that could adversely impact our business.

For example, we manufacture our products overseas in Thailand, Vietnam, Indonesia and Taiwan.

If additional tariffs are announced or implemented that apply to our products imported to the United States from those countries, our margins will be adversely affected beginning as early as fiscal 2025 depending on the ultimate scope and duration of tariffs imposed.

If additional tariffs are announced or otherwise implemented in a manner that apply to our products imported to the United States from those countries, our margins will be adversely affected beginning as early as fiscal 2025 depending on the ultimate scope and duration of tariffs imposed.

However, given the volatility and uncertainty regarding the scope and duration of such tariffs and other aspects of U.S.

20 unchanged sentences

When these occur, it has negatively impacted our profitability as we seek to transport an increased number of products from manufacturing locations in Asia to other markets around the world as quickly as possible.

Moreover, feeder vessels that move containers to key trans-Pacific terminal locations can be subject to similar impacts due to the timing of container transfers and vessel departure dates.

Moreover, feeder vessels that move containers to

key trans-Pacific terminal locations can be subject to similar impacts due to the timing of container transfers and vessel departure dates.

In addition, the global effects of climate change can result in increased frequency and severity of natural disasters that could also disrupt our transportation network.

59 unchanged sentences

We do not restrict the types of companies in which we seek to invest.

These companies may range from early-stage companies that are often still defining their strategic direction to more mature companies with established revenue streams and business models.

These companies may range from early-stage companies that are often still defining their strategic direction

to more mature companies with established revenue streams and business models.

If any company in which we invest fails, we could lose all or part of our investment in that company.

12 unchanged sentences

Moreover, if a competitor or potential competitor enters into an exclusive arrangement with any of our key third-party technology providers, or if any of these providers unilaterally decide not to do business with us for any reason, our ability to develop and sell products containing that technology would be severely limited.

If we are shipping products that contain third-party technology that we subsequently

lose the right to license, then we will not be able to continue to offer or support those products.

If we are shipping products that contain third-party technology that we subsequently lose the right to license, then we will not be able to continue to offer or support those products.

In addition, these licenses often require royalty payments or other consideration to the third-party licensor.

13 unchanged sentences

Product security vulnerabilities, system security risks, data protection breaches, cyber-attacks, improper use of artificial intelligence (“AI”) tools, and other threats and risks, could disrupt or otherwise compromise our products, services, internal operations or information technology systems, or those of third parties with whom we work.

Actual or perceived non-compliance with our privacy and security obligations could lead to regulatory investigations or actions, litigation, fines and penalties, business operation disruption, reputational harm, loss of revenue or profits, loss of customers or sales, and other adverse business consequences.

Actual or perceived non-compliance with our privacy and security obligations could lead to regulatory investigations or actions, litigation, fines and

penalties, business operation disruption, reputational harm, loss of revenue or profits, loss of customers or sales, and other adverse business consequences.

We and the third parties with whom we work process personal data and other sensitive information, and we disclose certain such sensitive information to relevant third parties as reasonably necessary to operate our business while maintaining measures designed to protect such information.

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Further, most of our major offices worldwide operate under a hybrid work model, allowing personnel the flexibility to work from home and at the workplace.

Work from home arrangements present additional cybersecurity risks, including potential increases in malware and phishing

attacks, greater challenges to secure home office data, and potential service degradation or disruption to key internal business applications and third-party services.

Work from home arrangements present additional cybersecurity risks, including potential increases in malware and phishing attacks, greater challenges to secure home office data, and potential service degradation or disruption to key internal business applications and third-party services.

Although we have taken measures to address these risks, they present challenges that could impact business operations and could cause recovery times to increase.

10 unchanged sentences

For example, customers may choose not to enable two-factor authentication for their NETGEAR account (which would likely increase the risk of compromise) or they could choose to disable automatic updates (which would likely delay or prevent entirely, important security updates).

In certain cases, where our customers choose not to implement or incorrectly implement those features or measures, misuse our products or services, or otherwise experience their own vulnerabilities or other compromises, even if we are not the cause of a resulting customer security issue or incident, our customer relationships, reputation and revenue could be adversely impacted.

our customer relationships, reputation and revenue could be adversely impacted.

If our products or services are compromised, a significant number or, in some instances, all of our customers and their data could be simultaneously affected.

13 unchanged sentences

In addition, U.S.

and foreign regulators have increased their focus on cybersecurity (including imposing specific security measures related to the products and services we sell) and data protection and many states, countries and jurisdictions have laws and regulations

that may impose significant penalties and fines for failure to comply with these requirements.

Compliance with laws, regulations, industry standards, contracts, policies and other obligations concerning artificial intelligence, privacy, cybersecurity, data governance and data protection is a rigorous and time-intensive process, that continuously evolves and develops, and we may be required to put in place additional mechanisms ensuring compliance with such obligations and incur substantial expenditures.

25 unchanged sentences

Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries.

These data localization and cross-border data transfer laws could lead to adverse consequences

such as interruption of our operations, increased exposure to regulatory actions, and difficulty transferring data to partners, vendors and other third parties with whom we work.

These data localization and cross-border data transfer laws could lead to adverse consequences such as interruption of our operations, increased exposure to regulatory actions, and difficulty transferring data to partners, vendors and other third parties with whom we work.

Preparing for and complying with our data privacy and security obligations requires us to devote significant resources which has in the past and may in the future necessitate changes to our products and services, information systems and practices.

20 unchanged sentences

Our competitors may incorporate AI technologies into their products and services more quickly or more successfully than us and could impair our ability to compete effectively and adversely affect our results of operations.

Further, the rapid evolution of AI may require the dedication of significant resources to develop, test and maintain AI technologies.

Further, the rapid evolution of AI may require the dedication of

significant resources to develop, test and maintain AI technologies.

If our incorporation of AI technologies does not increase our operational efficiency in accordance with our expectations, or if competition increases for the technology and services provided by third parties, our business, results of operations and financial condition may be harmed.

11 unchanged sentences

We continue to evolve our historically hardware-centric business model towards a model that includes more sophisticated software offerings, including subscription services and applications that complement our products and are intended to drive subscriber growth and future recurring revenue.

As such, we have evolved the focus of our organization towards the delivery

of more integrated hardware and software solutions for our customers, as well as related services, and we have and will continue to expend additional resources in this area in the future, including key new hires.

As such, we have evolved the focus of our organization towards the delivery of more integrated hardware and software solutions for our customers, as well as related services, and we have and will continue to expend additional resources in this area in the future, including key new hires.

Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations and insufficient revenue to offset expenses associated with this strategy.

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For example, one of our primary intellectual property assets is the NETGEAR name, trademark and logo.

We may be unable to stop third parties from adopting similar names, trademarks and logos, particularly in those international markets where our intellectual property rights may be less protected.

We may be unable to

stop third parties from adopting similar names, trademarks and logos, particularly in those international markets where our intellectual property rights may be less protected.

Furthermore, our competitors may independently develop similar technology or design around our intellectual property.

14 unchanged sentences

For example, in the past, various third parties have initiated litigation against us in Europe, China and the United States that carried the threat of an injunction on the importation of our products into certain European territories, the United States and China, as well as a significant increase in time and resources to defend against.

In addition, third parties,

some of whom are potential competitors, have initiated and may continue to initiate litigation against us, our manufacturers, suppliers, members of our sales channels or our service provider customers or even end user customers, alleging infringement of their proprietary rights with respect to existing or future products.

In addition, third parties, some of whom are potential competitors, have initiated and may continue to initiate litigation against us, our manufacturers, suppliers, members of our sales channels or our service provider customers or even end user customers, alleging infringement of their proprietary rights with respect to existing or future products.

In the event successful claims of infringement are brought by third parties, and we are unable to obtain licenses or independently develop alternative technology on a timely basis, we may be subject to indemnification obligations, be unable to offer competitive products, or be subject to increased expenses.

16 unchanged sentences

dollar could increase foreign currency denominated costs.

As a result, we may attempt to renegotiate pricing of existing contracts or request payment to be made in U.S.

As a result, we

may attempt to renegotiate pricing of existing contracts or request payment to be made in U.S.

We cannot be sure that our customers would agree to renegotiate along these lines.

26 unchanged sentences

More than 140 countries agreed to enact the Pillar II global minimum tax.

While the OECD issued a framework model, each country will enact its own laws to incorporate Pillar II.

While the OECD issued a framework model, many countries have enacted their own laws to incorporate Pillar II while certain countries, most notably the United States have not incorporated Pillar II into law.

While Pillar II is a global model, the country by country enactment of different laws to incorporate the framework is complex and there is uncertainty as to how the enactment of these laws will impact the Company.

2 unchanged sentences

Changes in tax laws could affect the distribution of our earnings, result in double taxation and adversely affect our results.

The Tax Cuts and Jobs Act of 2017 included provisions effective for the 2022 tax year that eliminate the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years for domestic payments and 15 years for payments to foreign parties.

These provisions have not been deferred, modified, or repealed by Congress as was previously anticipated might occur.

In years where we are profitable, these provisions have a material impact on our cash taxes which will continue in the future if these provisions are not modified, or repealed by Congress.

The Tax Cuts and Jobs Act of 2017 included provisions effective for the 2022 tax year that eliminate the option to deduct research and development (R&D) expenditures immediately in the year incurred and required taxpayers to amortize such

expenditures over five years for domestic payments and 15 years for payments to foreign parties.

These provisions were recently modified under The One Big Beautiful Bill Act (“OB3A”) which was enacted into law on July 4, 2025.

Under OB3A U.S.

domestic R&D expenses are retroactively deductible as of January 1, 2025.

Under prior law, in years where we are profitable, these provisions had a material impact on our cash taxes.

While changes to the treatment of domestic R&D expenses is favorable, there is continuing risk that foreign R&D expenses that are still required to be capitalized could have adverse consequences on both cash taxes and tax expense since the company has a full valuation allowance on its US deferred tax assets.

We have been audited by the Italy Tax Authority (“ITA”) for the 2004 through 2012 tax years.

8 unchanged sentences

While we regularly assess the likelihood of favorable or unfavorable outcomes resulting from examinations by the IRS and other tax authorities to determine the adequacy of our provision for income taxes, there can be no assurance that the actual outcome resulting from these examinations will not materially adversely affect our financial condition and operating results.

Additionally, the IRS and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangibles.

Tax authorities could disagree with our intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes.

12 unchanged sentences

Many of these laws and regulations are continuously evolving and developing, and the interpretations, application or impact of these laws and regulations on us are uncertain and could be interpreted in ways that harm our business.

For example, we manufacture and sell products which contain electronic components, and such components may contain materials that are subject to government regulation in both

the locations that we manufacture and assemble our products, as well as the locations where we sell our products.

For example, we manufacture and sell products which contain electronic components, and such components may contain materials that are subject to government regulation in both the locations that we manufacture and assemble our products, as well as the locations where we sell our products.

Certain regulations also limit the use of lead in electronic components.

7 unchanged sentences

If our products do not fully comply with RED requirements on a timely basis, including as a result of the directive being interpreted by authorities in unforeseen or unanticipated ways, our ability to sell our products in the Europe will be impacted, which may negatively impact our international revenue and our profitability.

If there is an unanticipated new regulation or new interpretations or applications of existing laws and regulations which significantly impacts our use of various components or requires more expensive components, that regulation would have a material adverse impact on our business, financial condition and results of operations.

If there is an unanticipated new regulation or new interpretations or applications of existing laws and regulations which significantly impacts our use of various

components or requires more expensive components, that regulation would have a material adverse impact on our business, financial condition and results of operations.

One area which has a large number of evolving and developing regulations is environmental compliance.

55 unchanged sentences

The United States and various foreign governments have imposed controls, export license requirements, and restrictions on the import or export of some technologies, particularly encryption technology.

In addition, from time to time, governmental agencies have proposed additional regulation of encryption

technology, such as requiring the escrow and governmental recovery of private encryption keys.

In addition, from time to time, governmental agencies have proposed additional regulation of encryption technology, such as requiring the escrow and governmental recovery of private encryption keys.

In response to terrorist activity, governments could enact additional regulation or restriction on the use, import, or export of encryption technology.

34 unchanged sentences

A severe and/or prolonged economic downturn could adversely affect our customers’ financial condition and the levels of business activity of our customers.

Weakness in, and uncertainty about, global

economic conditions may cause businesses to postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a material negative effect on the demand for networking products.

Weakness in, and uncertainty about, global economic conditions may cause businesses to postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a material negative effect on the demand for networking products.

Adverse changes in economic conditions, including inflation, slower growth or recession, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations could adversely impact the demand and sale of our products to end users and the quantity of products our customers decide to purchase from us (or change the mix of products demanded) and make it more challenging to forecast our operating results and make business decisions.

1 unchanged sentence

The uncertainty in global and regional economic conditions have also affected the financial markets and financial institutions on which we rely and have resulted in a number of adverse effects including a low level of liquidity in many financial markets, banking sector disruptions, extreme volatility in credit, equity, currency and fixed income markets, instability in the stock market, high inflation and high unemployment.

Macroeconomic weakness and uncertainty also make it more difficult for us to accurately forecast revenue, gross margin and expenses.

Macroeconomic weakness and uncertainty also make it more

difficult for us to accurately forecast revenue, gross margin and expenses.

If we are unable to successfully anticipate changing economic, geopolitical and financial conditions, we may be unable to effectively plan for and respond to those changes which could further disrupt our business or limit our ability to access certain assets and materially adversely affect our business and results of operations.

20 unchanged sentences

This could also lead to increased costs and decreased revenues.

In addition, health epidemics, war, terrorism, geopolitical uncertainties, social and economic instability, public health issues, sudden changes in trade and immigration policies (such as the higher tariffs on certain products imported from China, U.S.

sanctions against Russia as a result of the Russia-Ukraine dispute, the Israel-Hamas conflict, and Red Sea crisis), and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on us, our suppliers, logistics providers, manufacturing vendors and customers.

28 unchanged sentences

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 4. Controls and Procedures