Risk factor changes · CSCO
What changed in Cisco's risk factors
Item 1A (Risk Factors) of Cisco's FY2026 10-K compared with its FY2025 10-K, sentence by sentence.
67new sentences
197reworded
64removed
110unchanged
New in the latest 10-K 67
- Consequently, our results of operations are not a reliable indicator of future results.
- Economic conditions specific to one or more segments or customer markets may also affect our results of operations in those segments.
- Our quarterly revenue is difficult to predict, which can be exacerbated during challenging global macroenvironments and resulting market uncertainty.
- Nonlinear shipping patterns have occurred when shipments have exceeded net bookings or manufacturing or other issues have delayed shipments, making it difficult to predict revenue for a particular period.
- Furthermore, nonlinear or irregular shipping patterns can increase costs, due to resulting periods of underutilized capacity, overtime expenses, and potential additional inventory management-related costs.
- Because we plan our operating expenses primarily based on forecasted revenue levels and these costs and the impact of long term commitments are relatively fixed in the short term, a revenue shortfall from short term business changes or otherwise, may prevent us from adjusting these fixed expenses quickly enough to meet financial expectations.
- Financial problems of either contract manufacturers or component suppliers, reservation of manufacturing capacity at our contract manufacturers by other companies, and industry consolidation occurring within one or more component supplier markets, such as the semiconductor market, in each case, could either limit supply or increase costs.
- A reduction or interruption in supply, including disruptions on our global supply chain, caused in part by geopolitical tensions; public health emergencies; significant natural disasters (including as a result of climate change); tariffs or other trade barriers or disruptions; a significant increase in the price of components (including as a result of inflation); a failure to adequately authorize procurement of inventory by our contract manufacturers; a failure by suppliers to deliver on our contracts;
- IT-related failure or disruption; a failure to appropriately cancel, reschedule, or adjust our requirements based on our business needs; or a decrease in demand for our products could materially harm our business, results of operations, or financial condition and could materially damage customer relationships.
- Manufacturing capacity and supply constraints, such as the memory shortages experienced in fiscal 2026, remain significant risks, and we expect to continue to be adversely impacted by the rising costs of currently constrained memory components.
- We have also increased inventory deposits and prepayments with certain contract manufacturers and suppliers in connection with these arrangements.
- Product demand conditions for future periods can be difficult to predict, particularly in rapidly evolving sectors such as AI infrastructure.
- Sales to the service provider and cloud market are often characterized by large and sporadic purchases.
- Our sales of AI infrastructure solutions to cloud and hyperscaler customers may similarly involve large and concentrated purchases, and demand may depend on a limited number of customers' capital spending levels, the timing and scale of AI infrastructure deployments, technology and network architecture decisions, and decisions regarding whether to purchase solutions from us or other vendors or develop certain technologies internally.
- These customers may delay, reduce or cancel planned deployments or purchases for a variety of reasons, including, among others, as a result of budgetary constraints, funding limitations or concerns and changes in anticipated demand for AI infrastructure, available capacity, technology requirements, competitive offerings or investment priorities.
- As our business with large cloud and hyperscaler customers grows, changes in the timing or size of purchases by a limited number of customers could have a greater impact on our revenue, gross margins and results of operations from period to period.
- Changes in expectations regarding future demand for AI infrastructure or other network capacity could similarly result in reductions, delays or changes in customer investment plans.
- A number of service providers are also systems integrators.
- We compete with numerous vendors across our product categories, and the number, identity, and composition of our competitors, including those providing niche product solutions, may change as we expand into newer products, technologies, and key priority areas.
- Similar dynamics apply in the markets supporting AI and cloud infrastructure, where customers select among competing network architectures before they select individual products.
- To the extent customers adopt architectures that are not designed to include the type of products and solutions we provide, our opportunities may be limited even if our products are superior.
- The competitors in these markets include semiconductor companies, systems providers, cloud providers and other technology companies in addition to traditional networking vendors.
- Providers of cloud-based services also compete with us directly in certain of our product categories.
- To remain competitive, we may be required to reduce prices, increase discounts or offer more favorable terms, and we may need to increase research and development and sales and marketing spending in response to competitive pressures, any of which could reduce our revenue and gross margins.
- If we do not compete successfully in the markets in which we participate, we could lose market share.
- Certain of our largest customers, including hyperscalers, have the technical and financial resources to design their own networking equipment, semiconductors and software, or to purchase directly from contract manufacturers, rather than purchase these technologies from us.
- Agentic AI systems, which operate with autonomous decision-making capabilities and access to multiple tools and data sources, may also introduce unique risks such as unauthorized actions, privilege escalation, and potential exploitation by malicious actors.
- Because of increased complexity and autonomy, the use of agentic AI increases the difficulty of monitoring and controlling AI behavior, potentially resulting in unintended actions that could cause legal, regulatory, or reputational harm.
- Changes in industry structure and market conditions could lead to charges related to discontinuances of certain of our products or businesses, asset impairments and workforce reductions or restructurings.
- For example, we initiated a restructuring plan in the fourth quarter of fiscal 2026, for which we expect such plan to be substantially completed by the end of fiscal 2027.
- Prior acquisitions have produced mixed results, ranging from successful new products and technologies to failures to achieve expected benefits.
- We may not be able to provide products, services, support, or financing necessary to effectively compete for these markets.
- Expansion into other markets also subjects us to additional operational, legal, regulatory, and market risks, including adverse economic conditions and reduced customer spending.
- In addition, expanding our direct selling capabilities globally to meet changing customer demands subjects us to additional legal and regulatory requirements.
- If we are unable to manage these risks effectively, our business, results of operations, or financial condition could be harmed.
- We may not realize the expected benefits from these strategic alliances or joint ventures, and if successful, these relationships may also increase competition in certain business areas.
- Strategic alliances and joint ventures involve risks because we may compete with a company in some business areas while cooperating with that same company in others.
- For additional information and a further discussion of impacts and risks related to cybersecurity matters, see the risk factors under the Item 1A.
- Risk Factors Risk Related to Cybersecurity, Privacy, and Regulatory Requirements heading.
- Most of our sales are on an open credit basis, and, in addition to varying payment terms globally, we provide financing and facilitation of leasing arrangements for our products, services, and related installation costs.
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- Furthermore, if credit market turmoil restricts our customers ability to obtain financing, their ability to pay could be impaired, adversely affecting our business, results of operations, or financial condition.
- If the market value of these investments declines, as has occurred in the past, we may be required to recognize impairment charges or other losses in our results of operations for the period.
- As a result, we could lose all or part of our investments in these companies.
- We have received such claims in the past and may receive additional claims in the future. 20 Table of Contents Adverse resolution of claims, litigation or governmental investigations may harm our results of operations or financial condition.
- Claims, litigation or governmental investigations can be costly, time-consuming, and disruptive to our business operations, and their outcomes are inherently difficult to predict.
- In addition, management s assessment of these matters may change over time.
- Our products are subject to efforts by third parties to manufacture and sell counterfeit versions.
- We work diligently with law enforcement authorities in various countries to prevent the manufacture and sale of counterfeit products, detect counterfeit products in customer networks, and pursue enforcement actions against counterfeiters and their distributors.
- Although these efforts have resulted in fines, imprisonment and restitution, there can be no guarantee that such efforts will succeed and, in certain cases, they may not be successful.
- Counterfeiters often target customers who may not otherwise purchase our products due to the lack of verified origin or service support associated with counterfeit products.
- To the extent counterfeit sales displace legitimate sales, our results of operations and reputation could be negatively impacted.
- Significant judgment is used in determining our provision for income taxes and evaluating tax positions.
- If we do not meet the requirements for these reduced rates, our provision for income taxes could be adversely affected.
- Our business and operations are especially subject to the risks of earthquakes, floods, and other natural catastrophic events (including as a result of global climate change).
- Certain of our customers, suppliers, and logistics centers are located in areas that have experienced or may experience earthquakes, tsunamis, flooding, wildfires, storms, drought, sea-level rise, changing precipitation patterns, or other weather-related events.
- These events have disrupted, or could in the future disrupt, the supply of components, the manufacture and delivery of products, and other business operations.
- Global climate change may increase the frequency or severity of certain natural disasters and related disruptions.
- We also may not obtain patents from pending applications, and any issued patent claims may not be sufficiently broad to protect our technology.
- Such claims have increased over time due to our growth, developments in patent policy and practice, including at the United States Patent and Trademark Office, and increased intellectual property litigation activity, particularly in the United States.
- Furthermore, because intellectual property litigation may involve significant and unpredictable damages or injunctive relief, claims may be settled for substantial amounts, even when arguably unmeritorious.
- Additionally, if we are found to infringe the intellectual property rights of others, are required to indemnify customers, are unable to develop non-infringing technologies, or cannot obtain necessary licenses on commercially reasonable terms, our business, results of operations, or financial condition could be materially harmed.
- Furthermore, the rapid emergence, widespread dissemination, and maturation of AI capabilities have led to increases in the speed, scale, and effectiveness of cyber attacks or other attempts to gain unauthorized access.
- Such increases are expected to continue, further reducing the time to identify and mitigate threats.
- Rapidly accelerating advances in AI technology are enabling threat actors, or autonomous systems, to identify and exploit vulnerabilities across both software and hardware with little or no delay between discovery and exploitation, including so-called zero-minute vulnerabilities, increasing the likelihood and speed of successful cyber attacks.
- These advances also show AI technology can rapidly chain otherwise low-severity, unrelated vulnerabilities into more severe combined exploits, complicating prioritization of security updates.
- As a result of these advances in AI technology, the time available to detect, assess and remediate vulnerabilities before exploitation has been significantly reduced or eliminated, increasing the risk of unauthorized access to, or compromise of, solutions we sell to customers, the third-party products and components that we integrate into our solutions and use in our operations, and the cloud-based services operated or enabled by us or by third parties upon which we rely.
- Further, any failure by us to timely implement, or by our customers to timely adopt, post-quantum cryptography in our solutions or IT systems as it becomes available could render existing cryptographic protections ineffective upon the emergence of viable quantum computing, exposing pre-quantum encrypted data and systems to compromise.
Reworded 197
Removed words are struck through; added words are highlighted.
- Risks Related to our Business and Industry Our operations can be difficult to predict because our
operatingresults of operations may fluctuate in future periods. - Our
operatingresults of operations have been in the past, and will continue to be, subject to quarterly and annual fluctuations as a result of numerous factors, some of which may contribute to more pronounced fluctuations in an uncertain global economic environment. - These factors include:
FluctuationsinCustomer patterns, such as fluctuating demand for our products and services, especially with respect to service providers andInternetbusinesses,inpartduetochangesincloud customers; theglobaleconomicenvironmentChangestiming, size, and mix of orders from customers; and changes in sales and implementation cycles for our products and reduced visibility into our customers spending plans and associated revenue Our ability to maintain appropriate inventory levels and purchase commitments and manage manufacturing and customer lead times Price and product competition in the communications and networking industries, which can change rapidly due to technological innovation and different business models from various geographic regionsTheoverallmovementtowardindustryIndustry trends such as consolidation amongbothour competitors and ourcustomersThecustomers, and the introduction and market acceptance of newtechnologiestechnologies, products andproducts,technology standards, and our success in these new and evolvingmarkets,markets andinwith emerging technologies, includingAI,aswellastheadoptionofnewstandardsAI Variations in sales channels, product costs,mixofproductssold,or mix ofdirectsalesandindirectsalesThetiming,size,products sold (e.g., hardware and software sales, including mix ofordersfromcustomersManufacturingcloud-based andcustomerleadtimeson-premise software sales) Fluctuations in our gross margins, and the factors that contribute to such fluctuations The ability of our direct sale customers, channel partners, contract manufacturers and suppliers to obtainfinancingorfinancing, to fund capital expenditures,especiallyintheeventofdirectsalecustomers,channelpartner,contractmanufacturerorsupplierwithstand financial problems Actual events, circumstances, outcomes, and amounts differing from judgments, assumptions, and estimates used in determining the values of certain assets (including the amounts of related valuation allowances), liabilities, and other items reflected in our Consolidated Financial Statements How well we execute on our strategy and operating plans and the impact of changes in our business model that could result in significant restructuring charges Our ability to achieve targeted cost reductionsBenefitsand anticipated benefits from our investments Changes in tax laws or accounting rules, or interpretations thereofAsaconsequence,operatingresultsforaparticularfutureperiodaredifficulttopredict,and,therefore,priorresultsarenotnecessarilyindicativeAny ofresultstobeexpectedthese factors, or others discussed infutureperiods.this report, could materially harm our business, results of operations, or financial condition. AnyOur restructuring activities, including any related charges and the impact of theforegoingfactors,oranyotherfactorsdiscussedelsewhereherein,related headcount restructurings, could materially harm our business, results of operations,andor financial condition.- Our
operatingresults of operations may be negatively impacted by unfavorable economic and market conditions and the uncertain geopolitical environment. - Challenging global economic conditions, including tariffs or other trade
barriers,barriers or disruptions, rising inflation, or other changes, havefromtimetotimecontributed, and may continue to contribute, to slowdowns in thecommunicationsandnetworkingindustriesatlarge,aswellasinspecificsegmentsandmarkets in which we operate, resulting in: reduced demand for our productsasaresultofcontinuedconstraintsondue to constrained IT-relatedcapitalspending byourcustomers, particularly serviceproviderandcloudaswellasprovider, cloud, enterprise and other customer markets; increased price competition for our products, not only from our competitors but also as a consequence of customers disposing of unutilized products; risk of excess and obsolete inventories; risk of supply constraints; risk of excess facilities and manufacturing capacity; and higher overhead costs as a percentage of revenue and higher interest expense. Forexample,Furthermore, the impact of uncertainty regarding global central bank monetary policy, the instability in the geopolitical environment in many parts of the world (including as a11TableofContentsresult of theon-goingongoing Russia and Ukraine war, Middle East conflicts and wars, and China-Taiwan relations), government-related disruptions or shutdowns, and other disruptions may continue to put pressure on global economic conditions.- If global economic and market conditions were to deteriorate, we may experience material harm to our business,
operatingresults,andresults of operations, or financial condition. 11 Table of Contents Our revenue for a particular period is difficult to predict, and a shortfall in revenue may harm our results of operations. OurrevenueAs in prior periods, we maygrowatexperience a decline or slower revenue growth ratethaninpastperiods,ordeclineasitdidincertainpriorperiodson a year-over-year basis.- Our ability to meet financial expectations could also be negatively impacted if
thenonlinear salespatternor shipping patterns seen insomeofourpastprior quartersrecursoccur again in future periods. - In addition,
totheextentthatmanufacturingissuesandanyrelatedcomponentshortagesresultindelayed shipmentsinthefuture,andarising from manufacturing, component shortages, or any other issues, particularly in periods in which our contract manufacturers are operating at higher levels of capacity,itispossiblethatcould negatively impact revenue for a quartercouldbenegativelyimpactedif such matters occur and are not remediated within the same quarter. - The timing of large orders can also have a significant impact on our business and
operatingresults of operations from quarter to quarter. - From time to time, we receive large orders that have a significant effect on our
operatingresults of operations in the period in which the order is recognized as revenue. - As a result, our
operatingresults of operations could vary materially from quarter to quarter based on the receipt of such orders and their ultimate recognition as revenue. LongerAdditionally, longer than normal manufacturing lead times in the past have caused, and in the future could cause, some customers to placethesameorasimilarordermultipletimesorders within our various sales channels and to cancel the duplicative orders upon shipment or receipt of the product, or to also place orders with other vendors with shorter manufacturing lead times.- Further, our efforts to improve manufacturing lead-time performance may result in more variability and less predictability in our revenue and
operatingresults.results of operations. - In addition, when
facingmanaging component supply-related challenges, we have in thepastpast, and may in thefuturefuture, increaseourefforts in procuring componentsinorderto meet customer expectations, which in turn contributes to an increase in inventory and purchase commitments. - These
increasesinourinventoryandpurchasecommitmentstoshortenleadtimescouldalsoleadtosupply chain exposures include potential material excess and obsoleteinventorychargesinventory, losses on purchase commitments or othernegativeimpactstoourproductgrossmargininfutureperiodscharges if product demand significantly decreases or is delayed for a sustained duration, we are unable to generate demand for certain products planned for development, customer requirements or technology architectures change or we are otherwise unable tocontinuetomitigatetheremainingthese supply chain exposures. - For additional information and a further discussion of impacts and risks related to our inventory commitments and our purchase commitments with contract manufacturers and suppliers, see Results of Operations Product Gross Margin Supply Chain Impacts and Risks , Liquidity and Capital Resources Inventory Supply Chain
underItem7and Note1413 to the Consolidated FinancialStatementsofthisreport.Statements. - Supply chain issues, including financial problems of contract manufacturers or component suppliers, or a shortage of adequate component supply or manufacturing capacity that increase our costs or cause a delay in our ability to fulfill orders, could have an adverse impact on our business and
operatingresults,results of operations, and our failure to estimate customer demand properly or significant purchase commitments made in anticipation of such demand may result in excess or obsolete componentsupply,supply or other charges, which could negatively impact our gross margins. - The fact that we do not own or operate the bulk of our manufacturing facilities and that we are reliant on our extended supply chain could have an adverse impact on the supply of our products and on our business and
operatingresults.results of operations. - Furthermore, as a result of binding price or purchase commitments with suppliers, we may be obligated to purchase components at prices that are higher than those available in the current
market.market or in quantities that exceed our actual requirements if customer demand is lower than anticipated, delayed or shifts to different products or technologies. IntheeventthatIf webecomeare committed to purchase components at prices in excess of the current market price when the components are actually used, or in quantities in excess of our needs, our gross margins coulddecrease.decrease and we could incur excess or obsolete inventory, losses on purchase commitments or other charges.- In addition, vendors may
beunderpressuretoallocateproducttocertainprioritize other customers for business,regulatoryregulatory, or politicalreasons,and/orreasons or demandchangesinagreedpricingprice adjustments as a condition of supply. - Although we have generally secured additional supply or taken other mitigation actions when significant disruptions have occurred, if similar situations occur in the future, they could materially harm our business, results of
operations,andoperations or financial condition. - Our growth and ability to meet customer demands depend in part on our ability to obtain timely component deliveries
ofpartsfrom our suppliers and contract manufacturers. - We have experienced past component
shortagesinthepast,shortages, includingshortagesthose caused by 12 Table of Contents manufacturing process issues, that have affected our operations, includinglongerthannormalextended lead times. - Additionally, we may in the future experience a shortage of certain component parts as a result of our own manufacturing issues, manufacturing issues
atoursuppliersorcontractmanufacturers,capacity problemsexperiencedbyat our suppliers or contractmanufacturersmanufacturers, includingcapacityorcost problems resulting from industryconsolidation,consolidation or otherwise, or strong demand for those parts. - Growth in the economy is likely to create greater pressures on us and our suppliers to accurately project component demand and
toestablishoptimaloptimize component levels and manufacturing capacity, especially for labor-intensive components, components for which we purchase a substantial portion of the supply, or the re-ramping of manufacturing capacity for highly complex products. - During periods of shortages or delays, including delays
thepriceofcomponentsresulting from us not accurately forecasting our needs, component prices may increase, orthecomponents may not be available atall,andwemayalsoencountershortagesifwedonotaccuratelyanticipateourneeds.all. WeFor these or other reasons, we may not be able to secure enough components at reasonable prices or of acceptable quality to build new products in a timely manner in the quantities or configurations needed.- Although in many cases we use standard parts and components for our products, certain components are presently available only from
asinglesourceorlimited or single sources, and a global economic downturn and related market uncertainty could negatively impact the availability of components from one or more of these sources, especially during times when there are supplier constraints based on labor and other actions taken during economic downturns. - We believe
thatwemaybefacedwiththefollowingfuture supply chain challenges may include: rapid growth inthefuture:new markets in which weparticipatemaygrowquickly,participate, which may make it difficult to quickly obtain significant component capacity;asweacquirecompaniesandnewtechnologies,wemaybedependentdependency on unfamiliar supply chains or relatively small supplypartners;partners for the companies and new technologies wefaceacquire; and competition for certain components that are supply-constrained from existing competitors and companies in other markets. Whenfacingcomponentsupply-relatedchallenges,In recent periods, we have increased our efforts in procuring componentsinorderto meet customer expectations,suchas we have historically doneinpastperiodsdue to supply constraints, whichinturncontributeshas contributed to an increase in inventory and purchase commitments.InFor example, in fiscal2025,2025 and 2026, we entered into additional purchase commitments with contract manufacturers and suppliers related to manufacturing Cisco SiliconOneOne, memory components and other products to meet expected demand fromwebscalehyperscalers and other customers.- We expect to continue entering into these additional purchase commitments in fiscal
2026.2027. - These past efforts and additional purchase commitments and prepayments significantly increased our supply chain exposure, which resulted in negative impacts to our product gross margin in recent periods and may result in further negative impacts in future periods.
Productdemandconditionsforfutureperiodscanbedifficulttopredictormaypersistlongerthananticipated.13TableofContentsWe expect gross margin to vary over time, and our level of product gross margin may not be sustainable.Althoughourproductgrossmarginincreasedinfiscal2025,ourOur level of product gross margins has declined in certain priorperiods,periods and could decline in future periods due to adverse impacts from various factors, including: Changes in customer, geographic, or product mix, including the mix of hardware and softwareIntroductionofnewproducts,includingproductswithprice-performanceadvantages,andnewbusinessmodels(includingcontinuingtoincreasesales (and theusemix ofbusinessmodelswhererevenueisrecognizedovermultipleperiods)OurabilitytoreduceproductioncostsEntryintonewmarketsorgrowthinlowermarginmarkets,includingmarketswithdifferentpricingcloud-based andcoststructures,throughacquisitionsorinternaldevelopmentSalesdiscountson-premise software sales) Increases in material, labor or other manufacturing-related costs(i.e.(i.e., component costs, broker fees, expedited freight and overtime) or higher supply chain logistics costs, any of which could be significant, especially during periods of supply constraints for certain costs, such as those that we haveimpactedseen impact the market forcomponents,components in prior periods, including semiconductors and memory (as we saw inpastperiods,fiscal 2026 and expect to continue seeing), and which costs have in the past and may continue to be exacerbated by inflation 13 Table of Contents Introduction of new products, including products with price-performance advantages, and new business models (including continuing to increase the use of business models where revenue is recognized over multiple periods) Entry into new markets or growth in lower margin markets, including markets with different pricing and cost structures, through acquisitions or internal development Sales discounts, changes in distribution channels, or changes in shipment volume Excess inventory, inventory holding charges, and obsolescence chargesChangesinshipmentvolumeThe timing of revenue recognition and revenue deferrals or increased amortization of purchased intangible assets, especially from acquisitions Increased costs (including royalty or royalty costs and those caused by tariffs or economic conditions, including inflation), loss of cost savings or dilution of savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand or if the financial health of either contract manufacturers or suppliers deteriorates Lower than expected benefits from value engineering and our ability to reduce production costs Increased price competition, including competitors from Asia, especially from ChinaChangesindistributionchannelsIncreasedwarrantyorroyaltycostsIncreasedamortizationofpurchasedintangibleassets,especiallyfromacquisitionsHow well we execute on our strategy and operating plans Changes in service gross margin may result from various factors such as changes in the mix between technical support services andadvancedprofessional services, as well as the timing of technical support service contract initiations and renewals, the addition of personnel and other related costs, and other resources to support higher levels of service business in future periods.- Sales to the service provider and cloud
marketmarket, including sales of AI infrastructure solutions to large cloud and hyperscaler customers, are especiallyvolatile,volatile and may be concentrated among a limited number of customers, and weakness in orders from this industry may harm ouroperatingresultsandof operations or financial condition.
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- Although service provider and cloud product orders increased
duringfiscal2025,serviceproviderandcloudmarketproductordersdecreasedinfiscal2024,andatvarioustimesrecent quarters, in the past we have experienced significant weakness in product orders from the service provider and cloud market. ProductThese ordersfromtheserviceproviderandcloudmarketcould decline in the future and, as has been the case in the past, such weakness could persist over extended periodsoftimegiven fluctuating market conditions.- Products in the service provider and cloud market could also face a high degree of customer concentration, with bespoke product designs and features that would be difficult to sell to alternate customers should the primary customer reduce its product
orderswithCisco.orders. - Sales activity in this industry depends upon the stage of completion of expanding network infrastructures; the availability of funding; the expected returns from investments in AI and other infrastructure; customer decisions regarding network architecture, silicon, optics and other technologies; and the extent to which service provider and cloud customers are affected by regulatory, economic, and business conditions in the country of operations.
- Weakness in orders from this industry, including as a result of any slowdown in capital expenditures by service providers (which may be more prevalent during a global economic downturn, or periods of economic, political or regulatory uncertainty), could materially harm our business,
operatingresults,andresults of operations, or financial condition. - For example, in the past, many of our service provider and cloud customers have been negatively impacted
byby: slowdowns in the generaleconomy,byovercapacity,byeconomy; overcapacity; changes in the service provider and cloudmarket,bymarket; regulatorydevelopments,developments; andbyconstraints on capital availability, resulting in business failures and substantial reductions in spending and expansion plans. - These conditions have negatively impacted our business and
operatingresults of operations in the past, and could materially harm our business andoperating14TableofContentsresults of operations in any future period. - Finally, service provider and cloud customers typically have longer implementation cycles; require a broader range of services, including design services; demand that vendors take on a larger share of risks; may require customized products or significant commitments of supply or capacity; often require acceptance provisions, which can lead to a delay in revenue 14 Table of Contents recognition; and expect financing from vendors.
- All these factors can add further risk to business conducted with service
providers.providers and cloud customers. - Systems integrators also typically integrate our products into an overall
solution,andanumberofserviceprovidersarealsosystemsintegrators.solution. - There can be no assurance that future changes in the balance of our distribution model
infutureperiodswould not have an adverse effect on our gross margins and profitability. - Some factors could result in disruption of or changes in our distribution model, which could harm our sales and margins, including the following: competition with some of our channel partners, including through our direct sales, which may lead these channel partners to use other suppliers that do not
directlyselltheirownproductsdirectly orotherwisecompete with them; some of our channel partners may demand that we absorb a greater share of the risks that their customers may ask them to bear; some of our channel partners may have insufficient financial resourcesandmaynotbeableto withstand changes and challenges in business conditions; and revenue from indirect sales could suffer if our distributors financial condition or operations weaken. - To the extent that they fail to do so, that could materially harm our business,
operatingresults,andresults of operations, or financial condition. - The markets in which we compete are characterized by rapid change, converging technologies, and a migration to networking and communications solutions that offer relative
advantages.advantages, all of which are factors that pose competitive threats. - For example, as products related to network programmability, such as
softwaredefinedsoftware-defined networking (SDN) products, have become more prevalent, we have faced increased competition from companies that develop networking products based on commoditized hardware, referred to as white boxhardware,totheextentcustomersdecidetopurchasethoseproductofferingsinsteadofours.hardware. - Some
ofourcompetitors compete across many of our product lines, while othersareprimarilyfocusedfocus in a specific product area. - As we expand into new markets, we will face competition not only from our
existingcurrent competitors but also from other competitors, includingexistingestablished companies with strong technological, marketing, and sales positions in those markets. - We also
sometimesface competition from resellers and distributors of our products. - Companies with which we have strategic alliances in some areas may be competitors in other areas, and this trend may
increase.increase and we may have to cooperate and at the same time compete with companies. - Also, some of our current and potential competitors
forenterprisedatacenterbusinesshave made acquisitions, or announcednewstrategic alliances, designed to position them to 15 Table of Contents provide end-to-end technologysolutionsfortheenterprisedatacenter.solutions. - As a result of
allofthese developments, we face greater15TableofContentscompetition in the development and sale of enterprise data center technologies, including competition from entities that are among our long-term strategic alliance partners. AnyThe inherent nature of networking requires interoperability and any inability to effectively manage these complicated relationships with customers, suppliers, and strategic alliance partners could materially harm our business,operatingresults,andresults of operations, or financial condition and accordingly affect our chances of success.- We must manage inventory relating to sales
toof our distributors effectively,becauseas inventory held by them could affect our results of operations. OurdistributorsDistributors may increase orders during periods of product shortages, cancel orders if their inventory is too high, or delay orders in anticipation of new products.- They also may adjust their orders in response to the supply of our products and
thecompeting productsofourcompetitorsthat are available to them,andinresponsetoas well as seasonal fluctuations in end-user demand. - Our distributors
aregenerallygivenhave business terms that allow them to return a portion of inventory, receive credits for changes in selling price, and participate invariouscooperative marketing programs. - Inventory management remains an area of focus as we balance the need to maintain strategic inventory levels to ensure competitive lead times against the risk of inventory obsolescence
becauseofresulting from rapidly changingtechnologytechnologies and customer requirements. - If we ultimately determine that we have excess inventory, we may
havetoreduce our prices and write down inventory, whichinturncould result in lower gross margins. - We
currentlyincorporate AI technology in certain of our commercial offerings and in our business operations. - Leveraging AI
capabilitiesto potentially improve our internal functions and operations also presents risks, costs, and challenges. - The AI-related legal and regulatory landscape is complex and constantly evolving and therefore remains uncertain and may be inconsistent from jurisdiction to jurisdiction.
- Our obligations to comply with
thethis complex and evolving legal and regulatory landscape could entail significant compliance or other costs or limit our ability to incorporate certain AI capabilities into our offerings. - AI-related issues, deficiencies and/or failures could also give rise to legal and/or regulatory action (including with respect to proposed legislation regulating AI in jurisdictions such as the European Union and others, and as a result of new and different applications of existing and new data protection, privacy, cybersecurity, intellectual property, and other
laws);laws and regulations); damage our reputation; or otherwise materially harm our business. - This shift in our business model was accelerated by
recentacquisitions, including our acquisition ofSplunkinthethirdquarteroffiscal2024.Splunk. - To generate sales 16 Table of Contents growth for our software subscription offerings, we need to convince potential customers to purchase new licenses or subscriptions and generate timely renewals and additional purchases from existing customers.
- Any failure to do so could result in decreased revenue, reduced sales, increased churn or otherwise negatively impact our results of operations
andor financial condition. - We have experienced, and may in the future experience, interruptions in service, storage failures, and other performance-related problems due to a variety of factors, such as infrastructure and software
16TableofContentschanges, human or software errors, capacity constraints, unauthorized access, denial of service or other cyberattacks.attacks, and our exposure to these risks is growing as increasingly powerful AI capabilities emerge and are widely disseminated among threat actors. - Performance-related issues
ofwith our software subscription offerings may result in increased operational costs, delays in new feature rollouts, customer loss, reputational damage, and legal or regulatory liability, including liability under customer contracts or for losses suffered by our customers. - We also make significant investments to increase or maintain capacity and to develop and implement new technologies in our infrastructure and operations, including those provided by third-party providers on which we rely.
- To the extent that costs associated with software subscription offerings were to significantly increase or we do not effectively scale our operations to meet the needs of our customers
andor to maintain performance as our customers expand their use of our solutions, we may not be able to grow this business as quickly as we anticipate, our customers may reduce or cancel use of our solutions, andwemaybeunabletocompeteaseffectivelyandourbusinessandresults of operations may be harmed. WeAdditionally, we are also subject to the risk of performance-related problems or interruption of the services provided by third-party providers on which we rely, which could cause revenuesforsoftwaresubscriptionofferingsto decline, damage to our reputation, legal liability exposure, and/or increased expenses, all of which could negatively impact our business, results of operations,andor financial condition.- We depend upon the development of new products and services, and enhancements to existing products and services, and if we fail to predict and respond to emerging technological trends and customers changing needs, our
operatingresults of operations and market share may suffer. - Our
operatingresults of operations depend on our ability to develop and introduce new products and services into existing and emerging markets andtoreducetheproduction costs of existing products. TheprocessofdevelopingDeveloping newtechnology,technologies, including more programmable, flexible and virtual networks, and technology related to other market transitions such as AI, security, observability, and cloud is complex and uncertain, and if we fail toaccuratelypredictdeliver on our customers changingneedsneeds, including our hyperscaler and other customers performance, cost and power efficiency requirements, or accurately predict emergingtechnologicaltechnology trends our business could be harmed.- We
mustcommit significant resources, includingtheinvestmentswehavebeenmakinginourstrategic priorities such as silicon (Cisco Silicon One) and optics, including for AI infrastructure, todevelopingdevelop new products and services before knowing whether our investments will result in products and services the market will accept. - In addition, our business could be negatively impacted
inperiodssurroundingournewproductintroductionsif customers delay purchasing decisions to qualify or otherwise evaluatetheour new product offerings. AsWe seek to offer our products and solutions in the manner in which customers wish to consume them and as a part of these efforts, we continue to make changes tohowweareorganizedour organizational structure and how we build and deliver our technology, including changes in our business models with customers.- If our strategy for addressing
ourevolving customer needs, or the architectures and solutions we develop do not meet those needs, or the changes we are making inhowweareorganizedour organizational structure and how we build and deliverorour technology is incorrect or ineffective, our business could be harmed. - Furthermore, we may not execute successfully on our
visionorstrategy because of challenges with regard to product planning and timing, technical hurdles that we fail to overcome in a timely fashion, including keeping pace with evolving semiconductor and optical design and manufacturing technologies, or a lack of appropriate resources. - This could result in competitors, some of which may also be our strategic alliance partners, providing those solutions before we do and
lossofdecreased market share, revenue, and earnings. ThereAdditionally, there can be no assurance that we will successfully identify new product and services opportunities, 17 Table of Contents develop and bring new products and services to market in a timely manner, or achieve market acceptance of our products and services or that products, services and technologies developed by others will not render our products, services or technologies obsolete or noncompetitive.- The products and technologies in our other product categories and key priority areas may not prove to have the market success we anticipate, and we may not successfully identify and invest in other emerging or new products and services.
17TableofContentsChangesinindustrystructureandmarketconditionscouldleadtochargesrelatedtodiscontinuancesofcertainofourproductsorbusinesses,assetimpairmentsandworkforcereductionsorrestructurings. - Over the long term we intend to invest in engineering, sales, service and marketing activities, and in key priority areas, and these investments may achieve delayed, or lower than expected, benefits which could harm our
operatingresults.results of operations. - If we do not achieve the benefits anticipated from these investments (including if our selection of areas for investment does not play out as we expect), or if the achievement of these benefits is delayed, our
operatingresults of operations may be negatively impacted. - We have made and expect to continue to make acquisitions that could disrupt our operations and harm our
operatingresults.results of operations. - Our growth depends
uponon market growth, our ability to enhanceourexisting products, and our ability to introduce new products on a timely basis. - We
intendexpect to continuetoaddresstheneedtodevelopdeveloping new products andenhanceenhancing existing products through acquisitions ofothercompanies, product lines, technologies, and personnel. - Acquisitions involve numerous risks,
includingthefollowing:including: Difficulties or delaysinintegrating theoperations(includingoperations, including ITsecurity),security, systems, technologies, products, and personnel oftheacquired companies, particularlywithcompaniesthathavewith largeandwidespreadglobal operationsand/oror complex products(suchasSplunk)Diversion of management s attention fromnormaldailyday-to-day operationsofthebusinessand the challenges of managing larger and morewidespreadcomplex operationsresultingfromfollowing acquisitionsPotentialdifficultiesinDifficulties completing projectsassociatedwithrelated to acquired in-process research and developmentintangiblesDifficultiesinChallenges entering marketsinwhichwhere we havenoorlimiteddirectpriorexperience andwherecompetitorsinsuchmarketshave strongermarketpositionsInitialdependenceDependence on unfamiliar supply chains orrelativelysmallsmaller supply partners Insufficient revenue to offsetincreasedexpensesassociatedwithacquisitionsacquisition-related costs The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans Acquisitions have in the past and may in the future also cause us to: Issue common stock that would dilute our current stockholders percentage ownership Useasubstantialportionofoursignificant cash resources,orincurdebtSignificantlydebt, or increaseourinterest expense,leverageleverage, and debt servicerequirementsifweincuradditionaldebttopayforanacquisitionAssumeliabilitiesobligations 18 Table of Contents Assume liabilities, become subject to intellectual property or other litigation, and incur significant write-offs, restructuring charges, and related expenses Record goodwill and intangible assetsthataresubject to impairmenttestingonaregularbasisandtesting, potentialperiodicimpairmentchargesIncurcharges, and amortizationexpensesrelatedtocertainintangibleassetsexpense Incur taxexpensesexpense related to the effect of acquisitions on our legal structureIncurlargewrite-offsandrestructuringandotherrelatedexpensesBecomesubjecttointellectualpropertyorotherlitigationMergers and acquisitions ofhigh-technologytechnology companies are inherently risky and subject tomanyfactors outsideofour control, andnoassurancethere can begivenno assurance thatourpreviouspast or future acquisitions will be successfulandor will not materially harm our business,operatingresults,results of operations, or financial condition. - Failure to successfully manage and
successfullyintegrate acquisitions could materially harm our business andoperatingresults.results of operations. - Even
whenwhere an acquired company hasalreadydevelopedandmarketedexisting products, there can be no assurance that product enhancements will bemadeincompleted on a timelyfashionbasis or that pre-acquisition due diligencewillhavehas identified allpossibleissuesthatmightarisewithrespecttosuchproducts.potential issues. - In addition, mergers and acquisitions could affect our future effective tax
rateforfutureperiodsisuncertainandcouldbeimpactedbymergersandacquisitions.rate. - Risks
describedassociated withrespecttonew product development also apply to acquisitions. - As we
focusonpursue new market opportunities and key priority areas,suchasincluding AI, cloud, and cybersecurity, we compete with companies of allsizes.sizes, some of which may have greater resources than we do. Additionally,asAs customers complete infrastructure deployments, they may require greater levels of service, support, andfinancingthanwehaveprovidedinthepast,financing, especially in emergingcountries.markets, and demand for these offerings may increase.- We have
severalstrategic alliances with large and complex organizations and other companieswithwhichweworkto offer complementary products and services. - These arrangements are generally limited to specific
projects,thegoalofwhichisgenerallyprojects intended to facilitate product compatibility and the adoption of industry standards. Also,In addition, ifthesecompaniesour strategic alliance partners or joint venture partners fail to perform or if these relationshipsfailtomaterializedo not develop as expected, we couldsufferexperience delays in product development or other operational difficulties.- Joint ventures can also be difficult to
manage,givenmanage due to the potentially different interests ofjointventurepartners.the parties involved. - We produce highly complex hardware and software products that incorporate leading-edge
technology,includingbothhardwareandsoftware.technology. - Software typically contains bugs or other quality or reliability
problemsissues that can unexpectedlyinterferewithitsintendedoperationsordisrupt the intendedoperationoperations of the product or the systems in whichoursoftwareit is installed. Therecanbenoassurancethatourpre-shipmentorOur pre-release testing programswillbeadequatetomay not detect all isolated or systemic defects, either ones in individual products or ones that could affect numerous shipments, which might interfere with customer satisfaction, reduce sales opportunities, or affect gross margins.- From time to time, we have had to replace
certaincomponents andprovideremediationinresponsetothediscoveryofremediate defects or bugs inproductsthatwehadshipped.shipped products. - There can be no assurance that such
remediation,remediation would be successful or, depending on the product involved,wouldnothave a material impact. - Due to the global nature of our operations, political or economic changes or other factors in a specific country or region could harm our
operatingresultsandof operations or financial condition. - We also depend on non-U.S. operations of our contract manufacturers,
19TableofContentscomponent suppliers and distribution partners. - Our future results could be negatively 19 Table of Contents impacted by a variety of political, economic or other factors relating to our operations inside and outside the United States, any or all of which could materially harm our
operatingresultsandof operations or financial condition, including the following:impactsfromglobalcentralbankmonetarypolicy;issuesrelatedtothepoliticalrelationshipbetweentheUnitedStatesandothercountriesthatcanaffectregulatorymatters,affectthewillingnessofcustomersinthosecountriestopurchaseproductsfromcompaniesheadquarteredintheUnitedStatesoraffectourabilitytoprocurecomponentsifagovernmentbodyweretodenyusaccesstothosecomponents;government-relateddisruptionsorshutdowns;thechallengingChallenging andinconsistentuncertain global macroeconomicenvironment;foreignenvironments, central bank policies, currency exchangerates;geopoliticaltensions(includingChina-Taiwanrelations);politicalorsocialunrest;rates, and regional economic instabilityorweaknessornaturaldisastersinaspecificcountryorregion,including(including economic challenges in China and their resulting globaleconomicramificationsofChineseeconomicdifficulties;environmentalprotectionregulationsramifications) International tensions (includingnewlawsandregulationsrelatedtoclimatechange);tradeprotectionmeasures,suchastariffs;otherlegalandregulatoryrequirements,someofwhichmayaffectourabilityChina-Taiwan relations), U.S. foreign relations impacting customer willingness toimportourproductsto,exportourproductsfrom,orsellourbuy U.S. productsinvariouscountriesoraffectour ability to procurecomponents;politicalconsiderationsthataffectserviceprovidercomponents, trade protection measures such as tariffs, and governmentspendingpatterns;healthorsimilarissues,includingpandemicsdisruptions orepidemics;difficultiesinstaffingandmanaginginternationaloperations;shutdowns Import/export restrictions, environmental regulations (including climate change laws), and adverse taxconsequences,includingimpositionofconsequences (such as withholding taxes) Natural disasters, pandemics, political orothertaxesonsocial unrest Difficulties managing international operations We are exposed to the credit risk of some of ourglobaloperations.customers and to credit exposures in weakened markets, which could result in material losses. - Our exposure to
thecredit risks relating to our financing activities may increase if our customers are negatively impacted byaglobal economic downturn orperiodsofeconomicuncertainty. - In the past, there have been significant bankruptcies
amongof customersbothon open creditandwithloanorleasewith financingarrangements,particularlyamongInternetbusinessesandserviceproviders,causingustoincureconomicorarrangements that have caused financial losses. - Although these losses have not been material to date, future
losses,ifincurred,losses could materially harm our business,operatingresults,results of operations, or financial condition. OurWe maintain an investment portfolioincludeswith various holdings, investment types, and maturities, including available-for-sale debtinvestmentsand equity investments, the values of which are subject to marketpricevolatility.- Our
privatelyheldinvestmentsnon-marketable equity securities are subject to the risk of loss of investment capital. - These investments are inherently risky because the markets for the technologies or products
theyhaveunder development by these companies are typically in the early stages and may never materialize. - For information regarding
themarket risks associated with the fair value of portfolio investments and interest rates, refer to the section titled Quantitative and Qualitative Disclosures About Market Risk. - Because a significant portion of our business is conducted outside the United States, we
faceexposureare exposed to adverse movements in foreign currency exchange rates, including in emergingmarketmarkets where currencieswhichcanhaveextremecurrencyvolatility.may be extremely volatile. AnincreaseinthevalueoftheA stronger U.S. dollar could increase the real costtoourcustomersof our products inthosemarkets outside the United States where we sell indollarsanddollars, while aweakenedweaker dollar could increasethecostoflocal operating expenses andprocurementthe cost of components or raw materialstotheextentthatwemustpurchasecomponentspurchased in foreign currencies.- These exposures may change over time as our business practices
evolve,evolve andtheycould materially harm our financial results and cash flows. - Our success
hasalwaysdependeddepends in large part on our ability to attract and retain highly skilled technical, managerial, sales, and marketing personnel. - Competition for
suchqualified personnel is intense, especially intheSilicon ValleyareaofNorthernCaliforniaand20TableofContentsother major United States locations. StockOur stock incentiveplansareplan is designed to reward employees for their long-term contributions and provide incentives for them to remain with us.- Volatility or lack of positive performance in our stock price or equity incentive awards, or changes to our overall compensation program, including our stock incentive program, resulting from the management of share dilution
andor share-based compensationexpenseorotherwise,expense, mayalsonegativelyimpactaffect our ability to retain key employees. - As a result of one or more of these factors, we may increase
ourhiring ingeographicareaslocations outside the United States, which couldsubjectusincrease our exposure toadditionalgeopolitical andexchangeraterisk.foreign currency risks. - The loss of
servicesofanyofourkeypersonnel;theinabilitytoretainandattractpersonnel, difficulty attracting or retaining qualifiedpersonnelinthefuture;employees, or delays inhiringrequiredpersonnel,hiring, particularly in engineering and salesfields,roles, couldmakeitdifficultimpair our ability to meet key objectives,suchasincluding timely and effective product introductions. - In addition, companies in our industry whose employees accept positions with competitors
frequentlyclaimthatcompetitorshaveengagedinsometimes assert claims related to alleged improper hiring practices. AdverseAn unfavorable resolution of claims, litigation or governmental investigationsmaycould materially harm ouroperatingbusiness, results of operations, or financial condition.- We are a party to a variety of claims, litigation and governmental investigations arising in the normal course of
ourbusiness. Claims,litigationandgovernmentalinvestigationsThese matters may arise from a widevarietyrange of businesspracticesactivities and initiatives, includingmajornew product releases, significant business transactions, warranty or product claims, employment practices, andregulation.regulatory matters.- For additional information regarding certain
ofthematters in which we are involved, see Note1413 to the Consolidated Financial Statements, subsection (f) Legal Proceedings. - Our
operatingresults of operations may be negatively impacted and damage to our reputation may occur due to the production and sale of counterfeit versions of our products. - Our provision for income taxes is subject to volatility and could be negatively impacted by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates;
bychanges in the valuation ofourdeferred tax assets and liabilities;bychanges to foreign-derived intangible income, global intangible low-taxincomeandincome, base erosion and anti-abuse tax, research and development capitalization and amortization, and corporate alternative minimum tax laws, regulations, or interpretations thereof;byexpiration of or lapses in tax incentives;bytransfer pricing adjustments, includingtheeffectofthose resulting from acquisitionsonor changes to our legal structure;bytax effects of nondeductible compensation;bytax costs related to intercompany realignments; by changes in accounting principles; or by changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules. Further,asaresultofIn certainofcountries, ourongoingincome has benefited from reduced tax rates associated with employment and capital investment actions andcommitments,ourincomeincertaincountrieswassubjecttoreducedtaxrates.commitments.- There can be no assurance that the outcomes from these continuous examinations will not have an adverse effect on our
operatingresultsandfinancialcondition.21TableofContentsOurbusinessandoperationsareespeciallysubjecttotherisksofearthquakes,floods,andothernaturalcatastrophicevents(includingasaresultofglobalclimatechange).financial condition. - Our corporate headquarters, including certain
ofourresearch and developmentoperationsoperations, are located intheSiliconValleyareaofNorthernCalifornia,Valley, a region known for seismic activity. - Additionally,
acertainnumbersome of our facilities are located near rivers that have experienced flooding in the past. WehavenotAlthough to date we have not experienced a material eventasaresultofresulting from thesekindstypes of naturaldisasters;however,theoccurrenceofanysucheventinthedisasters, future events could materially harm our business,operatingresults,andresults of operations, or financial condition.- Terrorism, war, and other events may harm our business,
operatingresultsandof operations or financial condition. - The continued threat of terrorism and heightened security and military action in response thereto, or any other current or future acts of terrorism, war (such as the
on-goingongoing Russia-Ukraine war and Middle East conflicts and wars), and other events (such as economic sanctions, trade restrictions or disruptions and reactions of the governments, markets and the general public, including the sanctions and restrictions related to theon-goingongoing Russia-Ukrainewar)war or arising out of the current conflicts and wars in the Middle East) may cause further disruptions to the economies of the United States and other countries and create 21 Table of Contents further uncertainties or could otherwise negatively impact our business,operatingresults,andresults of operations, or financial condition. - To the extent that such disruptions or uncertainties result in delays or cancellations of customer orders or the manufacture or shipment of our products, our business,
operatingresults,andresults of operations, or financial condition could be materially harmed. - There can be no assurance that our
operatingresultsandof operations or financial condition will not be negatively impacted by our incurrence of debt. - As of the end of fiscal
2025,2026, we have senior unsecured notes outstanding in an aggregate principal amount of$24.8$23.0 billion that mature at specific dates from calendar year 2026 through 2064. - We have also established a commercial paper program under which we may issue short-term, unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $15.0 billion, and we had
$3.5$6.7 billion in commercial paper notes outstanding under this program as of July26,2025.25, 2026. - Further, we cannot be assured that our maintenance of this indebtedness or incurrence of future indebtedness will not negatively impact our
operatingresults of operations or financial condition. - We are subject to evolving and sometimes conflicting, laws, regulations, policies, and investor and other stakeholder expectations concerning environmental, social, and governance
matters,suchasenvironmentalsustainabilityandclimatechange,matters both in the United States and internationally. - For example, in September 2021, we announced our goal to achieve net zero across all scopes of greenhouse gas emissions by 2040, the achievement of which relies, in large part, on the accuracy of our estimates and assumptions around the
enhancedpowerenergy consumption and efficiency of our products, theadoptionintegration ofrenewableclean energyatcustomerandsuppliersites,into electric grids globally, and theadoptionprocurement of certainofourproducts and services by our customers. - We generally rely on patents, copyrights, trademarks,
andtradesecretsecrets, and other intellectual property laws to establish and maintain proprietary rights in our technology and products. - Although we have been issued numerous patents and
otherhave pending patentapplicationsarecurrentlypending,therecanbenoassurancethatanyoftheseapplications, our patentsorand other proprietary rightswillnotmay be challenged, invalidated,or22TableofContentscircumvented orthatourrightswill,infact,found insufficient to provide competitiveadvantagestous.advantages. Furthermore,In addition, many key aspects of our technology are governed by industry-widestandards,whichstandards that areusablebyallavailable to marketentrants.participants generally.Additionally,Furthermore, some U.S. governmental entities and courts haveexpressedataken the position that U.S. copyright and patent protection shouldbelimitedapply only toprotectinginventions and works of authorship created by humans.- Therefore, U.S. copyright or patent protection for inventions or works developed in part or
whollybyentirely using generative AI tools may belimited,limited ornotavailableatall.unavailable. Inaddition,theThe laws of some foreign countries may not protect our proprietary rights to the same extent asdoU.S. law, and thelawsoutcome of enforcement actions in those jurisdictions may differ from those in the United States.- Although we are not dependent on any individual
patentspatent or group ofpatentsforparticularsegmentsofthebusinessinwhichwecompete,patents, if we are unable to adequately protectourthe proprietary rights to the totality of the features(includingaspectsof our products and technologies, including features protected by means other thanbypatentrights)inamarket,patents, we mayfindourselvesbe placed at a competitive disadvantage compared tootherswhoneedcompetitors that do not incur thesubstantialexpense,time,same costs and effortrequiredtocreatedevelop innovative products that have enabled us to be successful. - Third parties, including customers, have
inthepastasserted and may in the future assert claims or initiate litigationrelatedrelating toexclusivepatent,copyright,trademark,patents, copyrights, trademarks, and other intellectual property rightstocovering technologiesandrelatedor standardsthatarerelevant tous.our business. - Because of 22 Table of Contents the existence of a large number of patents in the information technology field, the secrecy of some pending patents, and the rapid rate of issuance of new patents, it is not economically practical or even possible to determine in advance whether a product or any of its components infringes or will infringe on the patent rights of others.
- For additional information regarding our indemnification obligations, see Note
14(e)13(e) to the Consolidated Financial Statements contained in this report. - Our exposure to risks associated with the use of intellectual property may
beincreasedincrease as a result ofacquisitions,asacquisitions because we may havealowerlevelofmore limited visibility into the developmentprocesswithrespecttosuchtechnologyprocesses orthecaretakentosafeguardagainstinfringementrisks.risk management practices associated with acquired technologies. - Further,
inthepast,third parties havemadein some cases asserted infringement and similar claimsafterwehaverelating to acquiredtechnologytechnologies that had not been assertedpriortoourbefore the acquisition. - Many of our commercial offerings
aredesignedtoinclude software or other intellectual property licensed from third parties. ItWe maybenecessaryinthefutureneed toseekobtain or renew licenses relating to various aspects of theseproducts.products in the future, and such licenses may not be available on acceptable terms, or at all.- The inability to obtain
certainor renew necessary licenses or otherrightsorrights, the inability to obtain such licenses or rights on favorable terms, or the need toengageinlitigationregardinglitigate thesematters,matters could materially harm our business,operatingresults,andresults of operations, or financial condition. - Moreover, the inclusion in our commercial offerings of software or other intellectual property licensed from third parties on a nonexclusive basis could limit our ability to protect
ourthe proprietary rightsinassociated with our products. - Risks Related to Cybersecurity, Privacy, and Regulatory Requirements Cyber attacks, data breaches or other incidents impacting our solutions and IT environment may disrupt our operations, harm our
operatingresultsandof operations or financial condition, and damage our reputation or otherwise materially harm our business; and cyber attacks, data breaches or other incidents on our customers or third-party providers networks, or in third-party products we use, could result in claims of liability against us, give rise to legal and/or regulatory action, damage our reputation or otherwise materially harm our business. - We experience cyber attacks and other attempts to gain unauthorized access on a regular basis to (i) our products and services (together, our solutions ) and (ii) the servers, data centers, networks, systems, and cloud-based services operated or enabled by us, or by third parties upon which we rely, on or through which our and third-party data are stored, processed, or can be
23TableofContentsaccessed (collectively, our IT environment ). - We anticipate continuing to be increasingly subject to such attempts as cyber attacks become more
sophisticatedsophisticated, numerous, and difficult to predict and protect against. - Despite our active implementation of security and other measures, our solutions and IT environment have been, and continue to be, vulnerable to cyber attacks, incidents, data breaches, malware, inadvertent error, disruptions, failures, physical security breaches, tampering or other theft or misuse, including by
employees,contingentworkers,andmaliciousactors.actors (including criminals and activists) and by insider threats (including employees and contingent workers). - Additionally, nation-state actors or their agents have in the past successfully attacked our solutions and IT environment and have also exploited vulnerabilities in our solutions to carry out attacks, and we anticipate that these attacks and the exploitation of vulnerabilities in our solutions will continue and may intensify during periods of diplomatic or armed conflict or other geopolitical tensions.
- Further, a cyber attack, vulnerability exploitation, or other incident could go undetected and persist in our
environments,solutions and IT environment, or those of our customers or third-party providers upon which we rely, for extended periods. - Cyber-related events have caused, and in the future could result in, compromise to, or the disruption of access to, the operation of our solutions and IT environment or those of our customers or third-party providers upon which we rely, or result in
confidentialconfidential, private or otherwise sensitive information stored on our systems or our customers or other third-party systems being improperly accessed, processed, disclosed now (or in the future), or being lost or stolen. - Efforts to limit the ability of malicious actors to disrupt the operations of the Internet or undermine our security efforts are costly
toimplementand may not be successful. - Breaches of security in our solutions or IT environment, our customers or third-party providers networks, or in third-party products we use, regardless of whether the 23 Table of Contents breach is attributable to a vulnerability in our solutions, a failure by us to timely mitigate or apply a security fix for products we use that are found vulnerable, or a failure to maintain the digital security infrastructure or security tools that protect the integrity of our solutions and IT environment, could, in each case, result in claims of legal and/or regulatory action against us, damage our reputation or otherwise materially harm our business.
- The occurrence of a cyber attack, data breach or other incident could subject us to direct or indirect liability to our customers, data subjects, suppliers, business partners, employees, and others, give rise to legal and/or regulatory action, could damage our reputation or could otherwise negatively impact our business, any of which could materially harm our business,
operatingresults,andresults of operations, or financial condition. - The
productsandservices(together,oursolutions)we sell to customers, the third-party products and components that we integrate into our solutions and use in our operations, and the cloud-based services operated or enabled by us, or by third parties upon which we rely, inevitably contain vulnerabilities or security defects (despite our efforts to prevent and detect them through secure development lifecycle practices, testing, or other means), which have not been remedied or cannot be disclosed without compromising security. - We
alsomake prioritization decisions in determining which vulnerabilities or security defects to fix and the timing of these fixes. - In addition, workarounds or other mitigation efforts with our solutions and in our and customer environments in certain instances have not been, and in the future may not be,
availableavailable, sufficient, orsufficienttimely to protect customers prior to a security update being made available. - Vulnerabilities can persist even after we have issued security updates if we have not identified and addressed the root cause of a particular vulnerability, if we are required to issue incomplete or preliminary mitigations as new threats rapidly emerge, if customers have not installed the most recent updates, if the attackers exploited the vulnerabilities before a security update is applied (such as to install additional malware to further compromise customers systems), or if a previously patched vulnerability is inadvertently reintroduced due to a security regression during future development or a changed deployment.
- Failure to comply with internal security policies and standards, including secure development lifecycle practices, failure to prevent or promptly mitigate vulnerabilities and security defects, failure of companies that we have acquired to have adequate organizational security practices, prioritization errors in remedying vulnerabilities or security defects, failure of third-party providers to remedy vulnerabilities or security defects, or customers not deploying security updates in a timely manner, deciding not to upgrade solutions, or configuring our solutions in insecure
waysways, could, in each case, result in claims of legal and/or regulatory action against us, damage our reputation, or otherwise materially harm our business. - Global
privacyanddataprotection-relatedlawsprivacy, data, andregulations,includingcybersecuritylaws,laws areevolving,extensive, complex, andcomplex.constantly evolving, making compliance both difficult and costly. - In addition, evolving legal requirements restricting
24TableofContentsor controlling the collection, processing,useuse, sharing, access, or cross-border transmission of data, including regulation of cloud-based services, could materially affect our customers ability to use, and our ability to sell, our products and services. - The interpretation and application of these laws in some instances
isare uncertain, and our legalandregulatoryobligations and customer requirements are subject to frequent changes. - For example, the European 24 Table of Contents Union s ( EU ) General Data Protection Regulation ( GDPR )
appliesand Data Act apply to our activities conducted from an establishment in the EU or related to products and services offered in the EU and imposes a range of compliance obligations regarding the handling of personal and industrial data for both ourselves and our customers. - Additionally, we are subject to the California
sConsumerPrivacy Rights Act, Singapore s Personal Data Protection Act, and other laws, regulations, and obligations around the world that govern the handling ofpersonaldata.data and cybersecurity. - Our actual or perceived failure to comply with applicable laws and regulations or other obligations relating to the use of data and protecting data from unauthorized access, use, or other processing, could subject us to claims of liability,
orgive rise to legal and/or regulatory action, damage our reputation, and/ or otherwise negatively impact our business, any of which could materially harm ouroperatingresultsandof operations or financial condition. - Our business,
operatingresults,andresults of operations, or financial condition could be materially harmed by evolving regulatory uncertainty or obligations applicable to our products and services. - Changes in global regulatory requirements applicable to the industries and sectors in which we
operate,intheUnitedStatesandinothercountries,operate could materially affect our operations and the sales and use of our products and services. - In addition, changes in telecommunications regulations could impact our service provider customers purchase and use of our products and services, and they could also impact sales of our own regulated offerings.
- Government and other
customers'customers procurement policies, priorities,regulations,technology initiatives and/or other obligations often give rise to evolving privacy, cybersecurity, operational resilience, data governance, sourcing, or other requirements; the failure or delay in meeting and maintaining compliance with such requirements could negatively impact our business, including by limiting our ability to sell products and services, directly or indirectly, to public sector, critical infrastructure, and other customers. - Additional areas of uncertainty that could impact sales of our products and services include laws, regulations, or customer procurement requirements related to encryption technology, data, AI, privacy, cybersecurity, sovereignty, localization, operational resilience, environmental sustainability (including climate change), human rights, product certification, product and digital accessibility, country of origin,
andsourcing, nationalsecuritysecurity, and other security controls applicable to our offerings and supply chain. - Changes in regulatory requirements or our actual or perceived failure to comply (or to enable our customers to comply when using our offerings) with applicable laws, regulations, or other obligations could materially harm our business,
operatingresults,andresults of operations, or financial condition. - Additionally, volatility, lack of positive performance in our stock price or changes to our overall compensation program, including our stock incentive program, may negatively impact our ability to retain key employees, virtually all of whom are compensated, in part, based on the performance of our stock price. 25 Table of Contents
Removed since the previous 10-K 64
- Our operating results in one or more segments may also be affected by uncertain or changing economic conditions particularly germane to that segment or to particular customer markets within that segment.
- In addition, previous reports of certain intelligence gathering methods of the U.S. government could affect customers perception of the products of IT companies which design and manufacture products in the United States.
- Our revenue for a particular period is difficult to predict, and a shortfall in revenue may harm our operating results.
- As a result of a variety of factors discussed in this report, our revenue for a particular quarter is difficult to predict, which can be exacerbated during periods when the global macroenvironment is challenging and can result in market uncertainty.
- We have also experienced periods of time during which shipments have exceeded net bookings or manufacturing issues have delayed shipments, leading to nonlinearity in shipping patterns.
- In addition to making it difficult to predict revenue for a particular period, nonlinearity in shipping can increase costs, because irregular shipment patterns result in periods of underutilized capacity and periods in which overtime expenses may be incurred, as well as in potential additional inventory management-related costs.
- We plan our operating expense levels based primarily on forecasted revenue levels.
- These expenses and the impact of long-term commitments are relatively fixed in the short term.
- A shortfall in revenue could lead to operating results being below expectations because we may not be able to quickly reduce these fixed expenses in response to short-term business changes.
- Financial problems of either contract manufacturers or component suppliers, reservation of manufacturing capacity at our contract manufacturers by other companies, and industry consolidation occurring within one or more component supplier markets, such as the semiconductor market, in each case, could either limit supply or increase costs. 12 Table of Contents A reduction or interruption in supply, including disruptions on our global supply chain, caused in part by public health emergencies, geopolitical tensions (including as a result of China-Taiwan relations, increasing tariffs or any other trade tensions) or a significant natural disaster (including as a result of climate change); a significant increase in the price of one or more components (including as a result of inflation); a failure to adequately authorize procurement of inventory by our contract manufacturers; a failure by suppliers to deliver on our contracts; a failure to appropriately cancel, reschedule, or adjust our requirements based on our business needs; or a decrease in demand for our products could materially harm our business, operating results, and financial condition and could materially damage customer relationships.
- Manufacturing capacity and component supply constraints could be significant issues for us as they have been in certain prior periods.
- On August 26, 2025, we settled a legal dispute with a supplier relating to purchase obligations arising under long-term supply arrangements, which resulted in a charge to product cost of sales, which is described in Note 21 to the Consolidated Financial Statements.
- The remaining and new supply chain exposures include potential material excess and obsolete or other charges if product demand significantly decreases for a sustained duration, we are unable to generate demand for certain products planned for development, or we are otherwise unable to mitigate these supply chain exposures.
- Sales to the service provider and cloud market have been characterized by large and sporadic purchases, especially relating to our router sales and sales of certain other Networking and Collaboration products, in addition to longer sales cycles.
- These market factors represent a competitive threat to us.
- We compete with numerous vendors in each product category.
- The overall number of our competitors providing niche product solutions may increase.
- Also, the identity and composition of competitors may change as we increase our activity in newer product areas, and in key priority areas.
- The inherent nature of networking requires interoperability.
- As such, we must cooperate and at the same time compete with many companies.
- When facing component supply-related challenges, we have in the past and may in the future increase our efforts in procuring components or enter additional purchase commitments with contract manufacturers and suppliers in order to meet customer expectations.
- Additionally, if our costs associated with our software subscription offerings were to significantly increase, our business, results of operations and financial condition may be negatively impacted.
- We have also been seeking to meet the evolving needs of customers which include offering our products and solutions in the manner in which customers wish to consume them.
- The success of new products and services depends on several factors, including proper new product and service definition, component costs, timely completion and introduction of these products and services, differentiation of new products and services from those of our competitors, and market acceptance of these products and services.
- Our restructuring activities, including any related charges and the impact of the related headcount restructurings, could materially harm our business, operating results, and financial condition.
- Prior acquisitions have resulted in a wide range of outcomes, from successful introduction of new products and technologies to a failure to do so.
- Several of our competitors may have greater resources, including technical and engineering resources, than we do.
- Demand for these types of service, support, or financing contracts may increase in the future.
- There can be no assurance that we can provide products, service, support, and financing to effectively compete for these market opportunities.
- Further, entry into other markets has subjected and will subject us to additional risks, particularly to those markets, including the effects of general market conditions and reduced consumer confidence.
- For example, as we add direct selling capabilities globally to meet changing customer demands, we will face increased legal and regulatory requirements.
- There can be no assurance we will realize the expected benefits from these strategic alliances or from joint ventures.
- If successful, these relationships may be mutually beneficial and result in industry growth.
- However, alliances carry an element of risk because, in most cases, we must compete in some business areas with a company with which we have a strategic alliance and, at the same time, cooperate with that company in other business areas.
- We are exposed to the credit risk of some of our customers and to credit exposures in weakened markets, which could result in material losses.
- Most of our sales are on an open credit basis, with typical payment terms of 30 days in the United States, and, because of local customs or conditions, longer in some markets outside the United States.
- Beyond our open credit arrangements, we have also experienced demands for customer financing and facilitation of leasing arrangements.
- Our loan financing arrangements may include not only financing the acquisition of our products and services but also providing additional funds for other costs associated with network installation and integration of our products and services.
- Additionally, to the degree that turmoil in the credit markets makes it more difficult for some customers to obtain financing, those customers ability to pay could be adversely impacted, which in turn could materially harm our business, operating results, and financial condition.
- We maintain an investment portfolio of various holdings, types, and maturities.
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- If such investments suffer market price declines, as we experienced with some of our investments in the past, we may recognize in earnings the decline in the fair value of our investments below their cost basis.
- We could lose our entire investment in these companies.
- We have received these claims in the past and may receive additional claims in the future.
- Any claim, litigation or governmental investigation can be costly, lengthy, and disruptive to normal business operations.
- For example, on August 26, 2025, we settled a legal dispute with a supplier relating to purchase obligations arising under long-term supply arrangements, which resulted in a charge to product cost of sales, which is described in Note 21 to the Consolidated Financial Statements.
- Moreover, the results of complex legal proceedings are difficult to predict, and management's view of these matters may change in the future.
- An unfavorable resolution of claims, litigation or governmental investigations could materially harm our business, operating results, or financial condition.
- As is the case with leading products around the world, our products are subject to efforts by third parties to produce counterfeit versions of our products.
- While we work diligently with law enforcement authorities in various countries to block the manufacture of counterfeit goods and to interdict their sale, and to detect counterfeit products in customer networks, and have succeeded in prosecuting counterfeiters and their distributors, resulting in fines, imprisonment and restitution to us, there can be no guarantee that such efforts will succeed.
- While counterfeiters often aim their sales at customers who might not have otherwise purchased our products due to lack of verifiability of origin and service, such counterfeit sales, to the extent they replace otherwise legitimate sales, could negatively impact our operating results.
- Significant judgment is required to determine the recognition and measurement attribute prescribed in the accounting guidance for uncertainty in income taxes.
- The Organisation for Economic Co-operation and Development (OECD), an international association comprised of 38 countries, including the United States, has made changes, including a Pillar Two framework that imposes a minimum tax rate of 15% in each taxing jurisdiction, and is contemplating additional changes to numerous long-standing tax principles.
- There can be no assurance that these changes and any contemplated changes if finalized, once adopted by countries, will not have an adverse impact on our provision for income taxes.
- Our failure to meet these commitments could adversely impact our provision for income taxes.
- Also certain of our customers, suppliers and logistics centers are located in regions that have been or may be affected by earthquake, tsunami and flooding or other weather-related activity which in the past has disrupted, and in the future could disrupt, the flow of supply chain components and delivery of products.
- In addition, global climate change may result in significant natural disasters occurring more frequently and/or with greater intensity, such as drought, wildfires, storms, sea-level rise, changing precipitation, and flooding.
- In addition, there can be no assurance that patents will be issued from pending applications or that claims allowed on any patents will be sufficiently broad to protect our technology.
- The outcome of any actions taken in these foreign countries may be different than if such actions were determined under the laws of the United States.
- These assertions have increased over time as a result of our growth and the general increase in the pace of patent claims assertions, particularly in the United States.
- Furthermore, because of the potential for high court awards, including injunctive relief, that are not necessarily predictable, it is not unusual to find even arguably unmeritorious claims settled for significant amounts.
- If any infringement or other intellectual property claim made against us by any third party is successful, if we are required to indemnify a customer with respect to a claim against the customer, or if we fail to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions, our business, operating results, and financial condition could be materially harmed.
- There can be no assurance that the necessary licenses would be available on acceptable terms, if at all.
- Furthermore, the emergence and maturation of AI capabilities has led to new and/or more effective methods of cyber attacks.
- Compliance with these laws and regulations is difficult and costly.
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