CIEN Ciena Corp - 10-K

Item 1A. Risk Factors

Investing in our securities involves a high degree of risk. Before investing in our securities, you should consider carefully the information contained in this report, including the information in this “Risk Factors” section.

Risks Related to Financial Performance and Strategy

Our revenue, gross margin, and operating results can be adversely impacted by a number of factors that would cause our results to fluctuate.

Our results of operations are subject to significant, and often difficult to predict, quarterly fluctuations due to a variety of factors. A portion of our quarterly revenue is generated from customer orders received during that same quarter (which we refer to as “book to revenue”) and therefore may be less certain. Additionally, our customer contracts generally do not include minimum or guaranteed purchases and may allow customers to modify or cancel purchase orders. We must regularly compete for business with existing customers and there is no assurance that we will maintain our incumbency or revenue level with any particular customer in future periods. Our results can be materially adversely affected by factors set forth in this “Risk Factors” section including:

• order timing and volume, including book to revenue and backlog levels;

• changes in spending or deployment plans by customers;

• the level of competition we face and the impact of unfavorable transactions or commercial terms;

• customer, product and geographic mix;

• supply chain performance and costs;

• the financial stability of our customers; and

• consolidation activity involving us, our customers, suppliers, and competitors.

As a result, our historical financial results may not be indicative of future performance. Quarterly fluctuations in our revenue, gross margin, and results of operations could cause us to fail to meet our guidance or the expectations of financial analysts or investors, which may cause volatility or decreases in our stock price.

Our revenue is concentrated among a small number of customers and reductions in their spending could materially adversely impact our results of operations.

A significant portion of our revenue is concentrated among a small number of customers. For example, in fiscal 2025, our five largest customers contributed approximately 50% of our revenue, a cloud provider customer accounted for approximately 18% of our revenue, and a service provider accounted for approximately 11% of our revenue. Consequently, our results of operations could be materially adversely impacted by the loss of or a significant reduction in spending of a large customer. Moreover, our revenue is concentrated within the cloud provider and service provider customer segments. Adverse economic, business or regulatory dynamics within these industries or market segments affecting spending levels could materially adversely impact our results of operations.

Our growth is dependent on executing our strategy and expanding our addressable market, and we may not be successful.

Our growth depends on the successful execution of our business strategy and our ability to grow our addressable market, or to expand into new markets, technologies, or customer segments. A key part of this strategy is to leverage our optical technology leadership and expand our addressable market into complementary and adjacent markets by investing in new technologies, including for applications inside and around the data center, and specifically for AI-driven use cases. Many of these markets are nascent or dynamic, and it is difficult to predict trends of these markets, including any potential growth. Moreover, we have a more limited history in commercializing and selling solutions into these markets. This expansion strategy may require a significant investment of capital and human resources, may disrupt our operations, and could impose substantial demands on management time. If the markets relating to these solutions do not develop as we anticipate, or if we are unable to commercialize, increase market awareness of, or gain adoption of our solutions within those markets, our business, financial performance, and long-term growth prospects could be adversely affected.

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We operate in an intense and evolving competitive landscape and the level of competitive pressure we face may adversely impact our results of operations.

We operate in a highly competitive environment, where we and our competitors aggressively seek to capture market share and displace incumbent vendors. Many of these competitors have substantially greater resources, broader product offerings and more established customer relationships than we have. Because of their scale and resources, they may be perceived to be a better fit for the procurement or network strategies of larger network operators. We also face competition from certain smaller companies for specific products, applications, customer segments, or geographic markets that may be more attractive to customers in a particular opportunity.

Generally, competition in our industry is based on various factors, including:

• price and total cost of ownership;

• product features and functionality;

• incumbency and strength of existing business relationships;

• technology roadmap;

• financial stability and investment capacity;

• ability to address preferred customer consumption models;

• delivery lead-times; and

• services and support capabilities.

Additionally, as we address evolving customer consumption models or expand into adjacent market segments, we expect to compete with a broader range of suppliers, including existing business partners in our supply chain. Increases in the intensity of competition we face may adversely impact our business and results of operations.

Acquisitions and other strategic transactions could disrupt our operations and expose us to increased costs and unexpected liabilities.

We may pursue strategic transactions, including mergers, acquisitions, investments and other strategic partnerships, to advance our business strategy. These transactions inherently involve significant risks and uncertainties, including:

• failure to achieve the intended benefits or anticipated return on investment, including operational synergies;

• significant use of cash, assumption of debt, or dilution of stockholders;

• exposure to unexpected costs or liabilities;

• challenges integrating technology, operations and personnel, and loss of key employees;

• disruption of relationships with customers, suppliers, or other business partners;

• diversion of management attention;

• challenges obtaining required regulatory or third-party approvals; and

• adverse tax, internal control or financial reporting impacts.

If we are unable to successfully execute acquisitions and other strategic transactions our business, results of operations, and financial condition could be negatively impacted.

Risks Related to Technology Development and Intellectual Property

Misaligned or delayed technology investments may adversely impact our return on innovation, impair our strategy and weaken our competitive position.

The success of our business depends on our ability to develop and deliver products that align with customer needs and demands, technological advancements, and market trends. We continually invest in research and development to enhance our solutions and to develop new technologies. There is often a lengthy period between commencing development and bringing these solutions to market. Accordingly, there is no guarantee of market acceptance, and some of our development decisions will be unprofitable. There is also a possibility that we may miss a market opportunity because we failed to invest or invested too late. Failure to develop timely new, innovative solutions that are attractive to customers could have a material adverse effect on our competitive position and results of operations.

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We may experience difficulties in the development and production of our products that may negatively affect our competitive position and results of operations.

Our networking solutions are based on complex hardware and software, and we can experience unanticipated challenges or delays in developing, manufacturing and introducing these solutions. We regularly introduce new products and enhancements, and each development cycle step presents serious risks of failure, rework or delay that can be expensive and time-consuming. We may encounter difficulties relating to design, development, sourcing, and manufacture of prototypes that delay or even prevent the release of these products. Delays in product development may affect our reputation with customers, affect our ability to capture market opportunities and ultimately impact our competitive position and results of operations.

Problems affecting the performance, interoperability, reliability or security of our products could damage our business reputation and negatively affect our results of operations.

We may experience defects or problems affecting quality, interoperability, reliability, security and performance of our products or the third-party technologies and software we incorporate in our products. Such problems could relate to the design, manufacturing, installation, operation and interoperability of our products. We have had to replace certain components, provide software updates or other remediation actions in response to defects or bugs, and we may have to do so in the future. Such remediation costs could adversely impact our business and results of operations. In addition, we have encountered and may further encounter unanticipated security vulnerabilities relating to our technology, including as a result of the activities of our supply chain and our use of third-party inputs. Communications technologies, given their capability to transmit sensitive information, have frequently been the target of threat actors, including nation states and other malicious parties, and we expect these threats to increase with the growing prevalence of AI. These product-related risks could result in:

• damage to our reputation, reduced demand, or order cancellations;

• payment of liquidated damages, contractual or similar penalties, or other claims;

• write-offs of inventory;

• regulatory enforcement penalties or settlements;

• disruption to the operation of our network operator customers;

• reporting and other publication to customers or regulatory bodies; and

• delays in introducing new products, recognizing revenue, or collecting accounts receivable.

These and other consequences could negatively affect our business and results of operations.

Our intellectual property rights may be difficult and costly to enforce.

We rely on a combination of patents, copyrights, trademarks and trade secret laws to establish and maintain proprietary rights in our products and technology. There can be no assurance that our proprietary rights will not be challenged, invalidated or circumvented. Our intellectual property strategy must continually evolve to protect our proprietary rights. There can be no assurance that our pending patent applications will succeed or that our patents will sufficiently protect our technology, and the laws of some countries may not protect our proprietary rights to the same extent as in the United States.

We are subject to the risk that third parties may attempt to access, divert or use our intellectual property without authorization. Protecting our proprietary rights is difficult, time-consuming and expensive, and we cannot be certain that the steps that we are taking will detect, prevent or minimize the risks of such unauthorized use. Litigation may be necessary to enforce or defend our intellectual property. Such litigation could result in substantial cost and diversion of management time and resources, and there can be no assurance that we will obtain a successful result. Any inability to protect and enforce our intellectual property rights could harm our ability to compete effectively.

We may incur significant costs in response to claims that we infringe upon the intellectual property rights of others.

Third parties may assert claims or initiate litigation or other proceedings related to intellectual property rights in technologies and related standards that are relevant to our business. We have been subject to several claims related to patent infringement, and we have been requested to indemnify customers pursuant to contractual indemnity obligations relating to infringement claims made by third parties. We could also be adversely affected by intellectual property litigation or claims against our manufacturers, suppliers or customers, and the rate of such claims by patent assertion entities remains high, particularly in the United States. Regardless of the merit of these claims, they can be time-consuming, divert the time and attention of our technical and management personnel, and cause us to incur substantial costs. These claims, if successful, could require us to:

• pay substantial damages or royalties;

• stop offering certain of our products;

• seek a license for the use of another’s intellectual property;

• develop non-infringing technology or modify certain products; and

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• indemnify our customers or other third parties.

Third party claims and their related consequences could adversely affect our business, results of operations and financial condition.

Risks Related to Operations

Our failure to effectively align our supply chain capacity and inventory levels with customer demand can adversely impact our results of operations and customer relationships.

Our growth and ability to meet customer demand depends in part on our ability to adequately plan and ensure appropriate supply chain capacity and inventory levels. We have experienced supply chain capacity shortages that have affected our operations and financial results, including longer than normal lead times. Significant economic growth, and the unprecedented nature of AI related demand, can make it more difficult for us and our suppliers to accurately forecast demand and to set optimized levels of manufacturing capacity and inventory. Conversely, if actual demand is meaningfully less than our forecasts, we may spend unnecessarily on capital related to our supply chain or purchase more inventory than needed. This could lead to increased excess or obsolete inventory requiring us to incur significant write-offs. As of November 1, 2025, we had $826.2 million in inventory and $2.1 billion in purchase commitments, many of which are non-cancellable, across our supply chain. Our inability to effectively manage our supply chain capacity and inventory levels with customer demand could adversely impact our results of operations and customer relationships.

Our business may be adversely affected by risks associated with our third-party contract manufacturers’ businesses, financial condition, and the geographies in which they operate.

We rely on third-party manufacturers, including those with facilities in Canada, Mexico, Thailand, Vietnam and the United States, to perform many of our critical supply chain activities. There are a number of risks associated with our dependence on these manufacturers, including:

• constraints in their manufacturing capacity and other operational challenges;

• logistics disruption and reduced control over delivery schedules and planning;

• reliance on their quality assurance procedures and limited warranties provided to us;

• uncertainty regarding manufacturing yields and costs;

• exposure to their financial condition or labor practices;

• natural disasters or climate change in the regions in which they operate;

• the impact of commercial or contractual disputes; and

• lack of primary control of cyber and data security.

We have previously and may in the future experience significant challenges that require us to seek alternative partners and transition manufacturing operations. The process of qualifying a new contract manufacturer and commencing volume production is complex and time-consuming, and such transitions can be disruptive and costly. Our inability to effectively manage the risks associated with our third-party contract manufacturers could materially adversely impact our business and results of operations.

Our dependence upon third-party suppliers and limited sources of supply could adversely impact our business and results of operations.

We rely on a global network of third-party suppliers for products, components, related raw materials, and embedded software. Our products include optical and electronic components for which reliable, high-volume supply is often available only from sole or limited sources. We do not have any guarantees of supply from our third-party suppliers, and in certain cases we have limited contractual arrangements or are relying on standard purchase orders. Our reliance on these suppliers exposes us to risks of supply shortages, delays and increased costs. Increases in market demand and scarcity of raw materials and components have resulted, and may in the future result, in shortages of components, deployment delays, increased cost, and extended delivery timelines. For example, the electro-optical component and semiconductor industries have been experiencing increased demand as a result of significant spending related to AI and other cloud-based applications, which has led to a constrained supply environment. These constraints have resulted, and could further result in shortages, extended lead times, or increased costs that adversely impact our revenue and gross margin. Our inability to secure the required volumes of components or necessary licenses could result in lost revenue, additional product costs, increased lead times and deployment delays that could harm our results of operations and customer relationships.

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We depend on the effective functioning and scalability of our internal business processes, information systems and internal controls to support key business functions and manage growth.

We rely on internal business processes and information systems to support key business functions, and their efficient operation is critical to managing our business. Additionally, our business processes and information systems must be sufficiently scalable to support the growth of our business. We regularly pursue initiatives to scale, transform and optimize our business operations and IT systems through the reengineering of certain processes and investment in automation, including the use of AI. These initiatives may be costly, disruptive and impose operational risks, including the need for system upgrades, new internal controls, and change management initiatives. In addition, our IT systems, and those of third-party IT providers, may be vulnerable to disruption from catastrophic events, power anomalies, data security incidents, and computer system or network failures. Our inability to effectively manage risks associated with our business systems or those of our third-party business partners could result in significant operational disruption and cost, which could damage our business and harm our ability to profitably grow our business.

If we fail to effectively manage the third-party resellers and service partners we use to support our sales and operations, our business, financial results and relationships with customers could be adversely affected.

We rely on a number of domestic and international third-party resellers, distributors, and sales agents to extend our sales reach, and service partners to perform certain installation, maintenance and support functions. Certain partners may also provide similar services for other companies, including our competitors. We may not be able to manage our relationships with these third parties effectively, and we cannot be certain that they will be able to perform their necessary activities in the manner or time required. We may also be exposed to a number of risks or challenges relating to the performance of our resellers, distributors, sales agents and service partners, including delays in recognizing revenue or increased costs, liability for their actions or omissions, risks related to their financial condition, risks related to anti-bribery risk and compliance matters. If we do not effectively manage our relationships with these third-party business partners, our business, financial results and relationships with customers could be adversely affected.

If we are unable to attract and retain qualified personnel, we may be unable to manage our business and execute our strategy effectively.

Our future success depends upon our ability to recruit and retain qualified people, particularly in talent segments critical to the execution of our business strategy. Competition to attract and retain highly skilled technical, engineering and other personnel with experience in our industry is intense, and our employees have been the subject of targeted hiring by our competitors. Competition is particularly intense in certain geographies where we have research and development centers and in certain technology areas where we are looking to expand our business. We may experience difficulty retaining and motivating existing employees and attracting qualified personnel to fill key positions. None of our executive officers is bound by an employment agreement for any specific term. If we are unable to attract and retain qualified personnel, we may be unable to manage our business effectively and execute our strategy, and our operations and financial results could suffer.

Restructuring activities could be costly or disrupt our business and affect our results of operations.

We have taken, and may in the future engage in, steps to reduce the cost of our operations, improve efficiencies, or realign our organization to better match our market opportunities and our business strategy, including reductions in force, office closures, and internal reorganizations. These changes could be disruptive to our business and could result in significant expense, including employee-related costs, inventory and technology-related write-offs, and other charges. Substantial expense or charges resulting from restructuring activities could adversely affect our results of operations and use of cash in those periods in which we undertake such actions.

Risks Related to the Macroeconomic and Geopolitical Environment

Unfavorable changes in macroeconomic conditions could adversely impact our business and results of operations.

Our business and operating results depend significantly on general market and economic conditions. The current global macroeconomic environment is volatile and can be adversely impacted by exchange rates, interest rates, inflation, public health emergencies, natural disasters and geopolitical trends adversely impacting customer spending, global supply chains, and component costs, any of which could also have an adverse impact on us. Market volatility and weakness in the regions in which we operate have previously resulted in sustained periods of decreased demand that have adversely affected our operating results. Macroeconomic volatility, instability, or weakness could also result in:

• increased competitive or pricing pressure;

• decreased ability to forecast and make decisions about budgeting and investments;

• increased overhead and production costs as a percentage of revenue;

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• customer financial difficulty, including order cancellations, delivery deferrals, and difficulties collecting accounts receivable; and

• business and financial difficulties faced by, and changes in spending levels of, our customers, their end users, our suppliers, or other partners.

Due to our concentration of revenue in the United States, we would expect to incur a more significant impact from any change impacting the capital spending environment or causing market weakness in the United States. Consequences of an unfavorable or uncertain macroeconomic environment, globally or in a particular region, could adversely affect customer spending and our results of operations and financial condition.

Unfavorable changes in geopolitical conditions could adversely impact our business and results of operations.

Our global operations and supply chain expose us to risks associated with geopolitical developments, including instability or disruption in particular region, war, terrorism, riot, civil insurrection, and social or political unrest. We are also exposed to a wide range of shifting economic, regulatory or national security priorities in the countries we operate. Increasing tensions between the United States and China—including tariffs, export controls, investment restrictions, and evolving data security or technology transfer requirements—could disrupt our supply chain. Any escalation of these tensions, or similar geopolitical volatility in other regions, could result in reduced demand, increased costs, supply shortages, product delays or other adverse consequences to our business and operations. Our success depends on our ability to anticipate and manage these risks effectively. Failure to mitigate these risks could reduce our sales, or give rise to incremental costs that could adversely affect our results of operations.

Risks Related to Cybersecurity, Legal, and Regulatory Matters

Cyber-attacks could compromise our technology and information, damaging our business and reputation and disrupting our operations.

Our network environment and assets, and those of our third-party business partners, maintain information that is confidential, regulated, proprietary or sensitive to our business. The frequency and sophistication of cybersecurity events globally continues to increase, including through the use of AI, with companies in our industry particularly targeted given the nature of the products that we sell. Companies in the technology, communications and networking industries have been subjected to data security incidents, including cyber-attacks, attacks against products, and other attempts to gain unauthorized access to network assets, infrastructure or sensitive information.

We and our business partners have been, and may be in the future, subjected to cybersecurity incidents including ransomware attacks, exploitation, intrusion, disruption and other attempts to gain unauthorized access. These incidents could cause us to incur significant costs, risk to our technology, disruption of our operations, harm to customers and stakeholders, and reputational damage. We may also be subject to increased regulatory scrutiny, governmental investigations or enforcement actions, and regulatory fines. Additionally, a data security incident may result in significant remediation expenses and increased cybersecurity protection and insurance costs.

While we employ policies, training, controls, and other safeguards to mitigate these risks, there is no assurance they will be sufficient to prevent future data security incidents or insider threats. We have experienced, and may further experience, a range of incidents, including phishing, emails purporting to come from a company executive or vendor seeking payment requests, malware, and communications from look-alike corporate domains, as well as risks from malicious insiders and third-party software and services. We have also faced unauthorized access and exfiltration of confidential data through exploitation of vulnerabilities in third-party applications. While these incidents have not resulted in material cost or had a material effect on our business, operations, technology, or data to date, they could in the future. While we maintain cybersecurity insurance, there is no assurance that the coverage would be sufficient to cover any losses. Despite our cybersecurity measures, we operate in an evolving threat landscape with growing regulatory expectations that increases the risk that a security incident could materially adversely affect our business operations, reputation, or financial results.

Increased regulation of product security, cybersecurity and data practices could adversely affect our business and results of operations

We operate in a regulatory environment that is rapidly evolving with respect to product security, cybersecurity, and the collection, use, and retention of data. Governments around the world continue to adopt new, and expand existing, laws and regulations imposing heightened requirements on companies related to these topics. Further expansion of product security, cybersecurity, or data protection regulations, whether through new legislation, more stringent industry standards, or increased enforcement activity, could require us to modify our products, enhance our security controls, or change our data practices, potentially resulting in increased costs. Failure to comply with applicable laws and regulations, or perceived shortcomings in our security or data practices, could subject us to governmental investigations, regulatory penalties, litigation, or reputational harm which could materially and adversely affect our business, financial condition, and results of operations.

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Tariffs and other import measures imposed by the United States or other countries may adversely affect our business and results of operations.

Significant changes to trade policy, international trade agreements, export controls, sanctions, or tariffs have adversely impacted and could materially adversely impact our business, operations, and financial results. The tariff policy environment has been and is expected to continue to be dynamic. Our revenue is concentrated, with approximately 72% of our revenue in fiscal 2025 coming from the United States. Tariffs recently implemented that have impacted or could materially impact our business include tariffs on U.S. imports:

• from Canada and Mexico, as products making up a significant portion of our revenue are manufactured in or distributed from Mexico, and we generally introduce new products and conduct related early volume manufacturing in Canada;

• of steel, aluminum, and copper, including derivative goods that include certain of our products;

• from China, as our supply chain includes certain China-based suppliers; and

• from a wide range of countries globally, including Thailand and Vietnam, where we also rely on third-party manufacturing operations for a significant portion of our revenue.

Additionally, we currently rely upon certain trade agreements and product or technology-based exemptions that reduce our tariff exposure. However, the U.S. government is currently investigating imports of products, including semiconductors and derivative products relevant to our business, which could result in material additional tariffs. There can be no guarantee as to which of our products will be impacted by new or changing tariffs, or that they will remain eligible for exceptions under existing or future trade agreements or executive orders.

We have taken steps, and may take additional steps, to mitigate the impact of tariffs on our business, including: by availing ourselves of certain exemptions to tariffs; by making changes to our supply chain practices, sources of supply, or manufacturing locations; and by passing the cost of tariffs to customers. These mitigation strategies generally take considerable time to implement, can result in significant costs, and can disrupt our supply chain. Moreover, customer reaction to the imposition of new tariffs, or any tariff mitigation steps we elect to take is uncertain and may result in reduced spending, deferred orders or delivery of existing orders, or shifting of purchases to other vendors, each of which would adversely impact our financial results and competitive position.

Emerging issues related to the development and use of AI could give rise to legal or regulatory action, damage our reputation, or otherwise materially harm of our business.

Our development and use of AI technology in our products and operations remains in the early phases. While we aim to develop and use AI responsibly and attempt to mitigate ethical and legal issues presented by its use, we may ultimately be unsuccessful in identifying or resolving issues before they arise. AI technologies are complex and rapidly evolving, and the technologies that we develop or use may ultimately be flawed. Moreover, AI technology is subject to rapidly evolving domestic and international laws and regulations, including executive orders by the U.S. government and the EU’s Artificial Intelligence Act, which could impose significant costs and obligations on the Company. Emerging regulations may also pertain to data privacy, data protection, and the ethical use of AI, as well as clarifying intellectual property considerations. Our use of AI could give rise to legal or regulatory action or increased scrutiny or liability, and may damage our reputation or otherwise materially harm our business.

Legal proceedings, including government investigations and other claims or disputes, may be costly to defend and could adversely affect our business.

We are, from time to time, subject to claims, lawsuits, government investigations, and other legal proceedings that may arise in the ordinary course of business. These matters can be complex, involve uncertain outcomes, and require significant management time and resources. These proceedings could result in substantial costs to defend, monetary damages, fines, penalties, or injunctive relief, and could adversely affect our reputation, financial condition, or operating results.

Government regulations affecting our industry could harm our business and results of operations.

Our global operations are subject to complex U.S. and foreign laws and regulations, including trade controls, anti-corruption laws, antitrust regulations, sovereignty and localization requirements, and environmental and sustainability regulations. Compliance with these laws may impose significant costs, and violations could result in fines, penalties, criminal sanctions, restrictions on our operations, and harm to our reputation. While we maintain policies and procedures to promote compliance, they may not fully prevent violations or mitigate risks from employee misconduct, third-party actions, or evolving interpretations of these laws. Moreover, our customers are subject to these and a wide range of other global regulations, including communications regulations, impacting their network operations and their business more generally. These regulations may adversely affect customer spending and, by extension, also negatively impact our operations or financial results.

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Changes in tax law or regulation, effective tax rates and other adverse outcomes with taxing authorities could adversely affect our results of operations.

We are subject to complex, evolving, and sometimes conflicting tax laws and regulations in the jurisdictions where we operate. Changes in tax legislation, interpretations, or enforcement practices, including those related to global minimum tax regimes, transfer pricing, or the allocation of profits among countries, could increase our effective tax rate, result in additional tax liabilities, or impact our profitability. Changes in tax regulation could also adversely impact our go-to-market approach, global sourcing strategy, manufacturing practices, or competitiveness of our products. We are subject to the continuous examination of our income and other tax returns by the Internal Revenue Service and other tax authorities globally, and we have a number of such reviews underway at any time. It is possible that tax authorities may disagree with certain positions we have taken, and an adverse outcome of such a review or audit could have a negative effect on our financial position and operating results. There can be no assurance that the outcomes from such examinations, or changes in tax law or regulation impacting our effective tax rates, will not have an adverse effect on our business, financial condition and results of operations.

Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business, operating results and stock price.

We cannot be certain that our current design for internal control over financial reporting, or any future changes thereto, will be sufficient to enable management to determine that our internal controls are effective for any period, or on an ongoing basis. Certain ongoing initiatives, including efforts to transform business processes, to transition certain functions to third-party resources or providers, and to enter new markets or geographies, will necessitate modifications to our internal control systems, processes and related information systems as we optimize our business and operations. If we are unable to assert that our internal controls over financial reporting are effective, market and customer perception of our financial condition and business may suffer and the trading price of our stock may be adversely affected.

Risks Related to Common Stock, Debt, and Assets

Our stock price is volatile.

The market price and trading volume of our securities has been and may be subject to significant volatility, influenced by a variety of factors, many of which are outside our control. Our stock price has experienced significant fluctuations in the past and may continue to do so. Stock price volatility can result from any of the factors discussed in this “Risk Factors” section, including overall market and economic conditions, industry trends, investor sentiment, variations in operating results compared to expectations, announcements by us or our competitors, and changes in financial forecasts or guidance. Broader fluctuations in equity markets, shifts in market indices, or loss of investor confidence in a particular sector could also affect the market for our securities, regardless of our actual operating performance.

Volatility and uncertainty in the capital markets could limit our access to funding on favorable terms or at all.

We have accessed the capital markets in the past and have successfully raised funds, including through the issuance of equity, convertible notes and other indebtedness. We regularly evaluate our liquidity position, debt obligations and anticipated cash needs to fund our long-term operating plans, and we may consider it necessary or advisable to raise additional capital or incur additional indebtedness in the future. If we raise additional funds, our existing stockholders could suffer dilution in their percentage ownership of our company, or our leverage and outstanding indebtedness could increase. Our ability to access capital, and the cost of that capital, can be affected by a range of factors, including market conditions, interest rates, inflation, and ratings agency evaluation of our company. As such, there can be no assurance that financing alternatives will be available to us on favorable terms or at all.

Outstanding indebtedness may adversely affect our liquidity and results of operations and could limit our business.

We are a party to credit agreements governing a revolving credit facility, a term loan, and unsecured senior notes. These agreements contain certain covenants that limit our operational flexibility and include customary remedies that would apply should we default on our obligations. We may also enter into additional debt transactions or credit facilities which may increase our indebtedness and result in additional restrictions on our business. Our indebtedness could have important negative consequences, including: increasing our vulnerability to adverse economic and industry conditions; limiting our ability to obtain additional financing; debt service and repayment obligations that may reduce the availability of cash resources; limiting our flexibility in planning for, or reacting to, changes in our business and the markets; and placing us at a possible competitive disadvantage to competitors.

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Certain assets on our balance sheet are subject to impairment or write-down.

We have a number of assets on our balance sheet with significant values that can be adversely impacted by factors related to our business and operating performance, as well as factors outside of our control, including that: the value of receivables may be impacted by difficulty collecting amounts owed by customers, suppliers or partners due to their financial conditions; the value of certain fixed assets can be materially impacted by changes in our business operations or strategy; the value of the deferred tax asset can be significantly impacted by changes in tax policy, changes in future tax rates, or by our tax planning strategy; and the value of our goodwill or our long-lived assets may be impaired if market conditions for our business change. We could be required to record an impairment charge of certain of our assets which would create a loss and adversely affect our operating results.

Item 7.      Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this annual report.

Overview

We are a network technology company, providing hardware, software, and services to a wide range of network operators and enabling enhanced network capacity, service delivery, and automation. Our solutions support network traffic across a wide range of applications, including cloud, voice, video, data, and AI. Our network solutions are used globally by cloud providers, service providers, and other network operators across multiple industry verticals.

The markets into which we sell are dynamic and characterized by a high rate of change. Networks continue to experience strong demand for increased bandwidth due to traffic growth, which is being driven by a diverse set of services, technologies, and customer needs.

Business Momentum

Our industry has been experiencing unprecedented increases in demand, in particular as a result of expenditures related to AI and other cloud-based applications. As a result, we experienced broad-based business momentum in fiscal 2025, including significant year-over-year order growth in both of our major customer segments, cloud providers and service providers. Our revenue increased by 19% to $4.8 billion in fiscal 2025 as compared to $4.0 billion in fiscal 2024, with orders for our products and services significantly exceeding our revenue. We also significantly grew our backlog, which includes both products and services, to $5.0 billion, as compared to $2.1 billion at the end of fiscal 2024. While we believe much of this backlog growth reflects the increased demand for connectivity to address AI workloads, a portion is related to an industry-wide constrained supply environment. Our ability to scale our operational and manufacturing capacity is critical to our success within this environment. As such, we and many of our suppliers have sought to increase capacity to ensure availability of key inputs for our products and reduce extended lead times.

Within this environment, we have experienced increased customer concentration in both orders and revenue, particularly with cloud providers, with a single cloud provider customer continuing to provide a significant volume of orders and two cloud providers in our top five customers by revenue for fiscal 2025. Our growing sales to cloud providers has resulted in a changing mix in our product sales.

Gross Margin Dynamics

Our gross margin decreased to 42.0% in fiscal 2025, compared to 42.8% in fiscal 2024, primarily due to lower services margin driven by increased incentive compensation and shifts in services mix. In fiscal 2025, our growing sales to cloud providers contributed to a changing product mix and an increase in sales of interconnect products, impacting our product gross margin. Through our continued focus on a range of initiatives to maintain and enhance our gross margin, including cost reductions, manufacturing efficiencies and lower inventory provisions, we were able to offset the impact of this dynamic and our product margin was unchanged from fiscal 2024 to fiscal 2025.

Investment in Technology Innovation

During fiscal 2025, we invested $848.3 million in research and development activities, an increase of 11% compared to fiscal 2024. We believe that our investment capacity and our efforts to push the pace of innovation are important competitive differentiators in our markets, which requires considerable investment capacity and expenditures. In particular, in an effort to capture certain market opportunities created by the impact of AI on networks, we continued to increase the performance of, and enhance the capabilities for our leading WaveLogic TM coherent modem technology, through which we seek to extend our leadership in optical networking, and leverage it to expand our addressable market, including inside and around the data center.

In an effort to expand our addressable market, during the fourth quarter of fiscal 2025, we acquired privately-held Nubis, which specializes in high-performance, ultra-compact, low-power optical and electrical interconnects tailored to support AI workloads. Nubis’s portfolio, including technologies for co-packaged optics, near packaged optics and electrical active copper cables, will complement our existing optical networking portfolio of high-speed interconnects. See Note 3 to our Consolidated Financial Statements included in Item 8 of Part II of this report for more information on this acquisition.

Operating Expense Management

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Our operating expense grew from $1.6 billion in fiscal 2024 to $1.8 billion in fiscal 2025. As a result of our strong financial performance and order levels in fiscal 2025, our expense associated with our incentive compensation programs, including our annual bonus plan and sales compensation, increased year over year.

We regularly monitor our spending to optimize our operating expenses and to ensure that our strategic investments are aligned with our highest-growth demand opportunities. During the fourth quarter of fiscal 2025, we began implementing a plan intended to deliver increased operating efficiencies through a reduction in headcount of 4% to 5% of our global workforce and a decision to cease forward investment in certain broadband development initiatives, primarily 25G PON.

Capital Allocation Strategy

Our capital allocation strategy is focused on maintaining our significant innovation investment, investing in select transactions, and returning value to stockholders, while preserving our strategic and operational flexibility. We continuously work to improve our cash cycle and evaluate alternatives to manage our capital structure in order to enhance our liquidity. We ended fiscal 2025 with $1.4 billion of cash, cash equivalents, and investments. Cash generated from operations increased to $806.1 million in fiscal 2025 as compared to $514.5 million in fiscal 2024. Consistent with our capital allocation priorities, we invested $140.8 million in capital purchases, primarily for supply chain equipment, and research and development, $231.1 million for the acquisition of Nubis and $334.5 million on our share buyback program.

Consolidated Results of Operations

A discussion regarding results of operations for fiscal 2025 compared to fiscal 2024 is presented below. A discussion of fiscal 2024 compared to fiscal 2023 can be found under Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended November 2, 2024, filed with the SEC on December 20, 2024, which is available free of charge on the SEC’s website at www.sec.gov and our Investor Relations website at investor.ciena.com.

Our results of operations are presented based on our operating segments: (i) Networking Platforms; (ii) Platform Software and Services; (iii) Blue Planet Automation Software and Services; and (iv) Global Services. Effective as of the fourth quarter of fiscal 2025, we renamed (i) our “Maintenance Support and Training” product line to “Maintenance, Support, and Learning”, (ii) our “Installation and Deployment” product line to “Implementation”, and (iii) our “Consulting and Network Design” product line to “Advisory and Enablement.” These changes, affecting only the presentation of such information, were made on a prospective basis and do not impact comparability of previous financial results. However, references to the prior reported product lines have been changed herein to the new names described above. See Notes 2 and 24 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for more information on our segment reporting.

Revenue

As a result of the increased demand described above, our revenue increased by 18.8% in fiscal 2025 as compared to fiscal 2024.

Operating Segment Revenue

The table below sets forth the changes in our operating segment revenue for the periods indicated (in thousands, except percentage data):

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Fiscal Year

Increase (decrease)

Revenue:

Networking Platforms

Optical Networking

Routing and Switching

Total Networking Platforms

Platform Software and Services

Blue Planet Automation Software and Services

Global Services

Maintenance, Support, and Learning

Implementation

Advisory and Enablement

Total Global Services

Consolidated revenue

Denotes % of total revenue

Denotes % change from 2024 to 2025

• Networking Platforms segment revenue increased by $634.3 million.

◦ Optical Networking revenue increased by $603.7 million, primarily driven by increases in sales of our RLS to cloud providers. Revenue also benefited from increased sales of our coherent pluggable transceivers to cloud providers, 6500 Packet-Optical Platforms to service provider customers, and Waveserver ® systems.

◦ Routing and Switching revenue increased by $30.6 million, primarily driven by an increase in sales of our 3000 and 5000 series of service delivery and aggregation platforms to a cloud provider customer for DCOM solutions.

• Platform Software and Services segment revenue increased by $5.8 million, primarily reflecting sales increases of our software consulting services.

• Blue Planet Automation Software and Services segment revenue increased by $37.9 million, primarily reflecting sales increases in our orchestration software, unified assurance and analytics software, and our inventory management software services.

• Global Services segment revenue increased by $76.5 million, primarily reflecting sales increases of $61.7 million of our implementation services and $14.2 million of our maintenance, support, and learning.

Revenue by Geographic Region

Our operating segments engage in business and operations across three geographic regions: the United States, Canada, the Caribbean and Latin America (“Americas”); Europe, Middle East and Africa (“EMEA”); and Asia Pacific, Japan and India (“APAC”). The following table reflects our geographic distribution of revenue, principally based on the relevant location for our delivery of products and performance of services (in thousands, except percentage data):

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Fiscal Year

Increase

(decrease)

Americas

EMEA

APAC

Total

Denotes % of total revenue

Denotes % change from 2024 to 2025

• Americas revenue increased by $654.5 million, primarily driven by increased sales to cloud providers as well as increased sales to service providers, each primarily in the United States.

• EMEA revenue increased by $83.0 million, primarily driven by increased sales to cloud providers in the Netherlands and service providers in the United Kingdom, partially offset by decreased sales to submarine network operators.

• APAC revenue increased by $17.0 million, primarily driven by increased sales in Japan and Singapore, partially offset by decreased sales to Hong Kong and India.

Revenue Concentration

Sales to our five largest customers contributed 49.7% of our revenue in fiscal 2025 and 43.8% of our revenue in fiscal 2024. Sale s to one cloud provider were $851.6 million, or 17.9% of total revenue in fiscal 2025 and $532.3 million or 13.3% of total revenue in fiscal 2024. Sales to AT&T were $500.7 million, or 10.5% of total revenue, in fiscal 2025, and $475.3 million, or 11.8% of total revenue, in fiscal 2024. No other customer accounted for greater than 10% of our revenue in fiscal 2025 or fiscal 2024.

Currency Fluctuations

During fiscal 2025, 9.9% of our revenue was non-U.S. Dollar denominated, primarily including sales in Euros, Indian Rupees and Canadian Dollars. During fiscal 2025, as compared to fiscal 2024, the U.S. Dollar fluctuated against these and other currencies, with minimal impact as compared to fiscal 2024.

Gross Margin

Gross margin is calculated as revenue less cost of goods sold, divided by revenue.

Product cost of goods sold consists primarily of amounts paid to third-party contract manufacturers, component costs, employee-related costs, shipping, logistics, and tariff costs associated with manufacturing-related operations, warranty and other contractual obligations, royalties, license fees, amortization of intangible assets, cost of excess and obsolete inventory and, any estimated losses on committed customer contracts.

Services cost of goods sold consists primarily of direct and third-party costs associated with our provision of services, including implementation, maintenance, support, learning, advisory and enablement activities, and any estimated losses on committed customer contracts. The majority of these costs relate to personnel, including employee and third-party contractor-related costs.

Gross margin can fluctuate due to a number of factors, including technology-based price compression, product and service mix, the lifecycle stage of our products and cost reductions.

The tables below set forth the changes in revenue and gross margin for the periods indicated (in thousands, except percentage data):

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Fiscal Year

Gross

Revenue

Gross Margin (%)

Revenue

Gross Margin (%)

Revenue Change (%)

Margin Change

Total

Products

Services

• Gross margin decreased by 80 basis points from 42.8% for fiscal 2024 to 42.0% for fiscal 2025, primarily reflecting decreased services margin.

• Product gross margin did not change for fiscal 2025 as compared to fiscal 2024. However, the primary changes within gross margin were a less favorable product mix, offset by improved manufacturing efficiencies, product cost reductions and reduced inventory writedowns.

• Services gross margin decreased by 350 basis points, from 49.3% for fiscal 2024 to 45.8% for fiscal 2025, primarily due to higher incentive compensation, a lower proportion of maintenance services sales, and a higher proportion of implementation services sales.

Operating Expense

Operating expense consists of the component elements described below.

• Research and development expense primarily consists of salaries and related employee expense (including share-based compensation expense), prototype costs relating to design, development, product testing, depreciation expense, and third-party consulting costs.

• Selling and marketing expense primarily consists of salaries, commissions and related employee expense (including share-based compensation expense) and sales and marketing support expense, including travel, demonstration units, trade show expense, and third-party consulting costs.

• General and administrative expense primarily consists of salaries and related employee expense (including share-based compensation expense) and costs for third-party consulting and other services.

• Significant asset impairments and restructuring costs primarily reflect the costs associated with significant impairment or abandonment of assets and actions we have taken to restructure our business, including reductions in force, facility optimization, and the redesign of business processes.

• Amortization of intangible assets primarily reflects the amortization of both purchased technology and customer relationships derived from our acquisitions.

• Acquisition and integration costs primarily consist of expenses for financial, legal and accounting advisors and severance and other employee-related costs, associated with our acquisition activity.

The table below sets forth the changes in operating expense for the periods indicated (in thousands, except percentage data):

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Fiscal Year

Increase

(decrease)

Research and development

Selling and marketing

General and administrative

Significant asset impairments and restructuring costs

Amortization of intangible assets

Acquisition and integration costs

Total operating expenses

Denotes % of total revenue

Denotes % change from 2024 to 2025

• Research and development expense increased by $80.8 million, primarily due to higher incentive compensation. Expenses were also increased by professional services, partially offset by foreign exchange benefits.

• Selling and marketing expense increased by $70.7 million, primarily due to higher incentive compensation.

• General and administrative expense increased by $18.1 million, primarily due to incentive compensation, partially offset by lower legal fees and bad debt expense.

• Significant asset impairments and restructuring costs increased by $87.5 million, primarily due to the abandonment of our in-process R&D intangible asset. For more information on our restructuring costs, see Note 4 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.

• Amortization of intangible assets decreased by $3.8 million primarily reflecting certain intangible assets having reached the end of their economic lives.

• Acquisition and integration costs in fiscal 2025 primarily reflect financial, legal, and accounting advisory costs and certain employee-related costs related to our acquisition of Nubis.

Currency Fluctuations

During fiscal 2025, 46.3% of our operating expense was non-U.S. Dollar denominated, including Canadian Dollars and Indian Rupees. During fiscal 2025 as compared to fiscal 2024, the U.S. Dollar fluctuated against these and other currencies with minimal impact as compared to fiscal 2024.

Segment Profit (Loss)

The table below sets forth the changes in our segment profit (loss) for the respective periods (in thousands, except percentage data):

Fiscal Year

Increase

(decrease)

Segment profit (loss):

Networking Platforms

Platform Software and Services

Blue Planet Automation Software and Services

Global Services

Denotes % change from 2024 to 2025

• Networking Platforms segment profit increased by $179.9 million, primarily due to higher sales volume as described above, partially offset by higher research and development costs.

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• Platform Software and Services segment profit decreased by $5.2 million, primarily due to increased research and development costs and reduced services margins as described above, partially offset by higher services sales volume.

• Blue Planet Automation Software and Services segment profit increased by $33.6 million, primarily due to higher sales volume as described above, improved margins, and lower research and development costs.

• Global Services segment profit increased by $9.5 million, primarily due to increased sales volumes as described above, partially offset by reduced margins also described above.

Other Items

The table below sets forth the changes in other items for the periods indicated (in thousands, except percentage data):

Fiscal Year

Increase

(decrease)

Interest and other income, net

Interest expense

Loss on extinguishment and modification of debt

Provision for income taxes

Denotes % of total revenue

Denotes % change from 2024 to 2025

• Interest and other income, net decreased by $1.4 million, primarily resulting from lower interest income on our investments, partially offset by the impact of foreign exchange rates on assets and liabilities denominated in a currency other than the relevant functional currency, net of hedging activity.

• Interest expense decreased by $7.6 million, primarily due to lower interest rates on our floating rate debt, net of hedging activity.

• Loss on extinguishment and modification of debt reflects the refinancing of our 2030 Term Loan in the first quarter of fiscal 2025.

• Provision for income taxes decreased by $2.9 million, primarily due to the effective tax rate for fiscal 2025 being lower than the effective tax rate for fiscal 2024. The lower effective tax rate was a result of the recognition of tax benefits related to Uncertain Tax Positions for which the statute of limitations has expired.

Liquidity and Capital Resources

We regularly evaluate our capital structure, liquidity position, debt obligations, and anticipated cash needs to fund our operating or investment plans, and we will continue to consider capital raising and other market opportunities that may be available to us.

Principal Sources of Liquidity . Our principal sources of liquidity include our cash, cash equivalents and investments, which as of November 1, 2025 totaled $1.4 billion, as well as our Credit Facility (as defined in Note 19 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report). Based on past performance and current expectations, we believe that will satisfy our currently anticipated working capital needs, capital expenditures, and other liquidity requirements associated with our operations through the reasonably foreseeable future, including the next 12 months.

Foreign Liquidity . The amount of cash, cash equivalents and short-term investments held by our foreign subsidiaries was $412.4 million as of November 1, 2025 . Approximately $92.3 million of undistributed earnings from these foreign subsidiaries is expected to be repatriated, with any remaining amounts continuing to be indefinitely reinvested. A deferred tax liability related to the expected repatriation amount was accrued in fiscal 2023. There are no other significant temporary differences related to our investment in the foreign subsidiaries for which a deferred tax liability has not been recognized. See Note 22 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.

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Stock Repurchase Authorization. On October 2, 2024, we announced that our Board of Directors authorized a program to repurchase up to $1.0 billion of our common stock, which replaced in its entirety the previous stock repurchase program authorized in fiscal 2022 and completed in fiscal 2024. During fiscal 2025, we repurchased $329.7 million of our common stock under the stock repurchase program, and $670.3 million remained under the current repurchase authorization as of November 1, 2025 . The amount and timing of any further repurchases under our stock repurchase program are subject to a variety of factors including liquidity, cash flow, stock price and general business and market conditions. The program may be modified, suspended, or discontinued at any time. See Notes 21 and 27 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report .

Cash Flows

The following table sets forth changes in our cash and cash equivalents and investments in marketable debt securities (in thousands):

November 1, 2025

November 2, 2024

Increase (decrease)

Cash and cash equivalents

Short-term investments in marketable debt securities

Long-term investments in marketable debt securities

Total cash and cash equivalents and investments in marketable debt securities

Cash, cash equivalents and investments increased by $33.1 million during fiscal 2025. Cash from operating activities generated $806.1 million, which was partially offset by the following: (i) cash used for stock repurchases under our stock repurchase program of $334.5 million; (ii) cash used for the acquisition of a business of $231.1 million , net of cash acquired; (iii) cash used to fund our investing activities for capital expenditures totaling $140.8 million; (iv) stock repurchased upon vesting of our stock unit awards to employees relating to tax withholding of $91.3 million; and (v) cash used for payments on our term loan due October 28, 2030 (the “Refinanced 2030 Term Loan”) of $11.6 million. In addition to cash provided by operations, the issuance of equity under our employee stock purchase plans provided $35.9 million in cash during fiscal 2025.

See Notes 3, 18, and 21 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for information relating to these transactions.

Cash Provided by Operating Activities

The following sections set forth the components of our $806.1 million of cash provided by operating activities for fiscal 2025. Net income (adjusted for non-cash charges) provided cash of $586.3 million and cash provided by our operating assets and liabilities was $219.8 million.

Net Income (adjusted for non-cash charges)

The following table sets forth our net income (adjusted for non-cash charges) during fiscal 2025 (in thousands):

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Year Ended

November 1, 2025

Net income

Adjustments for non-cash charges:

Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements

Abandonment of acquired in-process research and development

Share-based compensation costs

Amortization of intangible assets

Deferred taxes

Provision for inventory excess and obsolescence

Provision for warranty

Other

Net income (adjusted for non-cash charges)

Operating Assets and Liabilities

Operating asset and liability requirements decreased by $219.8 million during the period. The following table sets forth the major components of the cash changes in operating assets and liabilities (in thousands):

Year Ended

November 1, 2025

Accounts receivable

Inventories

Prepaid expenses and other

Accounts payable, accruals, and other obligations

Deferred revenue

Operating lease assets and liabilities, net

Total cash provided by operating assets and liabilities

As compared to the end of fiscal 2024:

• The change in accounts receivable which includes accounts receivable, net, and long-term accounts receivable (see Notes 2 and 14 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for information relating to these transactions) primarily reflects increased sales volume, partially offset by improved cash collections;

• The change in inventories primarily reflects increases in raw materials;

• The change in prepaid expenses and other primarily reflects a significant reduction in the amount of refundable cash advances to third-party contract manufacturers, partially offset by increases in contract assets for unbilled accounts receivable and non-trade accounts receivable;

• The change in accounts payable, accruals, and other obligations primarily reflects a higher accrual associated with our incentive compensation and the timing of payments to suppliers;

• The change in deferred revenue primarily represents an increase in advanced payments received from customers for product orders prior to revenue recognition; and

• The change in operating lease assets and liabilities, net, represents cash paid for operating lease payments in excess of operating lease costs.

Cash Paid for Interest, Net

The following table sets forth the cash paid for interest, net during fiscal 2025 (in thousands):

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Year Ended

November 1, 2025

2030 Term Loan terminated January 17, 2025 (1)

Refinanced 2030 Term Loan due October 28, 2030 (2)

2030 Senior Notes due January 31, 2030 (3)

Interest rate swaps (4)

Revolving Credit Facility (5)

Finance leases

Cash paid during period

(1) The 2030 Term Loan bore interest at SOFR for the chosen borrowing period plus a spread of 2.00% subject to a minimum SOFR rate of 0.00%.

(2) Interest on the Refinanced 2030 Term Loan is payable periodically based on the interest period selected for borrowing. The Refinanced 2030 Term Loan bears interest at SOFR for the chosen borrowing period plus a spread of 1.75% subject to a minimum SOFR rate of 0.00%. At the end of fiscal 2025, the interest rate on the Refinanced 2030 Term Loan was 5.78%.

(3) The 2030 Senior Notes bear interest at a rate of 4.00% per annum and mature on January 31, 2030. Interest on the 2030 Notes is payable semiannually on January 31 and July 31 of each year.

(4) Our interest rate swaps fix the SOFR rate for $350.0 million of our Term Loans at 3.47% through January 2028 and another $350.0 million of our Term Loans at 3.287% through December 2028. The interest rate swaps entered into in April 2022, which matured in September 2025, fixed the SOFR rate for $350.0 million of our Term Loans at 2.968% from September 2023 to September 2025.

(5) During fiscal 2025, we utilized the revolving credit facility to issue certain standby letters of credit and paid nominal commitment fees, letter of credit fees, and other administrative charges primarily relating to the revolving credit facility.

For additional information about our debt, credit facility, and interest rate swaps, see Notes 15, 18 and 19 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report and Item 7A of Part II of this annual report.

Contractual Obligations

Debt. As of November 1, 2025, we had $1.15 billion outstanding principal associated with our Refinanced 2030 Term Loan, with $11.6 million maturing within 12 months. Interest payments on the Refinanced 2030 Term Loan and payments to be received under the interest rate swaps are variable and are calculated using the interest rate in effect as of November 1, 2025. Future interest payments associated with the Refinanced 2030 Term Loan totaled $328.5 million, with $67.0 million payable within 12 months. Future interest to be received net of payments under the interest rate swaps totaled $12.9 million, with $4.6 million to be received within 12 months. As of November 1, 2025, we had $400.0 million outstanding principal associated with the 2030 Notes payable January 31, 2030. Future interest payments associated with the 2030 Notes totaled $72.0 million, with $16.0 million payable within 12 months.For additional information about our short-term and long-term debt and interest rate swaps, see Notes 15 and 18 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report and Item 7A of Part II of this annual report.

Purchase Order Obligations. As of November 1, 2025 , we had $2.1 billion in outstanding purchase order commitments to our contract manufacturers and component suppliers for inventory. In certain instances, we are permitted to cancel, reschedule or adjust these orders. Consequently, only a portion of this amount relates to firm, non-cancelable and unconditional obligations.

Leases. We have lease arrangements for facilities globally to support the ongoing operations of our business segments and related functions. Office facilities are leased under various non-cancelable operating or finance leases. As of November 1, 2025 , we had fixed lease payment obligations of $109.3 million, with $23.4 million payable within 12 months. See Note 17 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financing arrangements. In particular, we do not have any equity interests in so-called limited purpose entities, which include special purpose entities (SPEs) and structured finance entities.

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Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Note 1 to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. The accounting policies described below are significantly affected by critical accounting estimates. Such accounting policies require significant judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements, and actual results could differ materially from the amounts reported based on these policies.

Revenue Recognition

We apply judgment in determining the transaction price, as we may be required to estimate variable consideration when determining the amount of revenue to recognize. Variable consideration can include various rebate, cooperative marketing, and other incentive programs that we offer to our distributors, partners and customers. When determining the amount of revenue to recognize, we estimate the expected usage of these programs, applying the expected value or most likely estimate and update the estimate at each reporting period as actual utilization data becomes available. We also consider any customer right of return and any actual or potential payment of liquidated damages, contractual or similar penalties, or other claims for performance failures or delays in determining the transaction price.

Revenue is allocated among performance obligations based on standalone selling price (“SSP”). SSP reflects the price at which we would expect to sell that product or service on a stand-alone basis at contract inception and that we would expect to be entitled to receive for the promised products or services. SSP is estimated for each distinct performance obligation and judgment may be required in its determination. The best evidence of SSP is the observable price of a product or service when we sell the products separately in similar circumstances and to similar customers. In instances where SSP is not directly observable, we determine SSP using information that may include market conditions and other observable inputs.

When transfer of control is judged to be over time for implementation and professional service arrangements, we apply the input method to determine the amount of revenue to be recognized in a given period. Utilizing the input method, we recognize revenue based on the ratio of actual costs incurred to date to the total estimated costs expected to be incurred.

Our total deferred revenue for products was $65.4 million and $19.0 million as of November 1, 2025 and November 2, 2024 , respectively. Our services revenue is deferred and primarily recognized ratably over the period during which the services are to be performed. Our total deferred revenue for services was $238.4 million and $218.6 million as of November 1, 2025 and November 2, 2024 , respectively.

Reserve for Inventory Obsolescence

We estimate future customer demand for our products to determine the appropriate reserve for excess and obsolete inventory. Forecasted demand is based on customer backlog, historical usage and sales forecast by product line. We write down inventory that has become obsolete, slow-moving or unmarketable to reduce its carrying value to the estimated net realizable value. Inventory write downs are a component of our product cost of goods sold. Once recorded, inventory write-downs establish a new lower cost basis for that inventory, and are not reversed. In an effort to limit our exposure to delivery delays and to satisfy customer needs, we purchase inventory based on forecasted sales across our product lines. From time to time, we may purchase products in excess of near term demand due to supplier last time buy requirements, or for other strategic reasons. We continue to manage long-lead component purchases and non-cancelable commitments with contract manufacturers and suppliers. As of November 1, 2025 and November 2, 2024 , we had $2.1 billion and $1.7 billion, respectively, in outstanding purchase order commitments to our contract manufacturers and component suppliers for inventory.

For fiscal 2025, 2024 and 2023, we recorded charges for excess and obsolete inventory of $48.4 million, $77.3 million and $29.5 million, respectively, primarily related to a lower forecasted demand for certain Networking Platforms products primarily sold to service providers. Inventory, net of allowance for excess and obsolescence, was $826.2 million and $820.4 million as of November 1, 2025 and November 2, 2024 , respectively.

Goodwill

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We record acquisitions using the purchase method of accounting. The assets acquired and liabilities assumed are recognized at their fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill. The application of the purchase method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to allocate purchase price consideration properly between assets that are depreciated and amortized from goodwill. Our estimates are based on historical experience, information obtained from the management of the acquired companies and, when appropriate, include assistance from independent third-party appraisal firms.

We test goodwill for impairment on an annual basis, which we have determined to be as of the last business day of fiscal September each year, or if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. In evaluating goodwill for impairment, we first decide whether to solely perform a qualitative test, which considers whether events and circumstances exist that indicate it is more likely than not that goodwill for a reporting unit is impaired. If such events or condition are identified, or if we elect to bypass the qualitative evaluation, we test goodwill impairment quantitatively by comparing the fair value of the reporting unit with the unit’s carrying amount, including goodwill. If this test indicates that the fair value is less than the carrying value, an impairment loss is recognized limited to the total amount of goodwill allocated to that reporting unit. A non-cash goodwill impairment charge would have the effect of decreasing earnings or increasing losses in such period. If we are required to take a substantial impairment charge, our operating results would be materially adversely affected in such period.

As of November 1, 2025 and November 2, 2024, the goodwill balance was $521.2 million and $444.7 million, respectively. There were no goodwill impairments resulting from our fiscal 2025 and 2024 impairment tests, and no reporting unit was determined to be at risk of failing the goodwill impairment test. See Note 12 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.

Purchased Intangible Assets

Our purchased intangible assets primarily result from our acquisitions. The accounting for acquisitions requires significant estimates and judgments in their valuation. Critical estimates used in the valuation of purchased intangible assets include, the amount and timing of expected future cash flows, useful lives, and discount rates. While our estimates of fair value are based on assumptions that are believed to be reasonable, these assumptions are inherently uncertain and unpredictable and may not reflect circumstances that may occur.

We review purchased intangible assets for impairment quarterly or whenever triggering events or changes in circumstances indicate that the assets’ carrying amount may not be recoverable from its undiscounted cash flows. These assets are assigned to asset groups which represent the lowest level for which we identify cash flows. We measure impairment loss as the amount by which the carrying amount of the asset or asset group exceeds its fair value.

During fiscal 2025, approximately $89.1 million was abandoned from in-process research and development with a corresponding expense reported in significant asset impairments and restructuring costs on the Consolidated Statement of Operations. As of November 1, 2025 and November 2, 2024, these assets totaled $224.2 million and $165.0 million , net, respectively. There were no asset impairments resulting from our fiscal 2025 and 2024 impairment tests. See Note 13 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.

Deferred Tax Assets

Pursuant to Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, we maintain a valuation allowance for a deferred tax asset when it is deemed to be more likely than not that some or all of the deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income (including the reversals of deferred tax liabilities) during the periods in which those deferred tax assets will become deductible. In evaluating whether a valuation allowance is required under such rules, we consider all available positive and negative evidence, including prior operating results, the nature and reason for any losses, our forecast of future taxable income, utilization of tax planning strategies, and the dates on which any deferred tax assets are expected to expire. These assumptions and estimates require a significant amount of judgment and are made based on current and projected circumstances and conditions.

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Quarterly, we perform an analysis to determine the likelihood of realizing our deferred tax assets and whether sufficient evidence exists to support reversal of all or a portion of the valuation allowance. The net deferred tax assets as of November 1, 2025 and November 2, 2024 were $884.4 million and $885.9 million, respectively, including valuation allowances of $214.5 million and $192.4 million, respectively. We will continue to evaluate future financial performance to determine whether such performance is both sustained and significant enough to provide sufficient evidence to support reversal of all or a portion of the remaining valuation allowance. The value of our net deferred tax asset may be subject to change in the future, depending on our generation or projections of future taxable income, as well as changes in tax law or our tax planning strategy.