{ "ticker": "NTAP", "company": "NetApp Inc.", "filing_type": "10-K", "year_current": "2025", "year_prior": "2024", "summary": { "added": 91, "removed": 4, "modified": 27, "unchanged": 7, "total_current": 125, "total_prior": 38 }, "source": "SEC EDGAR", "url": "https://riskdiff.com/ntap/2025-vs-2024/", "markdown_url": "https://riskdiff.com/ntap/2025-vs-2024/index.md", "json_url": "https://riskdiff.com/ntap/2025-vs-2024/index.json", "generated": "2026-06-01", "ai_summary": null, "risks": [ { "status": "ADDED", "current_title": "Our initiatives and disclosures related to sustainability and corporate responsibility matters expose us to risks that could adversely affect our reputation and performance.", "prior_title": null, "current_body": "We have publicly announced, and may continue to establish and announce, initiatives regarding sustainability and corporate responsibility matters, as well as other related matters in our Impact Report, on our website and elsewhere. These statements, which are included in our Impact Report, on our website, in our SEC filings, and elsewhere, reflect our current plans and aspirations but are not guarantees of achievement. Implementing these initiatives and goals can be challenging and costly, and our current plans and aspirations may not all succeed or be achieved in the way and on the timelines we expect or at all. While these initiatives and goals are not a critical part of our business operations and may not significantly impact our financial performance directly, they are an important part of our business ethos and corporate culture that we believe is valued and appreciated by our investors and key stakeholders. There is growing attention from governments, investors, customers, employees, and other stakeholders on sustainability and corporate responsibility matters, and laws and regulations regarding disclosure, reporting and diligence requirements continue to evolve. We may face scrutiny from stakeholders regarding the scope or nature of our sustainability and corporate responsibility initiatives or any changes to these initiatives. In addition, state attorneys general and other governmental authorities may take action against certain sustainability and corporate responsibility policies or practices, and we may become subject to restrictions on sustainability and corporate responsibility initiatives. Incomplete or inaccurate sustainability and corporate responsibility-related data, failure to achieve sustainability and corporate responsibility goals, or government enforcement actions or litigation relating to sustainability and corporate responsibility initiatives could negatively impact our ability to attract or retain employees, our attractiveness as an investment or business partner, and ultimately our business, financial performance, and growth." }, { "status": "ADDED", "current_title": "We may not be able to maintain appropriate internal financial reporting controls and procedures.", "prior_title": null, "current_body": "We cannot be assured that significant deficiencies or material weaknesses in our internal control over financial reporting will not exist in the future. Any failure to maintain or implement required new or improved controls, or any difficulties we encounter in their implementation, including in connection with our new ERP system, could result in significant deficiencies or material weaknesses, cause us to fail to timely meet our periodic reporting obligations, or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of periodic management evaluations and annual auditor attestation reports regarding disclosure controls and the effectiveness of our internal control over financial reporting required under the Sarbanes-Oxley Act and the rules promulgated thereunder. The existence of a material weakness could result in errors in our financial statements that could result in a restatement of financial statements, cause us to fail to timely meet our reporting obligations, or cause investors to lose confidence in our reported financial information, which could cause a decline in the market price of our stock and we could be subject to sanctions or investigations by the SEC or other regulatory authorities including equivalent foreign authorities. Further, irrespective of the controls that we adopt, we cannot be assured that we will not experience fraudulent financial reporting in the future, including earnings mismanagement, recording fictitious revenues, improper asset valuation, understating liabilities or expenses, inadequate disclosure, reserve manipulation, misuse of judgments in financial reporting, concealing fraud or illegal activities, information tampering, and insider trading based on non-public information about the Company's financials. 29 29 Item 1B. Unresolved Staff CommentsNot applicable.Item 1C. Cybersecurity Risk Management and StrategyThe Company regularly assesses risks from cybersecurity threats, monitors its information systems for potential vulnerabilities, and tests those systems pursuant to the Company’s cybersecurity policies, standards, processes and practices, which are integrated into the Company’s overall risk management system. To protect the Company’s information systems from cybersecurity threats, the Company uses various security technologies and tools that help the Company identify, escalate, investigate, manage, resolve and recover from security incidents in a timely manner. These efforts include:•ongoing collection of threat intelligence and environment awareness through monitoring,•data protection management and vulnerability monitoring through data loss prevention and exfiltration tools,•cybersecurity risk management processes and practices,•control assurance,•secure development of new products,•identity and access management,•incident response, auditing and monitoring, and •maintaining a 24x7 security operations center to allow for always available incident response. The Company takes a risk-based approach to cybersecurity and has implemented cybersecurity policies throughout its operations that are designed to address cybersecurity threats and incidents. In particular, the Company follows an incident escalation process that is incorporated into its incident and risk management processes. In the event the Company identifies a cybersecurity incident, its senior management, consisting of the Chief Financial Officer, Chief Information Security Officer (CISO), Chief Administrative Officer, and Executive Vice President of Business Technology and Operations review the facts and circumstances involved in such cybersecurity incident, or series of related cybersecurity incidents.The Company partners with third parties to assess the effectiveness of its cybersecurity prevention and response systems and processes, including third-party review of the Company’s Information Security Management System for ISO 27001 controls, assessment of the Company’s cloud products and managed services according to the American Institute of CPAs (AICPA) Service Organization Control (SOC) Audit Type II, and new product validation as part of the Company’s secure development lifecycle. The Company additionally engages third-party providers in support of endpoint detection and responses, data loss prevention efforts, and incident management efforts.To date, the Company is not aware of cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition. For additional discussion of cybersecurity risks and potential related impacts on the Company, refer to the risk factors in Part I, Item 1A. “Risk Factors,” including “If a material cybersecurity or other security breach impacts our services, systems, supply chain, or end-user customer systems, or if stored data is improperly accessed, our business could suffer significant harm.” GovernanceNetApp's Board of Directors oversees the Company’s risk management process, including cybersecurity risks, directly and through its committees. The Audit Committee of the Board of Directors oversees the Company’s risk management program, which focuses on the most significant risks the Company faces in the short-, intermediate-, and long-term timeframes. The Company’s CISO regularly updates each of the Board of Directors and the Audit Committee at least twice a year. Such updates include a review of cybersecurity risks affecting the Company, related metrics, and any incidents or issues that require attention from the Board of Directors.The CISO provides leadership, strategic direction, and oversight for NetApp’s Global Security Risk and Compliance functions and security program. Global Security executives oversee management of risks and track projects progress, remediations, and any issues related to cybersecurity risks.NetApp’s CISO is responsible for leading the assessment and management of cybersecurity risks. The current CISO has over 30 years of experience in IT and information security, including over 16 years with NetApp in roles of increasing seniority, and is a Item 1B. Unresolved Staff Comments Not applicable. Item 1C. Cybersecurity Risk Management and StrategyThe Company regularly assesses risks from cybersecurity threats, monitors its information systems for potential vulnerabilities, and tests those systems pursuant to the Company’s cybersecurity policies, standards, processes and practices, which are integrated into the Company’s overall risk management system. To protect the Company’s information systems from cybersecurity threats, the Company uses various security technologies and tools that help the Company identify, escalate, investigate, manage, resolve and recover from security incidents in a timely manner. These efforts include:•ongoing collection of threat intelligence and environment awareness through monitoring,•data protection management and vulnerability monitoring through data loss prevention and exfiltration tools,•cybersecurity risk management processes and practices,•control assurance,•secure development of new products,•identity and access management,•incident response, auditing and monitoring, and •maintaining a 24x7 security operations center to allow for always available incident response. The Company takes a risk-based approach to cybersecurity and has implemented cybersecurity policies throughout its operations that are designed to address cybersecurity threats and incidents. In particular, the Company follows an incident escalation process that is incorporated into its incident and risk management processes. In the event the Company identifies a cybersecurity incident, its senior management, consisting of the Chief Financial Officer, Chief Information Security Officer (CISO), Chief Administrative Officer, and Executive Vice President of Business Technology and Operations review the facts and circumstances involved in such cybersecurity incident, or series of related cybersecurity incidents.The Company partners with third parties to assess the effectiveness of its cybersecurity prevention and response systems and processes, including third-party review of the Company’s Information Security Management System for ISO 27001 controls, assessment of the Company’s cloud products and managed services according to the American Institute of CPAs (AICPA) Service Organization Control (SOC) Audit Type II, and new product validation as part of the Company’s secure development lifecycle. The Company additionally engages third-party providers in support of endpoint detection and responses, data loss prevention efforts, and incident management efforts.To date, the Company is not aware of cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition. For additional discussion of cybersecurity risks and potential related impacts on the Company, refer to the risk factors in Part I, Item 1A. “Risk Factors,” including “If a material cybersecurity or other security breach impacts our services, systems, supply chain, or end-user customer systems, or if stored data is improperly accessed, our business could suffer significant harm.” GovernanceNetApp's Board of Directors oversees the Company’s risk management process, including cybersecurity risks, directly and through its committees. The Audit Committee of the Board of Directors oversees the Company’s risk management program, which focuses on the most significant risks the Company faces in the short-, intermediate-, and long-term timeframes. The Company’s CISO regularly updates each of the Board of Directors and the Audit Committee at least twice a year. Such updates include a review of cybersecurity risks affecting the Company, related metrics, and any incidents or issues that require attention from the Board of Directors.The CISO provides leadership, strategic direction, and oversight for NetApp’s Global Security Risk and Compliance functions and security program. Global Security executives oversee management of risks and track projects progress, remediations, and any issues related to cybersecurity risks.NetApp’s CISO is responsible for leading the assessment and management of cybersecurity risks. The current CISO has over 30 years of experience in IT and information security, including over 16 years with NetApp in roles of increasing seniority, and is a Item 1C. Cybersecurity" }, { "status": "ADDED", "current_title": "Risk Management and Strategy", "prior_title": null, "current_body": "The Company regularly assesses risks from cybersecurity threats, monitors its information systems for potential vulnerabilities, and tests those systems pursuant to the Company’s cybersecurity policies, standards, processes and practices, which are integrated into the Company’s overall risk management system. To protect the Company’s information systems from cybersecurity threats, the Company uses various security technologies and tools that help the Company identify, escalate, investigate, manage, resolve and recover from security incidents in a timely manner. These efforts include: The Company regularly assesses risks from cybersecurity threats, monitors its information systems for potential vulnerabilities, and tests those systems pursuant to the Company’s cybersecurity policies, standards, processes and practices, which are integrated integrated into the Company’s overall risk management system. •ongoing collection of threat intelligence and environment awareness through monitoring, ongoing collection of threat intelligence and environment awareness through monitoring, •data protection management and vulnerability monitoring through data loss prevention and exfiltration tools, data protection management and vulnerability monitoring through data loss prevention and exfiltration tools, •cybersecurity risk management processes and practices, cybersecurity risk management processes and practices, •control assurance, control assurance, •secure development of new products, secure development of new products, •identity and access management, identity and access management, •incident response, auditing and monitoring, and incident response, auditing and monitoring, and •maintaining a 24x7 security operations center to allow for always available incident response. maintaining a 24x7 security operations center to allow for always available incident response. The Company takes a risk-based approach to cybersecurity and has implemented cybersecurity policies throughout its operations that are designed to address cybersecurity threats and incidents. In particular, the Company follows an incident escalation process that is incorporated into its incident and risk management processes. In the event the Company identifies a cybersecurity incident, its senior management, consisting of the Chief Financial Officer, Chief Information Security Officer (CISO), Chief Administrative Officer, and Executive Vice President of Business Technology and Operations review the facts and circumstances involved in such cybersecurity incident, or series of related cybersecurity incidents. The Company partners with third parties to assess the effectiveness of its cybersecurity prevention and response systems and processes, including third-party review of the Company’s Information Security Management System for ISO 27001 controls, assessment of the Company’s cloud products and managed services according to the American Institute of CPAs (AICPA) Service Organization Control (SOC) Audit Type II, and new product validation as part of the Company’s secure development lifecycle. The Company additionally engages third-party providers in support of endpoint detection and responses, data loss prevention efforts, and incident management efforts. The Company additionally engage engage s third-party providers in support of endpoint detection and responses, data loss prevention efforts, and incident management efforts. To date, the Company is not aware of cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition. For additional discussion of cybersecurity risks and potential related impacts on the Company, refer to the risk factors in Part I, Item 1A. “Risk Factors,” including “If a material cybersecurity or other security breach impacts our services, systems, supply chain, or end-user customer systems, or if stored data is improperly accessed, our business could suffer significant harm.” materially affected GovernanceNetApp's Board of Directors oversees the Company’s risk management process, including cybersecurity risks, directly and through its committees. The Audit Committee of the Board of Directors oversees the Company’s risk management program, which focuses on the most significant risks the Company faces in the short-, intermediate-, and long-term timeframes. The Company’s CISO regularly updates each of the Board of Directors and the Audit Committee at least twice a year. Such updates include a review of cybersecurity risks affecting the Company, related metrics, and any incidents or issues that require attention from the Board of Directors. Governance NetApp's Board of Directors oversees the Company’s risk management process, including cybersecurity risks, directly and through its committees. The Audit Committee of the Board of Directors oversees the Company’s risk management program, which focuses on the most significant risks the Company faces in the short-, intermediate-, and long-term timeframes. The Company’s CISO regularly updates each of the Board of Directors and the Audit Committee at least twice a year. Such updates include a review of cybersecurity risks affecting the Company, related metrics, and any incidents or issues that require attention from the Board of Directors. Board of Directors oversees the Company’s risk management process, including cybersecurity risks, directly and through its committees. The Audit Committee of the Board of Directors oversees the Company’s risk management program, which focuses on the most significant risks the Company faces in the short-, intermediate-, and long-term timeframes. The Audit Committee of the Board of Directors oversees the Company’s risk management program, which focuses on the most significant risks the Company faces in the short-, intermediate-, and long-term timeframes. The Company’s CISO regularly updates each of the Board of Directors and the Audit Committee at least twice a year. Such updates include a review of cybersecurity risks affecting the Company, related metrics, and any incidents or issues that require attention from the Board of Directors. The CISO provides leadership, strategic direction, and oversight for NetApp’s Global Security Risk and Compliance functions and security program. Global Security executives oversee management of risks and track projects progress, remediations, and any issues related to cybersecurity risks.NetApp’s CISO is responsible for leading the assessment and management of cybersecurity risks. The current CISO has over 30 years of experience in IT and information security, including over 16 years with NetApp in roles of increasing seniority, and is a The CISO provides leadership, strategic direction, and oversight for NetApp’s Global Security Risk and Compliance functions and security program. Global Security executives oversee management of risks and track projects progress, remediations, and any issues related to cybersecurity risks. The CISO provides leadership, strategic direction, and oversight The CISO provides leadership, strategic direction, and oversight for NetApp’s Global Security Risk and Compliance functions and security program. NetApp’s CISO is responsible for leading the assessment and management of cybersecurity risks. The current CISO has over 30 years of experience in IT and information security, including over 16 years with NetApp in roles of increasing seniority, and is a NetApp’s CISO is responsible for leading the assessment and management of cybersecurity risks. The current CISO has over 30 years of experience in IT and information security, including over 16 years with NetApp in roles of increasing seniority, and is a 30 30 Certified Information Security Auditor, Certified Information Security Manager with ISACA and a Certified Information Systems Security Professional with ISC2. The CISO stays informed on information security risks through regular meetings on key cybersecurity projects and KPIs. Updates are communicated to the Global Security Steering Committee, which provides quarterly reports to the Board of Directors and to the Audit Committee. Item 2. PropertiesWe owned or leased, domestically and internationally, the following properties as of April 25, 2025.We own approximately 0.8 million square feet of facilities in Research Triangle Park (RTP), North Carolina. In addition, we own 65 acres of undeveloped land. The RTP site supports research and development, global services and sales and marketing.We own approximately 0.7 million square feet of facilities in Bangalore, India on 14 acres of land. The Bangalore site supports research and development, finance and global services.We lease approximately 0.3 million square feet of office space for our corporate headquarters located in San Jose, California. The San Jose site supports research and development, corporate general administration, sales and marketing, global services and operations.We lease approximately 0.7 million square feet in other sales offices and research and development facilities throughout the U.S. and internationally. We expect that our existing facilities and those being developed worldwide are suitable and adequate for our requirements over at least the next two years. Item 3. Legal ProceedingsFor a discussion of legal proceedings, see Note 17 – Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference.Item 4. Mine Safety DisclosuresNot applicable. Certified Information Security Auditor, Certified Information Security Manager with ISACA and a Certified Information Systems Security Professional with ISC2. The CISO stays informed on information security risks through regular meetings on key cybersecurity projects and KPIs. Updates are communicated to the Global Security Steering Committee, which provides quarterly reports to the Board of Directors and to the Audit Committee. Certified Information Security Auditor, Certified Information Security Manager with ISACA and a Certified Information Systems Security Professional with ISC2. The CISO stays informed on information security risks through regular meetings on key cybersecurity projects and KPIs. Updates are communicated to the Global Security Steering Committee, which provides quarterly reports to the Board of Directors and to the Audit Committee. Certified Information Security Auditor, Certified Information Security Manager with ISACA and a Certified Information Systems Security Professional with ISC2. The CISO stays informed on information security risks through regular meetings on key cybersecurity projects and KPIs. Updates are communicated to the Global Security Steering Committee, which provides quarterly reports to the Board of Directors and to the Audit Committee. Certified Information Security Auditor, Certified Information Security Manager with ISACA and a Certified Information Systems Security Professional with ISC2 . The CISO stays informed on information security risks through regular meetings on key cybersecurity projects and KPIs. Updates are communicated to the Global Security Steering Committee, which provides quarterly reports to the Board of Directors and to the Audit Committee. provides quarterly reports to the Board of Directors and to the Audit Committee. Item 2. Properties We owned or leased, domestically and internationally, the following properties as of April 25, 2025. We own approximately 0.8 million square feet of facilities in Research Triangle Park (RTP), North Carolina. In addition, we own 65 acres of undeveloped land. The RTP site supports research and development, global services and sales and marketing. We own approximately 0.7 million square feet of facilities in Bangalore, India on 14 acres of land. The Bangalore site supports research and development, finance and global services. We lease approximately 0.3 million square feet of office space for our corporate headquarters located in San Jose, California. The San Jose site supports research and development, corporate general administration, sales and marketing, global services and operations. We lease approximately 0.7 million square feet in other sales offices and research and development facilities throughout the U.S. and internationally. We expect that our existing facilities and those being developed worldwide are suitable and adequate for our requirements over at least the next two years. Item 3. Legal Proceedings For a discussion of legal proceedings, see Note 17 – Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 31 31 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesThe Company’s common stock is traded on the NASDAQ Stock Market LLC (NASDAQ) under the symbol NTAP.Price Range of Common StockThe price range per share of common stock presented below represents the highest and lowest intraday sales prices for the Company’s common stock on the NASDAQ during each quarter of our two most recent fiscal years. Fiscal 2025 Fiscal 2024 High Low High Low First Quarter $ 135.01 $ 100.24 $ 80.53 $ 61.54 Second Quarter $ 134.37 $ 112.87 $ 80.02 $ 71.25 Third Quarter $ 135.45 $ 112.86 $ 91.76 $ 70.82 Fourth Quarter $ 127.78 $ 71.84 $ 112.48 $ 83.80 HoldersAs of May 29, 2025 there were 403 holders of record of our common stock.DividendsThe Company paid cash dividends of $0.52 per outstanding common share in each quarter of fiscal 2025 for an aggregate of $424 million and $0.50 per outstanding common share in each quarter of fiscal 2024 and fiscal 2023 for an aggregate of $416 million and $432 million, respectively. In the first quarter of fiscal 2026, the Company declared a cash dividend of $0.52 per share of common stock, payable on July 23, 2025 to shareholders of record as of the close of business on July 3, 2025. PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is traded on the NASDAQ Stock Market LLC (NASDAQ) under the symbol NTAP." }, { "status": "ADDED", "current_title": "Price Range of Common Stock", "prior_title": null, "current_body": "The price range per share of common stock presented below represents the highest and lowest intraday sales prices for the Company’s common stock on the NASDAQ during each quarter of our two most recent fiscal years." }, { "status": "ADDED", "current_title": "Fiscal 2024", "prior_title": null, "current_body": "High Low High Low First Quarter $ 135.01 $ 100.24 $ 80.53 $ 61.54 Second Quarter $ 134.37 $ 112.87 $ 80.02 $ 71.25 Third Quarter $ 135.45 $ 112.86 $ 91.76 $ 70.82 Fourth Quarter $ 127.78 $ 71.84 $ 112.48 $ 83.80 Holders As of May 29, 2025 there were 403 holders of record of our common stock. Dividends The Company paid cash dividends of $0.52 per outstanding common share in each quarter of fiscal 2025 for an aggregate of $424 million and $0.50 per outstanding common share in each quarter of fiscal 2024 and fiscal 2023 for an aggregate of $416 million and $432 million, respectively. In the first quarter of fiscal 2026, the Company declared a cash dividend of $0.52 per share of common stock, payable on July 23, 2025 to shareholders of record as of the close of business on July 3, 2025. 32 32 Performance GraphThe following graph shows a comparison of cumulative total shareholder return, calculated on a dividend reinvested basis, of an investment of $100 for the Company, the S&P 500 Index, the S&P 500 Information Technology Index and the S&P 1500 Technology Hardware & Equipment Index for the five years ended April 25, 2025. The comparisons in the graphs below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. The graph and related information shall not be deemed “soliciting material” or be deemed to be “filed” with the SEC, nor shall such information be incorporated by reference into any past or future filing with the SEC, except to the extent that such filing specifically states that such graph and related information are incorporated by reference into such filing.COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNAmong NetApp, Inc., the S&P 500 Index, the S&P 500 Information Technology Index and the S&P 1500 Technology Hardware & Equipment Index* *$100 invested on April 24, 2020 in stock or index, including reinvestment of dividends. Data points are the last day of each fiscal year for the Company’s common stock and each of the indexes. April 2020 April 2021 April 2022 April 2023 April 2024 April 2025 NetApp, Inc. $ 100.00 $ 179.71 $ 180.39 $ 159.78 $ 263.63 $ 234.64 S&P 500 Index $ 100.00 $ 149.89 $ 150.21 $ 154.21 $ 191.56 $ 210.35 S&P 500 Information Technology Index $ 100.00 $ 159.07 $ 162.08 $ 175.17 $ 245.24 $ 272.40 S&P 1500 Technology Hardware & Equipment Index $ 100.00 $ 177.82 $ 202.33 $ 214.81 $ 227.56 $ 271.36 We believe that a number of factors may cause the market price of our common stock to fluctuate significantly. See Item 1A. – Risk Factors." }, { "status": "ADDED", "current_title": "Performance Graph", "prior_title": null, "current_body": "The following graph shows a comparison of cumulative total shareholder return, calculated on a dividend reinvested basis, of an investment of $100 for the Company, the S&P 500 Index, the S&P 500 Information Technology Index and the S&P 1500 Technology Hardware & Equipment Index for the five years ended April 25, 2025. The comparisons in the graphs below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. The graph and related information shall not be deemed “soliciting material” or be deemed to be “filed” with the SEC, nor shall such information be incorporated by reference into any past or future filing with the SEC, except to the extent that such filing specifically states that such graph and related information are incorporated by reference into such filing." }, { "status": "ADDED", "current_title": "Among NetApp, Inc., the S&P 500 Index, the S&P 500 Information Technology Index and the S&P 1500 Technology Hardware & Equipment Index*", "prior_title": null, "current_body": "*$100 invested on April 24, 2020 in stock or index, including reinvestment of dividends. Data points are the last day of each fiscal year for the Company’s common stock and each of the indexes. April 2020 April 2021 April 2022 April 2023 April 2024 April 2025 NetApp, Inc. $ 100.00 $ 179.71 $ 180.39 $ 159.78 $ 263.63 $ 234.64 S&P 500 Index $ 100.00 $ 149.89 $ 150.21 $ 154.21 $ 191.56 $ 210.35 S&P 500 Information Technology Index $ 100.00 $ 159.07 $ 162.08 $ 175.17 $ 245.24 $ 272.40 S&P 1500 Technology Hardware & Equipment Index $ 100.00 $ 177.82 $ 202.33 $ 214.81 $ 227.56 $ 271.36 We believe that a number of factors may cause the market price of our common stock to fluctuate significantly. See Item 1A. – Risk Factors. 33 33 Purchases of Equity Securities by the Issuer and Affiliated PurchasersThe following table provides information with respect to the shares of common stock repurchased by us during the three months ended April 25, 2025: Total Number of Shares Approximate Dollar Value Total Number Average Purchased as Part of of Shares That May Yet of Shares Price Paid Publicly Announced Be Purchased Under The Period Purchased per Share Program Repurchase Program (Shares in thousands) (Shares in thousands) (Dollars in millions) January 25, 2025 - February 21, 2025 248 $ 121.03 379,256 $ 572 February 22, 2025 - March 21, 2025 246 $ 101.53 379,502 $ 547 March 22, 2025 - April 25, 2025 2,314 $ 84.28 381,816 $ 352 Total 2,808 $ 89.03 In May 2003, our Board of Directors approved a stock repurchase program. As of April 25, 2025, our Board of Directors had authorized the repurchase of up to $17.1 billion of our common stock, and on May 22, 2025, authorized an additional $1.1 billion. Since inception of the program through April 25, 2025, we repurchased a total of 382 million shares of our common stock for an aggregate purchase price of $16.8 billion. Under this program, we may purchase shares of our outstanding common stock through solicited or unsolicited transactions in the open market, in privately negotiated transactions, through accelerated share repurchase programs, pursuant to a Rule 10b5-1 plan or in such other manner as deemed appropriate by our management. The stock repurchase program may be suspended or discontinued at any time." }, { "status": "ADDED", "current_title": "Purchases of Equity Securities by the Issuer and Affiliated Purchasers", "prior_title": null, "current_body": "The following table provides information with respect to the shares of common stock repurchased by us during the three months ended April 25, 2025:" }, { "status": "ADDED", "current_title": "(Dollars in millions)", "prior_title": null, "current_body": "January 25, 2025 - February 21, 2025 248 $ 121.03 379,256 $ 572 February 22, 2025 - March 21, 2025 246 $ 101.53 379,502 $ 547 March 22, 2025 - April 25, 2025 2,314 $ 84.28 381,816 $ 352 Total 2,808 $ 89.03 In May 2003, our Board of Directors approved a stock repurchase program. As of April 25, 2025, our Board of Directors had authorized the repurchase of up to $17.1 billion of our common stock, and on May 22, 2025, authorized an additional $1.1 billion. Since inception of the program through April 25, 2025, we repurchased a total of 382 million shares of our common stock for an aggregate purchase price of $16.8 billion. Under this program, we may purchase shares of our outstanding common stock through solicited or unsolicited transactions in the open market, in privately negotiated transactions, through accelerated share repurchase programs, pursuant to a Rule 10b5-1 plan or in such other manner as deemed appropriate by our management. The stock repurchase program may be suspended or discontinued at any time. 34 34 Item 6. [Reserved] Item 6. [Reserved] 35 35 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion of our financial condition and results of operations should be read together with the financial statements and the accompanying notes set forth under Part II, Item 8. – Financial Statements and Supplementary Data. The following discussion also contains trend information and other forward-looking statements that involve a number of risks and uncertainties. The Risk Factors set forth in Part I, Item 1A. – Risk Factors are hereby incorporated into the discussion by reference.Executive OverviewOur Company NetApp helps customers make their data infrastructure more seamless, more dynamic, and higher performing. We were incorporated in 1992, are headquartered in San Jose, California, and provide a full range of enterprise-class software, systems and services that customers use to transform their data infrastructures across data types, workloads, and environments to realize business possibilities.We leverage over thirty years of innovation to make data infrastructure intelligent. Our unified data storage solutions deliver flexible, simplified, and silo-free infrastructure. Our active data management capabilities focus on security, compliance, and sustainability, while our adaptive operations enhance performance, efficiency, and productivity. Our extensive portfolio integrates hybrid and multi-cloud environments, addressing key customer priorities such as modernizing legacy systems, enhancing resilience against ransomware, and developing scalable, high-performance data pipelines for artificial intelligence (AI) workloads.NetApp empowers customers to harness their data for accelerated innovation, improved operations, and competitive advantage. Our unified data storage solutions provide the flexibility to consistently and easily store any data type and support any workload. As the only enterprise-grade storage service natively embedded in the world’s largest clouds, we power data across Amazon AWS, Microsoft Azure, and Google Cloud. Our integrated data services enable active data management, security, protection, governance, and sustainability. Additionally, our operational services support adaptive operations across infrastructure, applications, and teams. Together with our Hybrid Cloud products, these services enable customers to construct a seamless, intelligent data infrastructure across hybrid multi-cloud environments.Our operations are organized into two segments: Hybrid Cloud and Public Cloud.Hybrid Cloud offers a unified data storage portfolio of storage management and infrastructure solutions that helps customers modernize their data centers. Our Hybrid Cloud portfolio accommodates both structured and unstructured data with unified storage optimized for flash, disk, and cloud storage, capable of handling data-intensive workloads and applications. Hybrid Cloud includes software, hardware, and related support, along with professional and other services.Public Cloud offers a portfolio of products delivered primarily as-a-service, including related support. This portfolio includes cloud storage, data services, and operational services. These services are generally available on the leading public clouds, including Amazon AWS, Microsoft Azure, and Google Cloud.Financial Results and Key Performance Metrics OverviewThe following table provides an overview of key financial metrics for each of the last three fiscal years (in millions, except per share amounts and percentages): Year Ended April 25, 2025 April 26, 2024 April 28, 2023 Net revenues $ 6,572 $ 6,268 $ 6,362 Gross profit $ 4,613 $ 4,433 $ 4,209 Gross margin 70 % 71 % 66 % Income from operations $ 1,337 $ 1,214 $ 1,018 Income from operations as a percentage of net revenues 20 % 19 % 16 % Provision (benefit) for income taxes $ 197 $ 277 $ (208 ) Net income $ 1,186 $ 986 $ 1,274 Diluted net income per share $ 5.67 $ 4.63 $ 5.79 Net cash provided by operating activities $ 1,506 $ 1,685 $ 1,107 April 25, 2025 April 26,2024 Deferred revenue and financed unearned services revenue $ 4,536 $ 4,234 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our financial condition and results of operations should be read together with the financial statements and the accompanying notes set forth under Part II, Item 8. – Financial Statements and Supplementary Data. The following discussion also contains trend information and other forward-looking statements that involve a number of risks and uncertainties. The Risk Factors set forth in Part I, Item 1A. – Risk Factors are hereby incorporated into the discussion by reference." }, { "status": "ADDED", "current_title": "Our Company", "prior_title": null, "current_body": "NetApp helps customers make their data infrastructure more seamless, more dynamic, and higher performing. We were incorporated in 1992, are headquartered in San Jose, California, and provide a full range of enterprise-class software, systems and services that customers use to transform their data infrastructures across data types, workloads, and environments to realize business possibilities. We leverage over thirty years of innovation to make data infrastructure intelligent. Our unified data storage solutions deliver flexible, simplified, and silo-free infrastructure. Our active data management capabilities focus on security, compliance, and sustainability, while our adaptive operations enhance performance, efficiency, and productivity. Our extensive portfolio integrates hybrid and multi-cloud environments, addressing key customer priorities such as modernizing legacy systems, enhancing resilience against ransomware, and developing scalable, high-performance data pipelines for artificial intelligence (AI) workloads. NetApp empowers customers to harness their data for accelerated innovation, improved operations, and competitive advantage. Our unified data storage solutions provide the flexibility to consistently and easily store any data type and support any workload. As the only enterprise-grade storage service natively embedded in the world’s largest clouds, we power data across Amazon AWS, Microsoft Azure, and Google Cloud. Our integrated data services enable active data management, security, protection, governance, and sustainability. Additionally, our operational services support adaptive operations across infrastructure, applications, and teams. Together with our Hybrid Cloud products, these services enable customers to construct a seamless, intelligent data infrastructure across hybrid multi-cloud environments. Our operations are organized into two segments: Hybrid Cloud and Public Cloud. Hybrid Cloud offers a unified data storage portfolio of storage management and infrastructure solutions that helps customers modernize their data centers. Our Hybrid Cloud portfolio accommodates both structured and unstructured data with unified storage optimized for flash, disk, and cloud storage, capable of handling data-intensive workloads and applications. Hybrid Cloud includes software, hardware, and related support, along with professional and other services. Public Cloud offers a portfolio of products delivered primarily as-a-service, including related support. This portfolio includes cloud storage, data services, and operational services. These services are generally available on the leading public clouds, including Amazon AWS, Microsoft Azure, and Google Cloud." }, { "status": "ADDED", "current_title": "Financial Results and Key Performance Metrics Overview", "prior_title": null, "current_body": "The following table provides an overview of key financial metrics for each of the last three fiscal years (in millions, except per share amounts and percentages): Year Ended" }, { "status": "ADDED", "current_title": "April 28, 2023", "prior_title": null, "current_body": "Net revenues $ 6,572 $ 6,268 $ 6,362 Gross profit $ 4,613 $ 4,433 $ 4,209 Gross margin 70 % 71 % 66 % Income from operations $ 1,337 $ 1,214 $ 1,018 Income from operations as a percentage of net revenues 20 % 19 % 16 % Provision (benefit) for income taxes $ 197 $ 277 $ (208 ) Net income $ 1,186 $ 986 $ 1,274 Diluted net income per share $ 5.67 $ 4.63 $ 5.79 Net cash provided by operating activities $ 1,506 $ 1,685 $ 1,107" }, { "status": "ADDED", "current_title": "April 26,2024", "prior_title": null, "current_body": "Deferred revenue and financed unearned services revenue $ 4,536 $ 4,234 36 36 •Net revenues: Our net revenues increased approximately 5% in fiscal 2025 compared to fiscal 2024, due to increases in both product revenues and services revenues.•Gross margin: Our gross margin decreased less than one percentage point in fiscal 2025 compared to fiscal 2024, due to the decrease in gross margins on product revenues.•Income from operations as a percentage of net revenues: Our income from operations as a percentage of net revenues increased by one percentage point in fiscal 2025 compared to fiscal 2024, primarily due to higher net revenues.•Provision (benefit) for income taxes: Our provision for income taxes decreased in fiscal 2025 compared to fiscal 2024 primarily as a result of differences in discrete tax impacts in each year.•Net income and Diluted net income per share: The increase in both net income and diluted net income per share in fiscal 2025 compared to fiscal 2024 reflect the factors discussed above.Stock Repurchase Program and Dividend ActivityDuring fiscal 2025, we repurchased 10.2 million shares of our common stock at an average price of $112.55 per share, for an aggregate purchase price of $1.2 billion. We also declared aggregate cash dividends of $2.08 per share in fiscal 2025, for which we paid a total of $424 million.Restructuring EventsDuring fiscal 2025, we executed several restructuring plans and recognized expenses totaling $83 million consisting primarily of employee severance-related costs. Senior Notes IssuanceIn March 2025, we issued $625 million aggregate principal amount of 5.50% Senior Notes due 2032 and $625 million aggregate principal amount of 5.70% Senior Notes due 2035, for which we received total proceeds of $1.24 billion, net of discount and issuance costs. •Net revenues: Our net revenues increased approximately 5% in fiscal 2025 compared to fiscal 2024, due to increases in both product revenues and services revenues. Net revenues: Our net revenues increased approximately 5% in fiscal 2025 compared to fiscal 2024, due to increases in both product revenues and services revenues. •Gross margin: Our gross margin decreased less than one percentage point in fiscal 2025 compared to fiscal 2024, due to the decrease in gross margins on product revenues. Gross margin: Our gross margin decreased less than one percentage point in fiscal 2025 compared to fiscal 2024, due to the decrease in gross margins on product revenues. •Income from operations as a percentage of net revenues: Our income from operations as a percentage of net revenues increased by one percentage point in fiscal 2025 compared to fiscal 2024, primarily due to higher net revenues. Income from operations as a percentage of net revenues: Our income from operations as a percentage of net revenues increased by one percentage point in fiscal 2025 compared to fiscal 2024, primarily due to higher net revenues. •Provision (benefit) for income taxes: Our provision for income taxes decreased in fiscal 2025 compared to fiscal 2024 primarily as a result of differences in discrete tax impacts in each year. Provision (benefit) for income taxes: Our provision for income taxes decreased in fiscal 2025 compared to fiscal 2024 primarily as a result of differences in discrete tax impacts in each year. •Net income and Diluted net income per share: The increase in both net income and diluted net income per share in fiscal 2025 compared to fiscal 2024 reflect the factors discussed above. Net income and Diluted net income per share: The increase in both net income and diluted net income per share in fiscal 2025 compared to fiscal 2024 reflect the factors discussed above." }, { "status": "ADDED", "current_title": "Stock Repurchase Program and Dividend Activity", "prior_title": null, "current_body": "During fiscal 2025, we repurchased 10.2 million shares of our common stock at an average price of $112.55 per share, for an aggregate purchase price of $1.2 billion. We also declared aggregate cash dividends of $2.08 per share in fiscal 2025, for which we paid a total of $424 million." }, { "status": "ADDED", "current_title": "Restructuring Events", "prior_title": null, "current_body": "During fiscal 2025, we executed several restructuring plans and recognized expenses totaling $83 million consisting primarily of employee severance-related costs." }, { "status": "ADDED", "current_title": "Senior Notes Issuance", "prior_title": null, "current_body": "In March 2025, we issued $625 million aggregate principal amount of 5.50% Senior Notes due 2032 and $625 million aggregate principal amount of 5.70% Senior Notes due 2035, for which we received total proceeds of $1.24 billion, net of discount and issuance costs. 37 37 Results of OperationsOur fiscal year is reported on a 52- or 53-week year that ends on the last Friday in April. An additional week is included in the first fiscal quarter approximately every six years to realign fiscal months with calendar months. Fiscal years 2025, 2024 and 2023, which ended on April 25, 2025, April 26, 2024 and April 28, 2023, respectively, are all 52-week years, with 13 weeks in each of their quarters. Unless otherwise stated, references to particular years, quarters, months and periods refer to our fiscal years ended in April and the associated quarters, months and periods of those fiscal years.The following table sets forth certain Consolidated Statements of Income data as a percentage of net revenues for the periods indicated: Fiscal Year 2025 2024 2023 Revenues: Product 46 % 45 % 48 % Services 54 55 52 Net revenues 100 100 100 Cost of revenues: Cost of product 20 18 24 Cost of services 10 11 10 Gross profit 70 71 66 Operating expenses: Sales and marketing 28 29 29 Research and development 15 16 15 General and administrative 5 5 4 Restructuring charges 1 1 2 Acquisition-related expense — — — Total operating expenses 50 51 50 Income from operations 20 19 16 Other income, net 1 1 1 Income before income taxes 21 20 17 Provision (benefit) for income taxes 3 4 (3 ) Net income 18 % 16 % 20 % Percentages may not add due to roundingDiscussion and Analysis of Results of OperationsNet Revenues (in millions, except percentages): Fiscal Year 2025 2024 % Change 2023 % Change Net revenues $ 6,572 $ 6,268 5 % $ 6,362 (1 )% The increase in net revenues for fiscal 2025 compared to fiscal 2024 was due to an increase in both product revenues and services revenues. Product revenues as a percentage of net revenues increased by approximately one percentage point in fiscal 2025 compared to fiscal 2024, while services revenues as a percentage of net revenues decreased by approximately one percentage point.The decrease in net revenues for fiscal 2024 compared to fiscal 2023 was due to a decrease in product revenues partially offset by an increase in services revenues. Product revenues as a percentage of net revenues decreased by approximately three percentage points in fiscal 2024 compared to fiscal 2023, while services revenues as a percentage of net revenues increased by approximately three percentage points.Sales through our indirect channels represented 78%, 76% and 78% of net revenues in fiscal 2025, 2024 and 2023, respectively.The following customers, each of which is a distributor, accounted for 10% or more of net revenues:" }, { "status": "ADDED", "current_title": "Results of Operations", "prior_title": null, "current_body": "Our fiscal year is reported on a 52- or 53-week year that ends on the last Friday in April. An additional week is included in the first fiscal quarter approximately every six years to realign fiscal months with calendar months. Fiscal years 2025, 2024 and 2023, which ended on April 25, 2025, April 26, 2024 and April 28, 2023, respectively, are all 52-week years, with 13 weeks in each of their quarters. Unless otherwise stated, references to particular years, quarters, months and periods refer to our fiscal years ended in April and the associated quarters, months and periods of those fiscal years. The following table sets forth certain Consolidated Statements of Income data as a percentage of net revenues for the periods indicated:" }, { "status": "ADDED", "current_title": "Fiscal Year", "prior_title": null, "current_body": "2025 2024 2023 Revenues: Product 46 % 45 % 48 % Services 54 55 52 Net revenues 100 100 100" }, { "status": "ADDED", "current_title": "Operating expenses:", "prior_title": null, "current_body": "Sales and marketing 28 29 29 Research and development 15 16 15 General and administrative 5 5 4 Restructuring charges 1 1 2 Acquisition-related expense — — — Total operating expenses 50 51 50" }, { "status": "ADDED", "current_title": "Income before income taxes", "prior_title": null, "current_body": "21 20 17 Provision (benefit) for income taxes 3 4 (3 ) Net income 18 % 16 % 20 % Percentages may not add due to rounding" }, { "status": "ADDED", "current_title": "Fiscal Year", "prior_title": null, "current_body": "2025 2024 2023 Revenues: Product 46 % 45 % 48 % Services 54 55 52 Net revenues 100 100 100" }, { "status": "ADDED", "current_title": "Fiscal Year", "prior_title": null, "current_body": "2025 2024 2023 Revenues: Product 46 % 45 % 48 % Services 54 55 52 Net revenues 100 100 100" }, { "status": "ADDED", "current_title": "Fiscal Year", "prior_title": null, "current_body": "2025 2024 2023 Revenues: Product 46 % 45 % 48 % Services 54 55 52 Net revenues 100 100 100" }, { "status": "ADDED", "current_title": "Services revenues", "prior_title": null, "current_body": "$ 3,532 $ 3,419 3 % $ 3,313 3 % Support 2,512 2,488 1 % 2,419 3 % Professional and other services 355 320 11 % 319 — % Public cloud 665 611 9 % 575 6 % Hybrid Cloud Hybrid Cloud services revenues are derived from the sale of: (1) support, which includes both hardware and software support contracts (the latter of which entitle customers to receive unspecified product upgrades and enhancements, bug fixes and patch releases), and (2) professional and other services, which include customer education and training. Support revenues increased marginally in fiscal 2025 compared to fiscal 2024 and increased in fiscal 2024 compared to fiscal 2023 as a result of a higher aggregate support contract value for our installed base. Professional and other services revenues increased in fiscal 2025 compared to fiscal 2024 primarily due to an increase in revenues from our Keystone storage-as-a-service offering and remained relatively flat in fiscal 2024 compared to fiscal 2023. Public Cloud 39 39 Public Cloud revenues are derived from the sale of public cloud offerings delivered primarily as-a-service, which include cloud storage, data services and operational services.Public Cloud revenues increased in fiscal 2025 and fiscal 2024 compared to the respective prior years primarily due to customer demand for NetApp’s diversified cloud offerings, coupled with overall growth in the cloud market.Revenues by Geographic Area: Fiscal Year 2025 2024 2023 United States, Canada and Latin America (Americas) 51 % 51 % 51 % Europe, Middle East and Africa (EMEA) 34 % 34 % 34 % Asia Pacific (APAC) 15 % 15 % 15 % Percentages may not add due to rounding Americas revenues consist of sales to Americas commercial and United States (U.S.) public sector markets. Demand across geographies was relatively consistent for each fiscal year presented.Cost of RevenuesOur cost of revenues consists of: (1) cost of product revenues, composed of (a) cost of Hybrid Cloud product revenues, which includes the costs of manufacturing and shipping our products, inventory write-downs, and warranty costs, and (b) unallocated cost of product revenues, which includes stock-based compensation and amortization of intangibles, and;(2) cost of services revenues, composed of (a) cost of support revenues, which includes the costs of providing support activities for hardware and software support, global support partnership programs, and third party royalty costs, (b) cost of professional and other services revenues, (c) cost of public cloud revenues, constituting the cost of providing our Public Cloud offerings which includes depreciation and amortization expense and third party datacenter fees, and (d) unallocated cost of services revenues, which includes stock-based compensation and amortization of intangibles. Cost of Product Revenues (in millions, except percentages): Fiscal Year 2025 2024 % Change 2023 % Change Cost of product revenues $ 1,284 $ 1,137 13 % $ 1,517 (25 )% Hybrid Cloud 1,278 1,131 13 % 1,511 (25 )% Unallocated 6 6 — % 6 — % Hybrid CloudCost of Hybrid Cloud product revenues represented 42%, 40% and 50% of Hybrid Cloud product revenues in fiscal 2025, 2024 and 2023, respectively. Materials costs represented 89%, 88% and 94% of cost of Hybrid Cloud product revenues in fiscal 2025, 2024 and 2023, respectively.Materials costs increased by $140 million in fiscal 2025 compared to fiscal 2024 primarily reflecting the increase in product revenues.Hybrid Cloud product gross margins decreased by approximately two percentage points in fiscal 2025 compared to fiscal 2024 primarily due to higher component costs.Materials costs decreased by $418 million in fiscal 2024 compared to fiscal 2023 reflecting lower component and freight costs as a result of supply chain improvements. Materials costs were also impacted by the decrease in product revenues in fiscal 2024.Hybrid Cloud product gross margins increased by approximately ten percentage points in fiscal 2024 compared to fiscal 2023 primarily due to lower component and freight costs.Unallocated Public Cloud revenues are derived from the sale of public cloud offerings delivered primarily as-a-service, which include cloud storage, data services and operational services. Public Cloud revenues increased in fiscal 2025 and fiscal 2024 compared to the respective prior years primarily due to customer demand for NetApp’s diversified cloud offerings, coupled with overall growth in the cloud market." }, { "status": "ADDED", "current_title": "Fiscal Year", "prior_title": null, "current_body": "2025 2024 2023 Revenues: Product 46 % 45 % 48 % Services 54 55 52 Net revenues 100 100 100" }, { "status": "ADDED", "current_title": "Cost of Revenues", "prior_title": null, "current_body": "Our cost of revenues consists of: (1) cost of product revenues, composed of (a) cost of Hybrid Cloud product revenues, which includes the costs of manufacturing and shipping our products, inventory write-downs, and warranty costs, and (b) unallocated cost of product revenues, which includes stock-based compensation and amortization of intangibles, and; (2) cost of services revenues, composed of (a) cost of support revenues, which includes the costs of providing support activities for hardware and software support, global support partnership programs, and third party royalty costs, (b) cost of professional and other services revenues, (c) cost of public cloud revenues, constituting the cost of providing our Public Cloud offerings which includes depreciation and amortization expense and third party datacenter fees, and (d) unallocated cost of services revenues, which includes stock-based compensation and amortization of intangibles." }, { "status": "ADDED", "current_title": "Cost of product revenues", "prior_title": null, "current_body": "$ 1,284 $ 1,137 13 % $ 1,517 (25 )% Hybrid Cloud 1,278 1,131 13 % 1,511 (25 )% Unallocated 6 6 — % 6 — % Hybrid Cloud Cost of Hybrid Cloud product revenues represented 42%, 40% and 50% of Hybrid Cloud product revenues in fiscal 2025, 2024 and 2023, respectively. Materials costs represented 89%, 88% and 94% of cost of Hybrid Cloud product revenues in fiscal 2025, 2024 and 2023, respectively. Materials costs increased by $140 million in fiscal 2025 compared to fiscal 2024 primarily reflecting the increase in product revenues. Hybrid Cloud product gross margins decreased by approximately two percentage points in fiscal 2025 compared to fiscal 2024 primarily due to higher component costs. Materials costs decreased by $418 million in fiscal 2024 compared to fiscal 2023 reflecting lower component and freight costs as a result of supply chain improvements. Materials costs were also impacted by the decrease in product revenues in fiscal 2024. Hybrid Cloud product gross margins increased by approximately ten percentage points in fiscal 2024 compared to fiscal 2023 primarily due to lower component and freight costs. Unallocated 40 40 Unallocated cost of product revenues were consistent for each fiscal year presented.Cost of Services Revenues (in millions, except percentages): Fiscal Year 2025 2024 % Change 2023 % Change Cost of services revenues $ 675 $ 698 (3 )% $ 636 10 % Support 197 195 1 % 181 8 % Professional and other services 261 243 7 % 211 15 % Public cloud 165 203 (19 )% 184 10 % Unallocated 52 57 (9 )% 60 (5 )% Hybrid Cloud Cost of Hybrid Cloud services revenues, which are composed of the costs of support and professional and other services, increased in fiscal 2025 and fiscal 2024 compared to the respective prior years reflecting the increase in Hybrid Cloud services revenues. Cost of Hybrid Cloud services revenues represented 16%, 16% and 14% of Hybrid Cloud services revenues in fiscal 2025, 2024 and 2023, respectively.Hybrid Cloud support gross margins were similar in fiscal 2025, fiscal 2024 and fiscal 2023. Hybrid Cloud professional and other services gross margins increased by approximately two percentage points in fiscal 2025 compared to fiscal 2024 while they decreased by approximately ten percentage points in fiscal 2024 compared to fiscal 2023 primarily due to the mix of services provided.Public CloudCost of Public Cloud revenues decreased in fiscal 2025 compared to fiscal 2024, while Public Cloud gross margins increased by eight percentage points in fiscal 2025 compared to fiscal 2024. The decrease in cost of Public Cloud revenues and improved gross margins was due to cost optimization that included a decrease in fixed assets depreciation and the mix of offerings provided.Cost of Public Cloud revenues increased in fiscal 2024 compared to fiscal 2023, reflecting the increase in Public Cloud revenues. Public Cloud gross margins decreased by one percentage point in fiscal 2024 compared to fiscal 2023 primarily due to the mix of offerings provided.Unallocated Unallocated cost of services revenues decreased in fiscal 2025 compared to fiscal 2024 due to the derecognition of certain intangible assets as a result of the sale of our cloud optimization and management software business known as Spot by NetApp during the fourth quarter of fiscal 2025. Unallocated cost of services revenues decreased in fiscal 2024 compared to fiscal 2023 due to certain intangible assets becoming fully amortized during the first quarter of fiscal 2024. Operating ExpensesSales and Marketing, Research and Development and General and Administrative ExpensesSales and marketing, research and development, and general and administrative expenses for fiscal 2025 totaled $3,188 million, or 49% of net revenues, representing a decrease of one percentage point compared to fiscal 2024. Sales and marketing, research and development, and general and administrative expenses for fiscal 2024 totaled $3,165 million, or 50% of net revenues, representing an increase of two percentage points compared to fiscal 2023.Compensation costs represent the largest component of operating expenses. Included in compensation costs are salaries, benefits, other compensation-related costs, stock-based compensation expense and employee incentive compensation plan costs.Total compensation costs included in sales and marketing, research and development and general and administrative expenses in fiscal 2025 were relatively flat compared to fiscal 2024.Total compensation costs included in sales and marketing, research and development and general and administrative expenses increased by $115 million, or 6%, during fiscal 2024 compared to fiscal 2023, primarily due to higher incentive compensation expense Unallocated cost of product revenues were consistent for each fiscal year presented." }, { "status": "ADDED", "current_title": "Cost of services revenues", "prior_title": null, "current_body": "$ 675 $ 698 (3 )% $ 636 10 % Support 197 195 1 % 181 8 % Professional and other services 261 243 7 % 211 15 % Public cloud 165 203 (19 )% 184 10 % Unallocated 52 57 (9 )% 60 (5 )% Hybrid Cloud Cost of Hybrid Cloud services revenues, which are composed of the costs of support and professional and other services, increased in fiscal 2025 and fiscal 2024 compared to the respective prior years reflecting the increase in Hybrid Cloud services revenues. Cost of Hybrid Cloud services revenues represented 16%, 16% and 14% of Hybrid Cloud services revenues in fiscal 2025, 2024 and 2023, respectively. Hybrid Cloud support gross margins were similar in fiscal 2025, fiscal 2024 and fiscal 2023. Hybrid Cloud professional and other services gross margins increased by approximately two percentage points in fiscal 2025 compared to fiscal 2024 while they decreased by approximately ten percentage points in fiscal 2024 compared to fiscal 2023 primarily due to the mix of services provided. Public Cloud Cost of Public Cloud revenues decreased in fiscal 2025 compared to fiscal 2024, while Public Cloud gross margins increased by eight percentage points in fiscal 2025 compared to fiscal 2024. The decrease in cost of Public Cloud revenues and improved gross margins was due to cost optimization that included a decrease in fixed assets depreciation and the mix of offerings provided. Cost of Public Cloud revenues increased in fiscal 2024 compared to fiscal 2023, reflecting the increase in Public Cloud revenues. Public Cloud gross margins decreased by one percentage point in fiscal 2024 compared to fiscal 2023 primarily due to the mix of offerings provided. Unallocated Unallocated cost of services revenues decreased in fiscal 2025 compared to fiscal 2024 due to the derecognition of certain intangible assets as a result of the sale of our cloud optimization and management software business known as Spot by NetApp during the fourth quarter of fiscal 2025. Unallocated cost of services revenues decreased in fiscal 2024 compared to fiscal 2023 due to certain intangible assets becoming fully amortized during the first quarter of fiscal 2024." }, { "status": "ADDED", "current_title": "Operating Expenses", "prior_title": null, "current_body": "Sales and Marketing, Research and Development and General and Administrative Expenses Sales and marketing, research and development, and general and administrative expenses for fiscal 2025 totaled $3,188 million, or 49% of net revenues, representing a decrease of one percentage point compared to fiscal 2024. Sales and marketing, research and development, and general and administrative expenses for fiscal 2024 totaled $3,165 million, or 50% of net revenues, representing an increase of two percentage points compared to fiscal 2023. Compensation costs represent the largest component of operating expenses. Included in compensation costs are salaries, benefits, other compensation-related costs, stock-based compensation expense and employee incentive compensation plan costs. Total compensation costs included in sales and marketing, research and development and general and administrative expenses in fiscal 2025 were relatively flat compared to fiscal 2024. Total compensation costs included in sales and marketing, research and development and general and administrative expenses increased by $115 million, or 6%, during fiscal 2024 compared to fiscal 2023, primarily due to higher incentive compensation expense 41 41 reflecting higher operating performance against goals. The increase was partially offset by lower salaries expense, reflecting a decrease in average headcount of 7%.Sales and Marketing (in millions, except percentages): Fiscal Year 2025 2024 % Change 2023 % Change Sales and marketing expenses $ 1,865 $ 1,828 2 % $ 1,829 — % Sales and marketing expenses consist primarily of compensation costs, commissions, outside services, facilities and IT support costs, advertising and marketing promotional expense and travel and entertainment expense. The increase in sales and marketing expenses in fiscal 2025 compared to fiscal 2024 was primarily due to an increase in sales commission expenses.All primary components of sales and marketing expenses were relatively consistent in fiscal 2024 compared to fiscal 2023.Research and Development (in millions, except percentages): Fiscal Year 2025 2024 % Change 2023 % Change Research and development expenses $ 1,012 $ 1,029 (2 )% $ 956 8 % Research and development expenses consist primarily of compensation costs, facilities and IT support costs, depreciation, equipment and software related costs, prototypes, non-recurring engineering charges and other outside services costs. The decrease in research and development expenses in fiscal 2025 compared to fiscal 2024 was primarily due to lower compensation costs.The increase in research and development expenses in fiscal 2024 compared to fiscal 2023 was primarily due to higher compensation costs, attributable to higher incentive compensation expense and stock-based compensation expense, partially offset by lower salaries expense, reflecting a decrease in average headcount of 5%. General and Administrative (in millions, except percentages): Fiscal Year 2025 2024 % Change 2023 % Change General and administrative expenses $ 311 $ 308 1 % $ 265 16 % General and administrative expenses consist primarily of compensation costs, professional and corporate legal fees, outside services and facilities and IT support costs. General and administrative expenses remained relatively flat in fiscal 2025 compared to fiscal 2024.The increase in general and administrative expenses in fiscal 2024 compared to fiscal 2023 was attributable to increases in all components of compensation costs, but predominately incentive compensation expense. Professional and legal fees and outside services expense was also slightly higher in fiscal 2024 due to higher spending on certain business transformation projects. Restructuring Charges (in millions, except percentages): Fiscal Year 2025 2024 % Change 2023 % Change Restructuring charges $ 83 $ 44 89 % $ 120 (63 )% reflecting higher operating performance against goals. The increase was partially offset by lower salaries expense, reflecting a decrease in average headcount of 7%. Sales and Marketing (in millions, except percentages):" }, { "status": "ADDED", "current_title": "Fiscal Year", "prior_title": null, "current_body": "2025 2024 2023 Revenues: Product 46 % 45 % 48 % Services 54 55 52 Net revenues 100 100 100" }, { "status": "ADDED", "current_title": "Fiscal Year", "prior_title": null, "current_body": "2025 2024 2023 Revenues: Product 46 % 45 % 48 % Services 54 55 52 Net revenues 100 100 100" }, { "status": "ADDED", "current_title": "Fiscal Year", "prior_title": null, "current_body": "2025 2024 2023 Revenues: Product 46 % 45 % 48 % Services 54 55 52 Net revenues 100 100 100" }, { "status": "ADDED", "current_title": "Fiscal Year", "prior_title": null, "current_body": "2025 2024 2023 Revenues: Product 46 % 45 % 48 % Services 54 55 52 Net revenues 100 100 100" }, { "status": "ADDED", "current_title": "Fiscal Year", "prior_title": null, "current_body": "2025 2024 2023 Revenues: Product 46 % 45 % 48 % Services 54 55 52 Net revenues 100 100 100" }, { "status": "ADDED", "current_title": "Other Income, Net (in millions, except percentages)", "prior_title": null, "current_body": "The components of other income, net were as follows:" }, { "status": "ADDED", "current_title": "Fiscal Year", "prior_title": null, "current_body": "2025 2024 2023 Revenues: Product 46 % 45 % 48 % Services 54 55 52 Net revenues 100 100 100" }, { "status": "ADDED", "current_title": "Provision (Benefit) for Income Taxes (in millions, except percentages):", "prior_title": null, "current_body": "Our provision (benefit) for income taxes and effective tax rates were as follows:" }, { "status": "ADDED", "current_title": "Fiscal Year", "prior_title": null, "current_body": "2025 2024 2023 Revenues: Product 46 % 45 % 48 % Services 54 55 52 Net revenues 100 100 100" }, { "status": "ADDED", "current_title": "April 26,2024", "prior_title": null, "current_body": "Deferred revenue and financed unearned services revenue $ 4,536 $ 4,234 36 36 •Net revenues: Our net revenues increased approximately 5% in fiscal 2025 compared to fiscal 2024, due to increases in both product revenues and services revenues.•Gross margin: Our gross margin decreased less than one percentage point in fiscal 2025 compared to fiscal 2024, due to the decrease in gross margins on product revenues.•Income from operations as a percentage of net revenues: Our income from operations as a percentage of net revenues increased by one percentage point in fiscal 2025 compared to fiscal 2024, primarily due to higher net revenues.•Provision (benefit) for income taxes: Our provision for income taxes decreased in fiscal 2025 compared to fiscal 2024 primarily as a result of differences in discrete tax impacts in each year.•Net income and Diluted net income per share: The increase in both net income and diluted net income per share in fiscal 2025 compared to fiscal 2024 reflect the factors discussed above.Stock Repurchase Program and Dividend ActivityDuring fiscal 2025, we repurchased 10.2 million shares of our common stock at an average price of $112.55 per share, for an aggregate purchase price of $1.2 billion. We also declared aggregate cash dividends of $2.08 per share in fiscal 2025, for which we paid a total of $424 million.Restructuring EventsDuring fiscal 2025, we executed several restructuring plans and recognized expenses totaling $83 million consisting primarily of employee severance-related costs. Senior Notes IssuanceIn March 2025, we issued $625 million aggregate principal amount of 5.50% Senior Notes due 2032 and $625 million aggregate principal amount of 5.70% Senior Notes due 2035, for which we received total proceeds of $1.24 billion, net of discount and issuance costs. •Net revenues: Our net revenues increased approximately 5% in fiscal 2025 compared to fiscal 2024, due to increases in both product revenues and services revenues. Net revenues: Our net revenues increased approximately 5% in fiscal 2025 compared to fiscal 2024, due to increases in both product revenues and services revenues. •Gross margin: Our gross margin decreased less than one percentage point in fiscal 2025 compared to fiscal 2024, due to the decrease in gross margins on product revenues. Gross margin: Our gross margin decreased less than one percentage point in fiscal 2025 compared to fiscal 2024, due to the decrease in gross margins on product revenues. •Income from operations as a percentage of net revenues: Our income from operations as a percentage of net revenues increased by one percentage point in fiscal 2025 compared to fiscal 2024, primarily due to higher net revenues. Income from operations as a percentage of net revenues: Our income from operations as a percentage of net revenues increased by one percentage point in fiscal 2025 compared to fiscal 2024, primarily due to higher net revenues. •Provision (benefit) for income taxes: Our provision for income taxes decreased in fiscal 2025 compared to fiscal 2024 primarily as a result of differences in discrete tax impacts in each year. Provision (benefit) for income taxes: Our provision for income taxes decreased in fiscal 2025 compared to fiscal 2024 primarily as a result of differences in discrete tax impacts in each year. •Net income and Diluted net income per share: The increase in both net income and diluted net income per share in fiscal 2025 compared to fiscal 2024 reflect the factors discussed above. Net income and Diluted net income per share: The increase in both net income and diluted net income per share in fiscal 2025 compared to fiscal 2024 reflect the factors discussed above." }, { "status": "ADDED", "current_title": "(In millions)", "prior_title": null, "current_body": "2025 2024 Net cash provided by operating activities $ 1,506 $ 1,685 Net cash provided by (used in) investing activities 147 (735 ) Net cash used in financing activities (828 ) (1,344 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 15 (19 ) Net change in cash, cash equivalents and restricted cash $ 840 $ (413 ) As of April 25, 2025, our cash, cash equivalents and short-term investments totaled $3.8 billion, reflecting an increase of $594 million from April 26, 2024. The increase was primarily due to $1.24 billion of net proceeds from the issuance of Senior Notes and $1.5 billion of cash generated from operating activities, partially offset by $1.2 billion used to repurchase shares of our common stock, a $400 million principal repayment of our 3.30% Senior Notes due September 2024, $424 million used for the payment of dividends, and $168 million in purchases of property and equipment. Net working capital was $1.2 billion as of April 25, 2025, an increase of $398 million when compared to April 26, 2024, primarily due to the increases in cash, cash equivalents and short-term investments discussed above. Cash Flows from Operating Activities During fiscal 2025, cash provided by operating activities reflected net income of $1.2 billion which was increased for non-cash depreciation and amortization expense of $243 million and non-cash stock-based compensation expense of $386 million. Significant changes in assets and liabilities during fiscal 2025 included the following: •Accounts receivable increased by $219 million, primarily reflecting higher billing in the fourth quarter of fiscal 2025 compared to the fourth quarter of fiscal 2024. Accounts receivable increased by $219 million, primarily reflecting higher billing in the fourth quarter of fiscal 2025 compared to the fourth quarter of fiscal 2024. •Deferred revenue and financed unearned services revenue increased by $208 million, primarily due to an increase in deferred revenue for software and hardware support contracts. Deferred revenue and financed unearned services revenue increased by $208 million, primarily due to an increase in deferred revenue for software and hardware support contracts. •Long-term taxes payable decreased by $207 million, primarily due to settlements associated with certain IRS tax examinations and changes in prior period tax positions. Long-term taxes payable decreased by $207 million, primarily due to settlements associated with certain IRS tax examinations and changes in prior period tax positions. 44 44 During fiscal 2024, cash provided by operating activities reflected net income of $1.0 billion which was increased for non-cash depreciation and amortization expense of $255 million and non-cash stock-based compensation expense of $357 million.Significant changes in assets and liabilities during fiscal 2024 included the following:•Accounts payable increased by $123 million, primarily reflecting the timing of inventory purchases from, and payments to, our contract manufacturers.•Accrued expenses increased by $113 million, primarily due to higher employee compensation accruals as of the end of fiscal 2024 compared to fiscal 2023 related to incentive compensation and commissions plans.We expect that cash provided by operating activities may materially fluctuate in future periods due to a number of factors, including fluctuations in our operating results, shipping linearity, accounts receivable collections performance, inventory and supply chain management, vendor payment initiatives, and the timing and amount of compensation, income taxes and other payments.Cash Flows from Investing ActivitiesDuring fiscal 2025, we generated $245 million primarily from maturities and sales of investments, net of purchases, and paid $168 million for capital expenditures. Additionally, we received proceeds of $70 million from the sale of our Spot by NetApp business.During fiscal 2024, we used $580 million for the purchases of investments, net of maturities and sales, and $155 million for capital expenditures.Cash Flows from Financing ActivitiesDuring fiscal 2025, we used $1.2 billion for the repurchase of 10.2 million shares of common stock, $424 million for the payment of dividends and $400 million principal repayment upon maturity, partially offset by $1.24 billion of net proceeds from the issuance of Senior Notes.During fiscal 2024, we used $900 million for the repurchase of 11.5 million shares of common stock, and $416 million for the payment of dividends.Key factors that that could affect our cash flows include changes in our revenue mix and profitability, our ability to effectively manage our working capital, in particular, accounts receivable, accounts payable and inventories, the timing and amount of stock repurchases and payment of cash dividends, the impact of foreign exchange rate changes, our ability to effectively integrate acquired products, businesses and technologies and the timing of repayments of our debt. Based on past performance and our current business outlook, we believe that our sources of liquidity, including cash, cash equivalents and short-term investments, cash generated from operations, and our ability to access capital markets and committed credit lines will satisfy our working capital needs, capital expenditures, investment requirements, stock repurchases, cash dividends, contractual obligations, commitments, principal and interest payments on our debt and other liquidity requirements associated with operations and meet our cash requirements for at least the next 12 months and thereafter for the foreseeable future. We may choose to periodically raise additional debt capital based on certain conditions, including the refinancing of upcoming maturities and/or for potential strategic acquisitions and investments. Our ability to obtain this or any additional financing that we may pursue or need, will depend on, among other things, our business plans, operating performance and the condition of the capital markets at the time we seek financing. We may not be able to obtain such financing on terms acceptable to us or at all. In the event our liquidity is insufficient and we are unable to enter into new financing arrangements, we may be required to curtail spending and implement additional cost saving measures and restructuring actions. We cannot be certain that we will continue to generate cash flows at or above current levels. For further discussion of factors that could affect our cash flows and liquidity requirements, see Item 1A. Risk Factors.LiquidityOur principal sources of liquidity as of April 25, 2025 consisted of cash, cash equivalents and short-term investments, cash we expect to generate from operations, and our commercial paper program and related credit facility.Cash, cash equivalents and short-term investments consisted of the following (in millions): April 25, 2025 April 26,2024 Cash and cash equivalents $ 2,742 $ 1,903 Short-term investments 1,104 1,349 Total $ 3,846 $ 3,252 During fiscal 2024, cash provided by operating activities reflected net income of $1.0 billion which was increased for non-cash depreciation and amortization expense of $255 million and non-cash stock-based compensation expense of $357 million. Significant changes in assets and liabilities during fiscal 2024 included the following: •Accounts payable increased by $123 million, primarily reflecting the timing of inventory purchases from, and payments to, our contract manufacturers. Accounts payable increased by $123 million, primarily reflecting the timing of inventory purchases from, and payments to, our contract manufacturers. •Accrued expenses increased by $113 million, primarily due to higher employee compensation accruals as of the end of fiscal 2024 compared to fiscal 2023 related to incentive compensation and commissions plans. Accrued expenses increased by $113 million, primarily due to higher employee compensation accruals as of the end of fiscal 2024 compared to fiscal 2023 related to incentive compensation and commissions plans. We expect that cash provided by operating activities may materially fluctuate in future periods due to a number of factors, including fluctuations in our operating results, shipping linearity, accounts receivable collections performance, inventory and supply chain management, vendor payment initiatives, and the timing and amount of compensation, income taxes and other payments. Cash Flows from Investing Activities During fiscal 2025, we generated $245 million primarily from maturities and sales of investments, net of purchases, and paid $168 million for capital expenditures. Additionally, we received proceeds of $70 million from the sale of our Spot by NetApp business. During fiscal 2024, we used $580 million for the purchases of investments, net of maturities and sales, and $155 million for capital expenditures. Cash Flows from Financing Activities During fiscal 2025, we used $1.2 billion for the repurchase of 10.2 million shares of common stock, $424 million for the payment of dividends and $400 million principal repayment upon maturity, partially offset by $1.24 billion of net proceeds from the issuance of Senior Notes. During fiscal 2024, we used $900 million for the repurchase of 11.5 million shares of common stock, and $416 million for the payment of dividends. Key factors that that could affect our cash flows include changes in our revenue mix and profitability, our ability to effectively manage our working capital, in particular, accounts receivable, accounts payable and inventories, the timing and amount of stock repurchases and payment of cash dividends, the impact of foreign exchange rate changes, our ability to effectively integrate acquired products, businesses and technologies and the timing of repayments of our debt. Based on past performance and our current business outlook, we believe that our sources of liquidity, including cash, cash equivalents and short-term investments, cash generated from operations, and our ability to access capital markets and committed credit lines will satisfy our working capital needs, capital expenditures, investment requirements, stock repurchases, cash dividends, contractual obligations, commitments, principal and interest payments on our debt and other liquidity requirements associated with operations and meet our cash requirements for at least the next 12 months and thereafter for the foreseeable future. We may choose to periodically raise additional debt capital based on certain conditions, including the refinancing of upcoming maturities and/or for potential strategic acquisitions and investments. Our ability to obtain this or any additional financing that we may pursue or need, will depend on, among other things, our business plans, operating performance and the condition of the capital markets at the time we seek financing. We may not be able to obtain such financing on terms acceptable to us or at all. In the event our liquidity is insufficient and we are unable to enter into new financing arrangements, we may be required to curtail spending and implement additional cost saving measures and restructuring actions. We cannot be certain that we will continue to generate cash flows at or above current levels. For further discussion of factors that could affect our cash flows and liquidity requirements, see Item 1A. Risk Factors. Liquidity Our principal sources of liquidity as of April 25, 2025 consisted of cash, cash equivalents and short-term investments, cash we expect to generate from operations, and our commercial paper program and related credit facility. Cash, cash equivalents and short-term investments consisted of the following (in millions):" }, { "status": "ADDED", "current_title": "April 26,2024", "prior_title": null, "current_body": "Deferred revenue and financed unearned services revenue $ 4,536 $ 4,234 36 36 •Net revenues: Our net revenues increased approximately 5% in fiscal 2025 compared to fiscal 2024, due to increases in both product revenues and services revenues.•Gross margin: Our gross margin decreased less than one percentage point in fiscal 2025 compared to fiscal 2024, due to the decrease in gross margins on product revenues.•Income from operations as a percentage of net revenues: Our income from operations as a percentage of net revenues increased by one percentage point in fiscal 2025 compared to fiscal 2024, primarily due to higher net revenues.•Provision (benefit) for income taxes: Our provision for income taxes decreased in fiscal 2025 compared to fiscal 2024 primarily as a result of differences in discrete tax impacts in each year.•Net income and Diluted net income per share: The increase in both net income and diluted net income per share in fiscal 2025 compared to fiscal 2024 reflect the factors discussed above.Stock Repurchase Program and Dividend ActivityDuring fiscal 2025, we repurchased 10.2 million shares of our common stock at an average price of $112.55 per share, for an aggregate purchase price of $1.2 billion. We also declared aggregate cash dividends of $2.08 per share in fiscal 2025, for which we paid a total of $424 million.Restructuring EventsDuring fiscal 2025, we executed several restructuring plans and recognized expenses totaling $83 million consisting primarily of employee severance-related costs. Senior Notes IssuanceIn March 2025, we issued $625 million aggregate principal amount of 5.50% Senior Notes due 2032 and $625 million aggregate principal amount of 5.70% Senior Notes due 2035, for which we received total proceeds of $1.24 billion, net of discount and issuance costs. •Net revenues: Our net revenues increased approximately 5% in fiscal 2025 compared to fiscal 2024, due to increases in both product revenues and services revenues. Net revenues: Our net revenues increased approximately 5% in fiscal 2025 compared to fiscal 2024, due to increases in both product revenues and services revenues. •Gross margin: Our gross margin decreased less than one percentage point in fiscal 2025 compared to fiscal 2024, due to the decrease in gross margins on product revenues. Gross margin: Our gross margin decreased less than one percentage point in fiscal 2025 compared to fiscal 2024, due to the decrease in gross margins on product revenues. •Income from operations as a percentage of net revenues: Our income from operations as a percentage of net revenues increased by one percentage point in fiscal 2025 compared to fiscal 2024, primarily due to higher net revenues. Income from operations as a percentage of net revenues: Our income from operations as a percentage of net revenues increased by one percentage point in fiscal 2025 compared to fiscal 2024, primarily due to higher net revenues. •Provision (benefit) for income taxes: Our provision for income taxes decreased in fiscal 2025 compared to fiscal 2024 primarily as a result of differences in discrete tax impacts in each year. Provision (benefit) for income taxes: Our provision for income taxes decreased in fiscal 2025 compared to fiscal 2024 primarily as a result of differences in discrete tax impacts in each year. •Net income and Diluted net income per share: The increase in both net income and diluted net income per share in fiscal 2025 compared to fiscal 2024 reflect the factors discussed above. Net income and Diluted net income per share: The increase in both net income and diluted net income per share in fiscal 2025 compared to fiscal 2024 reflect the factors discussed above." }, { "status": "ADDED", "current_title": "Capital Expenditure Requirements", "prior_title": null, "current_body": "We expect to fund our capital expenditures, including our commitments related to facilities, equipment, operating leases and internal-use software development projects over the next few years through existing cash, cash equivalents, investments and cash generated from operations. The timing and amount of our capital requirements cannot be precisely determined and will depend on a number of factors, including future demand for products, changes in the network storage industry, hiring plans and our decisions related to the financing of our facilities and equipment requirements. We anticipate capital expenditures for fiscal 2026 to be between $175 million and $225 million." }, { "status": "ADDED", "current_title": "Transition Tax Payments", "prior_title": null, "current_body": "The Tax Cuts and Jobs Act of 2017 imposed a mandatory, one-time transition tax on accumulated foreign earnings and profits that had not previously been subject to U.S. income tax. As of April 25, 2025, a final transition tax payment of $178 million remains outstanding and is expected to be paid during fiscal 2026. During fiscal 2025, transition tax payments totaled $115 million." }, { "status": "ADDED", "current_title": "Dividends and Stock Repurchase Program", "prior_title": null, "current_body": "On May 22, 2025, we declared a cash dividend of $0.52 per share of common stock, payable on July 23, 2025 to holders of record as of the close of business on July 3, 2025. As of April 25, 2025, our Board of Directors had authorized the repurchase of up to $17.1 billion of our common stock under our stock repurchase program. Under this program, we may purchase shares of our outstanding common stock through solicited or unsolicited transactions in the open market, in privately negotiated transactions, through accelerated share repurchase programs, pursuant to a Rule 10b5-1 plan or in such other manner as deemed appropriate by our management. The stock repurchase program may be suspended or discontinued at any time. Since the May 13, 2003 inception of this program through April 25, 2025, we repurchased a total of 382 million shares of our common stock at an average price of $43.93 per share, for an aggregate purchase price of $16.8 billion. As of April 25, 2025, the remaining authorized amount for stock repurchases under this program was $0.4 billion. On May 22, 2025 our Board of Directors authorized the repurchase of an additional $1.1 billion of our common stock." }, { "status": "ADDED", "current_title": "Purchase Commitments", "prior_title": null, "current_body": "In the ordinary course of business, we make commitments to third-party contract manufacturers and component suppliers to manage manufacturer lead times and meet product forecasts, and to other parties, to purchase various key components used in the manufacture of our products. In addition, we have open purchase orders and contractual obligations associated with our ordinary course of business for which we have not yet received goods or services. These off-balance sheet purchase commitments totaled $1.0 billion at April 25, 2025, of which $0.6 billion is due in fiscal 2026, with the remainder due thereafter." }, { "status": "ADDED", "current_title": "Financing Guarantees", "prior_title": null, "current_body": "While most of our arrangements for sales include short-term payment terms, from time to time we provide long-term financing to creditworthy customers. We have generally sold receivables financed through these arrangements on a non-recourse basis to third party financing institutions within 10 days of the contracts’ dates of execution, and we classify the proceeds from these sales as cash flows from operating activities in our consolidated statements of cash flows. We account for the sales of these receivables as “true sales” as defined in the accounting standards on transfers of financial assets, as we are considered to have surrendered control of these financing receivables. We sold $65 million and $67 million of receivables during fiscal 2025 and 2024, respectively. In addition, we enter into arrangements with leasing companies for the sale of our hardware systems products. These leasing companies, in turn, lease our products to end-users. The leasing companies generally have no recourse to us in the event of default by the end-user. Some of the leasing arrangements described above have been financed on a recourse basis through third-party financing institutions. Under the terms of recourse leases, which are generally three years or less, we remain liable for the aggregate unpaid remaining lease payments to the third-party leasing companies in the event of end-user customer default. These arrangements are generally collateralized by a security interest in the underlying assets. As of April 25, 2025 and April 26, 2024, the aggregate amount 47 47 by which such contingencies exceeded the associated liabilities was not significant. To date, we have not experienced significant losses under our lease financing programs or other financing arrangements.We have entered into service contracts with certain of our end-user customers that are supported by third-party financing arrangements. If a service contract is terminated as a result of our non-performance under the contract or our failure to comply with the terms of the financing arrangement, we could, under certain circumstances, be required to acquire certain assets related to the service contract or to pay the aggregate unpaid payments under such arrangements. As of April 25, 2025, we have not been required to make any payments under these arrangements, and we believe the likelihood of having to acquire a material amount of assets or make payments under these arrangements is remote. The portion of the financial arrangement that represents unearned services revenue is included in deferred revenue and financed unearned services revenue in our consolidated balance sheets. Legal ContingenciesWe are subject to various legal proceedings and claims which arise in the normal course of business. See further details on such matters in Note 17 – Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8. Critical Accounting Policies and EstimatesOur consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP), which require management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses, and the disclosure of contingent assets and liabilities. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. We believe that the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from these estimates and such differences may be material.The summary of significant accounting policies is included in Note 1 – Description of Business and Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Part II, Item 8. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. The accounting policies described below reflect the significant judgments, estimates and assumptions used in the preparation of the consolidated financial statements.Revenue RecognitionOur contracts with customers often include the transfer of multiple products and services to the customer. In determining the amount and timing of revenue recognition, we assess which products and services are distinct performance obligations and allocate the transaction price, which may include fixed and/or variable amounts, among each performance obligation on a relative standalone selling price (SSP) basis. The following are the key estimates and assumptions and corresponding uncertainties included in this approach: Key Estimates and Assumptions Key Uncertainties  We evaluate whether products and services promised in our contracts with customers are distinct performance obligations that should be accounted for separately versus together.  In certain contracts, the determination of our distinct performance obligations requires significant judgment. As our business and offerings to customers change over time, the products and services we determine to be distinct performance obligations may change. Such changes may adversely impact the amount of revenue and gross margin we report in a particular period.  In determining the transaction price of our contracts, we estimate variable consideration based on the expected value, primarily relying on our history. In certain situations, we may also use the most likely amount as the basis of our estimate.  We may have insufficient relevant historical data or other information to arrive at an accurate estimate of variable consideration using either the “expected value” or “most likely amount” method. Additionally, changes in business practices, such as those related to sales returns or marketing programs, may introduce new forms of variable consideration, as well as more complexity and uncertainty in the estimation process. by which such contingencies exceeded the associated liabilities was not significant. To date, we have not experienced significant losses under our lease financing programs or other financing arrangements. We have entered into service contracts with certain of our end-user customers that are supported by third-party financing arrangements. If a service contract is terminated as a result of our non-performance under the contract or our failure to comply with the terms of the financing arrangement, we could, under certain circumstances, be required to acquire certain assets related to the service contract or to pay the aggregate unpaid payments under such arrangements. As of April 25, 2025, we have not been required to make any payments under these arrangements, and we believe the likelihood of having to acquire a material amount of assets or make payments under these arrangements is remote. The portion of the financial arrangement that represents unearned services revenue is included in deferred revenue and financed unearned services revenue in our consolidated balance sheets." }, { "status": "ADDED", "current_title": "Legal Contingencies", "prior_title": null, "current_body": "We are subject to various legal proceedings and claims which arise in the normal course of business. See further details on such matters in Note 17 – Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8." }, { "status": "ADDED", "current_title": "Critical Accounting Policies and Estimates", "prior_title": null, "current_body": "Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP), which require management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses, and the disclosure of contingent assets and liabilities. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. We believe that the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from these estimates and such differences may be material. The summary of significant accounting policies is included in Note 1 – Description of Business and Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Part II, Item 8. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. The accounting policies described below reflect the significant judgments, estimates and assumptions used in the preparation of the consolidated financial statements." }, { "status": "ADDED", "current_title": "Revenue Recognition", "prior_title": null, "current_body": "Our contracts with customers often include the transfer of multiple products and services to the customer. In determining the amount and timing of revenue recognition, we assess which products and services are distinct performance obligations and allocate the transaction price, which may include fixed and/or variable amounts, among each performance obligation on a relative standalone selling price (SSP) basis. The following are the key estimates and assumptions and corresponding uncertainties included in this approach:" }, { "status": "ADDED", "current_title": "Key Uncertainties", "prior_title": null, "current_body": " We evaluate whether products and services promised in our contracts with customers are distinct performance obligations that should be accounted for separately versus together.  In certain contracts, the determination of our distinct performance obligations requires significant judgment. As our business and offerings to customers change over time, the products and services we determine to be distinct performance obligations may change. Such changes may adversely impact the amount of revenue and gross margin we report in a particular period.  In determining the transaction price of our contracts, we estimate variable consideration based on the expected value, primarily relying on our history. In certain situations, we may also use the most likely amount as the basis of our estimate.  We may have insufficient relevant historical data or other information to arrive at an accurate estimate of variable consideration using either the “expected value” or “most likely amount” method. Additionally, changes in business practices, such as those related to sales returns or marketing programs, may introduce new forms of variable consideration, as well as more complexity and uncertainty in the estimation process. 48 48  In contracts with multiple performance obligations, we establish SSPs based on the price at which products and services are sold separately. If SSPs are not observable through past transactions, we estimate them by maximizing the use of observable inputs including pricing strategy, market data, internally-approved pricing guidelines related to the performance obligations and other observable inputs.  As our business and offerings evolve over time, modifications to our pricing and discounting methodologies, changes in the scope and nature of product and service offerings and/or changes in customer segmentation may result in a lack of consistency, making it difficult to establish and/or maintain SSPs. Changes in SSPs could result in different and unanticipated allocations of revenue in contracts with multiple performance obligations. These factors, among others, may adversely impact the amount of revenue and gross margin we report in a particular period. Inventory Valuation and Purchase Order AccrualsInventories consist primarily of purchased components and finished goods and are stated at the lower of cost or net realizable value, which approximates actual cost on a first-in, first-out basis. A provision is recorded when inventory is determined to be in excess of anticipated demand or obsolete in order to adjust inventory to its estimated realizable value. The following are the key estimates and assumptions and corresponding uncertainties for estimating the value of our inventories: Key Estimates and Assumptions Key Uncertainties  We periodically perform an excess and obsolete analysis of our inventory. Inventories are written down based on excess and obsolete reserves determined primarily on assumptions about future demand forecasts and market conditions. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.  Although we use our best estimates to forecast future product demand, any significant unanticipated changes in demand, including due to macroeconomic uncertainties, or obsolescence related to technological developments, new product introductions, customer requirements, competition or other factors could have a significant impact on the valuation of our inventory. If actual market conditions are less favorable than those projected, additional write-downs and other charges against earnings that adversely impact gross margins may be required. If actual market conditions are more favorable, we may realize higher gross profits in the period when the written-down inventory is sold. We are subject to a variety of environmental laws relating to the manufacture of our products. If there are changes to the current regulations, we may be required to make product design changes which may result in excess or obsolete inventory, which could adversely impact our operating results.  We make commitments to our third-party contract manufacturers and other suppliers to manage lead times and meet product forecasts and to other parties to purchase various key components used in the manufacture of our products. We establish accruals for estimated losses on non-cancelable purchase commitments when we believe it is probable that the components will not be utilized in future operations.  If the actual materials demand is significantly lower than our forecast, we may be required to increase our recorded liabilities for estimated losses on non-cancelable purchase commitments. Goodwill and Purchased Intangible AssetsWe allocate the purchase price of acquisitions to identifiable assets acquired and liabilities assumed at their acquisition date fair values based on established valuation techniques. Goodwill represents the residual value as of the acquisition date, which in most cases is measured as the excess of the purchase consideration transferred over the net of the acquisition date fair values of the assets acquired and liabilities assumed.The carrying values of purchased intangible assets are reviewed whenever events and circumstances indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. We periodically review the estimated remaining useful lives of our intangible assets. This review may result in impairment charges or shortened useful lives, resulting in charges to our consolidated statements of income.  In contracts with multiple performance obligations, we establish SSPs based on the price at which products and services are sold separately. If SSPs are not observable through past transactions, we estimate them by maximizing the use of observable inputs including pricing strategy, market data, internally-approved pricing guidelines related to the performance obligations and other observable inputs.  As our business and offerings evolve over time, modifications to our pricing and discounting methodologies, changes in the scope and nature of product and service offerings and/or changes in customer segmentation may result in a lack of consistency, making it difficult to establish and/or maintain SSPs. Changes in SSPs could result in different and unanticipated allocations of revenue in contracts with multiple performance obligations. These factors, among others, may adversely impact the amount of revenue and gross margin we report in a particular period." }, { "status": "ADDED", "current_title": "Inventory Valuation and Purchase Order Accruals", "prior_title": null, "current_body": "Inventories consist primarily of purchased components and finished goods and are stated at the lower of cost or net realizable value, which approximates actual cost on a first-in, first-out basis. A provision is recorded when inventory is determined to be in excess of anticipated demand or obsolete in order to adjust inventory to its estimated realizable value. The following are the key estimates and assumptions and corresponding uncertainties for estimating the value of our inventories:" }, { "status": "ADDED", "current_title": "Key Uncertainties", "prior_title": null, "current_body": " We evaluate whether products and services promised in our contracts with customers are distinct performance obligations that should be accounted for separately versus together.  In certain contracts, the determination of our distinct performance obligations requires significant judgment. As our business and offerings to customers change over time, the products and services we determine to be distinct performance obligations may change. Such changes may adversely impact the amount of revenue and gross margin we report in a particular period.  In determining the transaction price of our contracts, we estimate variable consideration based on the expected value, primarily relying on our history. In certain situations, we may also use the most likely amount as the basis of our estimate.  We may have insufficient relevant historical data or other information to arrive at an accurate estimate of variable consideration using either the “expected value” or “most likely amount” method. Additionally, changes in business practices, such as those related to sales returns or marketing programs, may introduce new forms of variable consideration, as well as more complexity and uncertainty in the estimation process. 48 48  In contracts with multiple performance obligations, we establish SSPs based on the price at which products and services are sold separately. If SSPs are not observable through past transactions, we estimate them by maximizing the use of observable inputs including pricing strategy, market data, internally-approved pricing guidelines related to the performance obligations and other observable inputs.  As our business and offerings evolve over time, modifications to our pricing and discounting methodologies, changes in the scope and nature of product and service offerings and/or changes in customer segmentation may result in a lack of consistency, making it difficult to establish and/or maintain SSPs. Changes in SSPs could result in different and unanticipated allocations of revenue in contracts with multiple performance obligations. These factors, among others, may adversely impact the amount of revenue and gross margin we report in a particular period. Inventory Valuation and Purchase Order AccrualsInventories consist primarily of purchased components and finished goods and are stated at the lower of cost or net realizable value, which approximates actual cost on a first-in, first-out basis. A provision is recorded when inventory is determined to be in excess of anticipated demand or obsolete in order to adjust inventory to its estimated realizable value. The following are the key estimates and assumptions and corresponding uncertainties for estimating the value of our inventories: Key Estimates and Assumptions Key Uncertainties  We periodically perform an excess and obsolete analysis of our inventory. Inventories are written down based on excess and obsolete reserves determined primarily on assumptions about future demand forecasts and market conditions. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.  Although we use our best estimates to forecast future product demand, any significant unanticipated changes in demand, including due to macroeconomic uncertainties, or obsolescence related to technological developments, new product introductions, customer requirements, competition or other factors could have a significant impact on the valuation of our inventory. If actual market conditions are less favorable than those projected, additional write-downs and other charges against earnings that adversely impact gross margins may be required. If actual market conditions are more favorable, we may realize higher gross profits in the period when the written-down inventory is sold. We are subject to a variety of environmental laws relating to the manufacture of our products. If there are changes to the current regulations, we may be required to make product design changes which may result in excess or obsolete inventory, which could adversely impact our operating results.  We make commitments to our third-party contract manufacturers and other suppliers to manage lead times and meet product forecasts and to other parties to purchase various key components used in the manufacture of our products. We establish accruals for estimated losses on non-cancelable purchase commitments when we believe it is probable that the components will not be utilized in future operations.  If the actual materials demand is significantly lower than our forecast, we may be required to increase our recorded liabilities for estimated losses on non-cancelable purchase commitments. Goodwill and Purchased Intangible AssetsWe allocate the purchase price of acquisitions to identifiable assets acquired and liabilities assumed at their acquisition date fair values based on established valuation techniques. Goodwill represents the residual value as of the acquisition date, which in most cases is measured as the excess of the purchase consideration transferred over the net of the acquisition date fair values of the assets acquired and liabilities assumed.The carrying values of purchased intangible assets are reviewed whenever events and circumstances indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. We periodically review the estimated remaining useful lives of our intangible assets. This review may result in impairment charges or shortened useful lives, resulting in charges to our consolidated statements of income.  In contracts with multiple performance obligations, we establish SSPs based on the price at which products and services are sold separately. If SSPs are not observable through past transactions, we estimate them by maximizing the use of observable inputs including pricing strategy, market data, internally-approved pricing guidelines related to the performance obligations and other observable inputs.  As our business and offerings evolve over time, modifications to our pricing and discounting methodologies, changes in the scope and nature of product and service offerings and/or changes in customer segmentation may result in a lack of consistency, making it difficult to establish and/or maintain SSPs. Changes in SSPs could result in different and unanticipated allocations of revenue in contracts with multiple performance obligations. These factors, among others, may adversely impact the amount of revenue and gross margin we report in a particular period." }, { "status": "ADDED", "current_title": "Goodwill and Purchased Intangible Assets", "prior_title": null, "current_body": "We allocate the purchase price of acquisitions to identifiable assets acquired and liabilities assumed at their acquisition date fair values based on established valuation techniques. Goodwill represents the residual value as of the acquisition date, which in most cases is measured as the excess of the purchase consideration transferred over the net of the acquisition date fair values of the assets acquired and liabilities assumed. The carrying values of purchased intangible assets are reviewed whenever events and circumstances indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. We periodically review the estimated remaining useful lives of our intangible assets. This review may result in impairment charges or shortened useful lives, resulting in charges to our consolidated statements of income. 49 49 We review goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying amount of one of our reporting units may exceed its fair value. The provisions of the accounting standard for goodwill allow us to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. For our annual goodwill impairment test in the fourth quarter of fiscal 2025, we performed a qualitative assessment of goodwill impairment by evaluating relevant factors to determine whether it is more likely than not that the fair value of each of our reporting units is less than their carrying values. As a result of the qualitative assessment, we determined the quantitative test was not necessary and there was no impairment of goodwill. We review goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying amount of one of our reporting units may exceed its fair value. The provisions of the accounting standard for goodwill allow us to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. For our annual goodwill impairment test in the fourth quarter of fiscal 2025, we performed a qualitative assessment of goodwill impairment by evaluating relevant factors to determine whether it is more likely than not that the fair value of each of our reporting units is less than their carrying values. As a result of the qualitative assessment, we determined the quantitative test was not necessary and there was no impairment of goodwill. 50 50 The following are the key estimates and assumptions and corresponding uncertainties for estimating the value of our goodwill and purchased intangible assets: Key Estimates and Assumptions Key Uncertainties  The assessment of fair value for goodwill and purchased intangible assets is based on factors that market participants would use in an orderly transaction in accordance with the accounting guidance for the fair value measurement of nonfinancial assets.The valuation of purchased intangible assets is principally based on estimates of the future performance and cash flows expected to be generated by the acquired assets from the acquired business.  While we employ experts to determine the acquisition date fair value of acquired intangibles, the fair values of assets acquired and liabilities assumed are based on significant management assumptions and estimates, which are inherently uncertain and highly subjective and as a result, actual results may differ from estimates. If different assumptions were to be used, it could materially impact the purchase price allocation.  Evaluations of possible goodwill and purchased intangible asset impairment require us to make judgments and assumptions related to the allocation of our balance sheet and income statement amounts and estimate future cash flows and fair market values of our reporting units and assets.  In response to changes in industry and market conditions, we could be required to strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses, which could result in an impairment of goodwill or purchased intangible assets. Assumptions and estimates about expected future cash flows and the fair values of our reporting units and purchased intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as the adverse impact of unanticipated changes in macroeconomic conditions, and technological changes or new product introductions from competitors. They can also be affected by internal factors such as changes in business strategy or in forecasted product life cycles and roadmaps. Our ongoing consideration of these and other factors could result in future impairment charges or accelerated amortization expense, which could adversely affect our operating results. Income TaxesWe are subject to income taxes in the United States and numerous foreign jurisdictions. We compute our provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets or liabilities are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.The following are the key estimates and assumptions and corresponding uncertainties for our income taxes: The following are the key estimates and assumptions and corresponding uncertainties for estimating the value of our goodwill and purchased intangible assets:" }, { "status": "ADDED", "current_title": "Key Uncertainties", "prior_title": null, "current_body": " We evaluate whether products and services promised in our contracts with customers are distinct performance obligations that should be accounted for separately versus together.  In certain contracts, the determination of our distinct performance obligations requires significant judgment. As our business and offerings to customers change over time, the products and services we determine to be distinct performance obligations may change. Such changes may adversely impact the amount of revenue and gross margin we report in a particular period.  In determining the transaction price of our contracts, we estimate variable consideration based on the expected value, primarily relying on our history. In certain situations, we may also use the most likely amount as the basis of our estimate.  We may have insufficient relevant historical data or other information to arrive at an accurate estimate of variable consideration using either the “expected value” or “most likely amount” method. Additionally, changes in business practices, such as those related to sales returns or marketing programs, may introduce new forms of variable consideration, as well as more complexity and uncertainty in the estimation process. 48 48  In contracts with multiple performance obligations, we establish SSPs based on the price at which products and services are sold separately. If SSPs are not observable through past transactions, we estimate them by maximizing the use of observable inputs including pricing strategy, market data, internally-approved pricing guidelines related to the performance obligations and other observable inputs.  As our business and offerings evolve over time, modifications to our pricing and discounting methodologies, changes in the scope and nature of product and service offerings and/or changes in customer segmentation may result in a lack of consistency, making it difficult to establish and/or maintain SSPs. Changes in SSPs could result in different and unanticipated allocations of revenue in contracts with multiple performance obligations. These factors, among others, may adversely impact the amount of revenue and gross margin we report in a particular period. Inventory Valuation and Purchase Order AccrualsInventories consist primarily of purchased components and finished goods and are stated at the lower of cost or net realizable value, which approximates actual cost on a first-in, first-out basis. A provision is recorded when inventory is determined to be in excess of anticipated demand or obsolete in order to adjust inventory to its estimated realizable value. The following are the key estimates and assumptions and corresponding uncertainties for estimating the value of our inventories: Key Estimates and Assumptions Key Uncertainties  We periodically perform an excess and obsolete analysis of our inventory. Inventories are written down based on excess and obsolete reserves determined primarily on assumptions about future demand forecasts and market conditions. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.  Although we use our best estimates to forecast future product demand, any significant unanticipated changes in demand, including due to macroeconomic uncertainties, or obsolescence related to technological developments, new product introductions, customer requirements, competition or other factors could have a significant impact on the valuation of our inventory. If actual market conditions are less favorable than those projected, additional write-downs and other charges against earnings that adversely impact gross margins may be required. If actual market conditions are more favorable, we may realize higher gross profits in the period when the written-down inventory is sold. We are subject to a variety of environmental laws relating to the manufacture of our products. If there are changes to the current regulations, we may be required to make product design changes which may result in excess or obsolete inventory, which could adversely impact our operating results.  We make commitments to our third-party contract manufacturers and other suppliers to manage lead times and meet product forecasts and to other parties to purchase various key components used in the manufacture of our products. We establish accruals for estimated losses on non-cancelable purchase commitments when we believe it is probable that the components will not be utilized in future operations.  If the actual materials demand is significantly lower than our forecast, we may be required to increase our recorded liabilities for estimated losses on non-cancelable purchase commitments. Goodwill and Purchased Intangible AssetsWe allocate the purchase price of acquisitions to identifiable assets acquired and liabilities assumed at their acquisition date fair values based on established valuation techniques. Goodwill represents the residual value as of the acquisition date, which in most cases is measured as the excess of the purchase consideration transferred over the net of the acquisition date fair values of the assets acquired and liabilities assumed.The carrying values of purchased intangible assets are reviewed whenever events and circumstances indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. We periodically review the estimated remaining useful lives of our intangible assets. This review may result in impairment charges or shortened useful lives, resulting in charges to our consolidated statements of income.  In contracts with multiple performance obligations, we establish SSPs based on the price at which products and services are sold separately. If SSPs are not observable through past transactions, we estimate them by maximizing the use of observable inputs including pricing strategy, market data, internally-approved pricing guidelines related to the performance obligations and other observable inputs.  As our business and offerings evolve over time, modifications to our pricing and discounting methodologies, changes in the scope and nature of product and service offerings and/or changes in customer segmentation may result in a lack of consistency, making it difficult to establish and/or maintain SSPs. Changes in SSPs could result in different and unanticipated allocations of revenue in contracts with multiple performance obligations. These factors, among others, may adversely impact the amount of revenue and gross margin we report in a particular period." }, { "status": "ADDED", "current_title": "Income Taxes", "prior_title": null, "current_body": "We are subject to income taxes in the United States and numerous foreign jurisdictions. We compute our provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets or liabilities are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. The following are the key estimates and assumptions and corresponding uncertainties for our income taxes: 51 51 Key Estimates and Assumptions Key Uncertainties  Our income tax provision is based on existing tax law and advanced pricing agreements or letter rulings we have with various tax authorities.  Our provision for income taxes is subject to volatility and could be adversely impacted by future changes in existing tax laws, such as a change in tax rate, possible U.S. changes to the taxation of earnings of our foreign subsidiaries, and uncertainties as to future renewals of favorable tax agreements and rulings.  The determination of whether we should record or adjust a valuation allowance against our deferred tax assets is based on assumptions regarding our future profitability.  Our future profits could differ from current expectations resulting in a change to our determination as to the amount of deferred tax assets that are more likely than not to be realized. We could adjust our valuation allowance with a corresponding impact to the tax provision in the period in which such determination is made.  The estimates for our uncertain tax positions are based primarily on company specific circumstances, applicable tax laws, tax opinions from outside firms and past results from examinations of our income tax returns.  Significant judgment is required in evaluating our uncertain tax positions. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome or tax court rulings of these matters will not be different from that which is reflected in our historical tax provisions and accruals. Item 7A. Quantitative and Qualitative Disclosures about Market RiskWe are exposed to market risk related to fluctuations in interest rates and foreign currency exchange rates. We use certain derivative financial instruments to manage foreign currency exchange risks. We do not use derivative financial instruments for speculative or trading purposes. All financial instruments are used in accordance with management-approved policies.Interest Rate RiskFixed Income Investments — As of April 25, 2025, we had fixed income debt investments of $2.0 billion and certificates of deposit of $24 million. Our fixed income debt investment portfolio primarily consists of investments with original maturities greater than three months at the date of purchase, which are classified as available-for-sale investments. These fixed income debt investments, which consist primarily of U.S. Treasury and government debt securities, and our certificates of deposit are subject to interest rate and interest income risk and will decrease in value if market interest rates increase. Conversely, declines in interest rates, including the impact from lower credit spreads, could have a material adverse impact on interest income for our investment portfolio. A hypothetical 100 basis point increase in market interest rates from levels as of April 25, 2025 would have resulted in a decrease in the fair value of our fixed-income securities of $3 million. Volatility in market interest rates over time will cause variability in our interest income. We do not use derivative financial instruments in our investment portfolio. Our investment policy is to limit credit exposure through diversification and investment in highly rated securities. We further mitigate concentrations of credit risk in our investments by limiting our investments in the debt securities of a single issuer and by diversifying risk across geographies and type of issuer. We actively review, along with our investment advisors, current investment ratings, company-specific events and general economic conditions in managing our investments and in determining whether there is a significant decline in fair value. We monitor and evaluate our investment portfolio on a quarterly basis for any impairments.Debt — As of April 25, 2025 we have outstanding $3.3 billion aggregate principal amount of Senior Notes. We carry these instruments at face value less unamortized discount and issuance costs on our consolidated balance sheets. Since these instruments bear interest at fixed rates, we have no financial statement risk associated with changes in interest rates. However, the fair value of these instruments fluctuates when interest rates change. See Note 8 – Financing Arrangements of the Notes to Consolidated Financial Statements included in Part II, Item 8 for more information.Credit Facility — We are exposed to the impact of changes in interest rates in connection with our $1.0 billion five-year revolving credit facility. Borrowings under the facility accrue interest at rates that vary based on certain market rates and our credit rating on our Senior Notes. Consequently, our interest expense would fluctuate with any changes in these market interest rates or in our credit rating if we were to borrow any amounts under the credit facility. As of April 25, 2025, no amounts were outstanding under the credit facility." }, { "status": "ADDED", "current_title": "Key Uncertainties", "prior_title": null, "current_body": " We evaluate whether products and services promised in our contracts with customers are distinct performance obligations that should be accounted for separately versus together.  In certain contracts, the determination of our distinct performance obligations requires significant judgment. As our business and offerings to customers change over time, the products and services we determine to be distinct performance obligations may change. Such changes may adversely impact the amount of revenue and gross margin we report in a particular period.  In determining the transaction price of our contracts, we estimate variable consideration based on the expected value, primarily relying on our history. In certain situations, we may also use the most likely amount as the basis of our estimate.  We may have insufficient relevant historical data or other information to arrive at an accurate estimate of variable consideration using either the “expected value” or “most likely amount” method. Additionally, changes in business practices, such as those related to sales returns or marketing programs, may introduce new forms of variable consideration, as well as more complexity and uncertainty in the estimation process. 48 48  In contracts with multiple performance obligations, we establish SSPs based on the price at which products and services are sold separately. If SSPs are not observable through past transactions, we estimate them by maximizing the use of observable inputs including pricing strategy, market data, internally-approved pricing guidelines related to the performance obligations and other observable inputs.  As our business and offerings evolve over time, modifications to our pricing and discounting methodologies, changes in the scope and nature of product and service offerings and/or changes in customer segmentation may result in a lack of consistency, making it difficult to establish and/or maintain SSPs. Changes in SSPs could result in different and unanticipated allocations of revenue in contracts with multiple performance obligations. These factors, among others, may adversely impact the amount of revenue and gross margin we report in a particular period. Inventory Valuation and Purchase Order AccrualsInventories consist primarily of purchased components and finished goods and are stated at the lower of cost or net realizable value, which approximates actual cost on a first-in, first-out basis. A provision is recorded when inventory is determined to be in excess of anticipated demand or obsolete in order to adjust inventory to its estimated realizable value. The following are the key estimates and assumptions and corresponding uncertainties for estimating the value of our inventories: Key Estimates and Assumptions Key Uncertainties  We periodically perform an excess and obsolete analysis of our inventory. Inventories are written down based on excess and obsolete reserves determined primarily on assumptions about future demand forecasts and market conditions. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.  Although we use our best estimates to forecast future product demand, any significant unanticipated changes in demand, including due to macroeconomic uncertainties, or obsolescence related to technological developments, new product introductions, customer requirements, competition or other factors could have a significant impact on the valuation of our inventory. If actual market conditions are less favorable than those projected, additional write-downs and other charges against earnings that adversely impact gross margins may be required. If actual market conditions are more favorable, we may realize higher gross profits in the period when the written-down inventory is sold. We are subject to a variety of environmental laws relating to the manufacture of our products. If there are changes to the current regulations, we may be required to make product design changes which may result in excess or obsolete inventory, which could adversely impact our operating results.  We make commitments to our third-party contract manufacturers and other suppliers to manage lead times and meet product forecasts and to other parties to purchase various key components used in the manufacture of our products. We establish accruals for estimated losses on non-cancelable purchase commitments when we believe it is probable that the components will not be utilized in future operations.  If the actual materials demand is significantly lower than our forecast, we may be required to increase our recorded liabilities for estimated losses on non-cancelable purchase commitments. Goodwill and Purchased Intangible AssetsWe allocate the purchase price of acquisitions to identifiable assets acquired and liabilities assumed at their acquisition date fair values based on established valuation techniques. Goodwill represents the residual value as of the acquisition date, which in most cases is measured as the excess of the purchase consideration transferred over the net of the acquisition date fair values of the assets acquired and liabilities assumed.The carrying values of purchased intangible assets are reviewed whenever events and circumstances indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. We periodically review the estimated remaining useful lives of our intangible assets. This review may result in impairment charges or shortened useful lives, resulting in charges to our consolidated statements of income.  In contracts with multiple performance obligations, we establish SSPs based on the price at which products and services are sold separately. If SSPs are not observable through past transactions, we estimate them by maximizing the use of observable inputs including pricing strategy, market data, internally-approved pricing guidelines related to the performance obligations and other observable inputs.  As our business and offerings evolve over time, modifications to our pricing and discounting methodologies, changes in the scope and nature of product and service offerings and/or changes in customer segmentation may result in a lack of consistency, making it difficult to establish and/or maintain SSPs. Changes in SSPs could result in different and unanticipated allocations of revenue in contracts with multiple performance obligations. These factors, among others, may adversely impact the amount of revenue and gross margin we report in a particular period." }, { "status": "ADDED", "current_title": "Interest Rate Risk", "prior_title": null, "current_body": "Fixed Income Investments — As of April 25, 2025, we had fixed income debt investments of $2.0 billion and certificates of deposit of $24 million. Our fixed income debt investment portfolio primarily consists of investments with original maturities greater than three months at the date of purchase, which are classified as available-for-sale investments. These fixed income debt investments, which consist primarily of U.S. Treasury and government debt securities, and our certificates of deposit are subject to interest rate and interest income risk and will decrease in value if market interest rates increase. Conversely, declines in interest rates, including the impact from lower credit spreads, could have a material adverse impact on interest income for our investment portfolio. A hypothetical 100 basis point increase in market interest rates from levels as of April 25, 2025 would have resulted in a decrease in the fair value of our fixed-income securities of $3 million. Volatility in market interest rates over time will cause variability in our interest income. We do not use derivative financial instruments in our investment portfolio. Our investment policy is to limit credit exposure through diversification and investment in highly rated securities. We further mitigate concentrations of credit risk in our investments by limiting our investments in the debt securities of a single issuer and by diversifying risk across geographies and type of issuer. We actively review, along with our investment advisors, current investment ratings, company-specific events and general economic conditions in managing our investments and in determining whether there is a significant decline in fair value. We monitor and evaluate our investment portfolio on a quarterly basis for any impairments. Debt — As of April 25, 2025 we have outstanding $3.3 billion aggregate principal amount of Senior Notes. We carry these instruments at face value less unamortized discount and issuance costs on our consolidated balance sheets. Since these instruments bear interest at fixed rates, we have no financial statement risk associated with changes in interest rates. However, the fair value of these instruments fluctuates when interest rates change. See Note 8 – Financing Arrangements of the Notes to Consolidated Financial Statements included in Part II, Item 8 for more information. Credit Facility — We are exposed to the impact of changes in interest rates in connection with our $1.0 billion five-year revolving credit facility. Borrowings under the facility accrue interest at rates that vary based on certain market rates and our credit rating on our Senior Notes. Consequently, our interest expense would fluctuate with any changes in these market interest rates or in our credit rating if we were to borrow any amounts under the credit facility. As of April 25, 2025, no amounts were outstanding under the credit facility. 52 52 Foreign Currency Exchange Rate RiskWe hedge risks associated with certain foreign currency transactions to minimize the impact of changes in foreign currency exchange rates on earnings. We utilize foreign currency exchange forward contracts to hedge against the short-term impact of foreign currency fluctuations on certain foreign currency denominated monetary assets and liabilities. We also use foreign currency exchange forward contracts to hedge foreign currency exposures related to forecasted sales transactions denominated in certain foreign currencies. These derivatives are designated and qualify as cash flow hedges under accounting guidance for derivatives and hedging.We do not enter into foreign currency exchange contracts for speculative or trading purposes. In entering into foreign currency exchange forward contracts, we have assumed the risk that might arise from the possible inability of counterparties to meet the terms of the contracts. We attempt to limit our exposure to credit risk by executing foreign currency exchange contracts with creditworthy multinational commercial banks. All contracts have a maturity of 12 months or less. See Note 11 – Derivatives and Hedging Activities of the Notes to Consolidated Financial Statements included in Part II, Item 8 for more information regarding our derivatives and hedging activities." }, { "status": "ADDED", "current_title": "Foreign Currency Exchange Rate Risk", "prior_title": null, "current_body": "We hedge risks associated with certain foreign currency transactions to minimize the impact of changes in foreign currency exchange rates on earnings. We utilize foreign currency exchange forward contracts to hedge against the short-term impact of foreign currency fluctuations on certain foreign currency denominated monetary assets and liabilities. We also use foreign currency exchange forward contracts to hedge foreign currency exposures related to forecasted sales transactions denominated in certain foreign currencies. These derivatives are designated and qualify as cash flow hedges under accounting guidance for derivatives and hedging. We do not enter into foreign currency exchange contracts for speculative or trading purposes. In entering into foreign currency exchange forward contracts, we have assumed the risk that might arise from the possible inability of counterparties to meet the terms of the contracts. We attempt to limit our exposure to credit risk by executing foreign currency exchange contracts with creditworthy multinational commercial banks. All contracts have a maturity of 12 months or less. See Note 11 – Derivatives and Hedging Activities of the Notes to Consolidated Financial Statements included in Part II, Item 8 for more information regarding our derivatives and hedging activities. 53 53 Item 8. Financial Statements and Supplementary DataINDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Balance Sheets 55 Consolidated Statements of Income 56 Consolidated Statements of Comprehensive Income 57 Consolidated Statements of Cash Flows 58 Consolidated Statements of Stockholders’ Equity 59 Notes to Consolidated Financial Statements 60 Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 89 Item 8. Financial Statements and Supplementary Data" }, { "status": "ADDED", "current_title": "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA", "prior_title": null, "current_body": "Consolidated Balance Sheets Consolidated Balance Sheets 55 Consolidated Statements of Income Consolidated Statements of Income 56 Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income 57 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows 58 Consolidated Statements of Stockholders’ Equity Consolidated Statements of Stockholders’ Equity 59 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 60 Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34) Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34 34 ) 89 54 54 NETAPP, INC.CONSOLIDATED BALANCE SHEETS(In millions, except par value) April 25, 2025 April 26,2024 ASSETS Current assets: Cash and cash equivalents $ 2,742 $ 1,903 Short-term investments 1,104 1,349 Accounts receivable 1,246 1,007 Inventories 186 186 Other current assets 573 452 Total current assets 5,851 4,897 Property and equipment, net 563 604 Goodwill 2,723 2,759 Purchased intangible assets, net 43 124 Other non-current assets 1,643 1,503 Total assets $ 10,823 $ 9,887 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 511 $ 517 Accrued expenses 1,122 1,013 Current portion of long-term debt 750 400 Short-term deferred revenue and financed unearned services revenue 2,279 2,176 Total current liabilities 4,662 4,106 Long-term debt 2,485 1,992 Other long-term liabilities 379 585 Long-term deferred revenue and financed unearned services revenue 2,257 2,058 Total liabilities 9,783 8,741 Commitments and contingencies (Note 17) Stockholders' equity: Preferred stock, $0.001 par value, 5 shares authorized; no shares issued or outstanding as of April 25, 2025 or April 26, 2024 — — Common stock and additional paid-in capital, $0.001 par value, 885 shares authorized; 201 and 206 shares issued and outstanding as of April 25, 2025 and April 26, 2024, respectively 1,106 997 Retained earnings — 208 Accumulated other comprehensive loss (66 ) (59 ) Total stockholders' equity 1,040 1,146 Total liabilities and stockholders' equity $ 10,823 $ 9,887 See accompanying notes to consolidated financial statements." }, { "status": "ADDED", "current_title": "April 26,2024", "prior_title": null, "current_body": "Deferred revenue and financed unearned services revenue $ 4,536 $ 4,234 36 36 •Net revenues: Our net revenues increased approximately 5% in fiscal 2025 compared to fiscal 2024, due to increases in both product revenues and services revenues.•Gross margin: Our gross margin decreased less than one percentage point in fiscal 2025 compared to fiscal 2024, due to the decrease in gross margins on product revenues.•Income from operations as a percentage of net revenues: Our income from operations as a percentage of net revenues increased by one percentage point in fiscal 2025 compared to fiscal 2024, primarily due to higher net revenues.•Provision (benefit) for income taxes: Our provision for income taxes decreased in fiscal 2025 compared to fiscal 2024 primarily as a result of differences in discrete tax impacts in each year.•Net income and Diluted net income per share: The increase in both net income and diluted net income per share in fiscal 2025 compared to fiscal 2024 reflect the factors discussed above.Stock Repurchase Program and Dividend ActivityDuring fiscal 2025, we repurchased 10.2 million shares of our common stock at an average price of $112.55 per share, for an aggregate purchase price of $1.2 billion. We also declared aggregate cash dividends of $2.08 per share in fiscal 2025, for which we paid a total of $424 million.Restructuring EventsDuring fiscal 2025, we executed several restructuring plans and recognized expenses totaling $83 million consisting primarily of employee severance-related costs. Senior Notes IssuanceIn March 2025, we issued $625 million aggregate principal amount of 5.50% Senior Notes due 2032 and $625 million aggregate principal amount of 5.70% Senior Notes due 2035, for which we received total proceeds of $1.24 billion, net of discount and issuance costs. •Net revenues: Our net revenues increased approximately 5% in fiscal 2025 compared to fiscal 2024, due to increases in both product revenues and services revenues. Net revenues: Our net revenues increased approximately 5% in fiscal 2025 compared to fiscal 2024, due to increases in both product revenues and services revenues. •Gross margin: Our gross margin decreased less than one percentage point in fiscal 2025 compared to fiscal 2024, due to the decrease in gross margins on product revenues. Gross margin: Our gross margin decreased less than one percentage point in fiscal 2025 compared to fiscal 2024, due to the decrease in gross margins on product revenues. •Income from operations as a percentage of net revenues: Our income from operations as a percentage of net revenues increased by one percentage point in fiscal 2025 compared to fiscal 2024, primarily due to higher net revenues. Income from operations as a percentage of net revenues: Our income from operations as a percentage of net revenues increased by one percentage point in fiscal 2025 compared to fiscal 2024, primarily due to higher net revenues. •Provision (benefit) for income taxes: Our provision for income taxes decreased in fiscal 2025 compared to fiscal 2024 primarily as a result of differences in discrete tax impacts in each year. Provision (benefit) for income taxes: Our provision for income taxes decreased in fiscal 2025 compared to fiscal 2024 primarily as a result of differences in discrete tax impacts in each year. •Net income and Diluted net income per share: The increase in both net income and diluted net income per share in fiscal 2025 compared to fiscal 2024 reflect the factors discussed above. Net income and Diluted net income per share: The increase in both net income and diluted net income per share in fiscal 2025 compared to fiscal 2024 reflect the factors discussed above." }, { "status": "ADDED", "current_title": "LIABILITIES AND STOCKHOLDERS' EQUITY", "prior_title": null, "current_body": "Current liabilities: Accounts payable $ 511 $ 517 Accrued expenses 1,122 1,013 Current portion of long-term debt 750 400 Short-term deferred revenue and financed unearned services revenue 2,279 2,176 Total current liabilities 4,662 4,106 Long-term debt 2,485 1,992 Other long-term liabilities 379 585 Long-term deferred revenue and financed unearned services revenue 2,257 2,058" }, { "status": "ADDED", "current_title": "Total liabilities", "prior_title": null, "current_body": "9,783 8,741 Commitments and contingencies (Note 17) Commitments and contingencies (Note 17) Commitments and contingencies (Note 17) Commitments and contingencies (Note 17) Stockholders' equity: Preferred stock, $0.001 par value, 5 shares authorized; no shares issued or outstanding as of April 25, 2025 or April 26, 2024 — — Common stock and additional paid-in capital, $0.001 par value, 885 shares authorized; 201 and 206 shares issued and outstanding as of April 25, 2025 and April 26, 2024, respectively 1,106 997 Retained earnings — 208 Accumulated other comprehensive loss (66 ) (59 )" }, { "status": "ADDED", "current_title": "Total liabilities and stockholders' equity", "prior_title": null, "current_body": "$ 10,823 $ 9,887 See accompanying notes to consolidated financial statements. 55 55 NETAPP, INC.CONSOLIDATED STATEMENTS OF INCOME(In millions, except per share amounts) Year Ended April 25, 2025 April 26, 2024 April 28, 2023 Revenues: Product $ 3,040 $ 2,849 $ 3,049 Services 3,532 3,419 3,313 Net revenues 6,572 6,268 6,362 Cost of revenues: Cost of product 1,284 1,137 1,517 Cost of services 675 698 636 Total cost of revenues 1,959 1,835 2,153 Gross profit 4,613 4,433 4,209 Operating expenses: Sales and marketing 1,865 1,828 1,829 Research and development 1,012 1,029 956 General and administrative 311 308 265 Restructuring charges 83 44 120 Acquisition-related expense 5 10 21 Total operating expenses 3,276 3,219 3,191 Income from operations 1,337 1,214 1,018 Other income, net 46 49 48 Income before income taxes 1,383 1,263 1,066 Provision (benefit) for income taxes 197 277 (208 ) Net income $ 1,186 $ 986 $ 1,274 Net income per share: Basic $ 5.81 $ 4.74 $ 5.87 Diluted $ 5.67 $ 4.63 $ 5.79 Shares used in net income per share calculations: Basic 204 208 217 Diluted 209 213 220 See accompanying notes to consolidated financial statements." }, { "status": "ADDED", "current_title": "April 28, 2023", "prior_title": null, "current_body": "Net revenues $ 6,572 $ 6,268 $ 6,362 Gross profit $ 4,613 $ 4,433 $ 4,209 Gross margin 70 % 71 % 66 % Income from operations $ 1,337 $ 1,214 $ 1,018 Income from operations as a percentage of net revenues 20 % 19 % 16 % Provision (benefit) for income taxes $ 197 $ 277 $ (208 ) Net income $ 1,186 $ 986 $ 1,274 Diluted net income per share $ 5.67 $ 4.63 $ 5.79 Net cash provided by operating activities $ 1,506 $ 1,685 $ 1,107" }, { "status": "ADDED", "current_title": "Cost of revenues:", "prior_title": null, "current_body": "Cost of product 1,284 1,137 1,517 Cost of services 675 698 636 Total cost of revenues 1,959 1,835 2,153 Gross profit 4,613 4,433 4,209" }, { "status": "ADDED", "current_title": "Operating expenses:", "prior_title": null, "current_body": "Sales and marketing 28 29 29 Research and development 15 16 15 General and administrative 5 5 4 Restructuring charges 1 1 2 Acquisition-related expense — — — Total operating expenses 50 51 50" }, { "status": "ADDED", "current_title": "Income before income taxes", "prior_title": null, "current_body": "21 20 17 Provision (benefit) for income taxes 3 4 (3 ) Net income 18 % 16 % 20 % Percentages may not add due to rounding" }, { "status": "ADDED", "current_title": "Net income per share:", "prior_title": null, "current_body": "Basic $ 5.81 $ 4.74 $ 5.87 Diluted $ 5.67 $ 4.63 $ 5.79" }, { "status": "ADDED", "current_title": "Shares used in net income per share calculations:", "prior_title": null, "current_body": "Basic 204 208 217 Diluted 209 213 220 See accompanying notes to consolidated financial statements. 56 56 NETAPP, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In millions) Year Ended April 25, 2025 April 26, 2024 April 28, 2023 Net income $ 1,186 $ 986 $ 1,274 Other comprehensive loss Foreign currency translation adjustments (3 ) (5 ) (4 ) Defined benefit obligations: Defined benefit obligation adjustments (2 ) (4 ) (2 ) Unrealized gains on available-for-sale securities: Unrealized holding gains arising during the period 1 — — Unrealized gains (losses) on cash flow hedges: Unrealized holding gains (losses) arising during the period (2 ) 2 (6 ) Reclassification adjustments for (gains) losses included in net income (1 ) (1 ) 5 Other comprehensive loss (7 ) (8 ) (7 ) Comprehensive income $ 1,179 $ 978 $ 1,267 See accompanying notes to consolidated financial statements." }, { "status": "ADDED", "current_title": "Other comprehensive loss", "prior_title": null, "current_body": "Foreign currency translation adjustments (3 ) (5 ) (4 ) Defined benefit obligations: Defined benefit obligation adjustments (2 ) (4 ) (2 ) Unrealized gains on available-for-sale securities: Unrealized holding gains arising during the period 1 — — Unrealized gains (losses) on cash flow hedges: Unrealized holding gains (losses) arising during the period (2 ) 2 (6 ) Reclassification adjustments for (gains) losses included in net income (1 ) (1 ) 5" }, { "status": "ADDED", "current_title": "Comprehensive income", "prior_title": null, "current_body": "$ 1,179 $ 978 $ 1,267 See accompanying notes to consolidated financial statements. 57 57 NETAPP, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions) Year Ended April 25, 2025 April 26, 2024 April 28, 2023 Cash flows from operating activities: Net income $ 1,186 $ 986 $ 1,274 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 243 255 248 Non-cash operating lease cost 41 45 52 Stock-based compensation 386 357 312 Deferred income taxes (100 ) 53 (606 ) Other items, net — (13 ) (67 ) Changes in assets and liabilities, net of acquisitions of businesses: Accounts receivable (219 ) (33 ) 260 Inventories (1 ) (18 ) 37 Other operating assets (87 ) (62 ) (63 ) Accounts payable (8 ) 123 (207 ) Accrued expenses 62 113 (103 ) Deferred revenue and financed unearned services revenue 208 (14 ) 46 Long-term taxes payable (207 ) (106 ) (76 ) Other operating liabilities 2 (1 ) — Net cash provided by operating activities 1,506 1,685 1,107 Cash flows from investing activities: Purchases of investments (1,782 ) (2,635 ) (1,269 ) Maturities, sales and collections of investments 2,027 2,055 550 Purchases of property and equipment (168 ) (155 ) (239 ) Acquisition of businesses, net of cash acquired — — (491 ) Other investing activities, net 70 — 59 Net cash provided by (used in) investing activities 147 (735 ) (1,390 ) Cash flows from financing activities: Proceeds from issuance of common stock under employee stock award plans 108 100 108 Payments for taxes related to net share settlement of stock awards (199 ) (127 ) (84 ) Repurchase of common stock (1,150 ) (900 ) (850 ) Issuances of debt, net of issuance costs 1,240 — — Repayments and extinguishment of debt (400 ) — (250 ) Dividends paid (424 ) (416 ) (432 ) Other financing activities, net (3 ) (1 ) (5 ) Net cash used in financing activities (828 ) (1,344 ) (1,513 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 15 (19 ) (1 ) Net change in cash, cash equivalents and restricted cash 840 (413 ) (1,797 ) Cash, cash equivalents and restricted cash: Beginning of period 1,909 2,322 4,119 End of period $ 2,749 $ 1,909 $ 2,322 See accompanying notes to consolidated financial statements." }, { "status": "ADDED", "current_title": "Cash flows from operating activities:", "prior_title": null, "current_body": "Net income $ 1,186 $ 986 $ 1,274 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 243 255 248 Non-cash operating lease cost 41 45 52 Stock-based compensation 386 357 312 Deferred income taxes (100 ) 53 (606 ) Other items, net — (13 ) (67 ) Changes in assets and liabilities, net of acquisitions of businesses: Accounts receivable (219 ) (33 ) 260 Inventories (1 ) (18 ) 37 Other operating assets (87 ) (62 ) (63 ) Accounts payable (8 ) 123 (207 ) Accrued expenses 62 113 (103 ) Deferred revenue and financed unearned services revenue 208 (14 ) 46 Long-term taxes payable (207 ) (106 ) (76 ) Other operating liabilities 2 (1 ) — Net cash provided by operating activities 1,506 1,685 1,107" }, { "status": "ADDED", "current_title": "Cash flows from investing activities:", "prior_title": null, "current_body": "Purchases of investments (1,782 ) (2,635 ) (1,269 ) Maturities, sales and collections of investments 2,027 2,055 550 Purchases of property and equipment (168 ) (155 ) (239 ) Acquisition of businesses, net of cash acquired — — (491 ) Other investing activities, net 70 — 59 Net cash provided by (used in) investing activities 147 (735 ) (1,390 )" }, { "status": "ADDED", "current_title": "Cash flows from financing activities:", "prior_title": null, "current_body": "Proceeds from issuance of common stock under employee stock award plans 108 100 108 Payments for taxes related to net share settlement of stock awards (199 ) (127 ) (84 ) Repurchase of common stock (1,150 ) (900 ) (850 ) Issuances of debt, net of issuance costs 1,240 — — Repayments and extinguishment of debt (400 ) — (250 ) Dividends paid (424 ) (416 ) (432 ) Other financing activities, net (3 ) (1 ) (5 ) Net cash used in financing activities (828 ) (1,344 ) (1,513 )" }, { "status": "ADDED", "current_title": "Cash, cash equivalents and restricted cash:", "prior_title": null, "current_body": "Beginning of period 1,909 2,322 4,119 End of period $ 2,749 $ 1,909 $ 2,322 See accompanying notes to consolidated financial statements. 58 58 NETAPP, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(In millions, except per share amounts) Accumulated Common Stock and Other Additional Paid-in Capital Retained Comprehensive Shares Amount Earnings Loss Total Balances, April 29, 2022 220 $ 760 $ 122 $ (44 ) $ 838 Net income — — 1,274 — 1,274 Other comprehensive loss — — — (7 ) (7 ) Issuance of common stock under employee stock award plans, net of taxes 5 24 — — 24 Repurchase of common stock (13 ) (45 ) (805 ) — (850 ) Stock-based compensation — 312 — — 312 Cash dividends declared ($2.00 per common share) — (106 ) (326 ) — (432 ) Balances, April 28, 2023 212 945 265 (51 ) 1,159 Net income — — 986 — 986 Other comprehensive loss — — — (8 ) (8 ) Issuance of common stock under employee stock award plans, net of taxes 6 (27 ) — — (27 ) Repurchase of common stock (12 ) (102 ) (798 ) — (900 ) Excise tax on net stock repurchases — (5 ) — — (5 ) Stock-based compensation — 353 — — 353 Modification of liability-classified awards — 4 — — 4 Cash dividends declared ($2.00 per common share) — (171 ) (245 ) — (416 ) Balances, April 26, 2024 206 997 208 (59 ) 1,146 Net income — — 1,186 — 1,186 Other comprehensive loss — — — (7 ) (7 ) Issuance of common stock under employee stock award plans, net of taxes 5 (91 ) — — (91 ) Repurchase of common stock (10 ) (50 ) (1,100 ) — (1,150 ) Excise tax on net stock repurchases — (6 ) — — (6 ) Stock-based compensation — 386 — — 386 Cash dividends declared ($2.08 per common share) — (130 ) (294 ) — (424 ) Balances, April 25, 2025 201 $ 1,106 $ — $ (66 ) $ 1,040 See accompanying notes to consolidated financial statements." }, { "status": "ADDED", "current_title": "Balances, April 29, 2022", "prior_title": null, "current_body": "220 $ 760 $ 122 $ (44 ) $ 838 Net income — — 1,274 — 1,274 Other comprehensive loss — — — (7 ) (7 ) Issuance of common stock under employee stock award plans, net of taxes 5 24 — — 24 Repurchase of common stock (13 ) (45 ) (805 ) — (850 ) Stock-based compensation — 312 — — 312 Cash dividends declared ($2.00 per common share) — (106 ) (326 ) — (432 )" }, { "status": "ADDED", "current_title": "Balances, April 28, 2023", "prior_title": null, "current_body": "212 945 265 (51 ) 1,159 Net income — — 986 — 986 Other comprehensive loss — — — (8 ) (8 ) Issuance of common stock under employee stock award plans, net of taxes 6 (27 ) — — (27 ) Repurchase of common stock (12 ) (102 ) (798 ) — (900 ) Excise tax on net stock repurchases — (5 ) — — (5 ) Stock-based compensation — 353 — — 353 Modification of liability-classified awards — 4 — — 4 Cash dividends declared ($2.00 per common share) — (171 ) (245 ) — (416 )" }, { "status": "ADDED", "current_title": "Balances, April 26, 2024", "prior_title": null, "current_body": "206 997 208 (59 ) 1,146 Net income — — 1,186 — 1,186 Other comprehensive loss — — — (7 ) (7 ) Issuance of common stock under employee stock award plans, net of taxes 5 (91 ) — — (91 ) Repurchase of common stock (10 ) (50 ) (1,100 ) — (1,150 ) Excise tax on net stock repurchases — (6 ) — — (6 ) Stock-based compensation — 386 — — 386 Cash dividends declared ($2.08 per common share) — (130 ) (294 ) — (424 )" }, { "status": "ADDED", "current_title": "Balances, April 25, 2025", "prior_title": null, "current_body": "201 $ 1,106 $ — $ (66 ) $ 1,040 See accompanying notes to consolidated financial statements. 59 59 NETAPP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of Business and Significant Accounting PoliciesDescription of Business — NetApp, Inc. (we, us, NetApp, or the Company) helps customers make their data infrastructure more seamless, more dynamic, and higher performing. We provide a full range of enterprise-class software, systems and services that customers use to transform their data infrastructures across data types, workloads, and environments to realize business possibilities.Fiscal Year — Our fiscal year is reported on a 52- or 53-week year ending on the last Friday in April. An additional week is included in the first fiscal quarter approximately every six years to realign fiscal months with calendar months. Fiscal years 2025, 2024 and 2023, which ended on April 25, 2025, April 26, 2024 and April 28, 2023, respectively, are all 52-week years, with 13 weeks in each of their quarters. Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended on the last Friday of April and the associated quarters, months and periods of those fiscal years.Principles of Consolidation — The consolidated financial statements include the Company and its subsidiaries. Intercompany accounts and transactions are eliminated in consolidation. Use of Estimates — The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, revenue recognition, reserves and allowances; inventory valuation; valuation of goodwill and intangibles; restructuring reserves; employee benefit accruals; stock-based compensation; loss contingencies; investment impairments; income taxes and fair value measurements. Actual results could differ materially from those estimates, the anticipated effects of which have been incorporated, as applicable, into management’s estimates as of and for the year ended April 25, 2025.Cash Equivalents — We consider all highly liquid debt investments with original maturities of three months or less at the time of purchase to be cash equivalents.Available-for-Sale Investments — We classify our investments in debt securities as available-for-sale investments. Debt securities primarily consist of U.S. Treasury and government debt securities and certificates of deposit. These investments are primarily held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of debt securities sold. These investments are recorded in the consolidated balance sheets at fair value.Unrealized gains and temporary losses, net of related taxes, are included in accumulated other comprehensive income (loss) (AOCI). Upon realization, those amounts are reclassified from AOCI to earnings. The amortization of premiums and discounts on the investments are included in our results of operations. Realized gains and losses are calculated based on the specific identification method.We classify our investments as current or noncurrent based on the nature of the investments and their availability for use in current operations.Impairments on Investments — All of our available-for-sale investments are subject to periodic impairment review. When the fair value of a debt security is less than its amortized cost, we assess what amount of the difference, if any, is caused by expected credit losses. The amount of the difference representing credit losses (defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the debt security) is recognized in earnings, and the amount relating to all other factors is recognized in other comprehensive income (OCI). If we intend to sell the security, or if it is more likely than not we will be required to sell the security before recovery of the amortized cost basis, the entire difference between the amortized cost and the fair value of the debt security is recognized in earnings." }, { "status": "ADDED", "current_title": "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS", "prior_title": null, "current_body": "1. Description of Business and Significant Accounting PoliciesDescription of Business — NetApp, Inc. (we, us, NetApp, or the Company) helps customers make their data infrastructure more seamless, more dynamic, and higher performing. We provide a full range of enterprise-class software, systems and services that customers use to transform their data infrastructures across data types, workloads, and environments to realize business possibilities.Fiscal Year — Our fiscal year is reported on a 52- or 53-week year ending on the last Friday in April. An additional week is included in the first fiscal quarter approximately every six years to realign fiscal months with calendar months. Fiscal years 2025, 2024 and 2023, which ended on April 25, 2025, April 26, 2024 and April 28, 2023, respectively, are all 52-week years, with 13 weeks in each of their quarters. Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended on the last Friday of April and the associated quarters, months and periods of those fiscal years.Principles of Consolidation — The consolidated financial statements include the Company and its subsidiaries. Intercompany accounts and transactions are eliminated in consolidation. Use of Estimates — The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, revenue recognition, reserves and allowances; inventory valuation; valuation of goodwill and intangibles; restructuring reserves; employee benefit accruals; stock-based compensation; loss contingencies; investment impairments; income taxes and fair value measurements. Actual results could differ materially from those estimates, the anticipated effects of which have been incorporated, as applicable, into management’s estimates as of and for the year ended April 25, 2025.Cash Equivalents — We consider all highly liquid debt investments with original maturities of three months or less at the time of purchase to be cash equivalents.Available-for-Sale Investments — We classify our investments in debt securities as available-for-sale investments. Debt securities primarily consist of U.S. Treasury and government debt securities and certificates of deposit. These investments are primarily held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of debt securities sold. These investments are recorded in the consolidated balance sheets at fair value.Unrealized gains and temporary losses, net of related taxes, are included in accumulated other comprehensive income (loss) (AOCI). Upon realization, those amounts are reclassified from AOCI to earnings. The amortization of premiums and discounts on the investments are included in our results of operations. Realized gains and losses are calculated based on the specific identification method.We classify our investments as current or noncurrent based on the nature of the investments and their availability for use in current operations.Impairments on Investments — All of our available-for-sale investments are subject to periodic impairment review. When the fair value of a debt security is less than its amortized cost, we assess what amount of the difference, if any, is caused by expected credit losses. The amount of the difference representing credit losses (defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the debt security) is recognized in earnings, and the amount relating to all other factors is recognized in other comprehensive income (OCI). If we intend to sell the security, or if it is more likely than not we will be required to sell the security before recovery of the amortized cost basis, the entire difference between the amortized cost and the fair value of the debt security is recognized in earnings." }, { "status": "ADDED", "current_title": "1. Description of Business and Significant Accounting Policies", "prior_title": null, "current_body": "Description of Business — NetApp, Inc. (we, us, NetApp, or the Company) helps customers make their data infrastructure more seamless, more dynamic, and higher performing. We provide a full range of enterprise-class software, systems and services that customers use to transform their data infrastructures across data types, workloads, and environments to realize business possibilities. Fiscal Year — Our fiscal year is reported on a 52- or 53-week year ending on the last Friday in April. An additional week is included in the first fiscal quarter approximately every six years to realign fiscal months with calendar months. Fiscal years 2025, 2024 and 2023, which ended on April 25, 2025, April 26, 2024 and April 28, 2023, respectively, are all 52-week years, with 13 weeks in each of their quarters. Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended on the last Friday of April and the associated quarters, months and periods of those fiscal years. Fiscal Year — Our fiscal year is reported on a 52- or 53-week year ending on the last Friday in April. An additional week is included in the first fiscal quarter approximately every six years to realign fiscal months with calendar months. Fiscal years 2025, 2024 and 2023, which ended on April 25, 2025, April 26, 2024 and April 28, 2023, respectively, are all 52-week years, with 13 weeks in each of their quarters. Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended on the last Friday of April and the associated quarters, months and periods of those fiscal years. Principles of Consolidation — The consolidated financial statements include the Company and its subsidiaries. Intercompany accounts and transactions are eliminated in consolidation. Principles of Consolidation — The consolidated financial statements include the Company and its subsidiaries. Intercompany accounts and transactions are eliminated in consolidation. Use of Estimates — The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, revenue recognition, reserves and allowances; inventory valuation; valuation of goodwill and intangibles; restructuring reserves; employee benefit accruals; stock-based compensation; loss contingencies; investment impairments; income taxes and fair value measurements. Actual results could differ materially from those estimates, the anticipated effects of which have been incorporated, as applicable, into management’s estimates as of and for the year ended April 25, 2025. Use of Estimates — The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, revenue recognition, reserves and allowances; inventory valuation; valuation of goodwill and intangibles; restructuring reserves; employee benefit accruals; stock-based compensation; loss contingencies; investment impairments; income taxes and fair value measurements. Actual results could differ materially from those estimates, the anticipated effects of which have been incorporated, as applicable, into management’s estimates as of and for the year ended April 25, 2025. Cash Equivalents — We consider all highly liquid debt investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash Equivalents — We consider all highly liquid debt investments with original maturities of three months or less at the time of purchase to be cash equivalents. Available-for-Sale Investments — We classify our investments in debt securities as available-for-sale investments. Debt securities primarily consist of U.S. Treasury and government debt securities and certificates of deposit. These investments are primarily held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of debt securities sold. These investments are recorded in the consolidated balance sheets at fair value.Unrealized gains and temporary losses, net of related taxes, are included in accumulated other comprehensive income (loss) (AOCI). Upon realization, those amounts are reclassified from AOCI to earnings. The amortization of premiums and discounts on the investments are included in our results of operations. Realized gains and losses are calculated based on the specific identification method.We classify our investments as current or noncurrent based on the nature of the investments and their availability for use in current operations. Available-for-Sale Investments — We classify our investments in debt securities as available-for-sale investments. Debt securities primarily consist of U.S. Treasury and government debt securities and certificates of deposit. These investments are primarily held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of debt securities sold. These investments are recorded in the consolidated balance sheets at fair value. Unrealized gains and temporary losses, net of related taxes, are included in accumulated other comprehensive income (loss) (AOCI). Upon realization, those amounts are reclassified from AOCI to earnings. The amortization of premiums and discounts on the investments are included in our results of operations. Realized gains and losses are calculated based on the specific identification method. We classify our investments as current or noncurrent based on the nature of the investments and their availability for use in current operations. Impairments on Investments — All of our available-for-sale investments are subject to periodic impairment review. When the fair value of a debt security is less than its amortized cost, we assess what amount of the difference, if any, is caused by expected credit losses. The amount of the difference representing credit losses (defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the debt security) is recognized in earnings, and the amount relating to all other factors is recognized in other comprehensive income (OCI). If we intend to sell the security, or if it is more likely than not we will be required to sell the security before recovery of the amortized cost basis, the entire difference between the amortized cost and the fair value of the debt security is recognized in earnings. Impairments on Investments — All of our available-for-sale investments are subject to periodic impairment review. When the fair value of a debt security is less than its amortized cost, we assess what amount of the difference, if any, is caused by expected credit losses. The amount of the difference representing credit losses (defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the debt security) is recognized in earnings, and the amount relating to all other factors is recognized in other comprehensive income (OCI). If we intend to sell the security, or if it is more likely than not we will be required to sell the security before recovery of the amortized cost basis, the entire difference between the amortized cost and the fair value of the debt security is recognized in earnings. 60 60 Inventories — Inventories are stated at the lower of cost or net realizable value, which approximates actual cost on a first-in, first-out basis. We write down excess and obsolete inventory based on the difference between the cost of inventory and the estimated net realizable value. Net realizable value is estimated using management’s best estimate of forecasts for future demand and expectations regarding market conditions. At the point of a loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts or circumstances do not result in the restoration or increase in that newly established basis. In addition, we record a liability for firm, non-cancelable and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of our future demand forecasts consistent with our valuation of excess and obsolete inventory.Property and Equipment — Property and equipment are recorded at cost. Depreciation and amortization is computed using the straight-line method, generally over the following periods: Depreciation Life Buildings and improvements 10 to 40 years Furniture and fixtures 5 years Computer, production, engineering and other equipment 2 to 3 years Computer software 3 to 5 years Leasehold improvements Shorter of remaining lease term or useful life Construction in progress will be depreciated over the estimated useful lives of the respective assets when they are ready for use. We capitalize interest on significant facility assets under construction and on significant software development projects. Interest capitalized during the periods presented was not material.Software Development Costs — The costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized in accordance with the accounting guidance for software. Because our current process for developing software is essentially completed concurrently with the establishment of technological feasibility, which occurs upon the completion of a working model, no costs have been capitalized for any of the periods presented.Internal-Use Software Development Costs — We capitalize qualifying costs, which are incurred during the application development stage, for computer software developed or obtained for internal-use to property and equipment, net and amortize them over the software’s estimated useful life.Business Combinations — We recognize identifiable assets acquired and liabilities assumed at their acquisition date fair values, with the exception of contract assets and liabilities, which we recognize in accordance with our revenue recognition policy as if we had originally executed the customer contract. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date values of the assets acquired and liabilities assumed. While we use our best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that we identify adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of income.Goodwill and Purchased Intangible Assets — Goodwill is recorded when the consideration paid for an acquisition exceeds the value of net tangible and intangible assets acquired. Purchased intangible assets with finite lives are generally amortized on a straight-line basis over their economic lives of three to five years for developed technology, two to five years for customer contracts/relationships, two to three years for covenants not to compete and two to five years for trademarks and trade names as we believe this method most closely reflects the pattern in which the economic benefits of the assets will be consumed. In-process research and development is accounted for as an indefinite lived intangible asset and is assessed for potential impairment annually until development is complete or when events or circumstances indicate that their carrying amounts might be impaired. Upon completion of development, in-process research and development is accounted for as a finite-lived intangible asset.The carrying value of goodwill is tested for impairment on an annual basis in the fourth quarter of our fiscal year, or more frequently if we believe indicators of impairment exist. Triggering events for impairment reviews may be indicators such as adverse industry or economic trends, restructuring actions, lower projections of profitability, or a sustained decline in our market capitalization. For the purpose of impairment testing, we have two reporting units, which are the same as our two reportable segments. We initially conduct a qualitative assessment to determine whether it is necessary to perform a quantitative goodwill impairment test. The performance of the quantitative impairment test requires comparing the fair value of each reporting unit to its carrying amount, including goodwill. The fair value of each reporting unit is based on a combination of the income approach and the market approach. Inventories — Inventories are stated at the lower of cost or net realizable value, which approximates actual cost on a first-in, first-out basis. We write down excess and obsolete inventory based on the difference between the cost of inventory and the estimated net realizable value. Net realizable value is estimated using management’s best estimate of forecasts for future demand and expectations regarding market conditions. At the point of a loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts or circumstances do not result in the restoration or increase in that newly established basis. In addition, we record a liability for firm, non-cancelable and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of our future demand forecasts consistent with our valuation of excess and obsolete inventory.Property and Equipment — Property and equipment are recorded at cost. Depreciation and amortization is computed using the straight-line method, generally over the following periods: Depreciation Life Buildings and improvements 10 to 40 years Furniture and fixtures 5 years Computer, production, engineering and other equipment 2 to 3 years Computer software 3 to 5 years Leasehold improvements Shorter of remaining lease term or useful life Construction in progress will be depreciated over the estimated useful lives of the respective assets when they are ready for use. We capitalize interest on significant facility assets under construction and on significant software development projects. Interest capitalized during the periods presented was not material.Software Development Costs — The costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized in accordance with the accounting guidance for software. Because our current process for developing software is essentially completed concurrently with the establishment of technological feasibility, which occurs upon the completion of a working model, no costs have been capitalized for any of the periods presented.Internal-Use Software Development Costs — We capitalize qualifying costs, which are incurred during the application development stage, for computer software developed or obtained for internal-use to property and equipment, net and amortize them over the software’s estimated useful life.Business Combinations — We recognize identifiable assets acquired and liabilities assumed at their acquisition date fair values, with the exception of contract assets and liabilities, which we recognize in accordance with our revenue recognition policy as if we had originally executed the customer contract. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date values of the assets acquired and liabilities assumed. While we use our best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that we identify adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of income.Goodwill and Purchased Intangible Assets — Goodwill is recorded when the consideration paid for an acquisition exceeds the value of net tangible and intangible assets acquired. Purchased intangible assets with finite lives are generally amortized on a straight-line basis over their economic lives of three to five years for developed technology, two to five years for customer contracts/relationships, two to three years for covenants not to compete and two to five years for trademarks and trade names as we believe this method most closely reflects the pattern in which the economic benefits of the assets will be consumed. In-process research and development is accounted for as an indefinite lived intangible asset and is assessed for potential impairment annually until development is complete or when events or circumstances indicate that their carrying amounts might be impaired. Upon completion of development, in-process research and development is accounted for as a finite-lived intangible asset.The carrying value of goodwill is tested for impairment on an annual basis in the fourth quarter of our fiscal year, or more frequently if we believe indicators of impairment exist. Triggering events for impairment reviews may be indicators such as adverse industry or economic trends, restructuring actions, lower projections of profitability, or a sustained decline in our market capitalization. For the purpose of impairment testing, we have two reporting units, which are the same as our two reportable segments. We initially conduct a qualitative assessment to determine whether it is necessary to perform a quantitative goodwill impairment test. The performance of the quantitative impairment test requires comparing the fair value of each reporting unit to its carrying amount, including goodwill. The fair value of each reporting unit is based on a combination of the income approach and the market approach. Inventories — Inventories are stated at the lower of cost or net realizable value, which approximates actual cost on a first-in, first-out basis. We write down excess and obsolete inventory based on the difference between the cost of inventory and the estimated net realizable value. Net realizable value is estimated using management’s best estimate of forecasts for future demand and expectations regarding market conditions. At the point of a loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts or circumstances do not result in the restoration or increase in that newly established basis. In addition, we record a liability for firm, non-cancelable and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of our future demand forecasts consistent with our valuation of excess and obsolete inventory. Inventories — Inventories are stated at the lower of cost or net realizable value, which approximates actual cost on a first-in, first-out basis. We write down excess and obsolete inventory based on the difference between the cost of inventory and the estimated net realizable value. Net realizable value is estimated using management’s best estimate of forecasts for future demand and expectations regarding market conditions. At the point of a loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts or circumstances do not result in the restoration or increase in that newly established basis. In addition, we record a liability for firm, non-cancelable and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of our future demand forecasts consistent with our valuation of excess and obsolete inventory. Property and Equipment — Property and equipment are recorded at cost. Depreciation and amortization is computed using the straight-line method, generally over the following periods: Depreciation Life Buildings and improvements 10 to 40 years Furniture and fixtures 5 years Computer, production, engineering and other equipment 2 to 3 years Computer software 3 to 5 years Leasehold improvements Shorter of remaining lease term or useful life Construction in progress will be depreciated over the estimated useful lives of the respective assets when they are ready for use. We capitalize interest on significant facility assets under construction and on significant software development projects. Interest capitalized during the periods presented was not material. Property and Equipment — Property and equipment are recorded at cost. Depreciation and amortization is computed using the straight-line method, generally over the following periods: Depreciation Life Buildings and improvements 10 to 40 years Furniture and fixtures 5 years Computer, production, engineering and other equipment 2 to 3 years Computer software 3 to 5 years Leasehold improvements Shorter of remaining lease term or useful life Depreciation and amortization is computed using the straight-line method, generally over the following periods:" }, { "status": "ADDED", "current_title": "Depreciation Life", "prior_title": null, "current_body": "Buildings and improvements 10 to 40 years 10 40 years Furniture and fixtures 5 years 5 Computer, production, engineering and other equipment 2 to 3 years 2 3 years Computer software 3 to 5 years 3 5 years Leasehold improvements Shorter of remaining lease term or useful life Shorter of remaining lease term or useful life Construction in progress will be depreciated over the estimated useful lives of the respective assets when they are ready for use. We capitalize interest on significant facility assets under construction and on significant software development projects. Interest capitalized during the periods presented was not material. Software Development Costs — The costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized in accordance with the accounting guidance for software. Because our current process for developing software is essentially completed concurrently with the establishment of technological feasibility, which occurs upon the completion of a working model, no costs have been capitalized for any of the periods presented. Software Development Costs — The costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized in accordance with the accounting guidance for software. Because our current process for developing software is essentially completed concurrently with the establishment of technological feasibility, which occurs upon the completion of a working model, no costs have been capitalized for any of the periods presented. Internal-Use Software Development Costs — We capitalize qualifying costs, which are incurred during the application development stage, for computer software developed or obtained for internal-use to property and equipment, net and amortize them over the software’s estimated useful life. Internal-Use Software Development Costs — We capitalize qualifying costs, which are incurred during the application development stage, for computer software developed or obtained for internal-use to property and equipment, net and amortize them over the software’s estimated useful life. Business Combinations — We recognize identifiable assets acquired and liabilities assumed at their acquisition date fair values, with the exception of contract assets and liabilities, which we recognize in accordance with our revenue recognition policy as if we had originally executed the customer contract. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date values of the assets acquired and liabilities assumed. While we use our best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that we identify adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of income. Business Combinations — We recognize identifiable assets acquired and liabilities assumed at their acquisition date fair values, with the exception of contract assets and liabilities, which we recognize in accordance with our revenue recognition policy as if we had originally executed the customer contract. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date values of the assets acquired and liabilities assumed. While we use our best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that we identify adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of income. Goodwill and Purchased Intangible Assets — Goodwill is recorded when the consideration paid for an acquisition exceeds the value of net tangible and intangible assets acquired. Purchased intangible assets with finite lives are generally amortized on a straight-line basis over their economic lives of three to five years for developed technology, two to five years for customer contracts/relationships, two to three years for covenants not to compete and two to five years for trademarks and trade names as we believe this method most closely reflects the pattern in which the economic benefits of the assets will be consumed. In-process research and development is accounted for as an indefinite lived intangible asset and is assessed for potential impairment annually until development is complete or when events or circumstances indicate that their carrying amounts might be impaired. Upon completion of development, in-process research and development is accounted for as a finite-lived intangible asset.The carrying value of goodwill is tested for impairment on an annual basis in the fourth quarter of our fiscal year, or more frequently if we believe indicators of impairment exist. Triggering events for impairment reviews may be indicators such as adverse industry or economic trends, restructuring actions, lower projections of profitability, or a sustained decline in our market capitalization. For the purpose of impairment testing, we have two reporting units, which are the same as our two reportable segments. We initially conduct a qualitative assessment to determine whether it is necessary to perform a quantitative goodwill impairment test. The performance of the quantitative impairment test requires comparing the fair value of each reporting unit to its carrying amount, including goodwill. The fair value of each reporting unit is based on a combination of the income approach and the market approach. Goodwill and Purchased Intangible Assets — Goodwill is recorded when the consideration paid for an acquisition exceeds the value of net tangible and intangible assets acquired. Purchased intangible assets with finite lives are generally amortized on a straight-line basis over their economic lives of three to five years for developed technology, two to five years for customer contracts/relationships, two to three years for covenants not to compete and two to five years for trademarks and trade names as we believe this method most closely reflects the pattern in which the economic benefits of the assets will be consumed. In-process research and development is accounted for as an indefinite lived intangible asset and is assessed for potential impairment annually until development is complete or when events or circumstances indicate that their carrying amounts might be impaired. Upon completion of development, in-process research and development is accounted for as a finite-lived intangible asset. three three five years two two five years two two three years two two five years The carrying value of goodwill is tested for impairment on an annual basis in the fourth quarter of our fiscal year, or more frequently if we believe indicators of impairment exist. Triggering events for impairment reviews may be indicators such as adverse industry or economic trends, restructuring actions, lower projections of profitability, or a sustained decline in our market capitalization. For the purpose of impairment testing, we have two reporting units, which are the same as our two reportable segments. We initially conduct a qualitative assessment to determine whether it is necessary to perform a quantitative goodwill impairment test. The performance of the quantitative impairment test requires comparing the fair value of each reporting unit to its carrying amount, including goodwill. The fair value of each reporting unit is based on a combination of the income approach and the market approach. 61 61 Under the income approach, we estimate the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on discrete forecast periods as well as terminal value determinations, and are derived based on forecasted revenue growth rates and operating margins. These cash flow projections are discounted to arrive at the fair value of each reporting unit. The discount rate used is based on the weighted-average cost of capital of comparable public companies adjusted for the relevant risk associated with business specific characteristics and the uncertainty related to the reporting unit's ability to execute on the projected cash flows. Under the market approach, we estimate the fair value based on market multiples of revenue and earnings derived from comparable publicly traded companies with operating and investment characteristics similar to the reporting unit. In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to individual reporting units to determine the carrying amount of each reporting unit. An impairment exists if the fair value of a reporting unit is lower than its carrying amount. The impairment loss is measured based on the amount by which the carrying amount of the reporting unit exceeds its fair value, with the recognized loss not to exceed the total amount of allocated goodwill. We did not recognize any impairment charges on our goodwill in any of the periods presented. Impairment of Long-Lived Assets — We review the carrying values of long-lived assets whenever events and circumstances, such as reductions in demand, lower projections of profitability, significant changes in the manner of our use of acquired assets, or significant negative industry or economic trends, indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. If this review indicates that there is an impairment, the impaired asset is written down to its fair value, which is typically calculated using: (i) quoted market prices and/or (ii) expected future cash flows utilizing a discount rate. Our estimates regarding future anticipated cash flows, the remaining economic life of the products and technologies, or both, may differ materially from actual cash flows and remaining economic life. In that event, impairment charges or shortened useful lives of certain long-lived assets may be required, resulting in charges to our consolidated statements of income when such determinations are made.Derivative Instruments — Our derivative instruments, which are carried at fair value in our consolidated balance sheets, consist of foreign currency exchange contracts as described below:Balance Sheet Hedges — We utilize foreign currency exchange forward and option contracts to hedge against the short-term impact of foreign currency exchange rate fluctuations related to certain foreign currency denominated monetary assets and liabilities, primarily intercompany receivables and payables. These derivative instruments are not designated as hedging instruments and do not subject us to material balance sheet risk due to exchange rate movements because the gains and losses on these contracts are intended to offset the gains and losses in the underlying foreign currency denominated monetary assets and liabilities being hedged, and the net amount is included in earnings.Cash Flow Hedges — We utilize foreign currency exchange forward contracts to hedge foreign currency exchange exposures related to forecasted sales transactions denominated in certain foreign currencies. These derivative instruments are designated and qualify as cash flow hedges and, in general, closely match the underlying forecasted transactions in duration. The effective portion of the contracts’ gains and losses resulting from changes in fair value is recorded in AOCI until the forecasted transaction is recognized in the consolidated statements of income. When the forecasted transactions occur, we reclassify the related gains or losses on the cash flow hedges into net revenues. If the underlying forecasted transactions do not occur, or it becomes probable that they will not occur within the defined hedge period, the gains or losses on the related cash flow hedges are reclassified from AOCI and recognized immediately in earnings. We measure the effectiveness of hedges of forecasted transactions on a monthly basis by comparing the fair values of the designated foreign currency exchange forward purchase contracts with the fair values of the forecasted transactions.Factors that could have an impact on the effectiveness of our hedging programs include the accuracy of forecasts and the volatility of foreign currency markets. These programs reduce, but do not entirely eliminate, the impact of currency exchange movements. Currently, we do not enter into any foreign currency exchange forward contracts to hedge exposures related to firm commitments. Cash flows from our derivative programs are included under operating activities in the consolidated statements of cash flows.Revenue Recognition — We recognize revenue by applying the following five step approach.•Identification of the contract, or contracts, with a customer — A contract with a customer is within the scope of ASC 606 when it meets all the following criteria:-It is enforceable-It defines each party’s rights-It identifies the payment terms-It has commercial substance, and-We determine that collection of substantially all consideration for goods or services that will be transferred is probable based on the customer’s intent and ability to pay Under the income approach, we estimate the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on discrete forecast periods as well as terminal value determinations, and are derived based on forecasted revenue growth rates and operating margins. These cash flow projections are discounted to arrive at the fair value of each reporting unit. The discount rate used is based on the weighted-average cost of capital of comparable public companies adjusted for the relevant risk associated with business specific characteristics and the uncertainty related to the reporting unit's ability to execute on the projected cash flows. Under the market approach, we estimate the fair value based on market multiples of revenue and earnings derived from comparable publicly traded companies with operating and investment characteristics similar to the reporting unit. In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to individual reporting units to determine the carrying amount of each reporting unit. An impairment exists if the fair value of a reporting unit is lower than its carrying amount. The impairment loss is measured based on the amount by which the carrying amount of the reporting unit exceeds its fair value, with the recognized loss not to exceed the total amount of allocated goodwill. We did not recognize any impairment charges on our goodwill in any of the periods presented. Impairment of Long-Lived Assets — We review the carrying values of long-lived assets whenever events and circumstances, such as reductions in demand, lower projections of profitability, significant changes in the manner of our use of acquired assets, or significant negative industry or economic trends, indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. If this review indicates that there is an impairment, the impaired asset is written down to its fair value, which is typically calculated using: (i) quoted market prices and/or (ii) expected future cash flows utilizing a discount rate. Our estimates regarding future anticipated cash flows, the remaining economic life of the products and technologies, or both, may differ materially from actual cash flows and remaining economic life. In that event, impairment charges or shortened useful lives of certain long-lived assets may be required, resulting in charges to our consolidated statements of income when such determinations are made.Derivative Instruments — Our derivative instruments, which are carried at fair value in our consolidated balance sheets, consist of foreign currency exchange contracts as described below:Balance Sheet Hedges — We utilize foreign currency exchange forward and option contracts to hedge against the short-term impact of foreign currency exchange rate fluctuations related to certain foreign currency denominated monetary assets and liabilities, primarily intercompany receivables and payables. These derivative instruments are not designated as hedging instruments and do not subject us to material balance sheet risk due to exchange rate movements because the gains and losses on these contracts are intended to offset the gains and losses in the underlying foreign currency denominated monetary assets and liabilities being hedged, and the net amount is included in earnings.Cash Flow Hedges — We utilize foreign currency exchange forward contracts to hedge foreign currency exchange exposures related to forecasted sales transactions denominated in certain foreign currencies. These derivative instruments are designated and qualify as cash flow hedges and, in general, closely match the underlying forecasted transactions in duration. The effective portion of the contracts’ gains and losses resulting from changes in fair value is recorded in AOCI until the forecasted transaction is recognized in the consolidated statements of income. When the forecasted transactions occur, we reclassify the related gains or losses on the cash flow hedges into net revenues. If the underlying forecasted transactions do not occur, or it becomes probable that they will not occur within the defined hedge period, the gains or losses on the related cash flow hedges are reclassified from AOCI and recognized immediately in earnings. We measure the effectiveness of hedges of forecasted transactions on a monthly basis by comparing the fair values of the designated foreign currency exchange forward purchase contracts with the fair values of the forecasted transactions.Factors that could have an impact on the effectiveness of our hedging programs include the accuracy of forecasts and the volatility of foreign currency markets. These programs reduce, but do not entirely eliminate, the impact of currency exchange movements. Currently, we do not enter into any foreign currency exchange forward contracts to hedge exposures related to firm commitments. Cash flows from our derivative programs are included under operating activities in the consolidated statements of cash flows.Revenue Recognition — We recognize revenue by applying the following five step approach.•Identification of the contract, or contracts, with a customer — A contract with a customer is within the scope of ASC 606 when it meets all the following criteria:-It is enforceable-It defines each party’s rights-It identifies the payment terms-It has commercial substance, and-We determine that collection of substantially all consideration for goods or services that will be transferred is probable based on the customer’s intent and ability to pay Under the income approach, we estimate the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on discrete forecast periods as well as terminal value determinations, and are derived based on forecasted revenue growth rates and operating margins. These cash flow projections are discounted to arrive at the fair value of each reporting unit. The discount rate used is based on the weighted-average cost of capital of comparable public companies adjusted for the relevant risk associated with business specific characteristics and the uncertainty related to the reporting unit's ability to execute on the projected cash flows. Under the market approach, we estimate the fair value based on market multiples of revenue and earnings derived from comparable publicly traded companies with operating and investment characteristics similar to the reporting unit. In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to individual reporting units to determine the carrying amount of each reporting unit. An impairment exists if the fair value of a reporting unit is lower than its carrying amount. The impairment loss is measured based on the amount by which the carrying amount of the reporting unit exceeds its fair value, with the recognized loss not to exceed the total amount of allocated goodwill. We did not recognize any impairment charges on our goodwill in any of the periods presented. Under the income approach, we estimate the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on discrete forecast periods as well as terminal value determinations, and are derived based on forecasted revenue growth rates and operating margins. These cash flow projections are discounted to arrive at the fair value of each reporting unit. The discount rate used is based on the weighted-average cost of capital of comparable public companies adjusted for the relevant risk associated with business specific characteristics and the uncertainty related to the reporting unit's ability to execute on the projected cash flows. Under the market approach, we estimate the fair value based on market multiples of revenue and earnings derived from comparable publicly traded companies with operating and investment characteristics similar to the reporting unit. In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to individual reporting units to determine the carrying amount of each reporting unit. An impairment exists if the fair value of a reporting unit is lower than its carrying amount. The impairment loss is measured based on the amount by which the carrying amount of the reporting unit exceeds its fair value, with the recognized loss not to exceed the total amount of allocated goodwill. We did not recognize any impairment charges on our goodwill in any of the periods presented. Impairment of Long-Lived Assets — We review the carrying values of long-lived assets whenever events and circumstances, such as reductions in demand, lower projections of profitability, significant changes in the manner of our use of acquired assets, or significant negative industry or economic trends, indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. If this review indicates that there is an impairment, the impaired asset is written down to its fair value, which is typically calculated using: (i) quoted market prices and/or (ii) expected future cash flows utilizing a discount rate. Our estimates regarding future anticipated cash flows, the remaining economic life of the products and technologies, or both, may differ materially from actual cash flows and remaining economic life. In that event, impairment charges or shortened useful lives of certain long-lived assets may be required, resulting in charges to our consolidated statements of income when such determinations are made. Impairment of Long-Lived Assets — We review the carrying values of long-lived assets whenever events and circumstances, such as reductions in demand, lower projections of profitability, significant changes in the manner of our use of acquired assets, or significant negative industry or economic trends, indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. If this review indicates that there is an impairment, the impaired asset is written down to its fair value, which is typically calculated using: (i) quoted market prices and/or (ii) expected future cash flows utilizing a discount rate. Our estimates regarding future anticipated cash flows, the remaining economic life of the products and technologies, or both, may differ materially from actual cash flows and remaining economic life. In that event, impairment charges or shortened useful lives of certain long-lived assets may be required, resulting in charges to our consolidated statements of income when such determinations are made. Derivative Instruments — Our derivative instruments, which are carried at fair value in our consolidated balance sheets, consist of foreign currency exchange contracts as described below:Balance Sheet Hedges — We utilize foreign currency exchange forward and option contracts to hedge against the short-term impact of foreign currency exchange rate fluctuations related to certain foreign currency denominated monetary assets and liabilities, primarily intercompany receivables and payables. These derivative instruments are not designated as hedging instruments and do not subject us to material balance sheet risk due to exchange rate movements because the gains and losses on these contracts are intended to offset the gains and losses in the underlying foreign currency denominated monetary assets and liabilities being hedged, and the net amount is included in earnings.Cash Flow Hedges — We utilize foreign currency exchange forward contracts to hedge foreign currency exchange exposures related to forecasted sales transactions denominated in certain foreign currencies. These derivative instruments are designated and qualify as cash flow hedges and, in general, closely match the underlying forecasted transactions in duration. The effective portion of the contracts’ gains and losses resulting from changes in fair value is recorded in AOCI until the forecasted transaction is recognized in the consolidated statements of income. When the forecasted transactions occur, we reclassify the related gains or losses on the cash flow hedges into net revenues. If the underlying forecasted transactions do not occur, or it becomes probable that they will not occur within the defined hedge period, the gains or losses on the related cash flow hedges are reclassified from AOCI and recognized immediately in earnings. We measure the effectiveness of hedges of forecasted transactions on a monthly basis by comparing the fair values of the designated foreign currency exchange forward purchase contracts with the fair values of the forecasted transactions.Factors that could have an impact on the effectiveness of our hedging programs include the accuracy of forecasts and the volatility of foreign currency markets. These programs reduce, but do not entirely eliminate, the impact of currency exchange movements. Currently, we do not enter into any foreign currency exchange forward contracts to hedge exposures related to firm commitments. Cash flows from our derivative programs are included under operating activities in the consolidated statements of cash flows. Derivative Instruments — Our derivative instruments, which are carried at fair value in our consolidated balance sheets, consist of foreign currency exchange contracts as described below: Balance Sheet Hedges — We utilize foreign currency exchange forward and option contracts to hedge against the short-term impact of foreign currency exchange rate fluctuations related to certain foreign currency denominated monetary assets and liabilities, primarily intercompany receivables and payables. These derivative instruments are not designated as hedging instruments and do not subject us to material balance sheet risk due to exchange rate movements because the gains and losses on these contracts are intended to offset the gains and losses in the underlying foreign currency denominated monetary assets and liabilities being hedged, and the net amount is included in earnings. Cash Flow Hedges — We utilize foreign currency exchange forward contracts to hedge foreign currency exchange exposures related to forecasted sales transactions denominated in certain foreign currencies. These derivative instruments are designated and qualify as cash flow hedges and, in general, closely match the underlying forecasted transactions in duration. The effective portion of the contracts’ gains and losses resulting from changes in fair value is recorded in AOCI until the forecasted transaction is recognized in the consolidated statements of income. When the forecasted transactions occur, we reclassify the related gains or losses on the cash flow hedges into net revenues. If the underlying forecasted transactions do not occur, or it becomes probable that they will not occur within the defined hedge period, the gains or losses on the related cash flow hedges are reclassified from AOCI and recognized immediately in earnings. We measure the effectiveness of hedges of forecasted transactions on a monthly basis by comparing the fair values of the designated foreign currency exchange forward purchase contracts with the fair values of the forecasted transactions. Factors that could have an impact on the effectiveness of our hedging programs include the accuracy of forecasts and the volatility of foreign currency markets. These programs reduce, but do not entirely eliminate, the impact of currency exchange movements. Currently, we do not enter into any foreign currency exchange forward contracts to hedge exposures related to firm commitments. Cash flows from our derivative programs are included under operating activities in the consolidated statements of cash flows. Revenue Recognition — We recognize revenue by applying the following five step approach.•Identification of the contract, or contracts, with a customer — A contract with a customer is within the scope of ASC 606 when it meets all the following criteria:-It is enforceable-It defines each party’s rights-It identifies the payment terms-It has commercial substance, and-We determine that collection of substantially all consideration for goods or services that will be transferred is probable based on the customer’s intent and ability to pay Revenue Recognition — We recognize revenue by applying the following five step approach. •Identification of the contract, or contracts, with a customer — A contract with a customer is within the scope of ASC 606 when it meets all the following criteria: Identification of the contract, or contracts, with a customer — A contract with a customer is within the scope of ASC 606 when it meets all the following criteria: -It is enforceable It is enforceable -It defines each party’s rights It defines each party’s rights -It identifies the payment terms It identifies the payment terms -It has commercial substance, and It has commercial substance, and -We determine that collection of substantially all consideration for goods or services that will be transferred is probable based on the customer’s intent and ability to pay We determine that collection of substantially all consideration for goods or services that will be transferred is probable based on the customer’s intent and ability to pay 62 62 •Identification of the performance obligations in the contract — Performance obligations promised in a contract are identified based on the goods or services (or a bundle of goods and services) that will be transferred to the customer that are distinct. •Determination of the transaction price — The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer. •Allocation of the transaction price to the performance obligations in the contract — Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation.•Recognition of revenue when, or as, we satisfy a performance obligation — We satisfy performance obligations either over time or at a point in time.Customarily we have a purchase order from or executed contract with our customers that establishes the goods and services to be transferred and the consideration to be received. We combine two or more contracts entered into at or near the same time with the same customer as a single contract if the contracts are negotiated as one package with a single commercial objective, if the amount of consideration to be paid on one contract depends on the price or performance of the other contract or if the goods and services promised in each of the contracts are a single performance obligation.Our contracts with customers may include hardware systems, software licenses, software support, hardware support, public cloud services and other services. Software support contracts entitle our customers to receive unspecified upgrades and enhancements on a when-and-if-available basis, and patch releases. Hardware support services include contracts for extended warranty and technical support with minimum response times. Other services include professional services and customer education and training services. We identify performance obligations in our contracts to be those goods and services that are distinct. A good or service is distinct where the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from us, and is distinct in the context of the contract, where the transfer of the good or service is separately identifiable from other promises in the contract. If a contract includes multiple promised goods or services, we apply judgment to determine whether promised goods or services are distinct. If they are not, we combine the goods and services until we have a distinct performance obligation. For example, a configured storage system inclusive of the operating system (OS) software essential to its functionality is considered a single performance obligation, while optional add-on software is a separate performance obligation. In general, hardware support, software support, and different types of professional services are each separate performance obligations.We determine the transaction price of our contracts with customers based on the consideration to which we will be entitled in exchange for transferring goods or services. Consideration promised may include fixed amounts, variable amounts or both. We sell public cloud services either on a subscription basis or a consumption basis. We sell professional services either on a time and materials basis or under fixed price projects.We evaluate variable consideration in arrangements with contract terms such as rights of return, potential penalties and acceptance clauses. We generally use the expected value method, primarily relying on our history, to estimate variable consideration. However, when we believe it to provide a better estimate, we use the most likely amount method. In either case, we consider variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Reassessments of our variable consideration may occur as historical information changes. Transaction prices are also adjusted for the effects of time value of money if the timing of payments provides either the customer or us a significant benefit of financing.Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation on a relative standalone selling price basis. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price by maximizing the use of observable inputs including pricing strategy, market data, internally-approved pricing guidelines related to the performance obligations and other observable inputs. We regularly review standalone selling prices and maintain internal controls over the establishment and updates of these estimates. Variable consideration is also allocated to the performance obligations. If the terms of variable consideration relate to one performance obligation, it is entirely allocated to that obligation. Otherwise, it is allocated to all the performance obligations in the contract.We typically recognize revenue at a point in time upon the transfer of goods to a customer. Products we transfer at a point in time include our configured hardware systems, OS software licenses, optional add-on software licenses and add-on hardware. Services are typically transferred over time and revenue is recognized based on an appropriate method for measuring our progress toward •Identification of the performance obligations in the contract — Performance obligations promised in a contract are identified based on the goods or services (or a bundle of goods and services) that will be transferred to the customer that are distinct. •Determination of the transaction price — The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer. •Allocation of the transaction price to the performance obligations in the contract — Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation.•Recognition of revenue when, or as, we satisfy a performance obligation — We satisfy performance obligations either over time or at a point in time.Customarily we have a purchase order from or executed contract with our customers that establishes the goods and services to be transferred and the consideration to be received. We combine two or more contracts entered into at or near the same time with the same customer as a single contract if the contracts are negotiated as one package with a single commercial objective, if the amount of consideration to be paid on one contract depends on the price or performance of the other contract or if the goods and services promised in each of the contracts are a single performance obligation.Our contracts with customers may include hardware systems, software licenses, software support, hardware support, public cloud services and other services. Software support contracts entitle our customers to receive unspecified upgrades and enhancements on a when-and-if-available basis, and patch releases. Hardware support services include contracts for extended warranty and technical support with minimum response times. Other services include professional services and customer education and training services. We identify performance obligations in our contracts to be those goods and services that are distinct. A good or service is distinct where the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from us, and is distinct in the context of the contract, where the transfer of the good or service is separately identifiable from other promises in the contract. If a contract includes multiple promised goods or services, we apply judgment to determine whether promised goods or services are distinct. If they are not, we combine the goods and services until we have a distinct performance obligation. For example, a configured storage system inclusive of the operating system (OS) software essential to its functionality is considered a single performance obligation, while optional add-on software is a separate performance obligation. In general, hardware support, software support, and different types of professional services are each separate performance obligations.We determine the transaction price of our contracts with customers based on the consideration to which we will be entitled in exchange for transferring goods or services. Consideration promised may include fixed amounts, variable amounts or both. We sell public cloud services either on a subscription basis or a consumption basis. We sell professional services either on a time and materials basis or under fixed price projects.We evaluate variable consideration in arrangements with contract terms such as rights of return, potential penalties and acceptance clauses. We generally use the expected value method, primarily relying on our history, to estimate variable consideration. However, when we believe it to provide a better estimate, we use the most likely amount method. In either case, we consider variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Reassessments of our variable consideration may occur as historical information changes. Transaction prices are also adjusted for the effects of time value of money if the timing of payments provides either the customer or us a significant benefit of financing.Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation on a relative standalone selling price basis. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price by maximizing the use of observable inputs including pricing strategy, market data, internally-approved pricing guidelines related to the performance obligations and other observable inputs. We regularly review standalone selling prices and maintain internal controls over the establishment and updates of these estimates. Variable consideration is also allocated to the performance obligations. If the terms of variable consideration relate to one performance obligation, it is entirely allocated to that obligation. Otherwise, it is allocated to all the performance obligations in the contract.We typically recognize revenue at a point in time upon the transfer of goods to a customer. Products we transfer at a point in time include our configured hardware systems, OS software licenses, optional add-on software licenses and add-on hardware. Services are typically transferred over time and revenue is recognized based on an appropriate method for measuring our progress toward •Identification of the performance obligations in the contract — Performance obligations promised in a contract are identified based on the goods or services (or a bundle of goods and services) that will be transferred to the customer that are distinct. •Determination of the transaction price — The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer. •Allocation of the transaction price to the performance obligations in the contract — Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation.•Recognition of revenue when, or as, we satisfy a performance obligation — We satisfy performance obligations either over time or at a point in time.Customarily we have a purchase order from or executed contract with our customers that establishes the goods and services to be transferred and the consideration to be received. We combine two or more contracts entered into at or near the same time with the same customer as a single contract if the contracts are negotiated as one package with a single commercial objective, if the amount of consideration to be paid on one contract depends on the price or performance of the other contract or if the goods and services promised in each of the contracts are a single performance obligation.Our contracts with customers may include hardware systems, software licenses, software support, hardware support, public cloud services and other services. Software support contracts entitle our customers to receive unspecified upgrades and enhancements on a when-and-if-available basis, and patch releases. Hardware support services include contracts for extended warranty and technical support with minimum response times. Other services include professional services and customer education and training services. We identify performance obligations in our contracts to be those goods and services that are distinct. A good or service is distinct where the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from us, and is distinct in the context of the contract, where the transfer of the good or service is separately identifiable from other promises in the contract. If a contract includes multiple promised goods or services, we apply judgment to determine whether promised goods or services are distinct. If they are not, we combine the goods and services until we have a distinct performance obligation. For example, a configured storage system inclusive of the operating system (OS) software essential to its functionality is considered a single performance obligation, while optional add-on software is a separate performance obligation. In general, hardware support, software support, and different types of professional services are each separate performance obligations.We determine the transaction price of our contracts with customers based on the consideration to which we will be entitled in exchange for transferring goods or services. Consideration promised may include fixed amounts, variable amounts or both. We sell public cloud services either on a subscription basis or a consumption basis. We sell professional services either on a time and materials basis or under fixed price projects.We evaluate variable consideration in arrangements with contract terms such as rights of return, potential penalties and acceptance clauses. We generally use the expected value method, primarily relying on our history, to estimate variable consideration. However, when we believe it to provide a better estimate, we use the most likely amount method. In either case, we consider variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Reassessments of our variable consideration may occur as historical information changes. Transaction prices are also adjusted for the effects of time value of money if the timing of payments provides either the customer or us a significant benefit of financing.Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation on a relative standalone selling price basis. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price by maximizing the use of observable inputs including pricing strategy, market data, internally-approved pricing guidelines related to the performance obligations and other observable inputs. We regularly review standalone selling prices and maintain internal controls over the establishment and updates of these estimates. Variable consideration is also allocated to the performance obligations. If the terms of variable consideration relate to one performance obligation, it is entirely allocated to that obligation. Otherwise, it is allocated to all the performance obligations in the contract.We typically recognize revenue at a point in time upon the transfer of goods to a customer. Products we transfer at a point in time include our configured hardware systems, OS software licenses, optional add-on software licenses and add-on hardware. Services are typically transferred over time and revenue is recognized based on an appropriate method for measuring our progress toward •Identification of the performance obligations in the contract — Performance obligations promised in a contract are identified based on the goods or services (or a bundle of goods and services) that will be transferred to the customer that are distinct. Identification of the performance obligations in the contract — Performance obligations promised in a contract are identified based on the goods or services (or a bundle of goods and services) that will be transferred to the customer that are distinct. •Determination of the transaction price — The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer. Determination of the transaction price — The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer. •Allocation of the transaction price to the performance obligations in the contract — Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation. Allocation of the transaction price to the performance obligations in the contract — Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation. •Recognition of revenue when, or as, we satisfy a performance obligation — We satisfy performance obligations either over time or at a point in time. Recognition of revenue when, or as, we satisfy a performance obligation — We satisfy performance obligations either over time or at a point in time. Customarily we have a purchase order from or executed contract with our customers that establishes the goods and services to be transferred and the consideration to be received. We combine two or more contracts entered into at or near the same time with the same customer as a single contract if the contracts are negotiated as one package with a single commercial objective, if the amount of consideration to be paid on one contract depends on the price or performance of the other contract or if the goods and services promised in each of the contracts are a single performance obligation. Our contracts with customers may include hardware systems, software licenses, software support, hardware support, public cloud services and other services. Software support contracts entitle our customers to receive unspecified upgrades and enhancements on a when-and-if-available basis, and patch releases. Hardware support services include contracts for extended warranty and technical support with minimum response times. Other services include professional services and customer education and training services. We identify performance obligations in our contracts to be those goods and services that are distinct. A good or service is distinct where the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from us, and is distinct in the context of the contract, where the transfer of the good or service is separately identifiable from other promises in the contract. If a contract includes multiple promised goods or services, we apply judgment to determine whether promised goods or services are distinct. If they are not, we combine the goods and services until we have a distinct performance obligation. For example, a configured storage system inclusive of the operating system (OS) software essential to its functionality is considered a single performance obligation, while optional add-on software is a separate performance obligation. In general, hardware support, software support, and different types of professional services are each separate performance obligations. We determine the transaction price of our contracts with customers based on the consideration to which we will be entitled in exchange for transferring goods or services. Consideration promised may include fixed amounts, variable amounts or both. We sell public cloud services either on a subscription basis or a consumption basis. We sell professional services either on a time and materials basis or under fixed price projects. We evaluate variable consideration in arrangements with contract terms such as rights of return, potential penalties and acceptance clauses. We generally use the expected value method, primarily relying on our history, to estimate variable consideration. However, when we believe it to provide a better estimate, we use the most likely amount method. In either case, we consider variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Reassessments of our variable consideration may occur as historical information changes. Transaction prices are also adjusted for the effects of time value of money if the timing of payments provides either the customer or us a significant benefit of financing. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation on a relative standalone selling price basis. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price by maximizing the use of observable inputs including pricing strategy, market data, internally-approved pricing guidelines related to the performance obligations and other observable inputs. We regularly review standalone selling prices and maintain internal controls over the establishment and updates of these estimates. Variable consideration is also allocated to the performance obligations. If the terms of variable consideration relate to one performance obligation, it is entirely allocated to that obligation. Otherwise, it is allocated to all the performance obligations in the contract. We typically recognize revenue at a point in time upon the transfer of goods to a customer. Products we transfer at a point in time include our configured hardware systems, OS software licenses, optional add-on software licenses and add-on hardware. Services are typically transferred over time and revenue is recognized based on an appropriate method for measuring our progress toward 63 63 completion of the performance obligation. Our stand-ready services, including both hardware and software support, are transferred ratably over the period of the contract. Our public cloud services are transferred either 1) for subscription arrangements, ratably over the subscription period or 2) for consumption-based arrangements, as actually consumed by the customer. For other services such as our fixed professional services contracts, we use an input method to determine the percentage of completion. That is, we estimate the effort to date versus the expected effort required over the life of the contract. Deferred Commissions — We capitalize sales commissions that are incremental direct costs of obtaining customer contracts for which revenue is not immediately recognized and classify them as current or non-current based on the terms of the related contracts. Capitalized commissions are amortized based on the transfer of goods or services to which they relate, typically over one to three years, and are also periodically reviewed for impairment. Amortization expense is recorded to sales and marketing expense in our consolidated statements of income.Leases — We determine if an arrangement is or contains a lease at inception, and we classify leases as operating or finance leases at commencement. In our consolidated balance sheets, operating lease right-of-use (ROU) assets are included in other non-current assets, while finance lease ROU assets are included in property and equipment, net. Lease liabilities for both types of leases are included in accrued expenses and other long-term liabilities. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over that term. Operating and finance lease ROU assets and liabilities are recognized at commencement based on the present value of lease payments over the lease term. ROU assets also include any lease payments made prior to lease commencement and exclude lease incentives. The lease term is the noncancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised. As the rate implicit in our leases is typically not readily determinable, in computing the present value of lease payments we generally use our incremental borrowing rate based on information available at the commencement date. Variable lease payments not dependent on an index or rate are expensed as incurred and not included within the calculation of ROU assets and lease liabilities. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.We do not separate non-lease components from lease components for any class of leases, and we do not recognize ROU assets and lease liabilities for leases with a lease term of twelve months or less.Foreign Currency Translation — For international subsidiaries whose functional currency is the local currency, gains and losses resulting from translation of these foreign currency financial statements into U.S. dollars are recorded in AOCI. For international subsidiaries where the functional currency is the U.S. dollar, gains and losses resulting from the process of remeasuring foreign currency financial statements into U.S. dollars are included in other (expense) income, net.Benefit Plans — We record actuarial gains and losses associated with defined benefit plans within AOCI and amortize net gains or losses in excess of 10 percent of the greater of the market value of plan assets as of the beginning of the fiscal year or the plans' projected benefit obligation on a straight-line basis over the remaining estimated service life of plan participants. The measurement date for all defined benefit plans is our fiscal year end.Stock-Based Compensation — We measure and recognize stock-based compensation for all stock-based awards, including employee stock options, restricted stock units (RSUs), including time-based RSUs and performance-based RSUs (PBRSUs), and rights to purchase shares under our employee stock purchase plan (ESPP), based on their estimated fair value, and recognize the costs in our financial statements using the straight-line attribution approach over the requisite service period for the entire award.The fair value of employee time-based RSUs, and PBRSUs that include a performance condition, is equal to the market value of our common stock on the grant date of the award, less the present value of expected dividends during the vesting period, discounted at a risk-free interest rate. The fair value of PBRSUs that include a market condition is measured using a Monte Carlo simulation model on the date of grant.The fair value of time-based RSUs, and PBRSUs that include a market condition, is not remeasured as a result of subsequent stock price fluctuations. When there is a change in management’s estimate of expected achievement relative to the performance target for PBRSUs that include a performance condition, such as our achievement against a billings result average target, the change in estimate results in the recognition of a cumulative adjustment of stock-based compensation expense.Our expected term assumption is based primarily on historical exercise and post-vesting forfeiture experience. Our stock price volatility assumption is based on a combination of our historical and implied volatility. The risk-free interest rates are based upon United States (U.S.) Treasury bills with equivalent expected terms, and the expected dividends are based on our history and expected dividend payouts.We account for forfeitures of stock-based awards as they occur. completion of the performance obligation. Our stand-ready services, including both hardware and software support, are transferred ratably over the period of the contract. Our public cloud services are transferred either 1) for subscription arrangements, ratably over the subscription period or 2) for consumption-based arrangements, as actually consumed by the customer. For other services such as our fixed professional services contracts, we use an input method to determine the percentage of completion. That is, we estimate the effort to date versus the expected effort required over the life of the contract. Deferred Commissions — We capitalize sales commissions that are incremental direct costs of obtaining customer contracts for which revenue is not immediately recognized and classify them as current or non-current based on the terms of the related contracts. Capitalized commissions are amortized based on the transfer of goods or services to which they relate, typically over one to three years, and are also periodically reviewed for impairment. Amortization expense is recorded to sales and marketing expense in our consolidated statements of income.Leases — We determine if an arrangement is or contains a lease at inception, and we classify leases as operating or finance leases at commencement. In our consolidated balance sheets, operating lease right-of-use (ROU) assets are included in other non-current assets, while finance lease ROU assets are included in property and equipment, net. Lease liabilities for both types of leases are included in accrued expenses and other long-term liabilities. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over that term. Operating and finance lease ROU assets and liabilities are recognized at commencement based on the present value of lease payments over the lease term. ROU assets also include any lease payments made prior to lease commencement and exclude lease incentives. The lease term is the noncancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised. As the rate implicit in our leases is typically not readily determinable, in computing the present value of lease payments we generally use our incremental borrowing rate based on information available at the commencement date. Variable lease payments not dependent on an index or rate are expensed as incurred and not included within the calculation of ROU assets and lease liabilities. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.We do not separate non-lease components from lease components for any class of leases, and we do not recognize ROU assets and lease liabilities for leases with a lease term of twelve months or less.Foreign Currency Translation — For international subsidiaries whose functional currency is the local currency, gains and losses resulting from translation of these foreign currency financial statements into U.S. dollars are recorded in AOCI. For international subsidiaries where the functional currency is the U.S. dollar, gains and losses resulting from the process of remeasuring foreign currency financial statements into U.S. dollars are included in other (expense) income, net.Benefit Plans — We record actuarial gains and losses associated with defined benefit plans within AOCI and amortize net gains or losses in excess of 10 percent of the greater of the market value of plan assets as of the beginning of the fiscal year or the plans' projected benefit obligation on a straight-line basis over the remaining estimated service life of plan participants. The measurement date for all defined benefit plans is our fiscal year end.Stock-Based Compensation — We measure and recognize stock-based compensation for all stock-based awards, including employee stock options, restricted stock units (RSUs), including time-based RSUs and performance-based RSUs (PBRSUs), and rights to purchase shares under our employee stock purchase plan (ESPP), based on their estimated fair value, and recognize the costs in our financial statements using the straight-line attribution approach over the requisite service period for the entire award.The fair value of employee time-based RSUs, and PBRSUs that include a performance condition, is equal to the market value of our common stock on the grant date of the award, less the present value of expected dividends during the vesting period, discounted at a risk-free interest rate. The fair value of PBRSUs that include a market condition is measured using a Monte Carlo simulation model on the date of grant.The fair value of time-based RSUs, and PBRSUs that include a market condition, is not remeasured as a result of subsequent stock price fluctuations. When there is a change in management’s estimate of expected achievement relative to the performance target for PBRSUs that include a performance condition, such as our achievement against a billings result average target, the change in estimate results in the recognition of a cumulative adjustment of stock-based compensation expense.Our expected term assumption is based primarily on historical exercise and post-vesting forfeiture experience. Our stock price volatility assumption is based on a combination of our historical and implied volatility. The risk-free interest rates are based upon United States (U.S.) Treasury bills with equivalent expected terms, and the expected dividends are based on our history and expected dividend payouts.We account for forfeitures of stock-based awards as they occur. completion of the performance obligation. Our stand-ready services, including both hardware and software support, are transferred ratably over the period of the contract. Our public cloud services are transferred either 1) for subscription arrangements, ratably over the subscription period or 2) for consumption-based arrangements, as actually consumed by the customer. For other services such as our fixed professional services contracts, we use an input method to determine the percentage of completion. That is, we estimate the effort to date versus the expected effort required over the life of the contract. completion of the performance obligation. Our stand-ready services, including both hardware and software support, are transferred ratably over the period of the contract. Our public cloud services are transferred either 1) for subscription arrangements, ratably over the subscription period or 2) for consumption-based arrangements, as actually consumed by the customer. For other services such as our fixed professional services contracts, we use an input method to determine the percentage of completion. That is, we estimate the effort to date versus the expected effort required over the life of the contract. Deferred Commissions — We capitalize sales commissions that are incremental direct costs of obtaining customer contracts for which revenue is not immediately recognized and classify them as current or non-current based on the terms of the related contracts. Capitalized commissions are amortized based on the transfer of goods or services to which they relate, typically over one to three years, and are also periodically reviewed for impairment. Amortization expense is recorded to sales and marketing expense in our consolidated statements of income. Deferred Commissions — We capitalize sales commissions that are incremental direct costs of obtaining customer contracts for which revenue is not immediately recognized and classify them as current or non-current based on the terms of the related contracts. Capitalized commissions are amortized based on the transfer of goods or services to which they relate, typically over one to three years, and are also periodically reviewed for impairment. Amortization expense is recorded to sales and marketing expense in our consolidated statements of income. one one three years Leases — We determine if an arrangement is or contains a lease at inception, and we classify leases as operating or finance leases at commencement. In our consolidated balance sheets, operating lease right-of-use (ROU) assets are included in other non-current assets, while finance lease ROU assets are included in property and equipment, net. Lease liabilities for both types of leases are included in accrued expenses and other long-term liabilities. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over that term. Operating and finance lease ROU assets and liabilities are recognized at commencement based on the present value of lease payments over the lease term. ROU assets also include any lease payments made prior to lease commencement and exclude lease incentives. The lease term is the noncancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised. As the rate implicit in our leases is typically not readily determinable, in computing the present value of lease payments we generally use our incremental borrowing rate based on information available at the commencement date. Variable lease payments not dependent on an index or rate are expensed as incurred and not included within the calculation of ROU assets and lease liabilities. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.We do not separate non-lease components from lease components for any class of leases, and we do not recognize ROU assets and lease liabilities for leases with a lease term of twelve months or less. Leases — We determine if an arrangement is or contains a lease at inception, and we classify leases as operating or finance leases at commencement. In our consolidated balance sheets, operating lease right-of-use (ROU) assets are included in other non-current assets, while finance lease ROU assets are included in property and equipment, net. Lease liabilities for both types of leases are included in accrued expenses and other long-term liabilities. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over that term. Operating and finance lease ROU assets and liabilities are recognized at commencement based on the present value of lease payments over the lease term. ROU assets also include any lease payments made prior to lease commencement and exclude lease incentives. The lease term is the noncancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised. As the rate implicit in our leases is typically not readily determinable, in computing the present value of lease payments we generally use our incremental borrowing rate based on information available at the commencement date. Variable lease payments not dependent on an index or rate are expensed as incurred and not included within the calculation of ROU assets and lease liabilities. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. We do not separate non-lease components from lease components for any class of leases, and we do not recognize ROU assets and lease liabilities for leases with a lease term of twelve months or less. Foreign Currency Translation — For international subsidiaries whose functional currency is the local currency, gains and losses resulting from translation of these foreign currency financial statements into U.S. dollars are recorded in AOCI. For international subsidiaries where the functional currency is the U.S. dollar, gains and losses resulting from the process of remeasuring foreign currency financial statements into U.S. dollars are included in other (expense) income, net. Foreign Currency Translation — For international subsidiaries whose functional currency is the local currency, gains and losses resulting from translation of these foreign currency financial statements into U.S. dollars are recorded in AOCI. For international subsidiaries where the functional currency is the U.S. dollar, gains and losses resulting from the process of remeasuring foreign currency financial statements into U.S. dollars are included in other (expense) income, net. Benefit Plans — We record actuarial gains and losses associated with defined benefit plans within AOCI and amortize net gains or losses in excess of 10 percent of the greater of the market value of plan assets as of the beginning of the fiscal year or the plans' projected benefit obligation on a straight-line basis over the remaining estimated service life of plan participants. The measurement date for all defined benefit plans is our fiscal year end. Benefit Plans — We record actuarial gains and losses associated with defined benefit plans within AOCI and amortize net gains or losses in excess of 10 percent of the greater of the market value of plan assets as of the beginning of the fiscal year or the plans' projected benefit obligation on a straight-line basis over the remaining estimated service life of plan participants. The measurement date for all defined benefit plans is our fiscal year end. Stock-Based Compensation — We measure and recognize stock-based compensation for all stock-based awards, including employee stock options, restricted stock units (RSUs), including time-based RSUs and performance-based RSUs (PBRSUs), and rights to purchase shares under our employee stock purchase plan (ESPP), based on their estimated fair value, and recognize the costs in our financial statements using the straight-line attribution approach over the requisite service period for the entire award.The fair value of employee time-based RSUs, and PBRSUs that include a performance condition, is equal to the market value of our common stock on the grant date of the award, less the present value of expected dividends during the vesting period, discounted at a risk-free interest rate. The fair value of PBRSUs that include a market condition is measured using a Monte Carlo simulation model on the date of grant.The fair value of time-based RSUs, and PBRSUs that include a market condition, is not remeasured as a result of subsequent stock price fluctuations. When there is a change in management’s estimate of expected achievement relative to the performance target for PBRSUs that include a performance condition, such as our achievement against a billings result average target, the change in estimate results in the recognition of a cumulative adjustment of stock-based compensation expense.Our expected term assumption is based primarily on historical exercise and post-vesting forfeiture experience. Our stock price volatility assumption is based on a combination of our historical and implied volatility. The risk-free interest rates are based upon United States (U.S.) Treasury bills with equivalent expected terms, and the expected dividends are based on our history and expected dividend payouts.We account for forfeitures of stock-based awards as they occur. Stock-Based Compensation — We measure and recognize stock-based compensation for all stock-based awards, including employee stock options, restricted stock units (RSUs), including time-based RSUs and performance-based RSUs (PBRSUs), and rights to purchase shares under our employee stock purchase plan (ESPP), based on their estimated fair value, and recognize the costs in our financial statements using the straight-line attribution approach over the requisite service period for the entire award. The fair value of employee time-based RSUs, and PBRSUs that include a performance condition, is equal to the market value of our common stock on the grant date of the award, less the present value of expected dividends during the vesting period, discounted at a risk-free interest rate. The fair value of PBRSUs that include a market condition is measured using a Monte Carlo simulation model on the date of grant. The fair value of time-based RSUs, and PBRSUs that include a market condition, is not remeasured as a result of subsequent stock price fluctuations. When there is a change in management’s estimate of expected achievement relative to the performance target for PBRSUs that include a performance condition, such as our achievement against a billings result average target, the change in estimate results in the recognition of a cumulative adjustment of stock-based compensation expense. Our expected term assumption is based primarily on historical exercise and post-vesting forfeiture experience. Our stock price volatility assumption is based on a combination of our historical and implied volatility. The risk-free interest rates are based upon United States (U.S.) Treasury bills with equivalent expected terms, and the expected dividends are based on our history and expected dividend payouts. We account for forfeitures of stock-based awards as they occur. 64 64 Income Taxes — Deferred income tax assets and liabilities are provided for temporary differences that will result in tax deductions or income in future periods, as well as the future benefit of tax credit carryforwards. A valuation allowance reduces tax assets to their estimated realizable value. We recognize the tax liability for uncertain income tax positions on the income tax return based on the two-step process prescribed in the interpretation. The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Estimating these amounts requires us to determine the probability of various possible outcomes. We evaluate these uncertain tax positions on a quarterly basis. We recognize interest and penalties related to unrecognized tax benefits within the provision for income taxes line on the accompanying consolidated statements of income.Net Income per Share — Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted net income per share is computed giving effect to the weighted-average number of dilutive potential shares that were outstanding during the period using the treasury stock method. Potential dilutive common shares consist primarily of outstanding stock options, shares to be purchased under our employee stock purchase plan and unvested RSUs.Treasury Stock — We account for treasury stock under the cost method. Upon the retirement of treasury stock, we allocate the value of treasury shares between common stock, additional paid-in capital and retained earnings.2. Recent Accounting Pronouncements Recent Accounting Pronouncements Not Yet AdoptedIn November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosure of the nature of expenses included in the income statement. The standard requires disclosures about specific types of expenses included in the expense captions presented in the income statement as well as disclosures about selling expenses. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The requirements should be applied on a prospective basis while retrospective application is permitted. We are currently evaluating the effect of this pronouncement on our disclosures.In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. We are currently evaluating the effect of this pronouncement on our income tax disclosures. Recently Adopted Accounting PronouncementIn November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. We adopted this standard for our annual period beginning fiscal year 2025 on a retrospective basis to all periods presented. The adoption of this standard did not result in a significant change to our consolidated financial statement disclosures. See Note 15 – Segment, Geographic, and Significant Customer Information of the Notes to Consolidated Financial Statements for our reportable segment disclosures.3. Concentration of RiskFinancial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents, investments, foreign currency exchange contracts and accounts receivable. We maintain the majority of our cash and cash equivalents with several major financial institutions where the deposits exceed federally insured limits. Cash equivalents and short-term investments consist primarily of money market funds, U.S. Treasury and government debt securities and certificates of deposit, all of which are considered high investment grade. Our policy is to limit the amount of credit exposure through diversification and investment in highly rated securities. We further mitigate concentrations of credit risk in our investments by limiting our investments in the debt securities of a single issuer and by diversifying risk across geographies and type of issuer. General macroeconomic uncertainty has led to an increase in market volatility, however, management believes that the financial institutions that hold our cash, cash equivalents and investments are financially sound and, accordingly, are subject to minimal credit risk.By entering into foreign currency exchange contracts, we have assumed the risk that might arise from the possible inability of counterparties to meet the terms of their contracts. The counterparties to these contracts are major multinational commercial banks, and we do not expect any losses as a result of counterparty defaults. Income Taxes — Deferred income tax assets and liabilities are provided for temporary differences that will result in tax deductions or income in future periods, as well as the future benefit of tax credit carryforwards. A valuation allowance reduces tax assets to their estimated realizable value. We recognize the tax liability for uncertain income tax positions on the income tax return based on the two-step process prescribed in the interpretation. The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Estimating these amounts requires us to determine the probability of various possible outcomes. We evaluate these uncertain tax positions on a quarterly basis. We recognize interest and penalties related to unrecognized tax benefits within the provision for income taxes line on the accompanying consolidated statements of income.Net Income per Share — Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted net income per share is computed giving effect to the weighted-average number of dilutive potential shares that were outstanding during the period using the treasury stock method. Potential dilutive common shares consist primarily of outstanding stock options, shares to be purchased under our employee stock purchase plan and unvested RSUs.Treasury Stock — We account for treasury stock under the cost method. Upon the retirement of treasury stock, we allocate the value of treasury shares between common stock, additional paid-in capital and retained earnings. Income Taxes — Deferred income tax assets and liabilities are provided for temporary differences that will result in tax deductions or income in future periods, as well as the future benefit of tax credit carryforwards. A valuation allowance reduces tax assets to their estimated realizable value. We recognize the tax liability for uncertain income tax positions on the income tax return based on the two-step process prescribed in the interpretation. The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Estimating these amounts requires us to determine the probability of various possible outcomes. We evaluate these uncertain tax positions on a quarterly basis. We recognize interest and penalties related to unrecognized tax benefits within the provision for income taxes line on the accompanying consolidated statements of income. Income Taxes — Deferred income tax assets and liabilities are provided for temporary differences that will result in tax deductions or income in future periods, as well as the future benefit of tax credit carryforwards. A valuation allowance reduces tax assets to their estimated realizable value. We recognize the tax liability for uncertain income tax positions on the income tax return based on the two-step process prescribed in the interpretation. The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Estimating these amounts requires us to determine the probability of various possible outcomes. We evaluate these uncertain tax positions on a quarterly basis. We recognize interest and penalties related to unrecognized tax benefits within the provision for income taxes line on the accompanying consolidated statements of income. Net Income per Share — Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted net income per share is computed giving effect to the weighted-average number of dilutive potential shares that were outstanding during the period using the treasury stock method. Potential dilutive common shares consist primarily of outstanding stock options, shares to be purchased under our employee stock purchase plan and unvested RSUs. Net Income per Share — Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted net income per share is computed giving effect to the weighted-average number of dilutive potential shares that were outstanding during the period using the treasury stock method. Potential dilutive common shares consist primarily of outstanding stock options, shares to be purchased under our employee stock purchase plan and unvested RSUs. Treasury Stock — We account for treasury stock under the cost method. Upon the retirement of treasury stock, we allocate the value of treasury shares between common stock, additional paid-in capital and retained earnings. Treasury Stock — We account for treasury stock under the cost method. Upon the retirement of treasury stock, we allocate the value of treasury shares between common stock, additional paid-in capital and retained earnings. 2. Recent Accounting Pronouncements Recent Accounting Pronouncements Not Yet AdoptedIn November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosure of the nature of expenses included in the income statement. The standard requires disclosures about specific types of expenses included in the expense captions presented in the income statement as well as disclosures about selling expenses. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The requirements should be applied on a prospective basis while retrospective application is permitted. We are currently evaluating the effect of this pronouncement on our disclosures.In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. We are currently evaluating the effect of this pronouncement on our income tax disclosures. Recently Adopted Accounting PronouncementIn November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. We adopted this standard for our annual period beginning fiscal year 2025 on a retrospective basis to all periods presented. The adoption of this standard did not result in a significant change to our consolidated financial statement disclosures. See Note 15 – Segment, Geographic, and Significant Customer Information of the Notes to Consolidated Financial Statements for our reportable segment disclosures." }, { "status": "ADDED", "current_title": "2. Recent Accounting Pronouncements", "prior_title": null, "current_body": "Recent Accounting Pronouncements Not Yet AdoptedIn November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosure of the nature of expenses included in the income statement. The standard requires disclosures about specific types of expenses included in the expense captions presented in the income statement as well as disclosures about selling expenses. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The requirements should be applied on a prospective basis while retrospective application is permitted. We are currently evaluating the effect of this pronouncement on our disclosures.In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. We are currently evaluating the effect of this pronouncement on our income tax disclosures. Recently Adopted Accounting PronouncementIn November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. We adopted this standard for our annual period beginning fiscal year 2025 on a retrospective basis to all periods presented. The adoption of this standard did not result in a significant change to our consolidated financial statement disclosures. See Note 15 – Segment, Geographic, and Significant Customer Information of the Notes to Consolidated Financial Statements for our reportable segment disclosures." }, { "status": "ADDED", "current_title": "Recent Accounting Pronouncements Not Yet Adopted", "prior_title": null, "current_body": "In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosure of the nature of expenses included in the income statement. The standard requires disclosures about specific types of expenses included in the expense captions presented in the income statement as well as disclosures about selling expenses. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The requirements should be applied on a prospective basis while retrospective application is permitted. We are currently evaluating the effect of this pronouncement on our disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. We are currently evaluating the effect of this pronouncement on our income tax disclosures." }, { "status": "ADDED", "current_title": "Recently Adopted Accounting Pronouncement", "prior_title": null, "current_body": "In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. We adopted this standard for our annual period beginning fiscal year 2025 on a retrospective basis to all periods presented. The adoption of this standard did not result in a significant change to our consolidated financial statement disclosures. See Note 15 – Segment, Geographic, and Significant Customer Information of the Notes to Consolidated Financial Statements for our reportable segment disclosures. 3. Concentration of RiskFinancial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents, investments, foreign currency exchange contracts and accounts receivable. We maintain the majority of our cash and cash equivalents with several major financial institutions where the deposits exceed federally insured limits. Cash equivalents and short-term investments consist primarily of money market funds, U.S. Treasury and government debt securities and certificates of deposit, all of which are considered high investment grade. Our policy is to limit the amount of credit exposure through diversification and investment in highly rated securities. We further mitigate concentrations of credit risk in our investments by limiting our investments in the debt securities of a single issuer and by diversifying risk across geographies and type of issuer. General macroeconomic uncertainty has led to an increase in market volatility, however, management believes that the financial institutions that hold our cash, cash equivalents and investments are financially sound and, accordingly, are subject to minimal credit risk.By entering into foreign currency exchange contracts, we have assumed the risk that might arise from the possible inability of counterparties to meet the terms of their contracts. The counterparties to these contracts are major multinational commercial banks, and we do not expect any losses as a result of counterparty defaults." }, { "status": "ADDED", "current_title": "3. Concentration of Risk", "prior_title": null, "current_body": "Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents, investments, foreign currency exchange contracts and accounts receivable. We maintain the majority of our cash and cash equivalents with several major financial institutions where the deposits exceed federally insured limits. Cash equivalents and short-term investments consist primarily of money market funds, U.S. Treasury and government debt securities and certificates of deposit, all of which are considered high investment grade. Our policy is to limit the amount of credit exposure through diversification and investment in highly rated securities. We further mitigate concentrations of credit risk in our investments by limiting our investments in the debt securities of a single issuer and by diversifying risk across geographies and type of issuer. General macroeconomic uncertainty has led to an increase in market volatility, however, management believes that the financial institutions that hold our cash, cash equivalents and investments are financially sound and, accordingly, are subject to minimal credit risk. By entering into foreign currency exchange contracts, we have assumed the risk that might arise from the possible inability of counterparties to meet the terms of their contracts. The counterparties to these contracts are major multinational commercial banks, and we do not expect any losses as a result of counterparty defaults. 65 65 We sell our products primarily to large organizations in different industries and geographies. We do not require collateral or other security to support accounts receivable. In addition, we maintain an allowance for potential credit losses. To reduce credit risk, we perform ongoing credit evaluations on our customers’ financial condition. We establish an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and other information, including the expected impact of macroeconomic disruptions, and, to date, such losses have been within management’s expectations. Concentrations of credit risk with respect to trade accounts receivable are limited due to the wide variety of customers who are dispersed across many geographic regions.There are no concentrations of business transacted with a particular market that would severely impact our business in the near term. However, we rely on a limited number of suppliers for certain key components and a few key contract manufacturers to manufacture most of our products; any disruption, or termination of these arrangements could materially adversely affect our operating results.4. Business Combinations Fiscal 2023 Acquisition Instaclustr AcquisitionOn May 20, 2022, we acquired all the outstanding shares of privately-held Instaclustr US Holding, Inc. (Instaclustr) for $498 million. Instaclustr is a leading platform provider of fully managed open-source database, pipeline and workflow applications delivered as-a-service.The acquisition-date values of the assets acquired and liabilities assumed are as follows (in millions): Amount Cash $ 4 Intangible assets 107 Goodwill 413 Other assets 19 Total assets acquired 543 Liabilities assumed (45 ) Total purchase price $ 498 The components of the intangible assets acquired were as follows (in millions, except useful life): Amount Estimated useful life(years) Developed technology $ 55 5 Customer contracts/relationships 50 5 Trade name 2 3 Total intangible assets $ 107 The acquired net assets and assumed debt of Instaclustr were recorded at their estimated values. We determined the estimated values with the assistance of valuations and appraisals performed by third party specialists and estimates made by management. We expect to realize revenue synergies and anticipate opportunities for growth through the ability to leverage additional future products and capabilities. These factors, among others, contributed to a purchase price in excess of the estimated value of its identifiable net assets acquired, and as a result, we have recorded goodwill in connection with the acquisition. The goodwill is not deductible for income tax purposes. The results of operations related to the acquisition of Instaclustr have been included in our consolidated statements of income from the acquisition date. Pro forma results of operations have not been presented because the impact from the acquisition was not material to our consolidated results of operations. We sell our products primarily to large organizations in different industries and geographies. We do not require collateral or other security to support accounts receivable. In addition, we maintain an allowance for potential credit losses. To reduce credit risk, we perform ongoing credit evaluations on our customers’ financial condition. We establish an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and other information, including the expected impact of macroeconomic disruptions, and, to date, such losses have been within management’s expectations. Concentrations of credit risk with respect to trade accounts receivable are limited due to the wide variety of customers who are dispersed across many geographic regions.There are no concentrations of business transacted with a particular market that would severely impact our business in the near term. However, we rely on a limited number of suppliers for certain key components and a few key contract manufacturers to manufacture most of our products; any disruption, or termination of these arrangements could materially adversely affect our operating results. We sell our products primarily to large organizations in different industries and geographies. We do not require collateral or other security to support accounts receivable. In addition, we maintain an allowance for potential credit losses. To reduce credit risk, we perform ongoing credit evaluations on our customers’ financial condition. We establish an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and other information, including the expected impact of macroeconomic disruptions, and, to date, such losses have been within management’s expectations. Concentrations of credit risk with respect to trade accounts receivable are limited due to the wide variety of customers who are dispersed across many geographic regions. There are no concentrations of business transacted with a particular market that would severely impact our business in the near term. However, we rely on a limited number of suppliers for certain key components and a few key contract manufacturers to manufacture most of our products; any disruption, or termination of these arrangements could materially adversely affect our operating results. 4. Business Combinations Fiscal 2023 Acquisition Instaclustr AcquisitionOn May 20, 2022, we acquired all the outstanding shares of privately-held Instaclustr US Holding, Inc. (Instaclustr) for $498 million. Instaclustr is a leading platform provider of fully managed open-source database, pipeline and workflow applications delivered as-a-service.The acquisition-date values of the assets acquired and liabilities assumed are as follows (in millions): Amount Cash $ 4 Intangible assets 107 Goodwill 413 Other assets 19 Total assets acquired 543 Liabilities assumed (45 ) Total purchase price $ 498 The components of the intangible assets acquired were as follows (in millions, except useful life): Amount Estimated useful life(years) Developed technology $ 55 5 Customer contracts/relationships 50 5 Trade name 2 3 Total intangible assets $ 107 The acquired net assets and assumed debt of Instaclustr were recorded at their estimated values. We determined the estimated values with the assistance of valuations and appraisals performed by third party specialists and estimates made by management. We expect to realize revenue synergies and anticipate opportunities for growth through the ability to leverage additional future products and capabilities. These factors, among others, contributed to a purchase price in excess of the estimated value of its identifiable net assets acquired, and as a result, we have recorded goodwill in connection with the acquisition. The goodwill is not deductible for income tax purposes. The results of operations related to the acquisition of Instaclustr have been included in our consolidated statements of income from the acquisition date. Pro forma results of operations have not been presented because the impact from the acquisition was not material to our consolidated results of operations." }, { "status": "ADDED", "current_title": "Instaclustr Acquisition", "prior_title": null, "current_body": "On May 20, 2022, we acquired all the outstanding shares of privately-held Instaclustr US Holding, Inc. (Instaclustr) for $498 million. Instaclustr is a leading platform provider of fully managed open-source database, pipeline and workflow applications delivered as-a-service. The acquisition-date values of the assets acquired and liabilities assumed are as follows (in millions): Amount Cash $ 4 Intangible assets 107 Goodwill 413 Other assets 19 Total assets acquired 543 Liabilities assumed (45 ) Total purchase price $ 498 The acquisition-date values of the assets acquired and liabilities assumed are as follows (in millions): Amount Cash $ 4 Intangible assets 107 Goodwill 413 Other assets 19 Total assets acquired 543 Liabilities assumed (45 ) Total purchase price $ 498 The components of the intangible assets acquired were as follows (in millions, except useful life): Amount Estimated useful life(years) Developed technology $ 55 5 Customer contracts/relationships 50 5 Trade name 2 3 Total intangible assets $ 107 The components of the intangible assets acquired were as follows (in millions, except useful life): Amount" }, { "status": "ADDED", "current_title": "Estimated useful life(years)", "prior_title": null, "current_body": "Developed technology $ 55 5 5 Customer contracts/relationships 50 5 5 Trade name 2 3 3 Total intangible assets $ 107 The acquired net assets and assumed debt of Instaclustr were recorded at their estimated values. We determined the estimated values with the assistance of valuations and appraisals performed by third party specialists and estimates made by management. We expect to realize revenue synergies and anticipate opportunities for growth through the ability to leverage additional future products and capabilities. These factors, among others, contributed to a purchase price in excess of the estimated value of its identifiable net assets acquired, and as a result, we have recorded goodwill in connection with the acquisition. The goodwill is not deductible for income tax purposes. The results of operations related to the acquisition of Instaclustr have been included in our consolidated statements of income from the acquisition date. Pro forma results of operations have not been presented because the impact from the acquisition was not material to our consolidated results of operations. 66 66 5. Goodwill and Purchased Intangible Assets, NetGoodwill activity is summarized as follows (in millions): Amount Balance as of April 28, 2023 $ 2,759 Additions — Balance as of April 26, 2024 2,759 Additions — Derecognition (36 ) Balance as of April 25, 2025 $ 2,723 During fiscal 2025, we derecognized a portion of the Public Cloud goodwill in connection with the sale of our cloud optimization and management software business known as Spot by NetApp, which formed part of our Public Cloud reportable segment. See \"Gains/losses on the sale or derecognition of assets\" section contained in Note 6 – Supplemental Financial Information for additional information related to this derecognition.Goodwill by reportable segment as of April 25, 2025 is as follows (in millions): Amount Hybrid Cloud $ 1,714 Public Cloud 1,009 Total goodwill $ 2,723 Purchased intangible assets, net are summarized below (in millions): April 25, 2025 April 26, 2024 Gross Accumulated Net Gross Accumulated Net Assets Amortization Assets Assets Amortization Assets Developed technology $ 55 $ (33 ) $ 22 $ 179 $ (108 ) $ 71 Customer contracts/relationships 50 (29 ) 21 114 (62 ) 52 Other purchased intangibles 2 (2 ) — 6 (5 ) 1 Total purchased intangible assets $ 107 $ (64 ) $ 43 $ 299 $ (175 ) $ 124 During fiscal 2025, we retired $25 million of fully amortized intangible assets. We also derecognized certain intangible assets, net in connection with the sale of our Spot by NetApp business. See \"Gains/losses on the sale or derecognition of assets\" section contained in Note 6 – Supplemental Financial Information for additional information related to this derecognition.Amortization expense for purchased intangible assets is summarized below (in millions): Year Ended Statements of April 25, 2025 April 26, 2024 April 28, 2023 IncomeClassifications Developed technology $ 28 $ 34 $ 42 Cost of revenues Customer contracts/relationships 19 22 24 Operating expenses Other purchased intangibles — 1 2 Operating expenses Total $ 47 $ 57 $ 68 As of April 25, 2025, future amortization expense related to purchased intangible assets is as follows (in millions): Fiscal Year Amount 2026 $ 21 2027 21 2028 1 2029 — Total $ 43 5. Goodwill and Purchased Intangible Assets, NetGoodwill activity is summarized as follows (in millions): Amount Balance as of April 28, 2023 $ 2,759 Additions — Balance as of April 26, 2024 2,759 Additions — Derecognition (36 ) Balance as of April 25, 2025 $ 2,723 During fiscal 2025, we derecognized a portion of the Public Cloud goodwill in connection with the sale of our cloud optimization and management software business known as Spot by NetApp, which formed part of our Public Cloud reportable segment. See \"Gains/losses on the sale or derecognition of assets\" section contained in Note 6 – Supplemental Financial Information for additional information related to this derecognition.Goodwill by reportable segment as of April 25, 2025 is as follows (in millions): Amount Hybrid Cloud $ 1,714 Public Cloud 1,009 Total goodwill $ 2,723 Purchased intangible assets, net are summarized below (in millions): April 25, 2025 April 26, 2024 Gross Accumulated Net Gross Accumulated Net Assets Amortization Assets Assets Amortization Assets Developed technology $ 55 $ (33 ) $ 22 $ 179 $ (108 ) $ 71 Customer contracts/relationships 50 (29 ) 21 114 (62 ) 52 Other purchased intangibles 2 (2 ) — 6 (5 ) 1 Total purchased intangible assets $ 107 $ (64 ) $ 43 $ 299 $ (175 ) $ 124 During fiscal 2025, we retired $25 million of fully amortized intangible assets. We also derecognized certain intangible assets, net in connection with the sale of our Spot by NetApp business. See \"Gains/losses on the sale or derecognition of assets\" section contained in Note 6 – Supplemental Financial Information for additional information related to this derecognition.Amortization expense for purchased intangible assets is summarized below (in millions): Year Ended Statements of April 25, 2025 April 26, 2024 April 28, 2023 IncomeClassifications Developed technology $ 28 $ 34 $ 42 Cost of revenues Customer contracts/relationships 19 22 24 Operating expenses Other purchased intangibles — 1 2 Operating expenses Total $ 47 $ 57 $ 68 As of April 25, 2025, future amortization expense related to purchased intangible assets is as follows (in millions): Fiscal Year Amount 2026 $ 21 2027 21 2028 1 2029 — Total $ 43" }, { "status": "ADDED", "current_title": "5. Goodwill and Purchased Intangible Assets, Net", "prior_title": null, "current_body": "Goodwill activity is summarized as follows (in millions): Amount Balance as of April 28, 2023 $ 2,759 Additions — Balance as of April 26, 2024 2,759 Additions — Derecognition (36 ) Balance as of April 25, 2025 $ 2,723 Goodwill activity is summarized as follows (in millions): Amount Balance as of April 28, 2023 $ 2,759 Additions — Balance as of April 26, 2024 2,759 Additions — Derecognition (36 ) Balance as of April 25, 2025 $ 2,723 During fiscal 2025, we derecognized a portion of the Public Cloud goodwill in connection with the sale of our cloud optimization and management software business known as Spot by NetApp, which formed part of our Public Cloud reportable segment. See \"Gains/losses on the sale or derecognition of assets\" section contained in Note 6 – Supplemental Financial Information for additional information related to this derecognition. Goodwill by reportable segment as of April 25, 2025 is as follows (in millions): Amount Hybrid Cloud $ 1,714 Public Cloud 1,009 Total goodwill $ 2,723 Goodwill by reportable segment as of April 25, 2025 is as follows (in millions): Amount Hybrid Cloud $ 1,714 Public Cloud 1,009 Total goodwill $ 2,723 Purchased intangible assets, net are summarized below (in millions): April 25, 2025 April 26, 2024 Gross Accumulated Net Gross Accumulated Net Assets Amortization Assets Assets Amortization Assets Developed technology $ 55 $ (33 ) $ 22 $ 179 $ (108 ) $ 71 Customer contracts/relationships 50 (29 ) 21 114 (62 ) 52 Other purchased intangibles 2 (2 ) — 6 (5 ) 1 Total purchased intangible assets $ 107 $ (64 ) $ 43 $ 299 $ (175 ) $ 124 Purchased intangible assets, net are summarized below (in millions):" }, { "status": "ADDED", "current_title": "Amortization", "prior_title": null, "current_body": "Assets Developed technology $ 55 $ (33 ) $ 22 $ 179 $ (108 ) $ 71 Customer contracts/relationships 50 (29 ) 21 114 (62 ) 52 Other purchased intangibles 2 (2 ) — 6 (5 ) 1 Total purchased intangible assets $ 107 $ (64 ) $ 43 $ 299 $ (175 ) $ 124 During fiscal 2025, we retired $25 million of fully amortized intangible assets. We also derecognized certain intangible assets, net in connection with the sale of our Spot by NetApp business. See \"Gains/losses on the sale or derecognition of assets\" section contained in Note 6 – Supplemental Financial Information for additional information related to this derecognition. Amortization expense for purchased intangible assets is summarized below (in millions): Year Ended Statements of April 25, 2025 April 26, 2024 April 28, 2023 IncomeClassifications Developed technology $ 28 $ 34 $ 42 Cost of revenues Customer contracts/relationships 19 22 24 Operating expenses Other purchased intangibles — 1 2 Operating expenses Total $ 47 $ 57 $ 68 Amortization expense for purchased intangible assets is summarized below (in millions): Year Ended" }, { "status": "ADDED", "current_title": "IncomeClassifications", "prior_title": null, "current_body": "Developed technology $ 28 $ 34 $ 42 Cost of revenues Customer contracts/relationships 19 22 24 Operating expenses Other purchased intangibles — 1 2 Operating expenses Total $ 47 $ 57 $ 68 As of April 25, 2025, future amortization expense related to purchased intangible assets is as follows (in millions): Fiscal Year Amount 2026 $ 21 2027 21 2028 1 2029 — Total $ 43 As of April 25, 2025, future amortization expense related to purchased intangible assets is as follows (in millions):" }, { "status": "REMOVED", "current_title": null, "prior_title": "Global economic and geopolitical conditions may harm our industry, business, and operating results, including our revenue growth and profitability, financial condition and cash flows.", "prior_body": "We operate globally and as a result, our business, revenues and profitability are impacted by global economic and market conditions, including, among others, inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, tax rates, economic uncertainty, political instability, warfare, changes in laws, reduced consumer confidence and spending, and economic and trade barriers. Such factors may contribute to increased periodic volatility in the IT industry at large and limit our ability to forecast future demand for our products and services, impact availability of supplies and could constrain future access to capital for our suppliers, customers and partners. Additionally, adverse macroeconomic conditions, including those identified above, could materially adversely impact the demand for our products and our operating results amid customer concerns over slowing demand for their products, reduced asset values, volatile energy costs, geopolitical issues, the availability and cost of credit and the stability and solvency of financial institutions, financial markets, businesses, local and state governments, and sovereign nations. The impacts of these circumstances are global and pervasive, and the timing and nature of any ultimate resolution of these matters remain highly uncertain. All of these risks and conditions could materially adversely affect our future sales and operating results." }, { "status": "REMOVED", "current_title": null, "prior_title": "Our business may be harmed by technological trends in our market or if we are unable to keep pace with rapid industry, technological and market changes.", "prior_body": "The growth in our industry and the markets in which we compete is driven by the increasing demand for data, which increases demand for, and purchases of, storage and data management solutions. Despite these growth drivers, our markets could be adversely impacted by technology transitions, increased storage efficiency, competitive pricing dynamics, changing consumption models, and/or uncertain macroeconomic conditions. Additionally, the impact of generative artificial intelligence (GenAI) in the markets for storage and data management solutions has yet to be fully realized and could evolve in unexpected ways. While customers are navigating through their information technology (IT) transformations, which leverage modern architectures and hybrid cloud environments, they are also looking for simpler solutions and changing how they consume IT. This evolution is diverting spending towards transformational projects and architectures like flash, hybrid cloud, cloud storage, and IT as a service. The future impact of these trends on both short- and long-term growth patterns is uncertain, and we may be unable to meet customer demand, with an expected level of quality and support for new products or services. Our business may be adversely impacted if we are unable to keep pace with rapid industry, technological or market changes or if our products and services are not accepted in the marketplace. As a result of these and other factors discussed in this report, customer demand for our products and services may fall and our revenue may decline on a year-over-year basis, as it did in fiscal 2017, 2020, and 2024. If the general historical rate of industry growth declines, if the growth rates of some or all of the specific markets in which we compete decline, if the consumption model of storage changes, if our new and existing products, services and solutions do not receive customer acceptance and/or if we do not adapt our sales programs to address market changes, our business, operating results, financial condition and cash flows could suffer." }, { "status": "REMOVED", "current_title": null, "prior_title": "Due to the global nature of our business, risks inherent in our international operations could materially harm our business.", "prior_body": "A significant portion of our operations are located, and a significant portion of our revenues are derived, outside of the U.S. In addition, most of our products are manufactured outside of the U.S., and we have research and development, sales and service centers overseas. Accordingly, our international operations, business and future operating results could be adversely impacted by economic, business, regulatory, social and political factors in foreign countries including, among other things, the imposition of government controls, local political or economic conditions including recessionary cycles, inflationary conditions and political uncertainty, economic sanctions, trade protections and regulations and export and import requirements, tariffs, tax policies, treaties or laws, local labor conditions, transportation costs, government spending patterns, geopolitical tensions and uncertainties, acts of terrorism, international conflicts and natural disasters in areas with limited infrastructure and adverse public health developments. In particular, ongoing trade tensions between the U.S. and China could impact our business and operating results. Any increase in tensions between China and Taiwan, including threats of military actions or escalation of military activities, could adversely affect our or our contract manufacturers’ ability to source key supply chain components included in our products. As a result of Russia’s actions in Ukraine, numerous countries and organizations have imposed sanctions and export controls, while businesses, including the Company, have limited or suspended Russian operations. Russia has likewise imposed currency restrictions and regulations and may further take 17 17 retaliatory trade or other actions, including the nationalization of foreign businesses. These actions could impact our supply chain, pricing, business and operating results and expose us to cyberattacks. In addition, due to the global nature of our business, we are subject to complex legal and regulatory requirements in the U.S. and the foreign jurisdictions in which we operate and sell our products, including antitrust and anti-competition laws, and regulations related to data privacy, data protection, and cybersecurity. We are also subject to the potential loss of proprietary information due to piracy, misappropriation, or laws that may be less protective of our intellectual property rights than U.S. laws. Such factors have or could have an adverse impact on our business, operating results, financial condition and cash flows. We face exposure to adverse movements in foreign currency exchange rates as a result of our international operations. These exposures may change over time as business practices evolve, and they could have a material adverse impact on our operating results, financial condition and cash flows. We utilize forward and option contracts in an attempt to reduce the adverse earnings impact from the effect of exchange rate fluctuations on certain assets and liabilities. Our hedging strategies may not be successful, and currency exchange rate fluctuations could have a material adverse effect on our operating results and cash flows. In addition, our foreign currency exposure on assets, liabilities, and cash flows that we do not hedge could have a material impact on our financial results in periods when the U.S. dollar significantly fluctuates in relation to foreign currencies. Moreover, in many foreign countries, particularly in those with developing economies, it is a common business practice to engage in activities that are prohibited by NetApp's internal policies and procedures, or U.S. laws and regulations applicable to us, such as the Foreign Corrupt Practices Act. There can be no assurance that all our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, will comply with these policies, procedures, laws and/or regulations. Any such violation could subject us to fines and other penalties, which could have a material adverse effect on our business, operating results, financial condition and cash flows." }, { "status": "REMOVED", "current_title": null, "prior_title": "Our goals and disclosures related to environmental, social and governance (ESG) matters expose us to risks that could adversely affect our reputation and performance.", "prior_body": "We have established and publicly announced, and may continue to establish and publicly announce, initiatives and goals regarding environmental matters, diversity, and other related matters, including our commitment to reducing our greenhouse gas emissions and increasing our representation of women in our global workforce and underrepresented minorities in our US workforce, in our ESG Report, on our website, in our SEC filings and elsewhere. These statements reflect our current plans and aspirations and are not quotas or guarantees that we will be able to achieve them. These initiatives and goals could be difficult and expensive to implement, the technologies we need to implement them may not be cost effective and may not advance at a sufficient pace, and ensuring the accuracy, adequacy or completeness of the disclosure of our ESG initiatives can be costly, difficult and time-consuming. Our failure to accomplish or accurately track and report on these goals on a timely basis, or at all, could adversely affect our reputation, financial performance and growth, and expose us to increased scrutiny from our stakeholders, the investment community as well as enforcement authorities. There is an increasing focus from U.S. and foreign government agencies, investors, customers, consumers, employees and other stakeholders concerning ESG matters, including sustainable products. These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations. For example, developing and acting on ESG initiatives, and collecting, measuring and reporting ESG information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s climate-related reporting requirements, the California climate reporting rules and, to the extent applicable, the European Union's (EU) Corporate Sustainability Reporting Directive. Statements about our ESG initiatives and goals, and progress against those goals, may be based on standards for tracking, measuring and reporting ESG matters that are continuing to evolve and assumptions that are subject to change. This may result in a lack of consistent or meaningful comparative data from period to period or between the Company and other companies in the same industry. In addition, our processes and controls may not always comply with evolving standards for identifying, measuring and reporting ESG metrics, including ESG-related disclosures that may be required of public companies by the Securities and Exchange Commission, and such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future. We could also face scrutiny from certain stakeholders for the scope or nature of our ESG initiatives or goals, or for any revisions to these goals. If our ESG related data, processes and reporting are incomplete or inaccurate, if we fail to achieve progress with respect to our ESG goals on a timely basis, or at all, or if we were to be subject to government enforcement actions or private litigation from stakeholders because of our ESG initiatives, our ability to attract or retain employees, and our attractiveness as an investment, business partner, acquiror or supplier could be negatively impacted and our business, financial performance and growth could be adversely affected." }, { "status": "MODIFIED", "current_title": "If our products or services are defective, or are perceived to be defective, including as a result of improper use or maintenance, our operating results and customer relationships may be harmed.", "prior_title": "If our products or services are defective, or are perceived to be defective as a result of improper use or maintenance, our operating results, including gross margins, and customer relationships may be harmed.", "similarity_score": 0.908, "confidence": "high", "key_changes": [ "Reworded sentence: \"We have experienced in the past, and expect to experience in the future, quality issues impacting certain products, and we could experience reliability issues with services we provide, including security vulnerabilities, software bugs, hardware failure in networked storage appliances, incompatibility issues with customer systems or other applications, performance deficiencies causing slow data retrieval or processing, firmware or software updates causing system instability, compliance with various product certifications, and data breaches due to flaws in the product design.\"" ], "current_body": "Our products and services are complex. We have experienced in the past, and expect to experience in the future, quality issues impacting certain products, and we could experience reliability issues with services we provide, including security vulnerabilities, software bugs, hardware failure in networked storage appliances, incompatibility issues with customer systems or other applications, performance deficiencies causing slow data retrieval or processing, firmware or software updates causing system instability, compliance with various product certifications, and data breaches due to flaws in the product design. Such quality and reliability issues may be due to, for example, our own designs or processes, the designs or processes of our suppliers, and/or flaws in third-party software used in our products. These types of risks are most acute when we are introducing new products. Quality or reliability issues have and could again in the future cause customers to experience outages or disruptions in service, data loss or data corruption. If we fail to remedy a product defect or flaw, we may experience a failure of a product line, temporary or permanent withdrawal from a product or market, damage to our reputation, loss of revenue, inventory costs or product reengineering expenses and higher ongoing warranty and service costs, and these occurrences could have a material impact on our gross margins, business and operating results. In addition, we exercise little control over how our customers use or maintain our products and services, and in some cases improper usage or maintenance could impair the performance of our products and services, which could lead to a perception of a quality or reliability issue. Customers may experience losses that may result from or are alleged to result from defects or flaws in our products and services, which could subject us to claims for damages, including consequential damages.", "prior_body": "Our products and services are complex. We have experienced in the past, and expect to experience in the future, quality issues impacting certain products, and in the future, we could experience reliability issues with services we provide. Such quality and reliability issues may be due to, for example, our own designs or processes, the designs or processes of our suppliers, and/or flaws in third-party software used in our products. These types of risks are most acute when we are introducing new products. Quality or reliability issues have and could again in the future cause customers to experience outages or disruptions in service, data loss or data corruption. If we fail to remedy a product defect or flaw, we may experience a failure of a product line, temporary or permanent withdrawal from a product or market, damage to our reputation, loss of revenue, inventory costs or product reengineering expenses and higher ongoing warranty and service costs, and these occurrences could have a material impact on our gross margins, business and operating results. In addition, we exercise little control over how our customers use or maintain our products and services, and in some cases improper usage or maintenance could impair the performance of our products and services, which could lead to a perception of a quality or reliability issue. Customers may experience losses that may result from or are alleged to result from defects or flaws in our products and services, which could subject us to claims for damages, including consequential damages." }, { "status": "MODIFIED", "current_title": "We are exposed to the credit and non-payment risk of our customers, resellers and distributors, especially during times of economic uncertainty and tight credit markets, which could result in material losses.", "prior_title": "We are exposed to the credit and non-payment risk of our customers, resellers and distributors, especially during times of economic uncertainty and tight credit markets, which could result in material losses.", "similarity_score": 0.905, "confidence": "high", "key_changes": [ "Reworded sentence: \"During periods of economic uncertainty, when access to liquidity may be limited, we may experience increased losses as more customers become unable to pay their obligations to us, either in full or in part.\"" ], "current_body": "Most of our sales to customers are on an open credit basis, with typical payment terms of 30 days. During periods of economic uncertainty, when access to liquidity may be limited, we may experience increased losses as more customers become unable to pay their obligations to us, either in full or in part. Additionally, some customers have entered into recourse and non-recourse financing leasing arrangements using third-party leasing companies. Under recourse leases, which typically last three years or less, we remain liable for the unpaid remaining lease payments to the third-party leasing companies if the end-user customer defaults. Our exposure to credit risks from our customers increases during economic uncertainty or volatility. This risk may further increase if our customers, their customers, or their lease financing sources are adversely affected by global economic conditions.", "prior_body": "Most of our sales to customers are on an open credit basis, with typical payment terms of 30 days. We may experience increased losses as potentially more customers are unable to pay all or a portion of their obligations to us, particularly in the current macroeconomic environment when access to sources of liquidity may be limited. Beyond our open credit arrangements, some of our customers have entered into recourse and non-recourse financing leasing arrangements using third-party leasing companies. Under the terms of recourse leases, which are generally three years or less, we remain liable for the aggregate unpaid remaining lease payments to the third-party leasing companies in the event of end-user customer default. During periods of economic uncertainty, our exposure to credit risks from our customers increases. In addition, our exposure to credit risks of our customers may increase further if our customers and their customers or their lease financing sources are adversely affected by global economic conditions." }, { "status": "MODIFIED", "current_title": "We could be subject to additional income tax liabilities.", "prior_title": "We could be subject to additional income tax liabilities.", "similarity_score": 0.89, "confidence": "high", "key_changes": [ "Reworded sentence: \"These factors include among other things, fluctuations in our earnings and financial results in the various countries and states in which we do business, changes to 28 28 the tax laws in such jurisdictions and the outcome of income tax audits.\"", "Reworded sentence: \"Many countries around the world are beginning to implement legislation and other guidance to align their international tax rules with the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting Project (BEPS) recommendation and related action plans that aim to standardize and modernize global corporate tax policy, including changes to cross-border tax, transfer pricing documentation rules and nexus-based tax incentive practices.\"", "Reworded sentence: \"We continue to evaluate the impacts of changes in tax laws and regulations on our business.\"" ], "current_body": "Our effective tax rate is influenced by a variety of factors, many of which are outside of our control. These factors include among other things, fluctuations in our earnings and financial results in the various countries and states in which we do business, changes to 28 28 the tax laws in such jurisdictions and the outcome of income tax audits. Changes to any of these factors could materially impact our operating results, financial condition and cash flows. We receive significant tax benefits from sales to our non-U.S. customers. These benefits are contingent upon existing tax laws and regulations in the U.S. and in the countries in which our international operations are located. Future changes in domestic or international tax laws and regulations or a change in how we manage our international operations could adversely affect our ability to continue realizing these tax benefits. Many countries around the world are beginning to implement legislation and other guidance to align their international tax rules with the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting Project (BEPS) recommendation and related action plans that aim to standardize and modernize global corporate tax policy, including changes to cross-border tax, transfer pricing documentation rules and nexus-based tax incentive practices. As a result, many of these changes, if enacted in whole or in part, could increase our worldwide effective tax rate and harm our operating results, financial condition, and cash flows. Implementation of the BEPS inclusive framework (Inclusive Framework), including potential incremental taxes under a new global minimum tax framework known as Pillar Two, is effective in most jurisdictions for fiscal years beginning on or after January 1, 2024. We are currently subject to Pillar Two rules starting in our fiscal year 2025 and could potentially be subject to additional taxes under the Inclusive Framework. Amount B under Pillar One of the Inclusive Framework is related to standardized returns for baseline marketing and distribution activities. Amount B is applicable to NetApp beginning in fiscal 2026 and we could be subject to higher controlled profit requirements for some of our global distribution entities which could increase our global tax burden. Our effective tax rate could also be adversely affected by changes in tax laws and regulations and interpretations of such laws and regulations, which in turn would negatively impact our earnings and cash and cash equivalent balances we currently maintain. Additionally, our effective tax rate could also be adversely affected if there is a change in international operations, our tax structure and how our operations are managed and structured, and as a result, we could experience harm to our operating results and financial condition. We continue to evaluate the impacts of changes in tax laws and regulations on our business. We are routinely subject to income tax audits in the U.S. and several foreign tax jurisdictions. If the ultimate determination of income taxes or at-source withholding taxes assessed under these audits results in amounts in excess of the tax provision we have recorded or reserved for, our operating results, financial condition and cash flows could be adversely affected.We may not be able to maintain appropriate internal financial reporting controls and procedures.We cannot be assured that significant deficiencies or material weaknesses in our internal control over financial reporting will not exist in the future. Any failure to maintain or implement required new or improved controls, or any difficulties we encounter in their implementation, including in connection with our new ERP system, could result in significant deficiencies or material weaknesses, cause us to fail to timely meet our periodic reporting obligations, or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of periodic management evaluations and annual auditor attestation reports regarding disclosure controls and the effectiveness of our internal control over financial reporting required under the Sarbanes-Oxley Act and the rules promulgated thereunder. The existence of a material weakness could result in errors in our financial statements that could result in a restatement of financial statements, cause us to fail to timely meet our reporting obligations, or cause investors to lose confidence in our reported financial information, which could cause a decline in the market price of our stock and we could be subject to sanctions or investigations by the SEC or other regulatory authorities including equivalent foreign authorities. Further, irrespective of the controls that we adopt, we cannot be assured that we will not experience fraudulent financial reporting in the future, including earnings mismanagement, recording fictitious revenues, improper asset valuation, understating liabilities or expenses, inadequate disclosure, reserve manipulation, misuse of judgments in financial reporting, concealing fraud or illegal activities, information tampering, and insider trading based on non-public information about the Company's financials. the tax laws in such jurisdictions and the outcome of income tax audits. Changes to any of these factors could materially impact our operating results, financial condition and cash flows. We receive significant tax benefits from sales to our non-U.S. customers. These benefits are contingent upon existing tax laws and regulations in the U.S. and in the countries in which our international operations are located. Future changes in domestic or international tax laws and regulations or a change in how we manage our international operations could adversely affect our ability to continue realizing these tax benefits. Many countries around the world are beginning to implement legislation and other guidance to align their international tax rules with the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting Project (BEPS) recommendation and related action plans that aim to standardize and modernize global corporate tax policy, including changes to cross-border tax, transfer pricing documentation rules and nexus-based tax incentive practices. As a result, many of these changes, if enacted in whole or in part, could increase our worldwide effective tax rate and harm our operating results, financial condition, and cash flows. Implementation of the BEPS inclusive framework (Inclusive Framework), including potential incremental taxes under a new global minimum tax framework known as Pillar Two, is effective in most jurisdictions for fiscal years beginning on or after January 1, 2024. We are currently subject to Pillar Two rules starting in our fiscal year 2025 and could potentially be subject to additional taxes under the Inclusive Framework. Amount B under Pillar One of the Inclusive Framework is related to standardized returns for baseline marketing and distribution activities. Amount B is applicable to NetApp beginning in fiscal 2026 and we could be subject to higher controlled profit requirements for some of our global distribution entities which could increase our global tax burden. Our effective tax rate could also be adversely affected by changes in tax laws and regulations and interpretations of such laws and regulations, which in turn would negatively impact our earnings and cash and cash equivalent balances we currently maintain. Additionally, our effective tax rate could also be adversely affected if there is a change in international operations, our tax structure and how our operations are managed and structured, and as a result, we could experience harm to our operating results and financial condition. We continue to evaluate the impacts of changes in tax laws and regulations on our business. We are routinely subject to income tax audits in the U.S. and several foreign tax jurisdictions. If the ultimate determination of income taxes or at-source withholding taxes assessed under these audits results in amounts in excess of the tax provision we have recorded or reserved for, our operating results, financial condition and cash flows could be adversely affected.", "prior_body": "Our effective tax rate is influenced by a variety of factors, many of which are outside of our control. These factors include among other things, fluctuations in our earnings and financial results in the various countries and states in which we do business, changes to the tax laws in such jurisdictions and the outcome of income tax audits. Changes to any of these factors could materially impact our operating results, financial condition and cash flows. We receive significant tax benefits from sales to our non-U.S. customers. These benefits are contingent upon existing tax laws and regulations in the U.S. and in the countries in which our international operations are located. Future changes in domestic or international tax laws and regulations or a change in how we manage our international operations could adversely affect our ability to continue realizing these tax benefits. Many countries around the world are beginning to implement legislation and other guidance to align their international tax rules with the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting Project (“BEPS”) recommendation and related action plans that aim to standardize and modernize global corporate tax policy, including changes to cross-border tax, transfer pricing documentation rules and nexus-based tax incentive practices. As a result, many of these changes, if enacted in whole or in part, could increase our worldwide effective tax rate and harm our operating result, financial condition, and cash flows. Implementation of the BEPS inclusive framework (“Inclusive Framework”), including potential incremental taxes under a new global minimum tax framework known as Pillar Two, is effective in most jurisdictions for fiscal years beginning on or after January 1, 2024. The first fiscal year for which NetApp will be potentially subject to additional taxes under the Inclusive Framework is fiscal year 2025. Our effective tax rate could also be adversely affected by changes in tax laws and regulations and interpretations of such laws and regulations, which in turn would negatively impact our earnings and cash and cash equivalent balances we currently maintain. Additionally, our effective tax rate could also be adversely affected if there is a change in international operations, our tax structure and how our operations are managed and structured, and as a result, we could experience harm to our operating results and financial condition. For example, on August 16, 2022, the U.S. enacted the Inflation Reduction Act, which includes a corporate minimum tax 28 28 and a 1% excise tax on net stock repurchases. We continue to evaluate the impacts of changes in tax laws and regulations on our business. We are routinely subject to income tax audits in the U.S. and several foreign tax jurisdictions. If the ultimate determination of income taxes or at-source withholding taxes assessed under these audits results in amounts in excess of the tax provision we have recorded or reserved for, our operating results, financial condition and cash flows could be adversely affected. 29 29" }, { "status": "MODIFIED", "current_title": "We rely on a limited number of suppliers for critical product components.", "prior_title": "We rely on a limited number of suppliers for critical product components.", "similarity_score": 0.877, "confidence": "high", "key_changes": [ "Reworded sentence: \"We depend on a limited number of suppliers for drives and other components used in assembling our products, including some single-source suppliers.\"" ], "current_body": "We depend on a limited number of suppliers for drives and other components used in assembling our products, including some single-source suppliers. This reliance has subjected us, and could in the future subject us, to price rigidity, periodic supply constraints, and challenges in producing our products with the required quality and quantities. Consolidation among suppliers, particularly within the semiconductor and storage media industries, has led to price volatility and supply constraints. When industry supply is constrained or the supply chain is disrupted, our suppliers may allocate volumes away from us and to our competitors, who depend on many of the same suppliers as we do. As a result, our business, operating results, financial condition and cash flows may be adversely affected.", "prior_body": "We rely on a limited number of suppliers for drives and other components utilized in the assembly of our products, including certain single source suppliers, which has subjected us, and could in the future subject us, to price rigidity, periodic supply constraints, and the inability to produce our products with the quality and in the quantities demanded. Consolidation among suppliers, particularly within the semiconductor and storage media industries, has contributed to price volatility and supply constraints. When industry supply is constrained, or the supply chain is disrupted, our suppliers may allocate volumes away from us and to our competitors, all of which rely on many of the same suppliers as we do. Accordingly, our business, operating results, financial condition and cash flows may be harmed." }, { "status": "MODIFIED", "current_title": "If we are unable to maintain and develop relationships with strategic partners, our revenues may be harmed.", "prior_title": "If we are unable to maintain and develop relationships with strategic partners, our revenues may be harmed.", "similarity_score": 0.876, "confidence": "high", "key_changes": [ "Reworded sentence: \"Our growth strategy relies on developing and maintaining strategic partnerships with major third-party software and hardware vendors to integrate our products into their products and co-market them.\"" ], "current_body": "Our growth strategy relies on developing and maintaining strategic partnerships with major third-party software and hardware vendors to integrate our products into their products and co-market them. Many of our strategic partners are industry leaders that provide us with expanded access to market segments where we do not directly participate. Strategic partnerships with public cloud providers and other cloud service vendors are particularly critical to the success of our cloud-based business. However, there is intense competition for attractive strategic partners, and these relationships may not be exclusive, may not generate significant revenues, and may be terminated on short notice. Some of our partners also collaborate with our competitors, which can increase the availability of competing solutions and hinder our ability to grow these relationships. Additionally, some partners, especially large and diversified technology companies, including major cloud providers, are also our competitors, complicating our relationships. If we are unable to establish new or maintain current partnerships, if our strategic partners prioritize their relationships with other vendors in the storage industry, if our strategic partners seek to renegotiate or terminate our agreements, or if our strategic partners increasingly compete with us, we could experience lower-than-expected revenues, delays in product development, and other adverse effects on our business, operating results, financial condition and cash flows.", "prior_body": "Our growth strategy includes developing and maintaining strategic partnerships with major third-party software and hardware vendors to integrate our products into their products and also co-market our products with them. A number of our strategic partners are industry leaders that offer us expanded access to segments in which we do not directly participate. In particular, strategic partnerships with public cloud providers and other cloud service vendors are critical to the success of our cloud-based business. However, there is intense competition for attractive strategic partners, and these relationships may not be exclusive, may not generate significant revenues and may be terminated on short notice. For instance, some of our partners are also partnering with our competitors, which may increase the availability of competing solutions and harm our ability to grow our relationships with those partners. Moreover, some of our partners, particularly large, more diversified technology companies, including major cloud providers, are also competitors, thereby complicating our relationships. If we are unable to establish new partnerships or maintain existing partnerships, if our strategic partners favor their relationships with other vendors in the storage industry or if our strategic partners increasingly compete with us, we could experience lower than expected revenues, suffer delays in product development, or experience other harm to our business, operating results, financial condition and cash flows." }, { "status": "MODIFIED", "current_title": "Any violation of U.S. export control laws and other laws affecting the countries in which our products and services may be sold, distributed, or delivered could have a material and adverse effect on our business, operating results, financial condition and cash flows.", "prior_title": "Some of our products are subject to U.S. export control laws and other laws affecting the countries in which our products and services may be sold, distributed, or delivered, and any violation of these laws could have a material and adverse effect on our business, operating results, financial condition and cash flows.", "similarity_score": 0.872, "confidence": "high", "key_changes": [ "Reworded sentence: \"The U.S., through the BIS and OFAC, places restrictions on the sale or export of certain products and services to certain countries, entities, and persons, including most recently to Russia, Belarus and regions of Ukraine.\"", "Reworded sentence: \"export control laws or any trade-related laws or regulations, even if inadvertent or without our knowledge, we may be subject to various penalties available under the laws, any of which could have a material and adverse impact on our business, operating results and financial condition.\"" ], "current_body": "Due to the global nature of our business, we are subject to import and export restrictions and regulations, including the Export Administration Regulations administered by the Commerce Department’s Bureau of Industry and Security (BIS) and the trade and economic sanctions regulations administered by the Treasury Department’s Office of Foreign Assets Control (OFAC). The U.S., through the BIS and OFAC, places restrictions on the sale or export of certain products and services to certain countries, entities, and persons, including most recently to Russia, Belarus and regions of Ukraine. These regulations have caused us to temporarily stop selling or servicing our products temporarily in restricted areas. Violators of export control and sanctions laws may be subject to significant penalties, which may include significant monetary fines, criminal proceedings against them and their officers and employees, a denial of export privileges, and suspension or debarment from selling products to the federal government. Our products could be diverted by third parties (including potentially our channel partners) to countries or end users under sanctions / embargo orders, despite our precautions. If we were ever found to have violated U.S. export control laws or any trade-related laws or regulations, even if inadvertent or without our knowledge, we may be subject to various penalties available under the laws, any of which could have a material and adverse impact on our business, operating results and financial condition. Even if we were not found to have violated such laws, the political and media scrutiny surrounding any governmental investigation of us could cause us significant expense and reputational harm. Such collateral consequences could have a material adverse impact on our business, operating results, financial condition and cash flows.", "prior_body": "Due to the global nature of our business, we are subject to import and export restrictions and regulations, including the Export Administration Regulations administered by the Commerce Department’s Bureau of Industry and Security (BIS) and the trade and economic sanctions regulations administered by the Treasury Department’s Office of Foreign Assets Control (OFAC). The U.S., through the BIS and OFAC, places restrictions on the sale or export of certain products and services to certain countries and persons, including most recently to Russia, Belarus and portions of Ukraine. These regulations have caused the Company to stop selling or servicing our products temporarily in restricted areas, such as Russia, Belarus and portions of Ukraine. The BIS and OFAC have also placed restrictions on dealing with certain \"blocked” entities, such as Russia’s federal security service (FSB), including the Company’s filing of notifications to the FSB for exporting certain products to Russia. Violators of these export control and sanctions laws may be subject to significant penalties, which may include significant monetary fines, criminal proceedings against them and their officers and employees, a denial of export privileges, and suspension or debarment from selling products to the federal government. Our products could be shipped to those targets by third parties, including potentially our channel partners, despite our precautions. If we were ever found to have violated U.S. export control laws, we may be subject to various penalties available under the laws, any of which could have a material and adverse impact on our business, operating results and financial condition. Even if we were not 25 25 found to have violated such laws, the political and media scrutiny surrounding any governmental investigation of us could cause us significant expense and reputational harm. Such collateral consequences could have a material adverse impact on our business, operating results, financial condition and cash flows." }, { "status": "MODIFIED", "current_title": "Our business, operating results, financial condition, and cash flows could be adversely affected if we are unable to develop, introduce and gain market acceptance for new products and services while managing the transition from older ones, or if we cannot provide the expected level of quality and support for our new products and services.", "prior_title": "If we are unable to develop, introduce and gain market acceptance for new products and services while managing the transition from older ones, or if we cannot provide the expected level of quality and support for our new products and services, our business, operating results, financial condition and cash flows could be harmed.", "similarity_score": 0.862, "confidence": "high", "key_changes": [ "Reworded sentence: \"Our future growth relies on the successful development and introduction of new hardware and software products and services.\"" ], "current_body": "Our future growth relies on the successful development and introduction of new hardware and software products and services. The complexity of storage and data management software, subsystems and appliances, as well as the challenges in estimating the engineering effort required to produce new products and services, pose significant technical and quality control risks for these new products and services. If we encounter technological challenges, customer reluctance, or other obstacles that prevent us from developing, introducing and gaining market acceptance for new products and services, or if we fail to provide the expected level of product and support quality, our business, operating results, financial condition and cash flows could be materially and adversely affected. Introducing new products and features exposes us to additional financial and operational risks. These include the ability to forecast customer preferences and demand, managing production capacity to meet the demand for new products and services and avoid excessive inventories of older products and components, manage the transition from older products and solutions, and handle the impact of customer demand for new offerings versus those being replaced. As customers transition from older products to newer ones, delays or decisions to postpone the transition could lead to non-renewal of new offerings, impacting our ability to manage and forecast customer churn and expansion rates. Additionally, uncertainties related to the price-performance of new products compared to competitors, competitors’ responses to our new products, extended evaluation periods by customers, and our partners’ investment in selling our new products add to the inherent risks. If we do not manage these risks effectively, our business, operating results, financial condition, and cash flows could face significant adverse impacts. Furthermore, entering new or emerging markets will likely increase demands on our service and support operations and expose us to additional competition. We may struggle to provide competitive products, services and support for these market opportunities.", "prior_body": "Our future growth depends upon the successful development and introduction of new hardware and software products and services. Due to the complexity of storage software, cloud operations software, subsystems and appliances and the difficulty in gauging the engineering effort required to produce new products and services, such products and services are subject to significant technical and quality control risks. If we are unable, for technological, customer reluctance or other reasons, to develop, introduce and gain market acceptance for new products and services, or if we are unable to provide the expected level of product and support quality for our new products and services, each as and when required by the market and our customers, our business, operating results, financial condition and cash flows could be materially and adversely affected. New or additional product and feature introductions, such as new all-flash arrays, including the block-optimized ASA families, and capacity flash C-series, subject us to additional financial and operational risks, including our ability to forecast customer preferences 15 15 and/or demand, our ability to successfully manage the transition from older products and solutions, our ability to forecast and manage the impact of customers’ demand for new products, services and solutions or the products being replaced, and our ability to manage production capacity to meet the demand for new products and services. In addition, as existing customers transition from older products and solutions to newer ones, the transition could take longer than expected, or the customer could decide to delay the transition, either of which could result in non-renewal of the new offerings or affect our ability to manage and forecast customer churn and expansion rates for new offerings. As new or enhanced products and services are introduced, we must avoid excessive levels of older product inventories and related components and ensure that new products and services can be delivered to meet customers’ demands. Further risks inherent in the introduction of new products, services and solutions include the uncertainty of price-performance relative to products of competitors, competitors’ responses to the introductions, delays in sales caused by the desire of customers to evaluate new products for extended periods of time and our partners’ investment in selling our new products and solutions. If these risks are not managed effectively, we could experience material risks to our business, operating results, financial condition and cash flows. As we enter new or emerging markets, we will likely increase demands on our service and support operations and may be exposed to additional competition. We may not be able to provide products, services and support to effectively compete for these market opportunities." }, { "status": "MODIFIED", "current_title": "Transition to consumption-based business models may adversely affect our revenues and profitability in other areas of our business, potentially harming our business, operating results, financial condition and cash flows.", "prior_title": "Transition to consumption-based business models may adversely affect our revenues and profitability in other areas of our business and as a result may harm our business, operating results, financial condition and cash flows.", "similarity_score": 0.837, "confidence": "high", "key_changes": [ "Reworded sentence: \"We offer customers a variety of consumption models, including cloud-based storage services and storage as a service (STaaS) delivered on-premises.\"" ], "current_body": "We offer customers a variety of consumption models, including cloud-based storage services and storage as a service (STaaS) delivered on-premises. As these business models continue to evolve, we may face challenges in competing effectively, generating significant revenues, or maintaining the profitability of our consumption-based offerings. Additionally, the growing prevalence of cloud and SaaS delivery models offered by us and our competitors may reduce overall demand for our traditional on-premises offerings sold through a capital expenditure (capex) model, which could negatively impact our revenues and cash flow, at least in the short term. Failure to successfully execute our consumption model strategy or anticipate customer needs could lead to a decline in our revenues and our profitability could decline. As customer demand for our consumption model offerings increases, we will encounter differences in the timing of revenue recognition compared to our traditional purchase arrangements. Revenue from traditional purchases is generally recognized in full at the time of delivery, whereas revenue from consumption model offerings is generally recognized ratably over the term of the arrangement. We incur certain expenses related to the infrastructure and marketing of our consumption model offerings before we can recognize the associated revenues.", "prior_body": "We offer customers a full range of consumption models, including cloud-based storage services and storage as a service (STaaS) delivered on premises. These business models continue to evolve, and we may not be able to compete effectively, generate significant revenues or maintain the profitability of our consumption-based offerings. Additionally, the increasing prevalence of cloud and SaaS delivery models offered by us and our competitors may have a dampening impact on overall demand for our on-premises offerings sold in a traditional capex model, which could reduce our revenues and cash flow, at least in the near term. If we do not successfully execute our consumption model strategy or anticipate the needs of our customers, our revenues and profitability could decline. As customer demand for our consumption model offerings increases, we will experience differences in the timing of revenue recognition between our traditional purchase arrangements (for which revenue is generally recognized in full at the time of delivery), relative to our consumption model offerings (for which revenue is generally recognized ratably over the term of the arrangement). We incur certain expenses associated with the infrastructure and marketing of our consumption model offerings in advance of our ability to recognize the revenues associated with these offerings." }, { "status": "MODIFIED", "current_title": "Our acquisitions or divestitures may not achieve the expected benefits and could increase our liabilities, disrupt our existing business, and harm our operating results, financial condition and cash flows.", "prior_title": "Our acquisitions or divestitures may not achieve expected benefits, and may increase our liabilities, disrupt our existing business and harm our operating results, financial condition and cash flows.", "similarity_score": 0.835, "confidence": "high", "key_changes": [ "Reworded sentence: \"As part of our strategy, we may seek to acquire other businesses and technologies to complement our current products and services, expand our market reach, or enhance our technical capabilities.\"", "Reworded sentence: \"We may also divest businesses, product lines, or divisions that no longer align with our current offerings.\"" ], "current_body": "As part of our strategy, we may seek to acquire other businesses and technologies to complement our current products and services, expand our market reach, or enhance our technical capabilities. The benefits we have received, and expect to receive, from these and other acquisitions depend on our ability to successfully conduct due diligence, negotiate the terms of the acquisition and integrate the acquired business into our systems, procedures and organizational structure. We may also divest businesses, product lines, or divisions that no longer align with our current offerings. For example, we sold our FinOps business to Flexera in fiscal 2025. Realizing the benefits we would expect to receive from a divestiture would depend on our ability to manage the separation of operations, services, products, and personnel, in addition to other risks. Any inaccuracy in our assumptions or failures to identify and mitigate liabilities or risks associated with an acquisition or divestiture – such as differing or inadequate cybersecurity and data privacy protection controls or contractual limitations of liability – could reduce or eliminate the expected acquisition or divestiture benefits. If we fail to make acquisitions or divestitures on favorable terms, integrate or divest the subject business or assets as planned, or retain or separate key employees, our costs could increase, our operations could be disrupted, and we could face additional liabilities, investigations and litigation. This could harm our strategy, business, and operating results. Additionally, the failure to achieve expected benefits from acquisitions or divestitures may result in impairment charges for goodwill and intangible assets.", "prior_body": "As part of our strategy, we seek to acquire other businesses and technologies to complement our current products and services, expand the breadth of our markets, or enhance our technical capabilities, and may seek to divest a business, product line, or division which no longer complements our current products or services. For example, we acquired a number of privately held companies in the past several years. The benefits we have received, and expect to receive, from these and other acquisitions depend on our ability to successfully conduct due diligence, negotiate the terms of the acquisition and integrate the acquired business into our systems, procedures and organizational structure. Similarly, the benefits we would expect to receive from a divestiture would depend on our ability to manage separation of operations, services, product, and personnel, in addition to other risks. Any inaccuracy in our assumptions or any failure to uncover or mitigate liabilities or risks associated with an acquisition or divestiture, such as differing or inadequate cybersecurity and data privacy protection controls or contractual limitations of liability, and any failure to make an acquisition or divestiture on favorable terms, integrate or divest the subject business or assets as and when expected, or retain or separate key employees of the subject company or business may reduce or eliminate the expected benefits to us, increase our costs, disrupt our operations, result in additional liabilities, investigations and litigation, and may also harm our strategy, our business and our operating results. The failure to achieve expected acquisition or divestiture benefits may also result in impairment charges for goodwill and intangible assets." }, { "status": "MODIFIED", "current_title": "Our success depends upon our ability to effectively plan and manage our resources and periodically restructure our business, which may adversely affect our business, operating results, financial condition, and cash flows.", "prior_title": "Our success depends upon our ability to effectively plan and manage our resources and to periodically restructure our business, and such actions may have an adverse effect on our business, operating results, financial condition and cash flows.", "similarity_score": 0.834, "confidence": "high", "key_changes": [ "Reworded sentence: \"To successfully offer our products and services in a rapidly evolving market, we need effective planning, forecasting, and management processes that allow us to scale and adjust our business in response to changing market opportunities and conditions.\"", "Reworded sentence: \"Our ability to achieve the anticipated cost savings and other benefits from these initiatives depends on many estimates and assumptions, which are subject to uncertainties.\"" ], "current_body": "To successfully offer our products and services in a rapidly evolving market, we need effective planning, forecasting, and management processes that allow us to scale and adjust our business in response to changing market opportunities and conditions. In fiscal 2024 and fiscal 2025, we reorganized our sales resources, including changes and additions to our sales leadership team, to gain operational efficiencies and better align our resources with customer and market opportunities. However, such reorganization and ongoing adjustments to our go-to-market model could disrupt our sales cycles in the short- or long-term, may not yield the desired efficiencies and benefits, and could harm our operating results, financial condition, and cash flows. We have undertaken, and may in the future undertake, initiatives that include reorganizing our workforce, restructuring, discontinuing certain products, acquisitions and dispositions of businesses, reducing facilities, or a combination of these actions, which could result in restructuring charges. Rapid changes in the size, alignment, or organization of our workforce, including our business unit structure, structure of our sales team, and sales account coverage, could impair our ability to develop, sell and deliver products and services as planned, or hinder our ability to achieve our business and financial objectives. Charges associated with these activities could harm our operating results. Our ability to achieve the anticipated cost savings and other benefits from these initiatives depends on many estimates and assumptions, which are subject to uncertainties. If our estimates and assumptions are incorrect, if we are unsuccessful at implementing changes, or if other unforeseen events occur, our business, financial condition, and results of operations could be adversely affected.", "prior_body": "Our ability to successfully offer our products and services in a rapidly evolving market requires an effective planning, forecasting, and management process to enable us to effectively scale and adjust our business in response to fluctuating market opportunities and conditions. In fiscal 2024, we reorganized our sales resources, which included changes and additions to our sales leadership team, to gain operational efficiencies and improve the alignment of our resources with customer and market opportunities. Reorganization of our sales resources, and ongoing evolution of our go-to-market model, could result in short or long-term disruption of our sales cycles, may not produce the efficiencies and benefits desired, and could harm our operating results, financial condition and cash flows. We have and may in the future undertake initiatives that could include reorganizing our workforce, restructuring, disposing of, and/or otherwise discontinuing certain products, facility reductions or a combination of these actions which have resulted in, or may result in, restructuring charges. Rapid changes in the size, alignment or organization of our workforce, including our business unit structure, structure of our sales team, and sales account coverage, could adversely affect our ability to develop, sell and deliver products and services as planned or impair our ability to realize our current or future business and financial objectives. Charges associated with these activities could harm our operating results. Our ability to achieve the anticipated cost savings and other benefits from these initiatives is subject to many estimates and assumptions, which are subject to uncertainties. If our estimates and assumptions are incorrect, if we are unsuccessful at implementing changes, or if other unforeseen events occur, our business, financial condition, and results of operations could be adversely affected." }, { "status": "MODIFIED", "current_title": "Any disruption to our supply chain could materially harm our business, operating results, financial condition and cash flows.", "prior_title": "Any disruption to our supply chain could materially harm our business, operating results, financial condition and cash flows.", "similarity_score": 0.829, "confidence": "high", "key_changes": [ "Reworded sentence: \"We rely on third parties to manufacture critical components and handle associated logistics.\"" ], "current_body": "We do not manufacture certain components used in our products. We rely on third parties to manufacture critical components and handle associated logistics. Our lack of direct control over these elements, combined with the diverse international geographic locations of our manufacturing partners and suppliers, creates significant risks for us, including: •Limited number of suppliers for certain components; Limited number of suppliers for certain components; •No guarantees of supply and limited ability to control the quality, quantity and cost of our products or of their components; No guarantees of supply and limited ability to control the quality, quantity and cost of our products or of their components; •Potential for binding price or purchase commitments with our suppliers at higher than market rates; Potential for binding price or purchase commitments with our suppliers at higher than market rates; •Limited ability to adjust production volumes in response to our customers’ demand fluctuations; Limited ability to adjust production volumes in response to our customers’ demand fluctuations; •Labor and political unrest at facilities we do not operate or own; Labor and political unrest at facilities we do not operate or own; 22 22 •Geopolitical disputes, acts of terrorism, cyber attacks and hacktivism disrupting our supply chain; •Impacts on our supply chain from adverse public health developments; •Business, regulatory compliance, legal compliance, litigation, trade controls and financial concerns affecting our suppliers or their ability to manufacture and ship components in the quantities, quality and manner as required; and •Disruptions due to floods, earthquakes, storms, fires and other natural disasters, especially those caused by climate change, and particularly in countries with limited infrastructure and disaster recovery resources.These risks have subjected us, and could in the future subject us, to supply constraints, price increases, and minimum purchase requirements, which could harm our business, operating results, financial condition, and cash flows. The risks associated with our outsourced manufacturing model are particularly acute when we transition products to new facilities or manufacturers, introduce and increase volumes of new products, or qualify new contract manufacturers or suppliers. During these times, our ability to manage relationships among ourselves, our manufacturing partners, and our component suppliers, becomes critical. New manufacturers, products, components, or facilities create increased costs and risk that we will fail to deliver high quality products in the required volumes to our customers. Any failure of a manufacturer or component supplier to meet our quality, quantity or delivery requirements in a cost-effective manner will harm our business, including customer relationships and as a result could harm our operating results, financial condition and cash flows. Additionally, disruption to our manufacturing operations, or those of our contract manufacturers, could significantly impact our ability to supply our customers and could produce a near-term severe impact on the Company.We rely on a limited number of suppliers for critical product components.We depend on a limited number of suppliers for drives and other components used in assembling our products, including some single-source suppliers. This reliance has subjected us, and could in the future subject us, to price rigidity, periodic supply constraints, and challenges in producing our products with the required quality and quantities. Consolidation among suppliers, particularly within the semiconductor and storage media industries, has led to price volatility and supply constraints. When industry supply is constrained or the supply chain is disrupted, our suppliers may allocate volumes away from us and to our competitors, who depend on many of the same suppliers as we do. As a result, our business, operating results, financial condition and cash flows may be adversely affected.If a material cybersecurity or other security breach impacts our services, systems, supply chain, or end-user customer systems, or if stored data is improperly accessed, our business could suffer significant harm. We store and transmit, and sell products and services that store and transmit, personal, sensitive and proprietary data related to our products, our employees, customers, clients, partners (including third-party vendors such as data centers and providers of SaaS, cloud computing, and internet infrastructure and bandwidth), and their respective customers. This data includes intellectual property, records, and personal information. It is critical to our business strategy that our infrastructure, products, and services remain secure and are perceived as secure by customers, clients, and partners. There are numerous and evolving cybersecurity and privacy risks, including criminal hacking (eCrime), state-sponsored intrusions, industrial espionage, hacktivism, insider threats, inadvertent disclosure, ransomware attacks, social-engineering, exploitation of unpatched or unmanaged vulnerabilities, cyber-attacks to the Company’s service providers, suppliers or vendors, technological vulnerabilities, or destruction or other misuse of data that could harm the Company, operations or our competitive position. In some cases, these types of attacks have been successful. Increasing use of AI in techniques employed by threat actors will continue to increase the risk of successful attacks, while also providing opportunities for improved attack detection and prevention capabilities. Our information systems and data have been specifically targeted by various threat actors, including nation-state affiliated threat actors, and we expect that our information systems and data will continue to be targeted in the future. Cybersecurity incidents or other security breaches have in the past and could in the future result in: (1) unauthorized access to, or loss or unauthorized use, alteration, or disclosure of, personal, sensitive and/or proprietary data; (2) litigation, indemnity obligations, government investigations and proceedings, regulatory fines and penalties, and other possible liabilities; (3) revenue loss; (4) negative publicity and damage to our reputation; and (5) disruptions to our internal and external operations. These outcomes could damage our reputation, harm our business, and lead to significant liabilities. Additionally, a cybersecurity incident or loss of personal information has in the past and could in the future result in remediation costs, disruption of internal operations, increased cybersecurity protection costs, significant fines, and/or lost revenues.Our clients and their customers use our platforms to transmit and store sensitive data. We do not generally have the ability to review the information or content they upload and store, nor do we control the substance of this information or content. If our employees, clients, partners, or their respective customers use our platforms for the transmission or storage of sensitive information, or our supply-chain cybersecurity is compromised and our security measures are breached as a result of third-party action, employee •Geopolitical disputes, acts of terrorism, cyber attacks and hacktivism disrupting our supply chain; Geopolitical disputes, acts of terrorism, cyber attacks and hacktivism disrupting our supply chain; •Impacts on our supply chain from adverse public health developments; Impacts on our supply chain from adverse public health developments; •Business, regulatory compliance, legal compliance, litigation, trade controls and financial concerns affecting our suppliers or their ability to manufacture and ship components in the quantities, quality and manner as required; and Business, regulatory compliance, legal compliance, litigation, trade controls and financial concerns affecting our suppliers or their ability to manufacture and ship components in the quantities, quality and manner as required; and •Disruptions due to floods, earthquakes, storms, fires and other natural disasters, especially those caused by climate change, and particularly in countries with limited infrastructure and disaster recovery resources. Disruptions due to floods, earthquakes, storms, fires and other natural disasters, especially those caused by climate change, and particularly in countries with limited infrastructure and disaster recovery resources. These risks have subjected us, and could in the future subject us, to supply constraints, price increases, and minimum purchase requirements, which could harm our business, operating results, financial condition, and cash flows. The risks associated with our outsourced manufacturing model are particularly acute when we transition products to new facilities or manufacturers, introduce and increase volumes of new products, or qualify new contract manufacturers or suppliers. During these times, our ability to manage relationships among ourselves, our manufacturing partners, and our component suppliers, becomes critical. New manufacturers, products, components, or facilities create increased costs and risk that we will fail to deliver high quality products in the required volumes to our customers. Any failure of a manufacturer or component supplier to meet our quality, quantity or delivery requirements in a cost-effective manner will harm our business, including customer relationships and as a result could harm our operating results, financial condition and cash flows. Additionally, disruption to our manufacturing operations, or those of our contract manufacturers, could significantly impact our ability to supply our customers and could produce a near-term severe impact on the Company.", "prior_body": "We do not manufacture certain components used in our products. We rely on third parties to manufacture critical components, as well as for associated logistics. Our lack of direct responsibility for, and control over, these elements of our business, as well as the diverse international geographic locations of our manufacturing partners and suppliers, creates significant risks for us, including, among other things: •Limited number of suppliers for certain components; Limited number of suppliers for certain components; •No guarantees of supply and limited ability to control the quality, quantity and cost of our products or of their components; No guarantees of supply and limited ability to control the quality, quantity and cost of our products or of their components; •The potential for binding price or purchase commitments with our suppliers at higher than market rates; The potential for binding price or purchase commitments with our suppliers at higher than market rates; •Limited ability to adjust production volumes in response to our customers’ demand fluctuations; Limited ability to adjust production volumes in response to our customers’ demand fluctuations; •Labor and political unrest at facilities we do not operate or own; Labor and political unrest at facilities we do not operate or own; •Geopolitical disputes disrupting our supply chain; Geopolitical disputes disrupting our supply chain; •Impacts on our supply chain from adverse public health developments; Impacts on our supply chain from adverse public health developments; •Business, legal compliance, litigation and financial concerns affecting our suppliers or their ability to manufacture and ship components in the quantities, quality and manner we require; and Business, legal compliance, litigation and financial concerns affecting our suppliers or their ability to manufacture and ship components in the quantities, quality and manner we require; and •Disruptions due to floods, earthquakes, storms and other natural disasters, especially those caused by climate change, and particularly in countries with limited infrastructure and disaster recovery resources. Disruptions due to floods, earthquakes, storms and other natural disasters, especially those caused by climate change, and particularly in countries with limited infrastructure and disaster recovery resources. Such risks have subjected us, and could in the future subject us, to supply constraints, price increases and minimum purchase requirements and our business, operating results, financial condition and cash flows could be harmed. The risks associated with our outsourced manufacturing model are particularly acute when we transition products to new facilities or manufacturers, introduce and increase volumes of new products or qualify new contract manufacturers or suppliers, at which times our ability to manage the relationships among us, our manufacturing partners and our component suppliers, becomes critical. New manufacturers, products, components or facilities create increased costs and risk that we will fail to deliver high quality products in the required volumes to our 22 22 customers. Any failure of a manufacturer or component supplier to meet our quality, quantity or delivery requirements in a cost-effective manner will harm our business, including customer relationships and as a result could harm our operating results, financial condition and cash flows. Additionally, disruption to our manufacturing operations, or those of our contract manufacturers, could significantly impact our ability to supply our customers and could produce a near-term severe impact on the Company." }, { "status": "MODIFIED", "current_title": "If a material cybersecurity or other security breach impacts our services, systems, supply chain, or end-user customer systems, or if stored data is improperly accessed, our business could suffer significant harm.", "prior_title": "If a material cybersecurity or other security breach impacts our services or occurs on our systems, within our supply chain, or on our end-user customer systems, or if stored data is improperly accessed, customers may reduce or cease using our solutions, our reputation may be harmed and we may incur significant liabilities.", "similarity_score": 0.819, "confidence": "high", "key_changes": [ "Reworded sentence: \"We store and transmit, and sell products and services that store and transmit, personal, sensitive and proprietary data related to our products, our employees, customers, clients, partners (including third-party vendors such as data centers and providers of SaaS, cloud computing, and internet infrastructure and bandwidth), and their respective customers.\"", "Added sentence: \"Future cyber-attacks or incidents could persist undetected in our environments for a period of time.\"", "Reworded sentence: \"While we conduct diligence on these third parties, our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place.\"", "Reworded sentence: \"The risk of reputational harm may be magnified by the rapid dissemination of information online.\"", "Reworded sentence: \"There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim.\"" ], "current_body": "We store and transmit, and sell products and services that store and transmit, personal, sensitive and proprietary data related to our products, our employees, customers, clients, partners (including third-party vendors such as data centers and providers of SaaS, cloud computing, and internet infrastructure and bandwidth), and their respective customers. This data includes intellectual property, records, and personal information. It is critical to our business strategy that our infrastructure, products, and services remain secure and are perceived as secure by customers, clients, and partners. There are numerous and evolving cybersecurity and privacy risks, including criminal hacking (eCrime), state-sponsored intrusions, industrial espionage, hacktivism, insider threats, inadvertent disclosure, ransomware attacks, social-engineering, exploitation of unpatched or unmanaged vulnerabilities, cyber-attacks to the Company’s service providers, suppliers or vendors, technological vulnerabilities, or destruction or other misuse of data that could harm the Company, operations or our competitive position. In some cases, these types of attacks have been successful. Increasing use of AI in techniques employed by threat actors will continue to increase the risk of successful attacks, while also providing opportunities for improved attack detection and prevention capabilities. Our information systems and data have been specifically targeted by various threat actors, including nation-state affiliated threat actors, and we expect that our information systems and data will continue to be targeted in the future. Cybersecurity incidents or other security breaches have in the past and could in the future result in: (1) unauthorized access to, or loss or unauthorized use, alteration, or disclosure of, personal, sensitive and/or proprietary data; (2) litigation, indemnity obligations, government investigations and proceedings, regulatory fines and penalties, and other possible liabilities; (3) revenue loss; (4) negative publicity and damage to our reputation; and (5) disruptions to our internal and external operations. These outcomes could damage our reputation, harm our business, and lead to significant liabilities. Additionally, a cybersecurity incident or loss of personal information has in the past and could in the future result in remediation costs, disruption of internal operations, increased cybersecurity protection costs, significant fines, and/or lost revenues. Our clients and their customers use our platforms to transmit and store sensitive data. We do not generally have the ability to review the information or content they upload and store, nor do we control the substance of this information or content. If our employees, clients, partners, or their respective customers use our platforms for the transmission or storage of sensitive information, or our supply-chain cybersecurity is compromised and our security measures are breached as a result of third-party action, employee 23 23 error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business may be harmed and we could incur significant liabilities.Security industry experts and U.S. government officials continue to emphasize risks to our industry. Cyber-attacks and security breaches continue to increase, and of particular concern are supply-chain attacks against software development and breaches of technology service providers. We anticipate that cyberattacks will continue to increase in the future given cyber warfare has become a consistent lever within geopolitical conflicts and increasingly leverages hacktivism. We cannot give assurance that we will always be successful in preventing or repelling unauthorized access to our systems. We also may face delays in our ability to identify or otherwise respond to any cybersecurity incident or any other breach. Future cyber-attacks or incidents could persist undetected in our environments for a period of time. Additionally, we use third-party service providers to provide some services to us that involve the storage or transmission of data, such as SaaS, cloud computing, and internet infrastructure and bandwidth, and they face various cybersecurity threats and also may suffer cybersecurity incidents or other security breaches. While we conduct diligence on these third parties, our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been or will not be compromised. Many jurisdictions require companies to notify regulators or individuals of data security incidents involving certain types of personal data. These mandatory disclosures regarding security incidents often lead to widespread negative publicity. The risk of reputational harm may be magnified by the rapid dissemination of information online. Any security incident, loss of data, or other security breach, whether actual or perceived, or whether impacting us or our third-party service providers, could harm our reputation, erode customer confidence in the effectiveness of our data security measures, negatively impact our ability to attract new customers, cause existing customers to elect not to renew their support contracts or their SaaS subscriptions, or subject us to third-party lawsuits, regulatory fines or other action or liability, which could materially and adversely affect our business and operating results.There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. Our existing general liability insurance coverage, cybersecurity insurance coverage and coverage for errors and omissions may not continue to be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims, or our insurers may deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceeds available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, operating results, financial condition and cash flows.If a data center or other third-party who relies on our products experiences a disruption in service or a loss of data, such disruption could be attributed to the quality of our products.Our clients, including data centers, SaaS providers, cloud computing services and internet infrastructure and bandwidth providers, rely on our products for their data storage needs. These clients may authorize third-party technology providers to access their data on our systems. Errors or wrongdoing by clients, their customers, or third-party technology providers resulting in actual or perceived security breaches may result in such actual or perceived breaches being attributed to us. A failure to meet our customers’ and partners’ expectations regarding security and confidentiality, due to disruptions in services provided by third-party vendors or the loss or alteration of data stored by such vendors, could cause financial or reputational harm to our business. This harm could occur if the disruption or data loss is caused by, or perceived to be caused by, defects in our products. The risk of reputational harm may be magnified by the rapid dissemination of information over the internet, including through news articles, blogs, social media, and other online communication forums and services. This could affect our ability to retain clients and attract new business.Additionally, our operations and select cloud services rely on third-party cloud providers. Interruptions due to technical failures such as hardware or software issues or connectivity problems, security incidents, compliance changes, operational challenges and natural disasters could reduce revenue due to the cloud services’ metered billing and could pose reputational risks. Moreover, dependence on key cloud infrastructure providers carries systemic risks, as we could face amplified reputational damage if observability features fail during client outages.Failure to comply with new and existing laws and regulations related to privacy, data protection, AI and information security could cause harm to our reputation, result in liability (including regulatory penalties and litigation), and adversely impact our business.Our business is increasingly subject to regulation by various federal, state and international governmental agencies responsible for enacting and enforcing laws and regulations relating to privacy, data protection, and information security. For example, since the EU’s General Data Protection Regulation became effective in 2018, the Court of Justice of the EU has issued rulings that have impacted how multinational companies must implement that law and the European Commission (EC) has published new regulatory error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business may be harmed and we could incur significant liabilities. Security industry experts and U.S. government officials continue to emphasize risks to our industry. Cyber-attacks and security breaches continue to increase, and of particular concern are supply-chain attacks against software development and breaches of technology service providers. We anticipate that cyberattacks will continue to increase in the future given cyber warfare has become a consistent lever within geopolitical conflicts and increasingly leverages hacktivism. We cannot give assurance that we will always be successful in preventing or repelling unauthorized access to our systems. We also may face delays in our ability to identify or otherwise respond to any cybersecurity incident or any other breach. Future cyber-attacks or incidents could persist undetected in our environments for a period of time. Additionally, we use third-party service providers to provide some services to us that involve the storage or transmission of data, such as SaaS, cloud computing, and internet infrastructure and bandwidth, and they face various cybersecurity threats and also may suffer cybersecurity incidents or other security breaches. While we conduct diligence on these third parties, our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been or will not be compromised. Many jurisdictions require companies to notify regulators or individuals of data security incidents involving certain types of personal data. These mandatory disclosures regarding security incidents often lead to widespread negative publicity. The risk of reputational harm may be magnified by the rapid dissemination of information online. Any security incident, loss of data, or other security breach, whether actual or perceived, or whether impacting us or our third-party service providers, could harm our reputation, erode customer confidence in the effectiveness of our data security measures, negatively impact our ability to attract new customers, cause existing customers to elect not to renew their support contracts or their SaaS subscriptions, or subject us to third-party lawsuits, regulatory fines or other action or liability, which could materially and adversely affect our business and operating results. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. Our existing general liability insurance coverage, cybersecurity insurance coverage and coverage for errors and omissions may not continue to be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims, or our insurers may deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceeds available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, operating results, financial condition and cash flows.", "prior_body": "We store and transmit, and sell products and services that store and transmit, personal, sensitive and proprietary data related to our products, our employees, customers, clients and partners (including third-party vendors such as data centers and providers of SaaS, cloud computing, and internet infrastructure and bandwidth), and their respective customers, including intellectual property, books of record and personal information. It is critical to our business strategy that our infrastructure, products and services remain secure and are perceived by customers, clients and partners to be secure. There are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, state-sponsored intrusions, industrial espionage, human error and technological vulnerabilities. Material cybersecurity incidents or other security breaches could result in (1) unauthorized access to, or loss or unauthorized use, alteration, or disclosure of, such information; (2) litigation, indemnity obligations, government investigations and proceedings, regulatory fines and penalties, and other possible liabilities; (3) negative publicity; and (4) disruptions to our internal and external operations. Any of these could damage our reputation and public perception of the security and reliability of our products, as well as harm our business and cause us to incur significant liabilities. In addition, a material cybersecurity incident or loss of personal information, or other material security breach could result in other negative consequences, including remediation costs, disruption of internal operations, increased cybersecurity protection costs and lost revenues. Our clients and customers use our platforms for the transmission and storage of sensitive data. We do not generally review the information or content that our clients and their customers upload and store, and we have no direct control over the substance of the information or content stored within our platforms. If our employees, or our clients, partners or their respective customers use our platforms for the transmission or storage of personal or other sensitive information, or our supply chain cybersecurity is compromised and our security measures are breached as a result of third-party action, employee error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business may be harmed and we could incur significant liabilities. Security industry experts and US Government officials continue to emphasize risks to our industry. Cyber attacks and security breaches continue to increase, and of particular concern are supply-chain attacks against software development and breaches of technology service providers. We anticipate that cyberattacks will continue to increase in the future given cyber warfare has become a consistent lever within geopolitical conflicts and increasingly leverages hacktivism. We cannot give assurance that we will always be successful in preventing or repelling unauthorized access to our systems. We also may face delays in our ability to identify or otherwise respond to any cybersecurity incident or any other breach. Additionally, we use third-party service providers to provide some services to us that involve the storage or transmission of data, such as SaaS, cloud computing, and internet infrastructure and bandwidth, and they face various cybersecurity threats and also may suffer cybersecurity incidents or other security breaches. Many jurisdictions have enacted or are enacting laws requiring companies to notify regulators or individuals of data security incidents involving certain types of personal data. These mandatory disclosures regarding security incidents often lead to widespread negative publicity. Moreover, the risk of reputational harm may be magnified and/or distorted through the rapid dissemination of information over the internet, including through news articles, blogs, social media, and other online communication forums and services. Any security incident, loss of data, or other security breach, whether actual or perceived, or whether impacting us or our third-party service providers, could harm our reputation, erode customer confidence in the effectiveness of our data security measures, negatively impact our ability to attract new customers, cause existing customers to elect not to renew their support contracts or their SaaS subscriptions, or subject us to third-party lawsuits, regulatory fines or other action or liability, which could materially and adversely affect our business and operating results. 23 23 There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. Our existing general liability insurance coverage, cybersecurity insurance coverage and coverage for errors and omissions may not continue to be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims, or our insurers may deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceeds available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, operating results, financial condition and cash flows." }, { "status": "MODIFIED", "current_title": "We may be found to infringe on intellectual property rights of others.", "prior_title": "We may be found to infringe on intellectual property rights of others.", "similarity_score": 0.812, "confidence": "high", "key_changes": [ "Reworded sentence: \"26 26 Patent litigation is particularly common in our industry.\"", "Reworded sentence: \"There is no guarantee that, in patent or other types of intellectual property litigation, we will prevail at trial or be able to settle at a reasonable cost.\"", "Reworded sentence: \"We expect that companies in the enterprise storage and data management, and cloud storage, operational and workload services markets will increasingly be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps.\"", "Added sentence: \"We rely on software from third parties, and a failure to properly manage our use of third-party software could result in increased costs or loss of revenue.\"", "Added sentence: \"Many of our products are designed to include software licensed from third parties.\"" ], "current_body": "We compete in markets in which intellectual property infringement claims arise in the normal course of business. Third parties have, from time to time, asserted intellectual property-related claims against us, including claims for alleged patent infringement brought by non-practicing entities. Such claims may be made against our products and services, our customers’ use of our products and services, or a combination of our products and third-party products. We also may be subject to claims and indemnification obligations from customers and resellers with respect to third-party intellectual property rights pursuant to our agreements with them. If we refuse to indemnify or defend such claims, even in situations in which the third-party’s allegations are meritless, then customers and resellers may refuse to do business with us. 26 26 Patent litigation is particularly common in our industry. We have been, and continue to be, in active patent litigations with non-practicing entities. There is no guarantee that, in patent or other types of intellectual property litigation, we will prevail at trial or be able to settle at a reasonable cost. If a judge or jury were to find that our products infringe, we could be required to pay significant monetary damages and be subject to an injunction that could cause product shipment delays, require us to redesign our products, affect our ability to supply or service our customers, and/or require us to enter into compulsory royalty or licensing agreements. We expect that companies in the enterprise storage and data management, and cloud storage, operational and workload services markets will increasingly be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. Any such claims, and any such infringement claims discussed above, could be time consuming, result in costly litigation, cause suspension of product shipments or product shipment delays, require us to redesign our products, or require us to enter into royalty or licensing agreements, any of which could materially and adversely affect our operating results, financial condition and cash flows. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all. We rely on software from third parties, and a failure to properly manage our use of third-party software could result in increased costs or loss of revenue. Many of our products are designed to include software licensed from third parties. Such third-party software includes software licensed from commercial suppliers and software licensed under public or open-source licenses. We have internal processes to manage our use of such third-party software. However, if we fail to adequately manage our use of third-party software, then we may be subject to copyright infringement or other third-party claims. If we are non-compliant with a license for commercial software, then we may be required to pay penalties or undergo costly audits pursuant to the license agreement. In the case of open-source software licensed under certain “copyleft” licenses, the license itself may require, or a court-imposed remedy for non-compliant use of the open-source software may require, that proprietary portions of our own software be publicly disclosed or licensed. Additionally, contract proposals, negotiations and software proposals are complex and frequently involve lengthy bidding and selection processes. We may not be able to negotiate extensions to our current third-party licenses when due for renewal or continue to secure such licenses under commercially reasonable terms. Each of the foregoing could result in a loss of intellectual property rights, increased costs, damage to our reputation and/or a loss of revenue.In addition, many of our products use open-source software. Such open-source software generally does not provide any warranty or contractual protection and may be susceptible to compromise and supply-chain attacks by threat actors. Further, open-source software or third-party software may contain vulnerabilities, which may or may not be known at the time of our inclusion of the software in a product. If a vulnerability in such software is successfully exploited, we could be subject to damages including remediation costs, reputational damage, and lost revenues. Our failure to adjust to emerging standards may harm our business.Emerging standards may adversely affect the UNIX®, Windows® and World Wide Web server markets upon which we depend. For example, we provide our open access data retention solutions to customers within the financial services, healthcare, pharmaceutical and government market segments, industries that are subject to various evolving governmental regulations, certifications and controls with respect to data access, reliability and permanence in the U.S. and in the other countries in which we operate. If our products do not meet and continue to comply with these evolving governmental regulations in this regard, customers in these market and geographical segments will not purchase our products, and we may not be able to expand our product offerings in these market and geographical segments at the rates which we have forecasted.Risks Related to Our SecuritiesOur stock price is subject to volatility.Our stock price is subject to changes in recommendations or earnings estimates by financial analysts, changes in investors' or analysts' valuation measures for our stock, changes in our capital structure, including issuance of additional debt, changes in our credit ratings, our ability to pay dividends and to continue to execute our stock repurchase program as planned and market trends and economic volatility unrelated to our performance. If we fail to meet any investor expectations related to dividends and/or stock repurchases, the market price of our stock could decline significantly, and could have a material adverse impact on investor confidence. Additionally, price volatility of our stock over a given period may cause the average price at which we repurchase our own stock to exceed the stock’s market price at a given point in time.Furthermore, speculation in the press or investment community about our strategic position, financial condition, results of operations or business can cause changes in our stock price. These factors, as well as general economic and political conditions and the timing of announcements in the public market regarding new products or services, product enhancements or technological Patent litigation is particularly common in our industry. We have been, and continue to be, in active patent litigations with non-practicing entities. There is no guarantee that, in patent or other types of intellectual property litigation, we will prevail at trial or be able to settle at a reasonable cost. If a judge or jury were to find that our products infringe, we could be required to pay significant monetary damages and be subject to an injunction that could cause product shipment delays, require us to redesign our products, affect our ability to supply or service our customers, and/or require us to enter into compulsory royalty or licensing agreements. We expect that companies in the enterprise storage and data management, and cloud storage, operational and workload services markets will increasingly be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. Any such claims, and any such infringement claims discussed above, could be time consuming, result in costly litigation, cause suspension of product shipments or product shipment delays, require us to redesign our products, or require us to enter into royalty or licensing agreements, any of which could materially and adversely affect our operating results, financial condition and cash flows. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all.", "prior_body": "We compete in markets in which intellectual property infringement claims arise in the normal course of business. Third parties have, from time to time, asserted intellectual property-related claims against us, including claims for alleged patent infringement brought by non-practicing entities. Such claims may be made against our products and services, our customers’ use of our products and services, or a combination of our products and third-party products. We also may be subject to claims and indemnification obligations from customers and resellers with respect to third-party intellectual property rights pursuant to our agreements with them. If we refuse to indemnify or defend such claims, even in situations in which the third-party’s allegations are meritless, then customers and resellers may refuse to do business with us. Patent litigation is particularly common in our industry. We have been, and continue to be, in active patent litigations with non-practicing entities. While we vigorously defend our ability to compete in the marketplace, there is no guarantee that, in patent or other types of intellectual property litigation, we will prevail at trial or be able to settle at a reasonable cost. If a judge or jury were to find that our products infringe, we could be required to pay significant monetary damages and be subject to an injunction that could cause product shipment delays, require us to redesign our products, affect our ability to supply or service our customers, and/or require us to enter into compulsory royalty or licensing agreements. We expect that companies in the enterprise storage and data management, cloud storage and cloud operations markets will increasingly be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. Any such claims, and any such infringement claims discussed above, could be time consuming, result in costly litigation, cause suspension of product shipments or product shipment delays, require us to redesign our products, or require us to enter into royalty or licensing agreements, any of which could materially and adversely affect our operating results, financial condition and cash flows. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all." }, { "status": "MODIFIED", "current_title": "If a data center or other third-party who relies on our products experiences a disruption in service or a loss of data, such disruption could be attributed to the quality of our products.", "prior_title": "If a data center or other third-party who relies on our products experiences a disruption in service or a loss of data, such disruption could be attributed to the quality of our products, thereby causing financial or reputational harm to our business.", "similarity_score": 0.806, "confidence": "high", "key_changes": [ "Reworded sentence: \"Our clients, including data centers, SaaS providers, cloud computing services and internet infrastructure and bandwidth providers, rely on our products for their data storage needs.\"", "Reworded sentence: \"A failure to meet our customers’ and partners’ expectations regarding security and confidentiality, due to disruptions in services provided by third-party vendors or the loss or alteration of data stored by such vendors, could cause financial or reputational harm to our business.\"" ], "current_body": "Our clients, including data centers, SaaS providers, cloud computing services and internet infrastructure and bandwidth providers, rely on our products for their data storage needs. These clients may authorize third-party technology providers to access their data on our systems. Errors or wrongdoing by clients, their customers, or third-party technology providers resulting in actual or perceived security breaches may result in such actual or perceived breaches being attributed to us. A failure to meet our customers’ and partners’ expectations regarding security and confidentiality, due to disruptions in services provided by third-party vendors or the loss or alteration of data stored by such vendors, could cause financial or reputational harm to our business. This harm could occur if the disruption or data loss is caused by, or perceived to be caused by, defects in our products. The risk of reputational harm may be magnified by the rapid dissemination of information over the internet, including through news articles, blogs, social media, and other online communication forums and services. This could affect our ability to retain clients and attract new business. Additionally, our operations and select cloud services rely on third-party cloud providers. Interruptions due to technical failures such as hardware or software issues or connectivity problems, security incidents, compliance changes, operational challenges and natural disasters could reduce revenue due to the cloud services’ metered billing and could pose reputational risks. Moreover, dependence on key cloud infrastructure providers carries systemic risks, as we could face amplified reputational damage if observability features fail during client outages.", "prior_body": "Our clients, including data centers, SaaS, cloud computing and internet infrastructure and bandwidth providers, rely on our products for their data storage needs. Our clients may authorize third-party technology providers to access their data on our systems. Because we do not control the transmissions between our clients, their customers, and third-party technology providers, or the processing of such data by third-party technology providers, we cannot ensure the complete integrity or security of such transmissions or processing. Errors or wrongdoing by clients, their customers, or third-party technology providers resulting in actual or perceived security breaches may result in such actual or perceived breaches being attributed to us. A failure or inability to meet our clients’ expectations with respect to security and confidentiality through a disruption in the services provided by these third-party vendors, or the loss or alteration of data stored by such vendors, could result in financial or reputational harm to our business to the extent that such disruption or loss is caused by, or perceived by our customers to have been caused by, defects in our products. Moreover, the risk of reputational harm may be magnified and/or distorted through the rapid dissemination of information over the internet, including through news articles, blogs, social media, and other online communication forums and services. This may affect our ability to retain clients and attract new business." }, { "status": "MODIFIED", "current_title": "Our gross margins may fluctuate.", "prior_title": "Our gross margins may vary.", "similarity_score": 0.802, "confidence": "high", "key_changes": [ "Reworded sentence: \"Our gross margins are influenced by a variety of factors, including macroeconomic volatility, competitive pricing, component and product design costs, inflation, foreign exchange currency fluctuations, and the volume and relative mix of revenues from product sales, software support, hardware support, and other services offerings.\"" ], "current_body": "Our gross margins are influenced by a variety of factors, including macroeconomic volatility, competitive pricing, component and product design costs, inflation, foreign exchange currency fluctuations, and the volume and relative mix of revenues from product sales, software support, hardware support, and other services offerings. Factors such as increased component and labor costs, pricing and discounting pressures, changes in component costs and product prices, or shifts in revenue mix and volume from different offerings could negatively impact our revenues, gross margins or earnings. Additionally, our gross margins are affected by the cost of any substandard materials and our sales and distribution activities, including pricing actions, rebates, sales initiatives, discount levels, and the timing of service contract renewals. Third-party component costs make up a significant portion of our product costs. We may have difficulty managing these costs if supplies of certain components, including NAND, become limited or component prices rise. Such limitations could increase our product costs. We have experienced, and may continue to experience, negative impacts on our gross margins due to rising component costs, logistics costs, tariffs and other trade barriers, and inflationary pressures. An increase in component or design costs relative to our product prices could harm our gross margins and earnings. Failure to sustain or improve our gross margins may have a material adverse effect on our business and stock price.", "prior_body": "Our gross margins reflect a variety of factors, including competitive pricing, component and product design, inflation, foreign exchange currency fluctuations, and the volume and relative mix of revenues from product, software support, hardware support and other services offerings. Increased component and labor costs, increased pricing and discounting pressures, the relative and varying rates of increases or decreases in component costs and product prices, or changes in the mix of revenue or decreased volume from product, software support, hardware support and other services offerings could harm our revenues, gross margins or earnings. Our gross margins are also impacted by the cost of any materials that are of poor quality and our sales and distribution activities, including, without limitation, pricing actions, rebates, sales initiatives and discount levels, and the timing of service contract renewals. The costs of third-party components comprise a significant portion of our product costs. While we generally have been able to manage our component and product design costs, we may have difficulty managing these costs if supplies of certain components, including NAND, become limited or component prices increase. Any such limitation could result in an increase in our product costs. We have seen, and may continue to see, our gross margins negatively impacted by increases in component costs, logistics costs, and inflationary pressures. An increase in component or design costs relative to our product prices could harm our gross margins and earnings. Failure to sustain or improve our gross margins may have a material adverse effect on our business and stock price." }, { "status": "MODIFIED", "current_title": "We often incur expenses before receiving related benefits, and it may be difficult to reduce expenses quickly if demand declines.", "prior_title": "We often incur expenses before we receive related benefits, and expenses may be difficult to reduce quickly if demand declines.", "similarity_score": 0.776, "confidence": "high", "key_changes": [ "Reworded sentence: \"We base our expense levels partly on future revenue expectations, and a significant portion of our expenses are fixed.\"" ], "current_body": "We base our expense levels partly on future revenue expectations, and a significant portion of our expenses are fixed. Reducing these fixed costs quickly can be challenging, and if our revenue falls below expectations, our operating results could be adversely impacted. During periods of uneven growth or decline, we may incur costs before realizing the anticipated benefits, which could also harm our operating results. We have made, and will continue to make, significant investments in engineering, sales, service and support, marketing, and other functions to support and grow our business. The costs associated with these investments are likely to be recognized earlier than some of the related anticipated benefits, such as revenue growth. Additionally, the return on these investments may be lower or may develop more slowly than we expect, which could harm our business, operating results, financial condition and cash flows.", "prior_body": "We base our expense levels in part on future revenue expectations and a significant percentage of our expenses are fixed. It is difficult to reduce our fixed costs quickly, and if revenue levels are below our expectations, operating results could be adversely impacted. During periods of uneven growth or decline, we may incur costs before we realize the anticipated related benefits, which could also harm our operating results. We have made, and will continue to make, significant investments in engineering, sales, service and support, marketing and other functions to support and grow our business. We are likely to recognize the costs associated with these investments earlier than some of the related anticipated benefits, such as revenue growth, and the return on these investments may be lower, or may develop more slowly, than we expect, which could harm our business, operating results, financial condition and cash flows." }, { "status": "MODIFIED", "current_title": "Failure to comply with new and existing laws and regulations related to privacy, data protection, AI and information security could cause harm to our reputation, result in liability (including regulatory penalties and litigation), and adversely impact our business.", "prior_title": "Failure to comply with new and existing laws and regulations relating to privacy, data protection, AI and information security could cause harm to our reputation, result in liability and adversely impact our business.", "similarity_score": 0.743, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Our business is increasingly subject to regulation by various federal, state and international governmental agencies responsible for enacting and enforcing laws and regulations relating to privacy, data protection, and information security.\"" ], "current_body": "Our business is increasingly subject to regulation by various federal, state and international governmental agencies responsible for enacting and enforcing laws and regulations relating to privacy, data protection, and information security. For example, since the EU’s General Data Protection Regulation became effective in 2018, the Court of Justice of the EU has issued rulings that have impacted how multinational companies must implement that law and the European Commission (EC) has published new regulatory 24 24 requirements relating to cross-border data transfers. NetApp relies on compliance methods such as Standard Contractual Clauses (SCCs) to transfer personal data of individuals located in the European Economic Area (EEA) to other countries. In June 2021, the EC imposed new SCC requirements which impose certain contractual and operational requirements on NetApp and its contracting parties, including requirements related to government access transparency, enhanced data subject rights, and broader third-party assessments to ensure safeguards necessary to protect personal data transferred from NetApp or its partners to countries outside the EEA, requiring NetApp to revise customer and vendor agreements. Other global governments have adopted new privacy and data protection laws implementing similarly comprehensive regulatory frameworks.The interpretation and application of many privacy, data protection, and information security laws and regulations, along with industry standards, are uncertain. These laws, regulations, or standards may be interpreted and applied in ways that are inconsistent with our data management practices or product features. Additionally, government certification requirements for products like ours may change and, in doing so, restrict our ability to sell into the government sector until we have attained revised certifications. Any failure, or perceived failure, by us or our business partners to comply with relevant laws, regulations, contractual commitments, required certifications, self-regulatory standards, or our policies could subject us to claims, investigations, sanctions, enforcement actions, disgorgement of profits, fines, damages, civil and criminal liability, penalties, or injunctions. As a technology provider, our customers expect us to demonstrate compliance with privacy, data protection, and information security laws and regulations. Our inability, or perceived inability, to do so may adversely impact sales of our products and services, especially to customers in highly regulated industries. We have invested resources in complying with new laws and regulations and may need to make additional significant changes to our business operations, which could adversely affect our revenue and overall business. Non-compliance could harm our reputation and brand, incur significant costs, materially affect our financial and operating results, and require modifications to our products or business practices.Our business could face stricter obligations, greater fines, and private causes of action under new privacy, data protection, and information security laws and regulations, including the GDPR, which provides for penalties of up to 20 million Euros or four percent of our total worldwide annual turnover of the preceding financial year (whichever is higher), the California Consumer Privacy Act, the California Privacy Rights Act, and other similar U.S. state-based regulations, as well as new and emerging privacy laws globally.As NetApp provides technology services to EU financial institutions, the Digital Operational Resilience Act (DORA) imposes financial and legal risks. These include compliance costs for enhancing cybersecurity, performing resilience testing, requiring comprehensive documentation, increased audits, and detailed reporting. Stricter contractual obligations will be imposed by financial institution clients, necessitating more robust incident reporting and data protection measures. Non-compliance could result in legal liabilities, suspension of services and reputational damage. Additionally, NetApp must ensure that its subcontractors and suppliers also comply with DORA requirements, further increasing the complexity and potential liability.If our products or services are defective, or are perceived to be defective, including as a result of improper use or maintenance, our operating results and customer relationships may be harmed.Our products and services are complex. We have experienced in the past, and expect to experience in the future, quality issues impacting certain products, and we could experience reliability issues with services we provide, including security vulnerabilities, software bugs, hardware failure in networked storage appliances, incompatibility issues with customer systems or other applications, performance deficiencies causing slow data retrieval or processing, firmware or software updates causing system instability, compliance with various product certifications, and data breaches due to flaws in the product design. Such quality and reliability issues may be due to, for example, our own designs or processes, the designs or processes of our suppliers, and/or flaws in third-party software used in our products. These types of risks are most acute when we are introducing new products. Quality or reliability issues have and could again in the future cause customers to experience outages or disruptions in service, data loss or data corruption. If we fail to remedy a product defect or flaw, we may experience a failure of a product line, temporary or permanent withdrawal from a product or market, damage to our reputation, loss of revenue, inventory costs or product reengineering expenses and higher ongoing warranty and service costs, and these occurrences could have a material impact on our gross margins, business and operating results. In addition, we exercise little control over how our customers use or maintain our products and services, and in some cases improper usage or maintenance could impair the performance of our products and services, which could lead to a perception of a quality or reliability issue. Customers may experience losses that may result from or are alleged to result from defects or flaws in our products and services, which could subject us to claims for damages, including consequential damages.Changes in regulations relating to our products or their components, or the manufacture, sourcing, distribution or use thereof, may harm our business, operating results, financial condition and cash flows.The laws and regulations governing the manufacturing, sourcing, distribution and use of our products have become increasingly complex and stringent. For example, in addition to various environmental laws relating to carbon emissions, the use and discharge of hazardous materials, and the use of certain minerals originating from identified conflict zones, many governments, including the U.S., requirements relating to cross-border data transfers. NetApp relies on compliance methods such as Standard Contractual Clauses (SCCs) to transfer personal data of individuals located in the European Economic Area (EEA) to other countries. In June 2021, the EC imposed new SCC requirements which impose certain contractual and operational requirements on NetApp and its contracting parties, including requirements related to government access transparency, enhanced data subject rights, and broader third-party assessments to ensure safeguards necessary to protect personal data transferred from NetApp or its partners to countries outside the EEA, requiring NetApp to revise customer and vendor agreements. Other global governments have adopted new privacy and data protection laws implementing similarly comprehensive regulatory frameworks. The interpretation and application of many privacy, data protection, and information security laws and regulations, along with industry standards, are uncertain. These laws, regulations, or standards may be interpreted and applied in ways that are inconsistent with our data management practices or product features. Additionally, government certification requirements for products like ours may change and, in doing so, restrict our ability to sell into the government sector until we have attained revised certifications. Any failure, or perceived failure, by us or our business partners to comply with relevant laws, regulations, contractual commitments, required certifications, self-regulatory standards, or our policies could subject us to claims, investigations, sanctions, enforcement actions, disgorgement of profits, fines, damages, civil and criminal liability, penalties, or injunctions. As a technology provider, our customers expect us to demonstrate compliance with privacy, data protection, and information security laws and regulations. Our inability, or perceived inability, to do so may adversely impact sales of our products and services, especially to customers in highly regulated industries. We have invested resources in complying with new laws and regulations and may need to make additional significant changes to our business operations, which could adversely affect our revenue and overall business. Non-compliance could harm our reputation and brand, incur significant costs, materially affect our financial and operating results, and require modifications to our products or business practices. Our business could face stricter obligations, greater fines, and private causes of action under new privacy, data protection, and information security laws and regulations, including the GDPR, which provides for penalties of up to 20 million Euros or four percent of our total worldwide annual turnover of the preceding financial year (whichever is higher), the California Consumer Privacy Act, the California Privacy Rights Act, and other similar U.S. state-based regulations, as well as new and emerging privacy laws globally. As NetApp provides technology services to EU financial institutions, the Digital Operational Resilience Act (DORA) imposes financial and legal risks. These include compliance costs for enhancing cybersecurity, performing resilience testing, requiring comprehensive documentation, increased audits, and detailed reporting. Stricter contractual obligations will be imposed by financial institution clients, necessitating more robust incident reporting and data protection measures. Non-compliance could result in legal liabilities, suspension of services and reputational damage. Additionally, NetApp must ensure that its subcontractors and suppliers also comply with DORA requirements, further increasing the complexity and potential liability.", "prior_body": "Our business is subject to increasing regulation by various federal, state and international governmental agencies responsible for enacting and enforcing laws and regulations relating to privacy, data protection, and information security. For example, since the effective date of the EU’s General Data Protection Regulation in 2018, the Court of Justice of the EU has issued rulings that have impacted how multinational companies must implement that law and the European Commission (EC) has published new regulatory requirements relating to cross-border data transfers applicable to multinational companies like NetApp. NetApp relies on a variety of compliance methods to transfer personal data of European Economic Area (EEA) individuals to other countries, including Binding Corporate Rules and Standard Contractual Clauses (SCCs). In June 2021, the EC imposed new SCC requirements which impose certain contract and operational requirements on NetApp and its contracting parties, including requirements related to government access transparency, enhanced data subject rights, and broader third-party assessments to ensure safeguards necessary to protect personal data transferred from NetApp or its partners to countries outside the EEA, requiring NetApp to revise customer and vendor agreements. In addition to the EU’s General Data Protection Regulation, other global governments have adopted new privacy and data protection laws implementing similarly comprehensive regulatory frameworks. The rapidly evolving regulatory landscape in this area is likely to remain uncertain for the foreseeable future given heightened cyber-security threats, and amid the innovation and adoption of GenAI technology. For example, the Artificial Intelligence Act, recently adopted by the EU, sets forth new AI risk categorization, obligations, and prohibitions. In addition, changes in the interpretation and enforcement of existing laws and regulations could impact our business operations and those of our partners, vendors and customers. Customers, privacy advocates and industry groups also may propose new and different self-regulatory standards or standards of care that may legally or contractually apply to us, and these standards may be subject to change. These factors create uncertainty and we cannot yet determine the impact such future laws, regulations and standards, or changes to such laws, regulations, or standards, or to their interpretation or enforcement, may have on our business or the businesses of our partners, vendors and customers. In addition, changes in the interpretation of existing laws and regulations could impact our business operations and those of our partners, vendors and customers. Because the interpretation and application of many laws and regulations relating to privacy, data protection and information security, along with industry standards, are uncertain, it is possible that relevant laws, regulations, or standards may be interpreted and applied in manners that are, or are alleged to be, inconsistent with our data management practices or the features of our products. Any failure, or perceived failure, by us or our business partners to comply with federal, state or international laws and regulations relating to privacy, data protection, and information security, commitments relating to privacy, data protection, and information security contained in our contracts, self-regulatory standards that apply to us or that third parties assert are applicable to us, or our policies or notices we post or make available could subject us to claims, investigations, sanctions, enforcement actions and other proceedings, disgorgement of profits, fines, damages, civil and criminal liability, penalties or injunctions. 24 24 Additionally, as a technology provider, our customers expect that we can demonstrate compliance with laws and regulations relating to privacy, data protection, and information security, and our inability or perceived inability to do so may adversely impact sales of our products and services, particularly to customers in highly-regulated industries. We have invested company resources in complying with new laws, regulations, and other obligations relating to privacy, data protection, and information security, and we may be required to make additional, significant changes in our business operations, all of which may adversely affect our revenue and our business overall. As a result of any inability to comply with such laws and regulations, our reputation and brand may be harmed, we could incur significant costs, and financial and operating results could be materially adversely affected, and we could be required to modify or change our products or our business practices, any of which could have an adverse effect on our business. Our business could be subject to stricter obligations, greater fines and private causes of action, including class actions, under the enactment of new laws and regulations relating to privacy, data protection, and information security, including but not limited to, the European Union General Data Protection Regulation, which provides for penalties of up to 20 million Euros or four percent of our annual global revenues, the California Consumer Privacy Act and the California Privacy Rights Act, and other U.S. state-based regulation." }, { "status": "MODIFIED", "current_title": "Increasing competition and industry consolidation could harm our business, operating results, financial condition and cash flows.", "prior_title": "Increasing competition and industry consolidation could harm our business, operating results, financial condition and cash flows.", "similarity_score": 0.734, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Our markets are highly competitive, fragmented, and characterized by rapidly changing technology.\"" ], "current_body": "Our markets are highly competitive, fragmented, and characterized by rapidly changing technology. We face competition from many companies, including established public companies, newer public companies with a strong focus on flash storage, and new market entrants targeting opportunities in GenAI and application data management for Kubernetes. Some competitors offer a broad range of IT products and services (full-stack vendors), while others offer a more limited set. Technology trends, such as GenAI, hosted or public cloud storage, software as a service (SaaS), IT as a service, and flash storage are driving significant changes in storage architectures and solution requirements. Cloud service providers offer storage on demand without requiring capital expenditure, which meets rapidly evolving business needs and has altered the competitive landscape. Competitors may develop new technologies, products, or services ahead of us or establish new business models, more flexible purchase models, or disruptive technologies. By extending our offerings in flash, cloud storage, converged infrastructure, and block storage, and GenAI, we are entering new segments and facing competition from both traditional competitors and emerging competitors. The long-term potential and competitiveness of emerging vendors remains uncertain. New competitors or alliances among existing competitors could emerge and quickly gain significant market share or buying power. Changes in customer requirements or increased industry consolidation could result in stronger competitors better able to compete. Additionally, current and potential competitors may establish cooperative relationships among themselves or with third parties, including some of our partners or suppliers. For additional information regarding our competitors, see the section entitled “Competition” contained in Part I, Item 1 - Business of this Annual Report on Form 10-K.", "prior_body": "Our markets are intensely competitive and are characterized by fragmentation and rapidly changing technology. We compete with many companies in the markets we serve, including established public companies, newer public companies with a strong flash focus, and new market entrants addressing the opportunity for GenAI and application data management for Kubernetes. Some offer a broad spectrum of IT products and services (full-stack vendors) and others offer a more limited set of products or services. Technology trends, such as hosted or public cloud storage, software as a service (SaaS) and flash storage are driving significant changes in storage architectures and solution requirements. Cloud service provider competitors provide customers storage on demand, without requiring a capital expenditure, which meets rapidly evolving business needs and has changed the competitive landscape. We also compete in the emerging cloud operations market, where growth is being driven by increased customer cloud usage and commensurate spend, but customer requirements are still evolving. There is no clear leader in this market. Competitors may develop new technologies, products or services in advance of us or establish new business models, more flexible purchase models or new technologies disruptive to us. By extending our flash, cloud storage, converged infrastructure and cloud operations offerings, we are competing in new segments with both traditional competitors and new competitors, particularly smaller emerging storage and cloud operations vendors. The longer-term potential and competitiveness of these emerging vendors remains to be determined. In cloud and converged infrastructure, we also compete with large well-established competitors. It is possible that new competitors or alliances among competitors might emerge and rapidly acquire significant market share or buying power. Changes in customer requirements or an increase in industry consolidation might result in stronger competitors that are better able to compete. In addition, current and potential competitors have established or might establish cooperative relationships among themselves or with third parties, including some of our partners or suppliers. For additional information regarding our competitors, see the section entitled “Competition” contained in Part I, Item 1 – Business of this Form 10-K." }, { "status": "MODIFIED", "current_title": "We are exposed to credit risks, fluctuations in the market value of our investment portfolio, and potential adverse effects on our cash and cash equivalents if the financial institutions holding them fail.", "prior_title": "We are exposed to credit risks, our investment portfolio may experience fluctuations in market value or returns, and our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail.", "similarity_score": 0.7, "confidence": "medium", "key_changes": [ "Reworded sentence: \"The credit ratings and pricing of our investments can be negatively affected by factors such as volatile macroeconomic conditions, liquidity issues, credit deterioration, financial results, economic risk, political risk, sovereign risk, or other factors.\"" ], "current_body": "We maintain an investment portfolio of various holdings, types, and maturities. The credit ratings and pricing of our investments can be negatively affected by factors such as volatile macroeconomic conditions, liquidity issues, credit deterioration, financial results, economic risk, political risk, sovereign risk, or other factors. Consequently, the value and liquidity of our investments and their returns may fluctuate significantly. Unfavorable macroeconomic conditions, rising interest rates, international trade protection measures and disputes (including economic and trade barriers, tariffs, sanctions and export controls), or other circumstances could lead to an economic slowdown or global recession, potentially causing failures of counterparties, including financial institutions, governments, and insurers. This could materially decrease the value of our investment portfolio and substantially reduce our investment returns. We regularly maintain cash balances at large third-party financial institutions that exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit of $250,000 and similar regulatory insurance limits outside the United States. If a depository institution where we maintain deposits fails or faces adverse financial or credit markets conditions, we may not be able to recover all of our deposits, which adversely impacts our operating liquidity and financial performance. Additionally, if our customers or partners experience liquidity issues due to financial institution defaults or non-performance where they hold cash assets, their ability to pay us may be impaired. This could materially affect our results of operations, including the collection of accounts receivable and cash flows.", "prior_body": "We maintain an investment portfolio of various holdings, types, and maturities. Credit ratings and pricing of our investments can be negatively affected by liquidity, credit deterioration, financial results, economic risk, political risk, sovereign risk or other factors. As a result, the value and liquidity of our investments and the returns thereon may fluctuate substantially. Unfavorable macroeconomic conditions, rising interest rates, or other circumstances could result in an economic slowdown and possibly cause a global recession. An economic slowdown or increased regional or global economic uncertainty may lead to failures of counterparties, including financial institutions, governments and insurers, which could result in a material decline in the value of our investment portfolio and 19 19 substantially reduce our investment returns. We regularly maintain cash balances at large third-party financial institutions in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit of $250,000 and similar regulatory insurance limits outside the United States. If a depository institution where we maintain deposits fails or is subject to adverse conditions in the financial or credit markets, we may not be able to recover all of our deposits, which could adversely impact our operating liquidity and financial performance. Similarly, if our customers or partners experience liquidity issues as a result of financial institution defaults or non-performance where they hold cash assets, their ability to pay us may become impaired and could have a material adverse effect on our results of operations, including the collection of accounts receivable and cash flows." }, { "status": "MODIFIED", "current_title": "If we are unable to attract and retain qualified personnel, our business, operating results, financial condition and cash flows could be harmed.", "prior_title": "If we are unable to attract and retain qualified personnel, our business, operating results, financial condition and cash flows could be harmed.", "similarity_score": 0.694, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Our success depends on our ability to hire and retain qualified personnel to advance our corporate strategy and maintain key aspects of our corporate culture.\"" ], "current_body": "Our success depends on our ability to hire and retain qualified personnel to advance our corporate strategy and maintain key aspects of our corporate culture. As our future success relies on enhancing and introducing new products and features, we particularly need to attract and retain qualified engineers and technical talent, especially in emerging technology areas like AI and machine learning. To increase revenues, we must also increase the productivity of our sales force, which may require an increase in support infrastructure and personnel, to achieve adequate customer coverage. Competition for qualified employees, particularly in the technology industry, is intense. We have periodically reduced our workforce, including restructuring plans announced in fiscal 2023, fiscal 2024, and fiscal 2025, respectively. These actions may make it more challenging to attract and retain qualified employees. Failure to hire and retain skilled management and personnel, particularly engineers, salespeople, and key executive management, could disrupt our development efforts, sales results, business relationships, and our ability to execute our business plan and strategy, adversely affecting our operating results, financial conditions and cash flows. 18 18 Many of our employees participate in our hybrid work program and work remotely on a full- or part-time basis. Changes to our office environments, including the adoption of new work models and our requirements and/or expectations about when or how often certain employees work on-site or remotely may not meet the expectations of our employees, and may create challenges in attracting and retaining qualified personnel, adversely affecting our business operations and financial performance. Additionally, many of our employees are foreign nationals relying on visas and entry permits to work legally in the U.S. and other countries, and may be dependent on licenses to work with controlled technology. Restrictions or difficulties in obtaining H-1B, L-1 and other business visas, as well as licenses to work with controlled technologies, along with compliance with new immigration and labor laws and unintended impacts from changes in immigration policy or in the enforcement of existing immigration laws and policies, could lead to unexpected labor costs and hinder our ability to retain and attract skilled professionals, negatively impacting our business, results of operations or financial conditions.Equity grants are a crucial part of our compensation programs, supporting talent attraction and engagement and aligning employee interests with stockholders. A competitive broad-based equity compensation program is essential to compete for talent in both the hardware and software industries, where competitors offer significant equity compensation. Reducing, modifying, or eliminating our equity programs, or failing to grant equity competitively, may hinder our ability to attract and retain critical employees. Furthermore, the structure of our sales, cash, and equity incentive compensation plans may increase the risk of losing employees at certain times, such as after the payment of periodic bonuses or the vesting of equity awards.Our acquisitions or divestitures may not achieve the expected benefits and could increase our liabilities, disrupt our existing business, and harm our operating results, financial condition and cash flows.As part of our strategy, we may seek to acquire other businesses and technologies to complement our current products and services, expand our market reach, or enhance our technical capabilities. The benefits we have received, and expect to receive, from these and other acquisitions depend on our ability to successfully conduct due diligence, negotiate the terms of the acquisition and integrate the acquired business into our systems, procedures and organizational structure. We may also divest businesses, product lines, or divisions that no longer align with our current offerings. For example, we sold our FinOps business to Flexera in fiscal 2025. Realizing the benefits we would expect to receive from a divestiture would depend on our ability to manage the separation of operations, services, products, and personnel, in addition to other risks. Any inaccuracy in our assumptions or failures to identify and mitigate liabilities or risks associated with an acquisition or divestiture – such as differing or inadequate cybersecurity and data privacy protection controls or contractual limitations of liability – could reduce or eliminate the expected acquisition or divestiture benefits. If we fail to make acquisitions or divestitures on favorable terms, integrate or divest the subject business or assets as planned, or retain or separate key employees, our costs could increase, our operations could be disrupted, and we could face additional liabilities, investigations and litigation. This could harm our strategy, business, and operating results. Additionally, the failure to achieve expected benefits from acquisitions or divestitures may result in impairment charges for goodwill and intangible assets.Risks Related to Our OperationsWe often incur expenses before receiving related benefits, and it may be difficult to reduce expenses quickly if demand declines.We base our expense levels partly on future revenue expectations, and a significant portion of our expenses are fixed. Reducing these fixed costs quickly can be challenging, and if our revenue falls below expectations, our operating results could be adversely impacted. During periods of uneven growth or decline, we may incur costs before realizing the anticipated benefits, which could also harm our operating results. We have made, and will continue to make, significant investments in engineering, sales, service and support, marketing, and other functions to support and grow our business. The costs associated with these investments are likely to be recognized earlier than some of the related anticipated benefits, such as revenue growth. Additionally, the return on these investments may be lower or may develop more slowly than we expect, which could harm our business, operating results, financial condition and cash flows.Initiatives to improve our cost structure, business processes, and systems may not achieve the expected benefits and could negatively impact our reputation, business, operating results, financial condition and cash flows.We continuously strive to make our cost structure and business processes more efficient, including by relocating our business activities from higher-cost to lower-cost locations, outsourcing certain business processes and functions, and implementing changes to our business information systems. These efforts require significant investment of financial and human resources and substantial changes to our current operations. For example, in fiscal 2025, we continued our implementation of certain new business information systems, including a new enterprise resource planning (ERP) system to enhance and standardize our processes, improve oversight, and better serve our customers. However, any disruption during this transition could impact our ability to send and track invoices, process Many of our employees participate in our hybrid work program and work remotely on a full- or part-time basis. Changes to our office environments, including the adoption of new work models and our requirements and/or expectations about when or how often certain employees work on-site or remotely may not meet the expectations of our employees, and may create challenges in attracting and retaining qualified personnel, adversely affecting our business operations and financial performance. Additionally, many of our employees are foreign nationals relying on visas and entry permits to work legally in the U.S. and other countries, and may be dependent on licenses to work with controlled technology. Restrictions or difficulties in obtaining H-1B, L-1 and other business visas, as well as licenses to work with controlled technologies, along with compliance with new immigration and labor laws and unintended impacts from changes in immigration policy or in the enforcement of existing immigration laws and policies, could lead to unexpected labor costs and hinder our ability to retain and attract skilled professionals, negatively impacting our business, results of operations or financial conditions. Equity grants are a crucial part of our compensation programs, supporting talent attraction and engagement and aligning employee interests with stockholders. A competitive broad-based equity compensation program is essential to compete for talent in both the hardware and software industries, where competitors offer significant equity compensation. Reducing, modifying, or eliminating our equity programs, or failing to grant equity competitively, may hinder our ability to attract and retain critical employees. Furthermore, the structure of our sales, cash, and equity incentive compensation plans may increase the risk of losing employees at certain times, such as after the payment of periodic bonuses or the vesting of equity awards.", "prior_body": "Our continued success depends, in part, on our ability to hire and retain qualified personnel and to advance our corporate strategy and preserve the key aspects of our corporate culture. Because our future success is dependent on our ability to continue to enhance and introduce new products and features, we are particularly dependent on our ability to hire and retain qualified engineers and technical talent, including in emerging areas of technology such as AI and machine learning. In addition, to increase revenues, we will be required to increase the productivity of our sales force and support infrastructure to achieve adequate customer coverage. Competition for qualified employees, particularly in the technology industry, remains tight. We have periodically reduced our workforce, including reductions of approximately 9% and 2% announced in fiscal 2023 and fiscal 2024, respectively, and these actions may make it more difficult to attract and retain qualified employees. Our inability to hire and retain qualified management and skilled personnel, particularly engineers, salespeople and key executive management, could disrupt our development efforts, sales results, business relationships and/or our ability to execute our business plan and strategy on a timely basis and could materially and adversely affect our operating results, financial conditions and cash flows. Many of our employees participate in our hybrid work program, and work remotely on a full- or part-time basis. While this has been generally well received by employees, it may also create other challenges that impact our ability to attract and retain qualified personnel, including, but not limited to, some employees may prefer an in person work environment, difficulty collaborating and communicating among employees, and ability to maintain consistent experience of our corporate culture and workforce morale. If we are unable to effectively manage the risks and challenges associated with hybrid work, our business operations and financial performance may be adversely affected. A number of our employees are foreign nationals who rely on visas and entry permits in order to legally work in the U.S. and other countries. In recent years, the U.S. has increased the level of scrutiny in granting H-1B, L-1 and other business visas. Compliance with new and unexpected U.S. immigration and labor laws could also require us to incur additional unexpected labor costs and expenses or could restrain our ability to retain and attract skilled professionals. Any of these restrictions could have a negative material adverse effect on our business, results of operations or financial conditions. Equity grants are a critical component of our current compensation programs as they support attraction and engagement of key talent and align employee interests with shareholders. A competitive broad-based equity compensation program is essential to compete for talent in both the hardware and software industries, in which competitors for talent provide a more significant portion of compensation via equity. If we reduce, modify or eliminate our equity programs or fail to grant equity competitively, we may have difficulty attracting and retaining critical employees. In addition, because of the structure of our sales, cash and equity incentive compensation plans, we may be at increased risk of losing employees at certain times. For example, the retention value of our compensation plans decreases after the payment of periodic bonuses or the vesting of equity awards. 18 18" }, { "status": "MODIFIED", "current_title": "Changes in regulations relating to our products or their components, or the manufacture, sourcing, distribution or use thereof, may harm our business, operating results, financial condition and cash flows.", "prior_title": "Changes in regulations relating to our products or their components, or the manufacture, sourcing, distribution or use thereof, may harm our business, operating results, financial condition and cash flows.", "similarity_score": 0.683, "confidence": "medium", "key_changes": [ "Reworded sentence: \"The laws and regulations governing the manufacturing, sourcing, distribution and use of our products have become increasingly complex and stringent.\"" ], "current_body": "The laws and regulations governing the manufacturing, sourcing, distribution and use of our products have become increasingly complex and stringent. For example, in addition to various environmental laws relating to carbon emissions, the use and discharge of hazardous materials, and the use of certain minerals originating from identified conflict zones, many governments, including the U.S., 25 25 the United Kingdom, and Australia, have adopted regulations to address the risk of human trafficking in supply chains, which govern how workers are recruited and managed. We incur costs to comply with these requirements. Given the complexity of our supply chain, we may face reputational harm if our customers or other stakeholders conclude that we are unable to verify sufficiently the origins of the minerals used in the products we sell or the actions of our suppliers with respect to workers. As the laws and regulations governing our products continue to expand and change, our costs are likely to rise, and the failure to comply with any such laws and regulations could subject us to business interruptions, litigation risks and reputational harm.Any violation of U.S. export control laws and other laws affecting the countries in which our products and services may be sold, distributed, or delivered could have a material and adverse effect on our business, operating results, financial condition and cash flows.Due to the global nature of our business, we are subject to import and export restrictions and regulations, including the Export Administration Regulations administered by the Commerce Department’s Bureau of Industry and Security (BIS) and the trade and economic sanctions regulations administered by the Treasury Department’s Office of Foreign Assets Control (OFAC). The U.S., through the BIS and OFAC, places restrictions on the sale or export of certain products and services to certain countries, entities, and persons, including most recently to Russia, Belarus and regions of Ukraine. These regulations have caused us to temporarily stop selling or servicing our products temporarily in restricted areas. Violators of export control and sanctions laws may be subject to significant penalties, which may include significant monetary fines, criminal proceedings against them and their officers and employees, a denial of export privileges, and suspension or debarment from selling products to the federal government. Our products could be diverted by third parties (including potentially our channel partners) to countries or end users under sanctions / embargo orders, despite our precautions.If we were ever found to have violated U.S. export control laws or any trade-related laws or regulations, even if inadvertent or without our knowledge, we may be subject to various penalties available under the laws, any of which could have a material and adverse impact on our business, operating results and financial condition. Even if we were not found to have violated such laws, the political and media scrutiny surrounding any governmental investigation of us could cause us significant expense and reputational harm. Such collateral consequences could have a material adverse impact on our business, operating results, financial condition and cash flows.Our failure to protect our intellectual property could harm our business, operating results, financial condition and cash flows.Our success depends significantly upon developing, maintaining and protecting our proprietary technology. We rely on a combination of patents, copyrights, trademarks, trade secrets, confidentiality procedures and contractual provisions with employees, resellers, strategic partners and customers, to protect our proprietary rights. We currently have multiple U.S. and international patent applications pending and multiple U.S. and international patents issued. The pending applications may not be approved, and our existing and future patents may be challenged. If such challenges are brought, the patents may be invalidated. We may not be able to develop proprietary products or technologies that are patentable, and patents issued to us may not provide us with any competitive advantages and may be challenged by third parties. Further, the patents of others may materially and adversely affect our ability to do business. In addition, a failure to obtain and defend our trademark registrations may impede our marketing and branding efforts and competitive condition. Litigation may be necessary to protect our proprietary technology. Any such litigation may be time-consuming and costly. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary. In addition, the laws of some foreign countries do not protect proprietary rights to as great an extent as do the laws of the U.S. Our means of protecting our proprietary rights may not be adequate or our competitors may independently develop similar technology, duplicate our products, or design around patents issued to us or other intellectual property rights of ours. There is persistent risk that some individuals will improperly take our intellectual property after terminating their employment or other engagements with us, which could lead to intellectual property leakage to competitors and a loss of our competitive advantages.We may be found to infringe on intellectual property rights of others.We compete in markets in which intellectual property infringement claims arise in the normal course of business. Third parties have, from time to time, asserted intellectual property-related claims against us, including claims for alleged patent infringement brought by non-practicing entities. Such claims may be made against our products and services, our customers’ use of our products and services, or a combination of our products and third-party products. We also may be subject to claims and indemnification obligations from customers and resellers with respect to third-party intellectual property rights pursuant to our agreements with them. If we refuse to indemnify or defend such claims, even in situations in which the third-party’s allegations are meritless, then customers and resellers may refuse to do business with us. the United Kingdom, and Australia, have adopted regulations to address the risk of human trafficking in supply chains, which govern how workers are recruited and managed. We incur costs to comply with these requirements. Given the complexity of our supply chain, we may face reputational harm if our customers or other stakeholders conclude that we are unable to verify sufficiently the origins of the minerals used in the products we sell or the actions of our suppliers with respect to workers. As the laws and regulations governing our products continue to expand and change, our costs are likely to rise, and the failure to comply with any such laws and regulations could subject us to business interruptions, litigation risks and reputational harm.", "prior_body": "The laws and regulations governing the manufacturing, sourcing, distribution and use of our products have become more complex and stringent over time. For example, in addition to various environmental laws relating to carbon emissions, the use and discharge of hazardous materials and the use of certain minerals originating from identified conflict zones, many governments, including the U.S., the United Kingdom and Australia, have adopted regulations concerning the risk of human trafficking in supply chains which govern how workers are recruited and managed. We incur costs to comply with the requirements of such laws. Further, since our supply chain is complex, we may face reputational harm if our customers or other stakeholders conclude that we are unable to verify sufficiently the origins of the minerals used in the products we sell or the actions of our suppliers with respect to workers. As the laws and regulations governing our products continue to expand and change, our costs are likely to rise, and the failure to comply with any such laws and regulations could subject us to business interruptions, litigation risks and reputational harm." }, { "status": "MODIFIED", "current_title": "A portion of our revenues is generated by large, recurring purchases from various customers, resellers and distributors.", "prior_title": "A portion of our revenues is generated by large, recurring purchases from various customers, resellers and distributors. A loss, cancellation or delay in purchases has negatively affected our revenues in the past, and could negatively affect our revenues in the future.", "similarity_score": 0.67, "confidence": "medium", "key_changes": [ "Reworded sentence: \"20 20 A significant portion of our net revenues rely on sales to a limited number of customers and distributors.\"" ], "current_body": "20 20 A significant portion of our net revenues rely on sales to a limited number of customers and distributors. We typically do not enter into binding long-term purchase commitments with our customers, resellers, and distributors, meaning there is no guarantee that we will continue to receive large, recurring orders from them. For instance, our reseller agreements generally do not require minimum purchases, and our customers, resellers, and distributors can stop purchasing and marketing our products at any time. The loss, cancellation, or delay of purchases has previously impacted our revenues and could again in the future. Any deterioration in the financial stability of our customers, resellers, and distributors, or their ability to obtain credit to finance purchases of our products, could significantly adversely affect our results of operations and cash flow. If any of our key customers, resellers, or distributors changes its pricing practices, reduces the size or frequency of its orders, or stops purchasing our products altogether, our operating results, financial condition, and cash flows could be materially adversely impacted. Additionally, major customers may seek pricing, payment, intellectual property-related, or other commercial terms that are less favorable to us, which could negatively impact our business, cash flow, and operating results.If we are unable to maintain and develop relationships with strategic partners, our revenues may be harmed.Our growth strategy relies on developing and maintaining strategic partnerships with major third-party software and hardware vendors to integrate our products into their products and co-market them. Many of our strategic partners are industry leaders that provide us with expanded access to market segments where we do not directly participate. Strategic partnerships with public cloud providers and other cloud service vendors are particularly critical to the success of our cloud-based business.However, there is intense competition for attractive strategic partners, and these relationships may not be exclusive, may not generate significant revenues, and may be terminated on short notice. Some of our partners also collaborate with our competitors, which can increase the availability of competing solutions and hinder our ability to grow these relationships. Additionally, some partners, especially large and diversified technology companies, including major cloud providers, are also our competitors, complicating our relationships.If we are unable to establish new or maintain current partnerships, if our strategic partners prioritize their relationships with other vendors in the storage industry, if our strategic partners seek to renegotiate or terminate our agreements, or if our strategic partners increasingly compete with us, we could experience lower-than-expected revenues, delays in product development, and other adverse effects on our business, operating results, financial condition and cash flows.Our success depends upon our ability to effectively plan and manage our resources and periodically restructure our business, which may adversely affect our business, operating results, financial condition, and cash flows.To successfully offer our products and services in a rapidly evolving market, we need effective planning, forecasting, and management processes that allow us to scale and adjust our business in response to changing market opportunities and conditions.In fiscal 2024 and fiscal 2025, we reorganized our sales resources, including changes and additions to our sales leadership team, to gain operational efficiencies and better align our resources with customer and market opportunities. However, such reorganization and ongoing adjustments to our go-to-market model could disrupt our sales cycles in the short- or long-term, may not yield the desired efficiencies and benefits, and could harm our operating results, financial condition, and cash flows.We have undertaken, and may in the future undertake, initiatives that include reorganizing our workforce, restructuring, discontinuing certain products, acquisitions and dispositions of businesses, reducing facilities, or a combination of these actions, which could result in restructuring charges. Rapid changes in the size, alignment, or organization of our workforce, including our business unit structure, structure of our sales team, and sales account coverage, could impair our ability to develop, sell and deliver products and services as planned, or hinder our ability to achieve our business and financial objectives. Charges associated with these activities could harm our operating results.Our ability to achieve the anticipated cost savings and other benefits from these initiatives depends on many estimates and assumptions, which are subject to uncertainties. If our estimates and assumptions are incorrect, if we are unsuccessful at implementing changes, or if other unforeseen events occur, our business, financial condition, and results of operations could be adversely affected.Reduced U.S. government demand could materially harm our business, operating results, financial condition and cash flows.The U.S. government is an important customer for us, but its demand is uncertain due to political and budgetary fluctuations and constraints. Uncertainty related to the U.S. government budget and debt levels, changes to governmental agency structure, compliance with new initiatives and executive orders, and reductions in force have increased demand uncertainty for our products. Changes in administration may also lead to programs and initiatives moving in or out of favor, which may lead to varied perception of our company in the U.S. government market and may negatively impact our sales to the U.S. government. Additionally, the U.S. government, like other customers, may evaluate competing products and delay purchases during technology transitions in the storage A significant portion of our net revenues rely on sales to a limited number of customers and distributors. We typically do not enter into binding long-term purchase commitments with our customers, resellers, and distributors, meaning there is no guarantee that we will continue to receive large, recurring orders from them. For instance, our reseller agreements generally do not require minimum purchases, and our customers, resellers, and distributors can stop purchasing and marketing our products at any time. The loss, cancellation, or delay of purchases has previously impacted our revenues and could again in the future. Any deterioration in the financial stability of our customers, resellers, and distributors, or their ability to obtain credit to finance purchases of our products, could significantly adversely affect our results of operations and cash flow. If any of our key customers, resellers, or distributors changes its pricing practices, reduces the size or frequency of its orders, or stops purchasing our products altogether, our operating results, financial condition, and cash flows could be materially adversely impacted. Additionally, major customers may seek pricing, payment, intellectual property-related, or other commercial terms that are less favorable to us, which could negatively impact our business, cash flow, and operating results.", "prior_body": "A significant portion of our net revenues depends on sales to a limited number of customers and distributors. We generally do not enter into binding purchase commitments with our customers, resellers and distributors for extended periods of time, and thus there is no guarantee we will continue to receive large, recurring orders from these customers, resellers or distributors. For example, our reseller agreements generally do not require minimum purchases, and our customers, resellers and distributors can stop purchasing and marketing our products at any time. Any deterioration in the solvency of our customers, resellers and distributors or the ability of such customers, resellers and distributors to obtain credit to finance purchases of our products could have a significant adverse effect on our results of operations and cash flow. If any of our key customers, resellers or distributors changes its pricing practices, reduces the size or frequency of its orders for our products, or stops purchasing our products altogether, our operating results, financial condition and cash flows could be materially adversely impacted. In addition, major customers may also seek pricing, payment, intellectual property-related, or other commercial terms that are less favorable to us, which may have a negative impact on our business, cash flow and operating results. 20 20" }, { "status": "MODIFIED", "current_title": "Our stock price is subject to volatility.", "prior_title": "Our stock price is subject to volatility.", "similarity_score": 0.648, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Our stock price is subject to changes in recommendations or earnings estimates by financial analysts, changes in investors' or analysts' valuation measures for our stock, changes in our capital structure, including issuance of additional debt, changes in our credit ratings, our ability to pay dividends and to continue to execute our stock repurchase program as planned and market trends and economic volatility unrelated to our performance.\"", "Reworded sentence: \"These factors, as well as general economic and political conditions and the timing of announcements in the public market regarding new products or services, product enhancements or technological 27 27 advances by our competitors or us, and any announcements by us of acquisitions, major transactions, or management changes may adversely affect our stock price.Our quarterly operating results may fluctuate materially, which could harm our common stock price.Our operating results have fluctuated in the past and will continue to do so, sometimes materially.\"" ], "current_body": "Our stock price is subject to changes in recommendations or earnings estimates by financial analysts, changes in investors' or analysts' valuation measures for our stock, changes in our capital structure, including issuance of additional debt, changes in our credit ratings, our ability to pay dividends and to continue to execute our stock repurchase program as planned and market trends and economic volatility unrelated to our performance. If we fail to meet any investor expectations related to dividends and/or stock repurchases, the market price of our stock could decline significantly, and could have a material adverse impact on investor confidence. Additionally, price volatility of our stock over a given period may cause the average price at which we repurchase our own stock to exceed the stock’s market price at a given point in time. Furthermore, speculation in the press or investment community about our strategic position, financial condition, results of operations or business can cause changes in our stock price. These factors, as well as general economic and political conditions and the timing of announcements in the public market regarding new products or services, product enhancements or technological 27 27 advances by our competitors or us, and any announcements by us of acquisitions, major transactions, or management changes may adversely affect our stock price.Our quarterly operating results may fluctuate materially, which could harm our common stock price.Our operating results have fluctuated in the past and will continue to do so, sometimes materially. All of the matters discussed in this Risk Factors section could impact our operating results in any fiscal quarter or year. In addition to those matters, we face the following issues, which could impact our quarterly results: •Seasonality, such as our historical seasonal decline in revenues in the first quarter of our fiscal year and seasonal increase in revenues in the fourth quarter of our fiscal year;•Linearity, such as our historical intra-quarter customer orders and revenue pattern in which a disproportionate percentage of each quarter’s total orders and related revenue occur in the last month of the quarter; and•Unpredictability associated with larger scale enterprise software license agreements which generally take longer to negotiate and occur less consistently than other types of contracts, and for which revenue attributable to the software license component is typically recognized in full upon delivery.If our operating results fall below our forecasts and the expectations of public market analysts and investors, the trading price of our common stock may decline. There are risks associated with our outstanding and future indebtedness.As of April 25, 2025, we had $3.3 billion aggregate principal amount of outstanding indebtedness for our senior notes that mature at specific dates in calendar years 2025, 2027, 2030, 2032 and 2035. We may incur additional indebtedness in the future under existing credit facilities and/or enter into new financing arrangements. We may fail to pay these or additional future obligations, as and when required. Specifically, if we are unable to generate sufficient cash flows from operations or to borrow sufficient funds in the future to service or refinance our debt, our business, operating results, financial condition and cash flows will be harmed. Any downgrades from credit rating agencies such as Moody’s Investors Service or Standard & Poor’s Rating Services may adversely impact our ability to obtain additional financing or the terms of such financing and reduce the market capacity for our commercial paper. Furthermore, if prevailing interest rates or other factors result in higher interest rates upon any potential future financing, then interest expense related to the refinance indebtedness would increase. In addition, all our debt and credit facility arrangements subject us to continued compliance with restrictive and financial covenants. If we do not comply with these covenants or otherwise default under the arrangements, we may be required to repay any outstanding amounts borrowed under these agreements. Moreover, compliance with these covenants may restrict our strategic or operational flexibility in the future, which could harm our business, operating results, financial condition and cash flows.General Risks Our business could be materially and adversely affected as a result of natural disasters, terrorist acts or other catastrophic events.We depend on the ability of our personnel, inventories, equipment and products to move reasonably unimpeded around the world. Any political, military, terrorism, global trade, world health or other issue that hinders this movement or restricts the import or export of materials could lead to significant business disruptions. For example, the COVID-19 pandemic impeded the mobility of our personnel, inventories, equipment and products and disrupted our business operations. Furthermore, any economic failure or other material disruption caused by natural disasters, including fires, floods, droughts, hurricanes, tornadoes, earthquakes, and volcanoes; power or water loss or shortages; environmental disasters; telecommunications or business information systems failures or break-ins and similar events could also adversely affect our ability to conduct business. As a result of climate change, we expect the frequency and impact of such natural disasters or other material disruptions to increase. If such disruptions result in cancellations of customer orders or contribute to a general decrease in economic activity or corporate spending on IT, or directly impact our marketing, manufacturing, financial and logistics functions, or impair our ability to meet our customer demands, our operating results and financial condition could be materially adversely affected. Our headquarters is located in Northern California, an area susceptible to earthquakes and wildfires. If any significant disaster were to occur there, our ability to operate our business and our operating results, financial condition and cash flows could be adversely impacted.We could be subject to additional income tax liabilities. Our effective tax rate is influenced by a variety of factors, many of which are outside of our control. These factors include among other things, fluctuations in our earnings and financial results in the various countries and states in which we do business, changes to advances by our competitors or us, and any announcements by us of acquisitions, major transactions, or management changes may adversely affect our stock price.", "prior_body": "Our stock price is subject to changes in recommendations or earnings estimates by financial analysts, changes in investors' or analysts' valuation measures for our stock, changes in our capital structure, including issuance of additional debt, changes in our credit ratings, our ability to pay dividends and to continue to execute our stock repurchase program as planned and market trends unrelated to our performance. Our ability to pay quarterly dividends and to continue to execute our stock repurchase program as planned will be subject to, among other things, our financial condition and operating results, available cash and cash flows in the U.S., capital requirements, and other factors. Future dividends are subject to declaration by our Board of Directors, and our stock repurchase program does not obligate us to acquire any specific number of shares. However, if we fail to meet any investor expectations related to dividends and/or stock repurchases, the market price of our stock could decline significantly, and could have a material adverse impact on investor confidence. Additionally, price volatility of our stock over a given period may cause the average price at which we repurchase our own stock to exceed the stock’s market price at a given point in time. Furthermore, speculation in the press or investment community about our strategic position, financial condition, results of operations or business can cause changes in our stock price. These factors, as well as general economic and political conditions and the timing of announcements in the public market regarding new products or services, product enhancements or technological advances by our competitors or us, and any announcements by us of acquisitions, major transactions, or management changes may adversely affect our stock price." }, { "status": "MODIFIED", "current_title": "Reduced U.S. government demand could materially harm our business, operating results, financial condition and cash flows.", "prior_title": "Reduced U.S. government demand could materially harm our business, operating results, financial condition and cash flows. In addition, we could be harmed by claims that we have or a channel partner has failed to comply with regulatory and contractual requirements applicable to sales to the U.S. government.", "similarity_score": 0.597, "confidence": "low", "key_changes": [ "Reworded sentence: \"government is an important customer for us, but its demand is uncertain due to political and budgetary fluctuations and constraints.\"", "Reworded sentence: \"government, whether directly or through channel partners, subjects us to specific regulatory and contractual requirements, which may change or increase at short notice.\"" ], "current_body": "The U.S. government is an important customer for us, but its demand is uncertain due to political and budgetary fluctuations and constraints. Uncertainty related to the U.S. government budget and debt levels, changes to governmental agency structure, compliance with new initiatives and executive orders, and reductions in force have increased demand uncertainty for our products. Changes in administration may also lead to programs and initiatives moving in or out of favor, which may lead to varied perception of our company in the U.S. government market and may negatively impact our sales to the U.S. government. Additionally, the U.S. government, like other customers, may evaluate competing products and delay purchases during technology transitions in the storage 21 21 industry. If the U.S. government or its agencies reduce or shift their IT spending patterns, our revenues and operating results may be adversely affected.Selling our products to the U.S. government, whether directly or through channel partners, subjects us to specific regulatory and contractual requirements, which may change or increase at short notice. Some of these requirements may extend past the specific nature and products of the arrangement and impact our broader corporate policies, initiatives and employee resources. Failure to comply with these requirements by either us or our channel partners could lead to investigations, fines, and other penalties (including the loss of such government contracts), harming our operating results and financial condition. For example, the U.S. Department of Justice (DOJ) has previously pursued claims and settlements with IT vendors, including us and our competitors and channel partners, under the False Claims Act and other statutes related to violations of regulatory and contractual requirements, which may include such areas as pricing and discount practices, cybersecurity, or procurement integrity. These actions, in addition to potential fines and other penalties as well as potential government audits and investigations, could also result in suspension or disbarment from future government contracts. Additionally, government certification requirements may change and, in doing so, restrict our ability to sell into the government sector until we have attained revised certifications (or are able to make the required certifications to the government). We could also be harmed by claims of non-compliance with these requirements by us or our channel partners. Any of these outcomes could materially adversely affect our business, operating results, financial condition and cash flows. In response to evolving and increasing security threats, the U.S. government has imposed additional requirements on IT vendors, including us. These requirements range from software development security (e.g., the Executive Order on Improving the Nation’s Cybersecurity (EO 14028), issued in May 2021, to require attestation to minimum requirements for our software development framework), to supply chain security (e.g., Section 5949 of the FY23 National Defense Authorization Act (NDAA) prohibits us from including in our products or using in our corporate environment certain semiconductor products and services), to cybersecurity (e.g., the U.S. Department of Defense’s Cybersecurity Maturity Model Certification (CMMC) program). Failure to meet these requirements as they apply to us and our products may result in delays or inability to execute contracts with customers, particularly with government entities.If we do not achieve forecasted sales orders in any quarter, our operating results, financial condition and cash flows could be harmed.We derive a significant amount of our revenues in any given quarter from orders booked in the same quarter. These orders typically follow intra-quarter seasonality patterns, with a significant portion occurring toward the end of the quarter. If we fail to achieve the forecasted level, timing, and mix of orders in line with our quarterly targets and historical patterns, or if we experience cancellations of significant orders, our operating results, financial condition and cash flows could be adversely affected.We are exposed to the credit and non-payment risk of our customers, resellers and distributors, especially during times of economic uncertainty and tight credit markets, which could result in material losses.Most of our sales to customers are on an open credit basis, with typical payment terms of 30 days. During periods of economic uncertainty, when access to liquidity may be limited, we may experience increased losses as more customers become unable to pay their obligations to us, either in full or in part. Additionally, some customers have entered into recourse and non-recourse financing leasing arrangements using third-party leasing companies. Under recourse leases, which typically last three years or less, we remain liable for the unpaid remaining lease payments to the third-party leasing companies if the end-user customer defaults. Our exposure to credit risks from our customers increases during economic uncertainty or volatility. This risk may further increase if our customers, their customers, or their lease financing sources are adversely affected by global economic conditions.Risks Related to Our Products and ServicesAny disruption to our supply chain could materially harm our business, operating results, financial condition and cash flows.We do not manufacture certain components used in our products. We rely on third parties to manufacture critical components and handle associated logistics. Our lack of direct control over these elements, combined with the diverse international geographic locations of our manufacturing partners and suppliers, creates significant risks for us, including:•Limited number of suppliers for certain components; •No guarantees of supply and limited ability to control the quality, quantity and cost of our products or of their components; •Potential for binding price or purchase commitments with our suppliers at higher than market rates; •Limited ability to adjust production volumes in response to our customers’ demand fluctuations; •Labor and political unrest at facilities we do not operate or own; industry. If the U.S. government or its agencies reduce or shift their IT spending patterns, our revenues and operating results may be adversely affected. Selling our products to the U.S. government, whether directly or through channel partners, subjects us to specific regulatory and contractual requirements, which may change or increase at short notice. Some of these requirements may extend past the specific nature and products of the arrangement and impact our broader corporate policies, initiatives and employee resources. Failure to comply with these requirements by either us or our channel partners could lead to investigations, fines, and other penalties (including the loss of such government contracts), harming our operating results and financial condition. For example, the U.S. Department of Justice (DOJ) has previously pursued claims and settlements with IT vendors, including us and our competitors and channel partners, under the False Claims Act and other statutes related to violations of regulatory and contractual requirements, which may include such areas as pricing and discount practices, cybersecurity, or procurement integrity. These actions, in addition to potential fines and other penalties as well as potential government audits and investigations, could also result in suspension or disbarment from future government contracts. Additionally, government certification requirements may change and, in doing so, restrict our ability to sell into the government sector until we have attained revised certifications (or are able to make the required certifications to the government). We could also be harmed by claims of non-compliance with these requirements by us or our channel partners. Any of these outcomes could materially adversely affect our business, operating results, financial condition and cash flows. In response to evolving and increasing security threats, the U.S. government has imposed additional requirements on IT vendors, including us. These requirements range from software development security (e.g., the Executive Order on Improving the Nation’s Cybersecurity (EO 14028), issued in May 2021, to require attestation to minimum requirements for our software development framework), to supply chain security (e.g., Section 5949 of the FY23 National Defense Authorization Act (NDAA) prohibits us from including in our products or using in our corporate environment certain semiconductor products and services), to cybersecurity (e.g., the U.S. Department of Defense’s Cybersecurity Maturity Model Certification (CMMC) program). Failure to meet these requirements as they apply to us and our products may result in delays or inability to execute contracts with customers, particularly with government entities.", "prior_body": "The U.S. government is an important customer for us. However, government demand is uncertain, as it is subject to political and budgetary fluctuations and constraints. Events such as the U.S. federal government shutdown from December 2018 to January 2019 and continued uncertainty regarding the U.S. budget and debt levels have increased demand uncertainty for our products. In addition, like other customers, the U.S. government may evaluate competing products and delay purchasing in the face of the technology transitions taking place in the storage industry. If the U.S. government or an individual agency or multiple agencies within the U.S. government continue to reduce or shift their IT spending patterns, our operating results, including revenues may be harmed. Selling our products to the U.S. government, whether directly or through channel partners, also subjects us to certain regulatory and contractual requirements. Failure to comply with these requirements by either us or our channel partners could subject us to investigations, fines, and other penalties, which could materially harm our operating results and financial condition. As an example, the United States Department of Justice (DOJ) and the General Services Administration (GSA) have in the past pursued claims against and financial settlements with IT vendors, including us and several of our competitors and channel partners, under the False Claims Act and other statutes related to pricing and discount practices and compliance with certain provisions of GSA contracts for sales to the federal government. Although the DOJ and GSA currently have no claims pending against us, we could face claims in the future. Violations of certain regulatory and contractual requirements, including with respect to cybersecurity, procurement process or affirmative action program requirements could also result in us being suspended or debarred from future government contracting. Any of these outcomes could have a material adverse effect on our business, operating results, financial condition and cash flows. In response to increasing cybersecurity threats, the U.S. government has subjected IT vendors, including us, to certain additional requirements. As an example, the Executive Order on Improving the Nation’s Cybersecurity (EO 14028), released in May 2021, 21 21 outlines the U.S. government’s plan to address software supply chain security for “critical software” and other software. NetApp’s products are categorized as critical software, requiring us to achieve compliance with the Secure Software Development Framework (SSDF) under NIST special publication 800-218. The current deadline for compliance is subject to the U.S. government’s finalization of their common attestation form, and any products that cannot attest to compliance with the SSDF may result in delays or inability to execute contracts with customers, particularly with government entities." }, { "status": "MODIFIED", "current_title": "Initiatives to improve our cost structure, business processes, and systems may not achieve the expected benefits and could negatively impact our reputation, business, operating results, financial condition and cash flows.", "prior_title": "Initiatives intended to make our cost structure, business processes and systems more efficient may not achieve the expected benefits and could inadvertently have an adverse effect on our business, operating results, financial condition and cash flows.", "similarity_score": 0.588, "confidence": "low", "key_changes": [ "Reworded sentence: \"We continuously strive to make our cost structure and business processes more efficient, including by relocating our business activities from higher-cost to lower-cost locations, outsourcing certain business processes and functions, and implementing changes to our business information systems.\"" ], "current_body": "We continuously strive to make our cost structure and business processes more efficient, including by relocating our business activities from higher-cost to lower-cost locations, outsourcing certain business processes and functions, and implementing changes to our business information systems. These efforts require significant investment of financial and human resources and substantial changes to our current operations. For example, in fiscal 2025, we continued our implementation of certain new business information systems, including a new enterprise resource planning (ERP) system to enhance and standardize our processes, improve oversight, and better serve our customers. However, any disruption during this transition could impact our ability to send and track invoices, process 19 19 vendor payments, pay employees, fulfill contractual obligations, report financial results, maintain effective internal controls, or operate our business effectively. We may also encounter difficulties in implementing new business information systems or maintaining and upgrading existing systems and software. These difficulties could lead to significant expenses or losses due to unexpected additional costs, disruption in business operations, loss of sales or profits, or delays in processing and reporting key financial information. As a result, our business, results of operations, financial condition and prospects could be materially adversely affected.Additionally, as we move operations to lower-cost jurisdictions and outsource certain business processes, we become subject to new regulatory regimes and lose control of certain aspects of our operations, increasing our dependence upon third-party systems and processes. If we fail to move operations, outsource processes, or implement new information in compliance with local laws and maintain adequate standards, controls and procedures, the quality of our products and services may suffer, and we may face increased litigation risk. These issues could adversely affect our business, operating results, and financial condition. If we do not achieve the expected benefits of these and other transformational initiatives, our business, operating results, financial condition, and cash flows could be harmed.We are exposed to credit risks, fluctuations in the market value of our investment portfolio, and potential adverse effects on our cash and cash equivalents if the financial institutions holding them fail. We maintain an investment portfolio of various holdings, types, and maturities. The credit ratings and pricing of our investments can be negatively affected by factors such as volatile macroeconomic conditions, liquidity issues, credit deterioration, financial results, economic risk, political risk, sovereign risk, or other factors. Consequently, the value and liquidity of our investments and their returns may fluctuate significantly. Unfavorable macroeconomic conditions, rising interest rates, international trade protection measures and disputes (including economic and trade barriers, tariffs, sanctions and export controls), or other circumstances could lead to an economic slowdown or global recession, potentially causing failures of counterparties, including financial institutions, governments, and insurers. This could materially decrease the value of our investment portfolio and substantially reduce our investment returns. We regularly maintain cash balances at large third-party financial institutions that exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit of $250,000 and similar regulatory insurance limits outside the United States. If a depository institution where we maintain deposits fails or faces adverse financial or credit markets conditions, we may not be able to recover all of our deposits, which adversely impacts our operating liquidity and financial performance. Additionally, if our customers or partners experience liquidity issues due to financial institution defaults or non-performance where they hold cash assets, their ability to pay us may be impaired. This could materially affect our results of operations, including the collection of accounts receivable and cash flows.Our initiatives and disclosures related to sustainability and corporate responsibility matters expose us to risks that could adversely affect our reputation and performance. We have publicly announced, and may continue to establish and announce, initiatives regarding sustainability and corporate responsibility matters, as well as other related matters in our Impact Report, on our website and elsewhere. These statements, which are included in our Impact Report, on our website, in our SEC filings, and elsewhere, reflect our current plans and aspirations but are not guarantees of achievement. Implementing these initiatives and goals can be challenging and costly, and our current plans and aspirations may not all succeed or be achieved in the way and on the timelines we expect or at all. While these initiatives and goals are not a critical part of our business operations and may not significantly impact our financial performance directly, they are an important part of our business ethos and corporate culture that we believe is valued and appreciated by our investors and key stakeholders. There is growing attention from governments, investors, customers, employees, and other stakeholders on sustainability and corporate responsibility matters, and laws and regulations regarding disclosure, reporting and diligence requirements continue to evolve. We may face scrutiny from stakeholders regarding the scope or nature of our sustainability and corporate responsibility initiatives or any changes to these initiatives. In addition, state attorneys general and other governmental authorities may take action against certain sustainability and corporate responsibility policies or practices, and we may become subject to restrictions on sustainability and corporate responsibility initiatives. Incomplete or inaccurate sustainability and corporate responsibility-related data, failure to achieve sustainability and corporate responsibility goals, or government enforcement actions or litigation relating to sustainability and corporate responsibility initiatives could negatively impact our ability to attract or retain employees, our attractiveness as an investment or business partner, and ultimately our business, financial performance, and growth.Risks Related to Our Customers and SalesA portion of our revenues is generated by large, recurring purchases from various customers, resellers and distributors. vendor payments, pay employees, fulfill contractual obligations, report financial results, maintain effective internal controls, or operate our business effectively. We may also encounter difficulties in implementing new business information systems or maintaining and upgrading existing systems and software. These difficulties could lead to significant expenses or losses due to unexpected additional costs, disruption in business operations, loss of sales or profits, or delays in processing and reporting key financial information. As a result, our business, results of operations, financial condition and prospects could be materially adversely affected. Additionally, as we move operations to lower-cost jurisdictions and outsource certain business processes, we become subject to new regulatory regimes and lose control of certain aspects of our operations, increasing our dependence upon third-party systems and processes. If we fail to move operations, outsource processes, or implement new information in compliance with local laws and maintain adequate standards, controls and procedures, the quality of our products and services may suffer, and we may face increased litigation risk. These issues could adversely affect our business, operating results, and financial condition. If we do not achieve the expected benefits of these and other transformational initiatives, our business, operating results, financial condition, and cash flows could be harmed.", "prior_body": "We continuously seek to make our cost structure and business processes more efficient, including by moving our business activities from higher-cost to lower-cost locations, outsourcing certain business processes and functions, and implementing changes to our business information systems. These efforts may involve a significant investment of financial and human resources and significant changes to our current operating processes. For example, in fiscal 2024, we implemented, and in fiscal 2025 we will continue to implement, certain new business information systems, including implementing our new enterprise resource planning system. We may encounter difficulties in implementing these new business information systems or maintaining and upgrading existing systems and software. Such difficulties may lead to significant expenses or losses due to unexpected additional costs required to implement or maintain systems, disruption in business operations, loss of sales or profits, or disruption to our ability to timely and accurately process and report key aspects of our financial statements and, as a result, may have a material adverse effect on our business, results of operations, financial condition and prospects. In addition, as we move operations into lower-cost jurisdictions and outsource certain business processes, we become subject to new regulatory regimes and lose control of certain aspects of our operations and, as a consequence, become more dependent upon the systems and business processes of third-parties. If we are unable to move our operations, outsource business processes or implement new business information systems in a manner that complies with local law and maintains adequate standards, controls and procedures, the quality of our products and services may suffer and we may be subject to increased litigation risk, either of which could have an adverse effect on our business, operating results and financial condition. Additionally, we may not achieve the expected benefits of these and other transformational initiatives, which could harm our business, operating results, financial condition and cash flows." }, { "status": "MODIFIED", "current_title": "Issues related to the development and use of artificial intelligence (AI), including GenAI, could lead to legal or regulatory action, damage our reputation, or otherwise materially harm our business.", "prior_title": "Issues related to the development and use of artificial intelligence (AI), including GenAI, could give rise to legal and/or regulatory action, damage our reputation or otherwise materially harm our business.", "similarity_score": 0.587, "confidence": "low", "key_changes": [ "Reworded sentence: \"As a technology company at the forefront of AI innovation, our business faces potential risks associated with the rapidly evolving regulatory landscape for AI.\"", "Reworded sentence: \"17 17 We may be unsuccessful in identifying or resolving ethical and legal issues presented by the use of AI before they arise.\"" ], "current_body": "As a technology company at the forefront of AI innovation, our business faces potential risks associated with the rapidly evolving regulatory landscape for AI. Governments and regulatory bodies worldwide are increasingly enacting new laws and guidelines to address the ethical, privacy, and security implications of AI technologies. Non-compliance, even if inadvertent or without our knowledge, with these emerging regulations could result in legal and financial penalties, reputational damage, and operational disruptions. Additionally, the diverse and sometimes conflicting nature of international AI regulations may pose challenges in maintaining consistent compliance across different jurisdictions. The complexity and novelty of these laws may also require investments in compliance infrastructure, including enhanced data governance frameworks, algorithmic transparency, and bias mitigation strategies. We are increasingly building and/or leveraging AI technology in certain products, services, and business operations, and our research and development in this area is ongoing. As with many innovations, AI presents risks, challenges, and potential unintended consequences that could affect our and our customers’ adoption and use of this technology. AI algorithms and training methodologies may be flawed, and AI technologies are complex and rapidly evolving. We face significant competition in the market and from other companies regarding such technologies. 17 17 We may be unsuccessful in identifying or resolving ethical and legal issues presented by the use of AI before they arise. AI-related issues, deficiencies and/or failures could result in (i) legal or regulatory action, including to enforce new legislation regulating AI in various jurisdictions where we operate, and the application of existing data protection, privacy, intellectual property, and other laws; (ii) damage to our reputation; (iii) time-consuming and costly litigation, including related to intellectual property; (iv) inability to protect our intellectual property; (v) disclosure of our confidential information or (vi) other material harm to our business. If regulation significantly delays or impedes the adoption of AI, we may not be able to meet our development goals or our sales forecasts.Increasing competition and industry consolidation could harm our business, operating results, financial condition and cash flows.Our markets are highly competitive, fragmented, and characterized by rapidly changing technology. We face competition from many companies, including established public companies, newer public companies with a strong focus on flash storage, and new market entrants targeting opportunities in GenAI and application data management for Kubernetes. Some competitors offer a broad range of IT products and services (full-stack vendors), while others offer a more limited set. Technology trends, such as GenAI, hosted or public cloud storage, software as a service (SaaS), IT as a service, and flash storage are driving significant changes in storage architectures and solution requirements. Cloud service providers offer storage on demand without requiring capital expenditure, which meets rapidly evolving business needs and has altered the competitive landscape. Competitors may develop new technologies, products, or services ahead of us or establish new business models, more flexible purchase models, or disruptive technologies. By extending our offerings in flash, cloud storage, converged infrastructure, and block storage, and GenAI, we are entering new segments and facing competition from both traditional competitors and emerging competitors. The long-term potential and competitiveness of emerging vendors remains uncertain. New competitors or alliances among existing competitors could emerge and quickly gain significant market share or buying power. Changes in customer requirements or increased industry consolidation could result in stronger competitors better able to compete. Additionally, current and potential competitors may establish cooperative relationships among themselves or with third parties, including some of our partners or suppliers. For additional information regarding our competitors, see the section entitled “Competition” contained in Part I, Item 1 - Business of this Annual Report on Form 10-K.Transition to consumption-based business models may adversely affect our revenues and profitability in other areas of our business, potentially harming our business, operating results, financial condition and cash flows.We offer customers a variety of consumption models, including cloud-based storage services and storage as a service (STaaS) delivered on-premises. As these business models continue to evolve, we may face challenges in competing effectively, generating significant revenues, or maintaining the profitability of our consumption-based offerings. Additionally, the growing prevalence of cloud and SaaS delivery models offered by us and our competitors may reduce overall demand for our traditional on-premises offerings sold through a capital expenditure (capex) model, which could negatively impact our revenues and cash flow, at least in the short term. Failure to successfully execute our consumption model strategy or anticipate customer needs could lead to a decline in our revenues and our profitability could decline.As customer demand for our consumption model offerings increases, we will encounter differences in the timing of revenue recognition compared to our traditional purchase arrangements. Revenue from traditional purchases is generally recognized in full at the time of delivery, whereas revenue from consumption model offerings is generally recognized ratably over the term of the arrangement. We incur certain expenses related to the infrastructure and marketing of our consumption model offerings before we can recognize the associated revenues.If we are unable to attract and retain qualified personnel, our business, operating results, financial condition and cash flows could be harmed.Our success depends on our ability to hire and retain qualified personnel to advance our corporate strategy and maintain key aspects of our corporate culture. As our future success relies on enhancing and introducing new products and features, we particularly need to attract and retain qualified engineers and technical talent, especially in emerging technology areas like AI and machine learning. To increase revenues, we must also increase the productivity of our sales force, which may require an increase in support infrastructure and personnel, to achieve adequate customer coverage.Competition for qualified employees, particularly in the technology industry, is intense. We have periodically reduced our workforce, including restructuring plans announced in fiscal 2023, fiscal 2024, and fiscal 2025, respectively. These actions may make it more challenging to attract and retain qualified employees. Failure to hire and retain skilled management and personnel, particularly engineers, salespeople, and key executive management, could disrupt our development efforts, sales results, business relationships, and our ability to execute our business plan and strategy, adversely affecting our operating results, financial conditions and cash flows. We may be unsuccessful in identifying or resolving ethical and legal issues presented by the use of AI before they arise. AI-related issues, deficiencies and/or failures could result in (i) legal or regulatory action, including to enforce new legislation regulating AI in various jurisdictions where we operate, and the application of existing data protection, privacy, intellectual property, and other laws; (ii) damage to our reputation; (iii) time-consuming and costly litigation, including related to intellectual property; (iv) inability to protect our intellectual property; (v) disclosure of our confidential information or (vi) other material harm to our business. If regulation significantly delays or impedes the adoption of AI, we may not be able to meet our development goals or our sales forecasts.", "prior_body": "We are increasingly building and/or leveraging AI technology, including GenAI, in certain of our products and services and in our business operations. Our research and development of such technology remains ongoing. As with many innovations, AI presents risks, challenges, and potential unintended consequences that could affect our and our customers’ adoption and use of this technology. AI algorithms and training methodologies may be flawed, and AI technologies are complex and rapidly evolving. We face significant competition in the market and from other companies regarding such technologies. While we aim to develop and use AI responsibly and attempt to identify and mitigate ethical and legal issues presented by its use, we may be unsuccessful in identifying or resolving issues before they arise. AI-related issues, deficiencies and/or failures could (i) 16 16 give rise to legal and/or regulatory action, including with respect to proposed legislation regulating AI in various jurisdictions in which we operate, and as a result of new applications of existing data protection, privacy, intellectual property, and other laws; (ii) damage our reputation; or (iii) otherwise materially harm our business. To the extent regulation materially delays or impedes the adoption of AI, demand for our products may not meet our forecasts." }, { "status": "MODIFIED", "current_title": "The dynamic markets in which we operate and our sales and distribution structure make it challenging to forecast revenues, and any disruption could harm our business, operating results, financial condition, and cash flows.", "prior_title": "The dynamic markets in which we participate and our sales and distribution structure makes forecasting revenues difficult and, if disrupted, could harm our business, operating results, financial condition and cash flows.", "similarity_score": 0.545, "confidence": "low", "key_changes": [ "Reworded sentence: \"We participate in dynamic markets and employ diverse business and sales models, which complicate revenue forecasting.\"" ], "current_body": "We participate in dynamic markets and employ diverse business and sales models, which complicate revenue forecasting. We sell to a wide range of customers across various industries and geographies, both directly and through multiple channels, each with different sales cycles. Most of our sales are made and/or fulfilled indirectly through channel partners, including value-added resellers, systems integrators, distributors, original equipment manufacturers (OEMs), and strategic business partners, including public cloud providers. This structure makes it particularly difficult to predict future revenue, especially within any specific fiscal quarter or year. Our relationships with our indirect channel partners and strategic business partners are crucial to our success. The loss of one or more of our key indirect channel partners in a particular region, or the failure of our channel or strategic partners, including public cloud providers, to promote our products could negatively impact our operating results. Qualifying and developing new indirect channel partners typically requires significant time and resource investment before achieving acceptable productivity levels. If we fail to maintain strong relationships with our indirect channel partners and strategic partners, including public cloud providers, if our partners seek to renegotiate or terminate existing contracts or agreements, or if their financial condition, business, or 16 16 customer relationships weaken, if they fail to comply with legal or regulatory requirements, or if we cease to do business with them for these or other reasons, our business, operating results, financial condition and cash flows could be adversely affected. Our business, operating results, financial condition, and cash flows could be adversely affected if we are unable to develop, introduce and gain market acceptance for new products and services while managing the transition from older ones, or if we cannot provide the expected level of quality and support for our new products and services.Our future growth relies on the successful development and introduction of new hardware and software products and services. The complexity of storage and data management software, subsystems and appliances, as well as the challenges in estimating the engineering effort required to produce new products and services, pose significant technical and quality control risks for these new products and services. If we encounter technological challenges, customer reluctance, or other obstacles that prevent us from developing, introducing and gaining market acceptance for new products and services, or if we fail to provide the expected level of product and support quality, our business, operating results, financial condition and cash flows could be materially and adversely affected. Introducing new products and features exposes us to additional financial and operational risks. These include the ability to forecast customer preferences and demand, managing production capacity to meet the demand for new products and services and avoid excessive inventories of older products and components, manage the transition from older products and solutions, and handle the impact of customer demand for new offerings versus those being replaced. As customers transition from older products to newer ones, delays or decisions to postpone the transition could lead to non-renewal of new offerings, impacting our ability to manage and forecast customer churn and expansion rates. Additionally, uncertainties related to the price-performance of new products compared to competitors, competitors’ responses to our new products, extended evaluation periods by customers, and our partners’ investment in selling our new products add to the inherent risks. If we do not manage these risks effectively, our business, operating results, financial condition, and cash flows could face significant adverse impacts. Furthermore, entering new or emerging markets will likely increase demands on our service and support operations and expose us to additional competition. We may struggle to provide competitive products, services and support for these market opportunities. Our gross margins may fluctuate.Our gross margins are influenced by a variety of factors, including macroeconomic volatility, competitive pricing, component and product design costs, inflation, foreign exchange currency fluctuations, and the volume and relative mix of revenues from product sales, software support, hardware support, and other services offerings. Factors such as increased component and labor costs, pricing and discounting pressures, changes in component costs and product prices, or shifts in revenue mix and volume from different offerings could negatively impact our revenues, gross margins or earnings. Additionally, our gross margins are affected by the cost of any substandard materials and our sales and distribution activities, including pricing actions, rebates, sales initiatives, discount levels, and the timing of service contract renewals. Third-party component costs make up a significant portion of our product costs. We may have difficulty managing these costs if supplies of certain components, including NAND, become limited or component prices rise. Such limitations could increase our product costs. We have experienced, and may continue to experience, negative impacts on our gross margins due to rising component costs, logistics costs, tariffs and other trade barriers, and inflationary pressures. An increase in component or design costs relative to our product prices could harm our gross margins and earnings. Failure to sustain or improve our gross margins may have a material adverse effect on our business and stock price.Issues related to the development and use of artificial intelligence (AI), including GenAI, could lead to legal or regulatory action, damage our reputation, or otherwise materially harm our business.As a technology company at the forefront of AI innovation, our business faces potential risks associated with the rapidly evolving regulatory landscape for AI. Governments and regulatory bodies worldwide are increasingly enacting new laws and guidelines to address the ethical, privacy, and security implications of AI technologies. Non-compliance, even if inadvertent or without our knowledge, with these emerging regulations could result in legal and financial penalties, reputational damage, and operational disruptions. Additionally, the diverse and sometimes conflicting nature of international AI regulations may pose challenges in maintaining consistent compliance across different jurisdictions. The complexity and novelty of these laws may also require investments in compliance infrastructure, including enhanced data governance frameworks, algorithmic transparency, and bias mitigation strategies.We are increasingly building and/or leveraging AI technology in certain products, services, and business operations, and our research and development in this area is ongoing. As with many innovations, AI presents risks, challenges, and potential unintended consequences that could affect our and our customers’ adoption and use of this technology. AI algorithms and training methodologies may be flawed, and AI technologies are complex and rapidly evolving. We face significant competition in the market and from other companies regarding such technologies. customer relationships weaken, if they fail to comply with legal or regulatory requirements, or if we cease to do business with them for these or other reasons, our business, operating results, financial condition and cash flows could be adversely affected.", "prior_body": "The dynamic markets in which we participate, and our business and sales models make revenues difficult to forecast. We sell to a variety of customers, across multiple industries and geographies, both directly and through various channels, with a corresponding variety of sales cycles. The majority of our sales are made and/or fulfilled indirectly through channel partners, including value-added resellers, systems integrators, distributors, original equipment manufacturers (OEMs) and strategic business partners, which include public cloud providers. This structure significantly complicates our ability to forecast future revenue, especially within any particular fiscal quarter or year. Moreover, our relationships with our indirect channel partners and strategic business partners are critical to our success. The loss of one or more of our key indirect channel partners in a given geographic area or the failure of our channel or strategic partners, including public cloud providers, to promote our products could harm our operating results. Qualifying and developing new indirect channel partners typically requires a significant investment of time and resources before acceptable levels of productivity are met. If we fail to maintain our relationships with our indirect channel partners and strategic partners, including public cloud providers, if their financial condition, business or customer relationships were to weaken, if they fail to comply with legal or regulatory requirements, or if we were to cease to do business with them for these or other reasons, our business, operating results, financial condition and cash flows could be harmed." }, { "status": "UNCHANGED", "current_title": "Our quarterly operating results may fluctuate materially, which could harm our common stock price.", "prior_title": "Our quarterly operating results may fluctuate materially, which could harm our common stock price.", "current_body": "Our operating results have fluctuated in the past and will continue to do so, sometimes materially. All of the matters discussed in this Risk Factors section could impact our operating results in any fiscal quarter or year. In addition to those matters, we face the following issues, which could impact our quarterly results: •Seasonality, such as our historical seasonal decline in revenues in the first quarter of our fiscal year and seasonal increase in revenues in the fourth quarter of our fiscal year; Seasonality, such as our historical seasonal decline in revenues in the first quarter of our fiscal year and seasonal increase in revenues in the fourth quarter of our fiscal year; •Linearity, such as our historical intra-quarter customer orders and revenue pattern in which a disproportionate percentage of each quarter’s total orders and related revenue occur in the last month of the quarter; and Linearity, such as our historical intra-quarter customer orders and revenue pattern in which a disproportionate percentage of each quarter’s total orders and related revenue occur in the last month of the quarter; and •Unpredictability associated with larger scale enterprise software license agreements which generally take longer to negotiate and occur less consistently than other types of contracts, and for which revenue attributable to the software license component is typically recognized in full upon delivery. Unpredictability associated with larger scale enterprise software license agreements which generally take longer to negotiate and occur less consistently than other types of contracts, and for which revenue attributable to the software license component is typically recognized in full upon delivery. If our operating results fall below our forecasts and the expectations of public market analysts and investors, the trading price of our common stock may decline." }, { "status": "UNCHANGED", "current_title": "Our business could be materially and adversely affected as a result of natural disasters, terrorist acts or other catastrophic events.", "prior_title": "Our business could be materially and adversely affected as a result of natural disasters, terrorist acts or other catastrophic events.", "current_body": "We depend on the ability of our personnel, inventories, equipment and products to move reasonably unimpeded around the world. Any political, military, terrorism, global trade, world health or other issue that hinders this movement or restricts the import or export of materials could lead to significant business disruptions. For example, the COVID-19 pandemic impeded the mobility of our personnel, inventories, equipment and products and disrupted our business operations. Furthermore, any economic failure or other material disruption caused by natural disasters, including fires, floods, droughts, hurricanes, tornadoes, earthquakes, and volcanoes; power or water loss or shortages; environmental disasters; telecommunications or business information systems failures or break-ins and similar events could also adversely affect our ability to conduct business. As a result of climate change, we expect the frequency and impact of such natural disasters or other material disruptions to increase. If such disruptions result in cancellations of customer orders or contribute to a general decrease in economic activity or corporate spending on IT, or directly impact our marketing, manufacturing, financial and logistics functions, or impair our ability to meet our customer demands, our operating results and financial condition could be materially adversely affected. Our headquarters is located in Northern California, an area susceptible to earthquakes and wildfires. If any significant disaster were to occur there, our ability to operate our business and our operating results, financial condition and cash flows could be adversely impacted." }, { "status": "UNCHANGED", "current_title": "Our failure to adjust to emerging standards may harm our business.", "prior_title": "Our failure to adjust to emerging standards may harm our business.", "current_body": "Emerging standards may adversely affect the UNIX®, Windows® and World Wide Web server markets upon which we depend. For example, we provide our open access data retention solutions to customers within the financial services, healthcare, pharmaceutical and government market segments, industries that are subject to various evolving governmental regulations, certifications and controls with respect to data access, reliability and permanence in the U.S. and in the other countries in which we operate. If our products do not meet and continue to comply with these evolving governmental regulations in this regard, customers in these market and geographical segments will not purchase our products, and we may not be able to expand our product offerings in these market and geographical segments at the rates which we have forecasted." }, { "status": "UNCHANGED", "current_title": "We rely on software from third parties, and a failure to properly manage our use of third-party software could result in increased costs or loss of revenue.", "prior_title": "We rely on software from third parties, and a failure to properly manage our use of third-party software could result in increased costs or loss of revenue.", "current_body": "Many of our products are designed to include software licensed from third parties. Such third-party software includes software licensed from commercial suppliers and software licensed under public or open-source licenses. We have internal processes to manage our use of such third-party software. However, if we fail to adequately manage our use of third-party software, then we may be subject to copyright infringement or other third-party claims. If we are non-compliant with a license for commercial software, then we may be required to pay penalties or undergo costly audits pursuant to the license agreement. In the case of open-source software licensed under certain “copyleft” licenses, the license itself may require, or a court-imposed remedy for non-compliant use of the open-source software may require, that proprietary portions of our own software be publicly disclosed or licensed. Additionally, contract proposals, negotiations and software proposals are complex and frequently involve lengthy bidding and selection processes. We may not be able to negotiate extensions to our current third-party licenses when due for renewal or continue to secure such licenses under commercially reasonable terms. Each of the foregoing could result in a loss of intellectual property rights, increased costs, damage to our reputation and/or a loss of revenue. In addition, many of our products use open-source software. Such open-source software generally does not provide any warranty or contractual protection and may be susceptible to compromise and supply-chain attacks by threat actors. Further, open-source software or third-party software may contain vulnerabilities, which may or may not be known at the time of our inclusion of the software in a product. If a vulnerability in such software is successfully exploited, we could be subject to damages including remediation costs, reputational damage, and lost revenues." }, { "status": "UNCHANGED", "current_title": "Our failure to protect our intellectual property could harm our business, operating results, financial condition and cash flows.", "prior_title": "Our failure to protect our intellectual property could harm our business, operating results, financial condition and cash flows.", "current_body": "Our success depends significantly upon developing, maintaining and protecting our proprietary technology. We rely on a combination of patents, copyrights, trademarks, trade secrets, confidentiality procedures and contractual provisions with employees, resellers, strategic partners and customers, to protect our proprietary rights. We currently have multiple U.S. and international patent applications pending and multiple U.S. and international patents issued. The pending applications may not be approved, and our existing and future patents may be challenged. If such challenges are brought, the patents may be invalidated. We may not be able to develop proprietary products or technologies that are patentable, and patents issued to us may not provide us with any competitive advantages and may be challenged by third parties. Further, the patents of others may materially and adversely affect our ability to do business. In addition, a failure to obtain and defend our trademark registrations may impede our marketing and branding efforts and competitive condition. Litigation may be necessary to protect our proprietary technology. Any such litigation may be time-consuming and costly. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary. In addition, the laws of some foreign countries do not protect proprietary rights to as great an extent as do the laws of the U.S. Our means of protecting our proprietary rights may not be adequate or our competitors may independently develop similar technology, duplicate our products, or design around patents issued to us or other intellectual property rights of ours. There is persistent risk that some individuals will improperly take our intellectual property after terminating their employment or other engagements with us, which could lead to intellectual property leakage to competitors and a loss of our competitive advantages." }, { "status": "UNCHANGED", "current_title": "There are risks associated with our outstanding and future indebtedness.", "prior_title": "There are risks associated with our outstanding and future indebtedness.", "current_body": "As of April 25, 2025, we had $3.3 billion aggregate principal amount of outstanding indebtedness for our senior notes that mature at specific dates in calendar years 2025, 2027, 2030, 2032 and 2035. We may incur additional indebtedness in the future under existing credit facilities and/or enter into new financing arrangements. We may fail to pay these or additional future obligations, as and when required. Specifically, if we are unable to generate sufficient cash flows from operations or to borrow sufficient funds in the future to service or refinance our debt, our business, operating results, financial condition and cash flows will be harmed. Any downgrades from credit rating agencies such as Moody’s Investors Service or Standard & Poor’s Rating Services may adversely impact our ability to obtain additional financing or the terms of such financing and reduce the market capacity for our commercial paper. Furthermore, if prevailing interest rates or other factors result in higher interest rates upon any potential future financing, then interest expense related to the refinance indebtedness would increase. In addition, all our debt and credit facility arrangements subject us to continued compliance with restrictive and financial covenants. If we do not comply with these covenants or otherwise default under the arrangements, we may be required to repay any outstanding amounts borrowed under these agreements. Moreover, compliance with these covenants may restrict our strategic or operational flexibility in the future, which could harm our business, operating results, financial condition and cash flows." }, { "status": "UNCHANGED", "current_title": "If we do not achieve forecasted sales orders in any quarter, our operating results, financial condition and cash flows could be harmed.", "prior_title": "If we do not achieve forecasted sales orders in any quarter, our operating results, financial condition and cash flows could be harmed.", "current_body": "We derive a significant amount of our revenues in any given quarter from orders booked in the same quarter. These orders typically follow intra-quarter seasonality patterns, with a significant portion occurring toward the end of the quarter. If we fail to achieve the forecasted level, timing, and mix of orders in line with our quarterly targets and historical patterns, or if we experience cancellations of significant orders, our operating results, financial condition and cash flows could be adversely affected." } ] }