2025
Notice & Proxy
Statement
2024
Annual Report
DEAR ARISTA NETWORKS STOCKHOLDERS:
Fiscal 2024 was another exceptional year full of progress and
innovation for Arista, as demonstrated by the achievement of
significant financial and operational milestones. I am so proud of the
team’s execution in delivering the ultimate combination of superior
growth and profitability. We continued to deliver modern platforms
enabling AI for networking and networking for AI.
2024 MILESTONES:
• Arista celebrated its 20th anniversary and its 10th anniversary since its IPO and
attained the #1 market share in data center switching during that time.
• Revenue for our fiscal year 2024 was $7 billion, an increase of 19.5% compared to
fiscal year 2023.
• Arista introduced the Switch Aggregation Group (SWAG™) capability in Arista EOS®
that uses industry-standard Ethernet to group and manage individual switches via a
single IP address. In addition, Arista CloudVision® Leaf Spine Stack (LSS™)
Management allows operators to collectively manage a logical stack of switches within
a single networking closet or across the entire campus.
• Arista announced the Etherlink AI platforms, which support AI cluster sizes ranging
from thousands to hundreds of thousands of XPUs with highly efficient one- and
two-tier network topologies, offering superior application performance compared to
multi-tier networks.
• Arista, in collaboration with NVIDIA, showcased its Arista EOS AI Agent, designed to
align compute and network domains as a single-managed AI entity and thus help
lower job completion times.
• Arista designed the C-460 to help enterprises address the challenges of rapidly
increasing bandwidth requirements, including AR/VR (augmented reality/virtual reality)
applications, streaming multimedia, IoT proliferation, video applications and
high-density deployments.
• Arista launched CloudVision Universal Network Observability™ (CV UNO™) to
automate network, systems, and application/workload visibility and provide AI-driven
proactive analysis and prescriptive recommendations.
We have much to be proud of during our two decades of business and will continue to
approach the future with the same hunger and quest for innovation as we did since our
founding. We look forward to bringing new products and technology to market that
support and meet customer needs.
I thank Arista stockholders, customers, partners and our employees for your continued
support.
JAYSHREE ULLAL
Chief Executive Officer, President and Chairperson
Arista Networks, Inc.
April 16, 2025
[THIS PAGE INTENTIONALLY LEFT BLANK]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held at 11:00 a.m. Pacific Time on Friday, May 30, 2025
Dear Stockholders of Arista Networks, Inc.:
The 2025 annual meeting of stockholders of Arista Networks, Inc. (the “Company”), a Delaware corporation, and any
postponements, adjournments or continuations thereof (the “Annual Meeting”), will be held on Friday, May 30, 2025 at
11:00 a.m. Pacific Time. The Annual Meeting will be conducted in a virtual format to provide convenience to our
stockholders and enable increased stockholder participation. You will be able to attend the Annual Meeting online and
submit your questions during the meeting at www.virtualshareholdermeeting.com/ANET2025. To access the virtual
meeting, you will need to enter the control number included in your Notice of Internet Availability of Proxy Materials (the
“Notice”), on your proxy card or on the instructions that accompanied your proxy materials.
Our board of directors has fixed the close of business on April 2, 2025 as the record date for the Annual Meeting. Only
stockholders of record on April 2, 2025 are entitled to notice of and to vote at the Annual Meeting. Further information
regarding voting rights and the matters to be voted upon is presented in the accompanying proxy statement. If you plan
on attending the Annual Meeting as a stockholder, you must follow the instructions set forth on page 10 of the
accompanying proxy statement.
On or about April 16, 2025, we expect to mail to our stockholders the Notice, which provides instructions on how to
access our proxy statement for the Annual Meeting and our annual report to stockholders, how to vote online or by
telephone, and how to receive a paper copy of the proxy materials by mail. The accompanying proxy statement and our
annual report can be accessed directly at the following Internet address: www.proxyvote.com. All you have to do is enter
the control number located on your proxy card.
YOUR VOTE IS IMPORTANT. We urge you to submit your vote via the Internet, telephone or mail.
We appreciate your continued support of Arista Networks, Inc. and look forward to either greeting you virtually at the
Annual Meeting or receiving your proxy.
By order of the Board of Directors,
JAYSHREE ULLAL
Chief Executive Officer, President and
Chairperson
Santa Clara, California
April 16, 2025
[THIS PAGE INTENTIONALLY LEFT BLANK]
TABLE OF CONTENTS
2025 PROXY STATEMENT SUMMARY
1
OUR COMMITMENT TO CORPORATE
RESPONSIBILITY
4
QUESTIONS AND ANSWERS
10
BOARD OF DIRECTORS AND CORPORATE
GOVERNANCE
14
Nominees for Director
18
Continuing Directors
20
Key Elements of Board Independence at Arista
23
Director Commitments
23
Board Leadership Structure
24
Lead Independent Director
24
Board of Directors Evaluation Process
25
Board of Directors Meetings and Committees
25
Compensation Committee Interlocks and Insider
Participation
28
Considerations in Evaluating Director Nominees
28
Stockholder Recommendations for Nominations to
the Board of Directors
29
Stockholder Outreach
30
Communications with the Board of Directors
30
Role of Board of Directors in Risk Oversight
30
Executive Talent Management and Succession
Planning
32
Director Compensation
32
PROPOSAL NO. 1 ELECTION OF DIRECTORS
34
Nominees
34
Vote Required
34
PROPOSAL NO. 2 ADVISORY VOTE ON
EXECUTIVE COMPENSATION
35
Vote Required
35
PROPOSAL NO. 3 RATIFICATION OF
INDEPENDENT REGISTERED PUBLIC ACCOUTING
FIRM
36
Fees Paid to the Independent Registered Public
Accounting Firm
36
Auditor Independence
37
Audit Committee Policy on Pre-Approval of Audit
and Permissible Non-Audit Services of
Independent Registered Public Accounting Firm
37
Vote Required
37
EXECUTIVE OFFICERS
39
EXECUTIVE COMPENSATION
41
Compensation Discussion and Analysis
41
Overview
42
Effect of Most Recent Stockholder Advisory Vote
on Executive Compensation
43
Executive Compensation Philosophy and
Objectives
43
Executive Compensation Program Components
47
Named Executive Officer Employment
Arrangements
54
Fiscal 2024 Summary Compensation Table
56
Outstanding Equity Awards at 2024 Fiscal
Year-End
57
Fiscal 2024 Grants of Plan-Based Awards
60
Fiscal 2024 Option Exercises and Stock Vested
62
Pension Benefits
62
Nonqualified Deferred Compensation
62
Potential Payments Upon Termination or Change
in Control
63
Risk Assessment and Compensation Practices
64
Compensation Policies and Hedging/Pledging
Policies
64
Insider Trading Policy
65
Tax and Accounting Considerations
65
CEO Pay Ratio
65
Pay Versus Performance
67
Equity Compensation Plan Information
73
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
74
DELIQUENT SECTION 16(A) REPORTS
77
2025 PROXY STATEMENT
i
RELATED PERSON TRANSACTIONS
78
Policies and Procedures for Related Person
Transactions
78
OTHER MATTERS
79
Householding
79
Stockholder Proposals
79
Availability of Bylaws
80
Fiscal Year 2024 Annual Report and SEC Filings
80
APPENDICES
Appendix A – Reconciliation of GAAP to
Non-GAAP Financial Measures
A-1
ii
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
2025 PROXY STATEMENT SUMMARY
This proxy statement and the enclosed form of proxy are furnished in connection with the solicitation of proxies by our
board of directors for use at the 2025 annual meeting of stockholders of Arista Networks, Inc. (the “Company” or
“Arista”), a Delaware corporation, and any postponements, adjournments or continuations thereof (the “Annual
Meeting”). Our principal executive offices are located at 5453 Great America Parkway, Santa Clara, California 95054.
This summary highlights information contained in this proxy statement. We encourage you to read the entire proxy
statement for more information prior to voting.
Annual
Meeting
Friday, May 30, 2025 at 11:00 a.m. Pacific Time
DATE AND TIME
www.virtualshareholdermeeting.com/ANET2025
VIRTUAL MEETING
YOUR VOTE IS IMPORTANT. We urge you to submit your vote via the Internet, telephone or mail.
April 2, 2025
RECORD DATE
Proposals and Board Recommendations
1
Proposal for your Vote: Page 34
Elect three Class II directors to serve until the 2028 annual meeting of stockholders
Board Voting Recommendation:
FOR the election of Charles Giancarlo, Daniel Scheinman and Yvonne Wassenaar
2
Proposal for your Vote: Page 35
Advisory vote to approve our named executive officer compensation
Board Voting Recommendation: FOR
3
Proposal for your Vote: Page 36
Ratification of the appointment of Ernest & Young LLP as our independent registered public
accounting firm
Board Voting Recommendation: FOR
Director Nominees
Name and Occupation
Age
Director Since
Independent
Committees
Charles Giancarlo, Director
67
2013
Compensation
Daniel Scheinman, Director
62
2011
Compensation
and Nominating
and Corporate
Governance
Yvonne Wassenaar, Director
56
2022
Audit and
Nominating and
Corporate
Governance
2025 PROXY STATEMENT
1
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
2024 Business Highlights
$7B
REVENUE
64.1%
GAAP GROSS MARGIN
Board of Directors Snapshot
33%
3/9 of our directors
are women
6
3
FEMALE
55%
5/9 of our directors
have served for less
than 6 years
5
4
<6 YR TENURE
77%
7/9 of our directors are
independent
2
7
INDEPENDENT
2
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Corporate Governance Highlights
We are committed to having sound corporate governance principles that we believe serve the best interest of all our
stockholders. Some highlights of our corporate governance practices are listed below. In addition, we regularly
evaluate our practices against prevailing best practices and emerging and evolving topics identified through
stockholder outreach, current literature and corporate governance organizations.
Board
Oversight
• Oversees the Company’s strategy, annual business plans, Enterprise Risk
Management (ERM) framework, cybersecurity and culture, values and conduct
• Regularly reviews succession plans for CEO and other key executives
Independent
Board
• Executive sessions of independent directors at each regularly scheduled
board meeting
• Strong Lead Independent Director facilitates independent board oversight
of management and has expansive duties including setting agendas for
the board meetings
Annual
Evaluations
• Annual board of directors and committee self-assessments enhance
performance
• Encompasses board and committee structure and composition, culture,
process and relationship with management
Stockholder
Engagement
• Active, year-round stockholder engagement process where we meet with
our stockholders and other key stakeholders
• Host Investor Day
• Present at investor conferences
Corporate
Governance
Policies
• Stock Ownership Guidelines for directors and CEO
• Clawback Policy for executive officers
• Corporate Governance Guidelines
• Proxy access for director nominees not exceeding the greater of 2 or
20% of directors in office
• Insider Trading Policy prohibits, among other things, hedging
Executive Compensation Highlights
Annual review of our executive compensation
program
Performance-based equity for CEO and other
senior officers
Independent compensation consultant
Stock Ownership Guidelines for CEO
Clawback Policy for executive officers
No executive-only retirement programs
No excise tax gross-ups
2025 PROXY STATEMENT
3
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
OUR COMMITMENT TO CORPORATE RESPONSIBILITY
THE ARISTA WAY
Maintain the highest level of
integrity in conduct
6
7
Discuss, debate but quickly align
to priorities
8
Treat your peers, vendors,
customers with respect and
develop a win-win partnership
9
Mentor individuals and develop
teams for overall success, not
personal, success
10
Cultivate Arista pride but never
ego or arrogance in our culture
1
Drive for customer success in
every aspect: support, quality,
innovation and experience
3
Challenge status quo, question
traditional habits and be cost-
effective
2
Do the right thing be it for
products, quality, customers and
daily interactions
4
Develop alternative ways of
achieving disruptive innovation in
every function, preserving quality
5
Develop agile and mobile teams
that can respond to priorities (as
opposed to fixed or top-down
organizations)
Arista is committed to transparency, engagement and
consistent communication of our environmental, social &
governance strategies and programs. While our core
competency is designing, manufacturing and delivering
leading software driven cloud networking solutions,
Arista is dedicated to delivering a superior client
experience, increasing shareholder value, serving our
communities and creating a workplace where talent can
thrive. To maximize our efforts, we focus our corporate
responsibility and sustainability programs around
environmental, social and governance programs,
including:
Environment
Social
Responsibility
Supply Chain
Governance
4
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Oversight
Our executive leadership team and board of directors recognized the importance of these responsibilities, and our
internal committee is tasked with driving additional progress in initiatives that promote sustainability, inclusion and
further transparency. Our sustainable governance structure begins at the very top. The core values of Arista reflect
what is truly important to us as an organization. Arista was founded on the principle of doing things the “Arista Way,”
which is to drive for customer success in every aspect of what we do. We build and deliver innovative, high-quality
products and services through commitment, innovation and uncompromising focus on customer needs. This includes
a commitment to designing, manufacturing and delivering leading software driven cloud networking solutions in an
environmentally and socially sustainable manner.
Environment
Arista is dedicated to responsible environmental practices that include climate
change resilience, conservation of natural resources, pollution prevention and
reduction of waste. We foster environmental awareness in our employees and
partners, engaging them to reduce their footprint and waste, while collaborating
to innovate powerfully efficient sustainable data technology solutions.
Arista is proactively working to produce ever more efficient and
sustainable products, and taking leadership on measuring,
reporting and reducing our third-party verified greenhouse gas
(GHG) emissions.
Arista’s Environmental Policy, ethos, and culture of efficiency
and innovation drive our pragmatic but passionate approach to
environmental sustainability. Through our Environmental
Management System (EMS), Arista implements our objectives
for achieving pollution prevention, environmental protection and
monitoring, and continual improvements in the environmental
performance of our operations.
In 2024, we established a new net zero climate change goal,
which is currently being validated by the Science Based
Targets initiative, Arista has targeted to reduce Scope 1, 2 and
3 emissions by 42% by 2030 and reaching net zero emissions
by 2050. In 2025 we are refining our climate action roadmaps,
including renewable energy procurement, and enhanced
customer and supplier sustainability engagement.
Arista’s Audit Committee continues to review and discuss Arista’s policies and practices relating to environmental and
social responsibility with Arista’s senior management team, including Arista’s climate change risk management. The
Audit Committee periodically meets with management to discuss environmental and social responsibility matters. This
committee in partnership with our Sustainability Committee oversees execution of initiatives including:
• Greenhouse gas (GHG) emissions measurement, reporting and reduction through the annual externally verified
GHG inventory, energy efficiency and renewable energy initiatives, and related supplier engagement through the
CDP Supply Chain program and Responsible Business Alliance (RBA).
• Our Santa Clara global headquarters and San Francisco office are both LEED Gold certified, and our Bangalore
office premises were built to LEED Gold standards.
2025 PROXY STATEMENT
5
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
• Each new generation of our products demonstrates improved network capacity, and energy efficiency, which
reduces overall GHG emissions and power consumption for our customers. In addition, our new products use
power supplies that are rated 80-Plus Platinum or better, which helps reduce the total product power consumption
and heat generated from the power supplies.
• We are committed to integrating sustainability in every aspect of our products’ life cycles, from the materials that
make up our products, all the way to the end of life of the product, while meeting our customers’ requirements. For
example, we implement Design for Environment principles in our development process with the goal of minimizing
the overall adverse environmental impact of our products, with a focus on the reduction of material diversity and
weight, selection of more environmentally friendly materials, ease of disassembly and recycling, energy efficiency,
design for longevity and upgradeability, and design for efficient packaging.
Arista focuses on collaboration and innovation to meet our
objective of reducing costs and improving operational
sustainability and extending these benefits up and down our
supply chain. We develop and implement highly efficient and
powerful new technologies, quickly responding to changes in
customer requirements, global regulations and industry
demands. We continue to look for opportunities to minimize
our environmental impact through our environmental
stewardship and sustainability initiatives.
Providing an amazing customer and product experience and technological
leadership all starts with a great team. We are focused on growing our team
of employees and prioritize providing resources that enrich their professional
development and personal total wellness. We believe that our ongoing success
depends upon a skilled, satisfied, and valued workforce.
Social Responsibility
As such, Arista provides opportunities for our employees to gain necessary and desired skills and knowledge as well
as upskill via a library of on-demand classes, webinars as well as in-person training.
Arista’s employees participate in incentive stock and bonus plans that
support our organizational philosophy of allowing employees to share in
our performance and success. Our executive compensation program is
designed to attract, retain, and reward performance and align
incentives with achievement of the Arista’s strategic plan and both
short- and long-term operating objectives. In accordance with our
compensation philosophy established by the Compensation Committee
Charter and the board of directors, we believe our executive pay is well
aligned with performance, creating a positive relationship between our
operational performance and shareholder returns.
Arista has never experienced a strike or similar work stoppage and we believe our employee relations are strong. We
conduct employee engagement surveys globally on an annual basis to gather information and feedback from our
team members. We use a holistic organization-wide approach to respond to the results of the survey, analyzing the
data for potential actions and positive change that can be taken in the areas of leadership, communication, culture,
inclusion, professional development and other areas. Beyond the workplace, the health and wellbeing of our
6
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
colleagues is our top priority and in recognition of this, Arista offers ongoing wellness webinars and quarterly wellness
weeks focused on mental, physical, financial health, social activity and professional.
Arista is all about respect, integrity, innovation, passion, pride, and trust. We strive
to build an inclusive culture that encourages, supports and celebrates the voices of
all our employees. It fuels our innovation and connects us closer to the customers
and communities we serve. We believe that the voices of our employees are the
ultimate barometer in evaluating our success. In 2024, Arista was extremely
honored and humbled to receive a record number of external recognitions primarily
based on enthusiastic employee feedback. These recognitions include:
From Time Magazine as one of the World’s Best Companies; from Comparably as a
Best Large Company for Culture, Happiness, Career Growth, Compensation,
Leadership & Engineering Teams; from USA Today, as one of America’s Climate
Leaders; from the SF Chronicle as a Bay Area Large Company Top Workplace;
from Most Loved Workplace as a Most Loved Workplace for Wellness, Volunteering
and Veterans.
We are committed to developing a qualified and motivated workforce to power our
continued evolution. The health and safety of our employees is the highest priority.
Our policy is to maintain our facilities and run our business operations in a manner
that does not jeopardize the occupational health and safety of our employees. We
provide necessary and legally required training to employees on safety standards
and protocols. Our Global Facilities team continues to proactively work to reduce
and eliminate potential risks and ensures compliance with local laws and
regulations. To evaluate performance, we regularly measure and monitor workplace
safety and implement continuous improvements.
We are aware of how our presence and partnership can positively impact others. Therefore, we are consciously and
continuously working to systemically create positive change in our communities by partnering with impactful
non-profits through fundraising and sponsorship activities as well as volunteer events. The Arista Foundation’s giving
priorities are aligned with the United Nations SDGs and are generally focused on education, hunger, environmental
sustainability, and disaster relief. In 2024, Arista is proud to have:
• Continued our partnership and support of Arizona State University including their
Technical Upskilling program, providing workforce readiness training and
technical certification opportunities
• Continue our multi-year partnership with HelpAge India. In 2024, the Arista
Foundation enthusiastically granted the necessary funds to provide cataract
surgeries free of cost to senior citizens in India who had no significant means of
support.
• Rapidly hosted an employee fundraiser with matching Arista Foundation support to
provide aid for those impacted in North Carolina and Florida by Hurricane Helene.
• Planted trees globally through partnerships with a number of non-profits.
• Provided over a million meals to people in need through a combination of
employee donations and matching Arista Foundation funds as part of our annual
Global Giving Drive through our partners, Second Harvest of Silicon Valley,
Feeding America, New Hampshire Food Bank, Central Texas Food Bank,
Greater Vancouver Food Bank, and Foodbank Australia.
2025 PROXY STATEMENT
7
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Through strategic nonprofit partnerships, pro bono work, volunteerism and philanthropy, our corporate responsibility
efforts are focused on contributing to the creation of a better world. Going forward, Arista will continue to partner with
nonprofit organizations that work to increase the number of individuals having access to education, decrease the
number of individuals facing economic barriers and support the communities in which we operate and our employees
work and live.
Manufacturing our products creates environmental and social impacts that
extend far beyond the walls of Arista.
Supply Chain
We engage with suppliers throughout our global supply chain to manage and improve these impacts to conserve
resources, save costs, and promote ethical social practices. Our Supply Chain Sustainability Expectations Policy
initially sets forth the requirement to align with industry expectations. As a member of the Responsible Business
Alliance (RBA) and CDP’s Supply Chain Program, we support the vision and mission of both, which strives to develop
a global electronics industry supply chain that consistently operates with social, environmental and economic
responsibility.
Arista takes steps to validate the absence of slavery, human trafficking and forced labor in our supply chain and
therefore ensure compliance with the California Transparency in Supply Chains Act and the UK Modern Slavery Act.
We perform supplier risk assessments of our suppliers and encourage them to adhere to the RBA Code of Conduct.
Furthermore, we are a member of the Responsible Minerals Initiative (RMI) and have management systems in place to
ensure that the components of our products are sourced responsibly.
Arista’s website contains information on our environmental and social programs. We routinely engage with our
stockholders to better understand their views, carefully considering the feedback we receive and acting when
appropriate. Arista reviews the results of the annual advisory vote on executive compensation in making
determinations about the structure of our pay programs. For more information, please visit our corporate website:
arista.com.
Arista is committed to achieving excellence in our governance practices and
to establishing a strong foundation for our long-term success. We emphasize
a culture of accountability and conduct our business in a manner that is fair,
ethical, and responsible to earn the trust of our stakeholders, including
customers, employees, investors, partners, and regulators.
Governance
Arista’s Code of Ethics and Business Conduct emphasizes the importance of honest business conduct and solid
business ethics. Our Code of Ethics and Business Conduct applies to all personnel employed by or engaged to
provide services to Arista including, but not limited to, our employees, officers and directors, including our Chief
Executive Officer, Chief Financial Officer, and other executive and senior financial officers. Arista provides periodic
training on our Code of Ethics and Business Conduct. Our Code of Ethics and Business Conduct addresses, among
other things, conflicts of interest, business practices, compliance with laws and regulations, and interacting fairly and
8
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
respectfully with each other, our customers, partners, suppliers and host communities. The full text of our Code of
Ethics and Business Conduct is available in the Governance section of our website at http:// investors.arista.com.
Furthermore:
• We are committed to complying with applicable international and domestic anti-corruption laws, including the U.S.
Foreign Corrupt Practices Act, the U.K. Bribery Act and applicable local laws. Our Anti-Corruption Compliance
Policy & Guidelines outline the parameters of what is acceptable and what is not acceptable from an anti-
corruption view. We have established procedures for conducting due diligence on our partners, manufacturers,
suppliers, logistics providers and other third parties that may interact with foreign officials on our behalf.
• Our Whistleblower Policy further supports our stated goals with our governance structure while encouraging
transparency, facilitating confidentiality, and providing multiple avenues for employees and non-employees to
submit concerns about accounting, auditing or other matters.
• We are committed to maintaining the highest level of professional and ethical standards in the conduct of our
business around the world. We believe our reputation for integrity and fair dealing is an important component of our
success and the personal satisfaction of our employees.
Our board of directors, consisting of 9 directors (7 of whom are independent),
is responsible for oversight of the management of the company for the long-
term benefit of our stakeholders. Our corporate governance policies and
practices include evaluations of the board of directors and its committees and
continuing director education. Our Nominating and Corporate Governance
Committee oversees corporate governance matters. Our Audit Committee
reviews our policies and practices relating to financial, environmental and social
responsibility, and monitors certain key risks including cybersecurity risks.
We believe that a range of tenure is important in order to provide fresh
perspectives and deep experience and knowledge. Our Nominating and
Corporate Governance Committee considers a broad range of backgrounds
and experiences in making determinations regarding nominations of directors.
Our internal risk management teams oversee compliance with applicable laws
and regulations and coordinate with subject matter experts throughout our
business to identify, monitor and mitigate risk including information security risk
management and cybersecurity programs. Arista performs an enterprise risk
assessment that is reviewed by the Audit Committee on an annual basis and
monitored on a quarterly basis by the Audit Committee. The enterprise risk
assessment is an assessment of key risks, including cybersecurity risks, data
privacy, supply chain, human capital, and others.
2025 PROXY STATEMENT
9
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
QUESTIONS AND ANSWERS
The information provided in the “question and answer” format below is for your convenience only and is merely a
summary of the information contained in this proxy statement. You should read this entire proxy statement carefully.
Information contained on, or that can be accessed through, our website is not intended to be incorporated by
reference into this proxy statement and references to our website address in this proxy statement are inactive textual
references only.
Q How do I vote?
Q Can I change my vote?
A
If you are a stockholder of record, you can
vote in one of the following ways:
A
Yes. Subject to the voting deadlines noted
above, if you are a stockholder of record, you
can change your vote or revoke your proxy
any time before the Annual Meeting by:
• by Internet at http://www.proxyvote.com, 24 hours
a day, seven days a week, until 11:59 p.m. EST on
May 29, 2025 (have your proxy card in hand when
you visit the website);
• by toll-free telephone at 1-800-690-6903 until 11:59
p.m. EST on May 29, 2025 (have your proxy card in
hand when you call);
• by signing, dating, and returning your proxy card (if
you received printed proxy materials); or
• by attending and voting at the Annual Meeting at
www.virtualshareholdermeeting.com/ANET2025. To
attend and participate in the Annual Meeting, you
will need the control number included in your Notice
of Internet Availability of Proxy Materials (the
“Notice”), on your proxy card or on the instructions
that accompanied your proxy materials.
If you are a street name stockholder, you will receive
voting instructions from your broker, bank or other
nominee. You must follow the voting instructions
provided by your broker, bank or other nominee in
order to instruct your broker, bank or other nominee
on how to vote your shares. Street name stockholders
should generally be able to vote by returning an
instruction card, or by telephone or on the Internet.
However, the availability of telephone and Internet
voting will depend on the voting process of your
broker, bank or other nominee. If you are a street
name stockholder, you may not vote your shares at
the Annual Meeting unless you obtain a legal proxy
from your broker, bank or other nominee.
Whether or not you plan to attend the Annual Meeting,
we urge you to vote by proxy to ensure your vote is
counted.
• entering a new vote by Internet or by telephone;
• returning a later-dated proxy card;
• notifying the Secretary of Arista Networks, Inc., in
writing, at Arista Networks, Inc., 5453 Great
America Parkway, Santa Clara, California 95054; or
• attending and voting at the Annual Meeting at
www.virtualshareholdermeeting.com/ANET2025.
If you are a street name stockholder, your broker,
bank or other nominee can provide you with
instructions on how to change your vote.
Q Who is entitled to vote?
A
Holders of our common stock as of
the close of business on April 2, 2025,
the record date, may vote at the Annual Meeting. As
of the record date, there were 1,255,625,511 shares
of our common stock outstanding. In deciding all
matters at the Annual Meeting, each stockholder will
be entitled to one vote for each share of our common
stock held by them on the record date. We do not
have cumulative voting rights for the election of
directors.
Stockholders of Record. If shares of our common stock
are registered directly in your name with our transfer
agent, you are considered the stockholder of record
with respect to those shares, and the Notice was
provided to you directly by us. As the stockholder of
record, you have the right to grant your voting proxy
directly to the individuals listed on the proxy card or to
vote on your own behalf at the Annual Meeting.
10
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Street Name Stockholders. If shares of our common
stock are held on your behalf in a stock brokerage
account or by a bank or other nominee, you are
considered the beneficial owner of those shares held
in “street name,” and the Notice was forwarded to you
by your broker or nominee, who is considered the
stockholder of record with respect to those shares. As
the beneficial owner, you have the right to direct your
broker or nominee how to vote your shares. Beneficial
owners are also invited to attend the Annual Meeting.
However, since a beneficial owner is not the
stockholder of record, you may not vote your shares
of our common stock at the Annual Meeting unless
you follow your broker’s procedures for obtaining a
legal proxy. Throughout this proxy, we refer to
stockholders who hold their shares through a broker,
bank or other nominee as “street name stockholders.”
Q
How do I ask questions during the Annual
Meeting?
You will be able to attend the Annual
Meeting online and submit your questions
during the meeting at
www.virtualshareholdermeeting.com/ANET2025. To
access the virtual meeting, you will need to enter the
control number included in the Notice, on your proxy
card or on the instructions that accompanied your
proxy materials.
Questions pertinent to meeting matters will be
answered during the meeting, subject to time
constraints. Questions regarding personal matters are
not pertinent to meeting matters and, therefore, will
not be answered. If we receive substantially similar
questions, we may group such questions together
and provide a single response to avoid repetition.
Q What is a quorum?
Q
How can I get help if I have trouble
checking in or listening to the meeting
online?
A quorum is the minimum number of
shares required to be present at the
Annual Meeting for the Annual Meeting to
If you encounter any difficulties accessing the
virtual meeting during the check-in or meeting
time, please call the technical support
be properly held under our amended and restated
bylaws and Delaware law. The presence (including by
proxy) of a majority of all issued and outstanding
shares of our common stock entitled to vote at the
Annual Meeting will constitute a quorum at the Annual
Meeting. Abstentions, withhold votes and broker non-
votes are counted as shares present and entitled to
vote for purposes of determining a quorum.
number that will be posted on the Virtual Shareholder
Meeting log-in page.
Q What is the effect of giving a proxy?
Proxies are solicited by and on behalf of our
board of directors. Jayshree Ullal, Chantelle
Breithaupt and Marc Taxay have been
designated as proxies by our board of directors.
When a proxy is properly dated, signed and returned,
the shares represented by such proxy will be voted at
the Annual Meeting in accordance with the
instructions of the stockholder contained on such
proxy. If no specific instructions are given, however,
the shares will be voted in accordance with the
recommendations of our board of directors as
described above. If any matters not described in this
proxy statement are properly presented at the Annual
Meeting, the proxy holders will use their own
judgment to determine how to vote the shares.
Q
Do I have to do anything in advance if I
plan to attend the Annual Meeting?
The Annual Meeting will be a completely
virtual meeting, which will be conducted via
a live webcast. You are entitled to
participate in the Annual Meeting only if you were a
stockholder of record as of the close of business on
April 2, 2025 or if you hold a valid proxy for the Annual
Meeting.
You will be able to attend the Annual Meeting online
and submit your questions during the meeting at
www.virtualshareholdermeeting.com/ANET2025. To
access the virtual meeting, you will need to enter the
control number included in the Notice, on your proxy
card or on the instructions that accompanied your
proxy materials.
We encourage you to access the meeting prior to the
start time. Online check-in will begin at 10:45 a.m.
Pacific Time, and you should allow ample time for the
check-in procedures.
2025 PROXY STATEMENT
11
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Q
Why did I receive a Notice of Internet
Availability of Proxy Materials instead of
a full set of proxy materials?
In accordance with the rules of the
Securities and Exchange Commission
(“SEC”), we have elected to furnish our proxy
materials, including this proxy statement and our
annual report, primarily via the Internet. The Notice
containing instructions on how to access our proxy
materials is first being mailed on or about April 16,
2025 to all stockholders entitled to vote at the
Annual Meeting. Stockholders may request to
receive all future proxy materials in printed form by
mail or electronically by e-mail by following the
instructions contained in the Notice. We encourage
stockholders to take advantage of the availability of
our proxy materials on the Internet to help reduce
the environmental impact of our annual meetings of
stockholders.
Q
How are proxies solicited for the Annual
Meeting?
Our board of directors is soliciting proxies
for use at the Annual Meeting. All
expenses associated with this solicitation will be
borne by us. Copies of solicitation materials will also
be made available upon request to brokers, banks
and other nominees to forward to the beneficial
owners of the shares held of record by such brokers,
banks or other nominees. The original solicitation of
proxies may be supplemented by solicitation by
telephone, electronic communication, or other
means by our directors, officers and employees.
No additional compensation will be paid to these
individuals for any such services, although we may
reimburse such individuals for their reasonable
out-of- pocket expenses in connection with such
solicitation. We may also reimburse brokerage firms,
banks and other agents for the cost of forwarding
proxy materials to beneficial owners. We will
reimburse brokers or other nominees for reasonable
expenses that they incur in sending our proxy
materials to you if a broker or other nominee holds
shares of our common stock on your behalf.
Q
How may my brokerage firm or other
intermediary vote my shares if I fail to
provide timely directions?
Brokerage firms and other intermediaries
holding shares of our common stock in
street name for customers are generally
required to vote such shares in the manner directed
by their customers. In the absence of timely directions,
your broker will have discretion to vote your shares on
our sole “routine” matter: the proposal to ratify the
appointment of Ernst & Young LLP. Absent direction
from you, your broker will not have discretion to vote
on the election of directors, on the approval, on an
advisory basis, of executive compensation of our
named executive officers, or on the frequency of future
stockholder advisory votes on the compensation of
our named executive officers, which are “non-routine”
matters.
Q
Where can I find the voting results of the
Annual Meeting?
We will announce preliminary voting results
at the Annual Meeting. We will also
disclose voting results on a Current Report
on Form 8-K that we will file with the SEC within four
business days after the Annual Meeting. If final voting
results are not available to us in time to file a Current
Report on Form 8-K within four business days after
the Annual Meeting, we will file a Current Report on
Form 8-K to publish preliminary results and will
provide the final results in an amendment to this
Current Report on Form 8-K as soon as they become
available.
Q
How many votes are needed for approval
of each proposal?
Proposal One: The election of directors
requires a plurality of the voting power of
the shares of our common stock present
in person or represented by proxy at the Annual
Meeting and entitled to vote thereon to be approved.
“Plurality” means that the nominees who receive the
largest number of votes cast “FOR” such nominees
are elected as directors. As a result, any shares not
voted “FOR” a particular nominee, whether as a result
of stockholder abstention or a broker non-vote (in
other words, where a broker has not received voting
instructions from the beneficial owner and for which
the broker does not have discretionary power to vote
on a particular matter), will not be counted in such
nominee’s favor and will have no effect on the
outcome of the election. You may vote “FOR” or
“WITHHOLD” on each of the nominees for election as
a director.
12
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Proposal Two: The approval, on an advisory basis, of the
compensation of our named executive officers requires
the affirmative vote of a majority of the voting power of the
shares of our common stock present in person or
represented by proxy at the Annual Meeting and entitled
to vote on the subject matter to be approved. You may
vote “FOR,” “AGAINST,” or “ABSTAIN” with respect to
this proposal. Abstentions are considered shares present
and entitled to vote on the subject matter, and thus, will
have the same effect as a vote “AGAINST” this proposal.
Broker non-votes will have no effect on the outcome of
this proposal.
Proposal Three: The ratification of the appointment of
Ernst & Young LLP as our independent registered public
accounting firm for our fiscal year ending December 31,
2025 requires the affirmative vote of a majority of the
voting power of the shares of our common stock present
in person or represented by proxy at the Annual Meeting
and entitled to vote on the subject matter to be approved.
You may vote “FOR,” “AGAINST,” or “ABSTAIN” with
respect to this proposal. Abstentions are considered
shares present and entitled to vote on the subject matter,
and thus, will have the same effect as a vote “AGAINST”
this proposal. Broker non-votes will have no effect on the
outcome of this proposal.
2025 PROXY STATEMENT
13
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
BOARD OF DIRECTORS & CORPORATE GOVERNANCE
Our business affairs are managed under the direction of our board of directors. Our board of directors is divided into
three staggered classes of directors. At each annual meeting of stockholders, a class of directors will be elected for a
three-year term to succeed the same class whose term is then expiring. Our board of directors is committed to good
corporate governance practices. These practices provide an important framework within which our board of directors
and management can pursue our strategic objectives for the benefit of our stockholders. Our board of directors has
adopted Corporate Governance Guidelines that address items such as the qualifications and responsibilities of our
directors and director candidates and corporate governance policies and standards applicable to us in general. The
full text of our Corporate Governance Guidelines is available in the Governance section of our website at
http://investors.arista.com. We believe that good governance leads to high board effectiveness, promotes the long-
term interests of our stockholders, strengthens the accountability of the board of directors and management, and
improves our standing as a trusted member of the communities we serve.
BOARD EFFECTIVENESS
WORKING DYNAMICS
• Candid discussions
• Open access to management and information
• Established processes for director feedback
• Regular non-executive directors’ meetings
BOARD OF DIRECTORS STRUCTURE
•
•
Strong lead independent director
3 standing committees
GOVERNANCE PRACTICES
• Oversight of CEO/management performance
• Board/management succession planning
• Code of Ethics and Business Conduct for our directors
and employees
• Stock ownership requirements for our directors
and CEO
• Clawback policy for our executives
• Corporate Governance Guidelines
BOARD OF DIRECTORS COMPOSITION
•
•
•
•
Broad range of skills and experiences
7/9 directors are independent
Our Chairperson and Chief Technology Officer are
the only non-independent directors
3/9 directors are women
• 2/9 directors are from underrepresented
communities
14
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Board Composition Overview
Consistent with the Company’s Corporate Governance Guidelines, the Nominating and Corporate Governance
Committee considers, among other factors, issues of character, professional ethics and integrity, judgment, business
acumen, diversity of experience, independence, area of expertise such as appropriate financial and other expertise
relevant to our business, corporate experience, length of service, potential conflicts of interest and other
commitments when reviewing and making recommendations to the board of directors regarding the composition and
size of the board of directors.
Our Nominating and Corporate Governance Committee considers a broad range of backgrounds and experiences in
making determinations regarding nominations of directors and in overseeing the annual board of directors and
committee evaluations.
7/9 DIRECTORS ARE INDEPENDENT
3/9 DIRECTORS ARE WOMEN
2/9 DIRECTORS ARE FROM
UNDERREPRESENTED COMMUNITIES
5/9 DIRECTORS HAVE SERVED LESS THAN 6 YEARS
The following table sets forth information as of April 2, 2025, for each of our directors with terms expiring at the
Annual Meeting:
DIRECTORS WITH TERMS EXPIRING AT THE ANNUAL MEETING/DIRECTOR NOMINEES
BOARD COMMITTEES
Name
Class Age
Director
Since
Current Term
Expires
Expiration of
Term for Which
Nominated
Audit Comp. Nom. & Gov. Independent
Charles Giancarlo
(Director Nominee)
II
67
2013
2025
2028
CHAIR
✓
Daniel Scheinman
(Director Nominee)
II
62
2011
2025
2028
+
CHAIR
✓
Yvonne Wassenaar
(Director Nominee)
II
56
2022
2025
2028
+
+
✓
2025 PROXY STATEMENT
15
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
The following table sets forth information, as of April 2, 2025, for each of the continuing members of our board of
directors:
CONTINUING DIRECTORS
BOARD COMMITTEES
Name
Class
Age
Director
Since
Current Term
Expires
Audit
Comp. Nom. & Gov. Independent
Kelly Battles
I
58
2020
2027
+
✓
Lewis Chew
III
62
2021
2026
CHAIR
✓
Kenneth Duda
I
53
2023
2027
Greg Lavender
III
64
2025
2026
+
✓
Mark B. Templeton
III
72
2017
2026
+
✓
Jayshree Ullal
I
64
2008
2027
16
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
BOARD SKILLS MATRIX
The following table summarizes the key qualifications, skills and attributes of our director nominees and the continuing
members of our board of directors. A mark indicates a specific area of focus or expertise on which our board of
directors particularly relies. Not having a mark does not mean the director does not possess that qualification or skill.
Our directors’ biographies describe each director’s background and relevant experience in greater detail.
Battles
Chew
Duda
Giancarlo
Lavender
Scheinman
Templeton
Ullal
Wassenaar
Industry Expertise
Insight in the cloud and software industry to oversee
our business and the risks we face.
+
+
+
+
+
+
+
+
+
Senior Leadership
Experience in senior leadership positions to analyze,
advise and oversee management in decision making,
operations and policies.
+
+
+
+
+
+
+
+
+
Financial Knowledge and Expertise
Knowledge of financial markets, financing and
accounting and financial reporting processes.
+
+
+
+
+
+
+
+
Diverse Backgrounds and Experiences
Diverse backgrounds and experiences that provide
unique perspectives and enhance decision-making.
+
+
+
+
Cybersecurity/Information Security/Security
Expertise to oversee cybersecurity, privacy, and
information security management.
+
+
+
+
+
Sales, Marketing and Brand Management
Sales, marketing and brand management experience
to provide expertise and guidance to grow sales and
enhance our brand.
+
+
+
+
+
Global/International Experience and Knowledge
Experience and knowledge of global operations,
business conditions and culture to advise and oversee
our global business.
+
+
+
+
+
+
+
+
Governance, Risk Oversight and Compliance
Experience in public company corporate governance,
risk oversight and management, compliance, policy
and creating long term sustainable value.
+
+
+
+
+
+
+
+
Emerging Technologies and Business Models
Experience identifying and developing emerging
technologies and business models to advise, analyze
and strategize regarding emerging technologies,
business models and potential acquisitions disrupting
our industry, business and company.
+
+
+
+
+
+
+
+
+
Human Capital Management
Experience attracting and retaining top talent to advise
and oversee our people and compensation policies.
+
+
+
+
+
+
+
+
+
Public Company Board Experience
Experience to understand the dynamics and operation
of a public company and the applicable legal and
regulatory landscape and risks.
+
+
+
+
+
+
+
ESG Experience
Experience addressing environmental, social and
governance issues, including climate risk.
+
+
+
+
+
+
+
2025 PROXY STATEMENT
17
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Set forth below is biographical information for the nominees and for each of the continuing members of our board of
directors. This includes information regarding each director’s experience, qualifications, attributes or skills that led our
board of directors to recommend them for board service.
NOMINEES FOR DIRECTOR
Charles
Giancarlo
Experience
Mr. Giancarlo has served as a member of our board of directors
since April 2013. Mr. Giancarlo has been chief executive officer
and a member of the board of directors of Pure Storage, Inc., a
data storage solutions company, since August 2017, and
Chairman of the board of directors of Pure Storage since
September 2018. From January 2008 to October 2015, Mr.
Giancarlo served as a managing director of Silver Lake Partners, a
private investment firm and served as a senior advisor to the firm
until 2015. From May 1993 to December 2007, Mr. Giancarlo
served in various positions with Cisco Systems, Inc., most recently
as executive vice president and chief development officer. Mr.
Giancarlo has also served on the board of directors of Zscaler,
Inc., a cloud-based information security company, since
November 2016. He previously served as a director of Accenture
plc, from November 2008 to February 2019. Mr. Giancarlo holds a
B.S. degree in Electrical Engineering from Brown University, an
M.S. degree in Electrical Engineering from the University of
California at Berkeley and an M.B.A. from Harvard University.
Qualifications
We believe Mr. Giancarlo possesses specific attributes that qualify
him to serve as a member of our board of directors, including his
extensive experience as a venture capital investor and as an
executive and board member of companies in the technology
industry.
Independent Director
Age: 67
Director Since: 2013
Committee(s):
Compensation (Chair)
Other Current Public Company Boards:
Pure Storage, Inc.
Zscaler, Inc.
Daniel
Scheinman
Experience
Mr. Scheinman has served as a member of our board of directors
since October 2011. Since April 2011, Mr. Scheinman has been
an angel investor. From January 1997 to April 2011, Mr.
Scheinman served in various capacities with Cisco Systems, Inc.,
most recently as senior vice president, Cisco Media Solutions
Group. Mr. Scheinman has served as a member of the board of
directors of Zoom Video Communications, Inc., a cloud-based
video communications company, since October 2011, where he is
lead director, chair of the audit committee and a member of the
compensation committee and SentinelOne, Inc., an autonomous
AI endpoint security platform since September 2015, where he is
lead independent director, chair of the nominating and corporate
governance committee and a member of the compensation
committee. He also currently serves on the board of directors of
several private companies. Mr. Scheinman holds a B.A. degree in
Politics from Brandeis University and a J.D. from the Duke
University School of Law.
Qualifications
We believe Mr. Scheinman possesses specific attributes that
qualify him to serve as a member of our board of directors,
including his extensive experience in the legal industry and as an
executive of companies in the technology industry.
Independent Director
Age: 62
Director Since: 2011
Committee(s):
Compensation
Nominating and Corporate Governance
(Chair)
Lead independent director
Other Current Public Company Boards:
Zoom Video Communications, Inc.
SentinelOne, Inc.
18
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Yvonne
Wassenaar
Experience
Ms. Wassenaar has served as a member of our board of
directors since July 2022. From January 2019 to May 2022,
Ms. Wassenaar served as chief executive officer and member
of the board of directors for Puppet, Inc., an information
technology company. From November 2019 to June 2022,
Ms. Wassenaar served as a member of the board of directors
and audit committee of Anaplan, Inc., a cloud-based business
planning software company. From June 2017 to September
2018, Ms. Wassenaar served as chief executive officer and
member of the board of directors of Airware Inc., an enterprise
drone analytics company. From August 2014 to May 2017,
Ms. Wassenaar served as chief information officer for New
Relic Inc., an information technology company. Ms.
Wassenaar has served as a member of the board of directors
and audit committee of Braze, Inc., a marketing automation
platform, since June 2024. Ms. Wassenaar has served as a
member of the board of directors of JFrog, Inc., a software
development company, since September 2022, where she is
a member of the compensation committee and chair of the
nomination and governance committee. Ms. Wassenaar has
served as a member of the board of directors and audit
committee of Rubrik, Inc., a cloud data management
company, since October 2021. Ms. Wassenaar has served as
a member of the board of directors of Forrester Research,
Inc., a research company, since June 2017, where she was a
member of the audit committee from June 2017 through May
2024 and is a member of the compensation committee since
May 2024. Ms. Wassenaar will retire as a member of the
board of directors of Forrest Research, Inc. effective at the
company’s upcoming annual meeting and will not stand for
re-election. She also currently serves on the board of directors
of several private companies. Ms. Wassenaar holds a B.A.
degree in economics with a specialization in computing from
the University of California, Los Angeles, and an M.B.A. from
UCLA Anderson School of Business.
Qualifications
We believe Ms. Wassenaar possesses specific attributes that
qualify her to serve as a member of our board of directors,
including her extensive experience as a chief executive officer
and board member of companies in the technology industry.
Independent Director
Age: 56
Director Since: 2022
Committee(s):
Audit
Nominating and Corporate Governance
Other Current Public Company Boards:
Forrester Research, Inc.
(retiring in May 2025)
JFrog, Inc.
Rubrik, Inc.
Braze, Inc.
2025 PROXY STATEMENT
19
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
CONTINUING DIRECTORS
Kelly
Battles
Experience
Ms. Battles has served as a member of our board of directors since
July 2020. Ms. Battles has over 30 years of finance, strategy and
operational leadership experience. From July 2020 to January 2022,
Ms. Battles served as chief financial officer of Alpha Medical Group, a
telemedicine provider, where she has also served as a member of the
board of directors since January 2022. From November 2016 to
March 2020, Ms. Battles served as chief financial officer of Quora, a
knowledge platform. Ms. Battles also previously served as chief
financial officer of Bracket Computing, a cloud computing company,
and Host Analytics, Inc., a cloud-based enterprise performance
management solutions company. She served as vice president of
finance of IronPort Systems, an email and web security company
(since acquired by Cisco Systems, Inc.), director of strategy and
corporate development group of Hewlett-Packard Company, an
information technology company, and as an associate at both
McKinsey and Company and JPMorgan Chase and Company earlier
in her career. Ms. Battles currently serves as an independent board
member and audit committee chair of DataStax, Inc., a data company,
Genesys Cloud Services, Inc., a software company, and Clari, Inc., a
revenue platform. Ms. Battles holds a B.S.E. degree in Operations
Research / Systems Management from Princeton University and an
M.B.A. from Harvard University.
Qualifications
We believe Ms. Battles possesses specific attributes that qualify her
to serve as a member of our board of directors, including her
extensive experience as a chief financial officer and as a board
member of companies in the technology industry.
Independent Director
Age: 58
Director Since: 2020
Committee(s):
Audit
Lewis
Chew
Experience
Mr. Chew has served as a member of our board of directors since July
2021. From June 2012 to October 2021, Mr. Chew served as
executive vice president and chief financial officer of Dolby
Laboratories, Inc., an audio, voice and imaging technology company.
From April 2001 to September 2011, Mr. Chew served as senior vice
president and chief financial officer of National Semiconductor
Corporation, a designer and manufacturer of semiconductor
components. Prior to joining National Semiconductor Corporation,
Mr. Chew was a partner at KPMG LLP, an accounting firm. Since
March 2020, Mr. Chew has served on the board of directors of
Cadence Design Systems, Inc., a multinational computational software
company, where he is chair of the audit committee, and since April
2024, Mr. Chew has served as a member of the board of directors
and chair of the audit committee of Intuitive Surgical, Inc., a leading
surgical robotics company. From September 2009 to April 2019,
Mr. Chew served as a director of PG&E Corporation, an energy-based
holding company, where he served as chair of both the public policy
committee and the audit committee. Mr. Chew holds a B.S. degree in
Accounting from the Leavey School of Business at Santa Clara
University.
Qualifications
We believe Mr. Chew possesses specific attributes that qualify him to
serve as a member of our board of directors, including his extensive
experience as a senior executive officer and board member of
companies in the technology industry.
Independent Director
Age: 62
Director Since: 2021
Committee(s):
Audit (Chair)
Other Current Public Company Boards:
Cadence Design Systems, Inc.
Intuitive Surgical, Inc.
20
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Kenneth
Duda
Experience
Mr. Duda is one of our founders and has served in various roles with
us from 2004 to present. Mr. Duda has served as a member of our
board of directors since December 2023. Since September 2011,
Mr. Duda has served as our Chief Technology Officer and Senior Vice
President of Software Engineering. From April 1999 to October 2004,
Mr. Duda served as chief technology officer of There, Inc., a virtual
worlds company. From September 1996 to April 1999, Mr. Duda was
leading the software development of the switch kernel for the Gigabit
System Business Unit with Cisco Systems, Inc. Mr. Duda holds B.S.
and M.S. degrees in Computer Science and Electrical Engineering
from the Massachusetts Institute of Technology and a Ph.D. degree in
Computer Science from Stanford University.
Qualifications
We believe Mr. Duda possesses specific attributes that qualify him to
serve as a member of our board of directors, including his extensive
experience in the networking industry and the operational insight and
expertise he has accumulated as one of our founders and as our Chief
Technology Officer and Senior Vice President, Software Engineering.
Director
Age: 53
Director Since: 2023
Committee(s):
N/A
Greg
Lavender
Experience
Dr. Lavender has served as a member of our board of directors
since March 2025. Dr. Lavender is the Chief Technology Officer for
Intel Corporation, a semiconductor manufacturing company, since
November 2023. Prior to becoming the Chief Technology Officer at
Intel Corporation, Dr. Lavender was the Corporate Chief
Technology Officer and Senior Vice President / General Manager of
the Software and Advanced Technology Group of Intel Corporation
from June 2021 to November 2023. From January 2018 to June
2021, Dr. Lavender, held senior positions, including Senior Vice
President and Chief Technology Officer, at VMware, a software
development company. Prior to VMware, Dr. Lavender held
leadership positions at Citigroup, Cisco Systems and Sun
Microsystems. Dr. Lavender also serves as a member of the Board
of Advisors to Virginia Tech’s College of Engineering and is a
member of the Department of Computer Sciences Advisory Council
to The University of Texas at Austin. Before Dr. Lavender’s career in
tech began, he was on the faculty of the University of Texas at
Austin for 14 years, including three years as Associate Chairman for
Academics. Dr. Lavender holds a B.S. degree in computer science
(applied mathematics) from the University of Georgia, and a M.S. in
computer science (software engineering) and PhD in computer
science (networking and distributed systems) from Virginia Tech.
Qualifications
We believe Dr. Lavender possesses specific attributes that qualify
him to serve as a member of our board of directors, including his
extensive experience as a chief technology officer of Intel
Corporation.
Independent Director
Age: 64
Director Since: 2025
Committee(s):
Audit
2025 PROXY STATEMENT
21
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Mark B.
Templeton
Experience
Mr. Templeton has served as a member of our board of directors
since June 2017. Mr. Templeton served as the chief executive
officer and a member of the board of directors of DigitalOcean,
Inc., a cloud computing company from June 2018 to August
2019. Previously, he served as the president and chief executive
officer and a member of the board of directors of Citrix Systems,
Inc., a global provider of virtualization, mobility management,
networking and software as service solutions, from January 1998
until his retirement in October 2015. Since July 2023, Mr.
Templeton has served on the board of directors of Nutanix, Inc., a
hybrid multi-cloud virtual software company. Mr. Templeton
served on the board of directors of Health Catalyst, Inc., a
provider of data and analytics technology and services to health
care organizations, from July 2020 to March 2024. Mr. Templeton
served on the board of directors of Equifax, Inc., a consumer
credit reporting agency, from February 2008 to November 2018
and Keysight Technologies, Inc., an electronics test and
measurement equipment company, from November 2015 to July
2018. Mr. Templeton holds a B.A. degree in product design from
North Carolina State University and an M.B.A. from the Darden
School of Business at the University of Virginia.
Qualifications
We believe Mr. Templeton possesses specific attributes that
qualify him to serve as a member of our board of directors,
including his extensive experience in the networking industry and
as chief executive officer and board member of companies in
the technology industry.
Independent Director
Age: 72
Director Since: 2017
Committee(s):
Compensation
Other Current Public Company Boards:
Nutanix, Inc.
Jayshree
Ullal
Experience
Ms. Ullal has served as our Chief Executive Officer, President and a
member of our board of directors since October 2008 and as our
Chairperson of the Board since December 2023. From September
1993 to May 2008, Ms. Ullal served in various positions at Cisco
Systems, Inc., with her last position as senior vice president of data
center, switching and services group. Prior to that, Ms. Ullal was a
vice president of marketing at Crescendo Communications, Inc.,
Cisco’s first acquisition in 1993. She has also held various product
and engineering positions at Ungermann-Bass, a computer
networking company, Advanced Micro Devices, Inc., a
semiconductor company, and Fairchild Semiconductor, a
semiconductor company. Ms. Ullal has served as a member of the
board of directors of Snowflake Inc., a cloud-based datawarehousing
company since June 2020. Ms. Ullal holds a B.S. degree in
Engineering (Electrical) from San Francisco State University and an
M.S. degree in Engineering Management from Santa Clara University.
She is a 2013 recipient of the Santa Clara University School of
Engineering Distinguished Engineering Alumni Award.
Qualifications
We believe that Ms. Ullal possesses specific attributes that qualify
her to serve as a member of our board of directors, including her
extensive experience in the networking industry and the
operational insight and expertise she has accumulated as our
President and Chief Executive Officer.
Director
Age: 64
Director Since: 2008
Committee(s):
N/A
Other Current Public Company Boards:
Snowflake Inc.
22
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Key Elements of Board Independence at Arista
Our board of directors’ independence enables it to be objective and critical in carrying out its oversight
responsibilities. Our Corporate Governance Guidelines provide that a substantial majority of our directors will be
independent.
Our board of directors has undertaken a review of the independence of each director. Based on information provided
by each director concerning his or her background, employment and affiliations, our board of directors has made the
following determinations:
• 7/9 of the directors are independent: We are
committed to maintaining a substantial majority of
directors who are independent of the Company and
management. Except for our employee directors, all
directors are independent.
• Committee independence: Only independent
directors are members of board committees.
• Executive sessions: Our independent directors
meet in executive session at each board and Audit
Committee meeting.
• Lead independent director: Our lead independent
director provides leadership to the board of directors
and particularly to the independent directors.
• Independent compensation consultant: The
compensation consultant retained by the
Compensation Committee is independent of the
Company and management.
In making the determination that Mr. Giancarlo is independent, the board of directors considered the fact that
Mr. Giancarlo is chief executive officer and a member of the board of directors of Pure Storage, Inc., and we sell
products to and purchase products from Pure Storage, Inc. in the ordinary course of business. The board of directors
determined that Mr. Giancarlo did not have a direct or indirect material interest in these transactions. Furthermore,
payments made to us by Pure Storage, Inc. pursuant to such transactions did not exceed the greater of $1 million or
2% of Pure Storage, Inc.’s consolidated gross revenues in any of the last three fiscal years. As a result, the board of
directors concluded that these transactions would not affect Mr. Giancarlo’s independence.
In making the determination that Dr. Lavender is independent, the board of directors considered the fact that
Dr. Lavender is chief technology officer of directors of Intel Corporation, and we sell products to and purchase
products from Intel Corporation in the ordinary course of business. The board of directors determined that
Dr. Lavender did not have a direct or indirect material interest in these transactions. Furthermore, payments made to
us by Intel Corporation pursuant to such transactions did not exceed the greater of $1 million or 2% of Intel
Corporation’s consolidated gross revenues in any of the last three fiscal years. As a result, the board of directors
concluded that these transactions would not affect Dr. Lavender’s independence.
Director Commitments
Our board of directors recognizes that all members of our board of directors should dedicate sufficient time and
attention to fulfill the responsibilities required of directors. In assessing whether directors and nominees for director
have sufficient time and attention to devote to board duties, our board of directors considers, among other things,
whether directors may be “overboarded,” which refers to the situation where a director serves on an excessive
number of boards. In addition, prior to recommending a candidate as a nominee for director, the Nominating and
Corporate Governance Committee reviews the number of boards that the candidate serves on and considers
whether those outside commitments may limit the ability of the candidate to devote sufficient time and attention to
board duties.
Our board of directors believes that each of our directors, including each of our director nominees, has demonstrated
the ability to devote sufficient time and attention to board duties and to otherwise fulfill the responsibilities required of
directors. However, we understand that certain proxy advisory firms may deem Mr. Giancarlo to be “overboarded”
based on criteria adopted by these advisory firms as a result of the number of public company boards on which he
serves. Our board of directors does not believe that Mr. Giancarlo’s role as chief executive officer of Pure Storage or
board commitments limit his ability to serve on our board and compensation committee. Our board of directors
2025 PROXY STATEMENT
23
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
discussed this issue with Mr. Giancarlo and determined that Mr. Giancarlo’s ability to serve on our board and as chair
of our compensation committee will not be impaired for the following reasons:
• Mr. Giancarlo has assured our board of directors that he is fully committed to the board of directors and will
dedicate the appropriate amount of time to fulfill his duties as a member of our board of directors.
• Despite being on multiple boards and serving as chief executive officer of Pure Storage, our experience is that Mr.
Giancarlo is prepared for board meetings as demonstrated by his insightful questions and comments.
• Mr. Giancarlo’s high attendance record demonstrates his commitment to our board of directors, participating in
100% of board meetings and 100% of compensation committee meetings in 2024.
• Mr. Giancarlo’s experience on the board of directors of other public companies and his role as chief executive
officer will benefit us by providing his insight and experience that enhances his value to Arista.
• Mr. Giancarlo has valuable experience and background including his extensive experience as a chief executive
officer and as a board member of companies in the technology industry.
Board Leadership Structure
We believe that the structure of our board of directors and its committees provides strong overall management of our
Company and supports the risk oversight function of the board of directors. Our current Chairperson, Jayshree Ullal,
is not independent under the listing standards of the New York Stock Exchange (“NYSE”) as a result of her
employment with us. Our board of directors believes that, given the perspective and experience Ms. Ullal brings,
Ms. Ullal’s service as our Chairperson is appropriate and is in the best interests of our board of directors, our
Company and our stockholders.
Our Chief Executive Officer is responsible for setting the strategic direction of our Company, the general management
and operation of the business and the guidance and oversight of senior management. The Chairperson of our board
of directors monitors the content, quality and timeliness of information sent to our board of directors and is available
for consultation with our board of directors regarding the oversight of our business affairs. Our board of directors
believes that the responsibilities of our lead independent director appropriately and effectively complement our
combined chairman and chief executive officer structure as described above.
Lead Independent Director
Recognizing the importance of strong independent oversight, our board of directors has appointed Mr. Scheinman to
serve as our lead independent director.
While the Chairperson directs the operations of the board of directors and is responsible for the overall management
and effective functioning of the board of directors, the lead independent director provides leadership to the board of
directors and particularly to the independent directors.
The lead independent director communicates with the Chief Executive Officer, disseminates information to the rest of
the board of directors in a timely manner, and raises issues with management on behalf of the outside directors when
appropriate. In addition, the lead independent director’s responsibilities include the following:
• calling meetings of independent directors when
necessary and appropriate;
• being available, when appropriate, for consultation
and direct communication with the Company’s
stockholders;
• building a productive relationship between the board
of directors and the CEO;
• ensuring that the board of directors fulfills its
oversight responsibilities in Company strategy, risk
oversight and succession planning; and
• performing such other duties as the board of
directors may from time to time designate.
24
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Board of Directors Evaluation Process
Our board of directors seeks to operate with the highest degree of effectiveness, supporting a dynamic boardroom
culture of independent thought and intelligent debate on critical matters. The Nominating and Corporate Governance
Committee oversees this process, which is led by the chair of the committee. Our board of directors and committee
evaluation process allows for annual assessment of our board of directors practices and the opportunity to identify
areas for improvement.
The annual assessment includes an evaluation of:
• Board structure and composition
• Board culture and relationship with management
• Information received by the board
• Quality of board meetings, board responsibilities and performance
• Current topics
• Each Committee of the Board
The following is an overview of the board of directors evaluation process.
BOARD EVALUATION PROCESS
HOW RESULTS ARE USED:
1
Evaluation process discussed at Nominating
and Corporate Governance Committee meeting
By the board of directors, to identify skills or
expertise that may be used as criteria when the
board of directors considers new board
candidates
By the board of directors, to identify strengths
and areas of opportunity of each board
member and to provide insight into how each
board member can be most valuable to Arista
By the board of directors, to improve their
agenda topics so that the information they
receive enables them to effectively address the
issues they consider most critical
By the Nominating and Corporate Governance
Committee, as part of its annual review of each
director’s performance when considering
whether to nominate the director for re-election
to the board of directors
2
Each board member assesses performance
and effectiveness of the board of directors, and
as applicable, the committees
3
Board members meet one-on-one with outside
counsel to discuss their assessments and to
provide feedback
4
Outside counsel shares feedback received with
the General Counsel, Nominating and Corporate
Governance Committee and the full board
5
The full board reviews and develops plans to
take actions based on the results, as
appropriate
Board of Directors Meetings and Committees
During our fiscal year ended December 31, 2024, each director attended at least 75% of the aggregate of (i) the total
number of meetings of our board of directors held during the period for which he or she has been a director and
(ii) the total number of meetings held by all committees of our board of directors on which he or she served during the
periods that he or she served.
Our Corporate Governance Guidelines set out that the Company encourages, but does not require, our directors to
attend the annual meeting of stockholders. All of our board members, except Kenneth Duda, attended our 2024
annual meeting.
2025 PROXY STATEMENT
25
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
NUMBER OF BOARD AND COMMITTEE MEETINGS HELD IN 2024
Audit Committee
Nominating and Corporate
Governance Committee
Compensation Committee
Board of Directors
4
4
4
4
16
meetings
Our board of directors has three standing committees. Charters describing the responsibilities of each of the Audit
Committee, Compensation Committee and Nominating and Corporate Governance Committee are available in the
Governance section of our website at http://investors.arista.com. The composition and responsibilities of each of the
committees of our board of directors is described below. Members will serve on these committees until their
resignation or until as otherwise determined by our board of directors.
AUDIT COMMITTEE
NUMBER OF MEETINGS: 4
Lewis Chew (Chair)
Kelly Battles
Greg Lavender(1)
Yvonne Wassenaar
(1) Dr. Lavender began serving on the Audit Committee upon his appointment as a director.
KEY RESPONSIBILITIES
• Providing oversight of our accounting and financial reporting processes and the audit of our financial
statements
• Assisting our board of directors in oversight of (i) the integrity of our financial statements, (ii) our compliance
with legal and regulatory requirements, (iii) the independent auditor’s qualifications, independence, and
performance, (iv) our internal accounting and financial controls, and (v) the organization and performance of
our internal audit function
• Providing to our board of directors such information and materials as it may deem necessary to make our
board of directors aware of significant financial matters that require the attention of our board of directors
• Preparing the report required by the SEC rules to be included in our proxy statement for the annual meeting
of stockholders
• Reviewing and discussing with management, including our internal audit function, if applicable, and our
independent auditor guidelines and policies to identify, monitor, and address enterprises risks, including our
investment policies
26
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
• Reviewing and discussing with management the adequacy and monitoring of our compliance programs with
respect to legal, ethical, and regulatory requirements, including our Code of Ethics and Business Conduct,
compliance with anti- bribery and anti-corruption laws, and compliance with export laws
• Reviewing periodic reports from management on our internal compliance policies and procedures
• Reviewing and discussing with management our policies and practices relating to environmental and social
responsibility matters
• Reviewing and discussing with management risks to significant cybersecurity matters and concerns involving
the Company, including information security, data privacy, backup of information systems and related
regulatory matters and compliance
INDEPENDENCE/QUALIFICATIONS:
• All committee members are independent under the NYSE listing standards and the heightened independence
requirements applicable to Audit Committee members under SEC rules
• All current committee members are financially literate in accordance with NYSE listing standards. Mr. Chew,
Ms. Battles and Ms. Wassenaar qualify as an “Audit Committee financial expert” under SEC rules and have
accounting or related financial management expertise in accordance with NYSE listing standards.
COMPENSATION COMMITTEE
NUMBER OF MEETINGS: 4
Charles Giancarlo (Chair)
Daniel Scheinman
Mark B. Templeton
KEY RESPONSIBILITIES:
• Providing oversight of our compensation policies, plans, benefits programs, and overall compensation
philosophy
• Assisting our board of directors in discharging its responsibilities relating to (i) oversight of the compensation
of our Chief Executive Officer, and other executive officers, and (ii) approving and evaluating our executive
officer compensation plans, policies, and programs
• Administering our equity compensation plans for our employees
• Reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive
Officer, and other executive officers, evaluating performance in light thereof, and considering factors related
to our performance, including accomplishment of our long-term business and financial goals
• Evaluating, at least annually, our compensation policies and practices with management to review the
relationship between risk management policies and compensation and evaluating compensation policies and
practices that could mitigate any such risk
• Monitoring compliance with our stock ownership guidelines and recommending to our board of directors any
changes to such guidelines
• Monitoring compliance with our clawback policy and approving any changes to such policy
INDEPENDENCE/QUALIFICATIONS:
• All committee members are independent under the NYSE listing standards and the independence
requirements applicable to Compensation Committee members under NYSE rules and the heightened
independence requirements under SEC rules
2025 PROXY STATEMENT
27
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
NUMBER OF MEETINGS: 4
Daniel Scheinman (Chair)
Yvonne Wassenaar
KEY RESPONSIBILITIES
• Reviewing and making recommendations regarding corporate governance
• Reviewing and making recommendations to our board of directors regarding the composition and size of our
board of directors and determining the relevant criteria (including any minimum qualifications) for board
membership, including issues of character, professional ethics and integrity, judgment, business acumen,
diversity of experience, independence, area of expertise, corporate experience, length of service, potential
conflicts of interest, an understanding of the our business, an understanding of the responsibilities that are
required of a member of our board of directors, other time commitments, diversity with respect to
professional background, education, race, ethnicity, gender, age and geography, as well as other individual
qualities and attributes that contribute to the total mix of viewpoints and experience represented on our board
of directors
• Identifying, considering and recommending candidates to fill new positions or vacancies on our board of
directors
• Reviewing actual and potential conflicts of interest of our board of directors and corporate officers
• Making recommendations for continuing education of our board of directors
• Leading the annual performance review of our board of directors, its committees and management
• Reviewing succession planning for our executive officers
INDEPENDENCE/QUALIFICATIONS:
• All committee members are independent under the NYSE listing standards and SEC rules
Compensation Committee Interlocks and Insider Participation
None of the members of our Compensation Committee is or has been an officer or employee of our Company. None
of our executive officers currently serves, or in the past year has served, as a member of the board of directors or
Compensation Committee (or other board committee performing equivalent functions or, in the absence of any such
committee, the entire board) of any entity that has one or more of its executive officers serving on our board of
directors or Compensation Committee.
Considerations in Evaluating Director Nominees
Our Nominating and Corporate Governance Committee uses a variety of methods for identifying and evaluating
potential director nominees. In accordance with the Company’s Corporate Governance Guidelines, in its evaluation of
director candidates, including the members of the board of directors eligible for re-election, the Nominating and
Corporate Governance Committee will consider: (a) the current size and composition of the board of directors, (b) the
needs of the board of directors and the respective committees of the board of directors, (c) such factors as character,
28
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
professional ethics and integrity, judgment, business acumen, diversity of experience, independence, area of
expertise, corporate experience, length of service, potential conflicts of interest, an understanding of the Company’s
business, an understanding of the responsibilities that are required of a member of the board of directors, other time
commitments, diversity with respect to professional background, education, race, ethnicity, gender, age and
geography, as well as other individual qualities and attributes that contribute to the total mix of viewpoints and
experience represented on the board of directors, and (d) other factors that the Nominating and Corporate
Governance Committee may consider appropriate. The Nominating and Corporate Governance Committee shall also
consider composition requirements imposed by applicable law. The Nominating and Corporate Governance
Committee evaluates these factors, among others, and does not assign any particular weighting or priority to any of
these factors.
The Nominating and Corporate Governance Committee requires the following minimum qualifications to be satisfied
by any nominee for a position on the board of directors: (a) the highest personal and professional ethics and integrity,
(b) proven achievement and competence in the nominee’s field and the ability to exercise sound business judgment,
(c) skills that are complementary to those of the existing board of directors, (d) the ability to assist and support
management and make significant contributions to the Company’s success, and (e) an understanding of the fiduciary
responsibilities that is required of a member of the board of directors and the commitment of time and energy
necessary to diligently carry out those responsibilities.
Below is a graphic summarizing the process for our board of directors to identify and review director candidates to
join our board of directors:
Candidate Pool
Recommend Selected
Candidates for
Appointment to Our
Board of Directors
5 New Director
Nominees In The Last
Five Years
Input From:
Directors
Management
Stockholders
In-Depth Review
by Board of Directors
and Nominating and
Corporate Governance
Committee Including:
Skills, Expertise,
Experience, Diversity
and Independence
Ms. Wassenaar, who was appointed to the board of directors by our other directors in July 2022, was initially
suggested to the Nominating and Corporate Governance Committee of the board of directors for consideration as a
potential director by our Chief Executive Officer. There is no arrangement or understanding between Ms. Wassenaar
and any other persons pursuant to which she was selected as a director of Arista. In addition, Ms. Wassenaar does
not have an interest in any transactions that would be reportable under Item 404(a) of Regulation S-K.
Stockholder Recommendations for Nominations to the Board of
Directors
The Nominating and Corporate Governance Committee will evaluate any recommendation for nominations to our
board of directors in accordance with its charter, our amended and restated bylaws, our policies and procedures for
director candidates, as well as the regular director nominee criteria described above. Under our Corporate
Governance Guidelines, the Nominating and Corporate Governance Committee will consider candidates for our
board of directors recommended by stockholders holding at least the minimum amount in market value of the
Company’s securities entitled to vote on the election of directors as set forth in applicable SEC rules and regulations
prior to the date of the submission of the recommendation so long as such recommendations and nominations
comply with the certificate of incorporation and bylaws of the Company and applicable laws, including SEC rules and
regulations. Such recommendations must include information about the candidate, including but not limited to, a
statement of support by the recommending stockholder, evidence of the recommending stockholder’s ownership of
our common stock and a signed letter from the candidate acknowledging that as a member of our board of directors,
the candidate will owe fiduciary duties to us and the stockholders. Our Nominating and Corporate Governance
Committee has discretion to decide which individuals to recommend for nomination as directors.
Any nomination should be sent in writing to our General Counsel or our Legal Department at Arista Networks, Inc.,
5453 Great America Parkway, Santa Clara, California 95054. To be timely for our 2026 annual meeting of
stockholders, our General Counsel or Legal Department must receive the nomination no earlier than January 31,
2026 and no later than March 2, 2026.
2025 PROXY STATEMENT
29
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Stockholder Outreach
We believe that effective corporate governance should include regular, constructive conversations with our
stockholders. Over the past year, our board of directors engaged with stockholders, including seeking and
encouraging feedback from stockholders about our corporate governance practices by conducting stockholder
outreach and engagement throughout the year.
Lead independent director
Senior management
Investor relations
Who
Participates
One-on-one and group meetings in-person and virtually
Written and electronic communications
How We
Engage
Other Ways
We Engage
•
•
•
•
•
•
•
•
•
Quarterly earnings calls
Industry presentations and conferences
Company-hosted events and presentations
Securities analyst meetings
Communications with the Board of Directors
Stockholders and other interested parties wishing to communicate directly with our independent or non-management
directors may do so by writing and mailing the correspondence to our General Counsel and Corporate Secretary at
Arista Networks, Inc., 5453 Great America Parkway, Santa Clara, California 95054. Each communication should set
forth (i) the name and address of the stockholder, as it appears on our books, and if the shares of our common stock
are held by a nominee, the name and address of the beneficial owner of such shares, and (ii) the number of shares of
our common stock that are owned of record by the record holder and beneficially by the beneficial owner.
Our General Counsel, in consultation with appropriate members of our board of directors as necessary, will review all
incoming communications and, if appropriate, all such communications will be forwarded to the appropriate member
or members of our board of directors, or if none is specified, to the Chairperson of our board of directors.
Role of Board of Directors in Risk Oversight
Risk is inherent with every business and we face a number of risks, including strategic, financial, business and
operational, legal and compliance, and reputational. We have designed and implemented processes to manage risk
in our operations. Management is responsible for the day-to-day management of risks the Company faces while our
board of directors has responsibility for the oversight of risk management. Our board committees assist our board of
directors in fulfilling its oversight responsibilities in certain areas of risk.
Our Audit Committee reviews the Company’s risk management processes and procedures, including our internal
controls and procedures on financial reporting, our investment policies, and our compliance programs with respect to
legal, ethical and regulatory requirements. The management and internal audit teams provide periodic updates on
cybersecurity risks and other risks to the Audit Committee. Further, the Audit Committee receives reports and
presentations from management on the Company’s risk assessment and mitigation programs, compliance matters,
and cybersecurity activities, and the results of various internal audit projects. Our Audit Committee receives quarterly
reports from our Chief Information Security Officer (“CISO”), in conjunction with other senior managers, on
cybersecurity risks. In addition, these managers update the Audit Committee, as necessary, regarding any material
cybersecurity incidents, as well as incidents with lesser impact potential.
30
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
The chart below illustrates the responsibilities of our board of directors and board committees in overseeing risk in our
operations.
BOARD OF DIRECTORS
•
Meets with CEO, CISO
and other members of
the senior management
team at quarterly
meetings of our board
of directors where they
discuss strategy and
risks facing the
Company
•
Confirms that the risk
management processes
designed and
implemented by
management are
appropriate and
functioning as designed
•
Reviews strategic and
operational risk in the
context of reports from
the management team,
receives reports on all
significant committee
activities at each regular
meeting, evaluates the
risks inherent in
significant transactions,
and provides guidance
to management
AUDIT COMMITTEE
•
Assists in the areas of internal control over financial reporting
and disclosure controls and procedures, legal and regulatory
compliance
•
Discusses with management and the independent auditor
guidelines and policies with respect to risk assessment and
risk management
•
Reviews our major financial risk exposures and the steps
management has taken to monitor and control these
exposures
•
Monitors certain key risks on a regular basis throughout the
fiscal year, such as cybersecurity risk and risk associated
with internal control over financial reporting and liquidity risk
•
Reviews the adequacy and monitoring of our compliance
programs for legal, ethical and regulatory requirements
•
Reviews our risk management policies, including our
investment policies
•
Reviews management reports on internal compliance
policies and procedures
•
Reviews and discusses with management our policies and
practices relating to environmental and social responsibility
matters
•
Reviews and discusses with management our information
security policies and internal controls regarding information
security
•
Oversees management’s implementation of our
cybersecurity risk management program
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
•
Manages risks associated with board organization,
membership and structure, corporate governance and
succession planning
•
Reviews any conflicts of interest
COMPENSATION COMMITTEE
•
Assesses risks created by the incentives inherent in our
compensation policies
•
Evaluates compensation policies and practices that could
mitigate risks
2025 PROXY STATEMENT
31
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Executive Talent Management and Succession Planning
Our board of directors places a high priority on senior management development and succession planning and
recognizes that thoughtful succession planning is critical to creating long-term shareholder value.
Pursuant to our Corporate Governance Guidelines, the Nominating and Corporate Governance Committee, in
consultation with the full board of directors, is primarily responsible for succession planning for the role of chief
executive officer. In addition, the Nominating and Corporate Governance Committee monitors management’s
succession plans for other key executives.
The Nominating and Corporate Governance Committee evaluates our key executives, discusses their development
and develops succession plans with the view of ensuring that a strong pipeline of talent is being developed for
planned or unplanned events. In addition, our lead independent director facilitates discussions among independent
directors about succession planning at executive sessions.
Director Compensation
The following table provides information regarding the total compensation of each of our non-employee directors in
2024. Directors who are also our employees do not receive additional compensation for their service as directors. In
particular, Jayshree Ullal, a named executive officer, and Kenneth Duda, a named executive officer, did not receive
additional compensation for their service as directors.
Director
Fees Earned
or Paid in
Cash ($)(1)
Stock
Awards ($)(2)
Option
Awards ($) Total ($)
Kelly Battles
87,500
250,788
—
338,288
Lewis Chew
105,707
250,788
—
356,495
Charles Giancarlo
100,000
250,788
—
350,788
Daniel Scheinman
142,000
250,788
—
392,788
Mark B. Templeton
87,052
250,788
—
337,840
Yvonne Wassenaar
97,500
250,788
—
348,288
(1) The amounts reported represent the fees earned for service on our board of directors and committees of our board of
directors for 2024.
(2) In accordance with SEC rules, the amounts shown reflect the aggregate grant date fair value of restricted stock units granted
to non-employee directors during 2024, computed in accordance with Financial Accounting Standards Board Accounting
Standards Codification Topic 718 (“FASB ASC 718”). The grant date fair value for restricted stock units is measured based on
the closing price of Arista’s common stock on the date of grant. Each of Mses. Battles and Wassenaar and Messrs. Chew,
Giancarlo, Scheinman and Templeton received an award of 3,380 restricted stock units on June 7, 2024.
32
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
The following table lists all outstanding equity awards held by our non-employee directors as of December 31, 2024.
Director
Stock
Awards (#)(1)
Option
Awards (#)
Kelly Battles
1,688
—
Lewis Chew
1,688
—
Charles Giancarlo
1,688
—
Daniel Scheinman
1,688
—
Mark B. Templeton
1,688
—
Yvonne Wassenaar
1,688
—
(1) Represents the number of restricted stock units unvested as of December 31, 2024.
With respect to 2024 board service, our board of directors approved compensation to each of our non-employee
directors as follows:
• a $75,000 cash retainer for general board service,
except that our lead independent director received a
$120,000 cash retainer;
• a $30,000 cash retainer for chairing the Audit
Committee;
• a $25,000 cash retainer for chairing the
Compensation Committee;
• a $12,000 cash retainer for chairing the Nominating
and Corporate Governance Committee;
• a $10,000 cash retainer for non-chair service on each
Compensation Committee and Nominating and
Corporate Governance Committee
• a $12,500 cash retainer for non-chair service on the
Audit Committee
In February 2025, our Compensation Committee recommended, and our board of directors approved, a revised
policy for annual equity grants to outside board members of restricted stock units with a total value of $250,000
(based on the lowest closing stock price for the 90 trading day period ending on the grant date) that vest quarterly (on
each Company standard quarterly vesting date following the grant date) over one year and are subject to continued
service on the board (the “Revised Director Equity Policy”). The board of directors adopted this new policy following
an independent review of the pay practices and policies conducted by Aon, the independent consultant for the
compensation committee. The decision to make policies changes was considered by the Compensation Committee
and presented to the Non-employee directors for approval. Grants under the Revised Director Equity Policy shall be
automatic immediately following an applicable annual meeting.
STOCK OWNERSHIP GUIDELINES
Arista’s stock ownership guidelines are designed to encourage our directors and our Chief Executive Officer to
achieve and maintain a meaningful equity stake in our Company and more closely align their interests with those of
our stockholders. The guidelines provide that our non-employee directors should accumulate and hold investment
levels of three times (3X) the annual cash base retainer for service on the board of directors within five years from the
later of the date of the adoption of the stock ownership guidelines or the date such director is appointed or elected.
All of our directors and our Chief Executive Officer are on track to meet these guidelines based on their current rate of
stock accumulations in the time frames set out in the guidelines.
2025 PROXY STATEMENT
33
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our board of directors is currently composed of nine members. In accordance with our amended and restated
certificate of incorporation, our board of directors is divided into three staggered classes of directors. At the Annual
Meeting, three Class II directors will be elected for a three-year term to succeed the same class whose term is then
expiring.
Each director’s term continues until the election and qualification of his or her successor, or such director’s earlier
death, resignation, or removal. Any increase or decrease in the number of directors will be distributed among the
three classes so that, as nearly as possible, each class will consist of one-third of our directors. This classification of
our board of directors may have the effect of delaying or preventing changes in control of our Company.
Nominees
Our Nominating and Corporate Governance Committee has recommended, and our board of directors has approved,
Charles Giancarlo, Daniel Scheinman and Yvonne Wassenaar, as nominees for election as Class II directors at the
Annual Meeting. If elected, each of Charles Giancarlo, Daniel Scheinman and Yvonne Wassenaar will serve as Class II
directors until the 2028 annual meeting of stockholders and until their successors are duly elected and qualified. Each
of the nominees is currently a director of our Company.
For information concerning the nominees, please see the section titled “Board of Directors and Corporate
Governance.”
If you are a stockholder of record and you sign your proxy card or vote by telephone or over the Internet but do not
give instructions with respect to the voting of directors, your shares will be voted “FOR” the election of:
• Charles Giancarlo
• Daniel Scheinman
• Yvonne Wassenaar
Charles Giancarlo, Daniel Scheinman and Yvonne Wassenaar have each
consented to being a nominee and to serving as a director, if elected;
however, in the event that a director nominee is unable to serve as a director
at the time of the Annual Meeting, the proxies will be voted for any nominee
who shall be designated by our board of directors to fill such vacancy. If you
are a street name stockholder and you do not give voting instructions to your
broker or nominee, your broker will leave your shares unvoted on this matter.
Vote Required
The election of directors is by a plurality of the voting power of the shares of our common stock present in person or
represented by proxy at the Annual Meeting and entitled to vote on the election of directors. Abstentions and broker
non-votes will have no effect on the outcome of the vote. “Plurality” means that the nominees who receive the largest
number of votes cast “for” are elected as directors. As a result, any shares not voted “for” a particular nominee (whether
as a result of a withheld vote or a broker non-vote) will not be counted in such nominee’s favor and will have no effect on
the outcome of the election. You may vote “for” or “withhold” on each of the nominees for election as a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” EACH OF THE NOMINEES NAMED ABOVE.
34
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
PROPOSAL NO. 2
ADVISORY VOTE ON EXECUTIVE
COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables
stockholders to approve, on an advisory or non-binding basis, the compensation of our named executive officers as
disclosed pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This
proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views
on our named executive officers’ compensation as a whole. This vote is not intended to address any specific item of
compensation or any specific named executive officer, but rather the overall compensation of all of our named
executive officers and the philosophy, policies and practices described in this proxy statement.
The say-on-pay vote is advisory, and therefore not binding on us, the Compensation Committee or our board of
directors. The say-on-pay vote will, however, provide information to us regarding investor sentiment about our
executive compensation philosophy, policies and practices, which the Compensation Committee will be able to
consider when determining executive compensation for the remainder of the current fiscal year and beyond. Our
board of directors and our Compensation Committee value the opinions of our stockholders and to the extent there is
any significant vote against the named executive officer compensation as disclosed in this proxy statement, we will
communicate directly with stockholders to better understand the concerns that influenced the vote, consider our
stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to
address those concerns.
We believe that the information provided in the “Executive Compensation” section of this proxy statement, and in
particular the information discussed in “Executive Compensation—Compensation Discussion and Analysis—
Executive Compensation Philosophy and Objectives” beginning on page 43 below, demonstrates that our executive
compensation program was designed appropriately and is working to ensure management’s interests are aligned
with our stockholders’ interests to support long-term value creation. Accordingly, we ask our stockholders to vote
“FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation paid to the named executive
officers, as disclosed in the proxy statement for the Annual Meeting pursuant to the compensation disclosure rules of
the SEC, including the compensation tables and narrative discussion, and other related disclosure.”
Vote Required
The advisory vote on executive compensation requires the affirmative vote of a majority of the voting power of the
shares of our common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on
the subject matter. Abstentions will have the effect of a vote AGAINST the proposal and broker non-votes will have no
effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF
THE ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION.
2025 PROXY STATEMENT
35
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT
REGISTERED PUBLIC
ACCOUNTING FIRM
Our Audit Committee has appointed Ernst & Young LLP (“EY”), an independent registered public accounting firm, to
audit our consolidated financial statements for our fiscal year ending December 31, 2025. During our fiscal years
ended December 31, 2024, and December 31, 2023, EY served as our independent registered public accounting
firm.
Notwithstanding the appointment of EY and even if our stockholders ratify the appointment, our Audit Committee, in
its discretion, may appoint another independent registered public accounting firm at any time during our fiscal year if
our Audit Committee believes that such a change would be in the best interests of our Company and stockholders. At
the Annual Meeting, our stockholders are being asked to ratify the appointment of EY as our independent registered
public accounting firm for our fiscal year ending December 31, 2025. Our Audit Committee is submitting the
appointment of EY to our stockholders because we value our stockholders’ views on our independent registered
public accounting firm and as a matter of good corporate governance. Representatives of EY are expected to attend
the Annual Meeting virtually, and they will have an opportunity to make a statement and will be available to respond to
appropriate questions from our stockholders.
If our stockholders do not ratify the appointment of EY, our Audit Committee may reconsider the appointment of EY.
Fees Paid to the Independent Registered Public Accounting Firm
The following table presents fees for professional audit services and other services rendered to our Company by EY
for our fiscal years ended December 31, 2023 and 2024.
2023
2024
(in thousands)
Audit Fees(1)
$3,130
$3,483
Audit-Related Fees(2)
—
—
Tax Compliance Fees(3)
$1,178
$1,149
Tax Advice and Planning Fees(4)
$
268
$
219
All Other Fees(5)
—
—
Total Fees
$4,576
$4,851
(1) Audit Fees consist of professional services rendered in connection with the audit of our annual consolidated financial statements, including
audited financial statements presented in our Annual Report on Form 10-K and services that are normally provided by the independent
registered public accountants in connection with statutory and regulatory filings or engagements for those fiscal years.
(2) Audit-Related Fees consist of fees for professional services for assurance and related services that are reasonably related to the performance
of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” These services include accounting
consultations concerning financial accounting and reporting standards.
(3) Tax Compliance Fees consist of fees for tax compliance and the preparation of original and amended tax returns and refund claims.
(4) Tax Advice and Planning Fees consist of fees for tax advice and tax planning assistance, including non-recurring tax assistance in connection
with acquisitions and intellectual property alignment.
(5) All Other Fees consist of fees billed for products and services provided by the independent registered public accountants other than those that
meet the criteria above.
36
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Auditor Independence
In our fiscal year ended December 31, 2024, there were no other professional services provided by EY, other than
those listed above, that would have required our Audit Committee to consider their compatibility with maintaining the
independence of EY.
Audit Committee Policy on Pre-Approval of Audit and
Permissible Non-Audit Services of Independent Registered
Public Accounting Firm
Our Audit Committee has established a policy governing our use of the services of our independent registered public
accounting firm. Under the policy, our Audit Committee is required to pre-approve all audit and non-audit services
performed by our independent registered public accounting firm in order to ensure that the provision of such services
does not impair the public accountants’ independence. All services and fees paid to EY for our fiscal years ended
December 31, 2023 and 2024 were pre-approved by our Audit Committee.
Vote Required
The ratification of the appointment of EY requires the affirmative vote of a majority of the voting power of the shares of
our common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the
subject matter. Abstentions will have the effect of a vote AGAINST the proposal and broker non-votes will have no
effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP.
2025 PROXY STATEMENT
37
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is a committee of the board of directors comprised solely of independent directors as required
by the NYSE listing standards and rules and regulations of the SEC. The Audit Committee operates under a written
charter approved by the board of directors, which is available in the Governance section of our website at
http://investors.arista.com. The composition of the Audit Committee, the attributes of its members and the
responsibilities of the Audit Committee, as reflected in its charter, are intended to be in accordance with applicable
requirements for corporate audit committees. The Audit Committee reviews and assesses the adequacy of its charter
and the Audit Committee’s performance on an annual basis.
With respect to the Company’s financial reporting process, the management of the Company is responsible for
(1) establishing and maintaining internal controls and (2) preparing the Company’s consolidated financial statements.
Our independent registered public accounting firm, Ernst & Young LLP (“EY”), is responsible for auditing these
financial statements. It is the responsibility of the Audit Committee to oversee these activities. It is not the
responsibility of the Audit Committee to prepare our financial statements. These are the fundamental responsibilities
of management. In the performance of its oversight function, the Audit Committee has:
•
reviewed and discussed the audited financial
statements with management and EY;
•
discussed with EY the matters required to be
discussed by the applicable requirements of the
Public Company Accounting Oversight Board and
the SEC; and
•
received the written disclosures and the letter from
EY required by applicable requirements of the
Public Company Accounting Oversight Board
regarding the independent accountant’s
communications with the Audit Committee
concerning independence, and has discussed with
EY its independence.
Based on the Audit Committee’s review and discussions with management and EY, the Audit Committee
recommended to the board of directors that the audited financial statements be included in the Annual Report on
Form 10-K for the fiscal year ended December 31, 2024 for filing with the SEC.
Respectfully submitted by the members of the Audit Committee of the board of directors*:
Lewis Chew (Chair)
Kelly Battles
Yvonne Wassenaar
This report of the Audit Committee is required by the SEC and, in accordance with the SEC’s rules, will not be
deemed to be part of or incorporated by reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended (“Securities Act”), or under the Exchange Act,
except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed
“soliciting material” or “filed” under either the Securities Act or the Exchange Act.
*
Dr. Lavender joined our board of directors and the Audit Committee on March 14, 2025 and did not participate in the Audit
Committee actions reported above.
38
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
EXECUTIVE OFFICERS
The following table identifies certain information about our executive officers as of April 16, 2025. Officers are
appointed by our board of directors to hold office until their successors are appointed. There are no family
relationships among any of our directors or executive officers.
Name
Age
Position
Jayshree Ullal
64
Chief Executive Officer, President and Chairperson
Chantelle Breithaupt
53
Senior Vice President, Chief Financial Officer
Kenneth Duda
53
Founder, Chief Technology Officer and Senior Vice President, Software
Engineering and Director
Marc Taxay
56
Senior Vice President, General Counsel
For biographical information about Ms. Ullal and Mr. Duda, please see “Board of Directors and Corporate
Governance- Continuing Directors.”
Chantelle
Breithaupt
Ms. Breithaupt joined Arista Networks, Inc. in January 2024 and
was appointed as the Company’s Senior Vice President, Chief
Financial Officer effective as of February 12, 2024. Ms. Breithaupt
served as Senior Vice President and Chief Financial Officer of
Aspen Technology from March 2021 to December 2023. Prior to
Aspen Technology, Ms. Breithaupt spent seven years with Cisco
Systems Inc. She held multiple leadership positions at Cisco, most
recently as Senior Vice President, Finance from January 2021 to
March 2021, Vice President of Finance – Customer Experience/
Services from August 2018 to January 2021, Vice President –
Finance, Americas from October 2017 to August 2018 and Senior
Director – Operational Finance from April 2014 to August 2015.
Before Cisco, Ms. Breithaupt worked with GE for 15 years, where
she held progressive, executive global finance roles.
Ms. Breithaupt has served as a member of the board of directors
of Ambarella, Inc., a semiconductor design company, since
February 2025. Ms. Breithaupt holds an Honors Business
Administration degree from Wilfrid Laurier University (Canada).
Senior Vice President, Chief Financial
Officer
2025 PROXY STATEMENT
39
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Marc
Taxay
Mr. Taxay has served as our Senior Vice President, General
Counsel since March 2016 and as our General Counsel since
February 2013. From 2007 to 2013, Mr. Taxay served as the
senior vice president and general counsel of MedeAnalytics, Inc.,
a healthcare analytics company. From 2006 to 2007, Mr. Taxay
served as the assistant general counsel of Coremetrics, Inc. a
digital marketing company. From 2002 to 2006, Mr. Taxay worked
as a partner at Cohen & Grigsby, a law firm. Mr. Taxay holds a
B.A. degree in Political Science and a J.D. from The University of
Michigan.
Senior Vice President, General Counsel
40
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The compensation provided to those individuals who are our named executive officers for our fiscal year ended
December 31, 2024 (our “Named Executive Officers”) is set forth in detail in the Fiscal 2024 Summary Compensation Table
and the other tables that follow this Compensation Discussion and Analysis. The following discussion provides an overview
of our executive compensation philosophy, the overall objectives of our executive compensation program, and each
component of compensation that we provide to our Named Executive Officers. In addition, we explain how and why the
Compensation Committee of our board of directors arrived at the specific compensation policies and decisions for our
Named Executive Officers. The following are the individuals who served as our Named Executive Officers for fiscal 2024:
• Jayshree Ullal, our Chief Executive Officer and
President;
• Chantelle Breithaupt, our Senior Vice President and
Chief Financial Officer;
• Ita Brennan, our former Senior Vice President, Chief
Financial Officer;
• Kenneth Duda, our Chief Technology Officer and
Senior Vice President of Software Engineering;
• Anshul Sadana, our former Chief Operating Officer;
• Marc Taxay, our Senior Vice President, General
Counsel; and
• John McCool, our former Chief Platform Officer,
Senior Vice President of Engineering and Operations
Ms. Brennan served as our Chief Financial Officer and Mr. Sadana served as our Chief Operating Officer for a portion
of fiscal 2024. Mr. McCool served as our Chief Platform Officer until April 7, 2025. Given their services, in their
respective executive officer roles, Ms. Brennan, Mr. Sadana and Mr. McCool are included as a NEO for the purposes
of this Proxy Statement in compliance with applicable disclosure requirements; however, any references to “Named
Executive Officers” or “NEOs” that relate to events, actions, decisions, or other matters that occurred after their
respective services ceased with the Company should be read to exclude them unless specifically noted.
Our board of directors has delegated to the Compensation Committee authority and responsibility for establishing
and overseeing salaries, incentive compensation programs, and other forms of compensation for our executive
officers, general remuneration policies for the balance of our employee population, and for overseeing and
administering our equity incentive and benefits plans.
The following compensation governance standards in our executive compensation policies and practices are
currently in effect:
What We Do
What We Do Not Do
Annual Review. We perform annual reviews of
our executive compensation program.
Performance-Based Equity. In 2024, we
continued to use performance-based equity as a
significant part of our compensation program for
our Named Executive Officers.
Independence. Our Compensation Committee is
made up solely of independent directors and
makes all executive compensation decisions.
Compensation Consultant. Our Compensation
Committee engages its own independent
compensation consultant to assist with its
compensation reviews.
Stock Ownership Guidelines. To align our Chief
Executive Officer’s long-term interests with those
of our stockholders, our Chief Executive Officer is
No Executive-Only Retirement Programs.
We do not offer pension arrangements,
retirement plans, or nonqualified deferred
compensation plans or arrangements to our
executive officers, other than the plans generally
available to all employees.
No Excise Tax Gross-Ups. We do not offer
golden parachute tax gross-ups to any of our
Named Executive Officers or other executive
officers.
No “Single-Trigger” Benefits and Limited
“Double-Trigger” Benefits. Potential change in
control payments and benefits are limited in
nature and are received only in connection with
the termination of employment without cause or
for good reason in connection with or following a
change in control.
2025 PROXY STATEMENT
41
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
What We Do
What We Do Not Do
required to own specified minimum levels of
Company stock.
Clawback Policy. We may seek the recovery of
cash incentive compensation and performance-
based equity compensation paid to our executive
officers.
Overview
FISCAL 2024 BUSINESS HIGHLIGHTS
Our executive compensation program is designed to align the compensation of our executives with our operating and
financial performance and create value for our stockholders. Accordingly, you should consider our executive
compensation decisions in the context of our financial and operational performance during fiscal 2024, including:
Revenue
$7B
FY2024 REVENUE
Revenue for our fiscal 2024 was $7 billion, representing an increase of 19.5%
compared to fiscal 2023. Product revenue increased by $854.5 million, or
17.0%, for the year ended December 31, 2024 compared to 2023. These
increases reflect increased shipments of our switching and routing products
across our customer base. In addition, service revenue increased by $288.5
million, or 34.7%, in the year ended December 31, 2024 compared to 2023,
as a result of continued growth in initial and renewal support contracts as our
customer installed base has continued to expand. International revenues as a
percentage of our total revenues decreased from 20.6% in 2023 to 18.2% in
2024, which was primarily driven by changes in the geographic mix of sales to
our large global customers.
Operating Income
$2.9B
FY2024 GAAP
OPERATING INCOME
47.5%
OF REVENUE
$3.3B
FY2024 NON-GAAP
OPERATING INCOME
Our GAAP operating income for fiscal 2024 was $2.9 billion or 42.0% of
revenue, representing a 30.45% increase compared to fiscal 2023.
Our non-GAAP operating income for fiscal 2024 was $3.3 billion or 47.5% of
revenue, representing a 27.8% increase compared to fiscal 2023 and 14.7%
above our internal targets set at the beginning of the year. This
outperformance reflected the benefit of increased revenue growth and careful
expense management throughout the year. The ratio of non-GAAP operating
income to revenue is a key metric for our stockholders as it provides a
consistent measure of the profitability of our business and as a result we used
non-GAAP operating income as a metric in our 2024 Bonus Plan (as defined
below).
See Appendix A for reconciliation of GAAP to non-GAAP financial measures.
42
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
FISCAL 2024 EXECUTIVE COMPENSATION HIGHLIGHTS
As reflected in our general compensation philosophy and objectives, our executive compensation program is
intended to reward performance, attract and retain key personnel and increase stockholder value. In light of our
financial performance as described in the “Fiscal 2024 Business Highlights” section above, our fiscal 2024 executive
compensation program was intended to reward performance against our financial and key business objectives and
incentivize successful performance in these areas. Accordingly, our key executive compensation actions in fiscal
2024 advanced these objectives:
•
No Base Salary Increases-We did not provide any
base salary increases to our Named Executive
Officers in fiscal 2024.
•
Annual Bonuses Reflecting Pay for Performance-We
did not provide any target bonus increases to our
Named Executive Officers in fiscal 2024. As noted
above, in fiscal 2024, we achieved revenue of
approximately $7 billion representing an increase of
19.5% compared to fiscal 2023, combined with
non-GAAP Operating Income of $3.3 billion an
increase of 27.8% from 2023 and 14.7% above
our internal targets. In addition to this financial
performance, we made significant progress on our
business diversification goals with strong growth in
our enterprise and provider businesses. We
demonstrated continued excellence in product
quality, innovation and support as demonstrated
by healthy new product qualification and order
activity with our cloud titan customers.
Performance across all of these metrics resulted in
payments to our Named Executive Officers under
the 2024 Bonus Plan.
•
Equity Awards Promoting Our Stockholders’ Interests-
Long-term equity incentives constitute a significant
majority of compensation paid to Named Executive
Officers in 2024. Long-term equity incentives align
the interests of executives with those of our
stockholders. For fiscal 2024, we continued to
provide long-term equity compensation to our
Chief Executive Officer in performance equity
awards only, and a mix of PRSUs and RSUs to our
Named Executive Officers other than our Chief
Executive Officer. Ms. Brennan did not receive any
equity awards in 2024 due to her retirement.
•
Equity Awards Subject to Achievement-Performance-
based equity was continued as an important
portion of our executive compensation program for
our Named Executive Officers, with performance-
based equity representing 100% of our Chief
Executive Officer’s equity compensation.
Effect of Most Recent Stockholder Advisory Vote on Executive
Compensation
Our Compensation Committee considers the results of the annual stockholder advisory vote on the compensation of
our Named Executive Officers and stockholder feedback on our executive compensation program as part of its
annual executive compensation review. At our 2024 annual meeting of stockholders, approximately 93% of the votes
cast approved the compensation program for our Named Executive Officers as described in our 2024 proxy
statement. Based on this strong stockholder support, our Compensation Committee determined not to make
significant changes to our existing executive compensation program and policies. Our Compensation Committee
continues to evaluate the executive compensation program and policies to determine the most appropriate ways of
effecting our executive compensation philosophy and objectives. Our Compensation Committee currently intends to
continue to consider the results of the annual advisory vote on executive compensation and stockholder feedback as
data points in making executive compensation decisions.
Executive Compensation Philosophy and Objectives
We operate in a highly competitive business environment, which is characterized by frequent technological advances. To
successfully grow our business in this dynamic environment, we must continually develop and refine our products and
services to stay ahead of our competitors. To achieve these objectives, we need a highly talented and seasoned team of
technical, sales, marketing, operations, and other business professionals. We compete with other companies in our
industry and other technology companies in the Silicon Valley to attract and retain a skilled management team. To
attract and retain qualified executive candidates, our Compensation Committee recognizes that it needs to develop
competitive compensation packages. At the same time, our Compensation Committee is sensitive to the need to
integrate new Named Executive Officers into our executive compensation structure that we were seeking to develop,
2025 PROXY STATEMENT
43
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
balancing both competitive and internal equity considerations. To meet this challenge, we have embraced a
compensation philosophy of offering our Named Executive Officers a competitive total compensation program, which
we view as the sum of base salary, cash performance-based incentives, equity compensation and employee benefits,
each of which recognizes and rewards individual performance and contributions to our success, allowing us to attract,
retain, and motivate talented executives with the skills and abilities needed to drive our desired business results.
The specific objectives of our executive compensation program are to:
•
reward the successful achievement of our financial
growth objectives;
•
drive the development of a successful and
profitable business;
•
attract, motivate, reward, and retain highly qualified
executives who are important to our success;
•
recognize strong performers by offering cash
performance-based incentive compensation and
equity awards that have the potential to reward
individual achievement as well as contributions to
our overall success; and
•
create value for our stockholders.
COMPENSATION PROGRAM DESIGN
Our executive compensation program for fiscal 2024 reflected our stage of development as a growing publicly traded
company. Accordingly, the compensation of our Named Executive Officers consisted of base salary, a short-term
cash incentive compensation opportunity, long-term equity compensation in the form of performance-based
restricted stock units (“PRSUs”) for our Chief Executive Officer and both PRSUs and time-based restricted stock units
(“RSUs”) for our other Named Executive Officers, and certain employee health and welfare benefits.
We offer cash compensation in the form of base salaries and cash incentive compensation opportunities with an
annual payment component. Typically, we have structured our annual cash incentive compensation opportunities to
focus on the achievement of specific short-term financial and operational objectives that will further our longer-term
growth objectives.
Additionally, equity awards for shares of our common stock serve as a key component of our executive compensation
program. For 2024, we granted (i) PRSUs (which become eligible to vest only if the threshold performance is achieved)
to all of our Named Executive Officers and (ii) RSUs (which provide certain value to recipients and limit dilution to our
stockholders) to our Named Executive Officers other than our Chief Executive Officer. In the future, we may introduce
other forms of equity awards, as we deem appropriate, into our executive compensation program to offer our Named
Executive Officers additional types of long-term incentive compensation that further the objective of aligning the
recipient’s interests with those of our stockholders.
Finally, we offer executives standard health and welfare benefits that are generally available to our other employees,
including medical, dental, vision, flexible spending accounts, life insurance and 401(k) plans.
We have not adopted any formal policies or guidelines for allocating compensation between current and long-term
compensation or between cash and non-cash compensation, although we use competitive market data to
understand the competitive market framework for pay mix. Within this overall framework, our Compensation
Committee reviews each component of executive compensation separately and also takes into consideration the
value of each Named Executive Officer’s compensation package as a whole and its relative value in comparison to
our other Named Executive Officers.
Our Compensation Committee evaluates our compensation philosophy and executive compensation program as
circumstances require, and reviews executive compensation annually. As part of this review, we expect that our
Compensation Committee will apply our philosophy and the objectives outlined above, together with consideration for
the levels of compensation that we would be willing to pay to ensure that our executive compensation remains
competitive and that we meet our retention objectives, as well as the cost to us if we were required to find a
replacement for a key executive officer.
44
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
COMPENSATION-SETTING PROCESS
Role of our Compensation Committee
Compensation decisions for our executives are made by our Compensation Committee. Currently, our Compensation
Committee is responsible for reviewing, evaluating and approving the compensation arrangements, plans, policies,
and practices for our Named Executive Officers and overseeing and administering our cash-based and equity-based
compensation plans.
Each fiscal year, our Compensation Committee, after consulting with our management team and its compensation
consultant, establishes our corporate performance objectives and makes decisions with respect to any base salary
adjustment, and approves the corporate performance objectives and target annual cash incentive compensation
opportunities and equity awards for our executive officers, including our Named Executive Officers, for the upcoming
fiscal year. With respect to (i) our cash incentive compensation plan and (ii) the performance-based equity grant to our
Named Executive Officers in 2024, our Compensation Committee determines the applicable goals for each corporate
performance objective used for the applicable year.
Our Compensation Committee reviews our executive compensation program from time to time, including any
incentive compensation plans, to determine whether they are appropriate, properly coordinated, and achieve their
intended purposes, and to make any modifications to existing plans and arrangements or to adopt new plans or
arrangements.
Role of Management
In carrying out its responsibilities, our Compensation Committee works with members of our management team,
including our Chief Executive Officer and our Group Vice President, Worldwide Human Resources & Operations.
Typically, our management team (together with our compensation consultant) assists our Compensation Committee
in the execution of its responsibilities by providing information on corporate and individual performance, market data,
and management’s perspective and recommendations on compensation matters.
Typically, except with respect to her own compensation, our Chief Executive Officer will make recommendations to
our Compensation Committee regarding compensation matters, including the compensation of our executive officers.
Our Chief Executive Officer also participates in meetings of our Compensation Committee, except with respect to
discussions involving her own compensation in which case she leaves the meeting.
While our Compensation Committee solicits the recommendations and proposals of our Chief Executive Officer with
respect to compensation-related matters, these recommendations and proposals are only one factor in our
Compensation Committee’s decision-making process.
Role of Compensation Consultant
Our Compensation Committee is authorized to retain the services of one or more executive compensation advisors
from time to time, as it sees fit, in connection with carrying out its duties.
In fiscal 2024, our Compensation Committee continued to engage Aon, plc, a national compensation consulting firm,
to assist us in executing our executive compensation strategy and guiding principles, assessing current executive
total compensation levels against competitive market practices, developing a compensation peer group and advising
on potential executive compensation decisions for fiscal 2024. Our Compensation Committee provided Aon with
instructions regarding the goals of our executive compensation program and the parameters of the competitive
review of executive officer compensation packages that it was to conduct. In particular, the Compensation
Committee instructed Aon to analyze whether the compensation packages of our executive officers were consistent
with our compensation philosophy and competitive relative to market-based peer practices and general market
trends. The Compensation Committee further instructed Aon to evaluate the following components to assist the
Compensation Committee in establishing fiscal 2024 compensation: base salary; target and actual annual incentive
compensation; target and actual total cash compensation (base salary and annual incentive compensation); long-
term incentive compensation (equity awards); target and actual total direct compensation (base salary, annual
incentive compensation and long-term incentive compensation); and beneficial ownership of our common stock.
Aon does not provide any services to us other than the services provided to our Compensation Committee. Our
Compensation Committee has assessed the independence of Aon taking into account, among other things, the
2025 PROXY STATEMENT
45
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
factors set forth in Exchange Act Rule 10C-1 and the NYSE listing standards, and has concluded that no conflict of
interest exists with respect to the work that Aon performs for our Compensation Committee.
Use of Competitive Data
To assess the competitiveness of our executive compensation program and to assist in setting compensation levels,
Aon provided market data for the compensation peer group approved by our Compensation Committee.
Competitive Positioning
In fiscal 2024, our Compensation Committee continued to compare and analyze our executive compensation
program with that of a formal compensation peer group of companies.
In fiscal 2024, our Compensation Committee reviewed our executive compensation peer group, highlighting potential
outliers in the existing group and adjusting for changes in our market capitalization. In considering an updated peer
group, our Compensation Committee considered the following criteria: (i) companies in the computer networking,
communication products/services and software sectors with a focus on growing technology companies;
(ii) companies with revenues between $2.5 billion to $12.5 billion (approximately 0.5x to 2.5x of our then-current
trailing 12-month revenue); (iii) companies with market capitalization generally between $14 and $100 billion
(approximately 0.3x to 2x of our then-current market capitalization); and (iv) companies with positive revenue growth,
with a preference for companies at or above 10% revenue growth. As a result, the following group was our executive
compensation peer group for fiscal 2024 compensatory decisions for fiscal year 2024:
Executive Compensation Peer Group for Fiscal 2024
Akamai Technologies
F5
Palo Alto Networks
Workday
Autodesk
Fortinet
ServiceNow
Zscaler
Cadence Design Systems
Juniper Networks
Splunk
Ciena
NetApp
Synopsys
With respect to fiscal 2025 executive compensation decisions our Compensation Committee reconsidered the peer
group, highlighting potential outliers in the existing group and adjusting for changes in our market capitalization. In
considering an updated peer group, our Compensation Committee considered the following criteria: (i) companies in
the computer networking, communication products/ services and software sectors with a focus on growing
technology companies; (ii) companies with revenues between $3 billion to $15 billion (approximately 0.5x to 2.5x of
our then-current trailing 12-month revenue); (iii) companies with market capitalization generally between $30.0 and
$200.0 billion (approximately 0.3x to 2x of our then-current market capitalization); and (iv) companies with positive
revenue growth, with a preference for companies at or above 10% revenue growth. As a result, the following group
was our executive compensation peer group for fiscal 2025 compensatory decisions for fiscal 2025:
Executive Compensation Peer Group for Fiscal 2025
Akamai Technologies
CrowdStrike*
Intuitive Surgical*
Synopsys
Autodesk
Digital Realty
NetApp
Workday
Cadence Design Systems
Equinix*
Palo Alto Networks
Zscaler
Ciena
Fortinet
ServiceNow
*
Company added to peer group for fiscal 2025.
As a result of changes in our compensation peer group, we are positioned at the 56th percentile in terms of revenue and the
89th percentile in terms of market capitalization (on a 30-day average basis) at the time the peer group was approved.
Aon provides our Compensation Committee with market data from our compensation peer group regarding each
element of our executive compensation program. However, our Compensation Committee does not rely on a specific
benchmark or percentile in our compensation peer group for any particular element of compensation preferring to
understand the range of pay between the 25th and 75th percentiles as a basis for looking at total compensation. The
Compensation Committee continues to place more emphasize on long-term incentives over cash compensation to
focus on the long-term success of the company and to align our executives with shareholders interest.
46
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Executive Compensation Program Components
For fiscal 2024, the portion of our Named Executive Officers’ actual total direct compensation (which consists of the
base salaries and annual cash incentive plan compensation paid to our Named Executive Officers with respect to
fiscal 2024 and the grant-date fair values of the equity awards granted to our Named Executive Officers in fiscal 2024,
with each such value calculated in the same manner as set forth in our Fiscal 2024 Summary Compensation Table
below) represented by each material component of our executive compensation program was as follows:
Base Salary
(3%)
Equity
Compensation
(95.4%)
Base Salary
Annual Cash
Incentive
Compensation
(1.6%)
Annual Cash Incentive Compensation
Equity Compensation
The following describes each component of our executive compensation program, the rationale for each, and how
the compensation amounts and awards were determined for fiscal 2024.
Base Salary. Base salary is the primary fixed component of our executive compensation program. We use base salary
to compensate our Named Executive Officers for services rendered during the fiscal year and to ensure that we
remain competitive in attracting and retaining executive talent.
Our Compensation Committee reviews the base salaries of each Named Executive Officer annually and makes
adjustments as it determines to be reasonable and necessary to reflect the scope of a Named Executive Officer’s
performance, contributions, responsibilities, experience, prior salary level, position (in the case of a promotion), and
market conditions. We typically establish the initial base salary of a Named Executive Officer through arm’s-length
negotiation at the time, after taking into consideration his or her position, qualifications, experience, salary
expectations, and the base salaries of our other executives.
For fiscal 2024, our Compensation Committee determined not to make any changes to the base salaries of our
Named Executive Officers (which were generally around or below the 25th percentile in our compensation peer
group) as it thought the base salary levels continued to be appropriate and to continue to focus more heavily on
long-term incentives in the total compensation policy.
Our Named Executive Officers’ base salaries for fiscal 2024 were as follows:
Named Executive Officer
Base Salary
through 2024
Jayshree Ullal
$300,000
Chantelle Breithaupt
$315,000
Kenneth Duda
$300,000
John McCool(1)
$315,000
Marc Taxay
$315,000
Ita Brennan(2)
$315,000
Anshul Sadana(3)
$300,000
(1) Mr. McCool resigned from his position as Chief Platform Officer, Senior Vice President of Engineering and Operations effective
April 7, 2025.
(2) Ms. Brennan retired from her position as Chief Financial Officer in February 2024.
(3) Mr. Sadana resigned from his position as Chief Operating Officer in May 2024.
2025 PROXY STATEMENT
47
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Annual Cash Incentive Compensation; 2024 Bonus Plan
We use cash incentive compensation under our omnibus Employee Incentive Plan to motivate our executive officers,
including our Named Executive Officers, to achieve our annual financial and key operational objectives, while making
progress towards our longer-term strategic goals. Each fiscal year, our Compensation Committee sets the terms and
conditions of the Employee Incentive Plan for that fiscal year, which identifies the plan participants and establishes the
target cash incentive opportunity for each participant, the performance measures to be used to determine whether to
make payouts related to the fiscal year and the associated target levels for each measure, and the potential payouts
based on actual performance for the fiscal year. Typically, cash incentive payouts have been determined after the end
of the applicable performance period based on our performance against one or more financial and operational
performance objectives for the performance period as set forth in our annual operating plan. The goals are typically
reviewed and established in the first quarter each year, with performance evaluated after the close of the fiscal year as
part of the standard Compensation Committee process.
In February 2024, our Compensation Committee set the terms and conditions of the Employee Incentive Plan for
fiscal 2024 (the “2024 Bonus Plan”). The 2024 Bonus Plan included financial performance metrics for revenue and
non-GAAP operating income for the year. These two financial metrics determine the funding of the overall bonus pool
available for distribution. No payout would be made under the plan if achievement of the revenue metric was below
85% of target. A specific performance range is established including a threshold, target and stretch performance
expectation to align priorities and decision making across the company. These goals are used to determine the
overall company performance and the funding for the companywide plan.
Once the overall funding level of the 2024 Bonus Plan was determined as outlined above, our Compensation
Committee would evaluate performance for each of our Named Executive Officers. In determining the payout for each
Named Executive Officer, our Compensation Committee considers multiple factors including: (A) contribution of the
individual to the achievement of the quantitative financial measures set forth above regarding the funding of the overall
bonus pool; (B) achievement against additional objectives related to the future growth of our business, including ability
to diversify and deliver in new markets; (C) consistent execution on product quality, innovation and support; and
(D) overall individual performance. The 2024 Bonus Plan provided for a single annual payout to each participant
following the end of fiscal 2024 after our Compensation Committee evaluated corporate and individual performance
as outlined above.
For purposes of our 2024 Bonus Plan, we define revenue in accordance with GAAP, and non-GAAP operating
income as GAAP operating income, less stock-based compensation expenses, other non-recurring items, one-time
acquisition related costs and the amortization of intangible assets. A reconciliation of the non-GAAP financial metrics
to the related GAAP financial measure is set forth in Appendix A.
Our Compensation Committee approved the following preliminary targets for the 2024 annual cash incentive
compensation of our Named Executive Officers (which provided each of our Named Executive Officers with target
total cash compensation around or below the market 25th percentile in our compensation peer group). Consistent
with fiscal 2023, for our Chief Executive Officer, this target was 100% of base salary, while the targets for our other
Named Executive Officers was 60% of base salary. These targets are not strict targets and merely inform the
aggregate of bonuses that will be accrued for financial accounting purposes. Once a total incentive pool is accrued
for all participants in the 2024 Bonus Plan, our Compensation Committee looks at the performance for the year
across the key metrics discussed above and factors in individual performance and market comparable compensation
in our peer group in determining a actual cash incentive paid to each Named Executive Officer for their contribution in
the performance year.
For fiscal 2024, we achieved revenue of approximately $7 billion (an increase of 19.5% from 2023, and above our
plan target by approximately 6%). In addition, we achieved non-GAAP operating income of approximately $3.3 billion
(an increase of 27.8% from 2023, and above our plan target by 14.7%). Our Compensation Committee considered
our overall achievement against these key metrics and determined it was appropriate to fund the 2024 Bonus Plan at
a level of 92.3%, the accrual of which is included in the above financial results.
Following the funding of the 2024 Bonus Plan based on the financial metrics outlined above, our Compensation
Committee looked at performance with respect to the other key metrics including gross margin, operating margin,
growth in non-cloud revenue, diversification and delivery into new markets, product quality, innovation and support,
48
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
and individual performance. Our Compensation Committee considered that we made significant progress against our
business diversification goals during the year with strong growth in our enterprise and provider businesses. We also
demonstrated continued excellence in product quality, innovation and support as demonstrated by healthy new
product qualification and order activity with our cloud titan customers in the second half of 2024.
Given our overall financial performance for the year and the significant progress made against our non-financial
objectives for the year combined with our Compensation Committee’s determination of individual performance for
each of our Named Executive Officers and including consideration of our total cash compensation being around or
below the 25th percentile of compensation of our peer group, the total payouts to our Named Executive Officers
under the 2024 Bonus Plan were made as set forth below.
Named Executive Officer
Actual Incentive
Compensation
Jayshree Ullal
$250,000
Chantelle Breithaupt
$240,000
Kenneth Duda
$240,000
John McCool(1)
$220,000
Marc Taxay
$220,000
Ita Brennan(2)
—
Anshul Sadana(3)
—
(1) Mr. McCool resigned from his position as Chief Platform Officer, Senior Vice President of Engineering and Operations effective
April 7, 2025.
(2) Ms. Brennan retired from her position as Chief Financial Officer in February 2024.
(3) Mr. Sadana resigned from his position as Chief Operating Officer in May 2024.
Equity Compensation
We use equity awards to incentivize and reward our executives (including our Named Executive Officers) for long-term
corporate performance based on the value of our common stock and, thereby, to align the interests of our executives
with those of our stockholders. We grant stock options covering shares of our common stock and full value awards
for shares of our common stock, or awards without a purchase price, such as RSU awards.
New hire, or initial, equity awards for our executives are established through arm’s-length negotiations at the time the
individual executive is hired. In making these awards, we consider, among other things, the prospective role and
responsibility of the individual executive, competitive factors, the expectations concerning the size of the equity
award, the cash compensation to be received by the executive, and the need to create a meaningful opportunity for
reward predicated on the creation of long-term stockholder value.
In addition, we grant equity awards to our executives when our Compensation Committee determines that such
awards are necessary or appropriate to recognize corporate and individual performance, in recognition of a
promotion, or to achieve our retention objectives. To date, we have not applied a rigid formula in determining the size
of these equity awards. Instead, our Compensation Committee has determined the size of such equity awards for an
individual executive after taking into consideration market data compiled from our compensation peer group, a
compensation analysis performed by Aon, the equity award recommendations of our Chief Executive Officer, the
scope of an executive’s performance, contributions, responsibilities, and experience, and the amount of equity
compensation held by the executive, including the current economic value of his or her outstanding unvested equity
awards and the ability of this equity to satisfy our retention objectives, market conditions, and internal equity
considerations. In making its award decisions, our Compensation Committee has exercised its best business
judgment to set the size of each award at a level it considered appropriate to create a meaningful opportunity for
reward predicated on the creation of long-term stockholder value. Equity awards to our named executive officers
typically have multi-year vesting periods of four or more years.
2025 PROXY STATEMENT
49
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
For fiscal 2024, our Compensation Committee continued to provide equity compensation to our Chief Executive
Officer in PRSUs only, and a mix of PRSUs and RSUs to our Named Executive Officers other than our Chief Executive
Officer. Ms. Brennan did not receive any equity awards in 2024 due to her retirement.
1. For our Chief Executive Officer, our Compensation Committee granted two PRSU awards, one subject to
performance against revenue and operating income goals that has three performance periods in each of fiscal
year 2024, 2025 and 2026 (the “2024 AOP PRSUs”), and one subject to performance against 3-year compound
annual growth rate goals for the period of fiscal 2024 through fiscal 2026 (“2024 CAGR PRSUs”). Approximately
50% of the PRSUs granted in fiscal 2024 were 2024 AOP PRSUs (one-third of which was eligible to be earned in
fiscal 2024), and approximately 50% of the PRSUs granted in fiscal 2024 were 2024 CAGR PRSUs. All of the
equity delivered to our CEO is performance-contingent with 50% of the award based on 3-year performance.
2. For Messrs. Duda, McCool, Taxay and Sadana, our Compensation Committee granted PRSU awards intended to
cover fiscal 2024, 2025, and 2026. One-third would be eligible to be earned each fiscal year, with the
performance conditions for each fiscal year determined as soon as practicable during the applicable fiscal year.
The mix between PRSUs and RSUs was approximately 50% PRSUs and 50% RSUs. 100% of the PRSUs
granted to our Named Executive Officers other than our Chief Executive Officer that were eligible to be earned in
fiscal 2024 were 2024 AOP PRSUs.
3. For Ms. Breithaupt, in January 2024, following arm’s-length negotiations at the time she was hired, our
Compensation Committee granted her RSUs with a target value of $10,000,000. In February 2024, our
Compensation Committee granted PRSU awards to Ms. Breithaupt intended to cover fiscal 2024, 2025, 2026,
and 2027. One-fourth would be eligible to be earned each fiscal year, with the performance conditions for each
fiscal year determined as soon as practicable during the applicable fiscal year. 100% of the PRSUs granted to our
Named Executive Officers other than our Chief Executive Officer that were eligible to be earned in fiscal 2024 were
2024 AOP PRSUs.
4. For Mr. Duda, in addition to the PRSUs and RSUs described above, our Compensation Committee approved an
additional award of RSUs with a target value of $25,000,000. In approving this additional award of RSUs, our
Compensation Committee determined that an additional award was appropriate because Mr. Duda was expected
to make exceptional contributions with respect to additional responsibilities and an expanded role that he had
recently agreed to assume in connection with recent changes to our executive team. In determining the size of the
award, our Compensation Committee considered the factors described above, and determined that the approved
award was necessary to incentivize and motivate Mr. Duda. Our Compensation Committee further considered our
long-term retention objectives in establishing the award’s extended 5-year vesting period.
Our Compensation Committee determined that the mix of performance goals for our Chief Executive Officer and the
proportion of performance-and service-based awards for our other Named Executive Officer provided appropriate
incentives to retain and motivate our Named Executive Officers and help to achieve success in our business, and that
this mix would best incentivize our Named Executive Officers to drive stockholder value creation, while also satisfying
the need to deliver certain value to our Named Executive Officers other than our Chief Executive Officer.
In determining the size of awards to our Named Executive Officers, our Compensation Committee considered market
compensation data from our peer group, the unvested equity held by each of these Named Executive Officers and
the Named Executive Officer’s expected future contributions to the Company and towards growing stockholder
value.
For our Chief Executive Officer, in 2022, our Compensation Committee granted a PRSU award subject to
performance against a 2-year compound annual growth rate goal ending on December 31, 2024 (“2022 CAGR
PRSUs”), and, in 2023, our Compensation Committee granted a PRSU award subject to performance against a non-
GAAP gross margin goal for the period of fiscal 2023 through fiscal 2024 (the “2023 Gross Margin PRSUs”). For our
Named Executive Officers other than our Chief Executive Officer, also previously, in 2022 and in 2023, our
Compensation Committee granted PRSU awards one-third of each of which were eligible to be earned in fiscal year
2024. 100% of the PRSUs granted to our Named Executive Officers other than our Chief Executive Officer that were
eligible to be earned in fiscal 2024 were eligible to be earned based on performance against revenue and operating
income goals (all PRSUs eligible to be earned in 2024 based on performance against revenue and operating income
goals regardless of the fiscal year of grant, “AOP PRSUs”).
50
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
2024 Performance-Based Awards Grant and Achievement
In February 2024, we granted performance-based awards of PRSUs to our Named Executive Officers to incentivize
our Named Executive Officers and drive stockholder value creation. The table below describes the PRSUs granted to
our Named Executive Officers. The intended value was converted into a target number of PRSUs using a 30-day
average trading price in accordance with our standard practices.
Named Executive Officer
Target Number of
PRSUs
Intended
Value
Jayshree Ullal
123,680(1)
$7,800,000
Chantelle Breithaupt
31,720(2)
$2,000,000
Kenneth Duda
29,360(3)
$1,850,000
John McCool(4)
15,880(3)
$1,000,000
Marc Taxay
21,440(3)
$1,350,000
Ita Brennan(5)
—
—
Anshul Sadana(6)
53,120(3)
$3,350,000
(1) As discussed above, 61,840 fiscal 2024 PRSUs were 2024 AOP PRSUs and 61,840 were 2024 CAGR PRSUs.
(2) As discussed above, 1/4 of the shares are earned based on attainment of certain 2024, 2025, 2026, and 2027 performance
conditions. The number of shares in the table reflects the shares available at target (100%). Maximum payout is 200%. Shares
earned will vest on February 20th of the year following the associated performance year. The performance conditions for each
fiscal 2025, 2026, and 2027 will be determined as soon as practicable during the applicable fiscal year.
(3) As discussed above, 1/3 of the shares are earned based on attainment of certain 2024, 2025, and 2026 performance conditions.
The number of shares in the table reflects the shares available at target (100%). Maximum payout is 200%. Shares earned will vest
on February 20th of the year following the associated performance year. The performance conditions for each fiscal 2025 and 2026
will be determined as soon as practicable during the applicable fiscal year. As applicable, these awards are in addition to awards
granted in 2022 and 2023, one-third of the total of which was eligible to be earned with respect to performance in fiscal 2024.
(4) Mr. McCool resigned from his position as Chief Platform Officer, Senior Vice President of Engineering and Operations effective
April 7, 2025.
(5) Ms. Brennan retired from her position as Chief Financial Officer in February 2024.
(6) Mr. Sadana resigned from his position as Chief Operating Officer in May 2024.
The metrics and targets for Chief Executive Officer’s fiscal 2024 CAGR PRSUs are shown in the following table:
Performance Period: January 1, 2024 – December 31, 2026
Metric
Weight
Performance Range
Payout
Cloud / AI CAGR
50%
Minimum:
12%
50%
Target:
14%
100%
Maximum:
16%
200%
Enterprise CAGR
50%
Minimum:
9%
50%
Target:
10%
100%
Maximum:
12%
200%
2025 PROXY STATEMENT
51
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
The number of CAGR PRSUs determined based on actual achievement as described above will become eligible to
vest upon determination of achievement. 100% of CAGR PRSUs that become eligible to vest will vest on the first
quarterly vesting date after the date the level of achievement of the performance goal is determined, which is
expected to be February 20, 2027, subject to our Chief Executive Officer’s continued service through those dates.
The metrics, targets, and actual performance and resulting payout for our Named Executive Officers’ AOP PRSUs
(including, if applicable, AOP PRSUs granted in 2022 and 2023 to our Named Executive Officers) are shown in the
following table:
Performance Period: January 1, 2024 – December 31, 2024
Metrics
Weight
Performance Range
Payout
Results
Revenue
50%
Minimum:
$ 6.4 billion
50%
Target:
$ 6.6 billion
100%
$7.0 billion
Maximum:
$ 6.8 billion
200%
Non-GAAP Operating Income
50%
Minimum:
$2.8 million
50%
Target:
$ 2.9 billion
100%
$3.3 billion
Maximum:
$ 3.2 billion
200%
The number of AOP PRSUs determined based on actual achievement as described above became eligible to vest
upon determination of achievement. The number of AOP PRSUs that were earned for performance between
performance range levels would be determined by linear interpolation, rounded up to the nearest whole share. 100%
of the AOP PRSUs that became eligible to vest vested on the first quarterly vesting date after the date the level of
achievement of the performance goals was determined.
For fiscal 2024, our revenue was $7 billion, above the maximum goal. Our non-GAAP operating income was
$3.3 billion, above the maximum goal. As a result of this achievement, AOP PRSUs became eligible to vest as set
forth in the table below. As noted above, certain of our other named executive officers remain eligible to earn portions
of the PRSUs granted in 2023 and 2024 (based on performance in subsequent fiscal years).
Number of PRSUs Eligible to Vest(1)
Named Executive Officer
Revenue PRSUs
Non-GAAP
Operating
Income
PRSUs
Jayshree Ullal
20,612
20,612
Chantelle Breithaupt
7,928
7,928
Kenneth Duda
52,612
52,612
John McCool(2)
26,720
26,720
Marc Taxay
39,276
39,276
Ita Brennan(3)
—
—
Anshul Sadana(4)
—
—
(1) Includes PRSU Awards granted in 2022 and 2023 and earned and eligible to vest pursuant to performance in fiscal 2024 (as
applicable).
52
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
(2) Mr. McCool resigned from his position as Chief Platform Officer, Senior Vice President of Engineering and Operations effective
April 7, 2025.
(3) Ms. Brennan retired from her position as Chief Financial Officer in February 2024.
(4) Mr. Sadana resigned from his position as Chief Operating Officer in May 2024.
As noted above, in 2024 Ms. Ullal was eligible to earn additional PRSUs that were granted in 2022 and 2023 (based
on performance measured as of the end of 2024). Based on the applicable vesting criteria, Ms. Ullal became eligible
to vest in a total of 269,760 PRSUs with respect to such awards.
2024 Time-Based Awards Grant
In February 2024, we also granted RSUs to our Named Executive Officers other than our Chief Executive Officer.
Ms. Brennan did not receive any equity awards in 2024 due to her retirement. To promote retention, the awards vest
in equal quarterly installments over a period of approximately 4 years from the date of grant, with the first vesting day
occurring February 2025, except as described below.
The numbers of shares of our common stock covered by each RSU award granted to our Named Executive Officers
in 2024 were as set forth in the chart below. The intended value was converted into RSUs using a 30-day average
trading price in accordance with our standard practices.
Named Executive Officer
RSUs
Intended Value
Chantelle Breithaupt
174,680
$10,000,000
Kenneth Duda
425,680(1)
$26,850,000
John McCool
15,880
$ 1,000,000
Marc Taxay
21,440
$ 1,350,000
Ita Brennan
—
—
Anshul Sadana
53,120
$ 3,350,000
(1) 396,320 of the RSUs vest in quarterly installments over a period of approximately 5 years from the date of grant, with the first
vesting day occurring November 2025.
WELFARE AND OTHER EMPLOYEE BENEFITS
We have established a tax-qualified Section 401(k) retirement plan for all employees who satisfy certain eligibility
requirements, including requirements relating to age and length of service. In 2024, we made matching contributions
for the contributions made to the 401(k) plan by our employees, including certain of our Named Executive Officers.
We intend for the plan to qualify under Section 401(a) of the Internal Revenue Code (the “Code”), so that contributions
by employees to the plan, and income earned on plan contributions, are not taxable to employees until withdrawn
from the plan.
In addition, we provide other benefits to our Named Executive Officers on the same basis as all of our full-time
employees. These benefits include standard health, vacation and other benefits offered to our employees.
PERQUISITES AND OTHER PERSONAL BENEFITS
We generally do not provide perquisites to our Named Executive Officers or other personal benefits beyond what is
provided to employees on a broad basis.
2025 PROXY STATEMENT
53
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Named Executive Officer Employment Arrangements
JAYSHREE ULLAL OFFER LETTER
We have entered into an offer letter with Jayshree Ullal, our Chief Executive Officer and President, pursuant to which
Ms. Ullal is an at-will employee. Ms. Ullal’s current annual base salary is $300,000 per year, and her target annual
bonus is targeted at $300,000. Ms. Ullal is also eligible to participate in all of our standard health, vacation and other
benefits offered to our employees.
CHANTELLE BREITHAUPT OFFER LETTER & SEVERANCE AGREEMENT
We have entered into an offer letter with Chantelle Breithaupt, our Senior Vice President, Chief Financial Officer,
pursuant to which Ms. Breithaupt is an at-will employee. Ms. Breithaupt’s current annual base salary is $315,000.
Ms. Breithaupt is also eligible to participate in all of our standard health, vacation and other benefits offered to our
employees.
In addition, we entered into a severance agreement with Ms. Breithaupt. The severance agreement provides that if
Ms. Breithaupt’s employment is involuntarily terminated other than for “cause” (as generally defined below) or if
Ms. Breithaupt resigns for “good reason” (as generally defined below) then, subject to her execution of a release of
claims, Ms. Breithaupt will receive continuing payments of her base salary for 12 months and accelerated vesting of
time-based equity awards that would have vested had Ms. Breithaupt remained employment with us for 12 months
following her termination of employment date. If the qualified termination of employment occurred during the period
beginning on, and for 12 months following a change in control, then the equity acceleration benefit would be 50% of
the then-unvested equity awards, if greater than the acceleration benefit described in the previous sentence.
For purposes of the severance agreement with Ms. Breithaupt, “cause” means generally:
•
an act of dishonesty made by her in connection
with her responsibilities as an employee;
•
her conviction of, or plea of nolo contendere to, a
felony or any crime involving fraud, embezzlement
or any other act of moral turpitude;
•
her gross misconduct;
•
her unauthorized use or disclosure of any
proprietary information or trade secrets of ours or
any other party to whom she owes a duty of
non-disclosure as a result of her relationship with
us;
•
her willful breach of any obligations under any
written agreement or covenant with us; or
•
her continued failure to perform her duties after a
demand from us setting the basis of our belief and
failure to cure within 10 business days after
receiving such notice.
For purposes of the severance agreement with Ms. Breithaupt, “good reason” means generally a resignation within
30 days following the expiration of any cure period following the occurrence of one or more of the following, without
her consent:
•
a material diminution of her authority, duties or
responsibilities (which includes a reduction in
authority, duties or responsibilities in connection with
our being acquired and made part of a larger entity);
•
a material reduction of her base salary (which
excludes a reduction in her base salary of 15% or
less in any one year) other than a reduction applied
to management generally; or
•
a material change in the geographic location of her
primary work facility or location (which excludes a
relocation of less than 50 miles from her then-
present location).
In order to receive the benefits described above, Ms. Breithaupt is required to provide written notice within 90 days of
the initial existence of good reason and provide a cure period of 30 days following the date of such notice.
KENNETH DUDA OFFER LETTER
We have entered into an offer letter with Kenneth Duda, our Chief Technology Officer and Senior Vice President,
Software Engineering, pursuant to which Mr. Duda is an at-will employee. Mr. Duda’s current annual base salary is
$300,000 per year, and his annual bonus is targeted at $180,000. Mr. Duda is also eligible to participate in all of our
standard health, vacation and other benefits offered to our employees.
54
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
MARC TAXAY OFFER LETTER & SEVERANCE AGREEMENT
We have entered into an offer letter with Marc Taxay, our Senior Vice President, General Counsel, pursuant to which
Mr. Taxay is an at-will employee. Mr. Taxay’s current annual base salary is $315,000 per year and he is eligible for an
annual bonus targeted at $189,000. Mr. Taxay is also eligible to participate in all of our standard health, vacation and
other benefits offered to our employees.
In addition, we entered into a severance agreement with Mr. Taxay. The severance agreement provides that if
Mr. Taxay’s employment is involuntarily terminated other than for “cause” or if Mr. Taxay resigns for “good reason” (as
generally defined below) then, subject to his execution of a release of claims, Mr. Taxay will receive continuing
payments of his base salary for 12 months and accelerated vesting of time-based equity awards that would have
vested had Mr. Taxay remained employed with us for 12 months following his termination of employment date. If the
qualified termination of employment occurred during the period beginning on, and for 12 months following a change
in control, then the equity acceleration benefit would be 50% of the then-unvested equity awards, if greater than the
acceleration benefit described in the previous sentence.
For purposes of the severance agreement with Mr. Taxay, “cause” and “good reason” have the same general
meanings as set forth in Ms. Breithaupt’s severance agreement.
2025 PROXY STATEMENT
55
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Fiscal 2024 Summary Compensation Table
The following table provides information regarding the total compensation for services rendered in all capacities that
was earned by our Named Executive Officers.
Name and
Principal Position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)(1)
Non-Equity
Incentive Plan
Compensation
($)
All Other
Compensation
($)
Total
($)
Jayshree Ullal
Chief Executive Officer
2024 300,000
—
6,856,502
250,000
1,542,901(2)(3)
8,949,403
2023 300,000
— 15,051,588
200,000
10,399
15,561,987
2022 300,000
— 10,165,988
255,000
14,899
10,735,887
Chantelle Breithaupt
Chief Financial Officer
2024 302,885 50,000 11,665,423
240,000
9,433(2)
12,267,741
Kenneth Duda
Chief Technology
Officer
2024 300,000
— 34,433,411
240,000
274,780(2)(4) 35,248,191
2023 300,000
—
3,900,407
205,000
10,399
4,415,806
2022 300,000
3,430
2,420,074
202,500
14,899
2,940,903
John McCool
Chief Platform Officer,
Senior Vice President of
Engineering and
Operations
2024 315,000
—
3,343,295
220,000
9,828
3,888,123
Marc Taxay
Senior Vice President,
General Counsel
2024 315,000
—
4,780,026
220,000
378(2)
5,315,404
2023 315,000
—
2,926,896
200,000
378
3,442,274
2022 308,077
—
1,815,462
200,000
360
2,323,899
Ita Brennan
Former Chief
Financial Officer
2024
54,519
—
—
—
1,880
56,399
2023 315,000
—
3,900,407
205,000
10,826
4,431,233
2022 308,077
—
2,420,074
225,000
13,895
2,967,046
Anshul Sadana
Former Chief Operating
Officer
2024
50,769
—
7,239,748
—
1,846
7,292,363
2023 300,000
—
6,825,182
250,000
10,399
7,385,581
2022 300,000
—
4,235,641
360,000
14,899
4,910,540
(1) The amounts reported include the aggregate grant-date fair value of restricted stock units or stock options awarded to the
Named Executive Officer, calculated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification Topic 718 (“ASC Topic 718”). The assumptions used in calculating the grant-date fair value of these awards are set
forth in the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K, as filed with the
SEC on February 13, 2025. For performance-based restricted stock units, the amount reported represents the grant-date fair
value based upon the probable outcome of the performance conditions for such awards, consistent with the estimate of
aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Topic
718, excluding the effect of estimated forfeitures. The amount disclosed for fiscal 2024 includes a portion of performance-based
restricted stock units granted in an earlier fiscal year to the extent the Named Executive Officer received an award in that fiscal
year and respect to which the performance conditions were set in 2024. Performance conditions have not been established with
respect to portions of such awards, and as a result those portions of the performance-based restricted stock units do not have
a grant-date fair value and are not included above. If maximum performance were deemed achieved for the performance-based
restricted stock unit awards for which the performance conditions were established during 2024, the grant-date fair value of
such awards would be $13,713,005 for Ms. Ullal, $1,318,545 for Ms. Breithaupt, $8,750,165 for Mr. Duda, $4,443,937 for
Mr. McCool, $6,977,625 for Mr. Sadana and $6,532,188 for Mr. Taxay. Based on actual achievement for fiscal 2024, for Named
Executive Officers other than our Chief Executive Officer, 200% of the performance-based restricted stock units awards granted
56
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
in 2022 that were eligible to be earned in fiscal 2024 became eligible to vest, 200% of the performance-based restricted stock
units awards granted in 2023 that were eligible to be earned in fiscal 2024 became eligible to vest, and 200% of the
performance-based restricted stock units awards granted in 2024 that were eligible to be earned in fiscal 2024 became eligible
to vest.
(2) The amounts reported for fiscal 2024 include, in the case of all Named Executive Officers other than Mr. Taxay, matching
contributions from the Company for the contributions made to the 401(k) plan by the Named Executive Officer and, in the case
of all Named Executive Officers, a life insurance premium paid on the Named Executive Officer’s behalf.
(3) Includes $780,000 paid on Mrs. Ullal’s behalf for HSR filing fees and $753,541 for related gross-up tax payment.
(4) Includes $135,000 paid on Mr. Duda’s behalf for HSR filing fees and $130,421 for related gross-up tax payment.
Outstanding Equity Awards at 2024 Fiscal Year-End
The following table sets forth information regarding outstanding stock options and stock awards held by our Named
Executive Officers as of December 31, 2024.
Option Awards
Stock Awards
Name
Grant
Date
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Option
Exercise
Price
($)
Option
Expiration
Date
Number of
Shares or
Units of Stock
That Have
Not Vested
(#)(1)
Market
Value
of Shares or
Units of
Stock
That Have
Not Vested
($)(2)
Jayshree Ullal
4/13/2018(3)
5,328
—
15.2625 4/12/2028
—
—
2/8/2019(4)
6,672
—
14.1463
2/7/2029
—
—
2/12/2021(5)
—
—
—
—
44,588
4,928,312
2/12/2021(6)
—
—
—
—
49,984
5,524,732
2/11/2022(7)
—
—
—
—
102,976
11,381,937
2/11/2022(8)
—
—
—
—
77,640
8,581,549
2/10/2023(9)
—
—
—
—
248,938
27,518,433
2/10/2023(10)
—
—
—
—
76,320
8,435,650
2/9/2024(11)
—
—
—
—
61,840
6,835,175
2/9/2024(12)
—
—
—
—
61,840
6,835,175
Chantelle Breithaupt 1/12/2024(13)
—
—
—
—
174,680
19,307,380
4/9/2024(14)
—
—
—
—
31,720
3,506,011
2025 PROXY STATEMENT
57
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Option Awards
Stock Awards
Name
Grant
Date
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Option
Exercise
Price
($)
Option
Expiration
Date
Number of
Shares or
Units of Stock
That Have
Not Vested
(#)(1)
Market
Value
of Shares or
Units of
Stock
That Have
Not Vested
($)(2)
Kenneth Duda
9/11/2015(15)
240,000
—
4.0288 9/10/2025
—
2/12/2016(16)
400,000
—
3.5150 2/11/2026
—
—
4/13/2018(17)
128,000
—
15.2625 4/12/2028
—
—
11/9/2018(18)
48,000
—
15.2769 11/8/2028
—
—
2/8/2019(18)
160,000
—
14.1463
2/7/2029
—
—
5/8/2020(19)
—
—
—
—
10,656
1,177,807
2/12/2021(20)
—
—
—
—
22,832
2,523,620
2/11/2022(21)
—
—
—
—
31,060
3,433,061
2/11/2022(22)
—
—
—
—
20,708
22,288,855
2/10/2023(23)
—
—
—
—
49,768
5,500,857
2/10/2023(24)
—
—
—
—
44,240
4,889,847
2/9/2024(25)
—
—
—
—
29,360
3,245,161
2/9/2024(26)
—
—
—
—
396,320
43,805,250
2/9/2024(27)
—
—
—
—
29,360
3,245,161
John McCool
5/8/2020(19)
—
—
—
—
5,824
643,727
2/12/2021(20)
—
—
—
—
11,760
1,299,833
2/11/2022(20)
—
—
—
—
15,540
1,717,636
2/11/2022(22)
—
—
—
—
10,360
1,145,091
2/10/2023(23)
—
—
—
—
24,900
2,754,197
2/10/2023(24)
—
—
—
—
22,136
2,446,692
2/9/2024(25)
—
—
—
—
15,880
1,755,216
2/9/2024(27)
—
—
—
—
15,880
1,755,216
Marc Taxay
5/8/2020(19)
—
—
—
—
10,176
1,124,753
2/12/2021(20)
—
—
—
—
20,880
2,307,866
2/11/2022(20)
—
—
—
—
23,300
2,575,349
2/11/2022(22)
—
—
—
—
15,532
1,716,751
2/10/2023(23)
—
—
—
—
37,348
4,128,074
2/10/2023(24)
—
—
—
—
33,200
3,669,596
2/9/2024(25)
—
—
—
—
21,440
2,369,763
2/9/2024(27)
—
—
—
—
21,440
2,369,763
58
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
(1) Represents awards of restricted stock units that remained unvested as of December 31, 2024. All vesting is subject to the
named executive officer’s continued role as a service provider to us through the applicable vesting date.
(2) This column represents the market value of the shares of our common stock underlying the awards of restricted stock units as
of December 31, 2024, based on the closing price of our common.
(3) 1/48th of the shares subject to the option vested on June 1, 2020 and 1/48th of the shares subject to the option shall vest
monthly thereafter.
(4) 1/48th of the shares subject to the option vested on December 1, 2020 and 1/48th of the shares subject to the option shall
continue to vest each month thereafter.
(5) This performance stock award was granted in February 2021 and is earned based on attainment of certain performance
conditions. The number of shares in the table reflects the shares available at target (100%). Maximum payout is 200%. Shares
earned will vest 1/4 on February 20, 2022, and will continue to vest at a rate of 1/16 quarterly thereafter. A quarterly vest date
is the first market trading day on or after February 20, May 20, August 20, and November 20 of each year.
(6) This performance stock award was granted in February 2021 and is earned based on attainment of certain performance
conditions. The number of shares in the table reflects the shares available at target (100%). Maximum payout is 200%. Shares
earned will vest 1/3 on February 20, 2022, and will continue to vest at a rate of 1/12 quarterly thereafter. A quarterly vest date
is the first market trading day on or after February 20, May 20, August 20, and November 20 of each year.
(7) This performance stock award was granted in February 2022 and is earned based on attainment of certain performance
conditions. The number of shares in the table reflects the shares available at target (100%). Maximum payout is 200%. The
award will vest 25% on February 20, 2023 and will continue to vest at a rate of 6.25% quarterly thereafter. A quarterly vest
date is the first market trading day on or after February 20, May 20, August 20, and November 20 of each year.
(8) This performance stock award was granted in February 2022 and is earned based on attainment of certain 2023-
2024performance conditions. The number of shares in the table reflects the shares available at target (100%). Maximum
payout is 200%. The award will vest 50% on February 20, 2025 and 50% on February 20, 2026.
(9) This performance stock award was granted in February 2023 and is earned based on attainment of certain 2023 performance
conditions. The number of shares in the table reflects the shares available at target (100%). Maximum payout is 200%. The
award will vest 25% on February 20, 2024 and will continue to vest at a rate of 6.25% quarterly thereafter. A quarterly vest
date is the first market trading day on or after February 20, May 20, August 20, and November 20 of each year.
(10) This performance stock award was granted in February 2023 and is earned based on attainment of certain 2023-2024
performance conditions. The number of shares in the table reflects the shares available at target (100%). Maximum payout is
200%. The award will vest 50% on February 20, 2025 and 50% on February 20, 2026.
(11) This performance stock award was granted in February 2024 and 1/3 of the shares are earned based on attainment of certain
2024, 2025 and 2026 performance conditions. The number of shares in the table reflects the shares available at target (100%).
Maximum payout is 200%. Shares earned will vest on February 20th of the year following the associated performance year.
(12) This performance stock award was granted in February 2024 and is earned based on attainment of certain 2024-2026
performance conditions. The number of shares in the table reflects the shares available at target (100%). Maximum payout is
200%. The award will vest 100% on February 20, 2027.
(13) Twenty five percent (25%) of the 174,680 restricted stock units awarded vest on Feb 20, 2025 and will continue to vest at a
rate of six and one-quarter percent (6.25%) each quarter on each quarterly vest date thereafter. A quarterly vest date is the
first market trading day on or after February 20, May 20, August 20 or November 20 of each year.
(14) This performance stock award was granted in February 2024 and 1/4 of the shares are earned based on attainment of certain
2024,2025, 2026, and 2027 performance conditions. The number of shares in the table reflects the shares available at target
(100%). Maximum payout is 200%. Shares earned will vest on February 20th of the year following the associated performance
year.
(15) Option granted 9/11/15 for shares from the 2014 plan. Option vests 1/5th of shares granted on 12/01/2017 with the
remaining shares vesting in equal amounts over the next 48 months.
(16) Option granted 02/12/16 for shares from the 2014 plan. Option vests 1/60th of shares granted on 04/01/2017, with the
remaining shares vesting in equal amounts over the next 59 months.
(17) 1/48th of the shares subject to the option shall vest and become exercisable on June 1, 2020 and 1/48th of the shares
subject to the option shall continue to vest each month thereafter.
(18) 1/48th of the shares subject to the option shall vest and become exercisable on December 1, 2020 and 1/48th of the shares
subject to the option shall continue to vest each month thereafter.
(19) Six and one-quarter percent (6.25%) of the restricted stock units awarded vested on May 20, 2021 and will continue to vest at
the same rate on each quarterly vest date thereafter. A quarterly vest date is the first market trading day on or after
February 20, May 20, August 20, and November 20 of each year.
2025 PROXY STATEMENT
59
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
(20) Six and one-quarter percent (6.25%) of the restricted stock units awarded will vest on February 20, 2022 and will continue to
vest at the same rate on each quarterly vest date thereafter. A quarterly vest date is the first market trading day on or after
February 20, May 20, August 20, and November 20 of each year.
(21) Six and one-quarter percent (6.25%) of the restricted stock units awarded will vest on February 20, 2023 and will continue to
vest at the same rate on each quarterly vest date thereafter. A quarterly vest date is the first market trading day on or after
February 20, May 20, August 20, or November 20 of each year
(22) This performance stock award was granted in February 2022 and 1/3 of the shares are earned based on attainment of certain
2022, 2023 and 2024 performance conditions. The number of shares in the table reflects the shares available at target (100%).
Maximum payout is 200%. Shares earned will vest on February 20th of the year following the associated performance year.
(23) Six and one-quarter percent (6.25%) of the restricted stock units awarded will vest on February 20, 2024 and will continue to
vest at the same rate on each quarterly vest date thereafter. A quarterly vest date is the first market trading day on or after
February 20, May 20, August 20, and November 20 of each year.
(24) This performance stock award was granted in February 2023 and 1/3 of the shares are earned based on attainment of certain
2023, 2024 and 2025 performance conditions. The number of shares in the table reflects the shares available at target (100%).
Maximum payout is 200%. Shares earned will vest on February 20th of the year following the associated performance year.
(25) Six and one-quarter percent (6.25%) of the restricted stock units awarded will vest on February 20, 2025 and will continue to
vest at the same rate on each quarterly vest date thereafter. A quarterly vest date is the first market trading day on or after
February 20, May 20, August 20, and November 20 of each year.
(26) Five percent (5%) of the restricted stock units awarded will vest on November 20, 2025 and will continue to vest at the same
rate on each quarterly vest date thereafter. A quarterly vest date is the first market trading day on or after February 20,
May 20, August 20, and November 20 of each year.
(27) This performance stock award was granted in February 2024 and 1/3 of the shares are earned based on attainment of certain
2024, 2025 and 2026 performance conditions. The number of shares in the table reflects the shares available at target (100%).
Maximum payout is 200%. Shares earned will vest on February 20th of the year following the associated performance year.
Fiscal 2024 Grants of Plan-Based Awards
The following table presents information regarding the amount of plan-based awards granted to our Named Executive
Officers during our fiscal year ended December 31, 2024. No option awards were granted to our Named Executive
Officers during our fiscal year ended December 31, 2024.
Named Executive
Officer
Grant
Date
Grant
Date
Estimated
Payouts
Under
Non-Equity
Plan Awards
(Target)($)(1)
Estimated Future Payouts Under
Equity Incentive Plan Awards
All Other
Stock
Awards:
Number
of Shares
or Units
(#)(2)
Grant
Date Fair
Value of
Awards
($)(3)
Threshold Target Maximum
Jayshree Ullal
—
—
300,000
—
—
—
—
—
2/9/2024 7/18/2024
—
10,306
20,612
41,224
1,714,042
2/9/2024 7/18/2024
—
30,920
61,840 123,680
5,142,460
Chantelle Breithaupt
—
—
189,000
—
—
—
—
—
1/12/2024 1/12/2024
—
—
174,680
—
11,006,150
2/9/2024 7/18/2024
—
3,964
7,928
15,856
659,273
Kenneth Duda
—
—
180,000
—
—
—
—
2/11/2022 7/18/2024
—
10,354
20,708
41,416
1,722,026
2/10/2023 7/18/2024
—
11,060
22,120
44,240
1,839,444
2/9/2024 2/9/2024
—
—
29,360
—
2,073,183
2/9/2024 2/9/2024
—
—
396,320
—
27,985,146
2/9/2024 7/18/2024
—
4,892
9,784
19,568
813,613
60
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Named Executive
Officer
Grant
Date
Grant
Date
Estimated
Payouts
Under
Non-Equity
Plan Awards
(Target)($)(1)
Estimated Future Payouts Under
Equity Incentive Plan Awards
All Other
Stock
Awards:
Number
of Shares
or Units
(#)(2)
Grant
Date Fair
Value of
Awards
($)(3)
Threshold Target Maximum
John McCool(4)
—
—
189,000
—
—
—
—
—
2/11/2022 7/18/2024
—
5,180
10,360
20,720
861,512
2/10/2023 7/18/2024
—
5,534
11,068
22,136
920,387
2/9/2024 2/9/2024
—
—
15,880
—
1,121,327
2/9/2024 7/18/2024
—
2,646
5,292
10,584
440,070
Marc Taxay
—
—
189,000
—
—
—
—
—
2/11/2022 7/18/2024
—
7,766
15,532
31,064
1,291,602
2/10/2023 7/18/2024
—
8,300
16,600
33,200
1,380,415
2/9/2024 2/9/2024
—
—
21,440
—
1,513,932
2/9/2024 7/18/2024
—
3,572
7,144
14,288
594,077
Ita Brennan(5)
—
—
189,000
—
—
—
—
—
Anshul Sadana(6)
—
—
180,000
—
—
—
—
—
2/11/2022 7/18/2024
—
18,120
36,240
72,480
949,035
2/10/2023 7/18/2024
—
19,354
38,708
77,416
1,289,654
2/9/2024 2/9/2024
—
—
53,120
—
3,750,936
2/9/2024 7/18/2024
—
8,852
17,704
35,408
1,250,124
(1) Our 2024 Bonus Plan does not have thresholds or maximums. However, bonuses would not be paid under our 2024 Bonus
Plan if achievement of the revenue metric was below 85% of target. The amounts set forth above represent the target annual
bonus for each Named Executive Officer. These targets are not strict targets and merely inform the aggregate of bonuses that
will be accrued for financial accounting purposes. Once a total incentive pool is accrued for all participants in the 2024 Bonus
Plan, our Compensation Committee looks at the performance for the year across the key metrics discussed above in the
“Compensation Discussion and Analysis” section and factors in individual performance and market comparable compensation
in our peer group in determining a total incentive paid to each Named Executive Officer.
(2) The RSU and PRSU awards were made under the 2014 Equity Plan.
(3) Represents the grant date fair value of each equity award granted in fiscal 2024, calculated in accordance with ASC Topic
718. Amounts reported for PRSUs are based upon the probable outcome of the performance conditions, consistent with the
estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under
FASB ASC Topic 718, excluding the effects of estimated forfeitures. In the case of Ms. Brennan and Messrs. Duda, Sadana
and Taxay, the amount disclosed includes a portion of performance-based restricted stock units granted in 2022 and a portion
of performance-based restricted stock units granted in 2023, with respect to each of which performance conditions were set
in 2023. Performance conditions have not been established with respect to portions of such awards, and as a result those
portions of the performance-based restricted stock units do not have a grant-date fair value and are not included above. If
maximum performance were deemed achieved for the performance-based restricted stock unit awards with respect to which
performance conditions were established during 2024, the grant-date fair value of such awards would be $13,713,005 for
Ms. Ullal, $1,318,545 for Ms. Breithaupt, $8,750,165 for Mr. Duda, $4,443,937 for Mr. McCool, $6,977,625 for Mr. Sadana,
and $6,532,188 for Mr. Taxay.
(4) Mr. McCool resigned from his position as Chief Platform Officer, Senior Vice President of Engineering and Operations effective
April 7, 2025.
(5) Ms. Brennan retired from her position as Chief Financial Officer in February 2024, and was not eligible for an annual bonus.
(6) Mr. Sadana resigned from his position as Chief Operating Officer in May 2024, and was not eligible for an annual bonus.
2025 PROXY STATEMENT
61
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Fiscal 2024 Option Exercises and Stock Vested
The following table presents information regarding the exercise of stock options and the vesting of stock awards by
our Named Executive Officers during our fiscal year ended December 31, 2024.
Named Executive Officer
Number of
Shares
Acquired on
Exercise
(#)
Value Realized
on Exercise
($)(1)
Number of
Shares
Acquired on
Vesting
(#)
Value
Realized
on Vesting
($)(2)
Jayshree Ullal
44,000
2,762,077
658,584
52,603,778
Chantelle Breithaupt
0
0
0
0
Ita Brennan
59,132
3,256,514
110,008
7,139,794
Kenneth Duda
880,000
70,255,696
201,440
15,219,950
John McCool
34,000
2,059,475
109,848
8,318,703
Anshul Sadana
104,132
6,594,016
205,288
13,432,205
Marc Taxay
35,840
2,175,485
167,292
12,711,616
(1) Based on the market price of our common stock on the date of exercise less the option exercise price paid for those shares,
multiplied by the number of shares for which the option was exercised.
(2) Based on the market price of our common stock on the vesting date or last trading date, multiplied by the number of shares vested.
Pension Benefits
We did not sponsor any defined benefit pension or other actuarial plan for our Named Executive Officers during fiscal
2024.
Nonqualified Deferred Compensation
We did not maintain any nonqualified defined contribution or other deferred compensation plans or arrangements for
our Named Executive Officers during fiscal 2024.
62
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Potential Payments Upon Termination or Change in Control
The tables below provide an estimate of the value of the compensation and benefits due to each of our Named
Executive Officers for our fiscal year ended December 31, 2024, in the events described below, assuming that the
termination of employment and change in control was effective on December 31, 2024, under the applicable
employment agreements described above. The actual amounts to be paid can only be determined at the time of the
termination of employment.
TERMINATION OF EMPLOYMENT UNRELATED TO A CHANGE IN CONTROL
Value of Accelerated Equity
Awards ($)(1)
Named Executive Officer
Salary
Continuation
($)
Restricted
Stock Units
Options
Total ($)
Chantelle Breithaupt
315,000
10,514,266
—
10,829,266
Marc Taxay
315,000
14,246,433
—
14,561,433
(1) The amounts reported in the table reflect the aggregate market value of the unvested shares of our common stock underlying
outstanding restricted stock unit awards and stock options that would become vested on a qualifying termination. For the restricted
stock unit awards, the aggregate market value is computed by multiplying (i) the number of unvested shares of our common stock
subject to outstanding restricted stock awards or outstanding restricted stock unit awards at December 31, 2024, that would
become vested by (ii) $110.53 (the closing market price of our common stock on NYSE on December 31, 2024).
TERMINATION OF EMPLOYMENT IN CONNECTION WITH A CHANGE IN CONTROL
Value of Accelerated Equity
Awards ($)(1)
Named Executive Officer
Salary
Continuation
($)
Restricted
Stock Units
Options
Total ($)
Chantelle Breithaupt
315,000
11,406,696
—
11,721,696
Marc Taxay
315,000
16,089,410
—
16,404,410
(1) The amounts reported in the table reflect the aggregate market value of the unvested shares of our common stock underlying
outstanding restricted stock unit awards and stock options that would become vested on a qualifying termination. For the
restricted stock unit awards, the aggregate market value is computed by multiplying (i) the number of unvested shares of our
common stock subject to outstanding restricted stock unit awards at December 31, 2024, that would become vested by (ii)
$110.53 (the closing market price of our common stock on NYSE on December 31, 2024).
2025 PROXY STATEMENT
63
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Risk Assessment and Compensation Practices
Our management assesses and discusses with our Compensation Committee at least annually our compensation
policies and practices for our employees as they relate to our risk management, and based upon this assessment, we
believe that, for the following reasons, any risks arising from such policies and practices are not reasonably likely to
have a material adverse effect on us in the future:
•
Our annual bonus plan considers a multiple of
performance factors and allows our Compensation
Committee to review performance on a holistic
basis minimizing risk related to our short-term
variable compensation;
•
Our equity awards include multi-year vesting
schedules requiring a long-term employee
commitment; and
•
As described below, we have stock ownership
guidelines and clawback policies that help to
mitigate risk.
Compensation Policies and Hedging/Pledging Policies
Stock Ownership Guidelines. In April 2019, our board of directors adopted stock ownership guidelines that are
designed to encourage our directors and our Chief Executive Officer to achieve and maintain a meaningful equity
stake in our Company and more closely align their interests with those of our stockholders. The guidelines provide
that our Chief Executive Officer should accumulate and hold, within five years from the later of the date of the
adoption of the stock ownership guidelines or the date such Chief Executive Officer was appointed to such role, an
investment level in our common stock of three times the Chief Executive Officer’s annual base salary. The following
types of holdings are included for our stock ownership guidelines: shares of our common stock, vested and
exercisable “in-the-money” stock options, and any other shares of our common stock in which our Chief Executive
Officer holds a beneficial interest. Our Chief Executive Officer is on track to meet these guidelines based on their
current rate of stock accumulations in the time frames set out in the guidelines.
Clawback Policy. In July 2023, we adopted a new Clawback Policy in accordance with the SEC and Nasdaq
requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act. This policy provides for the
non-discretionary recovery of excess incentive-based compensation from current and former executive officers in the
event of an accounting restatement, whether or not the executive officer was at fault for the restatement, in
accordance with the SEC and Nasdaq requirements.
Hedging or Pledging Policies. Our insider trading policy prohibits our directors, officers, employees, consultants,
contractors and advisors from engaging in transactions in publicly-traded options, such as puts and calls, and other
derivative securities with respect to the Company’s securities. This prohibition extends to any hedging or similar
transaction designed to decrease the risks associated with holding Company securities. Stock options, stock
appreciation rights and other securities issued pursuant to Company benefit plans or other compensatory
arrangements with the Company are not subject to this prohibition.
These policies were established in part because transactions in derivative securities may reflect a short term and
speculative interest in the Company’s securities and may create the appearance of impropriety, even where a
transaction does not involve trading on inside information. Trading in derivatives may also focus attention on
short-term performance at the expense of the Company’s long-term objectives. In addition, the application of
securities laws to derivatives transactions can be complex, and persons engaging in derivatives transactions run an
increased risk of violating securities laws.
In addition, our insider trading policy prohibits certain executive officers from pledging the Company’s securities as
collateral for loans. Short sales with respect to the Company’s securities are prohibited under our insider trading policy.
No Timing of Equity Awards In Relation to Disclosure of Material Non-Public Information
During 2024, we granted stock options to certain service providers who were not named executive officers. Stock
options approved by our board of directors or our Compensation Committee typically are granted during their
regularly scheduled meetings, but our Compensation Committee has also delegated authority to our Chief Executive
Officer to grant equity awards to any employee who (i) has a corporate rank of Senior Vice President or below and
64
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
(ii) is not a Section 16 officer or an executive direct report of our Chief Executive Officer. We do not take material
non-public information into account in determining the timing and terms of stock options, and the delegation of
authority to our Chief Executive Officer requires that any award she grants will become effective on the tenth business
day of the month in which she approves the award (or, if the tenth business day of that month has passed, on the
tenth business day of the immediately following month). We have not timed the disclosure of material nonpublic
information for the purpose of affecting the value of executive compensation. We did not grant stock options to our
named executive officers in 2024, and we have never granted stock appreciation rights to any service providers.
Insider Trading Policy
We have an insider trading policy governing the purchase, sale and other dispositions of the Company’s securities
that applies to the Company and its personnel, including officers, directors, all other co-workers of the Company and
its subsidiaries, and other covered persons (the “Insider Trading Policy”). We believe that the Insider Trading Policy is
reasonably designed to promote compliance with insider trading laws, rules and regulations, and listing standards
applicable to us. A copy of the Insider Trading Policy is filed as Exhibit 19.0 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2024.
Tax and Accounting Considerations
Deductibility of Executive Compensation. Section 162(m) of the Code generally disallows public companies a tax
deduction for federal income tax purposes of remuneration in excess of $1 million paid to the Chief Executive Officer
and certain other highly compensated executive officers.
Our Compensation Committee may consider the deductibility of compensation when making decisions, but may
authorize the payment of compensation that is not deductible when it believes it appropriate.
Taxation of “Parachute” Payments. Sections 280G and 4999 of the Code provide that executive officers and directors
who hold significant equity interests and certain other service providers may be subject to significant additional taxes
if they receive payments or benefits in connection with a change in control that exceeds certain prescribed limits and
that we (or a successor) may forfeit a deduction on the amounts subject to this additional tax. We did not provide any
of our Named Executive Officers with a “gross-up” or other reimbursement payment for any tax liability that the
Named Executive Officer might owe as a result of the application of Sections 280G or 4999, and we have not agreed
and are not otherwise obligated to provide any Named Executive Officer with such a “gross-up” or other
reimbursement.
Accounting for Share-Based Compensation. We follow ASC Topic 718 for our share-based compensation awards. ASC
Topic 718 requires companies to measure the compensation expense for all share-based compensation awards
made to employees and directors, including stock options, based on the grant date “fair value” of these awards. This
calculation is performed for accounting purposes and reported in the compensation tables above, even though our
Named Executive Officers may never realize any value from their awards. ASC Topic 718 also requires companies to
recognize the compensation cost of their share- based compensation awards in their income statements over the
period that an executive officer is required to render service in exchange for the option or other award.
CEO Pay Ratio
As required by Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the
annual total compensation of our employees and the annual total compensation of our Chief Executive Officer:
For 2024, our last completed fiscal year:
1. the median of the annual total compensation of all
employees of our Company (other than our Chief
Executive Officer), was $171,500; and
2. the annual total compensation of our Chief
Executive Officer, as reported in the Fiscal 2024
Summary Compensation Table presented
elsewhere in this proxy statement, was $8,949,403.
2025 PROXY STATEMENT
65
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Based on this information, for 2024, the ratio of the annual total compensation of our Chief Executive Officer to the
median of the annual total compensation of all employees was approximately 52:1. This pay ratio is a reasonable
estimate based on our reasonable judgement and assumptions and calculated in a manner consistent with Item
402(u) of Regulation S-K. SEC rules do not specify a single methodology for identification of the median employee or
calculation of the pay ratio, and other companies may use assumptions and methodologies that are different from
those used by us in calculating their pay ratio. Accordingly, the pay ratio disclosed by other companies may not be
comparable to the Company’s pay ratio as disclosed above.
Consistent with Item 402(u) of Regulation S-K, our Chief Executive Officer’s annual total compensation for the
purposes of the pay ratio is as presented in our Fiscal 2024 Summary Compensation Table.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total
compensation of the “median employee,” the methodology and the material assumptions, adjustments, and
estimates that we used were as follows:
1. We selected October 31, 2024 as the date upon
which we would identify the median employee.
2. To identify the “median employee” from our
employee population we used payroll and equity
plan records.
(a) The compensation measure included the
following: annual base salary for salaried
employees (or hourly rate multiplied by estimated
work schedule for hourly employees), actual
incentive compensation paid in 2024 as of the
determination date, and grant date fair value of
equity awards granted in 2024.
(b) We did not apply any de minimis exclusions to
remove certain employees in non-U.S.
jurisdictions allowed by Item 402(u).
3. Amounts paid in foreign currency were converted
into United States dollars using 2024 average
exchange rates.
4. The calculation was performed for all employees,
excluding Ms. Ullal, whether employed on a full-
time, part- time, or seasonal basis.
With respect to the annual total compensation of the “median employee,” we identified and calculated the elements
of such employee’s compensation for 2024 in accordance with the requirements of Item 402(c)(2)(x) of Regulation
S-K, resulting in annual total compensation of $171,500.
With respect to the annual total compensation for our Chief Executive Officer, we used the amount reported in the
“Total” column of our Fiscal 2024 Summary Compensation Table.
66
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Pay Versus Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v)
of Regulation S-K, we are providing the following information about the relationship between executive compensation
actually paid (“CAP”) and certain measures of the financial performance of the Company. For further information
concerning the Company’s variable pay-for- performance philosophy and how the Company aligns executive
compensation with corporate performance, please refer to the Compensation Discussion and Analysis.
The following table reports the compensation of our Principal Executive Officer (PEO) and the average compensation
of the other Named Executive Officers (non-PEO NEOs) as reported in the Summary Compensation Table for the past
five fiscal years, as well as their “Compensation Actually Paid” as calculated pursuant to recently adopted SEC rules
and certain performance measures required by the rules.
Value of Initial Fixed $100
Investment Based On:
Fiscal
Year
Summary
Compensation
Table Total
PEO
Compensation
Actually Paid
PEO
Average
Summary
Compensation
Table Total
non-PEO NEOs
Avg.
Compensation
Actually
Paid
non-PEO
NEOs
Company
Total
Shareholder
Return
Peer Group
Total
Shareholder
Return
Net
Income Revenue
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
2024
$ 8,949,403
$62,201,559
$10,891,249
$ 27,045,747
$869
$154
$2,852
$7,003
2023
$15,561,987
$63,914,394
$ 4,918,724
$ 20,487,088
$463
$133
$2,087
$5,860
2022
$10,735,887
$ 3,171,085
$ 3,285,597
($
785,576)
$239
$117
$1,352
$4,381
2021
$15,993,632
$65,318,255
$ 4,157,062
$ 25,133,973
$283
$129
$
841
$2,948
2020
$ 6,342,972
$ 8,680,019
$ 3,699,258
$ 11,419,845
$143
$107
$
635
$2,318
Column (b)
Represents the total compensation reported for our CEO, Jayshree Ullal, in the Summary Compensation Table for
each listed year. Ms. Ullal served as our CEO (PEO) for each year presented.
Column (c)
Represents the amount of Compensation Actually Paid (“CAP”) for a particular year, as computed in accordance with
SEC rules. The dollar amounts do not reflect the actual amounts of compensation paid to our CEO during the
applicable year.
To calculate CAP, the following amounts were deducted from and added to the “Total” compensation amount for the
CEO reflected in each year’s Summary Compensation Table as follows:
2024
Summary Compensation Table Total
$ 8,949,403
Subtract Grant Date Fair Value of Option Awards and Stock Awards Granted in Fiscal Year
($ 6,856,502)
Add Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock
Awards Granted in Fiscal Year
$ 11,391,664
Add Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards
Granted in Prior Fiscal Years
$ 34,040,182
Add Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That
Vested During Fiscal Year
$
0
Add Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in
Prior Fiscal Years for Which Applicable Vesting Conditions Were Satisfied During Fiscal Year
$ 14,676,812
Subtract Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in
Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year
$
0
Add Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise
Reflected in Fair Value or Total Compensation
$
0
Compensation Actually Paid $ 62,201,559
2025 PROXY STATEMENT
67
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Note that we have not reported any amounts in our Summary Compensation Table with respect to “Change in Pension
and Nonqualified Deferred Compensation” and, accordingly, the adjustments with respect to such items prescribed by
the pay-versus- performance rules are not relevant to our analysis and no adjustments have been made.
For purposes of calculating CAP, the fair value of equity awards is calculated in accordance with Financial Accounting
Standards Board Accounting Standards Codification Topic 718 (FASB ASC Topic 718) using consistent assumption
methodologies used to calculate the grant date fair value of awards, and for awards subject to performance-based
vesting conditions, based on the probable outcome of such performance-based vesting conditions as of the last day
of the fiscal year.
Column (d)
Represents the average of the total compensation reported for our non-PEO Named Executive Officers (“non-PEO
NEOs”) in the Summary Compensation Table for each listed year. The non-PEO NEOs in each year were as follows:
2024: Chantelle Breithaupt; Ita Brennan; Kenneth Duda; John McCool; Anshul Sadana; Marc Taxay
2023: Ita Brennan; Kenneth Duda; Anshul Sadana; Marc Taxay
2022: Ita Brennan; Kenneth Duda; Anshul Sadana; Marc Taxay
2021: Ita Brennan; Kenneth Duda; Anshul Sadana; Marc Taxay
2020: Ita Brennan; Kenneth Duda; Anshul Sadana; Marc Taxay
Column (e)
Represents the average amount of Compensation Actually Paid (“CAP”) for a particular Covered Year, as computed
in accordance with SEC rules, to our non-PEO NEOs. The dollar amounts do not reflect the actual amounts of
compensation paid to our non- PEO NEOs during the applicable year.
To calculate the average CAP payable to our non-PEO NEOs, the following amounts were deducted from and added
to the “Total” compensation amount for such non-PEO NEOs reflected in each year’s Summary Compensation Table
as follows:
2024
Summary Compensation Table Total
$ 10,891,249
Subtract Grant Date Fair Value of Option Awards and Stock Awards Granted in Fiscal Year
($10,456,863)
Add Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock
Awards Granted in Fiscal Year
$ 14,488,715
Add Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards
Granted in Prior Fiscal Years
$ 16,703,438
Add Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That
Vested During Fiscal Year
$
0
Add Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in
Prior Fiscal Years for Which Applicable Vesting Conditions Were Satisfied During Fiscal Year
$ 2,086,677
Subtract Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in
Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year
($ 6,667,468)
Add Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise
Reflected in Fair Value or Total Compensation
$
0
Compensation Actually Paid $ 27,045,747
The assumptions used for determining the fair values shown in this table are materially consistent with those
described in the note regarding Column (c).
Column (f)
Total shareholder return (“TSR”) is calculated by assuming that a $100 investment was made on the day prior to the
first fiscal year reported below and reinvesting all dividends until the last day of each reported fiscal year.
Because listed fiscal years are presented in the table in reverse chronological order (from top to bottom), the table
should be read from bottom to top for purposes of understanding cumulative returns over time.
68
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Column (g)
The peer group utilized in the table above is the NYSE Composite Index, as used in the company’s performance
graph in our annual report. For each listed fiscal year, the peer group cumulative TSR was calculated based on a
deemed fixed investment of $100 in the index made on the day prior to the first fiscal year reported below and
reinvesting all dividends until the last day of each reported fiscal year.
Column (h)
The dollar amounts reported are the Company’s net income reflected in the Company’s audited financial statements.
Column (i)
In the Company’s assessment, revenue is the financial performance measure that is the most important financial
performance measure (other than total shareholder return and net income) used by the company in 2024 to link
compensation actually paid to performance. The dollar amounts reported are the Company’s gross revenues
(in millions) as reflected in the Company’s audited financial statements.
TABULAR LIST OF PERFORMANCE MEASURES
The following table identifies the most important financial performance measures used by our Compensation
Committee to link the “compensation actually paid” to our CEO and other NEOs in 2024, calculated in accordance
with SEC regulations, to company performance. The role of each of these performance measures on our NEOs’
compensation is discussed in the CD&A.
Most Important Performance Measures
Revenue
Non-GAAP Operating Income
Non-GAAP Gross Margin
Compound Annual Growth Rate of Revenue
DESCRIPTION OF RELATIONSHIPS BETWEEN COMPENSATION ACTUALLY PAID AND PERFORMANCE
As discussed further in our CD&A, our compensation structure recognizes and rewards individual performance and
contributions to our success, allowing us to attract, retain, and motivate talented executives with the skills and
abilities needed to drive our desired business results, while creating long-term value for our stockholders.
2025 PROXY STATEMENT
69
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
The graphs below describe, in a manner compliant with the relevant SEC rules, the relationship between
Compensation Actually Paid and the specific performance measures shown.
Compensation Actually Paid Versus Cumulative TSR
$1,000
$900
$800
$400
$700
$300
$600
$200
$500
$100
$0
$0
$10
$20
$30
$40
$50
$60
$70
-$10
FY 2020
Compensation Actually Paid vs. Cumulative TSR
FY 2021
FY 2022
FY 2024
FY 2023
Compensation Actually Paid ($M)
Cumulative TSR
(Value of $100 investment)
$463
$869
PEO CAP ($M)
Average Non-PEO NEO CAP ($M)
Cumulative TSR
NYSE Composite Total Return TSR
$143
$107
$129
$117
$133
$154
$283
$239
Company TSR vs. Peer Group Cumulative TSR
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
Cumulative TSR
(Value of $100 Investment)
Company TSR vs. Peer Group Cumulative TSR
$283
$239
$463
$869
$117
$154
FY 2020
FY 2022
FY 2021
FY 2024
FY 2023
Cumulative TSR
NYSE Composite Cumulative TSR
$107
$143
$129
$133
70
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Compensation Actually Paid Versus Net Income
PEO CAP($M)
Average Non-PEO NEO CAP ($M)
Net Income ($M)
-$10
$0
$10
$20
$30
$40
$50
$60
$70
Compensation Actually Paid vs. Net Income
$0
$500
$1,000
$1,500
$2,000
$3,000
$2,500
Compensation Actually Paid ($M)
Net Income ($M)
FY 2020
FY 2021
FY 2022
FY 2024
FY 2023
$635
$841
$1,352
$2,087
$2,852
Compensation Actually Paid Versus Revenue
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
$0
$10
$20
$30
$40
$50
$60
$70
-$10
FY 2020
Compensation Actually Paid vs. Revenue
FY 2021
FY 2022
FY 2023
Compensation Actually Paid ($M)
Revenue ($m)
PEO CAP ($M)
Average Non-PEO NEO CAP ($M)
Revenue($M)
$2,318
$2,948
$4,381
$5,860
$7,003
$8,000
FY 2024
2025 PROXY STATEMENT
71
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Compensation Committee Report
The Compensation Committee has reviewed and discussed the section titled “Compensation Discussion and
Analysis” with management. Based on such review and discussion, the Compensation Committee has recommended
to the board of directors that the section titled “Compensation Discussion and Analysis” be included in this proxy
statement.
Respectfully submitted by the members of the Compensation Committee of the board of directors:
Charles Giancarlo (Chair)
Daniel Scheinman
Mark B. Templeton
72
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Equity Compensation Plan Information
The following table summarizes our equity compensation plan information as of December 31, 2024. Information is
included for equity compensation plans approved by our stockholders and equity compensation plans not approved
by our stockholders. We will not grant equity awards in the future under any of the equity compensation plans not
approved by our stockholders included in the table below.
Plan Category
(a) Number of
Securities to be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights
(b) Weighted
Average
Exercise Price of
Outstanding Options,
Warrants and
Rights
(c) Number of
Securities Remaining
Available for Future
Issuance Under Equity
Compensation Plans
(Excluding Securities
Reflecting in Column
(a))
Equity compensation plans
approved by stockholders
31,699,528(1)
$6.71(2)
157,283,106(3)
Equity compensation plans not
approved by stockholders
—
—
—
Total
31,699,528
$6.71
157,283,106
(1) Includes 3,090,458 shares underlying stock options and 28,609,070 shares of restricted stock units.
(2) The weighted average exercise price is calculated based solely on outstanding stock options.
(3) Includes the following plans: The 2014 Plan and Arista Networks, Inc. 2014 Employee Stock Purchase Plan (“ESPP”). Our
ESPP provides that on the first day of each fiscal year beginning in 2015 and ending in (and including) 2034, the number of
shares available for issuance thereunder is automatically increased by a number equal to the least of (i) 40,000,000 shares, (ii)
1% of the outstanding shares of our common stock on the first day of such year, or (iii) such other amount as our board of
directors may determine.
2025 PROXY STATEMENT
73
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of
April 2, 2025 for:
•
each of our directors and nominees for director;
•
each of our Named Executive Officers;
•
all of our current directors and executive officers as
a group; and
•
each person or group, who beneficially owned
more than 5% of our common stock.
We have determined beneficial ownership in accordance with the rules of the SEC, and thus it represents sole or
shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our
knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to
all shares that they beneficially owned, subject to community property laws where applicable.
We have based our calculation of the percentage of beneficial ownership on 1,255,625,511 shares of our common
stock outstanding as of April 2, 2025. We have deemed shares of our common stock subject to stock options that
are currently exercisable or exercisable within 60 days of April 2, 2025 and RSUs that vest within 60 days of April 2,
2025, which are subject to vesting conditions expected to occur to be outstanding and to be beneficially owned by
the person holding the stock option for the purpose of computing the percentage ownership of that person. We did
not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other
person.
74
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Arista Networks, Inc.,
5453 Great America Parkway, Santa Clara, California 95054. The information provided in the table is based on our
records, information filed with the SEC and information provided to us, except where otherwise noted.
Name of Beneficial Owner
Number of
Shares
Beneficially
Owned
Percentage of
Shares
Beneficially
Owned
5% Stockholders:
The Bechtolsheim Family Trust(1)
183,799,896
14.63%
The Vanguard Group(2)
95,090,956
7.57%
BlackRock, Inc.(3)
73,684,608
5.86%
Named Executive Officers and Directors:
Jayshree Ullal(4)
37,493,269
2.99%
Chantelle Breithaupt(5)
41,949
*
Ita Brennan(6)
56,048
*
Kenneth Duda(7)
4,299,977
*
Anshul Sadana(8)
0
*
John McCool(9)
7,952
*
Marc Taxay(10)
12,596
*
Kelly Battles(11)
9,816
*
Lewis Chew(12)
27,348
*
Charles Giancarlo(13)
359,420
*
Greg Lavender(14)
839
*
Daniel Scheinman(15)
154,308
*
Mark B. Templeton(16)
129,188
*
Yvonne Wassenaar(17)
14,948
*
All current executive officers and directors as a group (11 persons)(18)
42,543,658
3.39%
*
Represents beneficial ownership of less than one percent (1%) of the outstanding shares of our common stock.
(1) Includes 183,228,048 shares held by the Bechtolsheim Family Trust for which trust Mr. Bechtolsheim serves as trustee.
Mr. Bechtolsheim may be deemed to exercise sole voting and investment power over such shares held by the trust. Includes
158,000 shares issuable within 60 days of April 2, 2025 upon the exercise of outstanding exercisable stock options held by
Mr. Bechtolsheim.
(2) Based solely upon a Schedule 13G/A filed with the SEC on November 12, 2024 by The Vanguard Group (“Vanguard”)
reporting beneficial ownership as of September 30, 2024. Vanguard reported shared voting power with respect to 1,407,588
shares. Vanguard reported sole dispositive power with respect to 90,379,064 shares and shared dispositive power with
respect to 4,711,892 shares. The address for Vanguard is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355.
(3) Based solely upon a Schedule 13G/A filed with the SEC on January 29, 2024 by BlackRock, Inc. (“BlackRock”) reporting
beneficial ownership as of December 31, 2023 BlackRock reported sole voting power with respect to 66,141,496 shares and
sole dispositive power with respect to 73,684,608 shares. The address for BlackRock is 50 Hudson Yards, New York,
NY 10001.
2025 PROXY STATEMENT
75
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
(4) Includes 24,493,968 shares held by Jayshree Ullal and Vijay Ullal as Trustees of the 2000 Ullal Trust dated February 15, 2000.
Mr. and Ms. Ullal may be deemed to be the beneficial owner of the shares and to have shared voting and investment control
over such shares. Includes 12,846,400 shares held in trusts for Ms. Ullal’s family members for which trusts Ms. Ullal serves as
trustee. Ms. Ullal may be deemed to exercise sole voting and investment control over shares held in each of the trusts.
Includes 92,641 shares held directly by Ms. Ullal. Includes 60,260 shares issuable within 60 days of April 2, 2025 upon vesting
of restricted stock units or the exercise of outstanding exercisable options held by Ms. Ullal.
(5) Includes 10,916 shares issuable within 60 days of April 2, 2025 upon vesting of restricted stock units or the exercise of
outstanding exercisable options held by Ms. Breithaupt.
(6) Ms. Brennan retired from her position as Chief Financial Officer in February 2024 and her beneficial ownership information is
based on information available to the Company as of April 2, 2025.
(7) Includes 317,857 shares held by Kenneth Duda and Jennifer Duda as Trustees of the Kenneth Duda and Jennifer Duda Family
Trust dated September 24, 2004. Mr. and Ms. Duda may be deemed to be the beneficial owners of the shares and to have
shared voting and investment control over such shares. Includes 600,000 shares held in grantor retained annuity trusts of
which Mr. Duda is Trustee; 600,000 shares held in grantor retained annuity trusts of which Mr. Duda’s spouse is Trustee;
1,383,168 shares held in trusts for Mr. Duda’s children for which trusts Mr. Duda serves as Trustee; 634,400 shares held in a
501(c) foundation for which Mr. Duda and his spouse serve as co-trustees and 12,976 shares held directly by Mr. Duda.
Includes 751,576 shares issuable within 60 days of April 2, 2025 upon vesting of restricted stock units or the exercise of
outstanding exercisable options held by Mr. Duda.
(8) Mr. Sadana resigned from his position as Chief Operating Officer in May 2024 and his beneficial ownership information is
based on information available to the Company as of April 2, 2025.
(9) Mr. McCool resigned from his position as Chief Platform Officer on April 7, 2025.
(10) Includes 12,596 shares issuable within 60 days of April 2, 2025 upon vesting of restricted stock units or the exercise of
outstanding exercisable options held by Mr. Taxay.
(11) Includes 844 shares issuable within 60 days of April 2, 2025 upon vesting of restricted stock units held by Ms. Battles.
(12) Includes 844 shares issuable within 60 days of April 2, 2025 upon vesting of restricted stock held by Mr. Chew.
(13) Includes 139,784 shares held of record by Mr. Giancarlo as trustee of the Giancarlo Family Trust UAD 11/02/98. Mr. Giancarlo
may be deemed to be the beneficial owner of the shares and to have voting and investment power over such shares. Includes
218,792 shares held directly by Mr. Giancarlo. Also includes 844 shares issuable within 60 days of April 2, 2025 upon vesting
of restricted stock units held by Mr. Giancarlo.
(14) Includes 810 shares issuable within 60 days of April 2, 2025 upon vesting of restricted stock held by Mr. Lavender.
(15) Includes 844 shares issuable within 60 days of April 2, 2025 upon vesting of restricted stock held by Mr. Scheinman.
(16) Includes 75,200 shares held in a trust of which Mr. Templeton’s spouse serves as Trustee; 53,144 shares held directly by Mr.
Templeton and 844 shares issuable within 60 days of April 2, 2025 upon vesting of restricted stock units held by
Mr. Templeton.
(17) Includes 844 shares issuable within 60 days of April 2, 2025 upon vesting of restricted stock units held by Ms. Wassenaar.
(18) Includes 998,412 shares issuable within 60 days of April 2, 2025 upon vesting of options and restricted stock units or the early
exercise of outstanding options.
76
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
DELIQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors, executive officers and holders of more than 10% of Arista
Networks common stock to file with the SEC reports regarding their ownership and changes in ownership of our
securities, and to furnish copies of such reports to the Company. As a matter of practice, we assist our officers and
directors in preparing initial ownership reports and reporting ownership changes, and typically file those reports on
their behalf. Based solely on our review of such forms in our possession and the representations of our officers and
directors, we believe that during 2024, all Section 16(a) filing requirements were satisfied, except that an amended
Form 4 filed on May 22, 2024 reporting the correct number of performance stock units granted to Ms. Ullal which
was incorrectly reported on a Form 4 filed on February 20, 2024 due to an administrative error and a Form 4 filed on
June 24, 2024 reporting the exercise and sale of shares of common stock sold on June 13, 2024 by Mr. Duda was
inadvertently filed late due to an administrative error.
2025 PROXY STATEMENT
77
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
RELATED PERSON TRANSACTIONS
In addition to the compensation arrangements, including employment, termination of employment and change in
control arrangements discussed above in the sections titled “Board of Directors and Corporate Governance—Director
Compensation” and “Executive Compensation,” we describe below transactions and series of similar transactions,
since the beginning of our last fiscal year, to which we were a party or will be a party, in which:
•
the amounts involved exceeded or will exceed
$120,000; and
•
any of our directors, nominees for director,
executive officers or holders of more than 5% of
our outstanding capital stock, or any immediate
family member of, or person sharing the household
with, any of these individuals or entities, had or will
have a direct or indirect material interest.
Other than as described below, there has not been, nor is there any currently proposed, transactions or series of
similar transactions to which we have been or will be a party.
We have granted equity awards to our Named Executive Officers and certain of our directors. See the section titled
“Executive Compensation—Outstanding Equity Awards at 2024 Fiscal Year-End” for a description of these awards. In
the ordinary course of business, we enter into offer letters and employment agreements with our executive officers.
We have also entered into indemnification agreements with each of our directors and officers. The indemnification
agreements and our certificate of incorporation and bylaws require us to indemnify our directors and officers to the
fullest extent permitted by Delaware law.
Other than as described above under this section titled “Related Person Transactions,” since January 1, 2024, we
have not entered into any transactions, nor are there any currently proposed transactions, between us and a related
party where the amount involved exceeds, or would exceed, $120,000, and in which any related person had or will
have a direct or indirect material interest. We believe the terms of the transactions described above were comparable
to terms we could have obtained in arm’s-length dealings with unrelated third parties.
Policies and Procedures for Related Person Transactions
Our Audit Committee has the primary responsibility for reviewing and approving or ratifying related party transactions.
We have a formal written policy providing that a related party transaction is any transaction between us and an
executive officer, director, nominee for director, beneficial owner of more than 5% of any class of our capital stock, or
any immediate family member or person sharing the household of any of the foregoing persons, in which such party
has a direct or indirect material interest and the aggregate amount involved exceeds $120,000. In reviewing any
related party transaction, our Audit Committee is to consider the relevant facts and circumstances available to our
Audit Committee, including, whether the transaction is on terms no less favorable than the terms that could have
been reached with an unrelated third party, and the extent of the related party’s interest in the transaction. Our Audit
Committee has determined that certain transactions will be deemed to be pre-approved by our Audit Committee,
including certain executive officer and director compensation, transactions with another company at which a related
party’s only relationship is as a director or beneficial owner of less than 10% of that company’s shares (subject to a
one-time initial approval by the Audit Committee), transactions where a related party’s interest arises solely from the
ownership of our common stock and all holders of our common stock received the same benefit on a pro rata basis,
and transactions available to all employees generally.
78
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
OTHER MATTERS
Householding
We have adopted a procedure called “householding,” which the SEC has approved. Under this procedure,
stockholders of record who have the same address and last name and have not previously requested electronic
delivery of proxy materials will receive a single envelope containing the Notices for all stockholders having that
address. The Notice for each stockholder will include that stockholder’s unique control number needed to vote his or
her shares. This procedure reduces our printing costs, mailing costs, and fees. Upon written or oral request, we will
deliver promptly a separate copy of the Notice and, if applicable, our proxy materials to any stockholder at a shared
address to which we delivered a single copy of any of these materials. To receive a separate copy, or, if a stockholder
is receiving multiple copies, to request that we only send a single copy of the Notice and, if applicable, our proxy
materials, such stockholder may contact us at the following phone number (408) 547-5500 or address:
Arista Networks, Inc.
Attention: Investor Relations
5453 Great America Parkway
Santa Clara, California 95054
Stockholders who beneficially own shares of our common stock held in street name may contact their brokerage firm,
bank, broker-dealer or other similar organization to request information about householding.
Stockholder Proposals
Stockholders may present proposals for inclusion in our proxy statement and for consideration at the next annual
meeting of stockholders by submitting their proposals in writing to our Secretary in a timely manner. For a stockholder
proposal to be considered for inclusion in our proxy statement for our 2026 annual meeting of stockholders, our
Secretary must receive the written proposal at our principal executive offices no later than December 17, 2025. In
addition, stockholder proposals must comply with the requirements of Rule 14a-8 under the Exchange Act regarding
the inclusion of stockholder proposals in Company-sponsored proxy materials. Stockholder proposals should be
addressed to:
Arista Networks, Inc.
Attention: Secretary
5453 Great America Parkway
Santa Clara, California 95054
Our amended and restated bylaws also establish an advance notice procedure for stockholders who wish to present
a proposal before an annual meeting of stockholders but do not intend for the proposal to be included in our proxy
statement. Our amended and restated bylaws provide that the only business that may be conducted at an annual
meeting is business that is (i) specified in our proxy materials with respect to such meeting, (ii) otherwise properly
brought before the annual meeting by or at the direction of our board of directors, or (iii) properly brought before the
annual meeting by a stockholder of record entitled to vote at the annual meeting who has delivered timely written
notice to our Secretary, which notice must contain the information specified in our amended and restated bylaws. To
be timely for our 2026 annual meeting of stockholders, our Secretary must receive the written notice at our principal
executive offices:
•
not earlier than the close of business on January 31, 2026; and
•
not later than the close of business on March 2, 2026.
2025 PROXY STATEMENT
79
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
NOMINATION OF DIRECTOR CANDIDATES
Stockholders may recommend director candidates for consideration by our Nominating and Corporate Governance
Committee. Any such recommendations should include the nominee’s name and qualifications for membership on
our board of directors and should be directed to our Secretary at the address set forth above. For additional
information regarding stockholder recommendations for director candidates, see “Board of Directors and Corporate
Governance—Stockholder Recommendations for Nominations to the Board of Directors.”
In addition, our amended and restated bylaws permit stockholders to nominate directors for election at an annual
meeting of stockholders. To nominate a director, the stockholder must provide the information required by our
amended and restated bylaws. In addition, the stockholder must give timely notice to our Secretary in accordance
with our amended and restated bylaws, which, in general, require that the notice be received by our Secretary within
the time period described above under “Stockholder Proposals” for stockholder proposals that are not intended to be
included in a proxy statement.
Stockholders who intend to solicit proxies in support of director nominees other than our nominees must also provide
notice that sets forth the information required by Rule 14a-19 of the Exchange Act. Please note that the notice
requirement under Rule 14a-19 is in addition to the applicable notice requirements under the advance notice
provisions of our amended and restated bylaws described above.
Availability of Bylaws
A copy of our bylaws may be obtained by accessing our filings on the SEC’s website at www.sec.gov. You may also
contact our Secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the
requirements for making stockholder proposals and nominating director candidates.
Fiscal Year 2024 Annual Report and SEC Filings
Our financial statements for our fiscal year ended December 31, 2024 are included in our Annual Report on Form
10-K, which we will make available to stockholders at the same time as this proxy statement. This proxy statement
and our annual report are posted on the Financial Information section of our website at http://investors.arista.com
and are available from the SEC at its website at www.sec.gov. You may also obtain a copy of our annual report
without charge by sending a written request to Arista Networks, Inc., Attention: Investor Relations, 5453 Great
America Parkway, Santa Clara, California 95054.
* * *
The board of directors does not know of any other matters to be presented at the Annual Meeting. If any additional
matters are properly presented at the Annual Meeting, the persons named in the enclosed proxy card will have
discretion to vote the shares of our common stock they represent in accordance with their own judgment on such
matters.
It is important that your shares of our common stock be represented at the Annual Meeting, regardless of the number
of shares that you hold. You are, therefore, urged to vote by telephone or by using the Internet as instructed on the
enclosed proxy card or execute and return, at your earliest convenience, the enclosed proxy card in the envelope that
has also been provided.
THE BOARD OF DIRECTORS
Santa Clara, California
April 16, 2025
80
Appendices
Other
Matters
Security
Ownership
Voting
Proposals
Executive Officers
& Compensation
Proxy
Summary
Board and
Corporate Governance
APPENDIX A
RECONCILIATION OF SELECTED GAAP TO NON-GAAP FINANCIAL MEASURES
The following table reconciles our financial results reported in accordance with accounting principles generally
accepted in the United States (“GAAP”) to non-GAAP financial results (in thousands).
Twelve Months Ended
December 31,
2024
2023
GAAP gross profit
$4,491,303
$3,630,281
GAAP gross margin
64.1%
61.9%
Stock-based compensation expense
15,786
12,789
Intangible asset amortization
16,780
23,457
Non-GAAP gross profit
$4,523,869
$3,666,527
Non-GAAP gross margin
64.6%
62.6%
GAAP income from operations
$2,944,616
$2,257,249
GAAP operating margin
42.0%
38.5%
Stock-based compensation expense
355,364
296,756
Intangible asset amortization
26,760
33,437
Legal settlement(1)
—
16,000
Non-GAAP income from operations
$3,326,740
$2,603,442
Non-GAAP operating margin
47.5%
44.4%
(1) In the quarter ended December 31, 2023, we agreed to pay $16 million to settle an intellectual property dispute and we
recorded this amount to general and administrative expenses.
NON-GAAP EXECUTIVE INCENTIVE PLAN (“INCENTIVE PLAN”) PERFORMANCE METRICS IN
COMPENSATION DISCUSSION AND ANALYSIS
We use certain non-GAAP financial performance metrics in our Incentive Plan, as described on page 48.
2025 PROXY STATEMENT
A-1
[THIS PAGE INTENTIONALLY LEFT BLANK]
UNITED STATE
A
S
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____
_
___
_
___
_
__
_
__
_
__
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
_
_
FORM 10-K
____
_
___
_
___
_
__
_
__
_
__
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
_
_
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
Or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from
to
Commission file number: 001-36468
____
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
ARISTA N
T
ETWORKS, INC.
(Exact name of registrant as specifie
f d in its charter)
____
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
Delaware
20-1751121
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
5453 Great America Parkwa
k
y
Santa Clara, Califor
f
nia 95054
(Address of principal executive offic
f es)
(408) 547-5500
(Registrant’s telephone number, i
r ncluding area code)
Securities registered pursuant to Section 12(b) of the Act:
____
_
___
_
___
_
__
_
__
_
__
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
___
_
__
_
Title of each class
Tra
T ding Symbol(s)
Name of each exchange on which registered
Common Stock, $0.0001 par value
ANET
New Yor
Y
k Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rul
R e 405 of the Securities Act.
Yes
Y
☒
No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes ☐No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file
f
such reports), and (2) has been subject to such filing requirements for
f
the past
90 days.
Yes
Y
☒No ☐
Indicate by check mark whether the registrant has submitted electronically every I
r
nteractive Data File required to be submitted pursuant to Rul
R e 405 of Regulation
S-T (§232.405 of this chapt
a er) during the preceding 12 months (or for
f
such shorter period that the registrant was required to submit such file
f
s).
Yes
Y
☒
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting compa
m
ny, o
y
r an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting compa
m
ny” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated file
f
r
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting compa
m
ny
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
f
complying with any new or
revised fin
f ancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has file
f
d a report on and attestation to its management's assessment of the effect
f
iveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting fir
f m that prepared or issued its audit report.
☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compe
m
nsation received by any
of the registrant’s executive offic
f ers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rul
R e 12b-2 of the Exchange Act).
Yes
Y
☐No ☒
The aggregate market value of the voting and non-voting common equity held by non-affili
f
ates of the registrant was approximately $90.2 billion as of June 28,
2024 (the last business day of the registrant's most recently completed second fis
f cal quarter)
a
b sed on the closing price of the registrant’s common stock on the New
York Stock Exchange on such date. Shares held by persons who may be deemed affi
f liates have been excluded. This determination of affi
f liate status
t
is not necessarily a
conclusive determination for
f
other purpos
r
es.
On Februa
r
ry 12, 2025, 1,261,122,596 shares of the registrant’s common stock were outstanding.
DOCUMENTS INCORPORAT
R
ED BY REFERENCE
Portions of the registrant’s defin
f itive Proxy Statement relating to its 2025 Annual Meeting of Stockholders to be fil
f ed pursuant to Regulation 14A within 120 days
afte
f r the registrant’s fiscal year end of Decembe
m
r 31, 2024 are incorpor
r
ated by reference into Part III of this Annual Report on Form 10-K.
ARISTA N
T
ETWORKS, INC.
TABLE OF CONTENTS
Page
PART I
Item 1.
Business
1
Item 1A.
Risk Factors
14
Item 1B.
Unresolved Staff Comments
48
Item 1C.
Cybersecurity
48
Item 2.
Properties
49
Item 3.
Legal Proceedings
50
Item 4.
Mine Safety Disclosures
50
PART II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
51
Item 6.
[Reserved]
52
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
53
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
64
Item 8.
Financial Statements and Supplementary Data
66
Item 9.
Change in and Disagreements With Accountants on Accounting and Financial
Disclosure
100
Item 9A.
Controls and Procedur
d
es
100
Item 9B.
Other Information
101
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
101
PART III
Item 10.
Directors, Executive Offi
f cers, and Corporate Governa
r
nce
102
Item 11.
Executive Compensation
102
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
102
Item 13.
Certain Relationships and Related Transactions and Director Independence
102
Item 14.
Principal Accountant Fees and Services
102
PART IV
Item 15.
Exhibits and Financial Statement Schedules
102
Item 16.
Form 10-K Summary
104
Signatures
105
SPECIAL NOTE REGARDING FORWAR
W
D-LOOKING STATE
A
MENTS
This Annual Report on Form 10-K, including the sections entitled “Business,” “Risk Factors,” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the
t
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which statements involve subs
u
tantial risks and uncertainties. The words “believe,” “may,
a ” “will,” “potentially,”
y
"likely" “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” "should", “proje
o ct,” “plan,” “predict,” “expect”, the
negative of any of the
t
se words and similar expressions that convey uncertainty of future events or outcomes are intended to
identify forward-looking statements.
These for
f
wa
r
rd-looking statements include, but are not limited to, statements concerning the
t
following:
•
our ability to maintain an adequa
q
te rate of revenue growth and our fut
f ur
t
e fin
f ancial perfor
f
ma
r
nce, including our
expectations regarding our revenue, cost of revenue, gross profit or gross margin and operating expenses;
•
our belief that the networking marke
r
t is rapidly evolving and has a significant potential opportunity for growth;
t
•
our business plan and our ability to effe
f ctively manage our growth;
•
our ability to expand our leadership position in the networki
r ng industry and to develop new products and expand our
business into new markets such as the AI Ethernet switching, campu
m
s works
r
pace, enterprise data center and security
markets;
•
our ability to satisfy the requi
q rements for
f
networking solutions and to successfully anticipate technological shifts
f
and
market needs, including the impact of artific
f ial intelligence, innovate new products, rapi
a dly develop new feat
f
ur
t
es and
applications, and bring the
t
m to marke
r
t in a timely manner;
•
our ability to fulfil
f l our customers’ orders despite supply chain delays, issues with access to key commodities or
technologies or geopolitical events that impa
m
ct our manufac
f
turers or their suppliers such as the escalating tariff a
f
nd
non-tariff-r
f elated international trade measures, the
t
Russia-Ukraine and Israel-Hamas conflicts, the
t
Houthi attacks on
marine vessels in the Red Sea or the impa
m
ct of global pandemics such as the global coronavirus
r
("COVID-19")
pandemic;
•
our expectations related to our inventory a
r
nd purchase commitments;
•
our ability to identify,
f
complete and realize the benefit
f s of recent and future acquisitions of, o
f
r investments in,
complementary c
r
ompa
m
nies, products, services or technologies;
•
costs associated with defending intellectua
t
l property infri
f ngement and other claims and the potential outcomes of such
disputes, such as any claims discussed in “Legal Proceedings”;
•
our ability to retain and increase sales to existing customers and attract new customers, including large customers;
•
our ability to expand our business domestically and internationally;
•
the effe
f cts of increased compe
m
tition in our market and our ability to compe
m
te effe
f ctively;
•
the budgeting cycles and purchasing practices of customers, including large customers who may receive lower pricing
terms due
d
to volume discounts or who may elect to re-assign allocations to multiple vendors based upo
u
n specific
network r
r
oles or projects;
•
the growth and buying patterns
r
of our large customers and resulting volatility in our customer concentration in which
large bulk purchases may o
a
r may not occur in certain quarters or may be deferred into future quarters or cancelled due
to adju
d stments in their capital expenditur
t
e for
f
ecasts;
•
the deferral or cancellation of orders by customers, warranty retur
t
ns
r
or delays in acceptance of our products;
•
our ability to fur
f
ther penetrate our existing customer base and sell more compl
m ex and higher-perfor
f
ma
r
nce
config
f urations of our products;
•
our belief that increasing channel leverage will extend and improve our engagement with a broad set of customers;
•
our plans to continue to expand our sales force, marketing activities and relationships with channel, technology and
system-level partners;
•
our ability to scale our operational and manufactur
t
ing capacity;
•
our plans to invest in our research and development;
•
our ability to timely and effe
f ctively scale and adapt
a
our existing technology;
•
the benefits realized by our customers in their use of our products and services including lower total cost of ownership;
•
our ability to detect breaches of our cybersecuri yty y
systems or other securi yty breaches;
•
the effe
f cts of seasonal and cyclical trends on our results of operations;
•
our relationships with and expectations concerni
r ng third parties, including, but not limited to our large customers,
suppliers, distributors, systems integrators, channel partners and value-added resellers;
•
the attraction and retention of qualifie
f d employees and key personnel;
•
our ability to maintain, protect and enhance our brand and intellectual property;
•
economic and industry trends;
•
estimates and estimate methodologies used in preparing our fin
f ancial statements;
•
fut
f ur
t
e tra
t ding prices of our common stock;
•
our belief that we have adequa
q
tely reserved for uncertain tax positions;
•
the impact of global economic and political conditions that introduce instability into the U.S. and other economies;
•
the impact of climate cha g
nge and natural disasters;
•
the impact of global and domestic tax reform;
•
the impa
m
ct of tariffs o
f
r other changes in international trade policies imposed by the U.S. on goods from other countries
and tariffs
f
impo
m
sed by other countries on U.S. goods; and
•
our belief that our existing cash and cash equivalents together with cash flow from operations will be suffic
f ient to meet
our worki
r ng capi
a tal requi
q rements and our growth strategies for
f
the for
f
eseeable future.
These for
f
wa
r
rd-looking statements are subje
b ct to a numbe
m
r of risks, uncertainties and assumptions, including those
described in the
t
section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Moreover, we operate in a
very competitive and rapi
a dly changing environment, and new risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any fac
f
tor, or
combination of fact
f
ors, may cause actua
t
l results to differ
f
materially from those contained in any for
f
wa
r
rd-looking statements we
may make. In light of these risks, uncertainties and assumpt
m ions, the forward-looking events and circumstances discussed in
this Annual Report on Form 10-K may n
a
ot occur and actual results could differ
f
materially and adversely from those anticipated
or impl
m ied in the
t
forward-looking statements. You should not rely upon forward-looking statements as predictions of future
events.
The for
f
ward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on
which the
t
statements are made. We undertake no obligation to update any forward-looking statements made in this Annual
Report on Form 10-K to reflect events or circumstances after the date of this Annual Report on Form 10-K or to refle
f ct new
information or the occurre
r nce of unanticipated events, except as requi
q red by law. We m
W
ay not actually achieve the plans,
intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our for
f
wa
r
rd-
looking statements. Our for
f
wa
r
rd-looking statements do not refle
f ct the potential impact of any fut
f ur
t
e acqui
q sitions, mergers,
dispositions, joint ventur
t
es or investments we may make.
1
PART I
Item 1. Business
Arista Networks
r
is an industry
t
leader in data-driven, client-to-cloud netwo
t
rking for
f
large AI, data center, campu
m
s and
routing environments. Arista’s platfor
f
ms
r
deliver availability, agility, automation, analytics, and security through an advanced
network o
r
perating stack. Since Arista’s inception, our fou
f
nders have reimagined cloud networks for
f
perfor
f
mance, scale and
programmability with a focus on diffe
f rentiating in three ways: uncompromising reliability built on the fou
f
ndation of robust
quality assurance capabilities with a suite of automated diagnostics, advanced open and standards-based technology and
intelligent automation to decrease the manual workload on the operator.
At the core of Arista’s platfor
f
m i
r
s Arista’s Extensible Operating System ("EOS®"), a modernized publ
u ish-subs
u
cribe
state-sharing networking operating system. Arista EOS, combined with a set of network a
r
ppl
a
ications and our Ethernet switching
and routing platforms using best of breed merchant silicon, provides customers with a highly compe
m
titive and diversified
portfolio of products with improved price/performance and time to market.
Our curre
r nt portfolio of products, services and technologies are grouped into the fol
f lowing categories: Core (Data
Center, Cloud and AI Networking), Cognitive Adja
d cencies (Campus and Routing), and Cognitive Network (Software and
Services). Our customers include compa
m
nies of all sizes and span a range of industries and geographies and are grouped into the
following categories: Cloud and AI Titans, Enterpr
r
ise and Providers. Since we began shipping our products in 2008, we have
experienced rapid growth, and, according to market research in 2024, we have achieved the leadership position in overall data
center Etherne
r
t switch ports and revenue and continue to lead the market in higher speed Ethernet port shipments of 100G and
above. We have been profit
f able and cash flo
f w positive since 2010.
Our Market Opportunity
We sell our products through both a
t
direct sales for
f
ce and channel partne
t
rs, compe
m
ting primarily in the
t
high-speed data
center Ethe
t
rnet switching markets for 10 Gigabit Ethernet ("GbE") and above, including the Cloud and AI Etherne
r
t switching
markets, Enterprise Data Center switching/routing marke
r
t, the cloud-grade and enterpr
r
ise routing markets, and the campus
wired and wireless markets. We also participate in the Network Monitoring, Network Detection and Response ("NDR") and
Network A
r
ccess Control security markets thr
t
ough both a
t
cqui
q sition and organic development.
Our Customers
Our customers include large cloud customers or Cloud and AI Titans, othe
t
r internet and service providers, including
specialty and AI Neoclouds, and a wide breadth of enterprise customers, including financial servi
r ces organizations and
government agencies. We c
W
ontinue to diversify the type
t
s of enterpr
r
ise customers we sell to and have continued to expand our
presence across a wide spectrum of industries including media and entertainment, healthcare, oil and gas, education,
manufactur
t
ing, industrial, and more. Meta Platfor
f
ms
r
and Microsoft, two
t
of our Cloud and AI Titan end customers, each
accounted for more than 10% of our total revenue for
f
the years ended December 31, 2024, and December 31, 2023.
Market Drivers
Digital Tra
T
nsformation
Digital transformation is fund
f
amentally changing the way technology is integrated into business operations and as a
result how IT infra
f structur
t
e is built, and applications are delivered across cloud and end-customer environments. The expanded
dependency of business operations on the network has increased the compl
m exity of the network a
r
nd heightened the importance
of network availability, predictabl
a e performance, open programmabi
a lity, s
y
ecurity, a
y
nd operational simplicity.
Publ
u ic cloud leaders pioneered the development of large-scale cloud data centers to meet these growing demands from
their users, including business customers. Enterprises now have the option to move applications to the cloud as cloud servi
r ces
are generally easier and more cost effect
f
ive to deploy, scale and operate tha
t
n traditional applications. These cloud metrics have
become the baseline for
f
perfor
f
ma
r
nce, cost and effic
f iency of IT infra
f structur
t
e investments. Enterpr
r
ises and service providers
around the
t
world are also now adopting cloud computing technologies and principles to their own non-cloud or hybrid
operations in order to achieve similar performance, operational effic
f iencies and cost reductions.
Arista addresses our customers' requirements thr
t
ough our approach to network a
r
rchitectur
t
e, our platfor
f
ms
r
and our
softwa
t
re. Our comprehensive R-series, X-series and Etherlink switching and routing portfol
f ios run
r
ning the highly
programmable EOS, transfor
f
m n
r
etwo
t
rks with simpl
m ifie
f d and scalable architectures across multiple use-cases.
2
Artificial Intelligence (AI)
The expansion of generative AI computing and distributed app
a
lications is furthe
t
r pushing the boundary o
r
f predictable
scale and perfor
f
ma
r
nce in the network.
r
A common characteristic of the
t
se AI workloads is that they are both d
t
ata and compute
intensive. A typical AI workl
r oad involves large sparse matrix comput
m
ations, distributed across hundreds or thousands of
processors (CPU, GPU, TPU, etc.) with intense computations for a period of time and requi
q res a high-bandwidth, scalabl
a e,
lossless network i
r
n order to service these workloads. With the exponential growth o
t
f AI appl
a
ications, the
t
need for standardized
transport like Etherne
r
t becomes paramount, enabl
a ing a power-effi
f cient interconnect while overcoming the compl
m exities of
traditional app
a
roaches.
Arista's AI strategy is based on achieving two key obje
b ctives. Arista provides netwo
t
rk switching products intended to
provide a robust interconnect that seamlessly links GPUs, comput
m
e and storage to deliver fast job compl
m etion time for
f
training
and generative AI workloads. Arista also offer
f s customers the Arista Autonomous Vir
V tual Assist ("AVA
V
TM") which uses natural
processing language to provide AI-assisted outcomes for
f
network operations, security and observabi
a lity.
An overview of our AI enabl
a ed solutions is shown below:
As a proud fou
f
nding membe
m
r, Arista is committed to leading the
t
Ultra Etherne
r
t Consortium ("UEC") to achieve
scalable and effic
f ient remote memory access, implemented with enhanced packet spraying, fle
f xible ordering, and modern
r
congestion control algorithm
t
s.
Hybrid Work
In the post-pandemic world, the traditional “campus” has been redefined and the boundaries between the offic
f e, home,
teleworker and user have converged. At the same time, the prolifer
f ation and sophistication of devices that connect the campus,
such as smart devices, security cameras and Internet of Things ("IoT"), has grown dramatically. The challenge lies in
successful
f ly transitioning the
t
existing siloed campu
m
s into a data-driven, distributed campus model with a common experience,
while addressing the growing security and availabi
a lity needs.
Arista’s campus portfolio was driven by customers desiring the same quality and operational effic
f iency available from
EOS and CloudVis
V ion® throughout their entire enterpr
r
ise network. We e
W
ntered the campus marke
r
t with a diverse portfol
f io of
modular and fixed for
f
m f
r
ac
f
tor Campus
m
spine switches, Power-over-Ethernet ("PoE") leaf switches based on EOS and Wi-Fi
3
access points managed through CloudVision. We c
W
ontinue to expand our campus
m
portfol
f io to offe
f r the advantages of EOS
across the entire enterprise network. Most recently, we have added incremental Enterprise WAN products as well as embedded
NDR security sensors into our campu
m
s switches to address more of the security challenges that face
f
campu
m
s administrators.
Zero Trust Networking Security
Zero trus
r
t architectur
t
es attempt to mitigate risk associated with cyber threats by eliminating implicit trus
r
t in a device
simply because it is on the “interna
r
l” network. However, this is easier said than done, given today’s changing defin
f ition of the
t
network t
r
ha
t
t spans campus, data center, cloud, and more. Adding multiple network s
r
ecurity layers such as fir
f ewalls, network
access control, and threat detection, among others, comes with tre
t mendous cost, complexity, a
y
nd brittleness, whereas the
benefits are often hard to quantify.
Arista offe
f rs a ful
f l suite of security solutions built on the fou
f
ndations of our unified operating system in EOS® and the
common management plane in CloudVision™. These solutions map t
a
o the Cybersecurity and Infrastruc
r
ture Security Agency’s
Zero Trus
r
t Matur
t
ity Model and help organizations accelerate their journey toward optimal zero trus
r
t matur
t
ity. Moreover, these
network s
r
ecurity controls can help compensate for gaps in the organization’s zero tru
t
st postur
t
e in domains such as identity,y
devices, workload, and data.
Limitations of Tra
T
ditional Enterprise Data Center and Campus Networks
The introduction of large scale, highly complex, publ
u ic cloud environments and the digital transfor
f
ma
r
tion of customer
business models meant that the traditional ways of building networks were no longer adequa
q
te to meet the needs of customers
for the deployment and provision of cloud appl
a
ications and more recently generative AI appl
a
ications. New innovations were
needed to push network performance forward.
Historically, m
y
ost common network designs were rigidly hierarchical, based on a 3-tiered model developed in the early
days of the internet for
f
sparse north/south traffi
f c patterns. This model was limited in the number of devices that could be
connected to a network a
r
nd introduced many points of congestion as customers tried to scale the solution. As more applications
move to the cloud, netwo
t
rk connections must scale, and the
t
increased east/w
t
est traffic
f
must be managed without congestion.
In addition, the switches and routers used to build these tiered networks were based on proprietary, application-specific
integrated circuits ("ASICs") that historically underperformed when measured against Moore’s Law, and operating systems tha
t
t
lacked the openness and programmabi
a lity necessary to automate and effec
f
tively manage these networks. As demand for scale
and performance increased, the
t
end-user experience was degraded, operational costs increased, and the host cost-per-connection
increased.
Similarly, traditional enterpr
r
ise networks have been mired in complexity, p
y
roprietary featur
t
es and architectur
t
es,
custom ASICs, siloed designs, and fra
f gile softwa
t
re offe
f rings built up over the previous three decades. Becaus
a
e of this,
operating a legacy network i
r
s riddled with challenges; critical outages that cause risk-averse behaviors, labor-intensive rollouts
that impede business initiatives, limited visibility that prevent problem detection and isolation, and overall lack of automation
and uniformity that results in ineffi
f ciency. In addition, there had historically been little or no attempt to address the needs of
building and operating a netwo
t
rk infrastruc
r
ture at massive, cloud scale. As a result, as enterpr
r
ises moved app
a
lications to the
cloud and impl
m emented hybrid and multi-cloud strategies, there have been insuffi
f cient solutions that could config
f ure, deploy,y
automate, and manage these scaled and dispersed resources.
In the post-pandemic world, enterprise campus wired and wireless networks
r
must cope with an ever increasing numbe
m
r
of endpoint IoT devices and remote work l
r
ocations that require users to be connected from virtua
t
lly anywhere. Campus
administrators have sought to address the resulting increased network c
r
omplexities and bottlenecks thr
t
ough the adoption of a
myriad of platforms, operating systems, proprietary featur
t
es and netwo
t
rk management tools. Coupled with the explosive
growth of IoT and the requi
q rement for remote workl
r oads, the operational costs of managing these complexities have become
prohibitive.
Visibility is a critical compo
m
nent to a more effic
f ient cloud-like network.
r
Being abl
a e to capture what a network is
‘thinking’ or ‘doing’ is the basis for
f
true
r
network automation and analytics. Legacy networki
r ng has long suffe
f red fro
f
m
limitations in network v
r
isibility largely due to ineffic
f ient polling mechanisms that only provide a limited subset of data. As a
result, the
t
operators of legacy networks have been essentially blinded when it comes to true
r
network i
r
nsight.
Our Data-Driven Cloud Networking Solutions
4
The core of our cloud networking platfor
f
m is our data-driven operating system, EOS, which runs on top of standard
Linux and offe
f rs programmabi
a lity at all layers of the stack. System state and data are stored in EOS and maintained in a highly
effi
f cient, centralized system databa
a
se where data is accessed via an automated publish/subscribe model. This distinct design
principle provides modul
d e independence, self-h
f
ealing resiliency, a
y
nd multi-process softw
f
are stabi
a lity. EOS is packaged as a
perpetua
t
l license on Arista hardware platforms, virtua
t
lized EOS (vEOS) and CloudEOS for production or simulations use cases
with flexible platform supp
u
ort including third-party h
t
ardware.
Our cloud networking innovations started with pioneering Arista EOS, which provides switching, routing, state-
streaming and telemetry fun
f
ctions across all Arista platfor
f
ms
r
. EOS establ
a ished a new standard in netwo
t
rking for
f
large-scale
cloud operators, opened the door to the widespread adoption of merchant silicon hardware in networks
r
, and provided dramatic
decreases in deployment and operating costs while delivering high reliability for
f
cloud customers, service providers,
enterprises, and more.
The Arista EOS network stack architectur
t
e provides a foundation for consolidation of stre
t amed device state, telemetry,
packet, flo
f w, alert, sensor and third-party data into an aggregated Network Data Lake (Arista NetDL™). Arista NetDL
consolidates diverse datasets requi
q red for
f
effe
f ctively app
a
lying AI/Machine Learni
r ng (ML) methods by Arista AVA
A
for Netwo
t
rk
Operations (NetOps) and Security Operations (SecOps) use cases. NetDL also presents a single appl
a
ication programming
interface
f
("API") surface for access to network and network-related data for enhancing Arista and third-party app
a
lications.
An overview of our cloud networking solutions is shown below:
The key benefits of our cloud networki
r ng solutions are as follows:
Capa
a
city
i , P
y
er
P
fo
r
rmance and Sca
S
le
Our data-driven cloud networking platfor
f
ms enable data center networks
r
to scale to hundreds of tho
t
usands of physical
servers and millions of virtua
t
l machines with the least number of switching tiers. We a
W
chieve this by leveraging standard
protocols, non-blocking switch architectur
t
es and EOS to meet the scale requirements of cloud computing. We architect active-
active Layer 2 and Laye
a
r 3 network topologies to enabl
a e customers to build extremely large and resilient networks.
Emerging capabilities including recent developments related to AI will continue to place increased demands on
networki
r ng infrastruc
r
ture. Arista’s strategic commitment to using merchant silicon is also a key competitive diffe
f rentiator for
f
Arista in addressing these capacity demands. Merchant silicon not only provides the best price/pe
/
rfor
f
mance available but
allows Arista to bring next generation platfor
f
ms to market early, allowing customers to benefit
f
from Moore’s Law.
Availa
i bilit
i
yt
Networks
r
are only useful when the
t
y are availabl
a e. Arista’s modular EOS architectur
t
e and softwa
t
re testing innovations
provide fea
f
tures and network d
r
esigns that keep the network availabl
a e even dur
d
ing maintenance and upgrades. EOS publ
u ish-
subscribe architectur
t
e provides self-healing resiliency through live patching, upg
u
rades, fault isolation and containment and
graceful process restart to reduce maintenance windows and allow for intelligent insertion and removal of netwo
t
rk elements.
5
Openness and Pro
P
gr
o
ammability
i
Customers demand open, standards-based networking tha
t
t avoids vendor lock-in and enabl
a es third-party integration to
support best in-class technology ecosystems. Arista EOS, built on Linux, fea
f
tures open standard protocols, such as Border
Gateway P
a
rotocol ("BGP") and Ethernet VPN ("EVPN"), offer
f ing interoperable solutions. Our well-stru
t
ctur
t
ed set of APIs and
EOS Softw
f
are Development Kit ("SDK") as well as multiple DevOps integrations, enabl
a e enterpr
r
ises to automate networking
provisioning without manual interve
r
ntion. EOS also natively supports Ansible, CFEngine, Chef, P
f
uppet, virtua
t
l netwo
t
rk
orchestration appl
a
ications and third-party management tools.
Visi
i bi
i li
i ty
i
Monitoring network performance in real time is a core need for
f
current and next-generation architectur
t
es to run
dependably. Arista EOS and CloudVision bring a modern approach to network telemetry and a replacement for
f
legacy polling
mechanisms. CloudVision analytics engines and CloudVision telemetry apps
a
leverage the state streaming infra
f structur
t
e of EOS
and NetDL to give Arista customers an unprecedented level of visibility into their network operations.
Arista EOS also supports multiple telemetry tracers that bring deeper workload-level visibility by integrating witht
distributed appl
a
ications like big data, cloud, container and virtua
t
lized environments.
Security
i
Arista focuses on building security into the
t
networki
r ng layers through fea
f
tures native to EOS, such as segmentation
and encryption, and network access control and NDR powered by AI. Most impo
m
rtantly, A
y
rista’s integrated security toolset uses
the underlying network i
r
nfra
f structur
t
e fro
f
m switches to WAN
W
routers to deliver key security capabilities and integrates
seamlessly with the organization’s existing security program and tools.
Operatio
t nal Eff
E ic
f iency
c
Automation is critical to delivering operational effic
f iency and Arista has taken the lessons learne
r
d fro
f
m building large
publ
u ic clouds and engineered network a
r
ut
a omation into our CloudVision management platform. CloudVis
V ion eliminates
burdensome manual tasks so organizations can become more agile in making changes to network infrastruc
r
ture. Fewer manual
config
f urations enable faster time to service and improved availability for
f
our customers. Our open APIs enable standards-based
integration with third-party tools as well, supp
u
orting additional automation capa
a
bi
a lities.
Total Cos
C
t of O
o
wnersh
r
ip
We believe our programmable, scalable leaf-s
f pine architectures, combined with our app
a
lications, significantly reduce
networki
r ng costs when compa
m
red to legacy netwo
t
rk designs, enabl
a ing fas
f
ter time to service and improved availability. Our
automation tools reduce the operational costs of provisioning, managing and monitoring a data center netwo
t
rk and speed up
service delivery.
r
Our tools provide visibility into compl
m ex network e
r
nvironments without the need for
f
additional data collection
equipment.
Cognitive Campus Solutions
Arista’s Cognitive Campu
m
s is based on a data driven architectur
t
e and offe
f rs consistent, unified management across the
campus edge for
f
wired and wireless networks as well as integrated security & proactive network assurance. Our Cognitive
Campus networking solutions are based on three pillars:
Universa
r
l Net
N wo
t
rking
n
- Customers want a network that minimizes planned and unpl
n anned downtime. Arista delivers
that through capa
a
bi
a lities such as smart softw
f
are upg
u
rades tha
t
t can update a switch to a new version of code without taking an
outage. Moreover, Arista’s standards-based offe
f rings minimize the learni
r ng curve for
f
operators both i
t
n the
t
wired and the
wireless space.
Zero Touch Ope
O
rations - Arista’s solutions are designed fro
f
m the ground up for real-time telemetry, a
y
utomation, and
AI for netwo
t
rking based on our unified network data lake architectur
t
e. As a result, customers can achieve fas
f
ter deployment to
new locations and lower their cost of netwo
t
rk operations.
Zero Trust Net
N wo
t
rk - Arista delivers a combination of capabilities that help customers secure their campus netwo
t
rks,
from controlling who can get on the netwo
t
rk via network access control ("CloudVis
V ion AGNI") to detecting threats using
network d
r
etection and response ("Arista NDR") or wireless intrusion prevention. Arista also provides identity-based micro
segmentation ("Arista MSS") to ensure the zero trus
r
t posture extends to every critical asset within the
t
organization.
6
Our Competitive Strengths
We believe the
t
following strengths
t
will allow us to maintain and extend our technology leadership position in data-
driven cloud networking and next-generation data center and campus workspace Etherne
r
t products:
Purpose-Bu
-
ilt C
l
lo
C ud Networki
r ng
i
Plat
l fo
t
rm
We have developed a highly scalable cloud networking platfor
f
m t
r
hat uses softw
f
are to address the needs of large-scale
cloud companies, cloud service providers, and large enterpr
r
ises, including AI, virtualization, big data and low-latency
applications. As a result, our cloud networking platfor
f
m does not have the inherent limitations of legacy network architectur
t
es.
Broad and Diff
i er
f
entiat
i ed
t
Portfo
t
lio
Using multiple merchant silicon architectur
t
es, we deliver switches, capable of routing, with industry-leading capacity,y
low latency, p
y
ort density and power effi
f ciency, a
y
nd have innovated in areas such as deep packet buffer
f s, highly available
modular hardware, and reversible cooling options. Our broad portfol
f io has allowed us to offe
f r customers produc
d
ts that best
match their specific
f
requirements.
Sing
i
le Bina
i
ry Image Sof
S
tw
f
are
The single binary image of EOS softw
f
are allows us to maintain fea
f
ture consistency across our entire product portfol
f io
and enabl
a es us to introduce new softw
f
are innovations into the marke
r
t that become availabl
a e to our entire installed base without
a “forklift u
f
pg
u
rade” (i.e., a broad upg
u
rade of the data center infra
f structur
t
e).
Rapi
a d D
i
evelop
l
ment of New Fea
F
tures and Appl
p ic
l atio
t ns
Our highly modular EOS softw
f
are has allowed us to rapidly deliver new featur
t
es and app
a
lications while preserving the
structur
t
al integrity and quality of our network operating system. We believe our ability to deliver new fea
f
tures and capa
a
bi
a lities
more quickly than legacy switch/router operators provides us with a strategic advantage given that the requirements in cloud
and next-generation data center and campus
m
networking continue to evolve rapi
a dly.
Deep Understandin
d
g o
n
f C
o
us
C
tomer Require
i
mentst
We have developed close working partnerships with many of our largest customers that provide us with insights into
their needs and future requirements. This has allowed us to develop and deliver produc
d
ts to the market tha
t
t meet customer
demands and expectations as well as to rapi
a dly grow sales to existing customers.
Stro
t
ng Manage
a
ment and Eng
E
ineering
i
Team with
i
Sign
i
ific
f ant Data C
t
en
C
ter Net
N wo
t
rking E
n
xp
E
ertise
i
Our management and engineering team consists of networking veterans with extensive data center and campus
networki
r ng expertise. Our Chief Executive Offic
f er and Chairpe
r
rson, Jayshree Ullal, has over 40 years of networking expertise
from silicon to systems companies, and Kenneth Duda, our Founder, Chief Tec
T
hnology Offic
f er and Director, leads our software
development team including EOS. Our technical team also includes highly experienced leaders such as Hugh Holbrook, our
Chief Development Offic
f er, who leads our platform driven software engineering, and Andy Bechtolsheim, our Founder and
Chief Architect, who was previously a founder and chief system architect at Sun Microsystems.
Sign
i
ific
f ant Tec
T hnology
o
Lead
We believe that our networking technology represents a fundamental advance in networking softwa
t
re. Our EOS
softwa
t
re is a key cloud networking softw
f
are stack that is state-driven and a result of tremendous research and development
effo
f
rts.
Our Products and Services
Our portfol
f io of products and services are grouped into the fol
f lowing three categories:
Core Data center/Cloud/AI
Arista offe
f rs one of the broadest produc
d
t portfol
f ios of data-driven, high-speed, cloud and data center Etherne
r
t
switches. Built on top of the
t
superior quality and openness of Arista EOS, we deliver high perfor
f
ma
r
nce, industry-leading
capacity, u
y
ltra-low latency, rich featur
t
es, and powerful
f
effi
f cient solutions to meet our customers’ demand for
f
capa
a
city and
network s
r
peeds for
f
both f
t
ro
f
nt-end and back-end storage, compute and AI zones. Our core switching portfolio contains both
7
fixed and modular for
f
m fact
f
ors, varying port configurations and densities, and options in power delivery a
r
ll driven by customer
requirements.
The Arista Etherlink AI portfolio of 800G switches, coupl
u ed with Arista's EOS innovations such as AI Analyzer along
with optimal load balancing solutions, offe
f r compelling solutions for contemporary A
r
I app
a
lications and deployment. Arista also
continues to be innovative in such areas as deep packet buffer
f
architectures, virtua
t
l outpu
t
t queuing, non-disruptive upg
u
rades,
embedded optics and next-generation optics, reversible cooling and overall system power effi
f ciency. The Arista 7800R AI
Spine, 7060 AI Leaf and the Distributed Etherlink Switch ("DES") are designed to address the demanding scale and
perfor
f
mance requirements driven by large-scale AI networks. Arista also provides solutions for compute, GPU and storage
interconnects in driving AI/ML workl
r oads, leveraging its IP/Ethernet switches to deliver unparalleled performance and
scalability.
The Arista 7700R4 DES is an ultra-scalable, intelligent distri
t buted system engineered to meet the rigorous demands of
large-scale AI and machine learning ("ML") environments. Building upon
u
the fou
f
ndations of the 7800R4 series, the 7700R4
R
DES delivers strong performance and scalabi
a lity for accelerated computing. The Arista 7700R4 r
R
epresents a signific
f ant
advancement in networking technology, o
y
ffer
f ing a robust and scalable solution tailored for the most demanding AI and ML
workloads. Its combi
m nation of high throughput, deterministic perfor
f
mance, and advanced congestion management makes it an
ideal choice for
f
organizations aiming to build or expand their AI infrastruc
r
ture.
AI workloads requi
q re optimized performance and availability at all times, to minimize job completion time and thu
t
s
maximize utilization of expensive XPU accelerators. The EOS-based AI Agent can reside either directly on a SmartNI
t
C or on a
server CPU, to provide local config
f uration management of NICs along with stre
t aming telemetry of NIC performance fed to
directly-attached Arista EOS-based switches. This ensures the QoS parameters for
f
AI optimization are consistently app
a
lied
from the NIC to the network alike, to avoid misconfig
f urations which might cause perfor
f
ma
r
nce bottlenecks witho
t
ut an easy-to-
diagnose root cause. And with telemetry d
r
ata spanning the
t
AI NICs and the AI networki
r ng platforms, the network operations
team can have comprehensive visibility into the
t
entire traffi
f c path with immediate insight into perfor
f
ma
r
nce and problems.
Cognitive Adjacencies
Cogn
o
itive Campus Switch
t
ing - Arista’s Cognitive Campus switching products, powered by EOS, offer
f
consistent,
unified management across the
t
campu
m
s edge for wired and wireless networks as well as integrated security & proactive network
assurance. Our campu
m
s products include the Arista 7300 Series spine/Spline™, 720/750 Series POE switches, and a broad
range of indoor and outdoor Cognitive Wi-
W Fi Access Points.
Clou
l
d-Grade R
d
outing
i
- Arista’s Cloud-Grade Routing platfor
f
ms, powered by EOS, combine high performance
routing, high port density, deep buffer
f s, integrated DWDM and wire speed encrypt
r
ion. Our 7280R3 Universal Leaf and 7500R3
and 7800R3 Universal Spine platforms serve
r
a variety of use cases including high speed multi-cloud connect, Data Center
Interconnect (DCI), contro
t
ller-based traffi
f c engineering, peering, business VPNs, core routing and Secure Enterprise edge
routing.
WAN Routing
i
- The Arista AWE-7200R Series of WAN
W
Routing System, purpose built by Arista and powered by
Arista EOS, offe
f rs high perfor
f
mance and scale to meet enterprise modern WAN e
A
dge and aggregation requirements. We believe
the Arista AWE
A
-7200R Series sets the standard for
f
aggregation and critical site interconnect by supp
u
orting 1/10/100GbE
interfaces and flexible network m
r
odul
d es. It delivers fro
f
m 1Gb to over 50Gb of bidirectional AES256 encrypt
y ed traffi
f c with high
VRF and tunnel scale.
Networking Software and Services
Our softw
f
are and services are based on subscription-based models and include the fol
f lowing offe
f rings:
Clou
l
dVis
V ion - CloudVision is Arista’s modern, multi-domain management platfor
f
m t
r
ha
t
t leverages cloud networking
principles to deliver a simplified end-to-end network o
r
perations experience for our Enterprise market. Unlike traditional
domain-specific management solutions, CloudVis
V ion enabl
a es consistent zero touch network operations across data center,
campus wired and wireless, routing interconnect and multi-cloud networks helping to break down the compl
m exity of siloed
management approaches.
CloudVis
V ion is built on Arista’s NetDL architectur
t
e and leverages real-time network s
r
tate to provide an abs
a
traction of
the physical network to a broader, network-
r
wide perspective allowing for
f
a more effic
f ient approach for several operational and
network t
r
elemetry capa
a
bi
a lities.
8
Arista A-Care Services - We h
W
ave designed our customer supp
u
ort offer
f ings, Arista A-Care Servi
r ces, to provide our
customers with high levels of support. Our global team of support engineers engages directly with c
t
lient IT teams and is always
availabl
a e over e-mail, by phone or through our website.
We o
W
ffer
f
multiple service options that allow our customers to select the product replacement servi
r ce level that best
meets their needs. We stock spare parts in over 200 locations around the world through our third-party l
t
ogistics supp
u
liers. All
our service options include unlimited access to bug-fixes, new-featur
t
e-releases, online case management and our community
forums.
DANZ Monito
i ring
i
Fabric (DMF
D
)
F - DANZ Monitoring Fabr
a
ic ("DMF") is a next-generation network packet broker
(NPB) architected for perva
r
sive, organization-wide visibility and security, delivering multi-tenant monitoring-as-a-service.
Leveraging Arista's high-performance and versatile Ethernet switch platforms with DMF, IT operators can pervasively monitor
all user, device/IoT and app
a
lication traffi
f c (north-south a
t
nd east-west) by gaining compl
m ete visibility into physical, virtual and
container environments. Deep hop-by-hop visibility, p
y
redictive analytics, contextua
t
l insights and scale-out packet capture,
integrated through a single dashboard, enables simplifie
f d network perfor
f
ma
r
nce monitoring ("NPM") and SecMon workf
r
lo
f ws
for real-time and historical context across production data centers, enterpr
r
ise campu
m
s/br
/
anch and 4G/5G mobile networks
r
.
Arista Guardian
i
Network I
r
de
I
ntit
t y (
t
AG
(
NI
G
)I - To o
T
vercome the new security challenges and the explosion of clients in
today’
a s perimeter-less enterpr
r
ise networks, Arista delivers a novel AI-driven network Identity service, Arista Guardian for
Network I
r
dentity (AGNI
G
) to connect the network, users, and devices across remote and geograph
a
ically dispersed locations.
Based on Arista’s fla
f gship CloudVision, the
t
new AGNI platfor
f
m b
r
rings scale, simplicity, and security across users, their
associated endpoints, and IoT devices. AGNI integrates with Arista NDR and other third-party XDR and EDR solutions for
post-admission control fun
f
ctionality.
Arista's AI-d
I
ri
d ven Network D
r
etect
t
io
t n and Response (NDR
N
)
R - An AI-driven Security Platform, powered by AVA
V
TM,
Arista NDR analyzes billions of network communications to autonomously discover, profile and classify every d
r
evice, user,
and app
a
lication across perimeter, core, IoT, and cloud networks. Based on this deep understanding of the attack surface,
f
the
platform then detects threats to and fro
f
m these entities, while providing the
t
context necessary to respond rapi
a dly.
Clou
l
dEOS™-
S
CloudEOS is Arista’s multi-cloud and cloud-native networking solution supporting aut
a onomic
operation to deliver an enterpr
r
ise-class, highly secure, and reliabl
a e networking experience for
f
any cloud. As part of the Arista
EOS and CloudVis
V ion product family, i
y
t delivers consistent segmentation, automation, telemetry, p
y
rovisioning and
troubleshooting for
f
the enterpr
r
ise edge, WAN
W
, campu
m
s, data center and multiple public and private clouds. To p
T
rovide a scalabl
a e
and aut
a omated network experience, CloudEOS integrates with Arista CloudVis
V ion to simpl
m ify t
f
he
t
operator's experience of
interconnecting and managing multi-cloud, cloud-native and on-premises enterprise networks.
CloudEOS is designed for consumption on Amazon AWS
A
, Microsoft Azure, and Google public clouds via their
marketpl
t ace and service catalogs.
Sales and Marketing
We market and sell our produc
d
ts through our direct sales for
f
ce and in partnership with our channel partners, including
distributors, value-added resellers, systems integrators and original equipment manufactur
t
er ("OEM") partners. We also sell in
conjunction with various technology partners. To facilitate channel coordination and increase productivity, w
y
e have created a
partne
t
r program, the Arista Partner Program, to engage partners who provide value-added servi
r ces and extend our reach into the
marketpl
t ace. Authorized training partners perfor
f
m t
r
echnical training of our channel partners and end customers. Our partners
commonly receive an order from an end customer prior to placing an order with us, and we confirm the identific
f ation of the end
customer prior to accepting such orders. Our partne
t
rs generally do not stock inventory received from us.
Our sales organization is supported by systems engineers with deep technical expertise and responsibility for
f
pre-sales
technical support and solutions engineering for our customers, systems integrators, OEMs, and channel partne
t
rs. In general, the
t
personnel in our sales organization are formed into teams, and each team is responsible for a geograph
a
ical territory, has
responsibility for a number of majo
a r direct end-customer accounts or has assigned accounts in a specific vertical market. A pool
of shared channel sales and marketing representatives also supports these teams.
Our marketing activities consist primarily of technology confer
f ences, webinars, web marketing, trade shows, product
demonstrations, seminars and events, public relations, analyst relations, demand generation and direct marketing to build our
brand, increase end-customer awareness, communicate our product advantages and generate qua
q
lified leads for
f
our fie
f ld sales
force and channel partners.
9
Seasonality
We operate on a December 31st year end and typi
y cally have lower sequential quarter over quarter revenue growth in
the fir
f st quarter of each fis
f cal year, ofte
f n fol
f lowed by stronger seque
q
ntial revenue growth in the ensuing quarters. We b
W
elieve
that this seasonality results from a number of factors, including the procurement, budgeting and deployment cycles of many of
our customers. The effe
f cts of recent supply chain disrup
r
tions and our rapid growth may have reduc
d
ed the impact of seasonal or
cyclical factors that might othe
t
rwise have influ
f enced our business and broader industry perfor
f
mance. If our growth rates slow,
w
seasonal or cyclical variations in our operations may become more pronounced over time and may materially affe
f ct our
business, financial condition, results of operations and prospects. In addition, any supply chain shortages and manufac
f
turing
disrupt
r
ions that result in extended lead times may impact ou a
r bi
a lity to manufactur
t
e and ship products to our customers in a
timely manner, which may disrupt
u
typi
y cal seasonal trends.
Research and Development
Our success relies on the timely enhancement of existing products and the development of new solutions and feat
f
ur
t
es
to address changing customer needs and technological advancements. Our in-house engineering personnel are responsible for
the development, testing, documentation, support and release of our products. We have a highly skilled team of softwa
t
re and
hardware engineers with extensive experience in wired and wireless networking technologies, netwo
t
rk protocols, network
security, o
y
perating systems, programming languages, compilers, databa
a
ses, hardware system design, Field-Programmabl
a e Gate
Arra
r y programming, high-speed signal integrity, a
y
nd othe
t
r related technologies.
Our research and development strategy focuses on advancing our core products and expanding into new markets while
maintaining high product quality. We are foc
f
using research and development effor
f
ts in (1) adapt
a ing EOS for new and existing
silicon architectur
t
es, especially to support the unique requi
q rements of AI workloads; (2) adding or enhancing EOS control plane
and management plane functionality; (3) expanding our CloudVision management stack with enhanced automation,
provisioning, monitoring, and security capabilities; (4) building related servi
r ces, such as NDR and Network A
r
ccess Control
(NAC); (5) improving the security and scalability of our softwa
t
re development infra
f structur
t
e and softwa
t
re suppl
u
y chain; and
(6) maintaining high produc
d
t quality throughout. We have dedicated significant time and resources in test automation, ensuring
high test pass rates, and worki
r ng with our support group w
u
henever customers experience technical defects in our products.
Collabo
a
ration with customers and other industry leaders is integral to our approach, though uncertainties persist regarding the
successful
f
development and market acceptance of emerging technologies. Looking ahead, we plan to continue to invest in
resources to conduct our research and development effor
f
ts to evolve and extend our portfolio's capabilities, ensuring our
products continue to address dynamic market needs and solidify our indus
d
try leadership.
Manufac
f
turing
We subcontract the manufactur
t
ing of the majo
a rity of our products to various contract manufactur
t
ers. Our primary
manufactur
t
ing partners are Jabi
a l Inc., Sanmina Corpo
r
ration, Flex Ltd. and Foxconn Hon Hai. These partne
t
rs manufactur
t
e our
products internationally in Malaysia, Vie
V tnam, Mexico and other countries. We r
W
equi
q re all our manufac
f
turing locations to be
ISO-9001 certified. After manufactur
t
ing and testing, the products are shipped to direct fulfil
f lment fac
f
ilities in the United States,
the Nethe
t
rlands and Singapo
a
re for fur
f
ther transfor
f
mation as needed and distribution. We have four direct fulfil
f lment fac
f
ilities
worldwide to hold fin
f ished goods inventory and perform final product configuration and shipping to customers and partners.
Afte
f r distribution, our products are installed by the
t
customers or by thi
t rd-party service providers such as system integrators or
value-added resellers on their behalf.
Our contract manufactur
t
ing partners procure components needed to build our produc
d
ts and assembl
m e our products
according to our design specific
f ations. This allows us to leverage the
t
purchasing power of our contract manufac
f
turing partne
t
rs.
We retain complete control over the bill of materials, qualifie
f d component supp
u
liers, test procedur
d
es and qua
q
lity assurance
programs. Our personnel work c
r
losely with our partners and review on an ongoing basis for
f
ecasts, inventory levels, processes,
capacity, yields and overall quality. Our contract manufactur
t
ing partners procure components and assemble our products based
on our demand for
f
ecasts. These forecasts represent our estimates of future demand for our products based upo
u
n historical trends
and analyses fro
f
m our sales and product management fun
f
ctions as adju
d sted for overall market conditions. For exampl
m e, when
industry-wide supply chain shortages resulted in extended lead times for components, we were required to extend the time
horizon of our demand forecasts and increase our purchase commitments for
f
long lead time components.
Our products rely on key components, including merchant silicon, integrated circuit compo
m
nents and power supplies
purchased fro
f
m a limited number of suppliers, including certain sole source providers. We m
W
ay also see increased consolidation
among our component suppliers. In particular, we are primarily reliant upo
u
n our predominant merchant silicon vendor,
10
Broadcom, for
f
our switching chips. Generally, neither we nor our contract manufac
f
turers have a written agreement with these
component providers to guarantee the supp
u
ly of the key components used in our products, nor do we have exclusive rights to
such key compo
m
nents, and our suppliers could suffe
f r shortages, delay s
a
hipments, prioritize shipments to other vendors, increase
prices or cease manufactur
t
ing such products or selling them to us at any time. The supply of compo
m
nents may also be adversely
affe
f cted by geopolitical conditions such as escalating tariff a
f
nd non-tariff trade measures imposed by the U.S., Mexico, China
and other countries present in our suppl
u
y chain.
Our product development effo
f
rts also depend upo
u
n continued collaboration with our key suppliers such as Broadcom.
As we develop our product roadmap and continue to expand our relationships with these and othe
t
r merchant silicon vendors, it
is critical that we work in tandem with our key merchant silicon vendors to ensure that their silicon includes improved featur
t
es
and that our products take advantage of such improved fea
f
tures. This enables us to foc
f
us our development resources on
softwa
t
re core competencies and to leverage the investments made by merchant silicon vendors to achieve cost-effect
f
ive
solutions.
Competition
The markets in which we compete are highly compe
m
titive and characterized by rapi
a dly changing technology, c
y
hanging
end-customer needs, evolving industry standards, freque
q
nt introduc
d
tions of new products and services and industry
consolidation. We expect competition to intensify i
f
n the
t
future as the market for
f
cloud and AI networking expands and existing
competitors and new market entrants introduce new products or enhance existing products.
The data center and campu
m
s networking markets have been historically dominated by Cisco, with compe
m
tition also
coming from other large network equipment and system vendors, including Dell/EMC, Extreme Networks, Hewlett Packard
Enterprise, Huawei, Juniper Networks, Nvidia, and white box networki
r ng vendors utilizing open-source operating systems.
Most of our compe
m
titors and some strategic alliance partne
t
rs have made acqui
q sitions and/or have entered into or extended
partne
t
rships or other strategic relationships to offe
f r more compr
m
ehensive product lines, including cloud networki
r ng solutions.
For example, Broadcom has acquired VMware and Hewlett Packard Enterpr
r
ises has entered into an agreement to acqui
q re
Juniper Netwo
t
rks.
With the emergence of AI networking, new competitive technologies may enter the
t
market to address the
t
requirements
of AI clusters. Etherne
r
t, today, faces compe
m
tition from both I
t
nfin
f iBand ("IB") and NV Link interconnects for
f
back-end AI
networki
r ng clusters. IB has traditionally been used in supercomputer clusters due to its high reliability, low latency and high
bandwidth. Both IB and NV Link are often sold as part of a vertical solution along with the GPUs fro
f
m Nvidia.
We also face competition fro
f
m other companies and new marke
r
t entrants, current technology partners and customers
who may acquire or develop network s
r
witches and cloud service solutions for
f
internal use and/or to broaden their portfolio of
products to market and sell to customers. Some of these competitors are developing "white box" networki
r ng products based on
open-source network operating systems that may be provided for
f
free and off-t
f he-shelf or commoditized hardware technology,y
or “white box” hardware, while other compe
m
titors may a
a
dopt a disaggregated approach to the procurement of hardware and
their proprietary softwa
t
re. The entrance of new compe
m
titors into our marke
r
ts or the increased adoption of these new technology
solutions or consumption models may cause downward pricing pressures, result in lost sales or otherwise have a material
adverse effec
f
t on our business, prospects, financial condition and operating results.
In the NDR market, our Arista NDR offer
f ings compete with other network s
r
ecurity vendors including Cisco,
Darktrace, and Extra
t Hop. In the network packet broker ("NPB") market, Arista DANZ Monitoring Fabric ("DMF") competes
with Cisco, Gigamon, Keysight, Netscout and othe
t
r netwo
t
rk monitoring softwa
t
re providers.
Our relationships with our strategic alliance partners or suppliers may also shift a
f
s indus
d
try d
r
yna
d
mics change. If
strategic alliance partners acquire or develop compe
m
titive produc
d
ts or services, our relationship with those partners may be
adversely impacted, which could lead to more variability to our results of operations and impact the pricing of our solutions.
The principal competitive fac
f
tors applicable to our products include:
•
breadth of product offer
f ings and fea
f
tures;
•
reliabi
a lity and product quality;
•
ease of use;
•
pricing;
11
•
total cost of ownership, including automation, monitoring and integration costs;
•
performance and scale;
•
programmabi
a lity and extensibility;
•
interoperability with other produc
d
ts;
•
abi
a lity to be bundled with other vendor offer
f ings;
•
product availability and shipment lead times; and
•
quality of service, support and fulfil
f lment.
We believe our produc
d
ts compete fav
f
orably with respect to these factors. Our EOS softwa
t
re offe
f rs high reliability,
integrates with existing network protocols and is open and programmable. We b
W
elieve the combi
m nation of EOS, a set of network
r
applications and our 1/2.5/5/10/25/40/50/100/200/400/800 Gigabit Ethernet platforms make our offe
f ring highly competitive for
f
both c
t
loud and enterpr
r
ise data centers. However, many of our competitors have greater name recognition, longer operating
histories, larger sales and marketing budgets and resources, broader distribution and establ
a ished relationships with channel
partne
t
rs and end customers, greater access to larger customer bases, greater customer support resources, greater manufactur
t
ing
resources, the ability to leverage their sales effo
f
rts across a broader portfol
f io of products, the ability to leverage purchasing
power when purchasing subcomponents, the ability to bundle compe
m
titive offe
f rings with other products and services, the
t
ability
to develop their own silicon chips, the abi
a lity to set more aggressive pricing policies, lower labo
a
r and development costs,
greater resources to make acquisitions, larger intellectual property portfolios and substantially greater fin
f ancial, technical,
research and development or other resources.
Intellectual Property
Our success and abi
a lity to compete depend substantially upon our core technology and intellectual property. We r
W
ely
on patent, trademark and copyright laws, trade secret protection and confidentiality agreements with our employees, customers,
resellers, systems integrators, manufac
f
turers, and othe
t
rs to protect our intellectua
t
l property rights. We file U.S and foreign
patent applications to protect our intellectual property and believe that the dur
d
ation of our issued patents is adequate relative to
the expected lives of our products. Patents generally have a dur
d
ation of twe
t
nty years from filing. The remaining dur
d
ation on the
t
individual patents in our patent portfol
f io varies.
We cannot assure that any of our patent applications will result in the issuance of a patent or whethe
t
r the
t
examination
process will result in patents of valuable breadth or app
a
licability. In addition, any patents that may be issued may be contested,
circumvented, fou
f
nd unenforceabl
a e or invalidated, and we may n
a
ot be able to prevent thi
t rd parties fro
f
m infri
f nging upon them.
We also license software from third parties for integration into our products, including open-source software and other softwa
t
re
availabl
a e on commercially reasonable terms. We own a number of trademarks
r
in the U.S. and other jurisdictions, and Arista,
EOS, and CloudVision are among our core trademarks.
We control access to and use of our softwa
t
re, technology and othe
t
r proprietary information thr
t
ough internal and
external controls, including contra
t ctua
t
l protections with empl
m oyees, contractors, customers and partners. Our softwa
t
re is
protected by U.S. and interna
r
tional copyright, patent and trade secret laws. Despite our effo
f
rts to protect our softw
f
are,
technology and other proprietary infor
f
mation, unaut
a horized parties may still copy or otherwise obtain and use our softwa
t
re,
technology and other proprietary infor
f
ma
r
tion. In addition, we intend to expand our international operations, and effec
f
tive
patent, copyright, trademark and trade secret protection may not be available or may b
a
e limited in foreign countries.
Our indus
d
try i
r
s characterized by the existence of a large number of patents and freque
q
nt claims and related litigation
regarding patent and other intellectua
t
l property rights. If we become more successful
f , we believe that competitors will be more
likely to try t
r
o develop products that are similar to ours and that may infringe our proprietary rights. It may also be more likely
that competitors or other third parties will claim that our produc
d
ts infringe their proprietary rights. In particular, large and
establ
a ished companies in our indus
d
try h
r
ave extensive patent portfolios and are regularly involved in both offe
f nsive and
defensive litigation. From time to time, thi
t rd parties, including certain large companies and non-practicing entities, may assert
patent, copyright, tra
t demark and other intellectua
t
l property rights against us, our channel partners or our end customers, whom
our standard license and other agreements obligate us to indemnify a
f
gainst such claims.
Successful claims of infri
f ngement by a third-party, if any, could prevent us from distributing certain produc
d
ts or
perfor
f
ming certain servi
r ces, require us to spend time and money to develop non-infri
f nging solutions or force us to pay
12
substantial damages, royalties or other fees. We c
W
annot assure tha
t
t we do not currently infri
f nge, or that we will not in the future
infringe, upon any third-party patents or other proprietary rights.
Human Capital Management
At Arista, we seek to maintain an environment that is open, diverse and inclusive, and where our people feel valued,
included and accountabl
a e. One of our key principles is always doing the right thing for
f
our employees. We a
W
re committed to
maintaining the highest level of professional and ethical standards in the
t
conduct of our business around the world. As of
Decembe
m
r 31, 2024, we employed appr
a
oximately 4,412 full-time employees worldwide. None of our employees are represented
by unions. We c
W
onsider our relationship with o
t
ur empl
m oyees to be good and have not experienced significant interrup
r
tions of
operations due to labo
a
r disagreements.
Arista is proud to have been recognized in November 2024 by Forbes magazine as one of America’s Best Companies
to Work & Invest For as well as by Time Magazine as one of the Wor
W ld’s Best Companies.
Inclusion, Diversi
r ty
i
and Equ
E
al Empl
m oy
l
ment
We seek to maintain an environment tha
t
t is open, diverse and inclusive, and where our employees feel valued. We
W
believe tha
t
t diverse and inclusive teams enhance individual and compa
m
ny perfor
f
mance and help us attract and retain talent. We
strive to build an inclusive cultur
t
e that encourages, supports and celebrates the diverse voices of our employees. As part of the
Arista way, we believe in treating peers with respect, mentoring individuals and developing teams for
f
overall success.
We are proud to be one of a few S&P 500 compa
m
nies with both a fem
f
ale CEO and CFO. We w
W
ere also recognized by
Comparably in 2024 amongst the
t
best large compa
m
nies for culture, happiness, leadership and career growth as well as
compensation. 50% of our board of directors are women or underrepresented minorities. Arista also supp
u
orts inclusion thr
t
ough
mentorship opportun
t
ities for
f
our employees which are offe
f red through Women@Arista, one of our employee resource groups;
support of numerous under-represented employee affi
f nity organizations; and active recruiting fro
f
m historically black colleges
and universities, women’s colleges and Hispanic/Latinx and Afri
f can-American profes
f
sional societies and job fai
f rs.
We affi
f rm the principle of equa
q
l employment opportunity without regard to any protected characteristic, including but
not limited to race, religion, national origin, color, gender, age, disabi
a lity, p
y
regnancy, m
y
arital status
t
, ancestry, military status
t
or
sexual orientation. We practice and promote such policies in all locations as appropriate under applicable law. We affi
f rm this
principle of fre
f edom from discrimination in all aspects of the employment relationship fro
f
m recruitment and hiring, through
perfor
f
mance evaluations, compensation and promotions. At Arista, we believe that all employees should be treated with dignity
and respect.
Health
l
and Saf
S
et
f yt
Arista is committed to protecting the health and safet
f y o
t
f our empl
m oyees, visitors, and the public. Our health and safety
policy is to maintain our fac
f
ilities and run
r
our business operations in a manner that does not jeopardize the occupational health
and safet
f y o
t
f employees.
We h
W
ave implemented our injury and illness prevention program to protect empl
m oyees fro
f
m
occupa
u
tional risks of injury o
r
r illness.
Compensation and Benefit
f st
We provide competitive and comprehensive benefit
f
packages that are designed to help and empo
m
wer employees to
make the best decisions for themselves, their fam
f
ily and their lifes
f
tyle. In the United States, we offer
f
our employees an
employee stock purchase plan, healthcare and retirement benefit
f s, paid time off a
f
nd family leave, flexible time away, f
y
am
f
ily
planning benefits, backup r
u
esources for childcare and elder care, and other employee assistance programs including behavioral
health and emotional support assistance. In addition to base salary a
r
nd benefits, Arista’s employees participate in stock and
bonus incentive plans tha
t
t support our organizational philosophy of allowing employees to share in our perfor
f
ma
r
nce and
success. We are committed to payi
a ng our employees fairly and equitably and regularly and work w
r
ith a third party to identify
and resolve any gaps. Our executive compensation program is designed to attract, retain, and reward performance and align
incentives with the achievement of Arista’s stra
t tegic plan and both short- and long-term o
r
perating obje
b ctives. Our compensation
committee provides an oversight of our compe
m
nsation policies, plans, benefit programs and overall compensation philosophy.
Along with our traditional healthcare benefit
f s, Arista offe
f rs a broad variety of physical and mental wellness offe
f rings
to our global employees in a virtual as well as on-demand for
f
ma
r
t, including fit
f ness classes, webinars on practical wellness
takeaways, strategies for stress reduction, financial planning and education, career development and social activities. We also
host periodic wellness weeks, whose purpose is to raise awareness on health issues, increase education on preventive medicine
13
and available services and shift empl
m oyee behavior through interactive activities and live presentations. We p
W
roudly supp
u
ort an
active community empl
m oyee engagement program, which provides opportuni
t
ties for our employees to engage in volunteering
and community service in support of the communities they live, work, and thr
t
ive in. We empl
m oy a hybrid work m
r
odel for
designated roles, giving our employees the fle
f xibility to work offs
f ite or onsite and regularly surve
r
y our empl
m oyees to gain
valuable feedba
d
ck and suggestions on improvements to our cultur
t
e and strategy. Arista was recognized in 2024 by Most Loved
Workpl
k ace as a Most Loved Workpl
k ace for Wel
W lness and Volunteering.
Empl
m oy
l
ee Traini
i
ng
i
, D
g
evelopm
l
ent and Upskillin
l
g
Our employees receive regular periodic training on numerous subje
b cts, including our Code of Ethics and Business
Conduct, infor
f
ma
r
tion security, d
y
ata privacy, i
y
ntellectua
t
l property, insider trading, and anticorrup
r
tion. In addition, Arista
provides extensive training and accreditation opportunities to empl
m oyees in Sales, Customer Engineering and Softw
f
are
Research and Development roles including our Arista Certified Engineering ("ACE") certific
f ation program as well as
mentorship programs sponsored by our Women@Arista empl
m oyee resource group. Additional career development content
including management and AI tra
t ining is availabl
a e through our E-Learni
r ng portal to facilitate a culture of lifelong learni
r ng and
allow employees to personalize their development. Our Tech
T
nical employees can fur
f
ther upskill through our interna
r
l Arista
PREP Training Program, technical summits, and participation in indus
d
try c
r
onferences or associations.
Available Infor
f
mation
Our website is located at www.arista.com and our investor relations website is located at investors.arista.com. Our
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports
filed or fur
f
ni
r shed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”),
are available free of charge on the Investors portion of our website as soon as reasonably practicable afte
f r we electronically file
such material with, or fur
f
nish it to, the Securities and Exchange Commission ("SEC"). The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information regarding issuers that fil
f e electronically with the SEC
at www.sec.gov.
Webcasts of our earnings calls and certain events we participate in or host with members of the investment community
are on our investor relations website. Additionally, we announce investor information, including news and commentary about
our business and financial perfor
f
ma
r
nce, SEC fil
f ings, notices of investor events, and our press and earnings releases, on our
investor relations website. Investors and others can receive notifications of new information posted on our investor relations
website in real time by signing up f
u
or
f
email alerts and RSS fee
f
ds. Further corporate governance infor
f
ma
r
tion, including our
corporate governance guidelines, board committee charters, and code of conduc
d
t, is also availabl
a e on our investor relations
website under the heading “Governance.” The contents of our websites, or infor
f
mation that can be accessed through our
websites, are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we fil
f e
with the SEC, and any refer
f ences to our websites are intended to be inactive textual references only.
14
Item 1A. Risk Factors
You should c
l
onsider caref
r ul
f ly the risks and uncertainties described below, t
w ogether with all of t
o
he
t
othe
t
r infor
f
mation in
this Annual Report on For
F
m 10-K, which could materially affe
f ct our business, financial condition, res
r ults of operations and
pros
r
pe
s
cts.
t
The risks described below are n
r
ot the only r
l
isks facing us. Risks and uncertainties not curren
r
tly k
l
no
k
wn to us or that
we curren
r
tly deem to be immaterial may a
a
lso materially a
l
ff
a ec
f
t our business, fin
f ancial condition, results o
t
f o
o
pe
o
rations and
pros
r
pe
s
cts.
t
Risk Factors Summary
Our business is subje
b ct to numerous risks and uncertainties. These risks include, but are not limited to, the fol
f lowing:
Risks Related to Our Business and Industry
•
large purchases by a limited number of customers represent a subs
u
tantial portion of our revenue;
•
adverse economic conditions, continuing uncertain economic conditions or reduced infor
f
mation technology and
network i
r
nfra
f structur
t
e spending may adversely affec
f
t our business;
•
some key components in our products come fro
f
m sole or limited sources of supp
u
ly and increases the risk of supply
shortages, extended lead times or supply changes;
•
our revenue and revenue growth rates are volatile and may d
a
ecline or not meet our or our investor's expectations;
•
our results of operations may vary significantly fro
f
m period to period and can be unpredictabl
a e;
•
the networki
r ng market is rapi
a dly evolving;
•
fai
f lure to successful
f ly carry out new product and servi
r ce offe
f rings and expand into adja
d cent markets could adversely
impact our business;
•
we expect our gross margins to vary o
r
ver time and may b
a
e adversely affe
f cted by numerous factors;
•
we face
f
intense compe
m
tition and industry consolidation;
•
we are subject to risks associated with the expansion of our international sales and operations;
•
we face
f
risks associated with the investments in and acquisitions of compl
m ementary companies, products or
technologies;
•
seasonality and indust y
ry y
cyclicality m y
ay cause flu
f ctua
t
tions in our revenue;
•
flu
f ctua
t
tions in curre
r ncy excha g
nge rates could adverse yly affe
f ct our business;
•
fai
f lure to raise additional capital on fav
f
orable terms could harm our business.
Risks Related to Customers and Sales
•
inabi
a lity to attract new large customers or sell additional produc
d
ts and servi
r ces to our existing customers could
adversely affec
f
t our revenue growth;
•
sales of our switches generate most of our produc
d
t revenue;
•
large customers require more favorabl
a e terms
r
;
•
inabi
a lity to increase marke
r
t awareness or acceptance of our new products and services may a
a
dversely affe
f ct our
revenue;
•
sales prices of our products and servi
r ces may decrease;
•
sales cycles can be long and unpredictable;
•
inabi
a lity to offe
f r high quality support and servi
r ces could adversely affe
f ct our business;
•
declines in maintenance renewals by customers could harm o
r
ur business;
•
indemnific
f ation provisions under our standard sales contracts could expose us to losses;
•
we rely on distributors, systems integrators and value-added resellers to sell our products;
•
sales to government entities are subject to a number of challenges and risks;
•
we are exposed to the credit risk of our channel partners and some of our end customers.
Risks Related to Products and Services
•
product qua
q
lity problems, defect
f
s, erro
r
rs or vulnerabi
a lities could harm o
r
ur business;
•
fai
f lure to anticipate technological shifts could harm our business;
•
our products must interoperate with operating systems, softw
f
are app
a
lications and hardware that is developed by others.
Risks Related to Supply Chain and Manufac
f
turing
•
managing the
t
supply of our products and product compo
m
nents is compl
m ex;
•
primarily reliant upo
u
n a predominant merchant silicon vendor;
•
we depend on third-party manufactur
t
ers to build our products;
•
fut
f ur
t
e sales forecasts may materially change, which could result in incorrect levels of inventory and purchase
commitments;
15
•
shipment interruptions or delays could cause our revenue to fall.
Risks Related to Intellectual Property and Other Proprietary Rights
•
assertions by third parties of intellectua
t
l property r
t
ights infri
f ngement, misapp
a
ropriation or other violation could harm
our business;
•
fai
f lure or inability to protect or assert our intellectua
t
l property rights could harm our competitive position;
•
we rely on the availabi
a lity of licenses to third-party software and other intellectual property;
•
fai
f lure to comply with licenses to softw
f
are and othe
t
r technology could restrict our abi
a lity to sell our products;
•
our competitors could develop products tha
t
t are similar to or better than ours becaus
a
e we provide access to our
softwa
t
re and selected source code to certain partners.
Risks Related to Litigation
•
we may become involved in litigation tha
t
t may materially adversely affec
f
t us.
Risks Related to Cybersecurity and Data Privacy
•
defect
f
s, errors or vulnerabi
a lities in our products, failure of our produc
d
ts to detect security breaches or incidents, misuse
of our products or risks of product liabi
a lity could harm o
r
ur business;
•
breaches of our cybersecurity systems or other security breaches could degrade our ability to conduc
d
t our business
operations and deliver products and servi
r ces to our customers, caus
a
e vulnerabi
a lities in our products and services or
subject us to regulatory e
r
nfor
f
cement actions and or fin
f es or liabilities for
f
damages incurred by our customers or
partne
t
rs.
Risks Related to Accounting, Compliance, Regulation and Tax
T
•
fai
f lure to maintain effe
f ctive interna
r
l control over financial reporting could adversely affe
f ct the accuracy and timing of
our fin
f ancial reporting;
•
if our critical accounting policies are based on incorrect assumpt
m ions, our results of operations could fal
f l below analyst
and investor expectations and result in a decline in the market price of our common stock;
•
enhanced U.S. tax, tariff, i
f
mport/export restrictions, Chinese regulations or other trade barriers may negatively affe
f ct
our business;
•
changes in our income taxes, effec
f
tive tax rate or tax laws could adversely affec
f
t our results;
•
fai
f lure to comply with government laws and regulations could harm our business;
•
issues in the
t
development and use of artific
f ial intelligence, combi
m ned with an uncertain regulatory environment, may
result in reputational harm, liability, or other adverse consequences to our business operations;
•
we are subj
u ect to governm
r
ental export and import controls that could impair our ability to compe
m
te in international
markets or subje
b ct us to liability for
f
violations.
•
fai
f lure to comply with anti-bribery and anti-corrup
r
tion laws and anti-money laun
a
dering laws, and similar laws, could
subject us to penalties and other adverse consequences.
Risks Related to Ownership of Our Common Stock
•
the trading price of our common stock has been and may c
a
ontinue to be volatile and the value of your investment
could decline;
•
any future decisions to reduc
d
e or discontinue repurchasing our common stock pursuant to our stock repurchase
program could cause the marke
r
t price of our common stock to decline;
•
sales of substantial amounts of our common stock could reduce the market price of our common stock;
•
insiders have substantial control over us;
•
our charter documents and Delaware law could discourage takeover attempts and lead to management entrenchment.
General Risks
•
inabi
a lity to hire, retain, train and motivate qualified personnel and senior management could cause our business to
suffer
f ;
•
earthquakes, fire, power outages, floods, health epidemics and othe
t
r catastrophic events could harm o
r
ur business;
•
we have not paid dividends in the past and do not intend to pay dividends for the foreseeabl
a e fut
f ur
t
e.
Risks Related to Our Business and Industry
We expect la g
rge purchases
y
by a limited number of customers to continue to represent a substantial portion of our
revenue, and any loss, delay, decline or other change in expected purchases could result in material quarter-to-quarter
fluctuations of our revenue or otherwise adversely affect our results of operations.
16
Historically, l
y arge purchases by a relatively limited numbe
m
r of customers have accounted for
f
a significant portion of
our revenue. We h
W
ave experienced unpr
n
edictabi
a lity in the timing of orders fro
f
m the
t
se la g
rge customers primarily due
d
to the time
it takes these customers to evaluate, test, qua
q
li y
fy and accept our products, the overall compl
m exity of these la g
rge orders and
changes in demand patterns specific to these customers, including reduc
d
tions in or changes in mix of capital expenditur
t
es
y
by
these customers and the impa
m
ct of cost reduction and other effic
f iency effor
f
ts y
by these customers F
.
or exampl
m e, sales to our end
customer Microsoft r
f
epresented 20%, 18% and 16% of our total revenue for
f
the years ended 2024, 2023 and 2022 respectively.
And sales to our end customer Meta Platforms represented 15%, 21% and 26% of our total revenue, respectively for
f
the years
ended 2024, 2023 and 2022. This variabil y
ity in customer concentration has been linked to the timi g
ng of new product
depl y
oyments, and spending cycles with these customers, and we expect continued variabi
a lity in our customer concentration and
timing of sales on a qua
q
rterly and annual basis. In addition, we ytypically provide pricing discounts to la g
rg c
e ustomers, which
reduces gross margins for the
t
period in which such sales occur.
As a consequence of the concentrated natur
t
e of our customer base and their purchasing behavior, our quarterly revenue
and results of operations have flu
f ctua
t
ted fro
f
m qua
q
rter to quarter and are diffic
f ult to estimate and we expect the flu
f ctua
t
tions to
continue. Changes in the business requi
q rements or foc
f
us, upg
u
rade cycles, vendor selection, project prioritization, manner in
which spending allocations are assigned among multiple vendors based upo
u
n specific network roles or proje
o cts, financial
prospects, lack of growth of our large customers, capi
a tal resources and expenditur
t
es or purchasing behavior and deceleration in
spending of these customers could significantly decrease our sales to such customers or could lead to del y
ays, reductions
r
or
cancellations of planned purchases of our products or services I
.
n addition, an increased foc
f
us on the deployment of AI enabl
a ed
solutions by the
t
se customers has accelerated the need for advanced technology offe
f rings including some offe
f rings from
potential new marke
r
t entrants. This prioritization of AI related infra
f structur
t
e investment has at times come in c
j
onjunction with
the announcement of various cost reduction measures
y
by such customers, includi g
ng optimization and increased effi
f cien y
cy in
non-AI related capital expenditur
t
es I
. n addition, although the foc
f
us on deployment of AI enabled solutions has driven increased
demand for networking, the long-term trajectory is unknown. As such, demand estimates for our new products are diffic
f ult to
forecast and can create volatility in our revenue. In some instances, such measures have had, and m y
ay continue to have, an
impact on certain current or fut
f ur
t
e proje
o cts and have reduced our visibility to customer demand and may result in a reduction r
or
uncertain yty in the timing of orders fro
f
m these la g
rge customers, which may n g
egatively impact our revenue and increase the ri k
sk
of excess and obsolescence charges on our produc
d
ts. In addition, fiscal 2024 was marke
r
d by a year of new product introduc
d
tions
and expanded use cases, particularly in the AI Ethe
t
rnet market, and we expect this to continue into fiscal 2025. This has
resulted in increased customer trials and contracts with acceptance periods, and an increase in the volatili yty and m g
agnitude
f
of
our product deferred revenue balances, which in tur
t
n m y
ay create variabi
a li yty in our revenue results on a quarter yly and annual
basis. In addition, if we are not abl
a e to satis y
fy the requirements under customer trials or contra
t cts with acceptance periods, we
may be requi
q red to accept product returns fro
f
m our customers, which would prevent us fro
f
m rec g
ognizi g
ng revenue on such
transactions and m y
ay result in the write-down of invento y
ry.
Moreover, because our sales are based prima
m rily on purchase orders, some of our customers have previously and could
continue to cancel, delay, r
y
educe or otherwi
r
se modify their purchase commitments with little or no notice to us. For exampl
m e,
due to manufactur
t
ing and suppl
u
y chain disrupt
r
ions resulting in increased lead times, customers have, and m y
ay continue to place
orders based on l
g
onger planni g
ng horizons. These customers m y
ay decide to delay or cancel such orders for
f
any reason, includi g
ng
changes in their IT investment priorities, if economic conditions worsen or their fin
f ancial perfor
f
mance, condition or prospects
deteriorate. This limited visibil y
ity regarding our customers’ product needs or changes in those needs, the
t
timi g
ng and qua
q
ntity of
which could va y
ry signific
f antly, requires us to re yly on estimated demand for
f
ecasts to determine how much material to purchase
and product to manufact
f
ur
t
e. Extended supp
u
lier lead times on some newer technologies can creat g
e greater pressure on our abi
a li yty
to forecast future demand, which can lead to excess invento y
ry or produc
d
t short g
ages and to del y
ay i
s n ful
f filling curre
r nt and fut
f ur
t
e
purchase orders that can impede production by our customers and harm our customer relationships. Further, if we are unable to
reduce our lead times, customers m y
ay also cancel existi g
ng orders or reduce future orders. In the event of any cancellations or
reductions of orders, or any reductions in future demand, we may not have enough time to reduc
d
e operating expenses to
mitigate the effect
f
of the lost revenue on our business, and in addition, could incur increased excess and obsolete inventory-
r
related charges, all of which could materially affe
f ct our operating results.
We may b
a
e unabl
a e to sustain or increase our revenue fro
f
m our large customers, grow revenue with new or other
existing customers at the rate we anticipate or at all, or offs
f et a decline or discontinuation of concentrated purchases by our
larger customers with purchases by new or existing customers. These customers could reduce their spending levels or otherwise
could choose to divert all or a portion of their business with us to one of our competitors, re-assign spending allocations,
increase their adoption of "white box" solutions and open-source network operating systems, demand pricing concessions for
f
our servi
r ces, or require us to provide enhanced services that increase our costs. Moreover, the AI marke
r
t is new and customers
continue to evaluate their opportunity in this market, recent advances in network architectur
t
e may result in increased
effi
f ciencies and lowering of infra
f structur
t
e spending and the potential demand for our AI Ethernet switches may n
a
ot develop as
17
anticipated or at all. If these factors drive some of our large customers to cancel all or a portion of their business relationships
with us, the growth in our business and the abi
a lity to meet our current and long-term financial for
f
ecasts may be materially
impacted. We e
W
xpect that such concentrated purchases will continue to contribute materially to our revenue for the foreseeable
future and tha
t
t our results of operations may fluctuate materially as a result of such larger customers’ buying patterns. In
addition, we may see consolidation of our customer base, such as among Internet companies and cloud service providers, which
could result in the loss of customers. The loss of such customers, or a signific
f ant delay or reduction in their purchases,
including reductions or delays due
d
to customer departur
t
es from recent buying patterns
r
, or an unfav
f
orable change in competitive
conditions could materially harm our business, fin
f ancial condition, results of operations and prospects.
Adverse economic conditions, continui g
ng uncertain economic conditions or reduced information technology
gy and
network infra
f
structure spendi g
ng may adversely affec
f
t our business, financial condition, results of operations and
prospects.
Our business depends on the overall demand for infor
f
mation technology, network c
r
onnectivity and access to data and
applications. Wea
W
k domestic or global economic conditions and continuing economic uncertainty, f
y
ea
f
r or anticipation of such
conditions, a recession, geopolitical pressures, including international tra
t de disputes, global pandemics such as the COVID-19
pandemic, or a reduction in infor
f
ma
r
tion technology and network infrastruc
r
ture spending or a deterioration of the fin
f ancial
perfor
f
mance, condition or prospects of our customers, could adversely affe
f ct our business, financial condition, results of
operations and prospects in a number of ways
a
, including longer sales cycles, reduced demand or lower prices for our products
and servi
r ces, higher defau
f
lt rates among our channel partners, reduc
d
ed unit sales and lower or no growth. In addition, the global
macroeconomic environment has been negatively affe
f cted by, a
y
mong other thi
t ngs, the uncertainty in the global banking and
financial servi
r ces markets, epidemics, instability in global economic marke
r
ts, the
t
new U.S. presidential administration,
increased uncertainty associated with recent and schedul
d ed increases in U.S. trade tariffs
f
in the context of escalated and
unresolved trade disputes and tensions between the U.S., China, Mexico, Canada and other countries, inflationary pressures,
higher interest rates, instability in the global credit markets, the impact and uncertainty regarding global central bank monetary
policy, i
y
nstabi
a lity in the geopolitical environment, the Rus
R
sia-Ukraine and Israel-Hamas confli
f cts, political tensions betwe
t
en
Taiwan and China, political demonstrations, and foreign governmental debt concerns
r
which have caused, and are likely to
continue to caus
a
e, uncertainty and instabi
a lity in local economies and in global fin
f ancial markets. While some of our customers
may be adversely affe
f cted by negative macroeconomic conditions, the
t
impa
m
ct may be particularly significant in our enterprise
market where we are seeking to increase our penetration into this market. A government shutdown or a defaul
a t by the U.S.
government on its debt obligations, or related credit-rating downgrades could also have adverse effe
f cts on the broader global
economy and contri
t bute to, or worsen, an economic recession. We b
W
elieve that any extended or renewed economic disrup
r
tions
or deterioration in the global economy could have an adverse impa
m
ct to our liqui
q dity or to our curre
r nt and proje
o cted business
operations, financial condition or results of operations. For example, if banks or other fin
f ancial institut
t ions with whom we have
banking relationships or whose corpo
r
rate bonds are held in our marke
r
tabl
a e securities investment portfolio, enter receivership or
become insolvent in the future, we may be unabl
a e to access, and we may lose some of our existing cash, cash equi
q valents and
investments to the extent those fun
f
ds are not insured or otherwise protected by the
t
FDIC. In addition, in such circumstances we
might not be abl
a e to timely pay key vendors and others. We r
W
egularly maintain cash balances that are not insured or are in
excess of the
t
FDIC’s insurance limit. Any delay in our ability to access our cash, cash equivalents and investments (or the loss
of such funds) or to timely pay k
a
ey vendors and othe
t
rs could have a material adverse effec
f
t on our operations and cause us to
need to seek additional capital sooner than planned.
In addition, business disrupt
u ions and supply chain and manufac
f
turing disrup
r
tions may result in customers delaying or
canceling or reprioritizing capital expenditur
t
es on information technology and network i
r
nfra
f structur
t
e, which may affe
f ct the
overall demand for our products. Customers may also be placi g
ng orders based on l
g
onger planni g
ng horizons to ensure supply. We
W
also believe tha
t
t our customers continue to assess the impact of these macroeconomic fact
f
ors on their businesses and fut
f ur
t
e
investment plans, resulting in business uncertainty and a more constrained app
a
roach to forecasts and orders. Continuing or
worsening economic instabi
a lity or the deterioration of the fin
f ancial perfor
f
ma
r
nce, condition or prospects of our customers could
result in a cancellation of, o
f
r defau
f
lts in the
t
paym
a
ents for, such orders or othe
t
rwise adversely affe
f ct spending for IT, network
r
infrastruc
r
ture, systems and tools, and limit our ability to for
f
ecast fut
f ur
t
e demand for
f
our products, which could reduce expected
revenue or result in a write-down of excess or obsolete inventory. A downtur
t
n o
r
r a recession may also signific
f antly affec
f
t
financing marke
r
ts, the availabi
a lity of capi
a tal and the terms
r
and conditions of any financing arrangements, including the overall
cost of financing as well as the financial health or creditworthiness of our customers. Circumstances may arise in which we
need, or desire, to raise additional capital, and such capi
a tal may not be available on commercially reasonable terms, or at all.
Some of the key components in our products come fro
f
m sole or limited sources of supply.
Our products re yly on components, includi g
ng merchant silicon chips, int g
egrated circuit components, printed circuit
boards, connectors, optics, cables, custom-tooled sheet metal and power supplies that we purchase, or our contract
18
manufactur
t
ers purchase on our behalf from a limited number of suppl
u
iers, including certain sole source providers. In particular,
we are primarily reliant upo
u
n our predominant merchant silicon vendor, Broadcom, for our switching chips.
Our reliance on compo
m
nent suppliers also yields the potential for the infringement, misappropriation or other violation
of third-party intellectua
t
l property rights due to the incorpo
r
ration of such components into our products. We may not be
indemnifie
f d by such component suppliers for
f
such infringement, misapp
a
ropriation or other violation claims. Any litigation for
f
which we do not receive indemnific
f ation could require us to incur signific
f ant legal expenses in defending against such claims or
require us to pay subs
u
tantial royalty payments or settlement amounts that would not be reimbursed by our compo
m
nent suppl
u
iers.
Our product development effor
f
ts are also dependent upon the success of our continued collaboration with our key
merchant silicon vendors such as Broadcom. As we develop our product roadmap,
a
we select specific merchant silicon from
these vendors for each new produc
d
t. It is critical that
e
w work in tandem with these vendors to ensure that their silicon includes
improved featur
t
es, that our produc
d
ts take advantage of such improved fea
f
tures, and that such vendors are abl
a e to supply us with
suffic
f ient quantities on commercially reasonable term to meet customer demand. Reliance on these relationships allows us to
focus our research and development resources on our softw
f
are core compe
m
tencies while leveraging their investments and
expertise. The merchant silicon vendors may n
a
ot be successful
f
in continuing to innovate, develop products tha
t
t outpe
t
rfor
f
m
their compe
m
titors or meet the requi
q rements of our customers, meet deadlines for
f
the release of their products or produce a
suffic
f ient supply of the
t
ir produc
d
ts. Moreover, these vendors may not collaborate with us or may become competitive with us by
selling merchant silicon for “white boxes” with open-source network operating systems or othe
t
r products to our customers.
If our key merchant silicon vendors do not continue to innovate, develop products that outperform their competitors or
fail to meet the requi
q rements of our customers, if there are delays in the release of their products or supply shortages, if they no
longer collaborate in such fas
f
hion or if such merchant silicon is not offe
f red to us on commercially reasonabl
a e terms, our
products may b
a
ecome less compe
m
titive, our own product launches could be delayed or we may b
a
e requi
q red to redesign our
products to incorporate alterna
r
tive merchant silicon, which could result in lost sales, reduc
d
e gross margins, damage to our
customer relationships or otherwise have a material effec
f
t on revenue and business, financial condition, results of operations
and prospects.
We have entered into s gignificant purchase commitments and are susceptible to supply short g
ages, extended lead times or
supply cha g
nges, which could disrupt or delay our scheduled product deliveries to our customers and may result in the
loss of sales and customers.
Generally, we do not have guaranteed supply contracts with our component suppliers, and our suppliers have, or in the
t
future could continue to, suffe
f r shortages, requi
q re longer lead times, delay shipments, prioritize shipments to other vendors,
reje
e ct orders, decommit orders, increase prices, impose expedite fees or cease manufact
f
ur
t
ing such products or selling the
t
m to us
at any time. Supply of these compo
m
nents worldwide was and could continue to be adversely affec
f
ted by supply constraints, as
well as industry consolidation and geopolitical conditions such as international trade wars and increased political tensions. Such
shortages, increased compo
m
nent lead times, reduced allocations of components and rejections or decommitments of orders have
resulted in and may continue to result in increased compo
m
nent prices, few
f
er sourcing options, unpredictabi
a lity of suppl
u
y,
prolonged manufac
f
turing disrupt
r
ions and increased product lead times, which has impacted and may in the future adversely
impact our revenue and gross margins.
Although we have entered into signific
f ant purchase commitments to supp
u
ort long-term customer demand, if we are
unabl
a e to obtain suffi
f cient qua
q
ntities of any of these compo
m
nents on commercially reasonabl
a e terms or in a timely manner, or if
we are unabl
a e to obtain alternative sources for
f
these compo
m
nents, shipments of our produc
d
ts could be delayed or halted entirely,y
or we may b
a
e required to redesign our products. Any of these events could result in the cancellation of orders, lost sales,
reduced gross margins or damage to our customer relationships, which would adversely impa
m
ct our business, financial
condition, results of operations and prospects. Additionally, i
y f our supp
u
liers do not meet their commitments, customers cancel
orders or actual demand is less than our demand for
f
ecasts, it could result in excess or obsolete inventory, which we would be
required to write down to its estimated realizable value, which in tur
t
n c
r
ould result in lower gross margins and operating
income. Our operating cash flo
f ws have also been and may in the fut
f ur
t
e be negatively impacted by an increase of component
inventories on hand or at our contra
t ct manufactur
t
ers.
In the event of a shortage or supply interru
r
ption fro
f
m our component suppliers, we may not be abl
a e to develop
alternate or second sources in a timely manner. Further, long-term supply and maintenance obligations to customers increase
the dur
d
ation for
f
which specific compo
m
nents are required, which may increase the risk of component shortages or the cost of
carrying inventory. In addition, our compo
m
nent supp
u
liers change their selling prices frequently in response to market trends,
including industry-wide increases in demand, or charge additional fee
f
s to expedite orders, and becaus
a
e we do not have contracts
with these suppliers or guaranteed pricing, we are susceptible to availabi
a li yty or price flu
f ctua
t
tions related to raw materials and
19
components. If we are unabl
a e to pass compo
m
nent price increases along to our customers or maintain stabl
a e prici g
ng, our gross
ma g
rgins could be adversely affec
f
ted and our business, financial condition, results of operations and prospects could suffe
f r.
Our revenue and our revenu g
e growth rates are volatile and may decline or not meet our or our investors' expectations.
Our revenue growth rates in previous periods may not be indicative of our fut
f ur
t
e performance. We h
W
ave experienced
annual revenue growth rates of 19.5%, 33.8%, 48.6%, and 27.2% in 2024, 2023, 2022 and 2021, respectively. In the fut
f ur
t
e,
r
our
revenu g
e growth rates will continue to be volatile due to y
cyclical trends in our business, and as we become more penetrated in
our existing c
g
ustomer base and produc
d
t marke
r
ts and look to enter and expand into new markets. In addition, we have
experienced supply constraints that have resulted in manufact
f
ur
t
ing and shipment delays, which have negative yly affe
f cted the
timi g
ng of revenue recognition. If these manufac
f
turi g
ng and supply chain disrup
r
tions recur and/or if we are unabl
a e to reduce our
lead times it could also result in the
t
cancellation of orders
y
by customers, reduce demand from existi g
ng customers in fut
f ur
t
e
periods, and increase diffic
f ul yty in addi g
ng new customers. Other factors m y
ay also contribute to declines in our growth rates,
includi g
ng changes in demand for
f
our products and services, particularly fro
f
m our la g
rge customers, the deterioration of the
financial performance, condition or prospects of our large customers, changes in capital spendi g
ng
y
by our large customers,
increased competition, price sensitivities from our customers to increases in our pricing, our abi
a lity to successfully manage our
expansion or continue to capi
a talize on growth opportuni
t
ties, the maturation of our business, geopolitical pressures, recession
risks and monetary policy shifts
f , and our abi
a lity to be successful
f
in the AI marke
r
t and adja
d cent markets, such as campu
m
s
switching, Wi-Fi networking marke
r
ts and network security markets. Recent technologies, such as generative AI models, have
emerged, and while they have driven increased demand for
f
networking, the long-term traje
a ctory is unkno
k
wn and it is diffi
f cult
for us to predict the demand for
f
such new technologies. Customers may overestimate demand for
f
their AI build outs and cancel,
delay, reduce or otherwi
r
se modify their purchase commitments with little or no notice to us. In addition, customer may
a
implement changes to the
t
ir network architectur
t
e to improve effi
f ciencies and reduc
d
e demand for
f
our products. As such, demand
estimates for
f
our new produc
d
ts are diffi
f cult to forecast and create volatility in our revenue. In addition, given the timing a d
nd
prioritization of customer orders and shipment patterns
r
, near term revenue trends may not be reflective of current demand
levels F
.
urthermo
r
re, any prolonged economic disruptions or deterioration in the global economy could have a negative impact
on demand from our customers in future periods, particularly in the enterpr
r
ise marke
r
t where we are continuing to expand our
penetration. which may result in reductions in overall demand fro
f
m these customers in fut
f ur
t
e periods and negatively impact our
revenue, financial condition, business or prospects. You
Y
should not rely on our revenue for any prior qua
q
rterly or annual period
as an indication of our future revenue or revenue growth. If we are unabl
a e to maintain consistent revenue or revenue growth,
t
our business, financial condition, results of operations and prospects could be materially adversely affec
f
ted, and our stock price
could be volatile.
Our results of operations have varied signific
f antly fro
f
m period to period and are unpredictable and if we fail to meet the
expectations of analysts or investors or our previous yly issued financia g
l guidance, or if any for
f
ward-looki g
ng financial
guidance does not meet the expectation of ana ylysts or investors, the market price of our common stock could decline
substantially.
Our results of operations have historically varied from period to period, and we expect that this trend will continue. As
a result, you should not rely upon our past fin
f ancial results for
f
any period as indicators of fut
f ur
t
e performance. Our results of
operations in any given period have been and could continue to be influenced by a number of fac
f
tors, many of which are
outside of our contro
t
l and may b
a
e diffi
f cult to predict, including:
•
general economic conditions, both domestically and in for
f
eign markets, and disrupt
u ions in our business and the
markets due
d
to, among other things, recessionary risks and a global economic downtur
t
n,
r
higher interest rates,
monetary policy shifts
f , infla
f tionary p
r
ressures, supply chain and labor shortages, the new U.S. presidential
administration, the recent banking crisis, and geopolitical pressures;
•
our inability to ful
f fill our customers’ orders, the defer
f ra
r l, reduction or cancellation of orders or the del y
ay in shipment
of our products;
•
the reduction in future demand for our produc
d
ts y
by our customers or increased diffi
f culty in adding new customer d
s ue
d
to the unavailability or unpredictable supp
u
ly of inventory,
r
suppl
u
y chain delays, access to key commodities or
technologies, manufac
f
turing disrupt
r
ions or other events tha
t
t impact our manufactur
t
ers or their supp
u
liers;
•
a reduction, or uncertainty in the timing, of orders from our large customers;
•
announcements
y
by us or othe
t
r compe
m
titors of new products or produc
d
t enhancements, warran yty returns, general
economic conditions or other factors;
•
our ability to increase sales to existi g
ng customers and attract new customers, includi g
ng la g
rge customers;
•
the bu g
dgeting, sales, impl
m ementation and refresh cycles, purchasing practices, technology roadmaps and priorities and
buying patterns of customers, including large customers who generally receive lower pricing terms due
d
to volume
discounts and who may or may not make large bulk purchases in certain qua
q
rters or who may e
a
lect to re-assign
20
allocations to multiple vendors based upon specific
f
network roles or projects or who may be placing orders based on
lo g
nger planni g
ng horizons to ensure supp
u
ly;
•
changes in the growth r
t
ate of existing or new customers or the deterioration of the
t
financial performance, condition or
prospects of existing or new customers, including large customers and servi
r ce providers, changes in end-customer,
distributor or reseller requirements or market needs, and changes in growth rates of the networking market;
•
the inclusion of any acceptance provisions in our customer contracts and increased customer trials, and any delays in
acceptance, or reje
e ction, or any retur
t
n,
r
of those products;
•
the cost and potential outcomes of existing and future litigation;
•
increased expenses resulting fro
f
m increases in component, production and logistics costs resulting from factors such as
global inflationary pressures, shortages in supply for
f
semiconduc
d
tors, and China's contro
t
ls on the use of certain
products and on the
t
export of metals used in semiconduc
d
tor manufact
f
ur
t
ing, or the tariffs
f
imposed by the
t
U.S. on goods
from other countries and tariffs
f
impo
m
sed by other countries on U.S. goods, including the
t
tariffs i
f
mplemented by the
U.S. government on various imports from China and Mexico;
•
changes in our pricing policies, whether initiated by us or as a result of competition;
•
the amount and timing of operating costs and capi
a tal expenditur
t
es related to the operation and expansion of our
business;
•
diffi
f culty for
f
ecasting, budgeting and planning due to limited visibility into the spending plans of current or prospective
customers;
•
excess or obsolete inventory resulting in write-downs and charges related to supplier liabi
a lities;
•
the actua
t
l or rum
r
ored timing and success of new product and service intro
t
ductions by us or our compe
m
titors or any
other change in the compe
m
titive landscape
a
of our industry, i
y
ncluding consolidation among our compe
m
titors or
customers;
•
our ability to successfully expand our business domestically and interna
r
tionally;
•
our ability to increase the
t
size and production of our sales or distribution channel, or any disrup
r
tion in, or termi
r
nation
of, o
f
ur sales or distribution channels;
•
decisions by potential customers to purchase our networki
r ng solutions from larger, more established vendors, white
box vendors with open-source network operating systems or their primary n
r
etwork equi
q pment vendors;
•
disruptions caus
a
ed by pandemics, such as the COVID-19 pandemic, and the government restri
t ctions in response to
pandemics;
•
insolvency or credit diffi
f culties confronting our customers, which could adversely affec
f
t their ability to purchase or
pay for
f
our products and services, or confronting our key suppliers, including our sole source suppliers, which could
disrupt
r
our supply chain;
•
seasonality or cyclical fluctuations in our markets;
•
fut
f ur
t
e accounting pronouncements or changes in our accounting policies;
•
our overall effe
f ctive tax rate, including impacts caused by any reorganization in our corporate struc
r
ture, any changes in
our valuation allowance for
f
domestic deferred tax assets and any new legislation or regulatory developments;
•
increases or decreases in our expenses caused by flu
f ctua
t
tions in foreign currency exchange rates, as an increasing
portion of our expenses are incurred and paid in currencies other than the U.S. dollar;
•
increases in cybersecurity threats, including security threats fro
f
m state sponsors; and
•
other risk factors described in this Annual Report on Form 10-K.
Any one of the fac
f
tors above or the
t
cumulative effe
f ct of several of the factors described above may result in signific
f ant
fluctuations in our fin
f ancial and other results of operations and may caus
a
e the market price of our common stock to decline.
This variability and unpredictability could result in our fai
f lure to meet our revenue, gross margins, results of operations or othe
t
r
expectations contained in any forward-looking financial guidance we have issued or the expectations of securities analysts or
investors for
f
a particular period. If we fail to meet or exceed such guidance or expectations for the
t
se or any other reasons, the
market price of our common stock could decline substantially, and we could fac
f
e costly lawsuits, including securities class
action suits. In the past, we have failed to meet investor financial expectations and the marke
r
t price of our common stock
declined.
The networking market is rapidly evolving. If this market does not evolve as we anticipate or our target customers do
not adopt our networking solutions, we may not be able to compete effe
f ctively, and our ability to generate revenue will
suffer.
A substantial portion of our business and revenue depends on the
t
growth and evolution of the netwo
t
rking market,
including the evolution of the market for AI netwo
t
rks and the fut
f ur
t
e deployment of Ethernet networking solutions in these AI
networks
r
. The market demand for networking solutions has increased in recent years as customers have deployed larger, more
sophisticated networks and have increased the
t
use of virtualization and cloud compu
m
ting. The continued growth of thi
t s marke
r
t
21
will be dependent upon many factors including but not limited to the adoption of and demand for our customers’ products and
services, the expansion, evolution and build out of our customers’ netwo
t
rks, the capacity utilization of existing network
r
infrastruc
r
tures, changes in the technological requi
q rements for
f
the products and servi
r ces to be deployed in the
t
se networks, the
amount and mix of capi
a tal spending by our customers, including any changing technology priorities such as the deployment of
AI and related technologies, the development of netwo
t
rk switches and cloud service solutions by our large customers for
f
internal use, the fin
f ancial perfor
f
mance and prospects of our customers, the availability of capi
a tal resources to our customers,
changes in governm
r
ent regulation that could impact networking business models including those regulations related to AI,
cybersecurity, privacy, d
y
ata protection and net neutrality, our abi
a lity to provide networking solutions that address the needs of
our customers more effe
f ctively and economically than those of other competitors or existing technologies and general economic
conditions.
In particular, recent technologies, such as generative AI models, have emerged, and while they have driven increased
demand for networking, the long-term trajectory is unknown and it is diffic
f ult for
f
us to predict the demand for such new
technologies. Customers may o
a
verestimate demand for
f
their AI build outs and cancel, delay, reduce or otherwi
r
se modify their
purchase commitments with little or no notice to us. In addition, customers may implement changes to their netwo
t
rk
architectur
t
es to impr
m
ove effic
f iencies and reduce demand for our products. As such, demand estimates for
f
our new products are
diffic
f ult to for
f
ecast and create volatility in our revenue and inventory levels. If the AI market does not develop as anticipated or
at all, then the potential demand for AI Ethernet switches may not be realized. Moreover, even if the market for
f
AI applications
does develop, the successful
f
adoption of AI Ethernet produc
d
ts will be dependent upo
u
n their ability to compete against more
establ
a ished Infin
f iBand products or against the AI Etherne
r
t products of other competitors to address AI networking clusters.
If the networking solutions market including the AI Ethe
t
rnet market does not develop in the way w
a
e anticipate or
otherwise experiences a slow-down, if our solutions do not offe
f r benefit
f s compa
m
red to compe
m
ting networki
r ng produc
d
ts or if
customers do not recognize the
t
benefits that our solutions provide, then our business, financial condition, results of operations
and prospects could be materially adversely affec
f
ted.
We pursue new product and service offe
f rings and expand into adja
d
cent markets, and if we fai
f l to successful
f
ly carry out
these initiatives, our business, financial condition, or results of operations could be adversely impacted.
We have made subs
u
tantial investments to develop new produc
d
ts and servi
r ces and enhancements to existing produc
d
ts
through our acquisitions and internal research and development effor
f
ts to expand our product offe
f rings and maintain our
revenue growth. If we are unabl
a e to anticipate technological changes in our industry by introducing new or enhanced products
and services in a timely and cost-effec
f
tive manner or if we fai
f l to introduce products and services that meet market demand, we
may lose our competitive position, our products may become obsolete, and our business, financial condition or results of
operations could be adversely affect
f
ed. For example, with our most recent yly introduced 800 GbE and AI focused Ethernet
products, our ability to continue to maintain our competitive position with our customers will depend on our ability to deliv rer
these new products in a timely manner, our customers' acceptance of the
t
se products and the
t
growth of the markets that these
products serve. In addition, the evaluation, testi g
ng and qua
q
lification of our new produc
d
ts y
by our customers may b
a
e lengt y
hy and
may require increased customer trials and contracts with a
t
cceptance clauses, which delay revenue recognition m y
ay negatively
impact our revenue.
Fiscal 2024 was marke
r
d by a year of new product introductions and expanded use cases, particular yly in the AI Ethernet
market, and we expect this to continue into fiscal 2025. This has resulted in increased customer trials and contracts with
acceptance periods, and an increase in the volatility and magnitude of our product deferred revenue balances, which in tur
t
n m
r
y
ay
create variabili yty in our revenue results on a quarterly and annual basis. In addition, if we are not able to satisfy t
f
he
requirements under customer trials or contracts with acceptance periods, we may b
a
e requi
q red to accept product retur
t
ns from our
customers, which would prevent us fro
f
m rec g
ognizing revenue on such transactions and m y
ay result in the write-down of
inventory.
Additionally, from time to time, we invest in expansion into a jdjacent marke
r
ts, includi g
ng campus and Wi-
W Fi
networki
r
g
ng, AI networking, cloud and enterprise routing marke
r
ts, network securi yty markets and SD-WAN
W
markets. Although
we believe these solutions are compl
m ementa y
ry to our curre
r nt offe
f ri g
ngs, we have less experience and a more limited operati g
ng
history i
r
n the
t
se markets, and our effo
f
rts in this area m y
ay not be successful. Expandi g
ng our servi
r ces in existing and new marke
r
ts
and increasing the depth a d
nd breadth of our presence imposes signific
f ant burdens on our marketing, compl
m iance, and other
administrative and managerial resources. Our plan to expand and deepen our market share in our existing markets and possibly
expand into additional marke
r
ts is subj
u ect to a variety of risks and challenges. Our success in these new markets depends on a
variety of fact
f
ors, including but not limited to our abi
a lity to develop new produc
d
ts, new product fea
f
tures and services that
address the customer requirements for the
t
se markets, attract a customer base in marke
r
ts in which we have less experience,
compete with n
t
ew and existing competitors in these adjacent markets, and gain market acceptance of our new products. In
22
addition, when we intro
t
duce new products, we expect that it will take time for manufac
f
turing to ramp produc
d
tion and ful
f fill
customer demand.
Developing our produc
d
ts is expensive, and the investment in produc
d
t development typi
y cally involves a long payback
cycle.
We expect to continue to invest heavily in softw
f
are development in order to expand the capa
a
bi
a lities of our cloud
networki
r ng platform and introduce new products and featur
t
es. We e
W
xpect that our results of operations will be impacted by the
timing and size of these investme
t
nts. These investments may take several years to generate positive returns, if ever.
Additionally, future market share gains may t
a
ake longer tha
t
n planned and cause us to incur significant costs. If we are
unabl
a e to attract new large customers or to sell additional products and services to our existing customers, our revenue growth
will be adversely affect
f
ed, and our revenue could decrease. Diffic
f ulties in any of our new product development effor
f
ts or our
effo
f
rts to enter adja
d cent marke
r
ts could adversely affe
f ct our operating results and financial condition.
We expect ou g
r gross ma g
rgins to vary over time and may be adverse yly affe
f cted
y
by numerous factors.
We expect our gross margins to vary o
r
ver time and the gross margins we have achieved in recent years may n
a
ot be
sustainabl
a e and may be adv
d ersely affe
f cted in the fut
f ur
t
e by numerous fac
f
tors, including but not limited to pricing pressure on
our products and services due to competition, the abi
a lity of more fully integrated competitors to bundle their networking
products with other products, or utilize proprietary silicon in their produc
d
ts, the mix of sales to large customers who generally
receive lower pricing, the
t
mix of products sold, manufactur
t
ing-related costs, including costs associated with sourcing key
components from sole or limited suppliers and potential changes to our manufac
f
turing and supply chain to respond to
international trade wars, supply chain sourcing activities, merchant silicon costs, excess/obsolete inventory and suppl
u
ier liabi
a lity
charges, and fees
f
to expedite supplier components and costs related to tariffs f
f
ro
f
m our produc
d
ts that are manufact
f
ur
t
ed
internationally. In addition, other factors that may impa
m
ct our gross margins over time include the introduction of new products
and new business models including the sale and delivery o
r
f more softw
f
are and subs
u
cription solutions, entry i
r
nto new markets or
growth in lower margin marke
r
ts, entry in markets with diffe
f rent pricing and cost structur
t
es, pricing discounts given to
customers, costs associated with defen
f
ding intellectua
t
l property r
t
ights infri
f ngement, misapp
a
ropriation or othe
t
r violation claims
and the
t
potential outcomes of such disputes, increased costs arising from epidemics, changes in distribution channels, increased
warranty costs, and our ability to execute our operating plans. In addition, inflationary pressures and shortages have increased
and may continue to increase costs for
f
certain materials, compo
m
nents, suppl
u
ies and services. As a result of cost inflation in o r
ur
supp yly chain, we have impl
m emented targeted price increases fro
f
m time to time. However, these price increases could result in a
decrease in demand for
f
our products which would decrease revenue I
. n addition, if business were subje
b ct to sustained economic
stress or recession, many of the risk factors identifie
f d in thi
t s risk fac
f
tors section could be heightened. We d
W
etermine our
operating expenses largely on the basis of anticipated revenue and a high percentage of our expenses are fixed in the
t
short and
medium term. As a result, a failure or delay in generating or recognizing revenue could cause significant variations in our
operating results and operating margin from quarter to quarter. Failure to sustain or improve our gross margins reduces our
profit
f ability and may have a material adverse effect
f
on our business and stock price.
We face intense competition, especially from larger, w
r
ell-established companies and industry consolidation may lead to
further increased competition, which may harm our business, financial condition, results of operations and prospects.
The marke
r
ts in which we compete, including the markets for data center, campus networking and network visibility
and security, a
y
re intensely compe
m
titive, and we expect competition to increase in the future from establ
a ished competitors,
industry consolidation and new marke
r
t entrants. This competition has resulted in increased pricing pressure, which could result
in reduced profit margins, increased sales and marketing expenses and the loss of marke
r
t share, any of which would likely harm
our business, financial condition, results of operations and prospects.
The data center and campu
m
s networking markets have been historically dominated by Cisco, with compe
m
tition also
coming from other large network equipment and system vendors, including Dell/EMC, Extreme Networks, Hewlett Packard
Enterprise, Huawei, Juniper Networks, Nvidia and white box netwo
t
rking vendors utilizing open-source operati g
ng
y
systems.
Most of our compe
m
titors and some strat g
egic alliance partne
t
rs have made acquisitions and/or have entered into or extended
partne
t
rships or other strategic relationships to offe
f r more compr
m
ehensive product lines, includi g
ng cloud networking solutions
and network securi yty. For example, Cisco acquired Acacia Communications, Broadcom acquired Brocade Communications and
VMware, Dell acquired Force10 Networks, Hewlett Packard Enterprise recent yly announced the acquisition of Juniper
Networks
r
. This industry consolidation may l
a
ead to increased compe
m
tition and m y
ay harm our business. La g
rge system vendors are
increasingly seeking to deliver vertical yly integrated cloud networking solutions to customers that combine cloud-focused
hardware and softw
f
are solutions as an alternative to our produc
d
ts. We e
W
xpect this trend to continue as companies attempt to
stre g
ngthen their marke
r
t positions in an evolvi g
ng industry and as companies are acqui
q red or are unabl
a e to continue operations.
Indust y
ry consolidation m y
ay result in stro g
nger competitors that are better able to compete with us, and this could lead to more
23
variability in our results of operations and could have a material adverse effec
f
t on our business, the pricing of our solutions,
financial condition, results of operations and prospects.
We also face compe
m
tition from othe
t
r compa
m
nies and new market entrants, including current technology partne
t
rs,
suppliers and customers or other cloud service providers who may acquire or develop network switches and cloud service
solutions for
f
internal use and/or to broaden their portfol
f io of produc
d
ts to market and sell to customers. Some of the
t
se
competitors are developing "white box" networking produc
d
ts based on open-source network operating systems tha
t
t may be
provided for fre
f e and off-
f the-shelf or commoditized hardware technology, o
y
r “white box” hardware, while other competitors
may adopt a disaggregated approach to the procurement of hardware and their proprietary softw
f
are. Customers may also
increase their adoption of networking solutions based upon open-source network operating systems that may be provided for
f
free and used either on “white box” or proprietary hardware. As new markets emerge like AI, we expect the fie
f ld to remain
intensely compe
m
titive. In addition, we have not establ
a ished broad market awareness or acceptance of our AI Ethernet products
that will compete against more establ
a ished Infin
f iBand products or against the AI Etherne
r
t products of other competitors.
Furthe
t
rmore, the entra
t nce of new competitors into our markets or the increased adoption of the
t
se new technology solutions or
consumption models may caus
a
e downward pricing pressures, result in lost sales or otherwi
r
se have a material adverse effe
f ct on
our business, prospects, financial condition and operating results.
Our relationships with our strategic alliance partners or suppliers may also shift a
f
s indus
d
try d
r
yn
d
amics changes. If
strategic alliance partners acquire or develop compe
m
titive produc
d
ts or services, our relationship with those partners may be
adversely impacted, which could lead to more variability to our results of operations and impact the pricing of our solutions.
Many of our existing and potential competitors enjo
n y substantial competitive advantages, such as greater name
recognition and longer operating histories, larger sales and marke
r
ting budgets and resources, broader distribution and
establ
a ished relationships with channel partners and end customers, the
t
ability to leverage their sales effor
f
ts across a broader
portfolio of products, the abi
a lity to bundle competitive offer
f ings with othe
t
r products and servi
r ces or to reduce the price of
products and services that compete with ours in order to promote the sale of other products or services, the ability to develop
their own silicon chips, the
t
ability to set more aggressive pricing policies, lower labor and development costs, greater resources
to make acquisitions, larger intellectua
t
l property rights portfol
f io, and substantially greater financial, technical, research and
development or other resources.
In addition, large competitors may have more extensive relationships with and within existing and potential customers
that provide them with an advantage in competing for
f
business with those customers or may have a dominant marke
r
t position in
certain marke
r
ts that they can utilize to leverage sales of their Ethernet switching products. For example, certain large
competitors encourage customers of the
t
ir othe
t
r products and services to adopt the
t
ir data networking solutions through
discounted bundled product packages. Our ability to compe
m
te will depend upon our abi
a lity to provide a better solution than our
competitors at a more competitive price. We may b
a
e requi
q red to make substantial additional investments in research,
development, marketing and sales in order to respond to competition, and we cannot assure you that these investme
t
nts will
achieve any returns for
f
us or that we will be able to compete successful
f ly in the fut
f ur
t
e.
We also expect increased competition if our market continues to expand. As we continue to expand globally, we have
seen and continue to see new compe
m
tition in diffe
f rent geographi
a
c regions. In particular, we have experienced and could
continue to experience price-focused competition from competitors in Asia, especially from China. As we expand into new
markets, we will face competition not only from our existing competitors but also fro
f
m other competitors, including existing
companies with strong technological, marke
r
ting, and sales positions in those marke
r
ts, as well as those with greater resources,
including technical and engineering resources, than we do. Conditions in our market could change rapidly and significantly as a
result of technological advancements or othe
t
r fact
f
ors.
We are subject to a number of risks associated with the expansion of our international sales and operations.
Our abi
a lity to grow our business and our fut
f ur
t
e success will depend to a significant extent on our abi
a lity to expand our
operations and customer base worldwide. Many of our customers, resellers, partners, supp
u
liers and manufactur
t
ers operate
around the world. Operating in a global marketpl
t ace, we are subje
b ct to risks associated with having an international reach and
compliance and regulatory requirements. Our interna
r
tional sales and operations are subje
b ct to a numbe
m
r of risks, including the
following:
•
abi
a lity to establ
a ish necessary business relationships and to compl
m y with local business requirements, including
distributor and reseller relationships;
•
greater diffic
f ulty in enforcing contra
t cts and accounts receivable collection and longer collection periods and non-
standard terms with customers related to payment, warranties or performance obligations;
24
•
increased management complexity involved in, and expenses incurre
r d in establishing and maintaining our
international operations;
•
deterioration of political relations between the U.S. and China, Canada, Mexico, Rus
R
sia and EU including interna
r
tional
trade wars and increased tariffs b
f
etween the U.S. and such countries or regions, which could have a material adverse
effe
f ct on our sales as well as our manufact
f
ur
t
ing operations and supply chain in the
t
se countries;
•
flu
f ctua
t
tions in exchange rates between the
t
U.S. dollar and for
f
eign currencies where we do business;
•
general economic and political conditions in these foreign marke
r
ts;
•
global macroeconomic conditions, including recessionary cycles;
•
risks associated with U.S. and for
f
eign legal requi
q rements, including tho
t
se relating to anti-corrupt
u ion, anti-bribery,y
telecommunications, cybersecurity, suppl
u
y chain integrity, privacy, d
y
ata protection and the importation, certific
f ation
and localization of our produc
d
ts in foreign countries;
•
risks associated with government trade restrictions, including those which may i
a
mpose restrictions, including
prohibitions on the exportation, re-exportation, sale, shipment or other transfer
f
of programming, technology,y
components, and/or services to foreign persons;
•
changes in trade contro
t
ls, economic sanctions, or other international trade regulations, which have in general recently
trended toward increasing breadth and compl
m exity of controls, and which may affec
f
t our ability to import or export our
products to and fro
f
m various countries;
•
risks of unexpected changes in regulatory practices, tariffs
f
and tax laws and treaties;
•
possible deterioration in relations between Taiwan and China, and other fac
f
tors affe
f cting military, political, or
economic conditions in Taiwan or elsewhere in Asia;
•
issues related to cloud-specific and/or AI regulatory r
r
equirements in certain countries, including the UK, EU and Asia-
Pacific countries;
•
the uncertainty of protection and enforcement for
f
intellectual property rights in some countries; and
•
heightened risk of unfai
f r or corrupt
u
business practices in certain geograph
a
ies and of improper or fraudulent sales
arrangements that may impa
m
ct financial results and result in restatements of, or irregularities in, fin
f ancial statements.
These and othe
t
r fac
f
tors could harm o
r
ur ability to gain fut
f ur
t
e interna
r
tional revenue and, conseque
q
ntly, m
y
aterially affec
f
t
our business, financial condition, results of operations and prospects. Expanding our existing international operations and
entering into additional international marke
r
ts will require significant management attention and financial commitments. Our
failure to successfully manage our international operations and the associated risks effe
f ctively could limit our fut
f ur
t
e growth or
materially adversely affect
f
our business, financial condition, results of operations and prospects.
We have invested and m y
ay continue to invest in or acquire other businesses which could require signific
f ant man g
agement
attention, disrupt our business, dilute stockholder value and adversely affec
f
t our business, fin
f
ancial condition, results f
of
operations and prospects.
As part of our business strategy, we have made and could continue to make investments in compl
m ementary companies,
products or technologies which could involve licenses, additional channels of distribution, discount pricing or investments in or
acquisitions of other companies. For example, we completed the acquisition of Untangle Holdings and Pluribus Networks in
2022, which required management to focus effor
f
ts on integrating the
t
se acqui
q sitions with the company. In addition, the
privately-held companies in which we invested are in the startup or development stages. These investments are inherently risky
because the markets for the technologies or products these companies are developing are typically in the early stages and may
never materialize, and we could lose our entire investment in these companies. We m
W
ay not be able to find suitable investment
or acqui
q sition candidates and we may not be able to complete such investments or acquisitions on fav
f
orable terms, if at all. If
we do complete investme
t
nts or acqui
q sitions, we may not ultimately strengthe
t
n our competitive position or achieve our goals,
and any investments or acqui
q sitions we complete could be viewed negatively by our customers, investors and securities
analysts. Through acquisitions, we continue to expand into new markets and we may experience challenges in entering into new
markets for
f
which we have not previously manufactur
t
ed and sold products, including facing exposure to new marke
r
t risks,
diffic
f ulty achieving expected business results due
d
to a lack of experience in new markets, products or technologies or the
t
initial
dependence on unfamiliar distri
t bution partners or vendors.
In addition, investments and acquisitions may result in unfor
f
eseen operating diffic
f ulties and expenditures. For
exampl
m e, if we are unsuccessful at integrating any acqui
q sitions or retaining key talent from those acquisitions, or the
technologies associated with such acquisitions, into our company, the business, financial condition, results of operations and
prospects of the
t
combined company could be adversely affec
f
ted. We may h
a
ave diffi
f culty retaining the employees of any
acquired business or the acquired technologies or research and development expectations may prove unsuccessful
f . Any
integration process may require significant time and resources, and we may not be able to manage the process successful
f ly.
Acquisitions may also disrupt
u
our ongoing business, divert our resources and require signific
f ant management attention that
25
would otherwi
r
se be availabl
a e for
f
development of our business. We m
W
ay not successful
f ly evaluate or utilize the acquired
technology or personnel or accurately forecast the fin
f ancial effe
f cts of an acquisition transaction, including accounting charges.
Any acquisition or investment could expose us to unknown liabilities. Moreover, we cannot assure you that the anticipated
benefits of any acqui
q sition or investment would be realized or that we would not be exposed to unknow
k
n liabi
a lities. We m
W
ay not
be successful
f
in retaining or expanding the
t
customers and sales activities of any acquired business or in realizing the expected
operational and cost effi
f ciencies anticipated with the
t
acquisition. We may have to pay cash, incur debt or issue equity securities
to pay for
f
any such investment or acquisition, each of which could adversely affec
f
t our financial condition or the
t
market price
of our common stock. The sale of equity or issuance of debt to finance any such acquisitions could result in dilution to our
stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or
other restrictions tha
t
t would impede our abi
a lity to manage our operations. Moreover, if the
t
investment or acquisition becomes
impaired, we may be required to take an impa
m
irment charge, which could adversely affec
f
t our financial condition or the market
price of our common stock.
Seasonality and industry cyclicality may cause fluctuations in our revenue and results of operations.
We operate on December 31st year end and typi
t
cally have lower sequential quarter over quarter revenue growth in the
first qua
q
rter of each fiscal year, often followed by stronger sequential revenue growth in the ensuing qua
q
rters. We believe that
this seasonality results fro
f
m a number of factors, including the procurement, budgeting and deployment cycles of many of our
customers. The effect
f
s of recent supply chain disrupt
u ions and our rapi
a d growth may have reduced the impact of seasonal or
cyclical factors that might othe
t
rwise have influ
f enced our business and broader industry perfor
f
mance. If our growth rates slow,
w
seasonal or cyclical variations in our operations may become more pronounced over time and may materially affe
f ct our
business, fin
f ancial condition, results of operations and prospects. In addition, any supply chain shortages and manufactur
t
ing
disrupt
r
ions that result in extended lead times may impact ou a
r bi
a lity to manufactur
t
e and ship products to our customers in a
timely manner, which may disrupt
u
typi
y cal seasonal trends.
We are exposed to fluctuations in currency exchange rates, which could adversely affect
f
our business, financial
condition, results of operations and prospects.
Our sales contra
t cts are primarily denominated in U.S. dollars, and the
t
refore, substantially all of our revenue is not
subject to for
f
eign currency risk; however, as a result of the strengthe
t
ning U.S. dollar, there has been an increase in the
t
cost of
our products to our customers outside of the U.S., which could adversely affect
f
our business, financial condition, results of
operations and prospects. In addition, a decrease in the
t
value of the
t
U.S. dollar relative to for
f
eign currencies could increase our
product and operating costs in foreign locations. Further, a portion of our operating expenses is incurred outside the U.S., is
denominated in for
f
eign currencies and is subje
b ct to fluctuations due to changes in for
f
eign currency exchange rates. If we are not
able to successful
f ly hedge against the risks associated with the curre
r ncy flu
f ctua
t
tions, our business, financial condition, results
of operations and prospects could be adversely affec
f
ted.
If we needed to raise additional capital to expand our operations, invest in new products or for
f
other corporate
purposes, our fai
f lure to do so on favorable terms could reduce our ability to compete and could harm our business,
financial condition, results of operations and prospects.
We expect that our existing cash and cash equivalents, will be suffic
f ient to meet our anticipated cash needs for the
t
foreseeabl
a e fut
f ur
t
e. If we did need to raise additional fun
f
ds to expand our operations, invest in new products or for
f
other
corporate purpo
r
ses, we may not be able to obtain additional debt or equity fin
f ancing on favorabl
a e terms
r
. If we raise additional
equity financing, our stockho
k
lders may experience significant dilution of their ownership interests, and the market price of our
common stock could decline. Furthermo
r
re, if we engage in debt fin
f ancing, the holders of such debt would have priority over the
holders of common stock, and we may be required to accept terms that restrict our ability to incur additional indebtedness or
impose othe
t
r restrictions on our business. We may also be required to take other actions that would otherwise be in the interests
of the debt holders, including maintaining specified liquidity or other ratios, any of which could harm our business, financial
condition, results of operations and prospects. If we need additional capital and cannot raise it on acceptable terms, we may n
a
ot
be able to, among other things, enhance our products and services, expand our sales and marke
r
ting and research and
development organizations, acquire complementary t
r
echnologies, products or businesses, and respond to competitive pressures
or unanticipated worki
r ng capi
a tal requirements. Our fai
f lure to do any of these things could seriously harm our business, financial
condition, results of operations and prospects.
Risks Related to Customers and Sales
If we are unable to attract new large customers or to sell additional products and services in the AI Ethernet, Campus
Workspace and Network Security Markets, to our existing customers, our revenue growth will be adversely affec
f
ted and
our revenue could decrease.
26
To increase our revenue, we must add new customers, especially large customers, and sell additional products and
services to existing customers. For example, one of our sales strategies is to expand our current foo
f
tprint by targeting specific
projects at our current customers becaus
a
e they are familiar with the operational and economic benefits of our solutions, thereby
reducing the sales cycle into these customers. We also believe the
t
opportun
t
ity with current customers is significant given their
existing infra
f stru
t
ctur
t
e and expected future spend. Another one of our sales strategies is focused on increasing penetration in the
enterprise, campus and AI markets. However, sales strategies foc
f
used on expansion to adjacent marke
r
ts can requi
q re more time
and effor
f
t since enterprise and campu
m
s customers typi
y cally start with small purchases, and in the case of new markets such as AI
where we are introduc
d
ing new produc
d
ts there are ofte
f n longer testing and qualific
f ation periods. For this reason, in order to grow
our revenue, it is important for us to attract new large customers. Some factors that may limit our ability to attract new large
customers include, but are not limited to, saturation with certain large cloud networking customers, customers priorities and
initiatives to invest in new technology, c
y
ompetition, decreased capi
a tal spending by such customers, a limited numbe
m
r of such
customers, and a decline in growth at such customers. If we fai
f l to attract new large customers, including enterpr
r
ise, campu
m
s
and AI customers, fai
f l to reduc
d
e the sales cycle and sell additional produc
d
ts to our existing customers or if our products are not
accepted by the
t
se customers, our business, financial condition, results of operations and prospects will be harmed.
Sales of our switches generate most of our product revenue, and if we are unable to continue to grow sales of these
products, our business, fin
f
ancial condition, results of operations and prospects will suffer
f .r
Historical yly, w
y
e have derived subs
u
tantially all of our product revenue fro
f
m sales of our switchi g
ng and routi g
ng
platforms, and we expect to continue to do so for
f
the for
f
eseeable future. We h
W
ave experienced declines in sales for
f
some of our
products over time as they matur
t
e and are superseded by products with improved perfor
f
mance and functionali yty. A decline in
the price of switches and related services, or our inability to increase sales of these products, would harm o
r
ur business, fin
f ancial
condition, results of operations and prospects more serious yly than if we derived s gignificant revenue from a larger v
r
ariety of
product lines and services. Our future financial performance will also depend upon successful
f ly developing and selling next-
generation versions of our switches. If we fail to deliver new products, new feat
f
ur
t
es, or new releases that customers want and
that allow us to maintain leadership in what will continue to be a compe
m
titive market environment, our business, financial
condition, results of operations and prospects will be harmed.
Our large customers generally require more fav
f
orable terms and conditions fro
f
m their vendors and may request price
concessions. As we seek to sell more products to these customers, we may be required to agree to terms and conditions
that may have an adverse effe
f ct on our business or ability to recognize revenue.
Our large customers have significant purchasing power and, as a result, generally receive more favorabl
a e terms and
conditions than we typically provide to other customers, including lower prices, bundled upgrades, extended warranties,
acceptance terms, indemnific
f ation terms and extended retur
t
n p
r
olicies and other contractual rights. As we seek to sell more
products to these large customers, an increased mix of our shipments may be subje
b ct to such terms and conditions, which may
a
reduce our margins or affe
f ct the timing and amount of revenue, and thus may have an adverse effec
f
t on our business, financial
condition, results of operations and prospects.
If we are unable to increase market awareness or acceptance of our new products and services, our revenue may not
continue to grow or may decline.
We have no y
t yet establ
a ished broad market awareness or acceptance of products and services that we have introduced in
the AI Ethernet, campus works
r
pace and network securi yty markets. Market awareness of our value proposition and produc
d
ts and
services will be essential to our continued growth and our success, particularly for the service provider and broader enterpr
r
ise
markets. Additionally, becaus
a
e we are introducing new products in markets such as the
t
AI Ethe
t
rnet market, some products are
subject to trials, testing, qualification and acceptance periods. If our marketing effor
f
ts are unsuccessful
f
in creating marke
r
t
awareness of our company and our products and services or in gaining access to new customer markets, or if these new
products and services are not accepted by customers, then our business, financial condition, results of operation a
s and prospects
will be adversely affect
f
ed, and we will not be abl
a e to achieve sustained growth.
t
The sales prices of our products and services may decrease, which may reduce our gross profits and adversely affect
f
our
results of operations.
The sales prices for our products and servi
r ces may decline for
f
a variety of reasons, including compe
m
titive pricing
pressures, discounts, a change in our mix of products and servi
r ces, the introduction of new produc
d
ts and services by us or by
our compe
m
titors including the adoption of “white box” solutions, promotional programs, or broader macroeconomic factors. In
addition, we have provided, and plan to continue to in the
t
future provide, pricing discounts to large customers, which may
result in lower margins for the period in which such sales occur. Our gross margins may also fluctuate as a result of the timing
of such sales to large customers.
27
We have historical yly experienced declines in sales prices for some of our products and services and could continue to
experience such declines. Competition continues to increase in the markets in which we participate, and we expect competition
to further increas i
e n the future, the
t
reby leading to increased pricing pressures. Larger compe
m
titors with more diverse product
and servi
r ce offe
f rings may reduce the price of products and servi
r ces tha
t
t compe
m
te with ours or may b
a
undle the
t
m with other
products and services. Additionally, although we generally price our products and services worldwide in U.S. dollars, curre
r ncy
fluctuations in certain countri
t es and regions may adversely affe
f ct actual prices that partne
t
rs and customers are willing to pay i
a
n
those countries and regions. Furthe
t
rmore, sales prices and gross profits for our products may decrease over product life cycles.
Decreased sales prices for any reason may r
a
educe our gross profits and adversely affe
f ct our result of operations.
Our sales cycles can be long and unpredictable, and our sales effor
f
ts require considerable time and expense. As a result,
our sales and revenue are diffi
f cult to predict and may vary substantially fro
f
m period to period, which may cause our
results of operations to flu
f
ctuate signific
f antly.
The timing of our sales and revenue recognition is diffic
f ult to predict because of the
t
length and unpredictability of our
products’ sales cycles. A sales cycle is the period between initial contact with a prospective customer and any sale of our
products. End-customer orders often involve the purchase of multiple products. These orders are compl
m ex and diffi
f cult to
complete becaus
a
e prospective customers generally consider a number of factors over an extended period of time befor
f
e
committing to purchase the produc
d
ts and solutions we sell. Customers, especially our large customers, often view the purchase
of our products as a significant and strategic decision and require considerable time to evaluate, test and qualify o
f
ur products
prior to making a purchase decision and placing an order. The length of time that customers devote to their evaluation, contract
negotiation and budgeting processes varies significantly. In addition, customers may delay upgrades to their network
infrastructur
t
e which extends the upgrade and sales cycle. Our produc
d
ts’ sales cycles are lengthy in certain cases, especially with
respect to our prospective large customers and certain markets including the enterpr
r
ise, campus and AI marke
r
ts. During the
t
sales cycle, we expend significant time and money on sales and marke
r
ting activities and make investments in evaluation
equipment, all of which lower our operating margins, particularly if no sale occurs. Even if a customer decides to purchase our
products, there are many fac
f
tors affe
f cting the timing of our recognition of revenue, which makes our revenue diffic
f ult to
forecast. For example, there may be unexpected delays in a customer’s internal procurement processes, particularly for some of
our larger customers for which our products represent a very small percentage of their total procurement activity. In addition,
due to macroeconomic uncertainties, the sales cycle may b
a
e extended and there may be delays and reduc
d
tions of expenditures
and cancellations by customers. There are many othe
t
r fac
f
tors specific to customers that contribute to the
t
timing of their
purchases and the variabi
a lity of our revenue recognition, including the strategic importance of a particular project to a customer,r
budgetary c
r
onstraints and changes in their personnel.
Even afte
f r a customer makes a purchase, the
t
re may b
a
e circumstances or terms relating to the purchase that delay our
ability to recognize revenue fro
f
m tha
t
t purchase including acceptance terms contained in such agreements. In addition, the
significance and timing of our produc
d
t enhancements, and the
t
introduc
d
tion of new products by our competitors, may a
a
lso affec
f
t
customers’ purchases. For all of these reasons, it is diffic
f ult to predict whether a sale will be completed, the particular period in
which a sale will be completed or the
t
period in which revenue from a sale will be recognized, if at all. If our sales cycles
lengthen or acceptance of such products is not achieved, our revenue could be lower than expected, which would have an
adverse effec
f
t on our business, financial condition, results of operations and prospects.
Our ability to sell our products is highly dependent on the quality of our support and services offeri
f
ngs, and if we are
unable to offer
f
high-quality support and services this could adversely effe
f ct on our business, financial condition, results
of operations and prospects.
Once our products are deployed within our customers’ networks, our customers depend on our support organization
and our channel partners to resolve any issues relating to our produc
d
ts. High-quality support is critical for the successful
f
marketing and sale of our products. If we or our channel partners do not assist our customers in deploying our products
effe
f ctively, do not succeed in helping our customers resolve post-deployment issues quickly or do not provide adequate ongoing
support, or if we experience quality issues with these new products, it could adversely affec
f
t our ability to sell our products to
existing customers and could harm our reputation with potential customers. In addition, as we continue to expand our
operations internationally, our support organization will face additional challenges, including those associated with delivering
support, training and documentation in languages other than English. Our fai
f lure or the fai
f lure of our channel partners to
maintain high-quality supp
u
ort and services could have a material adverse effec
f
t on our business, financial condition, results of
operations and prospects.
Our business depends on customers renewing their maintenance and support contracts. Declines in maintenance
renewals by customers could harm our fut
f
ure business, financial condition, results of operations and prospects.
28
We typi
y cally sell our products with maintenance and support as part of the initial purchase, and a portion of our
revenue comes from renewals of maintenance and supp
u
ort contracts. Our customers have no obligation to renew their
maintenance and supp
u
ort contracts after the expiration of the
t
initial period, and they may elect not to renew their maintenance
and support contracts, to renew their maintenance and supp
u
ort contra
t cts at lower prices through alterna
r
tive channel partners or
to reduce the product quantity under the
t
ir maintenance and supp
u
ort contra
t cts, thereby reduc
d
ing our future revenue from
maintenance and support contracts. If our customers, especially our large customers, do not renew their maintenance and
support contracts or if they renew them on terms that are less favorabl
a e to us, our revenue may decline and our business,
financial condition, results of operations and prospects will suffe
f r.
Our standard sales contracts contain indemnific
f ation provisions requiring us to defend our customers against third-
party claims, including against infringement, misappropriation or other violation of certain intellectual property rights
that could expose us to losses which could seriously harm our business, financial conditions, results of operations and
prospects.
Under the indemnific
f ation provisions of our standard sales contracts, we agree to defen
f
d our customers and channel
partne
t
rs against third-party claims asserting infri
f ngement, misapp
a
ropriation or other violation of certain intellectua
t
l propertyt
rights, which may include patents, copyrights, trademarks or trade secrets, and to pay judgments entered on such claims. An
adverse rul
r ing in such litigation may potentially expose us to claims in the event that claims are brought against our customers
based on the ruling and we are required to indemnify such customers.
Our exposure under the
t
se indemnific
f ation provisions is fre
f quently limited to the total amount paid by our customer
under the agreement. However, certain agreements include indemnific
f ation provisions that could potentially expose us to losses
in excess of the
t
amount received under the
t
agreement. Any of these events, including claims for indemnific
f ation, could
seriously harm our business, fin
f ancial condition, results of operations and prospects.
In addition to our own direct sales for
f
ce, we rely on distributors, systems integrators and value-added resellers to sell
our products, and our failure to effect
f
ively develop, manage or prevent disruptions to our distribution channels and the
processes and procedures that support them could cause a reduction in the number of customers of our products.
Our fut
f ur
t
e success is highly dependent upon
u
maintaining our relationships with distributors, systems integrators and
value-added resellers and establishing additional sales channel relationships. We a
W
nticipate that sales of our products to a
limited numbe
m
r of channel partners will continue to account for
f
a material portion of our total product revenue for the
foreseeabl
a e fut
f ur
t
e. We provide our channel partners with specific training and programs to assist them in selling our products,
but these steps may not be effe
f ctive. In addition, our channel partners may b
a
e unsuccessful in marke
r
ting, selling and supporting
our products and services. If we are unable to develop and maintain effe
f ctive sales incentive programs for
f
our channel partners,
we may n
a
ot be able to incentivize these partners to sell our products to customers. These partne
t
rs may have incentives to
promote our competitors’ products to the
t
detriment of our own or may cease selling our products altogethe
t
r. One of our channel
partne
t
rs could elect to consolidate or enter into a strategic partnership with one of our compe
m
titors, which could reduc
d
e or
eliminate our future opportun
t
ities with that channel partner. Our agreements with our channel partners may generally be
terminated for any reason by either party w
t
ith advance notice. We may b
a
e unabl
a e to retain the
t
se channel partners or secure
additional or replacement channel partne
t
rs. The loss of one or more of our significant channel partners requires extensive
training, and any new or expanded relationship with a channel partner may t
a
ake several months
t
or more to achieve productivity.
Where we rely on the
t
channel partners for
f
sales of our products, we may have little or no contact with the ultimate
users of our produc
d
ts that purchase through such channel partne
t
rs, the
t
reby making it more diffic
f ult for
f
us to establ
a ish brand
awareness, ensure proper delivery and installation of our produc
d
ts, servi
r ce ongoing end-customer requi
q rements, estimate end-
customer demand and respond to evolving end-customer needs. In addition, our channel partner sales struc
r
ture could subject us
to lawsuits, potential liability and reputational harm if, f
f
or
f
exampl
m e, any of our channel partners misrepresent the functionality
of our products or servi
r ces to customers, fai
f l to compl
m y with their contra
t ctua
t
l obligations or violate laws such as the U.S.
Foreign Corrupt
u
Practices Act or other applicable anti-corru
r
ption laws or our corporate policies. If we fail to effe
f ctively manage
our existing sales channels, or if our channel partners are unsuccessful
f
in fulfil
f ling the orders for
f
our products, if we are unabl
a e
to enter into arrangements with, and retain a suffic
f ient number of, h
f
igh-quality channel partners in each of the regions in which
we sell products and keep them motivated to sell our products, our ability to sell our products and our business, financial
condition, results of operations and prospects will be harmed.
A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and
risks.
We anticipate increasing our sales effor
f
ts to U.S. and for
f
eign, fed
f
eral, state and local governm
r
ental customers in the
future. Sales to government entities are subje
b ct to a number of risks. Selling to government entities can be highly compe
m
titive,
29
expensive and time consuming, often requiring significant upfront time and expense without any assurance that these effor
f
ts
will generate a sale. The substantial m jajority o
t
f our sales to date t g
o governm
r
ent entities have been made indirect yly thro g
ugh our
channel partners. Government certific
f
tation requirements for
f
products like ours may c
a
hange and, in doing so, restrict our ability
to sell into the government sector until we have attained revised certifications. Government demand and payment for our
products and services may be affe
f cted by publ
u ic sector budgetary c
r
ycles and funding aut
a horizations, with fun
f
ding reductions or
delays adversely affec
f
ting public sector demand for our products and services. Government entities may have statutory,y
contra
t ctua
t
l or other legal rights to terminate contracts with our distributors and resellers for convenience or due to a defaul
a t.
Selling to government entities requi
q res us to compl
m y with various regulations that are not applicable to sales to non-governm
r
ent
entities, including regulations that may r
a
elate to pricing, prohibitions against use of certain for
f
eign components in our products
and services, anti-corrup
r
tion and other matters. The U.S. governm
r
ent may require certain products that it purchases to be
manufactur
t
ed in, or may require that products it purchases contain a certain threshold of “domestic origin” components from,
the U.S. and other relatively high-cost manufactur
t
ing locations, and we may not manufactur
t
e all produc
d
ts in locations that meet
these requi
q rements.
Complying with these regulations also requi
q res us to put in place controls and procedures to monitor compliance with
applicable regulations that may be costly or not possible. Governments also routinely investigate and audit government
contra
t ctors’ administrative processes and contract compliance. Failure to comply with the terms of our governm
r
ent contra
t cts or
applicable regulations, or an unfavorabl
a e aud
a
it, could result in the government ceasing to buy our products and services, a
reduction of revenue, fin
f es or civil or criminal liabi
a lity, a
y
ll of which could have a material adverse effect
f
on our business,
financial condition, results of operations and prospects.
We are exposed to the credit risk of our channel partners and some of our customers, which could result in material
losses.
Most of our contracts with customers are on an open credit basis, with standard paym
a
ent terms pa
p ym
a
ent terms of 30 to
90 days
a
. We m
W
onitor individual end-customer p y
ayment capa
a
bi
a li yty in granting
n such open credit arra
r ngements, seek to limit such
open credit to amounts we believe the customers can pay and maintain reserves we believe are adequate to cover exposure for
doubtful
f
accounts. We are unabl
a e to recognize revenue fro
f
m shipments until the collection of those amounts becomes
reasonably assured. Any significant delay o
a
r defau
f
lt in the collection of significant accounts receivabl
a e could result in an
increased need for us to obtain working capi
a tal fro
f
m other sources, possibly on worse terms than we could have negotiated if
we had established such worki
r ng capi
a tal resources prior to such delays or defau
f
lts. Any significant defaul
a t could adversely
affe
f ct our results of operations and delay our abi
a lity to recognize revenue.
A material portion of our sales is derived through our distributors, systems integrators and value-added resellers. Some
of our distributors, systems integrators and value-added resellers may experience financial diffi
f culties, which could adversely
affe
f ct our collection of accounts receivabl
a e. Distributors tend to have more limited financial resources than other systems
integrators, value-added resellers and customers. Distributors represent potential sources of increased credit risk because they
may be less likely to have the reserve resources required to meet payment obligations. Our exposure to credit risks of our
channel partners may increase if our channel partners and their customers are adversely affe
f cted by global or regional economic
conditions. One or more of these channel partners could delay payments or defaul
a t on credit extended to the
t
m, either of which
could materially adversely affec
f
t our business, fin
f ancial condition, results of operations and prospects.
Risks Related to Products and Services
Product quality problems, defec
f
ts, errors or vulnerabilities in our products or services could harm our reputation and
adversely affec
f
t our business, financial condition, results of operations and prospects.
We produce highly compl
m ex products that incorporate advanced technologies, including both h
t
ardware and software
technologies. Despite testing prior to their release, our products may contain undetected defects or errors, especially when first
introduced or when new versions are released. Product defec
f
ts or errors could affec
f
t the perfor
f
mance of our products, could
result in a fai
f lure of appropriate updates to be distributed or installed, could delay the development or release of new products
or new versions of products, and could result in warra
r nty claims and product liabi
a lity claims from customers. Any actua
t
l or
perceived defec
f
t, error, or vulnerability in our produc
d
ts or services, or other allegations of unsatisfactory p
r
erformance could
cause us to lose revenue or market share, increase our service costs, cause us to incur substantial costs in analyzing, correcting
or redesigning the products or otherwi
r
se addressing defects, erro
r
rs or vulnerabilities, cause us to lose significant customers,
harm our reputation and market positions, subject us to liability for
f
damages, subject us to litigation, regulatory inqui
q ries or
investigations, and divert our resources from other tasks, any one of which could materially adversely affe
f ct our business,
financial condition, results of operations and prospects.
30
From time to time, we have had to replace certain components of produc
d
ts that we had shipped and provide
remediation in response to the discovery of defects or bugs, including fai
f lures in softw
f
are protocols or defective compo
m
nent
batches resulting in reliability issues, in such products, and we may be required to do so in the future. We m
W
ay also be required
to provide ful
f l replacements or refun
f
ds for such defec
f
tive products. We c
W
annot assure you that such remediation or any of the
other circumstances described abov
a
e, including claims, litigation, or regulatory investigations, would not have a material effect
f
on our business, financial condition, results of operations and prospects.
If we do not successful
f
yly anticipate technological shifts and develop products and product enhancements that meet those
technological shifts, if those products are not made available in a time yly manner or do no g
t gain market acceptance, or fif
we do not successfully man g
age product introductions, we may not be able to compete effectively, and our ability to
generate revenue will suffe
f r.
We must continue to enhance our existing products and develop new technologies and products tha
t
t address emerging
technological trends, evolving indus
d
try s
r
tandards and changing end-customer needs. The process of enhancing our existing
products and developing new technology is complex and uncertain, and new offer
f ings require significant upfront investment
that may not result in material design improvements to existing products or result in marketable new products or costs savings
or revenue for
f
an extended period of time, if at all.
In addition, new technologies could render our existing products obsolete or less attractive to customers, and our
business, financial condition, results of operations and prospects could be materially adversely affec
f
ted if such technologies are
widely adopted. For example, customers may prefer to address their network switch requirements by licensing software
operating systems separately and placing the
t
m on “white box” hardware rather than purchasing integrated hardware produc
d
ts as
has occurre
r d in the server industry
t . Additionally, c
y
ustomers may r
a
equi
q re product upg
u
rades including higher Etherne
r
t speeds and
additional functionality to address the
t
increasing demands of the cloud computing environments.
In the past several years, we have announced a number of new produc
d
ts and enhancements to our produc
d
ts and
services, including new products in the AI Ethernet, campu
m
s workspace and network security markets. The success of our new
products depends on several fact
f
ors including, but not limited to, app
a
ropriate new product definition, the development of
product feat
f
ur
t
es that suffic
f iently meet end-user requirements, our ability to manage the risks associated with new produc
d
t
production ramp-up i
u
ssues, component costs, availability of compo
m
nents, timely completion and intro
t
duction of these products,
prompt
m
solution of any defect
f
s or bugs in the
t
se produc
d
ts, our ability to support these products, diffe
f rentiation of new products
from those of our competitors and market acceptance of these products. For exampl
m e, our new product releases will require
strong execution fro
f
m our third-party merchant silicon chip supp
u
liers to develop and release new merchant silicon chips that
satisfy e
f
nd-customer requirements, to meet expected release schedul
d es and to provide suffic
f ient quantities of these components.
If we are unabl
a e to successfully manage our produc
d
t introductions or transitions, or if we fai
f l to penetrate new marke
r
ts, as a
result of any of the
t
se or other fact
f
ors, our business, financial condition, results of operations and prospects could be adversely
affe
f cted.
Our product releases introduced new software produc
d
ts that include the capa
a
bi
a lity for disaggregation of our softwa
t
re
operating systems fro
f
m our hardware. The success of our strategy to expand our softw
f
are business is subject to a number of
risks and uncertainties including the additional development effo
f
rts and costs to create these new products or make them
compatible with othe
t
r technologies, the
t
potential for
f
our strategy to negatively impact revenue and gross margins and additional
costs associated with regulatory compliance.
We may not be able to successful
f ly anticipate or adapt to changing technology or end-customer requirements on a
timely basis, or at all. If we fail to keep up with technology changes or to convince our customers and potential customers of the
t
value of our solutions even in light of new technologies, we may lose customers, decrease or delay m
a
arke
r
t acceptance and sales
of our present and future products and servi
r ces and materially and adversely affe
f ct our business, financial condition, results of
operations and prospects.
Our products must interoperate with operating systems, softw
f
are applications and hardware that is developed by
others, and if we are unable to devote the necessary resources to ensure that our products interoperate with such
software and hardware, we may lose or fai
f l to increase market share and experience a weakening demand for our
products.
Generally, our products comprise only a part of the netwo
t
rk infrastructur
t
e and must interoperate with our customers’
existing infra
f stru
t
ctur
t
e, specifically their netwo
t
rks, servers, software and operating systems, which may be manufactur
t
ed by a
wide variety o
t
f vendors and OEMs. Our products must compl
m y with established industry standards in order to interoperate with
the servers, storage, softw
f
are and other networking equipment in the
t
network i
r
nfra
f structur
t
e such tha
t
t all systems fun
f
ction
effi
f ciently together. We depend on the vendors of servers and systems in a data center to supp
u
ort prevailing industry standards.
31
Ofte
f n, these vendors are significantly larger and more influential in driving industry standards than we are. Also, some industry
standards may not be widely adopted or implemented unifor
f
mly and competing standards may emerge that may b
a
e preferred by
our customers.
In addition, when new or updated versions of these software operating systems or app
a
lications are introduced, we must
sometimes develop updated versions of our softw
f
are so that our products will interoperate properly. We m
W
ay not accomplish
these development effo
f
rts qui
q ckly, c
y
ost-effe
f ctively or at all. These development effor
f
ts require capi
a tal investment and the
devotion of engineering resources. If we fai
f l to maintain compa
m
tibility with these systems and app
a
lications, our customers may
not be able to adequa
q
tely utilize our products, and we may lose or fail to increase market share and experience a weakening in
demand for our products, among othe
t
r consequences, which would adversely affe
f ct our business, financial condition, results of
operations and prospects.
Risks Related to Supply Chain and Manufac
f
turing
Managi g
ng the supply of our products and product components is complex. Insuffi
f cient component supp yly and inventory
ry
and the time to manufacture our products may result in lost sales opportunities or delayed revenue, while excess
inventory may harm our gross margins.
Managing our manufact
f
ur
t
ing capacity and extended supply chain is compl
m ex, and our inventory management systems
and related suppl
u
y-chain visibility tools may not enable us to effe
f ctively manage the
t
supp
u
ly of our products and product
components. Our ability to manage our suppl
u
y chain has also and could continue to be adversely affec
f
ted by other factors
including geopolitical conditions such as the Rus
R
sia-Ukraine conflict and related economic sanctions against Rus
R
sia, the Israel-
Hamas confli
f ct, the Houthi attacks on marine vessels in the Red Sea, changing international trade policies and political tensions
between China and Tai
T wan. Global geopolitical and macroeconomic uncertainties have resulted in prolonged manufact
f
ur
t
ing
and supply chain disrup
r
tions, including temporary closures of certain manufac
f
turing and supplier fac
f
ilities particularly within
China and controls on certain supplies including China's restrictions in the use of Micron produc
d
ts and its controls on metals
used in semiconduc
d
tor manufact
f
ur
t
ing such as gallium and germa
r
nium which, in turn, have caused and may c
a
ontinue to caus
a
e
shortages of, and extended lead times for, components used to manufactur
t
e our products, increases in the prices for
f
such
components, a reduction, unpredictability or interruption of supply, prioritization of component shipments to other vendors and
decommitments of orders. In addition, China impo
m
sed additional export controls on critical metals including tungsten,
tellurium, bismuth, molybdenum, and indium (and related compounds) in Februa
r
ry 2025 as part of its response to the United
States’s impo
m
sition of an additional 10% tariff on products from China. Insuffic
f ient component suppl
u
y, and increases in the time
required to manufactur
t
e our products may lead to prolonged inventory shortages, manufactur
t
ing disrupt
u ions and increased
customer lead times for
f
our products tha
t
t could result in increased cancellation of orders or loss of fut
f ur
t
e sales opportuni
t
ties
altogether as potential customers turn to competitors’ products that are readily availabl
a e. In addition, in order to meet customer
lead times, we have, and may continue to expedite the supply of compo
m
nents and make incremental investments in our supply
chain to increase our capacity for manufact
f
ur
t
ing products, which increases our product costs.
In order to reduc
d
e manufact
f
ur
t
ing lead times and plan for
f
adequa
q
te component supp
u
ly, w
y
e have issued and expect to
continue to issue purchase orders for
f
components and products that are non-cancellabl
a e and non-returnable, including purchase
commitments for
f
semiconductors as disclosed in Note 5. Commitments and Contingencies of the Notes to Consolidated
Financial Statements included in Part II, Item 8, of this Annual Report on Form 10-K. Our business is emerging fro
f
m a period
of unpr
n
ecedented global supp
u
ly chain disruptions.
Throughout this period, we made significant suppl
u
y chain investments,
including incremental purchase commitments for long lead time compon
m
ents in response to extended visibility to deployment
plans fro
f
m our customers. Although the global supply chain has shown improvement, we have had to invest in inventory to
address for
f
ecast uncertainty and expect that our invento y
ry and purchase commitments will remain volatile as we ramp n
m
ew
product introductions. In particular, we have increased our purchase commitments to respond to the rapi
a d deployment of AI
networks
r
and reduc
d
e overall lead times which will increase our working capital requi
q rements. There is n
g
o guarantee that
suppliers will meet their commitm
t ents or that actual customer demand will not be lower than our demand for
f
ecasts. As
customer lead times improve more broadly, we have seen and expect to continue to see a commensurate reduction in visibility
to customer demand and a gradual retur
t
n to a somewhat shorter demand-planning horizon. Additionally, certain customers have
and may continue to engage in cost reduction measures including reductions in capi
a tal expenditur
t
es and other effi
f ciency effo
f
rts
which may result in a cancellation of orders or reduc
d
e demand for
f
our products. We e
W
stablish a liabi
a lity for non-cancellabl
a e,
non-returnable purchase commitments with our compo
m
nent inventory s
r
uppliers for quantities in excess of our demand forecasts,
or for products that are considered obsolete. In addition, we establ
a ish a liability and reimburse our contra
t ct manufactur
t
er for
component inventory purchased on our behalf that has been rendered excess or obsolete due
d
to manufactur
t
ing and engineering
change orders, or in cases where inventory levels greatly exceed our demand forecasts. The magnitud
t
e of the
t
se balances,
combined with a reduc
d
tion in customer demand-planning horizons and shifti
f ng produc
d
t priorities, has resulted in increased risk
that we may not be able to sell all of this inventory, w
y
hich in turn has resulted, and may in the fut
f ur
t
e result, in additional excess
32
and obsolete inventory-
r
related charges. Our non-cancellabl
a e commitments and the
t
cash deposits to secure our purchases with
our contract manufactur
t
ers are disclosed in Note 5. Commitments and Contingencies of the Notes to Consolidated Financial
Statements included in Part II, Item 8, of this Annual Report on Form 10-K. If we ultimately determine that we have excess or
obsolete inventory,
r
we may h
a
ave to reduc
d
e our prices and write down inventory to its estimated realizabl
a e value, which in turn
could result in lower gross margins. If we are unable to effe
f ctively manage our suppl
u
y and inventory,
r
our business, financial
condition, results of operations and prospects could be adversely affect
f
ed.
Because we depend on third-party manufacturers to build our products, we are susceptible to manufac
f
turing delays and
pricing flu
f
ctuations that could prevent us fro
f
m shipping end-customer orders on time, if at all, or on a cost-effective
basis, which may result in the loss of sales and customers.
We depend on third-party contract manufac
f
turers to manufactur
t
e our product lines. A significant portion of our cost f
of
revenue consists of p y
ayments to these third-party contract manufac
f
turers. Our reliance on these third-par yty contra tct
manufactur
t
ers reduc
d
es our control over the
t
manufactur
t
ing process, quality assurance, product costs and product supp yly and
timi g
ng, which exposes us to operational risks includi g
ng their abi
a lity to obtain in a time yly manner suffi
f cient compo
m
nents for
f
our
products and to ramp m
m
anufac
f
turi g
ng suffic
f ient yly to meet our customer demand. Our reliance on contract manufactur
t
ers also
yields the potential for the
t
ir infringement, misappropriation or other violation of thi
t rd-party intellectual property rights in the
manufactur
t
ing of our products or the
t
ir infringement, misappropriation or other violation of our intellectual property rights in
the manufact
f
ur
t
ing of other customers’ produc
d
ts. If we are unable to manage our relationships with our third-party contra
t ct
manufactur
t
ers effect
f
ively, or if these thi
t rd-party manufactur
t
ers suffe
f r delays or disrupt
u ions or quality contro
t
l problems in their
operations, experience increased manufact
f
ur
t
ing lead times, capacity constraints or fai
f l to meet our future requirements for
timely delivery, o
y
ur ability to ship products to our customers would be severely impaired, and our business, fin
f ancial condition,
results of operations and prospects would be seriously harmed.
To the extent tha
t
t our produc
d
ts are manufac
f
tured at fac
f
ilities in for
f
eign countri
t es, we may be subject to additional risks
associated with complying with local rules and regulations in those jurisdictions. For exampl
m e, due to the COVID-19 pandemic,
some of our contra
t ct manufactur
t
ers experienced temporary closures and labo
a
r shortages. Shelter in place orders, fact
f
ory
r
closures or reductions in staffin
f g at our manufactur
t
ing sites would result in material disruptions, increased lead times and
supply shortages of our produc
d
ts. Due to their existence in foreign locations, our contract manufactur
t
ers may also be subject to
or become subject to new or increased tariffs
f
which, if suffic
f iently high, may affe
f ct the profitabi
a lity of these operations and may
require relocation to new locations, moves which may require bearing associated costs. There is no guarantee that any contra
t ct
manufactur
t
ing location may not be targeted by tariffs
f
or othe
t
r trade measures imposed by the United States or another country.
Our contract manufactur
t
ers typ
t
ically fulfil
f l our suppl
u
y requi
q rements on the basis of individual orders. We do not have
long-term c
r
ontracts with our third-party manufact
f
ur
t
ers tha
t
t guarantee capa
a
city, t
y he continuation of particular pricing terms or
the extension of credit limits. Accordingly, t
y hey are not obligated to continue to fulfil
f l our suppl
u
y requi
q rements, which could
result in suppl
u
y shortages, and the prices we are charged for
f
manufact
f
ur
t
ing servi
r ces could be increased on short notice. For
exampl
m e, a competitor could place large orders with the
t
third-party m
t
anufac
f
turer, thereby utilizing all or substantially all of
such third-party m
t
anufac
f
turer’s capacity and leaving the manufactur
t
er little or no capa
a
city to fulfil
f l our individual orders
without price increases or delays, or at all. Our contract with one of our contra
t ct manufactur
t
ers permits it to terminate the
t
agreement for
f
convenience, subject to prior notice requi
q rements. We may not be able to develop alterna
r
te or second contract
manufactur
t
ers in a timely manner.
If we add or change contract manufact
f
ur
t
ers or change any manufactur
t
ing plant locations within a contract
manufactur
t
er network,
r
we would add additional compl
m exity and risk to our supply chain management and may increase our
working capital requirements. Ensuring a new contract manufactur
t
er or new plant location is qualifie
f d and has suffi
f cient
manufactur
t
ing capacity to manufact
f
ur
t
e our products to our standards and indust y
ry requirements could take significant effo
f
rt and
be time consuming and expensive, and a y
ny delays or failures to adequa
q
te yly ramp production to meet our customer dema d
nd
could n g
egatively impact our business, financial condition, results of operations and prospects. A y
ny addition or change in
manufactur
t
ers m y
ay be extremely costly, time consuming and we may n
a
ot be able to do so successful
f lyly. Furthermo
r
re, when we
introduce new products, it could take time for manufac
f
turing to ramp production and ful
f fill customer demand.
In addition, we may be subj
u ect to additional significant challenges to ensure that qua
q
lity, processes and costs, among
other issues, are consistent with our expectations and those of our customers. A new contra
t ct manufactur
t
er or manufactur
t
ing
location may not be abl
a e to scale its production of our produc
d
ts at the volumes or quality we require. This could also adversely
affe
f ct our abi
a lity to meet our schedul
d ed product deliveries to our customers, which could damage our customer relationships
and cause the loss of sales to existing or potential customers, late delivery p
r
enalties, delayed revenue or an increase in our costs
which could adversely affec
f
t our gross margins. This could also result in increased levels of inventory subj
u ecting us to
increased risk of excess and obsolete charges that could have a negative impact on our operating results.
33
Any production interru
r
pt
u ions, labor shortages or disrupt
u ions for any reason, including those noted above, as well as a
natural disaster, epidemic, war, capacity shortages, adverse results from intellectual property litigation or quality problems, at
one of our manufac
f
turing partne
t
rs would adversely affec
f
t sales of our product lines manufac
f
tured by tha
t
t manufact
f
ur
t
ing partner
and adversely affe
f ct our business, financial condition, results of operations and prospects.
We base our inventory requirements on our for
f
ecasts of future sales. If these demand for
f
ecasts materially change from
our initial projections, we may procure inventory that we may be unable to use in a timely manner or at all.
We and our contract manufactur
t
ers procure components and build our products based on our forecasts. These for
f
ecasts
are based on estimates of future demand for our products, which are in tur
t
n b
r
ased on historical trends and analysis fro
f
m our
sales and marketing organizations, adjusted for
f
overall marke
r
t conditions and other factors. In order to address supply chain
shortages and extended lead times, we have entered, and may continue to enter, into significant purchase commitments with our
contra
t ct manufactur
t
ers and suppliers, with issuance of non-cancellabl
a e purchase orders for
f
such commitments. There is no
guarantee that suppliers will meet their commitments or that actual customer demand will directly match our demand forecasts.
If our for
f
ecasts materially change from our initial projections, customers' orders are cancelled or if we otherwise do not need
such inventory, we may under- or over-procure inventory,
r
which could materially adversely affect
f
our business, financial
condition and results of operations.
Interruptions or delays in shipments could cause our revenue for the applicable period to fall below expected levels.
We have been and could be subject to manufactur
t
ing disruptions and supply chain delays in the fut
f ur
t
e. This places
significant pressure on supply chain management, manufactur
t
ing, inventory and quality control management, shipping and
trade compliance. Conseque
q
ntly, t
y
his has hindered and may continue to hinder our abi
a lity to for
f
ecast component supply,
manufactur
t
ing capacity and timing of inventory r
r
eceipts. A significant interrup
r
tion in these critical fun
f
ctions has resulted and
could continue to result in delayed order ful
f fillment or cancellation of orders, which may negatively impact our relationships
with our customers, reduc
d
e fut
f ur
t
e sales or otherwise adversely affe
f ct our business, financial condition, results of operations and
prospects and result in a decline in the market price of our common stock.
Risks Related to Intellectual Property and Other Proprietary Rights
Assertions by third parties of infringement, misappropriation or other violations by us of their intellectual property
rights, or other lawsuits asserted against us, could result in significant costs and substantially harm our business,
financial condition, results of operations and prospects.
Patent and other intellectual property rights disputes are common in the network i
r
nfra
f structur
t
e, network security and
Wi-Fi industries and have resulted in protracted and expensive litigation for
f
many companies. Many companies in the network
r
infrastruc
r
ture, network security and Wi-
W Fi industries, including our compe
m
titors and other third parties, as well as non-
practicing entities, own large numbers of patents, copyrights, trademarks, trade secrets and other intellectua
t
l property r
t
ights,
which they may use to assert claims of infri
f ngement, misappropriation, or othe
t
r violations of intellectua
t
l property rights against
us. From time to time, they have or may in the future also assert such claims against us, our customers or channel partners
whom we typically indemnify a
f
gainst claims that our products infri
f nge, misapp
a
ropriate or otherwise violate the intellectua
t
l
property rights of third parties. For exampl
m e, we have previously been involved in litigation with Cisco and Optum
t
Soft, and are
currently involved in lit gigation with WSOU Investments LLC (“WSOU”), which is described in the “L g
egal Proceedi g
ngs”
subheadi g
ng in Note 5. Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II,
Item 8, of this Annual Report on Form 10 K
-K.
As the numb
m er of products and competitors in our market increases and overlaps occur or if we enter into new markets,
claims of infringement, misappropriation and othe
t
r violations of intellectua
t
l property rights may increase. Any claim of
infringement, misappropriation or other violations of intellectual property rights by a third-party, even those without merit,
could cause us to incur substantial costs defen
f
ding against the claim, distract our management fro
f
m our business and requi
q re us
to cease use or practice of such intellectua
t
l property. In addition, some claims for
f
patent infringement may relate to
subcomponents that we purchase fro
f
m third parties. If these third parties are unabl
a e or unwilling to indemnify u
f
s for
f
these
claims, we could be substantially harmed.
The patent portfol
f ios of most of our competitors are larger than ours. This disparity may increase the
t
risk that our
competitors may sue us for
f
patent infringement and may limit our ability to counterclaim for
f
patent infringement or settle
through patent cross-licenses. In addition, fut
f ur
t
e assertions of patent rights by third parties, and any resulting litigation, may
a
involve patent holding companies or other adverse patent owners who have no relevant produc
d
t revenue and against whom our
own patents may therefore provide little or no deterre
r nce or protection. We cannot assure you that we are not infringing,
misapp
a
ropriating or otherwise violating any third-party intellectual property rights.
34
The third-party asserters of intellectua
t
l property rights infri
f ngement claims may be unreasonable in their demands, or
may simpl
m y refus
f
e to settle, which could lead to expensive settlement payments, longer periods of litigation and related
expenses, additional burdens on empl
m oyees or other resources, distraction fro
f
m our business, supp
u
ly stoppages and lost sales.
An adverse outcome of a dispute may requi
q re us to pay s
a
ubstantial damages or penalties including treble damages if
we are fou
f
nd to have willfully infri
f nged a third-party’s patents; cease making, licensing, using or importing into the U.S.
products or services that are alleged to infringe, misappropriate or violate the intellectua
t
l property rights of others; expend
additional development resources to attempt to redesign our products or services or othe
t
rwise to develop non-infringing
technology, w
y
hich may n
a
ot be successful
f ; enter into potentially unfavorabl
a e royalty o
t
r license agreements in order to obtain the
t
right to use necessary technologies or intellectua
t
l property rights; and indemnify o
f
ur partners and other third parties. Any
damages, penalties or royalty obligations we may become subject to as a result of an adverse outcome, and any third-party
indemnity we may need to provide, could harm our business, fin
f ancial condition, results of operations and prospects. Royalty or
licensing agreements, if requi
q red or desirable, may be unavailable on terms acceptable to us, or at all, and may require
significant royalty payments and othe
t
r expenditures. Furthe
t
r, there is little or no infor
f
mation publicly available concerni
r ng
market or fair values for license fees, which can lead to overpa
r
yment of license or settlement fees. In addition, some licenses
may be non-exclusive, and therefor
f
e our competitors may have access to the same technology licensed to us. Supp
u
liers subje
b ct
to third-party intellectua
t
l property rights infri
f ngement claims also may choose or be forced to discontinue or alter their
arrangements with us, with little or no advance notice to us. Any of the
t
se events could seriously harm our business, financial
condition, results of operations and prospects.
In the event that we are fou
f
nd to infringe, misappropriate or violate any third-party intellectua
t
l property rights, we
could be enjoined, or subj
u ect to othe
t
r remedial orders that would prohibit us, fro
f
m making, licensing, using or importing into
the U.S. or elsewhere such produc
d
ts or services. In order to resume such activities with r
t
espect to any affect
f
ed produc
d
ts or
services, we (or our compon
m
ent suppliers) would be required to develop technical redesigns that no longer infringe,
misapp
a
ropriate or violate the
t
third-party i
t
ntellectua
t
l property right. In any effo
f
rts to develop technical redesigns for
f
these
products or services, we (or our compo
m
nent suppliers) may b
a
e unabl
a e to do so in a manner that does not continue to infringe the
t
third-party intellectua
t
l property right or that is acceptabl
a e to our customers. These redesign effor
f
ts could be extremely costly
and time consuming as well as disrupt
u ive to our other development activities and distracting to management. Moreover, such
redesigns could require us to obtain app
a
rovals from the court or administrative body to resume the activities with respect to
these affect
f
ed solutions. We may not be successful
f
in our effor
f
ts to obtain such approvals in a timely manner, or at all. Any
failure to effec
f
tively redesign our solutions or to obtain timely approval of those redesigns by a court or administrative body
may cause a disrupt
u ion to our product shipments and materially and adversely affec
f
t our business, prospects, reputation, results
of operations, and financial condition. For exampl
m e, in two prior investigations brought by Cisco in the International Tra
T de
Commission (“ITC”), we were subj
u ected to remedial orders that prohibited us fro
f
m importing and selling afte
f r importation any
products the ITC found to infringe Cisco’s patents. As a result, we were required to redesign certain aspects of our produc
d
ts and
obtain U.S. Customs and Border Protection’s app
a
roval of those redesigns befor
f
e we could continue to import those products
into the United States.
If we are unable to protect our intellectual property rights, our competitive position could be harmed or we could be
required to incur signific
f ant expenses to enfor
f
ce our rights.
We depend on our abi
a lity to protect our proprietary technology. We r
W
ely on trade secret, patent, copyright and
trademark laws and confid
f entiality agreements with employees and thi
t rd parties, all of which offe
f r only limited protection.
The process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all
necessary or desirabl
a e patent appl
a
ications at a reasonable cost or in a timely manner. We may c
a
hoose not to seek patent
protection for
f
certain innovations and may choose not to pursue patent protection in certain jurisdictions. Further, we do not
know whether any of our pending patent applications will result in the issuance of patents or whether the examination process
will require us to narrow our claims. To t
T
he extent that additional patents are issued fro
f
m our patent applications, which is not
certain, they may be contested, circumvented or invalidated in the future. Moreover, the rights granted under any issued patents
may not provide us with proprietary protection or competitive advantages, and, as with any technology, c
y
ompe
m
titors may b
a
e
able to develop similar or supe
u
rior technologies to our own now or in the future. In addition, we rely on confidentiality or
license agreements with third parties in connection with the
t
ir use of our products and technology. There is no guarantee that
such parties will abi
a de by the terms of such agreements or that we will be able to adequa
q
tely enforce our rights, in part becaus
a
e
we rely on “shrink-wrap” or other unsigned licenses in some instances.
We have not registered our trademarks in all geographic markets. Failure to secure those registrations could adversely
affe
f ct our abi
a lity to enforce and defend our trademark rights and result in indemnific
f ation claims. Further, any claim of
infringement by a thi
t rd-party, e
y
ven those claims without merit, could cause us to incur substantial costs defending against such
35
claim, could divert management attention from our business and could require us to cease use or practice of such intellectual
property in certain geographic marke
r
ts.
Despite our effor
f
ts, the
t
steps we have taken to protect our proprietary r
r
ights may not be adequa
q
te to preclude
misapp
a
ropriation of our proprietary information or infri
f ngement of our intellectual property rights, and our ability to police
such misapp
a
ropriation or infringement or any other violation is uncertain, particularly in countries outside of the United States.
Detecting and protecting against the unaut
a horized use of our products, technology and proprietary rights is expensive,
diffic
f ult and, in some cases, impossible. Litigation may b
a
e necessary in the fut
f ur
t
e to enfor
f
ce or defend our intellectua
t
l propertyt
rights, to protect our trade secrets or to determi
r
ne the validity and scope of the proprietary r
r
ights of others. Such litigation could
result in subs
u
tantial costs and diversion of management resources, either of which could harm our business, financial condition,
results of operations and prospects, and there is no guarantee that we would be successful. Furthermore, many of our curre
r nt
and potential competitors have the
t
ability to dedicate substantially greater resources to protecting the
t
ir technology or
intellectua
t
l property rights than we do. Accordingly, despite our effo
f
rts, we may not be able to prevent third parties fro
f
m
infringing or misapp
a
ropriating our intellectua
t
l property rights, which could result in a subs
u
tantial loss of our market share.
We rely on the availability of licenses to third-party software and other intellectual property.
Many of our products and services include softw
f
are or other intellectual property licensed from third parties, and we
otherwise use softwa
t
re and other intellectua
t
l property l
t
icensed fro
f
m third parties in our business. This exposes us to risks over
which we may have little or no control. For example, a licensor may h
a
ave diffi
f culties keeping up with technological changes or
may stop supporting the softw
f
are or other intellectua
t
l property t
t
hat it licenses to us. Also, it will be necessary in the fut
f ure to
renew licenses, expand the scope of existing licenses or seek new licenses, relating to various aspects of these products and
services or otherwise relating to our business, which may r
a
esult in increased license fees
f
. These licenses may not be availabl
a e
on acceptabl
a e terms, if at all. In addition, a third-party may assert that we or our customers are in breach of the terms of a
license, which could, among other things, give such thi
t rd-party the right to terminate a license or seek damages fro
f
m us, or
both. The inability to obtain or maintain certain licenses or other rights or to obtain or maintain such licenses or rights on
favorabl
a e terms, or the need to engage in litigation regarding these matters, could result in delays in releases of products and
services and could otht erwi
r
se disrup
r
t our business, until equi
q valent technology can be identifie
f d, licensed or developed, if at all,
and integrated into our products and services or othe
t
rwise in the conduc
d
t of our business. Moreover, the inclusion in our
products and services of softwa
t
re or other intellectua
t
l property l
t
icensed fro
f
m thi
t rd parties on a nonexclusive basis may limit our
ability to diffe
f rentiate our produc
d
ts from those of our competitors. Lastly, o
y
ur use of third-party technology may subj
u ect us to
claims of infringement which could result in a material adverse effe
f ct on our business, financial condition, results of operations
and time-intensive litigation and for which we may n
a
ot be eligible for indemnification protections. Any of these events could
have a material adverse effe
f ct on our business, financial condition, results of operations and prospects.
Our products contain third-party open source softw
f
are components, and fai
f lure to comply with the terms of the
underlying open source software licenses could restrict our ability to sell our products.
Our products contain softw
f
are modules licensed to us by third-party a
t
ut
a hors under “open source” licenses. Use and
distribution of open source softwa
t
re may e
a
ntail greater risks than use of third-party c
t
ommercial softw
f
are, as open source
licensors generally do not provide warranties or other contractua
t
l protections regarding intellectua
t
l property rights
infringement, misappropriation or violation claims or the quality of the code. Some open source licenses contain requirements
that we make availabl
a e source code for
f
modifications or derivative works we create based upon the type of open source
softwa
t
re that we use. If we combine our softwa
t
re with open source software in a certain manner, we could, under certain open
source licenses, be required to release portions of the source code of our softw
f
are to our customers or the
t
public more generally.
This would allow our competitors to create similar produc
d
ts with lower development effo
f
rt and time and ultimately could result
in a loss of product sales for us.
Although we monitor our use of open source softw
f
are to avoid subje
b cting our products to conditions we do not intend,
the terms of many open source licenses have not been interpreted by U.S. courts, and the
t
se licenses could be construe
r
d in a way
a
that could impose unanticipated conditions or restrictions on our abi
a lity to commercialize our products. Moreover, we cannot
assure you that our processes for
f
controlling our use of open source softw
f
are in our produc
d
ts will be effe
f ctive. If we are held to
have breached the terms of an open source softw
f
are license, we could be required to seek licenses fro
f
m third parties to continue
offe
f ring our produ
d cts on terms
r
that are not economically feasible, to re-engineer our products, to discontinue the sale of our
products if re-engineering could not be accomplished on a timely basis or to make generally available, in source code for
f
m, our
u
proprietary c
r
ode, any of which could adversely affe
f ct our business, financial condition, results of operations and prospects.
We provide access to our software and other selected source code to certain partners, which creates additional risk that
our competitors could develop products that are similar to or better than ours.
36
Our success and abi
a lity to compete depend substantially upon our internally developed technology, which is
incorporated in the source code for our produc
d
ts. We s
W
eek to protect the source code, design code, documentation and other
information relating to our software, under trade secret, patent and copyright laws. However, we have chosen to provide access
to selected source code of our softw
f
are to several of our partners for
f
co-development, as well as for
f
open appl
a
ication APIs,
formats and protocols. Though we generally control access to our source code and other intellectua
t
l property and enter into
confid
f entiality or license agreements with such partners as well as with our employees and consultants, this combi
m nation of
procedural and contractua
t
l safeg
f
uards may be insuffic
f ient to protect our trade secrets and other rights to our technology. Our
protective measures may be inadequa
q
te, especially because we may n
a
ot be able to prevent our partners, employees or
consultants fro
f
m violating any agreements or licenses we may have in place or abu
a
sing their access granted to our source code.
Impr
m
oper disclosure or use of our source code could help competitors develop products similar to or better than ours.
Risks Related to Litigation
We may become involved in litigation that may materially adversely affect
f
us.
From time to time, we are involved in legal proceedings relating to matters incidental to the ordinary c
r
ourse of our
business, including patent, copyright, commercial, product liabi
a lity, e
y
mployment, class action, whistleblower and other
litigation, in addition to governm
r
ental and other regulatory i
r
nvestigations and proceedings. Such matters can be time-
consuming, divert management’s attention and resources, cause us to incur signific
f ant expenses or liability and/or requi
q re us to
change our business practices. For exampl
m e, we were previously involved in litigation with Cisco and OptumSoft.
f
In addition,
on November 25, 2020, WSOU filed a lawsuit against us in the Wes
W tern District of Texas asserting tha
t
t certain of our produc
d
ts
infringe three WSOU patents. WSOU's allegations are directed to certain featur
t
es of our wireless and switching products.
WSOU seeks remedies including monetary damages, attorney’s fees and costs. On February 4
r
, 2021, we filed an answer
denying WSOU's allegations. On November 5, 2021, the
t
case was transferred to the Northern District of California. On March
30, 2022, WSOU dismissed one of the patents with pr jejudice, removing Arista wireless products fro
f
m thos
t
e accused of
infringement. On July 1, 2022, the court st y
ayed the case pendi g
ng the resolution of an inter partes review of one of the
t
patents-
in-suit. On May 3
a
0, 2023, the US Patent Trial and Appeal Board (“PTAB”) rul
r ed all challenged claims in the inter partes review
unpa
n
tentable. The district court case remains st y
ayed pending appe
a
al and/or fina r
l esolution of the PTAB
T
ruling. We i
W
ntend to
vigorous yly defend g
against the claims br
g
ought g
against us by WSOU. However, we cannot be certain that a y
ny of WSOU's claims
will be resolved in our fav
f
or, r g
egardless of the
t
merits of those claims. Any adverse litigation ruli g
ng could result in a signific
f ant
damages award g
against us and inju
n nctive relief.
Because of the p totential risks, expenses and uncertainties of litigation, we may, f
y ro
f
m time to time, settle disputes, even
where we have meritorious claims or defenses. Although we have insurance which may provide coverage for some kinds of
claims we may f
a
ac
f
e, that insurance may not cover some kinds of claims or type
y
s of relief and may not be adequate in a
particular case. Because litigation is inherently unpredictable, we cannot assure you tha
t
t the results of any of these actions will
not have a material adverse effe
f ct on our business, financial condition, results of operations and prospects.
For more infor
f
ma
r
tion regarding the litigation in which we have been involved, see the
t
“Legal Proceedings”
subheading in Note 5. Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II,
Item 8, of this Annual Report on Form 10-K.
Risks Related to Cybersecurity and Data Privacy
Defects, errors or vulnerabilities in our products, the failure of our products to detect security breaches or incidents, the
misuse of our products or the risks of product liability could harm our reputation and adversely impact our operating
results.
Our products, services and interna
r
l network systems could become a target for
f
security attacks, including attacks
specifically designed to disrupt
u
our business and our customers and introduce malicious software and attacks by state sponsors.
If our products, services or internal networks, system or data are or are perceived to have been compromised, our reputation
may be damaged and our financial results may be negatively affect
f
ed.
Organizations are increasingly subje
b ct to a wide variety of attacks on the
t
ir networks, systems, endpoints, products and
services, and no security solution, including our security platform, can address all possible security threats or block all methods
of penetrating a network, products and services or otherwise perpe
r
trating a security incident. Additionally, any defec
f
ts, errors,
or vulnerabi
a lities in our security platfor
f
m or in the hardware upon which it is deployed, including a failure to implement
updates to such platfor
f
m,
r
could tempo
m
rarily or permanently limit our detection capabilities and expose our end-customers’
networks
r
, leaving their netwo
t
rks unprotected against the
t
latest security threats. If customers of our security platform do suffer
f
a
data security incident or data breach, even if it is not attributable to a fai
f lure of our platfor
f
m to identify a
f
ny threat or
37
vulnerabi
a lity, c
y
ustomers may b
a
elieve that our platform failed to detect a thr
t
eat or vulnerabi
a lity, w
y
hich could harm our reputation
or negatively affe
f ct our fin
f ancial results.
The classific
f ations of application type, virus, spyware, vulnerability exploits, data, or URL categories by our security
platform may a
a
lso fal
f sely detect, report and act on applications, content, or threats tha
t
t do not actually exist. These fal
f se
positives may i
a
mpair the perceived reliabi
a lity of our security platform and may therefor
f
e adversely impact marke
r
t acceptance of
our security platfor
f
m.
r
Any such fal
f se identification of impo
m
rtant fil
f es or applications could result in damage to our reputation,
negative publicity, l
y
oss of channel partners, end-customers and sales, increased costs to remedy a
d
ny problem, and costly
litigation.
Breaches of our cybersecurity systems, or other security or privacy breaches or incidents with respect to our products,
services, networks, systems, or data, could degrade our ability to conduct our business operations and deliver products
and services to our customers, cause vulnerabilities in our products and services, and subject us to regulatory
enforcement actions and or fin
f
es or liabilities for
f
damages incurred by our customers or partners, delay our ability to
recognize revenue, compromise the integrity of our software products and our networks, systems, and data, result in
signific
f ant data losses and the theft of our intellectual property, damage our reputation, expose us to liability to third
parties and require us to incur significant additional costs to maintain the security of our networks and data.
We increasingly depend upon
u
our IT systems to conduc
d
t virtually all of our business operations, ranging from our
internal operations and product development activities to our marketing and sales effor
f
ts and communications with our
customers and business partne
t
rs. Compu
m
ter programmers or other persons or organizations may a
a
ttempt to penetrate our
network s
r
ecurity, o
y
r that of our website or systems, and access, use, or obtain confid
f ential, personal, or otherwise sensitive or
proprietary i
r
nfor
f
ma
r
tion about us or our customers, or via the
t
se or other methods, including denial of service attacks and other
cyberattacks, disrup
r
t or cause interrup
r
tions of our systems, produc
d
ts, servi
r ces and networks
r
. In addition, geopolitical tensions
and conflicts, such as the
t
Russia-Ukra
k ine conflict, the Israel-Hamas hostilities and deteriorating relations with China, may
create a greater risk of cyberattacks against our compa
m
ny and our manufactur
t
ers, supp
u
liers, logistics providers, banks and other
business partners. Becaus
a
e the
t
techniques used to access, disrup
r
t, or sabot
a
age networks and systems change freque
q
ntly and may
not be recognized until launched against a target, we may be unabl
a e to anticipate these techniques. In addition, our software and
sophisticated hardware and operating system software and appl
a
ications that we develop or procure from third parties may
contain vulnerabi
a lities or defec
f
ts in design or manufactur
t
e, including “bugs,” virus
r
es, ransomware and other malware, and other
problems that could cause the softw
f
are or appl
a
ications to fail or otherwise to unexpectedly interfer
f e with the operation of the
system or that could result in a breach of or disruption to our systems, products, servi
r ces or networks or the systems, networks,
products, or services of third parties that support us and our services. We a
W
lso fac
f
e risks of others gaining unaut
a horized access
to our products and services and introducing malicious softw
f
are, and such malicious softwa
t
re, defec
f
ts, bugs or vulnerabilities,
or othe
t
r defect
f
s, bugs, or vulnerabi
a lities in our products or services may result in fai
f lures or interru
r
pt
u ions of our products or
services or expose our end-customers' networks, leaving their networks unpr
n
otected against the latest security threats.
We have also outsourced some business functions to third parties, including our manufac
f
turers, logistics providers, and
cloud service providers, and our business operations also depend, in part, on the success of these third parties’ own
cybersecurity measures. Similarly, w
y
e rely upon distributors, resellers and system integrators to sell our products and our sales
operations depend, in part, on the reliabi
a lity of their cybersecurity measures. Additionally, we depend upon our employees to
appropriately handle confidential, sensitive, and proprietary data and comply with the securi yty measures we have institut
t ed to
prevent exposure of our networks
r
and systems to securi yty breaches and incidents, the unauthorized access to our products and
the loss of data. We and the
t
afor
f
ementioned third parties also fac
f
e the risk of ransomware and other malicious softwa
t
re,
phishing schemes and other social engineering metho
t
ds, fra
f ud and other malfeas
f
ance, cybersecurity thr
t
eats from state sponsors
and other actors, and intentional or negligent acts or omissions of empl
m oyees and contractors. Furthermo
r
re, our acquisition of
Awake Security and our provision of its NDR platform may result in us being a more attractive target for
f
such attacks.
Accordingly, if our cybersecurity systems and measures or those of any of the aforementioned thi
t rd parties fai
f l to protect
against sophisticated cyber-attacks, other means of effe
f ctua
t
ting security breaches or incidents, interrupt
r
ions or other disrupt
u ions
of our or our third-party s
t
ervi
r ce providers’ systems, networks
r
, products, or servi
r ces, the mishandling of data by employees and
contra
t ctors, the corrupt
u ion, loss, or mishandling or other unaut
a horized processing of data by unaut
a horized persons, or any other
means of unaut
a horized access to, or use of, our manufact
f
ur
t
ing process, products, services, netwo
t
rks, systems, or data that we or
such third parties maintain, operate, or process, our abi
a lity to conduc
d
t our business effect
f
ively could be damaged in a number of
ways, including:
•
sensitive data regarding our business or our customers, including intellectual property and other proprietary data, could
be stolen or lost, modifie
f d, rendered unavailable, or otherwi
r
se assessed, used, or processed in autho
t
rized manners;
•
our electronic communications systems, including email and other methods, or other systems, and access to or
availabi
a lity of data, could be disrupted or harmed, and our abi
a lity to conduc
d
t our business operations could be seriously
38
damaged until such systems or data access and availabi
a lity can be restored, which we may be unabl
a e to achieve in a
prompt
m
manner or at all;
•
our ability to process customer orders and electronically deliver produc
d
ts and services could be degraded, and our
distribution channels could be disrupt
u ed, resulting in delays in revenue recognition;
•
defect
f
s and security vulnerabilities could be intro
t
duced into our softwa
t
re, thereby damaging the reputation and
perceived reliabi
a lity and security of our products and potentially making the data systems of our customers vulnerabl
a e
to data loss and security breaches and incidents;
•
our manufactur
t
ing process, products, services, supply chain, network systems and data could be corrup
r
ted or otherwise
disrupt
r
ed; and
•
personal data of our customers, employees, contractors, and business partners could be lost, accessed, obtained,
modified, disclosed or used without authorization, corrupt
r
ed or made unavailable, or otherwise compromised.
Should any of the abo
a
ve events occur, or be perceived to occur, we could be subj
u ect to significant claims for liabi
a lity
from our customers and others and regulatory investigations and actions from governmental agencies, and we could be required
to expend significant capi
a tal and othe
t
r resources to remediate and otherwise address any security breach or incident, including
to notify i
f
ndividuals, entities, or regulatory b
r
odies and to implement measures in an effor
f
t to prevent further breaches or
incidents. In addition, our abi
a lity to protect our intellectual property rights could be compromised and our reputation and
competitive position could be signific
f antly harmed. Also, the
t
regulatory and contractua
t
l actions, proceedings, litigation,
investigations, fin
f es, penalties and liabi
a lities relating to any actua
t
l or perceived data breaches or security incidents that result in
losses of, d
f
amage or destruc
r
tion of, o
f
r unaut
a horized access to or acquisition of, credit card information or other personal or
sensitive data of users of our services can be significant in terms of fines and reputational impact and necessitate changes to our
business operations tha
t
t may be disrupt
u ive to us. Additionally, we could incur significant costs in order to upgrade our
cybersecurity systems and measures in an effo
f
rt to prevent network and system disrupt
u ions and other security breaches and
other incidents. Even the
t
perception of inadequate security may damage our reputation and negatively impact our ability to win
new customers and retain existing customers. Consequently, o
y
ur financial performance and results of operations could be
adversely affec
f
ted by any of the for
f
egoing type
y
s of security breaches, incidents, vulnerabi
a lities, or other matters, or the
perception that any of them have occurred.
In addition, we cannot assure that any limitation of liability provisions in our customer agreements, contra
t cts with
third-party vendors and service providers or other contracts would be enforceabl
a e or adequate or would otherwise protect us
from any liabi
a lities or damages with respect to any particular claim relating to a security breach or other security-related matter.
We also cannot be certain that our insurance coverage will be adequa
q
te for data handling or data security liabi
a lities actua
t
lly
incurred, that insurance will continue to be availabl
a e to us on economically reasonabl
a e terms, or at all, or that any future claim
will not be excluded or otherwise be denied coverage by any insurer. The successful assertion of one or more large claims
against us tha
t
t exceed availabl
a e 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 effe
f ct on our
business, including our reputation, fin
f ancial condition and operating results.
Risks Related to Accounting, Compliance, Regulation and Tax
T
If we fail to maintain effe
f ctive internal control over fin
f
ancial reporting in the future, the accuracy and timing of our
financial reporting may be adversely affec
f
ted.
Assessing our processes, procedures and staffi
f ng in order to improve our interna
r
l control over financial reporting is an
ongoing process. Preparing our financial statements involves a number of complex processes, many of which are done
manually and are dependent upon individua
d
l data input or review. These processes include, but are not limited to, calculating
revenue, inventory c
r
osts and the preparation of our statement of cash flo
f ws. While we continue to automate our processes and
enhance our review controls to reduc
d
e the likelihood for errors, we expect that for the
t
foreseeabl
a e fut
f ur
t
e many of our processes
will remain manually intensive and thus subje
b ct to human error.
If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove
to be incorrect or if there is a change in accounting principles, our results of operations could fall below expectations of
securities analysts and investors, resulting in a decline in the market price of our common stock.
The preparation of financial statements in conformity with a
t
ccounting principles generally accepted in the United
States requires management to make estimates and assumptions that affec
f
t the amounts reported in the
t
consolidated financial
statements and accompanying notes. A change in these principles or interpretations could harm our revenue and fin
f ancial
results, and could affe
f ct the reporting of transactions completed befor
f
e the
t
announcement of a change. In addition, we base our
estimates on historical experience and on various other assumpt
m ions that we believe to be reasonabl
a e under the circumstances,
as described in "Management’s Discussion and Analysis of Financial Condition and Results of Operations", in Part II, Item 7,
39
of this Annual Report on Form 1
r
0-K, the results of which for
f
m the
t
basis for
f
making judgments abo
a
ut the carry
r
ing values of
assets, liabi
a lities, equity, revenue and expenses. Significant assumptions and estimates used in preparing our consolidated
financial statements include those related to revenue recognition, inventory v
r
aluation and contract manufactur
t
er/s
r upplier
liabilities, income taxes and loss contingencies. If our assumptions change or if actual circumstances diffe
f r fro
f
m thos
t
e in our
assumptions, our results of operations may be adversely affe
f cted and may fall below the expectations of securities analysts and
investors, resulting in a decline in the market price of our common stock.
Escalati g
ng U.S. tax, tariff, i
f mport/export restrictions, and other trade or regulato y
ry barriers, as well as countermeasures
taken by affec
f
ted countries, m y
ay have a n g
egative effec
f
t o
g
n global economic conditions, financial markets and o r
ur
business.
Because our products are primarily manufac
f
tured interna
r
tionally, the import of our products may b
a
e affect
f
ed by
changes in appl
a
icable tariffs.
f
Our products are primarily manufact
f
ur
t
ed in Malaysia, Vie
V tnam, and Mexico, and we also procure
some of our products directly from China. In February 2
r
025, the U.S. government schedul
d ed 25% tariffs
f
to be impos
m
ed on
products of Mexican origin. Although subsequent discussions between the
t
President of the United States and the
t
President of
Mexico have resulted in an agreement to temporarily defer the
t
effe
f ctive date for
f
these tariffs
f , this policy may be reversed at any
time. In addition, imports of products manufac
f
tured in Malaysia and/or Vietnam may be targeted for U.S. tariff i
f
ncreases in
light of the increased trade imbalances betwe
t
en the United States and these countries, which has increased signific
f antly in the
past decade as manufactur
t
ing operations have increasingly moved to these countries due to strained U.S.-China trade relations.
An increase in trade-related costs associated with these imports may impair the profitabi
a lity of such international production,
may strain our supp
u
liers’ ability to provide inputs necessary for the produc
d
tion of these items, and may otherwi
r
se affe
f ct our
manufactur
t
ing partners’ ability to provide our products at previously contracted prices. We also may not be able to pass on the
full burden of the increase in trade-related costs to our partners and/or customers which could impact our profitabi
a lity and/or
our compe
m
titiveness.
Our products may also be subject to further increased U.S. or international tariffs
f
as a result of the outbr
t
eak of and
escalation in interna
r
tional trade wars between the U.S., China, Mexico and other countries. In response to the February 2025
U.S. governm
r
ent tariffs
f
scheduled on goods of Canadian, Mexican, and Chinese origin, all three affe
f cted countries announced
plans to implement retaliatory m
r
easures including new tariffs
f
on certain U.S. goods, and, in the case of China, new export
contro
t
ls on certain critical metal items. The U.S. tariffs
f
on Canadian and Mexican origin products and the Canadian and
Mexican tariffs o
f
n U.S. origin products has been suspended for
f
a period of 30 days pursuant to agreements betwe
t
en the U.S.
government and the Canadian and Mexican governments, pending fur
f
ther negotiations between these countries. Such
agreements and negotiations may fail and result in the impos
m
ition of new trade measures between any or all of these countries
and the United States. The February 2025 U.S. government executive orders schedul
d ing the tariff increases on goods of
Canadian, Mexican, and Chinese origin also included provisions allowing for fur
f
ther escalation of tariffs
f
in the event affe
f cted
countries implement retaliatory measures. Such increases could result in the imposition of extreme tariff or non-tariff m
f
easures,
which may lead to a breakdown in international supply chains due
d
to increased tariff c
f
osts and disrupt
u ions in the availability of
goods.
There is curre
r ntly signific
f ant uncertainty about the future relationship between the United States, and various othe
t
r
countries, most signific
f antly China, Canada and Mexico, with respect to trade policies, treaties, tariffs
f
and taxes. The U.S.
government has and continues to make significant additional changes in U.S. trade policy and has taken certain actions that
could negatively impact U.S. trade. In addition, the
t
re may b
a
e fur
f
ther changes in U.S. trade policy given the
t
change in the
presidential administration.
For example, in 2018, the Offic
f e of the U.S. Trade Representative ("USTR") enacted various tariffs
f
of 7.5%, 10%,
15% and 25% on impo
m
rts into the U.S. from China, including communications equi
q pment products and components
manufactur
t
ed and imported fro
f
m China. USTR has continued to expand these tariffs r
f
ecently announcing new tariffs
f
of up to
100% on certain products. Since then, China has retaliated through various trade related measures including impo
m
sing tariffs o
f
n
imports into China from the United States. Most recently, i
y n February 2
r
025, the U.S. government imposed an additional 10%
tariff on impo
m
rts fro
f
m China, on top of existing tariff burdens, and the
t
U.S. President has indicated that additional tariffs m
f
ay be
forthcoming. In response, China announced additional tariffs
f
on certain U.S.-origin goods and implemented new export
contro
t
ls on various critical metals.
Additional changes or thr
t
eatened changes in U.S. trade measures have affe
f cted and may continue to affe
f ct trade
involving additional countri
t es as well, including Mexico, Canada, Colombia, the United Kingdom, and the member countri
t es of
the European Union among others. Each of these measures or threatened measures may i
a
nstigate reciprocal countermeasures by
affe
f cted countries, potentially accelerating fur
f
ther increases in trade measures. Such escalations in these trade measures may
directly impa
m
ir our business by increasing trade-related costs or disrupt
u ing established suppl
u
y chains and may i
a
ndirectly impair
40
our business by causing a negative effec
f
t on global economic conditions and fin
f ancial markets. The ultimate impact of these
trade measures is uncertain, and may be affect
f
ed by various fact
f
ors, including whether and when such trade measures are
implemented, the timing when such measures may b
a
ecome effec
f
tive, and the amount, scope, or natur
t
e of such tra
t de measures.
The U.S. government continues to add additional entities, in China and elsewhere, to restricted party lists impacting
the abi
a lity of U.S. companies to provide produc
d
ts, and in certain cases services, to these entities and, in some cases, receive
products or services from these entities. Additionally, t
y
he
t
U.S. government continues to expand contro
t
ls enacted in October
2022 restricting the
t
ability to send certain products and technology related to semiconductors, semiconductor manufac
f
turing,
and supercomputing to China without an export license. In 2023 and 2024, the U.S. government expanded the list of advanced
integrated circuits subj
u ect to heightened export controls, including certain hardware containing these specified integrated
circuits, expanded the
t
list of destinations requiring export authorization for
f
such items, and added new restrictions based on the
headquarters location of the
t
parties involved. Proposed regulations would fur
f
ther expand the controls to impose a worldwide
licensing requirement on certain integrated circuits and computing resources that are used for
f
training of AI models. The U.S.
government also continues to expand the scope of restrictions on the development or production of advanced integrated circuits
and certain semiconduc
d
tor manufac
f
turing equi
q pment, and the restrictions on supe
u
rcomput
m
ing, in China and othe
t
r countri
t es.
Proposed regulations would expand the
t
se controls furthe
t
r and impo
m
se additional reporting requi
q rements. Other for
f
eign
governments may in turn impo
m
se similar or more restrictive controls. These controls or any additional restrictions may impa
m
ct
our abi
a lity to export certain products to China or othe
t
r countries, prohibit us fro
f
m selling our products to certain of our
customers, restrict our abi
a lity to use certain Integrated Circuits (“ICs”) in our products, or impact our supp
u
liers who may utilize
facilities or equi
q pment described in these controls.
It also is possible that the Chinese government will retaliate in ways tha
t
t could impa
m
ct our business. For example,
China has announced controls on both the
t
use of Micron products and export license requirements on certain materials used,
among other things, in the produc
d
tion of semiconductors, optical components, and othe
t
r electronic devices including
germanium and gallium. China also has announced a new export control regime. Additionally, these restrictions could disrupt
the abi
a lity of China to produce semiconductors and othe
t
r electronics and impact our ability to source components from China.
China has also announced plans to implement retaliatory c
r
ounterme
r
asures in response to the additional 10% tariffs i
f
mposed by
the United States in February 2025, including new tariffs o
f
n certain U.S. origin goods, and has implemented export contro
t
ls on
various critical metal materials. These restrictions could impact the cost of components or inpu
n
ts used to produc
d
e our produc
d
ts.
Should the relationship between China and Tai
T wan deteriorate, it is possible that the U.S. government could impose
new controls on China, specific parties, or specific kinds of transactions in the region that could impa
m
ct our business including
our abi
a lity to source components from China and sell to certain of our customers. These restrictions could impa
m
ct the cost of
components or inputs used to produce our products. Additionally, these contro
t
ls or any additional restrictions may i
a
mpact our
ability to export certain products to China and/or prohibit us fro
f
m selling our products to certain of our customers.
We cannot predict what actions may ultimately be taken with respect to trade relations between the
t
United States and
China or other countries, what produc
d
ts may b
a
e subje
b ct to such actions or what actions may be taken by the other countri
t es in
retaliation. If we are unabl
a e to obtain or use components for
f
inclusion in our products, if compo
m
nent prices increase
significantly or if we are unabl
a e to export or sell our produc
d
ts to any of our customers, our business, liquidity, f
y
in
f ancial
condition, and/or results of operations would be materially and adversely affe
f cted.
As well, due to concerns with products and services from certain semiconductor, telecommunications and video
providers based in China, U.S. Congress has enacted bans on the use of certain Chinese-origin components or systems either in
items sold to the U.S. government or, in some cases, in the internal networks of government contractors and subcontractors
(even if those networks are not used for government-related projects). Further, the Chinese government has responded to these
U.S. actions by indicating its intention to develop an unreliable entity list, which may limit the ability of companies on the list
to engage in business with Chinese customers.
If tariffs,
f
trade restrictions, or trade barri
r ers remain in place or if new tariffs
f , tra
t de restrictions, or trade barriers are
placed on products such as ours by U.S. or for
f
eign governments, especially China, our costs may i
a
ncrease. We believe we can
adju
d st our supply chain and manufactur
t
ing practices to minimize the impact of the tariffs a
f
nd any impact on the supp
u
ly chain of
components sourced in China, but our effor
f
ts may not be successful, there can be no assurance that we will not experience a
disrupt
r
ion in our business related to these or other changes in trade practices and the process of changing suppliers in order to
mitigate any such tariff c
f
osts could be compl
m icated, time-consuming, and costly.
The U.S. tariffs
f
may a
a
lso cause customers to delay orders as they evaluate where to take delivery o
r
f our produc
d
ts in
connection with t
t
he
t
ir effo
f
rts to mitigate their own tariff e
f
xposure. Such delays create forecasting diffi
f culties for
f
us and increase
the risk that orders might be canceled or might never be placed. Current or fut
f ur
t
e tariffs
f
impo
m
sed by the U.S. may also
negatively impact our customers' sales, the
t
reby caus
a
ing an indirect negative impa
m
ct on our own sales. Even in the abs
a
ence of
41
further tariffs
f , the related uncertainty and the market's fear of an escalating trade war might cause our distributors and
customers to place fewer orders for
f
our produc
d
ts, which could have a material adverse effec
f
t on our business, liquidity, financial
condition, and/or results of operations.
In June 2022, the import restrictions contained in the Uyghur Forced Labo
a
r Prevention Act ("UFLPA"
P
) became
effe
f ctive. The UFLPA creates a rebuttabl
a e presumption that any goods mined, produced or manufactur
t
ed, wholly or in part in
the Xinji
n ang Uyghur Autonomous Region (“XUAR”) of China, or produced by a listed entity, were made with forced labo
a
r and
would the
t
refore not be entitled to entry a
r
t any U.S. port. Importers are required to present clear and convincing evidence that
such goods are not made with for
f
ced labor. While we do not source items from the XUAR or fro
f
m listed parties, and we have
increased our supply chain diligence, there is risk that our ability to import compo
m
nents and products may be adversely affe
f cted
by the UFLPA.
Given the relatively fluid regulatory e
r
nvironment in China and the United States and uncertainty h
t
ow the U.S.
government or foreign governments will act with respect to tariffs
f , interna
r
tional trade agreements and policies, a trade war,
further governm
r
ental action related to tariffs o
f
r interna
r
tional trade policies, or additional tax or other regulatory changes in the
t
future could directly and adversely impa
m
ct our fin
f ancial results and results of operations.
In addition to laws aimed directly at trade, fai
f lure of our products to comply with a broader set of evolving industry
r
standards and government regulations may a
a
dversely impact our business and in particular our ability to marke
r
t in particular
countries. Our products must compl
m y with v
t
arious U.S. federal governm
r
ent regulations and standards defined by agencies such
as the Federal Communications Commission, standards establ
a ished by governmental authorities in various foreign countries
and recommendations of the International Tel
T ecommunication Union. In some circumstances, we must obtain regulatory
r
approvals or certific
f ates of compliance before we can offer
f
or distribute our products in certain jurisdictions or to certain
customers. In recent years, certain jurisdictions have tied these app
a
rovals to concerns about international relationships,
including, e.g., concerns
r
about entities with compo
m
nents sourced from China. Complying with new regulations or obtaining
certifications, especially as standards evolve, may b
a
e costly and disrup
r
tive to our business and also may a
a
ffec
f
t our ability to sell
our products where these standards or regulations apply, which in tur
t
n m
r
ay prevent us fro
f
m sustaining our net revenues or
achieving profitabi
a lity.
Changes in our income taxes or our effe
f ctive tax rate, enactment of new tax laws or changes in the application of
existing tax laws of various jurisdictions or adverse outcomes resulting fro
f
m examination of our income tax returns
could adversely affect
f
our results.
Our income taxes are subject to volatility and could be adversely affec
f
ted by several factors, some of which are outside
of our control, including earnings that are lower than anticipated in countries that have lower tax rates and higher tha
t
n
anticipated in countries that have higher tax rates; our ability to generate and use tax attributes; changes in the valuation of our
deferred tax assets and liabi
a lities; transfer pricing adju
d stments fro
f
m tax authorities challenging our metho
t
ds for valuing
developed technology or intercompany arrangements; tax effec
f
ts of nondeductible compensation, including certain stock-based
compensation; tax costs related to inter-company restructur
t
ing; changes in accounting principles; changes in tax law and
regulations, tre
t aties, or interpretation thereof; imposition of withholding or other taxes on payments by subsidiaries or
customers; or a change in our decision to indefinitely reinvest certain foreign earni
r ngs.
Significant judgment is required to evaluate our tax positions and determi
r
ne our income tax liability. The accounting
guidance for
f
uncertainty in income taxes app
a
lies to all income tax positions, including the potential recovery of previously paid
taxes, which if settled unfavorabl
a y could adversely affect
f
income taxes.
Tax laws are dynamic and subj
u ect to change. Changes in tax laws and regulations and interpr
r
etations of such laws and
regulations, including taxation of earnings outside of the U.S. may have adverse effec
f
ts on our operating results and could
impact the tax treatment of our earnings and cash and cash equi
q valent balances we currently maintain. Furthe
t
rmore, due to
shifti
f ng economic and political conditions, tax policies and rates in various jurisdictions, may be subje
b ct to signific
f ant change.
Domestically, f
y
ol
f lowing the 2024 Presidential election, it is possible the newly elected Tru
T mp Administration and Republican
contro
t
lled Congress will pass some tax reform in order to address certain provisions of the 2017 Tax
T
Cuts and Jobs Act expiring
at the end of 2025. It is uncertain what proposals to refor
f
m U
r
.S. and International tax laws might pass and whether such laws
could increase or decrease the U.S. corporate tax rate. The Organization for Economic Cooperation and Development
(“OECD”), comprising 38 international member countries including the United States, has introduced a global minimum tax
initiative (“Pillar Two”), which has been adopted by membe
m
rs of the European Union ("EU"), among other jurisdictions. While
the U.S. has not yet adopted Pillar Two, other OECD countries outside or the EU are actively considering changes to existing
tax laws or have proposed new laws to align with the recommendations and guidelines proposed by the OECD, including Pillar
Two. Enactment of such tax laws could increase our tax obligations in countri
t es where we do business or cause us to change the
way we operate our business. We have assessed the impacts of these new laws in countri
t es that we operate in and do not
42
currently anticipate any material impacts to our effe
f ctive tax rate. However, we cannot provide any assurance that there will not
be a material impact to our effect
f
ive tax rate in the fut
f ur
t
e as a result of these developments or other proposed changes.
Finally, we are subject to examination of our income tax retur
t
ns
r
by the Internal Revenue Service ("IRS") and other tax
authorities. Audits by the IRS or othe
t
r tax authorities are subj
u ect to inherent uncertainties and could result in unfavorabl
a e
outcomes, including potential fin
f es or penalties. As we operate in numerous taxing jurisdictions, the application of tax laws can
be subject to diverging and sometimes conflicting interpretations by tax authorities of the
t
se jurisdictions. The expense of
defending and resolving such audits may b
a
e significant. The amount of time to resolve an audit is also unpr
n
edictabl
a e and may
divert management’s attention fro
f
m our business operations. We r
W
egularly assess the likelihood of adverse outcomes resulting
from tax examinations to determine the adequacy of our provision for
f
income taxes. We cannot assure you that flu
f ctua
t
tions in
our provision for income taxes or our effect
f
ive tax rate, the enactment of new tax laws or changes in the appl
a
ication or
interpretation of existing tax laws or adverse outcomes resulting fro
f
m examination of our tax returns by tax authorities will not
have an adverse effect
f
on our business, financial condition, results of operations and prospects.
Failure to comply with governmental laws and regulations could harm our business, fin
f
ancial condition, results of
operations and prospects.
Our business is subje
b ct to regulation by various federal, state, local and for
f
eign governmental agencies, including
agencies responsible for
f
monitoring and enfor
f
cing empl
m oyment and labor laws, workpl
r
ace safet
f y, product safet
f y, environmental
laws (including new laws related to climate change), consumer protection laws, privacy, data protection, telecommunications,
anti-bribery laws such as the U.S. Foreign Corrup
r
t Practices Act, impo
m
rt/e
t xport controls and sanctions, confli
f ct minerals,
federal securities laws and tax laws and regulations. In addition, emerging tools and technologies we utilize in providing our
products, like AI and machine learning, may a
a
lso become subject to regulation under new laws or new applications of existing
laws. Vio
V lations of these laws and regulations could result in fines and penalties, criminal sanctions against us, our offi
f cers or
our employees, prohibitions on the conduct of our business, and damage to our reputation.
In addition, in certain jurisdictions, these regulatory r
r
equirements may be more stringent than those in the United
States, such as the EU's General Data Protection Regulation (“GDPR”). The GDPR provides for
f
substantial obligations relating
to the handling, storage and othe
t
r processing of data relating to individuals and administrative fin
f es for violations, which can be
up to four percent of the
t
previous year’s annual revenue or €20 million, whichever is higher. In the past, we relied on the E.U.-
U.S. and Swiss-U.S. Privacy Shield programs, and/or the use of standard contractua
t
l clauses approved by the European
Commission ("SCCs"), to legitimize transfers of data out of the
t
EU. EU courts later invalidated the
t
E.U.-U.S. Privacy Shield
and imposed additional obligations in connection with use of the SCCs. The European Commission subseque
q
ntly issued new
SCCs. The continued validity o
t
f these new SCCs for cross-border data transfer is uncertain and diffi
f cult to predict. Among
other effec
f
ts, we may experience additional costs associated with increased compliance burdens and new contract negotiations
with third parties that aid in processing data on our behalf. F
f
urther, the UK has implemented legislation that substantially
mirrors the GDPR, and which provides for
f
fines of up t
u
o the greater of 17.5 million British Pounds or fou
f
r percent of the
t
previous year’s annual revenue, whichever is higher. The relationship betwe
t
en the UK and the EU in relation to certain aspects
of data protection law remains unclear fol
f lowing the UK’s exit fro
f
m the
t
EU, including with respect to regulation of data
transfer
f s between EU member states and the
t
UK. The UK has issued new standard contractua
t
l clauses that, like the SCCs, are
required to be implemented.
We may experience reluctance or refus
f
al by current or prospective customers in the European Economic Area (the
t
"EEA"), the UK, or other regions to use our products, and we may find it necessary or desirable to make further changes to our
handling of personal data of residents of the EEA, UK, or other regions. The regulatory environment app
a
licabl
a e to the handling
of personal data of EEA and UK residents, and our actions taken in response, may caus
a
e us to assume additional liabi
a lities or
incur additional costs and could result in our business, operating results and fin
f ancial condition being harmed. Additionally, we
and our customers may face a risk of enfor
f
cement actions by data protection authorities relating to personal data transfers to us
and by us fro
f
m the EEA, UK, or other regions. Any such enfor
f
cement actions could result in substantial costs and diversion of
resources, distract management and technical personnel and negatively affe
f ct our business, operating results, and financial
condition.
Several jurisdictions have passed new laws and regulations relating to privacy, data protection, and other matters, and
other jurisdictions are considering impo
m
sing additional restrictions. These laws continue to develop and may b
a
e inconsistent
from jurisdiction to jurisdiction. For exampl
m e, the Califor
f
ni
r a Consumer Privacy Act (“CCPA”
P
) became operative on January 1
r
,
2020 and was amended by the
t
Califor
f
ni
r a Privacy Rights Act (“CPRA”
R
) going into effe
f ct over time through July 1, 2023.
Aspects of the CCPA/
P
CPRA and its interpretation remain uncertain and are likely to remain uncertain for an extended period
and may require us to incur additional costs and expenses in an effo
f
rt to comply. In addition to the CCPA/CPRA,
R
numerous
other states have enacted or are considering similar laws that will require ongoing compliance effor
f
ts and investment. For
43
exampl
m e, Connecticut, Virginia, Colorado and Utah have enacted legislation similar to the
t
CCPA and CPRA t
R
hat took effec
f
t in
2023; Florida, Montana, Oregon, and Tex
T
as have enacted similar legislation tha
t
t took effec
f
t in 2024; Delaware, Ten
T
nessee,
Iowa, Maryland, Minnesota, New Hamps
m
hire, Nebraska, New Jersey and Tennessee have enacted similar legislation effe
f ctive,
or taking effe
f ct in 2025; and Indiana, Rhode Island and Kentuc
t
ky have enacted similar legislation that will become effe
f ctive in
2026.
Among other emerging laws relating to privacy and data protection globally, India has released its Digital Personal
Data Protection Act 2023, India’s Ministry of Electronics and Infor
f
mation Technology has published Draft Digital Personal
Data Protection Rul
R es for public comment on January 3
r
, 2025, addressing various matters under this law, b
w
ut the ful
f l scope of
the implementation remains uncertain. We maintain an employee and operational presence in India, and this act may r
a
equi
q re us
to modify our policies and practices and incur increased costs in our effo
f
rts to compl
m y.
In addition, some countries are considering or have enacted legislation requiring local storage and processing of data
that could increase the cost and complexity of delivering our services. Accordingly, w
y
e cannot predict the ful
f l impact of other
evolving privacy and data protection obligations on our business or operations. Complying with emerging and changing legal
and regulatory r
r
equi
q rements relating to privacy, d
y
ata protection and other matters may c
a
ause us to incur costs or require us to
change our business practices, which could harm our business, fin
f ancial condition, results of operations and prospects.
We are also subject to environmental laws and regulations governing the
t
management and disposal of hazardous
materials and wastes, including the hazardous material content of our products and laws relating to the collection, recycling and
disposal of electrical and electronic equipment. Our failure, or the fai
f lure of our partners, including our contract manufacturers,
to comply with past, present and fut
f ur
t
e environmental laws could result in fin
f es, penalties, third-party claims, reduc
d
ed sales of
our products, re-engineering our products, substantial product inventory write-offs a
f
nd reputational damage, any of which could
harm our business, financial condition, results of operations and prospects. We also expect that our business will be affec
f
ted by
new environmental laws and regulations on an ongoing basis applicable to us and our partners, including our contract
manufactur
t
ers. To date, our expenditur
t
es for environmental compl
m iance have not had a material effe
f ct on our results of
operations or cash flo
f ws. Although we cannot predict the future effe
f ct of such laws or regulations, the
t
y will likely result in
additional costs or require us to change the content or manufactur
t
ing of our produc
d
ts, which could have a material adverse
effe
f ct on our business, fin
f ancial condition, results of operations and prospects.
From time to time, we may receive inquiries fro
f
m governmental agencies or we may make voluntary disclosures
regarding our compliance with applicable governmental regulations or requirements relating to various matters, including
import/e
t xport controls, federal securities laws and tax laws and regulations which could lead to for
f
mal investigations. Actual or
alleged noncompliance with applicable laws, regulations or othe
t
r governm
r
ental requirements could lead to regulatory
r
investigations, enfor
f
cement actions, and othe
t
r proceedings, private claims and litigation, and potentially may subje
b ct us to
sanctions, mandatory product recalls, enfor
f
cement actions, disgorgement of profits, fin
f es, damages, civil and criminal penalties
or inju
n nctions. If any governmental fin
f es, penalties, or other sanctions are imposed, or if we do not prevail in any possible civil
or criminal litigation, our business, fin
f ancial condition, results of operations and prospects could be materially adversely
affe
f cted. In addition, responding to any investigation, action or other proceeding will likely result in a significant diversion of
management’s attention and resources and an increase in professional fees
f
. Enfor
f
cement actions, investigations, and fin
f es,
penalties, and other sanctions could harm our business, fin
f ancial condition, results of operations and prospects.
Issues in the development and use of artific
f ial intelligence, combined with an uncertain regulatory environment, may
result in reputational harm, liability, o
y
r other adverse consequences to our business operations.
We u
W
se machine learning and AI technologies in our offer
f ings and business, including in our Arista Guardian for
Network I
r
dentity offer
f ing, and we are making investments in expanding our AI capa
a
bi
a lities in our products, servi
r ces, and tools,
including ongoing deployment and impr
m
ovement of existing machine learni
r ng and AI technologies, as well as developing new
product feat
f
ur
t
es using AI technologies. AI technologies are complex and rapi
a dly evolving, and we fac
f
e significant competition
from other companies as well as evolving legal and regulatory landscapes. Laws and regulations applicable to AI continue to
develop and may be inconsistent from jurisdiction to jurisdiction. For example, the European Union has adopted on an Artificial
Intelligence Act that, when effe
f ctive, prohibits certain AI applications and systems and imposes additional requirements on the
use of certain applications or systems. Additionally, s
y
ome U.S. states have proposed, and in certain cases enacted, legislation
addressing aspects of the use and deployment of AI. The use of AI technologies in new or existing produc
d
ts may r
a
esult in new
or enhanced governmental or regulatory scrutiny, n
y
ew or modified laws or regulations, claims, demands, and litigation,
confid
f entiality, privacy, d
y
ata protection, or security risks, ethical concerns
r
, or other complications that could adversely affe
f ct
our business, financial condition, results of operations and prospects.
Uncertainty around new and emerging AI technologies may r
a
equire additional investment in the obtaining, developing
and maintaining of proprietary d
r
atasets and machine learning models, development of new approaches and processes to provide
44
attribution or remuneration to creators of training data, and development of appropriate protections, safeg
f
uards, and policies for
f
handling the processing of data with AI technologies, which may b
a
e costly and could impact our expenses. AI technologies also
present emerging legal, ethical and social issues, including with respect to potential or actua
t
l bias refle
f cted in, or fla
f wed output
t
s
of, m
f
odels. AI technologies that we make use of may produc
d
e or create outpu
t
ts that appear correct but are fact
f
ua
t
lly inaccurate
or othe
t
rwise fla
f wed, which may expose us to brand or reputational harm,
r
competitive harm, regulatory scrutiny, a
y
nd/or legal
liability.
We are subject to governmental export and import controls that could impair our ability to compete in international
markets or subject us to liability if we violate these controls.
Our products are subj
u ect to various export contro
t
ls and because we incorporate encrypt
y ion technology into certain of
our products, certain of our products may be exported from various countries only with the required export license or through
an export license exception. If we were to fail to comply with the appl
a
icable export control laws, customs regulations, economic
sanctions or other applicable laws, we could be subj
u ect to monetary d
r
amages or the imposition of restrictions which could be
material to our business, operating results and prospects and could also harm our reputation. Further, there could be criminal
penalties for
f
knowing or willful
f
violations, including incarceration for
f
culpable employees and managers. Obtaining the
necessary export license or othe
t
r autho
t
rization for
f
a particular sale may be time-consuming and may result in the delay or loss
of sales opportunities. Furthermore, certain export contro
t
l and economic sanctions laws prohibit the shipment of certain
products, technology, software and servi
r ces to embargoed countries and sanctioned governments, entities, and persons. For
exampl
m e, in addition to the controls imposed on China, following Rus
R
sia’s invasion of Ukraine, the
t
United States and other
countries imposed restrictions on the import to the US of raw materials and goods fro
f
m Rus
R
sia and certain economic sanctions
and severe export control restrictions against Rus
R
sia, Belarus and regions of Ukra
k ine as well as certain Russian nationals and
entities which requi
q red us, in many cases, to terminate business relationships in those countri
t es. These sanctions and restrictions
have continued to increase as the conflic
f
t has further escalated, and the United States and othe
t
r countries could impose wider
sanctions and export restrictions as well as prohibitions on the import into the United States of additional raw materials from
Russia and take other actions in the future that could fur
f
ther impact our business. Any deterioration in relations between Tai
T wan
and China could lead to additional sanctions or export controls on China, on specific
f
individuals or entities, or otherwi
r
se in the
region which could impact our ability to sell to certain of our customers, source components from China, or othe
t
rwise
negatively impa
m
ct our business. Even though we take precautions to ensure that we and our channel partners comply with all
relevant regulations, any failure by us or our channel partners to compl
m y with such regulations could have negative
conseque
q
nces, including reputational harm, government investigations and penalties. In addition, economic sanctions that are
vague and not subject to guidance by regulators lead to heightened compl
m iance risk.
Although we have developed procedures and controls to compl
m y with e
t
xport control and other applicable laws,
historically, w
y
e have had some instances where we, or a business that we acqui
q red, inadvertently did not fully compl
m y with
certain trade laws, but we made relevant disclosures to, and implemented corrective actions with, the appropriate government
agencies.
In addition, various countries regulate the
t
import of certain encryption technology, i
y
ncluding through import permit
and license requirements, and have enacted laws that could limit our abi
a lity to distribute our produc
d
ts or could limit our
customers’ ability to implement our products in those countries. Any change in export or import regulations, economic
sanctions or related legislation, shift i
f
n the enforcement or scope of existing regulations or change in the countries,
governments, persons or technologies targeted by such regulations could result in decreased use of our products by, or in our
decreased ability to export or sell our products to, existing or potential customers with international operations or create delays
in the introduction of our products into international marke
r
ts. Any decreased use of our products or limitation on our ability to
export or sell our products could adversely affec
f
t our business, financial condition, results of operations and prospects.
Failure to comply with anti-bribery and anti-corruption laws and anti-money laundering laws, and similar laws, could
subject us to penalties and other adverse consequences.
We are subje
b ct to the U.S. Foreign Corrup
r
t Practices Act of 1977 (the “FCPA”), the U.S. domestic bribery statute
contained in 18 U.S.C. § 201, the United Kingdom Bribery Act 2010, and possibly other anti-bribery and anti-corrup
r
tion laws
and anti-money laundering laws in countries outside of the United States where we conduct our activities. Anti-corruption and
anti-bribery laws have been enforced aggressively in recent years and are interpr
r
eted broadly to generally prohibit companies,
their employees, agents, representatives, business partners, and thi
t rd-party intermediaries from authorizing, offe
f ring, or
providing, directly or indirectly, i
y mproper payments or benefit
f s to recipients in the
t
publ
u ic or private sector.
We s
W
ometimes leverage third parties to sell our produc
d
ts and conduct our business abr
a
oad. We, our empl
m oyees, agents,
representatives, business partners and third-party interme
r
diaries may have direct or indirect interactions with offi
f cials and
employees of government agencies or state-owned or affil
f iated entities and we may be held liabl
a e for
f
the corru
r
pt
u
or othe
t
r illegal
45
activities of these empl
m oyees, agents, representatives, business partners or third-party intermediaries even if we do not explicitly
authorize such activities. We cannot assure you that all of our employees, agents, representatives, business partners or third-
party i
t
ntermediaries will not take actions in violation of app
a
licabl
a e law for which we may b
a
e ultimately held responsible. As we
have increased our interna
r
tional sales and business, our risks under these laws have increased.
These laws also requi
q re that we keep accurate books and records and maintain internal controls and compl
m iance
procedures designed to prevent any such actions. While we have policies and procedur
d
es to address compl
m iance with such
laws, we cannot assure you that none of our empl
m oyees, agents, representatives, business partners or thi
t rd-party intermediaries
will take actions in violation of our policies and app
a
licable law, for which we may b
a
e ultimately held responsible.
Any allegations or violation of the FCPA or other appl
a
icable anti-bribery and anti-corrup
r
tion laws and anti-money
laundering laws could result in whistleblower complaints, sanctions, settlements, prosecution, enfor
f
cement actions, fin
f es,
damages, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, or suspension or
debarment fro
f
m governm
r
ent contracts, all of which may have an adverse effec
f
t on our reputation, business, results of
operations, and prospects. Responding to any investigation or action will likely result in a materially significant diversion of
management’s attention and resources and significant defense costs and other profes
f
sional fee
f
s.
Risks Related to Ownership of Our Common Stock
The trading price of our common stock has been and may continue to be volatile, and the value of your investment could
decline.
The trading price of our common stock has historically been and is likely to continue to be volatile and could be
subject to wide flu
f ctua
t
tions in response to various factors, some of which are beyond our control. These fluctuations could
cause you to lose all or part of your investment in our common stock. In addition, although the trading price of our common
stock has increased significantly in recent years, it is uncertain to continue to increase at the same rate and it may decrease in
the fut
f ur
t
e. Factors that could caus
a
e flu
f ctua
t
tions in the marke
r
t price of our common stock include, but are not limited to,
forward-looking statements related to future revenue, gross margins and earnings per share, changes or decreases in our growtht
rate, manufact
f
ur
t
ing, supp
u
ly or distribution shortages or constraints, the decline in purchases from any of our large customers or
the degradation in our relationships with any of our material vendors or partners, ratings changes by securities analysts, actua
t
l
or anticipated announcements of new products by our company or our competitors, developments in the marke
r
ts in which we
operate, both i
t
n the U.S. and globally, l
y
itigation, actua
t
l or anticipated changes or flu
f ctua
t
tions in our results of operations,
regulatory developments, repurchases of our common stock, departures of key executives, the
t
financial results or financial
projections of our large customers, majo
a r catastrophic events, macroeconomic fact
f
ors including the new U.S. presidential
administration, interna
r
tional trade wars, inflation and interest rate fluctuations and other broad marke
r
t and industry fluctuations.
In addition, technology stocks have historically experienced high levels of volatility and, if the market for technology
stocks or the stock market in general experiences a loss of investor confid
f ence, the market price of our common stock could
decline for
f
reasons unrelated to our business, financial condition, results of operations and prospects. The market price of our
common stock might also decline in reaction to events that affec
f
t other companies in our industry even if these events do not
directly affe
f ct us, or where actua
t
l fin
f ancial results do not meet the expectations set by indus
d
try a
r
nalysts or other market
participants. In the past, fol
f lowing periods of volatility in the market price of a company’s securities, securities class action
litigation has often been brought against that company. If the marke
r
t price of our common stock is volatile, we may become the
target of securities litigation. Securities litigation could result in subs
u
tantial costs and divert our management’s attention and
resources from our business and prospects. This could have a material adverse effect
f
on our business, financial condition,
results of operations and prospects.
We have adopted a stock repurchase program to repurchase shares of our common stock; however, any fut
f
ure decisions
to reduce or discontinue repurchasing our common stock pursuant to such stock repurchase program could cause the
market price of our common stock to decline.
Although our board of directors has aut
a horized a stock repurchase program, any determination to execute stock
repurchases will be subje
b ct to, among othe
t
r things, our fin
f ancial position and results of operations, available cash and cash flo
f w,
capital requirements, marke
r
t and business conditions, stock price, acqui
q sition opportun
t
ities and other fac
f
tors, as well as our
board of director’s continuing determination that the repurchase program is in the best interests of our shareholders and is in
compliance with all laws and agreements applicable to the repurchase program. Our stock repurchase program does not obligate
us to acquire any common stock. If we fail to meet any expectations related to stock repurchases, the market price of our
common stock could decline, and could have a material adverse impa
m
ct on investor confid
f ence. Additionally, p
y
rice volatility of
our common stock over a given period may c
a
ause the average price at which we repurchase our common stock to exceed the
t
stock’s marke
r
t price at a given point in time.
46
We may fur
f
ther increase or decrease the amount of repurchases of our common stock in the
t
future. As part of the
Inflation Reduc
d
tion Act of 2022 signed into law in August 2022, the
t
United States impl
m emented a 1% excise tax on the value of
certain stock repurchases by publicly tra
t ded companies. This tax could increase the costs to us of any share repurchases, which
could reduc
d
e the
t
number of shares we repurchase. Any reduction or discontinuance by us of repurchases of our common stock
pursuant to our current stock repurchase program could cause the marke
r
t price of our common stock to decline. Moreover, in
the event repurchases of our common stock are reduced or discontinued, our failure or inabi
a lity to resume repurchasing
common stock at historical levels could result in a lower market valuation of our common stock.
Sales of substantial amounts of our common stock in the public markets, or the perception that such sales might occur,r
could reduce the market price that our common stock might otherwise attain and dilute your voting power and your
ownership interest in us.
Sales of a subs
u
tantial number of shares of our common stock in the
t
publ
u ic market, or the perception that such sales
could occur, could adversely affe
f ct the marke
r
t price of our common stock and may make it more diffic
f ult for
f
you to sell your
common stock at a time and price that you deem appropriate and may d
a
ilute your voting power and your ownership interest in
us.
In addition, we have registered the offer
f
and sale of all shares of common stock that we may issue under our equity
compensation plans. If holders, by exercising the
t
ir registration rights, sell large numbers of shares, it could adversely affe
f ct the
market price of our common stock.
Insiders have substantial control over us, which could limit your ability to influ
f
ence the outcome of key transactions,
including a change of control.
Our directors, executive offi
f cers and each of our stockholders who own greater tha
t
n 10% of our outstanding common
stock together with the
t
ir affi
f liates, in the aggregate, beneficially own app
a
roximately 17.9% of the
t
outstanding shares of our
common stock, based on shares outstanding as of December 31, 2024. As a result, these stockho
k
lders, if acting together, could
exercise a significant level of influ
f ence over matters requiring approval by our stockholders, including the election of directors
and the
t
approval of mergers, acquisitions or other extraordinary tra
t nsactions. They may also have interests that diffe
f r fro
f
m
yours and may v
a
ote in a way with which you disagree and which may be adverse to your interests. This concentration of
ownership may also discourage a potential investor fro
f
m acquiring our common stock due to the limited voting power of such
stock or otherwi
r
se may h
a
ave the effe
f ct of delaying, preventing or deterri
r ng a change of control of our compa
m
ny, c
y
ould deprive
our stockholders of an opportunity to receive a premium for
f
their common stock as part of a sale of our company and might
ultimately affe
f ct the market price of our common stock.
Our charter documents and Delaware law could discourage takeover attempts and lead to management entrenchment.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could
delay or prevent a change in control of our company. These provisions could also make it diffi
f cult for stockho
k
lders to elect
directors tha
t
t are not nominated by the current members of our board of directors or take other corporate actions, including
effe
f cting changes in our management. These provisions include:
•
a classified board of directors with three-year staggered terms, which could delay the abi
a lity of stockholders to change
the membe
m
rship of a majo
a rity of our board of directors;
•
the ability of our board of directors to issue shares of prefer
f re
r d stock and to determine the price and other terms of
those shares, including prefer
f ences and voting rights, without stockholder app
a
roval, which could be used to
significantly dilute the ownership of a hostile acqui
q rer;
•
the exclusive right of our board of directors to elect a director to fil
f l an unfil
f led seat on our board of directors created
by the expansion of our board of directors or the resignation, death or removal of a director, which prevents
stockholders from being abl
a e to fil
f l vacancies on our board of directors;
•
a prohibition on stockholder action by written consent, which for
f
ces stockholder action to be taken at an annual or
special meeting of our stockholders;
•
the requirement that a special meeting of stockho
k
lders may be called only by the
t
chairman of our board of directors,
our chief executive offic
f er, our president (in the abs
a
ence of our chief executive offi
f cer) or our board of directors, by a
vote of a majo
a rity of the total number of authorized directors, which could delay the abi
a lity of our stockholders to
force consideration of a proposal or to take action, including the removal of directors;
•
the requirement that a director may be removed from offi
f ce by our stockho
k
lders only for
f
caus
a
e and only by the
affi
f rmative vote of holders of at least 66 2/3% of the voting power of our capi
a tal stock entitled to vote thereon;
47
•
the requirement for
f
the affir
f mative vote of holders of at least 66 2/3% of the
t
voting power of all of the then
outstanding shares of our capital stock entitled to vote generally in the election of directors, voting together as a single
class, to amend the provisions of our amended and restated certificate of incorpo
r
ration relating to the structur
t
e of our
board of directors, the management of our business, and certain rights of our stockholders (including the prohibition on
the stockho
k
lder’s ability to act by written consent), which may inhibit the ability of an acqui
q rer to effec
f
t such
amendments to facilitate an unsolicited takeover attempt
m ;
•
the requirement for the
t
affi
f rmative vote of holders of at least 66 2/3% of the voting power of our capi
a tal stock entitled
to vote thereon for
f
stockholders to amend, alter or repeal our amended and restated bylaws, which may inhibit the
t
ability of an acquirer to effec
f
t such amendments to fac
f
ilitate an unsolicited takeover attempt;
•
the ability of our board of directors, by a vote of a majo
a rity of the total number of authorized directors, to amend the
bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and
inhibit the ability of an acqui
q rer to amend the bylaws to fac
f
ilitate an unsolicited takeover attempt; and
•
advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to
propose matters to be acted upo
u
n at a stockholders’ meeting, which may discourage or deter a potential acqui
q rer fro
f
m
conducting a solicitation of proxies to elect the acqui
q rer’s own slate of directors or otherwi
r
se attempting to obtain
contro
t
l of us.
In addition, as a Delaware corpo
r
ration, we are subj
u ect to Section 203 of the Delaware General Corporation Law. These
provisions may p
a
rohibit large stockho
k
lders, in particular those owning 15% or more of our outstanding voting stock, fro
f
m
merging or combining with us for a certain period of time.
General Risks
If we are unable to hire, retain, train and motivate qualified personnel and senior management, our business, financial
condition, results of operations and prospects could suffe
f r.
Our fut
f ur
t
e success depends, in part, on our abi
a lity to continue to attract and retain highly skilled personnel, particularly
softwa
t
re engineering and sales personnel. In addition, we are expanding interna
r
tionally and into adja
d cent markets including the
enterprise and AI market, which requires a significant investment of time, effor
f
t and financial resources into hiring and tra
t ining
our sales force to address these marke
r
ts. If we do not effe
f ctively train our direct sales for
f
ce, we may b
a
e unabl
a e to add new
customers, increase sales to our existing customers, or successful
f ly expand into new marke
r
ts. Compe
m
tition for highly skilled
personnel is often intense, especially in the San Francisco Bay Area where we have a subs
u
tantial presence and need for highly
skilled personnel. Many of the
t
companies with which we compete for
f
experienced personnel have greater resources than we
have to provide more attractive compe
m
nsation packages and other amenities. Research and development personnel are
aggressively recrui
r ted by startup
t
and growth companies, which are especially active in many of the technical areas and
geographic regions in which we conduct produc
d
t development. In addition, in making employment decisions, particularly in the
high-technology industry, j
y
ob candidates ofte
f n consider the
t
value of the stock-based compe
m
nsation they are to receive in
connection with t
t
heir employment. Declines in the market price of our stock could adversely affec
f
t our ability to attract,
motivate or retain key employees. In addition, our future perfor
f
mance also depends on the continued services and continuing
contri
t butions of our senior management to execute our business plan and to identify and pursue new opportunities and product
innovations. Our employment arrangements with our empl
m oyees do not generally require that they continue to work for us for
f
any specified period, and therefor
f
e, they could termi
r
nate their employment with us at any time. If we are unabl
a e to attract or
retain qualifie
f d personnel, or if there are delays in hiring requi
q red personnel, our business, financial condition, results of
operations and prospects may be seriously harmed.
Our business is subject to the risks of earthquakes, fir
f e, power outages, flo
f ods, health epidemics and other catastrophic
events including as a result of climate change and to interruption by man-made problems such as terrorism and war.
Our corpo
r
rate headquarters and the operations of our key manufactur
t
ing vendors, logistics providers and partne
t
rs, as
well as many of our customers, are located in areas exposed to risks of natural disasters such as earthquakes and tsunamis,
including the San Francisco Bay Area, Japan and Tai
T wan. In addition, climate change may result in greater freque
q
ncy and
severity of natural disasters. A signific
f ant natur
t
al disaster, such as an earthquake, tsunami, fire or a flo
f od, or other catastrophic
event such as the
t
COVID-19 pandemic or othe
t
r disease outbreak, could have a material adverse effec
f
t on our or their business,
which could in turn materially affe
f ct our fin
f ancial condition, results of operations and prospects. These events could result in
manufactur
t
ing and suppl
u
y chain disrupt
r
ions, shipment delays, order cancellations, and sales delays which could result in missed
financial targets. Any health epidemic could have a material adverse effec
f
t on our ability to obtain components for
f
our products
that are supplied fro
f
m Asia or to manufac
f
ture our produc
d
ts in Asia. Any such disrupt
r
ion of our suppliers, our contract
manufactur
t
ers or our service providers would likely impact our sales and operating results. In addition, a health epidemic could
48
adversely affec
f
t the economies of many countries, resulting in an economic downturn that could affec
f
t demand for
f
our products
and likely impact our operating results. In addition, acts of terrorism and war could caus
a
e disrupt
u ions in our business or the
business of our manufact
f
ur
t
ers, logistics providers, partners or customers or the economy as a whole. Given our typi
t
cal
concentration of sales at each quarter end, any disrupt
r
ion in the business of our manufac
f
turers, logistics providers, partners or
customers that affect
f
s sales at the end of our quarter could have a particularly signific
f ant adverse effe
f ct on our quarterly results.
We have not paid dividends in the past and do not intend to pay dividends for the foreseeable fut
f
ure.
We have never declared nor paid any dividends on our common stock, and we do not anticipate paying any cash
dividends in the future. As a result, you may o
a
nly receive a retur
t
n o
r
n your investment in our common stock if the market price
of our common stock increases.
Item 1B. Unresolved Staff Comments
Not app
a
licable.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
We h
W
ave developed and impl
m emented a cybersecurity risk management program intended to protect the confid
f entiality,
integrity, and availability of our critical systems and infor
f
ma
r
tion. In addition, our Legal and Information Tec
T
hnology
(IT)/Infor
f
ma
r
tion Security (IS) teams work together to oversee our compl
m iance with appl
a
icable laws and regulations and
coordinate with subj
u ect matter experts throughout our business to identify,
f
monitor and mitigate risk including infor
f
mation
security risk management and cyber defense programs.
Our cybersecurity risk management program is aligned with our overall enterpr
r
ise risk management programs and
shares common methodologies, reporting channels and governa
r
nce processes that app
a
ly across the enterpr
r
ise risk management
programs to othe
t
r legal, compl
m iance, strategic, operational, and fin
f ancial risk areas.
Our cybersecurity risk management program includes:
•
an information security management systems policy, including a business continuity policy, a
y
cceptabl
a e use and
physical security policies, and an incident response policy and plan for responding to cybersecurity incidents, among
others;
•
risk assessments designed to help identify material cybersecurity risks to our critical systems, infor
f
mation, products,
services, and our broader enterprise IT environment;
•
a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security
contro
t
ls, and (3) our response to cybersecurity incidents;
•
the use of internal audit teams and external service providers, where appropriate, to assess, test or otherwi
r
se assist with
aspects of our security controls;
•
cybersecurity awareness, data protection, and privacy training of our employees, incident response personnel, and
senior management; and
•
a vetting and management process for
f
third party service providers, suppliers, and vendors
Through thi
t s program, our IT/IS team identifie
f s and executes improvements based upo
u
n its own assessments, public
cybersecurity events and the identification of new risks by third parties, including our external cybersecurity consultants. As
part of these continuous improvement effo
f
rts, there may be times when the IT/IS team prioritizes certain cybersecurity fix
f es or
program improvements over other measures, which could lead to new known or unknown risks being identifie
f d on an ongoing
basis. Cybersecurity threat actors are often highly sophisticated and nimbl
m e in the
t
ir attacks. Despite the
t
se effo
f
rts, we cannot
guarantee that our priorities and effo
f
rts will prevent any cybersecurity incident from happ
a
ening.
We also engage in periodic testing programs, using both internal assets and externa
r
l consultants, including penetration
testing, and incorpo
r
rate multiple layers of physical, logical and written controls into our cybersecurity risk management
program. Our IT/IS team leverages centralized identity management, encrypt
y ion configurations and technologies on the
t
systems, devices, and third-party connections used in our operations.
We also maintain cyber liabi
a lity insurance coverage. While we currently hold such coverage, we cannot be certain that
our insurance coverage will be adequa
q
te for liabi
a lities actually incurred, that insurance will continue to be availabl
a e to us on
49
economically reasonable terms, or at all, or that any fut
f ur
t
e claim will not be excluded or otherwi
r
se be denied coverage by any
insurer.
As of the date of thi
t s report, we have not identifie
f d any risks fro
f
m cybersecurity threats, including as a result of any
previous cybersecurity incidents, that we believe have, or are likely to, materially affe
f ct us, our business strategy, r
y
esults of
operations, or fin
f ancial condition. For additional infor
f
ma
r
tion concerni
r ng risks fro
f
m cybersecurity thr
t
eats, please refer
f
to Item
1A, “Risk Factors,” in thi
t s annual report on Form 10-K, including the
t
risk factors in the category entitled, “Risks Related to
Cybersecurity and Data Privacy”.
Cybersecurity Governance
Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee
(Committee) oversight of cybersecurity and other information technology risks. The Committee oversees management’s
implementation of our cybersecurity risk management program. The Committee receives quarterly reports from our Vic
V e
President and Chief Infor
f
ma
r
tion Security Offi
f cer (CISO), in conju
n nction with othe
t
r senior managers, on cybersecurity risks. In
addition, these managers update the Committee, as necessary, r
y
egarding any material cybersecurity incidents, as well as
incidents with lesser impact potential. The Committee reports to the full Board on cybersecurity no less fre
f quently than once
annually. The full Board also receives briefin
f gs from management on our cyber risk management program on a periodic basis.
Our cybersecurity program includes an annual fun
f
ding and for
f
ecast process, and we have further established processes
to secure additional fund
f
ing in response to emerging risks, threats and identifie
f d improvement opportuni
t
ties. Our IS team, led
by one of our Vice Presidents who also serve
r
s as our CISO, is responsible for assessing and managing risks from cybersecurityt
threats. The IS team has primary responsibility for
f
our overall cybersecurity risk management program and supe
u
rvises both o
t
ur
internal cybersecurity personnel and our external cybersecurity consultants.
Our CISO has over 20 years of experience in the cybersecurity industry and has been instrumental in building several
key security technologies, viz. Network Intrusion Prevention Systems (NIPS), Host Intrus
r
ion Prevention Systems (HIPS), Web
W
Application Firewalls (WAF
W
), Whitelisting, Endpo
d
int/Server Host Monitoring (EDR) and Virtua
t
lization Based Security (VBS).
Previously, o
y
ur CISO served in senior executive and technical leadership roles in several security compa
m
nies. In addition, our
CISO has experience as a pen-tester and has in-depth knowledge of operating system, networking and security products. Our
CISO holds a bachelor’s degree in compu
m
ter science and a master’s degree in softwa
t
re systems. In addition, our IS team
includes over 20 membe
m
rs each with experience in network security related roles, with the two IS leads reporting to our CISO
each having more than 20 years of security experience.
Our management team, including our CISO in consultation with our Chief Technology Offi
f cer and Chief Financial
Offi
f cer, supervi
r ses effor
f
ts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents, which may include:
briefings fro
f
m internal security personnel; threat intelligence and other infor
f
mation obtained from governmental, public or
private sources, including external cybersecurity consultants; and alerts and reports produced by security tools deployed in our
IT environment. However, as indicated above, we cannot guarantee that our effo
f
rts will prevent any cybersecurity incident from
occurring.
As part of our IT security program, our Cybersecurity Executive Committee and Information Security Steering
Committee meet throughout the
t
year to monitor and assess information security risks. In addition, we perfor
f
m a
r
n enterpr
r
ise risk
assessment that is reviewed by the Committee and our Board of Directors on an annual basis and monitored on a qua
q
rterly basis
by the Committee. The enterprise risk assessment is an assessment of key risks, including information security risks, data
privacy, s
y
upply chain, human capi
a tal, and other risks.
Item 2. Properties
Our corpo
r
rate headquarters are located in Santa Clara, Califor
f
ni
r a where we lease app
a
roximate yly 180,000 square feet
f
f
of
space under a lease agreement that expires in Septembe
m
r 2026. Duri g
ng th y
e year ended Decembe
m
r 31, 2021, we purchased land
and the impr
m
ovements thereon in Santa Clara, California to construc
r
t a buildi g
ng for offic
f e, lab a
a
nd data center spac .e In
addition, we lease offic
f e spaces for data centers, operations, sales personnel and research and development in locations
throughout the U.S. and various international locations, including Ireland, Canada, India, and Australia. We also lease data
centers in the U.S., Ireland and Australia. We believe that our current fac
f
ilities are adequate to meet our curre
r nt needs and are
being utilized by our business.
50
Item 3. Legal Proceedings
The infor
f
ma
r
tion set for
f
th under the “Legal Proceedings” in Note 5. Commitments and Contingencies of the Notes to
Consolidated Financial Statements included in Part II, Item 8, of this Annual Report on Form 10-K is incorporated herein by
reference.
Item 4. Mine Safety Disclosures
Not app
a
licable.
51
PART II
Item 5. Market for Registrant’s Common Equity, R
y
elated Stockholder Matters, and Issuer Purchases of Equity
Securities
Market Information
Our common stock is listed on the NYSE under the
t
symbol “ANE
A
T”. As of February 12, 2025, there were 44 holders
of record of our common stock. Because many of our shares of common stock are held by brokers and other institut
t ions on
behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Dividend Policy
We have never declared nor paid any cash dividends on our common stock, and we do not anticipate paying any cash
dividends in the foreseeabl
a e fut
f ur
t
e.
Stock Performance Graph
The fol
f lowing shall not be deemed “fil
f ed” for
f
purposes of Section 18 of the
t
Exchange Act, or incorporated by
reference into any of our othe
t
r fil
f ings under the
t
Exchange Act or the
t
Securities Act, except to the extent we specifically
incorporate it by refer
f ence into such filing.
The fol
f lowi g
ng graph compa
m
res the cumulative total retur
t
n o
r
f our common stock with the total retur
t
n f
r
or
f
the NYSE
Composite Index and the Standard & Poor’s 500 Index (the “S&P 500”) from December 31, 2019 (the last tradi g
ng day of the
t
year) to December 31, 2024.
Th g
e graph
a
assumes $ 0
1 0 was invested at the marke
r
t close on December 31, 201 i
9 n the
t
Company’s common stock and
in each of the aforementioned indices with the re-investment of dividends, if any. The stock price performance on the fol
f lowing
graph is not necessarily indicative of future stock price perfor
f
mance.
Securities Authorized for Issuance Under Equity Compensation Plans
Information abo
a
ut securities autho
t
rized for issuance under our equity compensation plans is provided in Note 6.
Stockholders' Equi
q ty and Stock-Based Compensation of the Notes to Consolidated Financial Statements included in Part II,
Item 8, of this Annual Report on Form 10-K.
52
Recent Sales of Unregistered Equity Securities
There were no sales of unregistered securities during fiscal year 2024.
Issuer Repurchases of Equity Securities
Under our equi
q ty incentive plans, certain participants may exercise options prior to vesting, subje
b ct to a right of
repurchase by us. During the
t
fourth quarter of 2024, there were no repurchases of unvested shares of our common stock made
pursuant to our equity incentive plans as a result of us exercising our rights nor pursuant to any publicly-announced plan or
program.
Stock Repurchase Program
From time to time, we repurchase shares of our common stock pursuant to the
t
Repurchase Programs (as defin
f ed
below) that are fun
f
ded fro
f
m worki
r ng capi
a tal. In April 2024, we completed repurchases under our previous $1.0 billion stock
repurchase program (the “Prior Repurchase Program”). In May 2024, our board of directors authorized and announced a new
$1.2 billion stock repurchase program (the “New Repurchase Program” and together with the Prior Repurchase Program, the
"Repurchase Programs"), which expires in May 2
a
027. The Repurchase Programs do not obligate us to acqui
q re any of our
common stock, and may be suspended or discontinued by the
t
company at any time without prior notice. During the year ended
Decembe
m
r 31, 2024, we repurchased a total of $279.0 million of our common stock under our New Repurchase Program and
$144.6 million of our common stock under our Prior Repurchase Program. As of December 31, 2024, the remaining authorized
amount for stock repurchases under the New Repurchase Program was approximately $921.0 million. Our repurchases for the
t
three months ended Decembe
m
r 31, 2024 are disclosed as below (in thousands, except per share amounts). For our repurchase
activities made for
f
the year ended December 31, 2024, please refer
f
to Note 6. Stockholders' Equi
q ty and Stock-Based
Compensation of the Notes to Consolidated Financial Statements included in Part II, Item 8, of this Annual Report on Form 10-
K.
Total Number
of Shares
Purchased
Average Price
Paid Per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Approximate Dollar
Value of Shares That May Yet
Be Purchased Under the
Publicly Announced Plans
or Programs
October 1, 2024 - October 31, 2024
—
$
—
—
$
1,044,650
November 1, 2024 - November 30,
2024 (1)
1,306
94.80
1,306
920,854
Decembe
m
r 1, 2024 - Decembe
m
r 31,
2024
—
—
—
920,854
1,306
1,306
) Novembe
m
r results have been adju
d sted to reflect the four-for
f
-one stock split effe
f cted in Decembe
m
r, 2024. See Note
1,Organization and Summary o
r
f Accounting Policies, included in Part II, Item 8, of this Annual Report on Form 10-K
for details.
Item 6. [Reserved]
53
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the fol
f lowing disc
i
ussion and analys
l
is of our fin
f ancial condition and results o
t
f o
o
pe
o
rations together
with the consolidated fin
f ancial statements a
t
nd related notes that are i
r
ncluded elsewhere in this Annual Report on For
F
m 10-K.
This disc
i
ussion contains forward-
r looking statements b
t
ased upon current plans, expe
x
ctations and beliefs
e
that involve risks and
uncertainties. Our actual results m
t
ay diff
i er
f
materially from
r
those anticipated in these for
f
ward-l
d ooking statements as a res
r ult ofo
various fac
f
tors, including those set forth u
t
nder “Ri
“
sk
i
Factors”
r
and elsewhere in this Annual Repo
e
rt on Form 10-K.
K
Overview
Arista Networks is an industry
t
leader in data-driven, client to cloud netwo
t
rking for
f
large AI, data center, campu
m
s and
routing environments. Arista's platforms deliver availabi
a lity, a
y
gility, automation, analytics and security through an advanced
network o
r
perating stack. Since Arista’s inception, our fou
f
nders have reimagined cloud networks for performance, scale and
programmability with a focus on diffe
f rentiating in three ways: uncompromising reliability built on the fou
f
ndation of robust
quality assurance capabilities with a suite of automated diagnostics, advanced open and standards-based technology and
intelligent automation to decrease the manual workl
r oad on the
t
operator. At the core of Arista’s platform is Arista EOS, a
modernized publish-subs
u
cribe state-sharing networking operating system. Arista EOS, combined with a set of network
applications and our Ethe
t
rnet switching and routing platfor
f
ms
r
using best of breed merchant silicon, provides customers with a
highly competitive and diversifie
f d portfol
f io of produc
d
ts with impr
m
oved price/pe
/
rfor
f
mance and time to market.
The Compa
m
ny’s current portfol
f io of produc
d
ts, servi
r ces and technologies are grouped into the
t
following categories:
Core (Data Center, Cloud and AI Networki
r ng), Cognitive Adjacencies (Campus and Routing), and Cognitive Network
(Softw
f
are and Services). The percentage of revenue derived fro
f
m these product categories during the
t
current fis
f cal year was
approximately 65% fro
f
m Core, 18% fro
f
m Cognitive Adja
d cencies, and 17% from Networking softw
f
are and services. Our
customers include companies of all sizes and span a range of industries and geographi
a
es and are grouped into the
t
following
categories: Cloud and AI Titans, Enterpr
r
ise and Providers. The percentage of revenue derived fro
f
m these customers during the
current fis
f cal year was app
a
roximate yly 48% fro
f
m Cloud and AI Titans, 35% from Enterprise and 17% from Providers.
Historically, l
y arge purchases by a relatively limited numbe
m
r of customers have accounted for
f
a significant portion of
our revenue. We h
W
ave experienced unpr
n
edictabi
a lity in the timing of orders fro
f
m the
t
se large customers primarily due
d
to the time
it takes the
t
se customers to evaluate, test, qua
q
lify and accept our newer produc
d
ts, the
t
overall complexity of the
t
se large orders
and changes in demand patterns
r
specific
f
to these customers, includi g
ng reductions in or changes in mix of capi
a tal expenditures
by
by these customers and the
t
impact of cost reduction and other effic
f iency effor
f
ts y
by these customers F
.
or example, sales to our
end customer Microsoft represented 20%, 18% and 16% of our total revenue for
f
the years ended 2024, 2023 and 2022
respectively. And sales to our end customer Meta Platforms represented 15%, 21% and 26% of our total revenue, respectively
for the years ended 2024, 2023 and 2022. This variabi
a lity in customer concentration has been linked to the timing of new
product deployments and spending cycles with the
t
se customers, and we expect continued variabi
a lity in our customer
concentration and timing of sales on a quarterly and annual basis. In addition, we typi
y cally provide pricing discounts to large
customers, which reduc
d
es gross margins for the period in which such sales occur.
We believe an increased focus on the deployment of AI enabled solutions by our large customers has accelerated the
t
need for advanced technology offe
f rings including some offe
f rings fro
f
m potential new market entrants. This prioritization and
acceleration of AI related infrastruc
r
ture investment has at times come in conjunction with a reduction or changes in the mix of
previously planned purchases and various cost reduction measures by these customers, including optimization and increased
effi
f ciency in non-AI related capital expenditur
t
es. In addition, although the foc
f
us on deployment of AI enabled solutions has
driven increased demand for
f
networking, the long-term t
r
raje
a ctory i
r
s unkno
k
wn. As such, demand estimates for
f
our new products
are diffi
f cult to forecast and can create volatility in our revenue. In some instances, such measures have had, and may c
a
ontinue
to have, an impact on certain curre
r nt or future projects and have reduc
d
ed our visibility to customer demand and may r
a
esult in a
reduction or uncertainty in the timing of orders fro
f
m these large customers and increase the risk of charges for
f
excess and
obsolete inventory. Fiscal 2024 was marke
r
d by a year of new product introduc
d
tions and expanded use cases, particularly in the
AI Ethernet market, and we expect this to continue into fiscal 2025. This has resulted in increased customer trials and contracts
with acceptance periods, and an increase in the
t
volatility and magnitude
t
of our product defer
f re
r d revenue balances, which in turn
may create variabi
a li yty in our revenue results on a quarterly and annual basis. In addition, if we are not abl
a e to satis y
fy the
requirements under customer trials or contracts with acceptance periods, we may b
a
e requi
q red to accept product retur
t
ns from our
customers, which would prevent us fro
f
m rec g
ognizing revenue on such transactions and m y
ay result in the write-down of
inventory.
54
We believe that cloud computing represents a fundamental shift from traditional legacy netwo
t
rk architectures. As
organizations of all sizes have moved workl
r oads to the cloud, spending on cloud and next-generation data centers has increased
rapi
a dly, while tra
t ditional legacy IT spending has grown at a slower rate. Our cloud networking platforms are well positioned to
address the growing cloud networking market, and to address increasing performance requirements driven by the growing
number of connected devices, as well as the need for constant connectivity and access to data and applications.
The markets for cloud networki
r ng solutions are highly compe
m
titive and characterized by rapi
a dly changing technology,
changing end-customer needs, evolving industry standards, freque
q
nt introductions of new products and services, and indus
d
try
r
consolidation. We expect competition to intensify in the fut
f ur
t
e as the market for cloud networki
r ng expands and existing
competitors and new marke
r
t entrants introduce new products or enhance existing products. Our fut
f ur
t
e success is dependent
upon our abi
a lity to continue to evolve and adapt
a
to our rapidly changing environment. We must also continue to develop
market-leading produc
d
ts and softw
f
are fea
f
tures that address the changing needs of our existing and new customers, and increase
sales in the cloud, AI and enterpr
r
ise data center ethernet switching/routing markets, and campus works
r
pace markets. We intend
to continue expanding our sales for
f
ce and marke
r
ting activities in key geographies, as well as our relationships with channel,
technology and system-level partners in order to reach new customers more effect
f
ively, increase sales to existing customers,
and provide services and support. In addition, we intend to continue to invest in our research and development organization to
enhance the functionality of our existing cloud networki
r ng platform, intro
t
duce new products and featur
t
es, and build upo
u
n our
technology leadership. We b
W
elieve one of our greatest strengths lies in our abi
a lity to rapi
a dly develop new fea
f
tures and
applications.
Macroeconomic Update
Global economic and business activities continue to fac
f
e widespread macroeconomic uncertainties, includi g
ng the
effe
f cts of, among other things, infla
f tion, monetary p
r
olicy shifts, recession risks, potential supply chain disrupt
r
ions, cha g
nges in
the U.S. administration, geopolitical pressures and escalati g
ng international trade measures.
Our business is emerging fro
f
m a period of unpr
n
ecedented global supply chain disrup
r
tions. Throughout this period, we
made signific
f ant supply chain investments, including fun
f
ding additional working capi
a tal and incremental purchase
commitments in response to extended visibility to deployment plans from our customers. We have worked closely with our
contra
t ct manufactur
t
ers and supply chain partners to ramp p
m
roduction fol
f lowing a period of delayed component sourcing and
workforce disruptions. Increased capa
a
city has allowed us to ship produc
d
ts against previously committed demand/deployment
plans and accelerate some deployments where needed, while trying to balance our customers' requi
q rements and lead times with
the availabi
a lity of key compo
m
nents and produc
d
ts and lead times of our key suppliers and contract manufactur
t
ers. As a result,
some shipments against these previously committed demand/depl y
oyment plans have extended into 2025.
As th g
e global supply chain has experienced some improvements and as customer lead times have been reduc
d
ed from
their peak, we have seen and expect to continue to see a commensurate reduction in visibili yty to customer demand and a gradua
d
l
return to shorter demand-planni g
ng horizons. Given the timing and prioritization of customer orders and shipment patterns, as
well as the timing and outcome of customer trials and contracts with acceptance periods, near term revenue trends may not be
reflective of curre
r nt demand levels, and as discussed abo
a
ve will also benefit fro
f
m demand/depl y
oyment plans tha
t
t have b
n
een
previous yly committed. We expect that our invento y
ry and purchase commitments will remain volatile as we ramp new produc
d
t
introductions. The magnitud
t
e of these balances, combi
m ned with a reduction in customer demand-planning horizons and shiftin
f
g
customer produc
d
t priorities, has resulted in increased risk that we may not be able to sell all of this inventory, which in tur
t
n h
r
as
resulted in additional excess and obsolete inventory a
r
nd supplier liability charges. In addition, inflation pressure in our supp
u
ly
chain and scarcity of some materials needed to build our products have increased our cost of revenue and have impa
m
cted, and
may continue to negatively impact our gross margin. These cost pressures may b
a
e increased if escalating tariff a
f
nd non-tariff
international trade measures continue to prolifer
f ate in or affec
f
t our supply chain. We also may n
a
ot be able to pass on the ful
f l
burden of the increase in trade-related costs to our customers, which could furthe
t
r negatively impact our gross margin. While
we have seen improvements in our supply chain and manufac
f
turing operations, any remaining or new supply chain and
manufactur
t
ing related constra
t ints could negatively impact our business in future periods.
Management continues to actively monitor the
t
impa
m
ct of macroeconomic fac
f
tors on the Compa
m
ny's financial
condition, liquidity, o
y
perations, suppliers, industry, and workfor
f
ce. The extent of the impact of the
t
se factors on our operational
and fin
f ancial perfor
f
ma
r
nce, including our abi
a lity to execute our business strategies and initiatives in the
t
expected time frame,
will depend on future developments, the impact on our customers, partners, employees, contract manufactur
t
ers and suppl
u
y
chain, all of which continue to evolve and are unpr
n
edictabl
a e. In addition, any continued or renewed disrup
r
tion in manufactur
t
ing
and supply and new or enhanced tariffs
f
impos
m
ed by the U.S. and othe
t
r countries resulting fro
f
m the
t
se factors could negatively
55
impact our business. Furthermore, any prolonged economic disrupt
r
ions or further deterioration in the global economy could
have a negative impact on demand from our customers in future periods, particularly in the enterpr
r
ise market where we are
continuing to expand our penetration. Accordingly, c
y
urre
r nt results and financial conditions discussed herein may not be
indicative of fut
f ur
t
e operating results and trends.
Results of Operations
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
Revenue, C
e
os
C
t of R
o
evenue and Gro
G
ss Margin (in t
i
ho
t
usands, e
s
xc
e
ept percentage
t
s)
e
Year Ended December 31,
2024
2023
Change in
$
% of
Revenue
$
% of
Revenue
$
%
venue
Product
$5,884,021
84.0 % $5,029,493
85.8 % $ 854,528
17.0 %
Service
1,119,125
16.0
830,675
14.2
288,450
34.7
Total revenue
7,003,146
100.0
5,860,168
100.0
1,142,978
19.5
Cost of revenue
Product
2,299,063
32.8
2,061,167
35.2
237,896
11.5
Service
212,780
3.1
168,720
2.9
44,060
26.1
Total cost of revenue
2,511,843
35.9
2,229,887
38.1
281,956
12.6
Gross profit
$4,491,303
64.1 % $3,630,281
61.9 % $ 861,022
23.7 %
Gross margin
64.1 %
61.9 %
Revenue by Geogra
g
ph
a
y (
h
in
(
thousands,
d
except
e
percentage
a
s)
e
Year Ended December 31,
2024
% of
Total
2023
% of
Total
Americas
$5,729,039
81.8 % $4,651,193
79.4 %
Europe, Middle East and Afri
f ca
713,175
10.2
670,960
11.4
Asia-Pacific
560,932
8.0
538,015
9.2
Total revenue
$7,003,146
100.0 % $5,860,168
100.0 %
Revenue
Product revenue primarily consists of sales of our switching and routing products, and related netwo
t
rk applications.
Service revenue is primarily derived from sales of PCS contracts, which are typically purchased in conjunction with our
u
products, and subseque
q
nt renewals of those contracts. We e
W
xpect our revenue may vary f
r
ro
f
m period to period based on, among
other things, the timing, size, and complexity of orders, especially with respect to our large customers.
Product revenue increased by $854.5 million, or 17.0%, for the year ended Decembe
m
r 31, 2024 compared to 2023.
This increase refle
f cts healthy customer demand and higher shipments of our switching and routing platfor
f
ms
r
, with strong
contri
t butions across our customer bas .e In addition, service revenue increased by $288.5 million, or 34.7%, for
f
the year ended
Decembe
m
r 31, 2024 compared to 2023, as a result of continued growth in initial and renewal supp
u
ort contracts as our customer
installed base has continued to expand. International revenues as a percentage of our total revenues decreased from 20.6% in
2023 to 18.2% in 2024, which was primarily driven by changes in the geographic mix of sales to our large global customers.
Cost of Revenue and Gros
r
s Mar
M
gi
r n
Cost of produc
d
t revenue primarily consists of amounts paid for inventory to our third-party contract manufactur
t
ers and
merchant silicon vendors, overhead costs of our manufac
f
turing operations, including freight, and other costs associated with
manufactur
t
ing our products and managing our inventory a
r
nd supply chain. Cost of service revenue primarily consists of
personnel and other costs associated with our global customer support and services organizations.
56
Cost of revenue increased by $282.0 million, or 12.6% for
f
the year ended Decembe
m
r 31, 2024 compared to 2023.
These increases were driven by a corre
r sponding increase in produc
d
t and service revenues, partially offse
f
t by reduc
d
tions of
$180.4 million in net excess/obsolete inventory and supplier liabi
a lity charges for
f
the year ended December 31, 2024 compared
to 2023.
Gross margin, or gross profit as a percentage of revenue, has been and will continue to be affe
f cted by a variety of
factors, including pricing pressure on our produc
d
ts and services due to competition, the mix of sales to large customers who
generally receive lower pricing, the mix of products sold, manufactur
t
ing-related costs, including costs associated with supply
chain sourcing activities, merchant silicon costs, and excess/obsolete inventory and supplier liabi
a lity charges. For example, in
order to meet customer lead times, we have, and may continue to expedite the supply of components and make incremental
investments in our supp
u
ly chain to increase our capa
a
city for manufac
f
turing products, which increases our produc
d
t costs and
negatively impa
m
cts our gross margin. We expect our gross margin to fluctuate over time, depending on the factors described
above.
Gross margin increased from 61.9% for
f
the year ended December 31, 2023 to 64.1% for the year ended Decembe
m
r 31,
2024. These changes refle
f ct an impr
m
ovement in produc
d
t margins of 60.9% in 2024 compared to 59.0% in 2023, driven by a
reduction of $180.4 million in net excess/obsolete inventory-
r
related charges. In addition, our gross margin benefited in 2024
from the leverage of relatively fix
f ed manufactur
t
ing overhead costs on a higher revenue base of $7.0 billion in 2024 compared
to $5.9 billion in 2023.
Operatin
t
g E
n
xp
E
enses (in
(
thousands,
d
except
e
percentage
t
s)
Our operating expenses consist of research and development, sales and marketing, and general and administrative
expenses. The largest compo
m
nent of our operating expenses is personnel costs. Personnel costs consist of wages, benefit
f s,
bonuses and, with respect to sales and marketing expenses, sales commissions. Personnel costs also include stock-based
compensation and travel-related expenses.
Year Ended December 31,
2024
2023
Change in
$
% of
Revenue
$
% of
Revenue
$
%
Operating expenses:
Research and development
$
996,717
14.2 % $
854,918
14.6 % $ 141,799
16.6 %
Sales and marketing
427,264
6.1
399,034
6.8
28,230
7.1
General and administrative
122,706
1.8
119,080
2.0
3,626
3.0
Total operating expenses
$ 1,546,687
22.1 % $ 1,373,032
23.4 % $ 173,655
12.6 %
Research
r
and deve
d
lopm
o
ent.
Research and development expenses consist primarily of personnel costs, prototype
y
expenses, thi
t rd-party engineering
costs, and an allocated portion of faci
f
lity and IT costs. Our research and development effo
f
rts are focused on new produc
d
t
development and maintaining and developing additional fun
f
ctionality for our existing produc
d
ts, including new releases and
upgrades to our EOS software and app
a
lications. We expect our research and development expenses to increase in abs
a
olute
dollars as we continue to invest in software development in order to expand the capabilities of our cloud netwo
t
rking platfor
f
m,
r
introduce new products and fea
f
tures, and continue to invest in our technology.
Research and development expenses increased by $141.8 million, or 16.6%, for
f
the year ended December 31, 2024
compared to 2023. The increase was primarily due to a $64.9 million increase in personnel costs driven by an increase in
headcount, and a $52.3 million increase in new produc
d
t introduction costs, including non-recurring engineering costs and
prototype
t
expenses as we expand our produc
d
t portfol
f io.
Sales and market
k ing.
Sales and marketing expenses consist primarily of personnel costs, marketing, trade shows, and other promotional
activities, and an allocated portion of faci
f
lity and IT costs. We e
W
xpect our sales and marke
r
ting expenses to increase in abs
a
olute
dollars as we continue to expand our sales and marketing effor
f
ts worldwide.
Sales and marketing expenses increased by $28.2 million, or 7.1%, for the year ended December 31, 2024 compa
m
red to
57
2023 primarily due
d
to an increase in personnel costs.
General and admi
d
nist
i ra
t
tive.
General and administrative expenses consist primarily of personnel costs and professional servi
r ces costs for our
finance, human resources, legal and certain executive functions. Our professional services costs are primarily related to external
legal, accounting, and tax services.
General and administrative expenses increased by $3.6 million, or 3.0%, for the
t
year ended December 31, 2024
compared to 2023.
Othe
t
r Inc
I
ome, Net (in
(
thousands,
d
except percentage
a
s)
e
Other income (expense), net consists primarily of interest income fro
f
m our cash, cash equivalents and marketable
securities, and gains and losses on our strategic investments. We expect other income (expense), net may flu
f ctua
t
te in the fut
f ur
t
e
as a result of changes in interest rates, changes in our cash, cash equivalents and marke
r
tabl
a e securities balances, and the re-
measurement of our equity investments upon
u
the occurrence of either observabl
a e price changes or impairments.
Year Ended December 31,
2024
2023
Change in
$
% of
Revenue
$
% of
Revenue
$
%
her income (expense), net:
Interest income
$
310,998
4.4 % $
152,421
2.6 % $ 158,577
104.0 %
Other income (expense), net
9,420
0.1
12,356
0.2
(2,936)
(23.8)
Total other income, net
$
320,418
4.6 % $
164,777
2.8 % $ 155,641
94.5 %
The fav
f
orable movement in other income (expense), net, during the year ended December 31, 2024 as compa
m
red to
2023 was driven by an increase in interest income of $158.6 million due to an increase in our cash and marke
r
tabl
a e securities
balances, coupl
u ed with higher investment yields.
Provision for
f
Income Taxe
a
s (in
(
thousands,
d
except
e
percentage
a
s)
e
We operate in a number of tax jurisdictions and are subje
b ct to taxes in each country o
r
r jurisdiction in which we
conduc
d
t business. Earnings from our non-U.S. activities are subj
u ect to local country income tax and may a
a
lso be subje
b ct to U.S.
income tax. Generally, our U.S. tax obligations are reduced by a credit for
f
foreign income taxes paid on these for
f
eign earnings,
which avoids double taxation. Our tax expense to date consists of federal, state and foreign curre
r nt and defer
f re
r d income taxes.
Year Ended December 31,
2024
2023
Change in
$
% of
Revenue
$
% of
Revenue
$
%
ovision for
f
income taxes
$ 412,980
5.9 % $ 334,705
5.7 % $ 78,275
23.4 %
Effe
f ctive tax rate
12.6 %
13.8 %
Our provision for income taxes increased for
f
the year ended December 31, 2024, as compared to 2023, while our
effe
f ctive tax rate decreased for the year ended Decembe
m
r 31, 2024, as compared to 2023. The increase in our income taxes was
largely due
d
to an increase in pre-tax income, partly offse
f
t by a decrease in our effe
f ctive tax rate due to favorabl
a e changes in
state taxes and tax benefits attributable to stock-based compe
m
nsation. For fur
f
ther information regarding income taxes and the
impact on our results of operations and fin
f ancial position, refer to Note 8. Income Tax
T
es of the Notes to Consolidated Financial
Statements included in Part II, Item 8, of this Annual Report on Form 10-K.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Revenue, C
e
os
C
t of R
o
evenue and Gro
G
ss Margin (in t
i
ho
t
usands, e
s
xc
e
ept percentage
t
s)
e
58
Year Ended December 31,
2023
2022
Change in
$
% of
Revenue
$
% of
Revenue
$
%
venue
Product
$5,029,493
85.8 % $3,716,079
84.8 % $1,313,414
35.3 %
Service
830,675
14.2
665,231
15.2
165,444
24.9
Total revenue
5,860,168
100.0
4,381,310
100.0
1,478,858
33.8
Cost of revenue
Product
2,061,167
35.2
1,573,629
35.9
487,538
31.0
Service
168,720
2.9
131,985
3.0
36,735
27.8
Total cost of revenue
2,229,887
38.1
1,705,614
38.9
524,273
30.7
Gross profit
$3,630,281
61.9 % $2,675,696
61.1 % $ 954,585
35.7 %
Gross margin
61.9 %
61.1 %
Revenue y
by Ge g
ogra
g
ph
a
y (
h
in
(
thousands,
d
except
e
percentage
a
s)
e
Year Ended December 31,
2023
% of
Total
2022
% of
Total
Americas
$4,651,193
79.4 % $3,462,621
79.0 %
Europe, Middle East and Afri
f ca
670,960
11.4
529,800
12.1
Asia-Pacific
538,015
9.2
388,889
8.9
Total revenue
$5,860,168
100.0 % $4,381,310
100.0 %
Revenue
Product revenue increased by $1.3 billion, or 35.3%, for the year ended December 31, 2023 compa
m
red to 2022. These
increases reflect increased shipments of our switching and routing products across our customer base, including improved
supply availabi
a lity for our enterprise customers. In addition, servi
r ce revenue increased by $165.4 million, or 24.9%, in the year
ended Decembe
m
r 31, 2023 compared to 2022, as a result of continued growth in initial and renewal support contracts as our
customer installed base has continued to expand. International revenues as a percentage of our total revenues decreased fro
f
m
21.0% in 2022 to 20.6% in 2023, which was primarily driven by changes in the geographi
a
c mix of sales to our large global
customers.
Cost fof Revenue and Gross Ma g
rgin
Cost of revenue increased by $524.3 million, or 30.7% for
f
the year ended December 31, 2023 compared to 2022.
These increases were primarily driven by a corresponding increase in product and service revenues, combined with an increase
in provisions for
f
excess/obsolete inventory and supplier liabi
a lity charges.
Gross margin increased from 61.1% for
f
the year ended December 31, 2022 to 61.9% for the year ended Decembe
m
r 31,
2023. These changes refle
f ct an impr
m
ovement in product margins driven by a lower mix of revenue from our larger customers,
partly offs
f et by an increase in excess/obsolete inventory-related charges. In addition, our gross margin benefit
f ed in 2023 from
the leverage of relatively fix
f ed overhead costs on a higher revenue base.
59
Operatin
t
g E
n
xpe
E
nses (in t
i
ho
t
usands, e
s
xc
e
ept percentage
a
s)
Year Ended December 31,
2023
2022
Change in
$
% of
Revenue
$
% of
Revenue
$
%
erating expenses:
Research and development
$
854,918
14.6 % $
728,394
16.6 % $ 126,524
17.4 %
Sales and marketing
399,034
6.8
326,955
7.5
72,079
22.0
General and administrative
119,080
2.0
93,241
2.1
25,839
27.7
Total operating expenses
$ 1,373,032
23.4 % $ 1,148,590
26.2 % $ 224,442
19.5 %
Research
r
and deve
d
lopm
o
ent
Research and development expenses increased by $126.5 million, or 17.4%, for the year ended December 31, 2023
compared to 2022. The increase was primarily due to a $84.1 million increase in personnel costs driven by an increase in
headcount, and a $40.7 million increase in new product introduction costs, including non-recurring engineering costs and
prototype
t
expenses as we expand our produc
d
t portfol
f io.
Sales and market
k ing
Sales and marketing expenses increased by $72.1 million, or 22.0%, for the
t
year ended Decembe
m
r 31, 2023 compared
to 2022. The increase was primarily caus
a
ed by increased personnel costs driven by headcount growth, in addition to increased
sales and marketing events and field demonstration costs.
General and admi
d
nist
i ra
t
tive
General and administrative expenses increased by $25.8 million, or 27.7%, for the
t
year ended December 31, 2023
compared to 2022. The increase was primarily caused by an increase in personnel costs driven by increased stock-based
compensation, and increased legal and profes
f
sional fees.
Othe
t
r Inc
I
ome, Net (in
(
thousands,
d
except percentage
a
s)
e
Year Ended December 31,
2023
2022
Change in
$
% of
Revenue
$
% of
Revenue
$
%
her income, net:
Interest income
$
152,421
2.6 % $ 27,556
0.6 % $124,865
453.1 %
Other income (expense), net
12,356
0.2
27,134
0.6
(14,778)
(54.5)
Total other income, net
$
164,777
2.8 % $ 54,690
1.2 % $110,087
201.3 %
The fav
f
orable movement in other income (expense), net, during the year ended December 31, 2023 as compared to
2022 was driven by an increase in interest income of $124.9 million due to an increase in our cash and investments balances
and higher interest rates.
Provisio
f
n for
f
Income Taxe
a
s (in
(
thousands,
d
except
e
percentage
a
s)
e
Year Ended December 31,
2023
2022
Change in
$
% of
Revenue
$
% of
Revenue
$
%
ovision for
f
income taxes
$ 334,705
5.7 % $229,350
5.2 % $ 105,355
45.9 %
Effe
f ctive tax rate
13.8 %
14.5 %
Our provision for income taxes increased in 2023, as compared to 2022, and our effec
f
tive tax rate decreased in 2023 as
compared to 2022. The increase in our income taxes was largely due to an increase in pre-tax income, partly offse
f
t by an
increase in tax benefits
f
attributable to stock-based compe
m
nsation. The decrease in our effe
f ctive tax rate was primarily due to a
60
reduction of unrecognized tax benefits on uncertain tax positions due to the expiration of the statute of limitations. For fur
f
ther
information regarding income taxes and the impact on our results of operations and fin
f ancial position, refer
f
to Note 8. Income
Taxes of the Notes to Consolidated Financial Statements included in Part II, Item 8, of this Annual Report on Form 1
r
0-K.
Liquidity and Capital Resources
Our principal sources of liquidity are cash, cash equivalents, marketable securities, and cash generated fro
f
m
operations. As of December 31, 2024, our total balance of cash, cash equi
q valents and marketable securities was $8.3 billion, of
which app
a
roximately $1.4 billion was held outside the
t
U.S. in our foreign subsidiaries.
Our cash, cash equivalents and marke
r
tabl
a e securities are held for
f
general business purpo
r
ses, including the fun
f
ding of
working capital. Our marketable securities investment portfolio is primarily invested in highly-rated securities, with the primary
r
objective of minimizing the potential risk of principal loss. We p
W
lan to continue to invest for long-term growth. We b
W
elieve that
our existing balances of cash, cash equivalents and marketable securities, togethe
t
r with cash generated from operations, will be
suffic
f ient to meet our working capital requirements and our growth strategies for at least the next 12 months
t
. Our future capi
a tal
requirements will depend on many factors, including our growth r
t
ate, the timing and extent of our spending to supp
u
ort research
and development activities, the
t
timing and cost of establishing additional sales and marketing capabilities, the intro
t
duction of
new and enhanced produc
d
t and service offer
f ings, our costs associated with supply chain activities, including access to
outsourced manufac
f
turing, our costs related to investing in or acqui
q ring complementary o
r
r strategic businesses and
technologies, the
t
continued marke
r
t acceptance of our products, stock repurchases, and capi
a tal expenditures, including the
construc
r
tion of a new building in Santa Clara, Califor
f
nia. In addition, although the global suppl
u
y chain has shown
improvement, we have had to invest in inventory to address for
f
ecast uncertainty and expect that our inventory and purchase
commitments will remain volatile as we ramp new product introductions. In particular, we have increased our purchase
commitments to respond to the
t
rapi
a d deployment of AI netwo
t
rks and reduce overall lead times which will increase our working
capital requirements. If we require or elect to seek additional capi
a tal thr
t
ough debt or equity financing in the future, we may not
be able to raise capital on terms acceptabl
a e to us or at all. If we are required and unabl
a e to raise additional capital when desired,
our business, operating results and financial condition may b
a
e adversely affe
f cted.
Cash Flow
l
s
Year Ended December 31,
2024
2023
2022
(in thousands)
Cash provided by operating activities
$
3,708,235
$
2,034,014
$
492,813
Cash provided by (used in) investing activities
(2,457,354)
(687,454)
216,327
Cash (used in) financing activities
(421,810)
(83,749)
(654,601)
Effe
f ct of exchange rate changes
(4,767)
675
(3,611)
Net increase in cash, cash equivalents and restricted cash
$
824,304
$
1,263,486
$
50,928
Cash Flow
l
s fro
f
m Ope
O
rating
i
Activiti
i es
Our operating activities consist of net income, adjusted for
f
certain non-cash items, and changes in operating assets and
liabilities.
During the year ended December 31, 2024, cash provided by operating activities was $3.7 billion, primarily from net
income of $2.9 billion along with a net decrease in working capital requirements of $985.2 million, offs
f et by net non-cash
adju
d stments to net income of $129.0 million. Cash inflows consisted of an increase in deferred revenue of $1.3 billion resulting
from increased customer PCS contracts and an increase in product defer
f red revenue related to customer contracts with
acceptance terms, and a $110.6 million decrease in inventory resulting fro
f
m strong product shipments. These cash inflo
f ws were
partially offse
f
t by a $234.2 million increase in other assets driven by increased deferred cost of sales associated with higher
product revenue deferrals, an increase in accounts receivabl
a e of $106.1 million due to increased product and service billings
and a $66.5 million increase in income tax payments due
d
to timing. Net non-cash adjustments primarily consisted of an increase
in deferred income taxes of $492.9 million primarily resulting from increased defer
f red tax assets associated with the increase in
deferred revenue and capi
a talization of research and development costs under IRC Section 174, which were largely offse
f
t by
$355.4 million of stock-based compensation expenses.
61
During the year ended December 31, 2023, cash provided by operating activities was $2.0 billion, primarily from net
income of $2.1 billion, offs
f et by net non-cash adjustments to net income of $37.4 million, and a net change of $15.9 million in
working capital requirements. Net non-cash adjustments primarily consisted of an increase in deferred income taxes of $370.8
million primarily resulting fro
f
m increased deferred tax assets associated with the capi
a talization of research and development
costs under IRC Section 174, which were largely offse
f
t by $296.8 million of stock-based compensation expenses and $70.6
million of depreciation, amortization and other expenses. The change in working capital requirements primarily consisted of a
$655.5 million increase in inventory in response to a significant increase in business volume, a $101.5 million increase in
accounts receivable due to the larger business volume and timing of shipments in the fou
f
rth q
t
uarter of 2023, as well as a $66.4
million increase in other assets primarily driven by increased deferred cost of sales associated with h
t
igher product revenue
deferrals. These cash outflows were largely offs
f et by a $465.0 million increase in deferred revenue driven by a growth in PCS
contra
t cts and increased produc
d
t defer
f re
r d revenue related to customer contracts with acceptance terms, a $322.3 million increase
in accounts paya
a
bl
a e and other liabi
a lities related to significant business volume, timing of paym
a
ents, and increased supplier and
contra
t ct manufactur
t
er liability reserves and a $20.2 million increase in income taxes, net, due
d
to timing of paym
a
ents.
Cash Flow
l
s fro
f
m Inv
I
esting
i
Activiti
i es
Our investing activities primarily consist of our marketable securities investments, business combinations, and capi
a tal
expenditur
t
es.
During the year ended December 31, 2024, cash used in investing activities was $2.5 billion, consisting of purchases
of availabl
a e-for-sale securities of $4.5 billion, partially offs
f et by proceeds of $2.1 billion fro
f
m matur
t
ities and sales of
marketable securities.
During the year ended December 31, 2023, cash used in investing activities was $687.5 million, consisting of
purchases of available-for
f
-sale securities of $2.6 billion, and purchases of property, equi
q pment and intangible assets of $34.4
million, partially offse
f
t by proceeds of $1.9 billion fro
f
m matur
t
ities of marke
r
tabl
a e securities, and proceeds fro
f
m the sale of
marketable securities of $67.3 million,
Cash Flow
l
s fro
f
m Fin
F
ancing
i
Activiti
i es
Our fin
f ancing activities consist of proceeds from the issuance of our common stock under employee equity incentive
plans, offs
f et by repurchases of our common stock.
During the year ended December 31, 2024, cash used in financing activities was $421.8 million, consisting of
payments for repurchases of our common stock from the open marke
r
t of $423.6 million and employee taxes withheld and paid
of $58.4 million upon vesting of restricted stock units, partially offs
f et by proceeds from the issuance of common stock under
employee equi
q ty incentive plans of $60.2 million.
During the year ended December 31, 2023, cash used in financing activities was $83.7 million, consisting primarily of
common stock repurchases of $112.3 million and taxes paid of $33.6 million upo
u
n vesting of restricted stock units, offs
f et
partially by proceeds fro
f
m the
t
issuance of common stock under empl
m oyee equi
q ty incentive plans of $62.1 million.
Stoc
t
k Repurchase Pro
P
gr
o
ams
From time to time, we repurchase shares of our common stock pursuant to the Repurchase Programs that are fun
f
ded
from working capital. In April 2024, we compl
m eted repurchases under our previous $1.0 billion stock repurchase program
(“Prior Repurchase Program”). In May 2024, our board of directors autho
t
rized a new $1.2 billion stock repurchase program
(“New Repurchase Program” and together with the Prior Repurchase Program, the "Repurchase Programs"), which expires in
May 2
a
027. The Repurchase Programs do not obligate us to acquire any of our common stock, and may be suspended or
discontinued by the compa
m
ny at any time without prior notice. During the year ended Decembe
m
r 31, 2024, we repurchased a
total of $279.0 million of our common stock under our New Repurchase Program and $144.6 million of our common stock
under our Prior Repurchase Program. As of Decembe
m
r 31, 2024, the remaining authorized amount for stock repurchases under
the New Repurchase Program was approximately $921.0 million. Refer to Note 6. Stockho
k
lders' Equi
q ty and Stock-Based
Compensation of the Notes to Consolidated Financial Statements included in Part II, Item 8, of this Annual Report on Form 10-
K for
f
further discussion.
62
Material
i
Cash Requirements
Our material cash requi
q rements will have an impact on our future liquidity. Our material cash requirements represent
material expected or contractua
t
lly committed future payment obligations. We b
W
elieve that we will be able to fund these
obligations through cash generated from operations and fro
f
m our existing balances of cash, cash equivalents and marketabl
a e
securities.
Our material cash requi
q rements include the fol
f lowing contractua
t
l and other obligations:
Purchase Obligat
i
ions
Purchase obligations not recorded on our balance sheet represent an estimate of all non-cancellabl
a e open purchase
orders and contractua
t
l obligations, made either directly by Arista or by our contract manufactur
t
ers on our behalf, i
f n the
t
ordinary
course of business for which we have not received the goods or services. As of Decembe
m
r 31, 2024, we had $3.1 billion of such
purchase obligations, of which $2.8 billion are expected to be received within 12 months, an
$
d
0.3 billion are expected to be
received afte
f r one year. These open purchase orders are considered enforceabl
a e and legally binding, and while we may have
some limited abi
a lity to reschedule and adjust our requirements based on our business needs prior to the delivery o
r
f goods or
perfor
f
mance of servi
r ces, this can only occur with the agreement of the related supplier.
Leases
We have operating lease arrangements for
f
offi
f ce space, data center, equipment and other corpor
r
ate assets. As of
Decembe
m
r 31, 2024, we had lease payment obligations, net of immaterial subl
u ease income, of $65.3 million, with $24.7 million
payabl
a e within 12 months.
Prop
r
erty proj
r ect
During the year ended December 31, 2021, we purchased land and the impr
m
ovements thereon in Santa Clara,
California to construc
r
t a building for
f
offi
f ce, lab a
a
nd data center space. The estimated capi
a tal expenditures related to this project
is expected to be approximately $235.0 million to $260.0 million for
f
the next two
t
years, with construc
r
tion expected to be
completed by the
t
end of fis
f cal 2026.
Accrued Inc
I
ome Tax
T
es
As of Decembe
m
r 31, 2024, we have recorded long-term tax liabi
a lities of $110.0 million related to uncertain tax
positions; however, we are unabl
a e to make a reasonably reliabl
a e estimate of the timing of settlement, if any, o
y
f the
t
se future
payments.
In connection with the TCJA, effe
f ctive fro
f
m January 1st, 2022, the TCJA eliminates the option to deduc
d
t research and
development expenditur
t
es currently and requires taxpayers to capi
a talize and amortize them over fiv
f e or fif
f te
f en years pursuant to
Internal Revenue Code (“IRC”) Section 174. As of December 31, 2024, the
t
incremental cash tax impact resulting fro
f
m the
regulation was app
a
roximately $210.2 million for
f
the year, of which substantially all the liability has been paid. It is anticipated
that IRC Section 174 will result in cash tax outlays exceeding our income tax expense over the next three years unless the
current legislation is changed. There is no material change to our effe
f ctive tax rate as a result of this regulation.
Off-
f balance She
S
et Arrangements
As of December 31, 2024, we did not have any relationships with any unconsolidated entities or fin
f ancial partnerships,
such as entities often referred to as structur
t
ed finance or special purpose entities, that would have been established for the
purpose of fac
f
ilitating off-b
f
alance sheet arrangements or other contractua
t
lly narrow or limited purposes.
63
Critical Accounti g
ng Estimates
We have prepared our consolidated fin
f ancial statements in accordance with accounting principles generally accepted in
the United States ("GAAP" or "U.S. GAAP") and include our accounts and the accounts of our wholly owned subsidiaries. The
preparation of these consolidated financial statements requi
q res our management to make estimates, assumptions and judgments
that affe
f ct the reported amounts of assets and liabi
a lities at the date of the financial statements, disclosure of contingent assets
and liabi
a lities at the date of the fin
f ancial statements and the
t
reported amounts of revenue and expenses during the appl
a
icable
periods. Note 1, “Organization and Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial
Statements in Part II, Item 8 of this Form 10-K describes the
t
signific
f ant accounting policies and methods used in the
t
preparation of the Company’s consolidated fin
f ancial statements. We b
W
ase our estimates, assumptions and judgments on
historical experience and on various othe
t
r fact
f
ors that we believe to be reasonable under the circumstances. Differ
f ent
assumptions and judgments would change the estimates used in the preparation of our consolidated financial statements, which,
in turn, could change the results from those reported. We evaluate our estimates, assumptions and judgments on an ongoing
basis. Actual results may differ
f
from these estimates. To t
T
he extent that there are material differ
f ences between these estimates
and our actua
t
l results, our future financial statements will be affect
f
ed.
Revenue Recogn
o
itio
t n
We generate revenue fro
f
m sales of our products, which incorpo
r
rate our EOS softwa
t
re and accessories such as cabl
a es
and optics, to direct customers and channel partners together with PCS. We t
W
ypically sell products and PCS in a single contra
t ct.
We recognize revenue upon transfer of control of promised produc
d
ts or services to customers in an amount that refle
f cts the
consideration we expect to be entitled to receive in exchange for those produc
d
ts or services. Most of our contracts with
customers, othe
t
r than renewals of PCS, contain multiple perfor
f
mance obligations with a combi
m nation of products and PCS.
Products and PCS generally qualify a
f
s distinct performance obligations. Our hardware includes EOS software, which together
deliver the essential fun
f
ctionality of our products. For contracts which contain multiple perfor
f
ma
r
nce obligations, we allocate
revenue to each distinct perfor
f
ma
r
nce obligation based on the standalone selling price (“SSP”). Judgment is required to
determine the SSP for
f
each distinct perfor
f
mance obligation. We use a range of amounts to estimate SSP for products and PCS
sold together in a contract to determine whether there is a discount to be allocated based on the relative SSP of the various
products and PCS.
If we do not have an observa
r
bl
a e SSP, s
P
uch as when we do not sell a product or service separately, then SSP is
estimated using judgment and considering all reasonabl
a y availabl
a e infor
f
mation, such as gross margin obje
b ctives, marke
r
t
conditions and infor
f
ma
r
tion about the size and/or purchase volume of the customer. We g
W
enerally use a range of amounts to
estimate SSP for
f
individual products and services based on multiple fac
f
tors including, but not limited to, product category,y
actual and expected volume, discounting policies, and customer vertical and size.
We limit the amount of revenue recognition for
f
contracts containing forms of variabl
a e consideration, such as future
perfor
f
mance obligations, customer-specific
f
returns, and acceptance or refun
f
d obligations. We d
W
efer
f
revenue recognition on
customer contracts for
f
new products or use cases, which contain customer-specifie
f d requi
q rements tha
t
t must be met prior to
acceptance. We include some or all of an estimate of the related at-risk consideration in the transaction price only to the extent
that it is probable that a significant reversal in the amount of cumulative revenue recorded under each contra
t ct will not occur
when the uncertainties surrounding the variable consideration are resolved.
We have elected a practical expedient to appl
a
y the
t
guidance to a portfol
f io of contra
t cts or performance obligations with
similar characteristics so long as such app
a
lication would not differ
f
materially from applying the guidance to the individual
contra
t cts (or perfor
f
ma
r
nce obligations) within that portfol
f io. Consequently, we have chosen to apply the portfolio app
a
roach
when possible, which we do not believe will happen fre
f quently. Additionally, we will evaluate a portfol
f io of data, when
possible, in various situa
t
tions, including accounting for
f
commissions, rights of retur
t
n a
r
nd transactions with variable
consideration.
Inventory Valuatio
t n and Contra
t
ct Manufa
u
cturer/S
r
uppl
p ie
l r Liabili
i ti
i es
Inventories primarily consist of fin
f ished goods, including evaluation inventory h
r
eld at customers or partne
t
rs, and
strategic compo
m
nents, primarily integrated circuits. Inventories are stated at the lower of cost (computed using the fir
f st-in, first-
out method) and net realizable value. Evaluation inventory consists of new products and/or use cases at customer or partner
sites for
f
trial purpo
r
ses. Title to the inventory r
r
emains with Arista during the trial period and invoicing occurs only upon
64
completion of the trial period and when/if the products have been accepted by the customer. Manufactur
t
ing overhead costs and
inbound shipping costs are included in the cost of inventory.
r
We record a provision when inventory i
r
s determi
r
ned to be in
excess of anticipated demand, or obsolete, to adjust inventory to its estimated realizable value.
Our contract manufactur
t
ers procure components and assemble products on our behalf and we procure strategic
components from suppliers based on our forecasts. We record a liabi
a lity and a corresponding charge for non-cancellabl
a e, non-
returnable purchase commitments with our contract
manufact
f
ur
t
ers and supp
u
liers for
f
quantities in excess of our demand
forecasts or that are considered obsolete due to manufactur
t
ing and engineering change orders resulting from design changes.
We use significant judgment in establishing our forecasts of future demand and obsolete material exposures. These
estimates depend on our assessment of current and expected orders from our customers, product development plans and current
sales levels. In addition, indus
d
try-wide supply chain shortages in prior years have resulted in extended lead times for some
components, and consequently we were required to extend the time horizon of our demand for
f
ecasts. We h
W
ave experienced
some impr
m
ovements in the
t
supp
u
ly chain throughout the year, and as customer lead times reduce more broadly, we have seen and
expect to continue to see a commensurate reduction in visibility to customer demand and a gradual return to shorter demand-
planning horizons. In addition, we expect that our invento y
ry and purchase commitments will remain volatile as we ramp new
product introductions. There is however no guarantee that all suppliers will meet their commitments in the time fra
f me
committed or tha
t
t actua
t
l customer demand will directly match our demand for
f
ecasts. If actua
t
l market demand conditions or
supplier execution on commitments are less fav
f
orable than those proje
o cted by management, which may be caused by fac
f
tors
within and/or outside of our control, we may be required to increase our inventory write-downs and liabi
a lities to our contract
manufactur
t
ers and suppliers, which could have an adverse impact on our gross margins and profitabi
a lity. We r
W
egularly evaluate
our exposure for
f
inventory write-downs and adequacy of our contract manufac
f
turer and supplier liabilities.
Income Taxe
a
s
Significant management judgment is requi
q red in developing our provision for or benefit
f
from income taxes, including
the determination of defer
f red tax assets and liabi
a lities and any valuation allowances that might be required against the defer
f red
tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results
and estimates of our abi
a lity to generate suffic
f ient future taxabl
a e income in certain foreign and state tax jurisdictions, future
reversals of taxable temporary d
r
iffe
f rences, and potential tax planning stra
t tegies. An adjustment to the
t
valuation allowance will
either increase or decrease our provision for
f
or benefit
f from income taxes in the period such determination is made.
We are subje
b ct to income taxes in the U.S. and numerous for
f
eign jurisdictions, which involves signific
f ant judgment in
the interpr
r
etation of compl
m ex domestic and international tax laws and may g
a
ive rise to uncertain tax positions. We r
W
ecognize
potential liabi
a lities for
f
anticipated tax audit issues in the
t
U.S. and other tax jurisdictions based on our estimate of whether it is
more likely than not that additional taxes, interest, and penalties will be due. Although management believes our unrecognized
tax benefit
f s are reasonabl
a e, no assurance can be given that the final tax outcome of the
t
se matters will not be differ
f ent fro
f
m tha
t
t
which is refle
f cted in our unrecognized tax benefit
f s. Our unrecognized tax benefits are adjusted considering changing facts and
circumstances, such as the closing of a tax examination or the refin
f ement of an estimate. Resolution of these uncertainties in a
manner inconsistent with management’s expectations could have a material impact on our fin
f ancial condition and operating
results.
Recent Accounting Pronouncements
Refer to the subh
u
eading titled “Recently Adop
d
ted Accounting Pronouncements” in Note 1. Organization and Summary
of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Part II, Item 8, of this Annual
Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may
a
impact our fin
f ancial position due to adverse changes in fin
f ancial market prices and rates. Our market risk exposure is primarily
a result of flu
f ctua
t
tions in for
f
eign currency exchange rates, interest rates, and strategic equi
q ty investments. Global economic and
business activities continue to face
f
widespread macroeconomic uncertainties, including the effec
f
ts of, a
f
mong other things,
inflation, monetary policy shifts
f , recession risks, potential supply chain disrup
r
tions, geopolitical pressures, and escalating
international tra
t de measures, which may increase our foreign curre
r ncy exchange risk and interest rate risk. For further
discussion of the potential impa
m
cts on our business, operating results, and fin
f ancial condition, see Risk Factors included in Part
I, Item 1A of this Form 10-K.
65
Foreign C
g
ur
C
rency E
c
xc
E
hange Risk
Our results of operations and cash flo
f ws are subje
b ct to fluctuations due to changes in foreign currency exchange rates.
Subs
u
tantially all of our revenue is denominated in U.S. dollars, and therefor
f
e, our revenue is not directly subject to foreign
currency risk. However, we are indirectly exposed to for
f
eign currency risk. A stronger U.S. dollar could make our products and
services more expensive in for
f
eign countries and therefor
f
e reduc
d
e demand. A weaker U.S. dollar could have the opposite effec
f
t.
Such economic exposure to currency fluctuations is diffic
f ult to measure or predict because our sales are also influ
f enced by
many other fac
f
tors.
Our expenses are generally denominated in the curre
r ncies in which our operations are located, which is primarily in
the U.S. and to a lesser extent in Europe and Asia. Our results of operations and cash flo
f ws are, therefor
f
e, subj
u ect to fluctuations
due to changes in foreign curre
r ncy exchange rates and may be adversely affect
f
ed in the fut
f ur
t
e due
d
to changes in for
f
eign
exchange rates. To date, for
f
eign currency transaction gains and losses and exchange rate fluctuations have not been material to
our fin
f ancial statements. While we have not engaged in the
t
hedging of our foreign currency tra
t nsactions to date and do not
enter into any hedging contracts for trading or speculative purpo
r
ses, we may i
a
n the
t
future hedge selected significant
transactions denominated in curre
r ncies other than the U.S. dollar.
Interest Rate Sensitiv
t ityt
As of December 31, 2024, and 2023, we had cash, cash equivalents and availabl
a e-for-sale marketable securities
totaling $8.3 billion and $5.0 billion, respectively. Cash equi
q valents and marketable securities were invested primarily in money
market funds, corporate bonds, U.S. agency mortgage-backed securities, U.S. tre
t asury s
r
ecurities and commercial pape
a
r. Our
primary investme
t
nt obje
b ctives are to preserve capital and maintain liquidity requirements. In addition, our policy limits the
amount of credit exposure to any single issuer. We do not enter into investments for trading or speculative purpos
r
es and have
not used any derivative fin
f ancial instruments to manage our interest rate risk exposure. Our primary e
r
xposure to marke
r
t risk is
interest income sensitivity, w
y
hich is affe
f cted by changes in the general level of the interest rates in the U.S. A decline in interest
rates would reduce our interest income on our cash, cash equivalents and marketable securities. Conversely, an increase in
interest rates could have a material impact to the fai
f r marke
r
t value of our investments in fixed income securities. We w
W
ould
incur unrealized losses on fixed income securities if there is an increase in interest rates compared to interest rates at the
t
time of
purchase. A hypothetical 100 basis point increase in marke
r
t interest rates would have resulted in a decrease app
a
roximately
$70.0 million and $39.0 million in the market value of our availabl
a e-for-sale debt securities and cash equivalents as of
Decembe
m
r 31, 2024 and 2023. In the unlikely event we are forced to sell our marke
r
tabl
a e securities prior to maturity, w
y
e may
incur realized losses in such investments. However, becaus
a
e of the
t
conservative and short-term natur
t
e of the
t
investments in our
portfolio, a change in interest rates is not expected to have a material impact on our consolidated financial statements.
Stra
t
tegi
e c Equ
E
ity I
t
nv
I
estments
Our non-marketabl
a e equity investments in privately-held companies are recorded in “other assets” in our consolidat d
ed
balance sheets. As of December 31, 2024 and 2023, the total carryi g
ng amount of our investments in privately-held companies
was $81.3 millio a
n nd $62.3 million, respectively. See Note 2. Fair Val
V ue Measurements of the Notes to Consolidated Financial
Statements included in Part II, Item 8, of this Annual Report on Form 10-K for details.
The privately-held compa
m
nies in which we invested are in the startup o
u
r development stages. These investments are
inherently risky b
k
ecause the markets for
f
the technologies or products these companies are developing are typically in the early
stages and may never materialize. We could lose our entire investment in these companies. Our evaluation of investments in
privately-held companies is based on the fun
f
damentals of the businesses invested in, including among other fac
f
tors, the nature
of their technologies and potential for fin
f ancial retur
t
n.
r
66
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATE
A
D FINANCIAL STAT
T
EMENTS
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)
67
Consolidated Balance Sheets
71
Consolidated Statements of Income
70
Consolidated Statements of Comprehensive Income
72
Consolidated Statements of Stockholders' Equity
73
Consolidated Statements of Cash Flows
74
Notes to the Consolidated Financial Statements
75
67
Report of Independent Registered Public Accounting Firm
To the Stockho
k
lders and the Board of Directors of Arista Netwo
t
rks, Inc.
Opinion on the Financial Statements
We have audited the
t
accompanying consolidated balance sheets of Arista Networks, Inc. (the
t
Company) as of December 31,
2024 and 2023, the related consolidated statements of income, compr
m
ehensive income, stockho
k
lders’ equity and cash flo
f ws for
each of the three years in the period ended December 31, 2024, and the related notes (collectively refer
f red to as the
“consolidated fin
f ancial statements”). In our opinion, the consolidated fin
f ancial statements present fai
f rly, in all material respects,
the fin
f ancial position of the Compa
m
ny at December 31, 2024 and 2023, and the
t
results of its operations and its cash flo
f ws for
each of the three years in the period ended Decembe
m
r 31, 2024, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over fin
f ancial reporting as of Decembe
m
r 31, 2024, based on criteria established in
Internal Control—Integrated Framework i
r
ssued by the
t
Committee of Sponsoring Organizations of the Tre
T adway C
a
ommission
(2013 fra
f mework), and our report dated February 1
r
8, 2025 expressed an unqua
q
lified opinion the
t
reon.
Basis for
f
Opinion
These fin
f ancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Compa
m
ny’s financial statements based on our aud
a
its. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Compa
m
ny in accordance with the U.S. fed
f
eral securities laws and the
t
applicable
rules and regulations of the Securities and Exchange Commission and the
t
PCAOB.
We conduc
d
ted our audits in accordance with the standards of the PCAOB. Those standards requi
q re that we plan and perform the
audit to obtain reasonable assurance abo
a
ut whethe
t
r the financial statements are free of material misstatement, whether due to
error or fra
f ud.
a
Our aud
a
its included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures tha
t
t respond to thos
t
e risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the fin
f ancial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
t
overall
presentation of the fin
f ancial statements. We b
W
elieve that our audits provide a reasonabl
a e basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising fro
f
m the
t
current period aud
a
it of the fin
f ancial statements that
was communicated or required to be communicated to the
t
audit committee and tha
t
t: (1) relates to accounts or disclosures tha
t
t
are material to the financial statements and (2) involved our especially challenging, subjective or compl
m ex judgments. The
communication of the critical audit matter does not alter in any way o
a
ur opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the
t
critical audit matter below, p
w
roviding a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.
68
Inventory Valuatio
t n and Contra
t
ct Manufa
u
cturer/S
r
uppl
p ie
l r Liabili
i ti
i es
Description of the
Matter
As discussed in Note 1 of the consolidated fin
f ancial statements, the Company’s inventories are stated at
the lower of cost (compu
m
ted using the fir
f st-in, first-out method) and net realizable value. The
Company’s inventory balance totaled $1.8 billion on December 31, 2024. The Company records a
provision when inventory is determined to be in excess of anticipated demand, or obsolete, to adju
d st
inventory to its estimated realizabl
a e value. The Company records a contra
t ct manufact
f
ur
t
er/s
r upplier
liability and a corresponding charge for non-cancellabl
a e, non-returnable purchase commitments with
contra
t ct manufactur
t
ers or suppliers for qua
q
ntities in excess of the Company’s demand for
f
ecasts, or that
are considered obsolete.
Auditing
management’s
assessment
of
net
realizabl
a e
value
for
inventory
and
contra
t ct
manufactur
t
er/s
r upplier liabi
a lities was compl
m ex and highly judgmental due to the assessment of
management’s estimates of for
f
ecasted product demand, which can be impacted by changes in overall
customer demand, changes in the timing of the introduc
d
tion and customer adoption of new products,
adju
d stments to manufac
f
turing and engineering schedules, and overall general economic and market
conditions.
How We A
W
ddressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the
t
operating effec
f
tiveness of controls
over the
t
Company’s determi
r
nation of the net realizable value of inventory a
r
nd the contract
manufactur
t
er/s
r upplier liabi
a lity. This included controls over the preparation of the demand and
production forecasts, and the
t
evaluation of the accuracy and completeness of the inventory provision
and contract manufact
f
ur
t
er/s
r upplier liabi
a lity.
To test the inventory provision and contract manufactur
t
er/s
r upplier liabi
a lity, w
y
e performed audit
procedures that included, among others, assessing the
t
Company’s methodology over the computation of
the provision and liabi
a lity, t
y
esting the significant assumptions and the underlying inpu
n
ts used by the
Company in its analysis including historical sales trends, expectations regarding fut
f ur
t
e sales, changes in
the Company’s business, customer base and other relevant fact
f
ors.
/s/ Ernst & You
Y
ng LLP
We have served as the Compa
m
ny's auditor since 2008.
San Mateo, Califor
f
ni
r a
Februa
r
ry 18, 2025
69
Report of Independent Registered Public Accounting Firm
To the Stockho
k
lders and the Board of Directors of Arista Netwo
t
rks, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Arista Netwo
t
rks, Inc.’s internal control over fin
f ancial reporting as of Decembe
m
r 31, 2024, based on criteria
establ
a ished in Interna
r
l Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Tre
T adway
a
Commission (2013 fra
f mework) (the COSO criteria). In our opinion, Arista Netwo
t
rks, Inc. (the Company) maintained, in all
material respects, effect
f
ive internal control over financial reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Compa
m
ny as of December 31, 2024 and 2023, the related consolidated
statements of income, compr
m
ehensive income, stockholders’ equi
q ty and cash flo
f ws for each of the three years in the period
ended December 31, 2024, and the
t
related notes and our report dated February 1
r
8, 2025 expressed an unqualified opinion
thereon.
Basis for
f
Opinion
The Compa
m
ny's management is responsible for
f
maintaining effec
f
tive interna
r
l control over fin
f ancial reporting and for its
assessment of the
t
effe
f ctiveness of internal control over financial reporting included in the
t
accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s interna
r
l control over
financial reporting based on our audit. We are a publ
u ic accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. fed
f
eral securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the
t
PCAOB. Those standards require that we plan and perfor
f
m t
r
he
t
audit to obtain reasonabl
a e assurance about whether effe
f ctive interna
r
l control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over fin
f ancial reporting, assessing the risk that a material
weakne
k
ss exists, testing and evaluating the
t
design and operating effe
f ctiveness of interna
r
l control based on the assessed risk, and
perfor
f
ming such other procedures as we considered necessary in the circumstances. We b
W
elieve that our aud
a
it provides a
reasonable basis for
f
our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A compa
m
ny’s internal control over fin
f ancial reporting is a process designed to provide reasonable assurance regarding the
reliability of fin
f ancial reporting and the preparation of fin
f ancial statements for externa
r
l purpo
r
ses in accordance with generally
accepted accounting principles. A compa
m
ny’s internal control over fin
f ancial reporting includes those policies and procedur
d
es
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fai
f rly refle
f ct the transactions and
dispositions of the assets of the compa
m
ny; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of fin
f ancial statements in accordance with generally accepted accounting principles, and that receipts and
expenditur
t
es of the compa
m
ny are being made only in accordance with a
t
uthorizations of management and directors of the
company; and (3) provide reasonabl
a e assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the
t
company’s assets that could have a material effe
f ct on the fin
f ancial statements.
Because of its inherent limitations, internal contro
t
l over fin
f ancial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effec
f
tiveness to future periods are subj
u ect to the risk that contro
t
ls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may d
a
eteriorate.
/s/ Ernst & You
Y
ng LLP
San Mateo, Califor
f
ni
r a
Februa
r
ry 18, 2025
ARISTA N
T
ETWORKS, INC.
Consolidated Statements of Income
(In thousands, except per share amounts)
70
Year Ended December 31,
2024
2023
2022
Revenue:
Product
$
5,884,021
$
5,029,493
$
3,716,079
Service
1,119,125
830,675
665,231
Total revenue
7,003,146
5,860,168
4,381,310
Cost of revenue:
Product
2,299,063
2,061,167
1,573,629
Service
212,780
168,720
131,985
Total cost of revenue
2,511,843
2,229,887
1,705,614
Gross profit
4,491,303
3,630,281
2,675,696
Operating expenses:
Research and development
996,717
854,918
728,394
Sales and marketing
427,264
399,034
326,955
General and administrative
122,706
119,080
93,241
Total operating expenses
1,546,687
1,373,032
1,148,590
Income from operations
2,944,616
2,257,249
1,527,106
Other income, net
320,418
164,777
54,690
Income before income taxes
3,265,034
2,422,026
1,581,796
Provision for
f
income taxes
412,980
334,705
229,350
Net income
$
2,852,054
$
2,087,321
$
1,352,446
Earnings per share (1):
Basic
$
2.27
$
1.69
$
1.10
Diluted
$
2.23
$
1.65
$
1.07
Weighted-average common shares outstanding (1):
Basic
1,256,303
1,237,417
1,225,891
Diluted
1,281,077
1,268,538
1,265,835
) Prior period results have been adju
d sted to reflect the fou
f
r-for-one stock split effe
f cted in December 2024. See Note 1, Organization and Summary o
r
f
Accounting Policies, for details.
The accompa
m
nying notes are a
r
n integra
g
l part of t
o
he
t
se consolidat
d ed financial statements.
t
ARISTA N
T
ETWORKS, INC.
Consolidated Balance Sheets
(In thousands, except par value)
71
December 31,
2024
2023
ASSETS
RRENT ASSETS:
Cash and cash equivalents
$
2,762,357
$
1,938,606
Marketable securities
5,541,116
3,069,362
Accounts receivabl
a e, net
1,140,478
1,034,398
Inventories
1,834,572
1,945,180
Prepaid expenses and other current assets
632,292
412,518
Total curre
r nt assets
11,910,815
8,400,064
Property and equipment, net
98,845
101,580
Goodwill and acquisition-related intangible assets, net
330,540
357,299
Deferred tax assets
1,440,418
945,792
Other assets
263,303
151,900
TOTALASSETS
$
14,043,921
$
9,956,635
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payabl
a e
$
381,083
$
435,059
Accrue
r
d liabi
a lities
435,277
407,302
Deferred revenue
1,727,280
915,204
Other curre
r nt liabilities
188,582
161,870
Total curre
r nt liabilities
2,732,222
1,919,435
Deferred revenue, non-curre
r nt
1,064,135
591,000
Other long-term l
r
iabi
a lities
252,757
227,141
TOTAL LIABILITIES
4,049,114
2,737,576
Commitments and contingencies (Note 5)
OCKHOLDERS’ EQUITY:
Prefer
f red stock, $0.0001 par value—100,000 shares authorized and no shares issued
and outstanding as of Decembe
m
r 31, 2024 and 2023
—
—
Common stock, $0.0001 par value—4,000,000 shares authorized as of December 31,
2024 and 2023; 1,261,334 and 1,248,982 shares issued and outstanding as of
Decembe
m
r 31, 2024 and 2023 (1)
126
125
Additional paid-in capi
a tal (1)
2,465,409
2,108,237
Retained earnings
7,542,460
5,114,025
Accumulated other comprehensive income (loss)
(13,188)
(3,328)
TOTAL STOCKHOLDERS’ EQUITY
9,994,807
7,219,059
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
14,043,921
$
9,956,635
(1) Prior period results have been adju
d sted to reflect the fou
f
r-for-one stock split effe
f cted in December 2024. See Note 1, Organization and Summary o
r
f
Accounting Policies, for details.
The accompa
m
nying notes are a
r
n integra
g
l part of t
o
he
t
se consolidat
d ed financial statements.
t
ARISTA N
T
ETWORKS, INC.
Consolidated Statements of Comprehensive Income
(In thousands)
72
Yea
Y
r Ended December 31,
2024
2023
2022
Net income
$
2,852,054
$
2,087,321
$
1,352,446
Other compr
m
ehensive income (loss), net of tax:
Foreign curre
r ncy translation adju
d stments
(4,156)
825
(3,215)
Availabl
a e-for-sale investments:
Changes in net unrealized gains (losses) on availabl
a e-for-sale
securities
(5,657)
25,939
(23,025)
Less: reclassification adjustment for
f
net (gains) losses included in
net income
(47)
3,816
632
Other compr
m
ehensive income (loss)
(9,860)
30,580
(25,608)
Comprehensive income
$
2,842,194
$
2,117,901
$
1,326,838
The accompa
m
nying notes are a
r
n integra
g
l part of t
o
he
t
se consolidat
d ed financial statements.
t
ARISTA N
T
ETWORKS, INC.
Consolidated Statements of Stockholders’ Equity
(In thousands)
73
Common Stock
Additional
Paid-
Retained
Accumulated
Other
Total
Stockholders’
Shares (1)
Amount (1)
In Capital (1)
Earnings
Comprehensive
Income (Loss)
Equity
Balance—December 31, 2021
1,230,725
$
123
$1,529,954
$ 2,456,823
$
(8,300)
$ 3,978,600
Net income
—
—
—
1,352,446
—
1,352,446
Other compr
m
ehensive loss, net of tax
—
—
—
—
(25,608)
(25,608)
Stock-based compensation
—
—
230,934
—
—
230,934
Issuance of common stock in connection
with empl
m oyee equi
q ty incentive plans
23,633
1
48,410
—
—
48,411
Repurchase of common stock
(25,844)
(1)
—
(670,286)
—
(670,287)
Tax withholding paid for net share
settlement of equity awards
(1,084)
—
(32,725)
—
—
(32,725)
Common stock issued for
f
business
combinations
132
—
4,049
—
—
4,049
Balance—December 31, 2022
1,227,562
123
1,780,622
3,138,983
(33,908)
4,885,820
Net income
—
—
—
2,087,321
—
2,087,321
Other compr
m
ehensive income, net of tax
—
—
—
—
30,580
30,580
Stock-based compensation
—
—
296,756
—
—
296,756
Issuance of common stock in connection
with empl
m oyee equi
q ty incentive plans
25,920
2
62,091
—
—
62,093
Repurchase of common stock
(3,816)
—
—
(112,279)
—
(112,279)
Tax withholding paid for net share
settlement of equity awards
(812)
—
(33,563)
—
—
(33,563)
Common stock issued for
f
business
acquisition
128
—
2,331
—
—
2,331
Balance—December 31, 2023
1,248,982
125
2,108,237
5,114,025
(3,328)
7,219,059
Net income
—
—
—
2,852,054
—
2,852,054
Other compr
m
ehensive loss, net of tax
—
—
—
—
(9,860)
(9,860)
Stock-based compensation
—
—
355,364
—
—
355,364
Issuance of common stock in connection
with empl
m oyee equi
q ty incentive plans
18,613
2
60,179
—
—
60,181
Repurchase of common stock
(5,492)
(1)
1
(423,619)
—
(423,619)
Tax withholding paid for net share
settlement of equity awards
(769)
—
(58,372)
—
—
(58,372)
Balance—December 31, 2024
1,261,334
$
126
$2,465,409
$ 7,542,460
$
(13,188)
$ 9,994,807
___
_
___
_
___
_
__
_
____
_
__
_
__
_
__
_
___
_
__
_
__
_
__
_
___
_
___
_
_
_
(1) Prior period results have been adju
d sted to reflect the fou
f
r-for-one stock split effe
f cted in December 2024. See Note 1, Organization and Summary o
r
f Accounting
Policies, for details.
The accompa
m
nying notes are a
r
n integra
g
l part of t
o
he
t
se consolidat
d ed financial statements.
t
ARISTA N
T
ETWORKS, INC.
Consolidated Statements of Cash Flows
(In thousands)
74
Year Ended December 31,
2024
2023
2022
CASH FLOWS FROM OPERATI
A
NG ACTIVITIES:
Net income
$
2,852,054
$
2,087,321
$
1,352,446
Adju
d stments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
62,038
70,630
62,700
Stock-based compensation
355,364
296,756
230,934
Deferred income taxes
(492,874)
(370,796)
(244,382)
Amortization (accretion) of investment premiums (discount)
(60,468)
(33,518)
12,767
Other
6,939
(463)
(8,831)
Changes in operating assets and liabilities:
Accounts receivabl
a e, net
(106,080)
(105,927)
(401,950)
Inventories
110,608
(655,474)
(638,948)
Other assets
(234,242)
(66,401)
(117,465)
Accounts payabl
a e
(51,635)
198,612
31,436
Other liabi
a lities
47,823
128,148
71,123
Deferred revenue
1,285,211
464,958
98,957
Income taxes, net
(66,503)
20,168
44,026
Net cash provided by operating activities
3,708,235
2,034,014
492,813
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds fro
f
m matur
t
ities of marketabl
a e securities
2,058,588
1,887,939
1,643,824
Proceeds fro
f
m sale of marketabl
a e securities
48,845
67,284
193,782
Purchases of marketabl
a e securities
(4,526,127)
(2,606,878)
(1,418,857)
Purchases of property,
t
equi
q pment and intangible assets
(32,032)
(34,434)
(44,644)
Cash paid for business combi
m nation, net of cash acquired
—
1,799
(145,087)
Other Investing activities
(6,628)
(3,164)
(12,691)
Net cash provided by (used in) investing activities
(2,457,354)
(687,454)
216,327
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds fro
f
m issuance of common stock under equity plans
60,181
62,093
48,411
Tax withholding paid on behalf of employees for net share settlement
(58,372)
(33,563)
(32,725)
Repurchase of common stock
(423,619)
(112,279)
(670,287)
Net cash used in fin
f ancing activities
(421,810)
(83,749)
(654,601)
Effe
f ct of exchange rate changes
(4,767)
675
(3,611)
NET INCREASE IN CASH, CASH EQUIVALENTS AND
A
RESTRICTED
CASH
824,304
1,263,486
50,928
CASH, CASH EQUIVAL
V
ENTS AND RESTRICTED CASH —Beginning
of period
1,939,464
675,978
625,050
CASH, CASH EQUIVAL
V
ENTS AND RESTRICTED CASH —End of
period
$
2,763,768
$
1,939,464
$
675,978
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for income taxes, net of refunds
$
970,639
$
686,155
$
427,846
75
ARISTA NETWORKS, INC.
Notes to Consolidated Financial Statements
1.
Organization and Summary of Signific
f ant Accounting Policies
Orga
r
niza
i
tion
Arista Networks
r
, Inc. (together with our subs
u
idiaries, “we,” “our,” "Arista," "Company" or “us”) is an indus
d
try l
r
eader
in data-driven, client-to-cloud networking for
f
large AI, data center, campus
m
and routing environments. Our cloud networking
solutions consist of our EOS, a set of network applications and our Ethe
t
rnet switching and routing platfor
f
ms. We a
W
re
incorporated in the state of Delaware. Our corporate headqua
q
rters are located in Santa Clara, Califor
f
nia, and we have wholly-
owned subsidiaries throughout the world, including North A
t
merica, Europe, Asia and Australia.
Basis o
i
f P
o
re
P
sentat
t io
t n and Principl
i es
l
of Consolid
l at
d io
t n
The accompanying consolidated financial statements include the accounts of Arista Networks, Inc. and its wholly-
owned subsidiaries and are prepared in accordance with accounting principles generally accepted in the
t
United States
("GAAP"). All signific
f ant intercompany accounts and transactions have been eliminated.
On November 7, 2024, the
t
Company announced a four-for
f
-one forward stock split ("Stock Split") of the Company’s
common stock that was effe
f cted through the filing of an amendment to the Compa
m
ny's Amended and Restated Certificate of
Incorporation ("Amendment") on December 3, 2024. The Stock Split proportionately increased the authorized shares of
common stock, and all share and per share amounts presented herein have been retroactively adjusted to refle
f ct the impact of
the Stock Split.
Certain reclassifications of prior period amounts were made in the curre
r nt year to confor
f
m to the current period
presentation.
Use of E
o
st
E im
t
ates
t
The preparation of the accompa
m
nying consolidated fin
f ancial statements in confor
f
mity with GAAP requires us to make
estimates and assumptions that affec
f
t the amounts reported and disclosed in the consolidated financial statements and
accompanying notes. Those estimates and assumpt
m ions include, but are not limited to, valuation of inventory a
r
nd contract
manufactur
t
er/s
r upplier liabi
a lities, accounting for
f
income taxes, including the recognition of defer
f red tax assets and liabi
a lities,
valuation allowance on defer
f red tax assets and reserve
r
s for
f
uncertain tax positions, revenue recognition and deferred revenue,
valuation of goodwill and acqui
q sition-related intangible assets, estimate of useful lives of long-lived assets including intangible
assets, and the recognition and measurement of contingent liabilities. We evaluate our estimates and assumpt
m ions based on
historical experience and other factors and adju
d st these estimates and assumpt
m ions when facts and circumstances dictate. Actual
results could differ
f
materially from these estimates.
Concentratio
t ns of Busine
i
ss and Cre
C
dit R
i
isk
We work closely with third-party contract manufactur
t
ers to manufact
f
ur
t
e our products. As of Decembe
m
r 31, 2024, we
had four
f
primary contra
t ct manufactur
t
ing partners, who provided the vast majo
a rity of our electronic manufac
f
turing services. Our
contra
t ct manufac
f
turing partners deliver our products to our thi
t rd-party direct fulfil
f lment fac
f
ilities. We and our fulfil
f lment
partne
t
rs then perfor
f
m l
r
abeling, final configuration, qua
q
lity assurance testing and shipment to our customers. Our products rely
on key compo
m
nents, including certain integrated circuit components and power supplies, some of which our contract
manufactur
t
ing partners purchase on our behalf from a limited number of suppliers, including certain sole-source providers. We
generally do not have guaranteed suppl
u
y contracts with our component suppliers, and our manufactur
t
ing partners could delay
a
shipments or cease manufactur
t
ing such products or selling them to us at any time. If we are unabl
a e to obtain a suffic
f ient
quantity of the
t
se components on commercially reasonabl
a e terms or in a timely manner, or if we are unabl
a e to obtain alternative
sources for these components, sales of our products could be delayed or halted entirely, or we may be requi
q red to redesign our
products. Quality or perfor
f
mance fai
f lures of our produc
d
ts or changes in our contra
t ctors’ or vendors’ fin
f ancial or business
condition could disrupt
r
our abi
a lity to supply quality products to our customers. Any of the
t
se events could result in lost sales and
damage to our end-customer relationships, which would adversely impa
m
ct our business, financial condition and results of
operations.
Financial instrum
r
ents that potentially subje
b ct us to concentrations of credit risk consist primarily of cash, cash
equivalents, marketable securities, and accounts receivabl
a e. Our cash equivalents and marketabl
a e securities are invested in high
76
quality financial instrum
r
ents with banks and financial institutions. Such deposits may be in excess of insured limits provided on
such deposits.
Our accounts receivable are unsecured and represent amounts due to us based on contra
t ctua
t
l obligations of our
customers. We mitigate credit risk with respect to accounts receivabl
a e by performing ongoing credit evaluations of our
customers to assess the probabi
a lity of collection based on a numbe
m
r of fac
f
tors, including past transaction experience with the
customer, evaluation of their credit history,
r
the credit limits extended, review of the invoicing terms of the
t
arrangement, and
current economic conditions that may affe
f ct a customer’s abi
a lity to pay. In situations where a customer may be thinly
capitalized and we have limited payment history with it, we will either establish a small credit limit or require it to prepay its
purchases. We generally do not requi
q re our customers to provide collateral to support accounts receivabl
a e. We have recorded an
allowance for
f
doubtful
f
accounts for accounts receivabl
a es that we have determined to be uncollectible. We m
W
itigate credit risk
with respect to accounts receivabl
a es by performing ongoing credit evaluations of the borrower to assess the probabi
a lity of
collecting all amounts due
d
to us under the existing contractua
t
l terms.
We market and sell our produc
d
ts through both our direct sales for
f
ce and our channel partners, including distributors,
value-added resellers, system integrators and OEM partners, and in conjunction with various technology partne
t
rs. Significant
customers are those that represent more than 10% of our total net revenue during the period or net accounts receivabl
a e balance
at each respective balance sheet date. As of Decembe
m
r 31, 2024, we had two resellers who represented 26% and 24% of total
accounts receivabl
a e. As of Decembe
m
r 31, 2023, we had two resellers who represented 28% and 11% of total accounts
receivabl
a e. There were two
t
end customers who represented more than 10% of our total revenue for the years ended 2024, 2023
and 2022. Sales to one end customer represented 15%, 21% and 26% of our total revenue, and sales to the other end customer
represented 20%, 18% and 16% of our total revenue for
f
the years ended 2024, 2023 and 2022, respectively.
Cash and Cas
C
h Equivalen
l
ts
We consider all highly liqui
q d investments with original or remaining matur
t
ities of three months or less at the time of
purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with various fin
f ancial institut
t ions and
highly liqui
q d investments in money market funds. Interest is accrue
r
d as earned.
Marketabl
t
e S
l
ec
S
uritie
t s
We classify all highly liquid investments in debt securities with maturities of greater tha
t
n three months at the date of
purchase as marketable securities. We have classified and accounted for
f
our marke
r
tabl
a e debt securities as available-for
f
-sale. We
determine the appropriate classific
f ation of the
t
se investments at the time of purchase and reevaluate such designation at each
balance sheet date. After consideration of our risk versus reward obje
b ctives, as well as our liquidity requi
q rements, we may hold
or sell these securities prior to their stated matur
t
ities. As we view these securities as available to support current operations, we
classify securities with maturities beyond 12 months as curre
r nt assets under the capt
a ion marke
r
tabl
a e securities in the
accompanying consolidated balance sheets. We carry
r
these securities at fair value. For marketabl
a e debt securities, we report the
t
unrealized gains and losses, net of taxes, as a compo
m
nent of stockholders’ equity. We determine any realized gains or losses on
the sale of marke
r
tabl
a e securities using the specific identific
f ation method, and record such gains and losses in other income, net
in the accompanying consolidated statements of income.
For our debt securities in an unrealized loss position, we determine whethe
t
r a credit loss exists by considering, among
other fact
f
ors, current marke
r
t conditions, credit quality of debt issuers, any changes to the rating of the security by a rating
agency, a
y
nd the extent to which fair value is less than cost. We would recognize an allowance for
f
credit losses, up t
u
o the amount
of the unrealized loss when appropriate, and write down the amortized cost basis of the
t
investment if it is more likely than not
we will be required to sell or we intend to sell the investment befor
f
e recovery of its amortized cost basis.
Accounts R
t
eceivable
Accounts receivabl
a e are recorded at the invoiced amount, net of allowances for doubtful
f
accounts. We estimate our
allowance for
f
doubtful
f
accounts based upo
u
n the
t
collectabi
a lity of the receivabl
a es in light of historical trends, reasonable and
supportable information of our customers' economic conditions that may affect
f
our customers’ abi
a lity to pay,
a
and prevailing
economic conditions. This evaluation is done in order to identify issues that may i
a
mpact the collectability of receivabl
a es and
related estimated required allowance. Revisions to the allowance are recorded as an adju
d stment to bad debt expense. After
appropriate collection effor
f
ts are exhaus
a
ted, specific accounts receivabl
a e deemed to be uncollectible are charged against the
allowance in the
t
period they are deemed uncollectible. Recoveries of accounts receivabl
a e previously written-off are recorded as
credits to bad debt expense.
77
Fair Value Mea
M
surementst
Fair value is defin
f ed as the exchange price that would be received for
f
an asset or an exit price that would be paid to
transfer
f
a liabi
a lity in the principal or most advantageous market for the asset or liabi
a lity in an orderly transaction between
market participants on the measurement date. We apply fai
f r value accounting for
f
all fin
f ancial assets and liabi
a lities that are
recognized or disclosed at fai
f r value in the fin
f ancial statements on a recurri
r ng basis. These assets and liabi
a lities include cash
and cash equivalents, marketable securities, accounts receivabl
a e, accounts payable, and accrued liabilities. Cash equivalents,
accounts receivabl
a e, accounts payabl
a e and accrue
r
d liabi
a lities are stated at carry
r
ing values in our consolidated financial
statements, which approximate their fair value due
d
to the short-term natur
t
e of these instruments.
Assets and liabi
a lities recorded at fair value on a recurring basis in the accompa
m
nying consolidated balance sheets are
categorized based upo
u
n the
t
level of judgment associated with the input
n
s used to measure their fai
f r value. We u
W
se a fai
f r value
hierarchy to measure fair value, maximizing the use of observable inpu
n
ts and minimizing the use of unobserva
r
bl
a e inputs. The
three-tiers of the
t
fair value hierarchy are as fol
f lows:
Level I—I
I
nputs are unadju
d sted, quo
q
ted prices in active marke
r
ts for identical assets or liabilities at the measurement
date;
Level II—I
I
nputs are observable, unadjusted quoted prices in active marke
r
ts for similar assets or liabilities, unadju
d sted
quoted prices for identical or similar assets or liabi
a lities in markets that are not active, or other inputs that are observable or can
be corroborated by observabl
a e marke
r
t data for
f
subs
u
tantially the full term of the related assets or liabilities; and
Level IIII —U
I
nobserva
r
bl
a e inputs that are supp
u
orted by little or no market data for the related assets or liabi
a lities and
typically reflect management’s estimate of assumpt
m ions that market participants would use in pricing the
t
asset or liabi
a lity.
Foreign C
g
ur
C
rency
c
The fun
f
ctional curre
r ncy of our foreign subsidiaries is either the
t
U.S. dollar or their local currency depending on the
nature of the subsidiaries’ activities.
Transaction re-
r measurem
r
ent - Assets and liabi
a lities denominated in a currency other than a subs
u
idiary’s functional
currency are re-measured into the subsidiary's functional currency using exchange rates in effe
f ct at the end of the reporting
period, with gains and losses recorded in other income, net in the consolidated statements of income. To d
T
ate, foreign currency
transaction gains and losses and exchange rate fluctuations have not been material to our consolidated financial statements.
Translation - Assets and liabi
a lities of subs
u
idiaries denominated in for
f
eign functional currencies are translated into U.S.
dollars at the closing exchange rate on the balance sheet date and equity-related balances are translated at historical exchange
rates. Revenues, costs and expenses in foreign fun
f
ctional currencies are translated using average exchange rates tha
t
t
approximate those in effec
f
t dur
d
ing the period. Tra
T nslation adju
d stments are recorded within accumulated othe
t
r compr
m
ehensive
income, a separate component of total stockholders’ equity.
Inventory Valuatio
t n and Contra
t
ct Manufa
u
cturer/S
r
uppl
p ie
l r Liabili
i ti
i es
Inventories primarily consist of fin
f ished goods, including evaluation inventory h
r
eld at customers or partne
t
rs, and
strategic compo
m
nents, primarily integrated circuits. Inventories are stated at the lower of cost (computed using the fir
f st-in, first-
out method) and net realizable value. Evaluation inventory consists of new products and/or use cases at customer or partner
sites for
f
trial purpos
r
es. Title to the inventory remains with Arista dur
d
ing the
t
trial period and invoicing occurs only upon
completion of the trial period and when/if the products have been accepted by the customer. Manufac
f
turing overhe
r
ad costs and
inbound shipping costs are included in the cost of inventory. We r
W
ecord a provision when inventory i
r
s determi
r
ned to be in
excess of anticipated demand, or obsolete, to adju
d st inventory to its estimated realizable value. For the years ended
Decembe
m
r 31, 2024, 2023 and 2022, we recorded charges of $267.2 million, $234.4 million and $71.4 million, respectively,
within cost of product revenue for inventory w
r
rite-downs.
Our contract manufactur
t
ers procure components and assemble products on our behalf and we procure strategic
components from suppliers based on our forecasts. We r
W
ecord a liability and a corre
r sponding charge for non-cancellabl
a e, non-
returnable purchase commitments with our contract
manufact
f
ur
t
ers and supp
u
liers for
f
quantities in excess of our demand
forecasts or that are considered obsolete due
d
to manufactur
t
ing and engineering change orders resulting from design changes.
For the
t
years ended Decembe
m
r 31, 2023 and 2022, we recorded charges of $113.0 million and $43.7 million, respectively,y
within cost of produc
d
t revenue for such liabi
a lities with our contract manufac
f
turers and suppliers. For the year ended
78
Decembe
m
r 31, 2024, we recorded a credit of $74.3 million within cost of product revenue related to such liabi
a lities, which was
driven by a reduction in the liabi
a lity due to the receipt of excess compo
m
nents tha
t
t were previously reserved. We subs
u
equently
assessed the realizable value of such compo
m
nents upo
u
n inventory receipt.
We use significant judgment in establishing our forecasts of future demand and obsolete material exposures. These
estimates depend on our assessment of current and expected orders from our customers, product development plans and current
sales levels. In addition, when industry-wide supply chain shortages resulted in extended lead times for components, we were
required to extend the time horizon of our demand for
f
ecasts and increase our purchase commitments for long lead time
components. As customer lead times reduc
d
e more broadly, w
y
e have seen and expect to continue to see a commensurate
reduction in visibility to customer demand and a gradual retur
t
n t
r
o shorter demand-planning horizons. Although the global
supply chain has shown improvement, we have had to invest in inventory to address forecast uncertainty and we expect that o r
ur
inventory and purchase commitments will remain volatile as we ramp new product introductions T
.
here is, however, no
guarantee that all suppliers will meet their commitments in the time fra
f me committed or that actua
t
l customer demand will
directly match our demand forecasts. If actua
t
l marke
r
t conditions are less favorabl
a e than thos
t
e proje
o cted by management, which
may be caused by fact
f
ors within and/or outside of our control, we may b
a
e requi
q red to increase our inventory write-downs and
liabilities to our contract manufactur
t
ers and supp
u
liers, which could have an adverse impact on our gross margins and
profit
f ability. We r
W
egularly evaluate our exposure for
f
inventory write-downs and adequacy of our contra
t ct manufac
f
turer and
supplier liabilities.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation, except for
f
land which is not depreciated. We
W
capitalize any additions and improvements and expense maintenance and repairs as incurred. Depreciation is calculated using
the straight-line method over the estimated useful
f
lives of the
t
related assets, generally three years. Our leasehold improvements
are depreciated over the shorter of the estimated useful
f
lives of the improvements or the remaining lease term.
Leases
We lease offic
f e space, data centers, and equipment under non-cancellabl
a e operating leases with various expiration
dates through 2031. We d
W
etermi
r
ne if an arrangement contains a lease at inception. Operating leases are recorded as right-of-use
(“ROU”) assets and lease liabi
a lities, and are included in other assets and other current and non-current liabi
a lities in our
consolidated balance sheets. We do not have any fin
f ance leases in any of the periods presented.
ROU assets and lease liabi
a lities are recognized at the commencement date based on the present value of remaining
lease payments over the lease term. The interest rate implicit in our operating leases is not readily available, and therefor
f
e, an
incremental borro
r
wing rate is estimated based on a hypothetical interest rate on a collateralized basis with similar terms,
payments, and economic environments. ROU assets also include any prepaid lease payments and lease incentives.
Our operating lease agreements may c
a
ontain rent concession, rent escalation, and option to renew provisions. Lease
expense is recognized on a straight-line basis over the lease term commencing on the date we have the right to use the leased
property. Our lease terms may i
a
nclude options to extend or terminate the lease when it is reasonably certain that the option will
be exercised. In addition, certain of our operating lease agreements contain tenant impr
m
ovement allowances fro
f
m landlords.
These allowances are accounted for as lease incentives and decrease our right-of-u
f
se asset and reduce lease expense over the
lease term.
Our lease agreements may contain lease and non-lease compo
m
nents, which are combined and accounted for as a single
lease compo
m
nent. We a
W
lso have elected to apply the short-term lease measurement and recognition exempt
m ion in which ROU
assets and lease liabi
a lities are not recognized for leases with terms of 12 months
t
or less.
Busine
i
ss Combinatio
t ns
We use the acquisition method to account for
f
our business combi
m nations in accordance with Accounting Standards
Codification ("ASC") 805 - Business
e
Combinations. We a
W
llocate the total fai
f r value of purchase consideration to the tangible
and intangible assets acquired and liabilities assumed based on their estimated fai
f r values. The excess of the consideration
transfer
f re
r d over the fair values of the assets acquired and liabilities assumed is recorded as goodwill. The results of operations
of the acquired businesses are included in our consolidated financial statements fro
f
m the
t
date of acquisition. Acquisition-related
transaction and restructur
t
ing costs are expensed as incurred.
79
During the measurement period, which is not to exceed one year from the acqui
q sition date, we may record adju
d stments
to the acqui
q red assets and liabilities assumed, with a corresponding offse
f
t to goodwill or the
t
preliminary p
r
urchase price, to
reflect new infor
f
ma
r
tion obtained about fact
f
s and circumstances that existed as of the acquisition date. Upon the conclusion of
the measurement period, any subsequent adjustments are recorded to earni
r ngs.
Goodwi
d
ll
i and Acquire
i
d Int
I
an
t
gibl
i e A
l
ssetst
Goodwill represents the excess of the purchase price over the fair value of net assets acqui
q red in a business
combination. The Compa
m
ny has one reporting unit and tests goodwill for
f
impairment at least annually in the fourth quarter or
more freque
q
ntly if indicators of potential impairment exist. We f
W
ir
f st perfor
f
m a qualitative assessment to determine whether it is
more likely than not tha
t
t the fair value of our reporting unit is less than its carrying amount. If the reporting unit does not pass
the qua
q
litative assessment, a quantitative test is perfor
f
me
r
d by comparing the fai
f r value of our reporting unit with its carrying
amount. We w
W
ould recognize an impa
m
irment loss for the
t
amount by which the carryi
r ng amount exceeds the fair value. There
were no impa
m
irment charges in any of the periods presented in the consolidated financial statements. See Note 4. Acqui
q sition,
Goodwill and Acqui
q sition-Related Intangible Assets for additional infor
f
ma
r
tion.
Acquired intangible assets are carried at cost less accumulated amortization. All acqui
q red intangible assets have been
determined to have definite lives and are amortized on a straight-line basis over their estimated useful lives, ranging
from three to eight years. Acquired intangible assets are reviewed for
f
impairme
r
nt under the long-lived asset model described
below. There were no impairment charges in any of the periods presented in the consolidated fin
f ancial statements. See Note 4.
Acquisition, Goodwill and Acquisition-Related Intangible Assets for additional infor
f
mation.
Equity
i
Investments in Privatel
t y-
l He
-
ld Companies
Our equity investments in privately-held companies without readily determinable fair values are measured using the
measurement alternative, defin
f ed by ASC 321 - Investments-Equity S
t
ec
S
urities as cost, less impairments, and remeasured based
on observable price changes from orderly transactions of identical or similar securities of the same issuer. Any adju
d stments
resulting fro
f
m impairments and/or observa
r
bl
a e price changes are recorded within othe
t
r income, net, in our consolidated
statements of income. This election is reassessed each reporting period to determine whether investments in privately-held
companies have a readily determinable fair value, in which case the
t
y would no longer be eligible for
f
this election. The
Company did not hold investme
t
nts in privately-held compa
m
nies whose fai
f r value was readily determinable as of December 31,
2024 and 2023.
Impa
m
irme
r
nt of Long-L
g
ived Assets and Inv
I
estments in Privatel
t y-
l He
-
ld Companies
The carrying amounts of our long-lived assets, including property a
t
nd equi
q pment, intangible assets, ROU assets and
investments in privately-held compa
m
nies, are periodically reviewed for impairment whenever events or changes in
circumstances indicate tha
t
t the carry
r
ing value of these assets may not be recoverable. Recoverability of these assets is measured
by comparison of the carrying amount of each asset to the fut
f ur
t
e undiscounted cash flows the
t
asset is expected to generate over
its remaining life. If the
t
asset is considered to be impaired, the amount of any impa
m
irment is measured as the diffe
f rence betwe
t
en
the carrying value and the fair value of the impaired asset. No impa
m
irme
r
nt of any long-lived assets was identified for any of the
periods presented in the consolidated financial statements.
Loss Contin
t
ge
n
ncies
In the ordinary c
r
ourse of business, we are a party to claims and legal proceedings including matters relating to
commercial, employee relations, business practices and intellectua
t
l property. In assessing loss contingencies, we use significant
judgments and assumptions to estimate the likelihood of loss, impairme
r
nt of an asset or the
t
incurrence of a liabi
a lity, a
y
s well as
our abi
a lity to reasonably estimate the amount of loss. We record a provision for contingent losses when it is both probable that
an asset has been impa
m
ired or a liabi
a lity has been incurred and the amount of the
t
loss can be reasonabl
a y estimated. We r
W
ecord a
charge equa
q
l to the minimum estimated liability for
f
litigation costs or a loss contingency only when both o
t
f the
t
following
conditions are met: (i) information available prior to issuance of our consolidated financial statements indicates that it is
probable that a liabi
a lity had been incurre
r d at the date of the fin
f ancial statements, and (ii) the range of loss can be reasonabl
a y
estimated. We r
W
egularly evaluate current infor
f
ma
r
tion available to us to determine whether such accruals should be adjusted and
whethe
t
r new accrua
r
ls are requi
q red.
80
Revenue Recogn
o
itio
t n
We generate revenue fro
f
m sales of our products, which incorpo
r
rate our EOS softwa
t
re and accessories such as cabl
a es
and optics, to direct customers and channel partners togethe
t
r with post-contra
t ct customer supp
u
ort (“PCS”). We t
W
ypically sell
products and PCS in a single contract. We r
W
ecognize revenue upon tra
t nsfer of control of promised produc
d
ts or services to
customers in an amount that refle
f cts the consideration we expect to be entitled to receive in exchange for
f
those products or
services. We a
W
ppl
a
y the following fiv
f e-step revenue recognition model:
•
Identific
f ation of the contract, or contracts, with a customer
•
Identific
f ation of the perfor
f
ma
r
nce obligations in the contract
•
Determination of the transaction price
•
Allocation of the
t
transaction price to the performance obligations in the contract
•
Recognition of revenue when (or as) we satisfy the performance obligation
Post-Cont
C
ra
t
ct Customer Supp
u
ort ("PCS")
PCS, which includes technical support, hardware repair and replacement parts beyond standard warranty, b
y
ug fixes,
patches and unspecified upgrades on a when-and-if-a
f vailable basis, is offe
f red under renewabl
a e, fee-based contracts. We i
W
nitially
defer PCS revenue and recognize it ratabl
a y over the life of the PCS contract as there is no discernible pattern of delivery related
to these promises. We do not provide unspecified upgrades on a set schedule and address customer requests for technical
support if and when the
t
y arise, with the related expenses recognized as incurred. PCS contra
t cts generally have a term of one to
three years. We include billed but unearned PCS revenue in deferred revenue.
Contra
t
cts w
t
ith M
t
ul
M tipl
i e Perfo
r rmance Obligat
i
ions
Most of our contra
t cts with customers, other than renewals of PCS, contain multiple performance obligations with a
combination of products and PCS. Produc
d
ts and PCS generally qualify a
f
s distinct performance obligations. Our hardware
includes EOS softw
f
are, which together deliver the essential functionality of our produc
d
ts. For contracts that contain multiple
perfor
f
mance obligations, we allocate revenue to each distinct perfor
f
mance obligation based on the standalone selling price
("SSP"). Judgment is required to determine the SSP for each distinct perfor
f
ma
r
nce obligation. We use a range of amounts to
estimate SSP for products and PCS sold together in a contract to determine whether there is a discount to be allocated based on
the relative SSP of the various products and PCS.
If we do not have an observa
r
bl
a e SSP, s
P
uch as when we do not sell a product or service separately, then SSP is
estimated using judgment and considering all reasonably availabl
a e infor
f
ma
r
tion such as gross margin, market conditions and
information abo
a
ut the size and/or purchase volume of the
t
customer. We g
W
enerally use a range of amounts to estimate SSP for
individual products and services based on multiple factors including, but not limited to product category, actual and expected
volume, discounting policies, and customer vertical and size.
We limit the amount of revenue recognition for
f
contracts containing forms of variabl
a e consideration, such as future
perfor
f
mance obligations, customer-specific retur
t
ns
r
, and acceptance or refun
f
d obligations. We d
W
efer
f
revenue recognition on
customer contracts for
f
new products or use cases, which contain customer-specifie
f d requi
q rements tha
t
t must be met prior to
acceptance. We include some or all of an estimate of the related at-risk consideration in the transaction price only to the extent
that it is probable that a significant reversal in the amount of cumulative revenue recorded under each contra
t ct will not occur
when the uncertainties surrounding the variabl
a e consideration are resolved.
Most of our contracts with customers have standard paym
a
ent terms of 30 to 90 days. We h
W
ave determi
r
ned our contracts
generally do not include a signific
f ant fin
f ancing component becaus
a
e the Company and the customer have specific business
reasons other than financing for
f
entering into such contracts. Specifically, both we and our customers seek to ensure the
customer has a simplified way o
a
f purchasing Arista products and services.
We account for
f
multiple contracts with a single partne
t
r as one arra
r ngement if the contractual terms and/o
d r substance of
those agreements indicate that they may be so closely related that they are, in effe
f ct, parts of a single contract.
We may occasionally accept retur
t
ns
r
to address customer satisfaction issues even though there is generally no
contra
t ctua
t
l provision for such retur
t
ns
r
. We e
W
stimate retur
t
ns for sales to customers based on historical return rates appl
a
ied against
81
current-period shipments. Specific
f
customer returns and allowances are considered when determining our sales retur
t
n r
r
eserve
r
estimate.
Our policy app
a
lies to the accounting for
f
individual contracts. However, we have elected a practical expedient to app
a
ly
the guidance to a portfolio of contracts or performance obligations with similar characteristics so long as such application
would not differ
f
materially from applying the guidance to the
t
individual contracts (or perfor
f
mance obligations) within that
portfolio. Consequently, w
y
e have chosen to appl
a
y the portfolio app
a
roach when possible, which we do not believe will happen
frequently. Additionally, we will evaluate a portfol
f io of data, when possible, in various situations, including accounting for
commissions, rights of return and transactions with variable consideration.
We report revenue net of sales taxes. We i
W
nclude shipping charges billed to customers in revenue and the related
shipping costs are included in cost of product revenue.
We account for customer sales rebates as a reduction to revenue and accrue for
f
such rebates based on the amount tha
t
t
is earned and expected to be claimed by customers.
Contra
t
ct Balances
A contract asset is recognized when we have a contra
t ctua
t
l right to consideration for
f
both c
t
ompl
m eted and partially
completed performance obligations that have not yet been invoiced. Contract assets are included in other current assets in the
accompanying consolidated balance sheets.
A contract liabi
a lity is recognized when we have received customer payments in advance of our satisfaction of a
perfor
f
mance obligation under a contract that is cancellabl
a e. Contract liabilities are included in other current liabi
a lities and other
long-term l
r
iabi
a lities in the accompa
m
nying consolidated balance sheets.
Research and Develop
l
ment Expe
x
nses
Costs related to the research, design and development of our products are charged to research and development
expenses as incurred. Softw
f
are development costs are capi
a talized beginning when a product’s technological feasibility has been
establ
a ished and ending when the product is available for general release to customers. Generally, o
y
ur produc
d
ts are released soon
afte
f r technological feasibility has been establ
a ished. As a result, costs incurre
r d subsequent to achieving technological fea
f
sibility
have not been significant and accordingly, all softw
f
are development costs have been expensed as incurred.
Segm
e
ent Reporting
i
We develop, market and sell cloud networki
r
g
ng solutions, which primari yly consist of our switching and routing
platforms and related netwo
t
rk applications, and there are no segment man g
agers who are held accountable for operations
r
or
operati g
ng results below the Compa
m
y
ny level. Our chief operati g
ng decision maker is our President, Chief Executive Offi
f cer and
Chairperson of the Board, who reviews financial infor
f
ma
r
tion presented on a consolidated basis for
f
purposes of allocating
resources and evaluating fin
f ancial perfor
f
ma
r
nce. Accordingly, we have determined that we operate as one reportable segment.
Stoc
t
k-Ba
-
sed Com
C
pe
m
nsatio
t n
Stock-based compe
m
nsation cost for
f
equi
q ty awards is measured at the grant-date fai
f r value using app
a
ropriate valuation
techniques and recognized as expense over the requisite service or perfor
f
mance period. We account for for
f
feitur
t
es when they
occur.
Stock-based compensation costs for stock options and restri
t cted stock units ("RSUs") are recognized on a straight-line
basis over the requisite servi
r ce period, which is generally two
t
to five years. The Company has granted RSUs that vest upon the
satisfact
f
ion of both s
t
ervi
r ce-based and performance-based conditions ("PRSUs"). The service-based condition for these awards
is generally satisfied over one to four years. The performance-based conditions are satisfie
f d upo
u
n achieving specified
perfor
f
mance targets, such as fin
f ancial or operating metrics. We r
W
ecord stock-based compensation expense for
f
perfor
f
ma
r
nce-
based equity awards on an accelerated attribution method over the
t
requisite service period, and only if perfor
f
mance-based
conditions are considered probabl
a e to be satisfied.
See Note 6. Stockho
k
lders' Equi
q ty and Stock-Based Compensation for a detailed discussion of the Company’s stock
plans, assumptions to the
t
valuation techniques, and stock-based compensation expense.
82
Income Taxe
a
s
Income tax expense is an estimate of current income taxes payabl
a e in the current fis
f cal year based on reported income
before income taxes. Deferred income taxes refle
f ct the effec
f
t of tempo
m
rary differ
f ences and carry
r
forwards that we recognize for
financial reporting and income tax purposes.
We account for
f
income taxes under the liabi
a lity approach for defer
f re
r d income taxes, which requires recognition of
deferred income tax assets and liabi
a lities for the expected future tax consequences of events that have been recognized in our
consolidated financial statements, but have not been reflected in our taxable income. Estimates and judgments occur in the
t
calculation of certain tax liabi
a lities and in the
t
determination of the
t
recoverabi
a lity of certain defer
f re
r d income tax assets, which
arise fro
f
m tempo
m
rary differ
f ences and carry
r
forwards. Defer
f re
r d income tax assets and liabi
a lities are measured using the currently
enacted tax rates that apply to taxable income in effe
f ct for the
t
years in which those tax assets are expected to be realized or
settled. We regularly assess the likelihood that our defer
f red income tax assets will be realized based on the positive and
negative evidence availabl
a e. We record a valuation allowance to reduc
d
e the deferred tax assets to the amount that we are more
likely than not to realize.
We believe tha
t
t we have adequately reserve
r
d for
f
our uncertain tax positions, although we can provide no assurance
that the fin
f al tax outcome of these matters will not be materially diffe
f rent. To t
T
he extent that the fin
f al tax outcome of these
matters is diffe
f rent than the amounts recorded, such diffe
f rences will affe
f ct the provision for income taxes in the period in which
such determination is made and could have a material impact on our fin
f ancial condition and results of operations. The provision
for income taxes includes the effect
f
s of any reserves that we believe are appropriate, as well as the related net interest and
penalties.
We regularly review our tax positions and benefits to be realized. We r
W
ecognize tax liabi
a lities based upon our estimate
of whether, and to the
t
extent to which, additional taxes will be due when such estimates are more likely than not to be
sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. We
recognize interest and penalties related to income tax matters as income tax expense.
The U.S. tax rules requi
q re U.S. tax on for
f
eign earnings, known as global intangible low taxed income (“GILTI
L
”).
Under U.S. GAAP, we are allowed to make an accounting policy choice of either (1) treating taxes due on fut
f ur
t
e U.S.
inclusions in taxab
a le income related to GILTI
L
as a curre
r nt-period expense when incurred (the “period cost metho
t
d”) or (2)
factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). We s
W
elected the defer
f red
method of accounting and recorded the associated basis differ
f ences anticipated to influence prospective GILTI calculations.
83
Recently Adop
d
ted Accountin
t
g P
n
ro
P
nouncements
In November 2023, the
t
FASB issued ASU 2023-07, Segment Reporting (Topic 280)-Impr
m
ovements to Reportabl
a e
Segment Disclosures. The ASU requires that an entity disclose significant segment expenses impacting profit
f
and loss that are
regularly provided to the
t
chief operating decision maker. The upd
u
ate is requi
q red to be appl
a
ied retrospectively to prior periods
presented, based on the signific
f ant segment expense categories identifie
f d and disclosed in the period of adoption. The
amendments in this ASU are required to be adopted for fis
f cal years beginning afte
f r December 15, 2023, and interim periods
within fiscal years beginning afte
f r December 15, 2023. Early adoption is permi
r
tted. We h
W
ave adopted ASU 2023-07 for the year
ended December 31, 2024. The adoption of this new standard did not have a material impact on our consolidated financial
statements. For more information regarding the adoption, see Note 9, Segment and Geographical Infor
f
ma
r
tion for the
t
inclusion
of the new required disclosures.
Recent Accounting
i
Pronouncements Not Yet
Y
Effe
f ctiv
t e
In December 2023, the FASB issued ASU 2023-09, Income Tax
T
es (Top
T
ic 740)-Improvements to Income Tax
T
Disclosures. The ASU requires that an enti yty disclose specific
f
cat g
egories in the effe
f ctive tax rate reconciliation as well as
provide additional infor
f
mation for reconcili g
ng items that meet a quantitative threshold. Further, the ASU requires certain
disclosures of state versus federal income tax expense and taxes paid. The amendments in this ASU are requi
q red to be adopted
for fis
f cal years b g
eginni g
ng afte
f r Decembe
m
r 15, 2024. Ear yly adoption is permitted for
f
annual financial statements tha
t
t have not yet
been issued. The amendments should be applied on a prospective basis although retrospective app
a
lication is permitted. we have
not early adopted ASU 2023-09 for Decembe
m
r 31, 2024. We a
W
re currently evaluating the impact of future adoption on our
financial disclosures.
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subt
u opic 220-
40). The ASU requires the disaggregated disclosure of specific
f
expense categories, including purchases of inventory, e
y
mployee
compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requi
q res disclosure of
the total amount of selling expenses along with the defin
f ition of selling expenses. The ASU is effec
f
tive for annual periods
beginning afte
f r Decembe
m
r 15, 2026, and interim periods within fiscal years beginning afte
f r Decembe
m
r 15, 2027. Adoption of
this ASU can either be applied prospectively to consolidated financial statements issued for
f
reporting periods afte
f r the effe
f ctive
date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption
is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial
statements, once adopted. We a
W
re currently evaluating the
t
provisions of this ASU.
2.
Fair Value Measurements
Assets measured at fair values on a recurri
r ng
i
basisi
We m
W
easure and report our cash equivalents, restri
t cted cash, and availabl
a e-for-sale marketable securities at fair value
on a recurring basis. The fol
f lowing tabl
a es summarize the fai
f r value of these fin
f ancial assets by signific
f ant investment category
and their levels within the fai
f r value hierarchy (in thousands):
84
December 31, 2024
December 31, 2023
Level I
Level II
Level III
Total
Level I
Level II
Level III
Total
Financial Assets:
sh Equivalents:
t
Money marke
r
t fund
f
s
$1,707,513
$
—
$
—
$1,707,513
$1,015,705
$
—
$
—
$1,015,705
Commercial paper
—
—
—
—
—
1,999
—
1,999
Agency securities
—
3,000
—
3,000
—
—
—
—
U.S. government notes
31,366
—
—
31,366
—
—
—
—
1,738,879
3,000
—
1,741,879
1,015,705
1,999
—
1,017,704
Market
k able Securities:
Commercial paper
—
48,815
—
48,815
—
—
—
—
Certific
f ates of deposits
(1)
—
—
—
—
—
5,000
—
5,000
U.S. government notes
1,921,490
—
—
1,921,490
1,044,859
—
—
1,044,859
Corporate bonds
—
2,593,547
—
2,593,547
—
1,362,124
—
1,362,124
Agency securities
—
977,264
—
977,264
—
657,379
—
657,379
1,921,490
3,619,626
—
5,541,116
1,044,859
2,024,503
—
3,069,362
Othe
t
r Assets:
Money marke
r
t fund
f
s -
restricted cash
1,411
—
—
1,411
858
—
—
858
Total Financial Assets
$3,661,780 $3,622,626
$
—
$7,284,406
$2,061,422 $2,026,502
$
—
$4,087,924
_______
_
___
_
___
_
__
_
___
_
__
_
__
_
___
_
___
_
__
_
__
_
__
_
___
_
_
_
(1) As of Decembe
m
r 31, 2023, all of our certificates of d p
eposits were domestic d p
eposits.
Duri g
ng th y
e year ended on December 31, 2024, the
t
Company did not make a y
ny transfer
f s betwe
t
en the levels of the fa rir
value hierarc y
hy.
The fol
f lowing tabl
a e summarizes the amortized cost, unrealized gains and losses, and fai
f r value of our debt securities
measured at fair value on a recurring basis (in thousands):
December 31, 2024
December 31, 2023
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Val
V ue
Amortized
Cost
Unrealized
Gains
Unrealized
Losse
F
s
air Val
V ue
Commercial paper
$
48,815
$
—
$
—
$
48,815
$
1,999
$
—
$
—
$
1,999
U.S. government
1,954,733
2,739
(4,616)
1,952,856
1,043,445
2,874
(1,460) 1,044,859
Corporate bonds
2,595,682
4,356
(6,491)
2,593,547
1,361,132
2,810
(1,818) 1,362,124
Agency securities
981,041
1,641
(2,418)
980,264
657,118
1,143
(882)
657,379
Total
$5,580,271
$
8,736
$ (13,525) $ 5,575,482
$3,063,694
$
6,827
$ (4,160) $3,066,361
85
For debt securities in unrealized loss positions, it is not likely that we will be requi
q red to sell such securities befor
f
e
recovery of their amortized cost basis nor do we have the intent to sell such securities befor
f
e matur
t
ity; we invest in debt
securities that have maximum matur
t
ities of three years and are generally deemed to be low risk based on their credit ratings
from the major rating agencies. The longer the duration of these marketable securities, the more susceptible they are to changes
in market interest rates and bond yields. Given the short-term and conservative nature of our portfol
f io, the
t
unrealized losses are
not subj
u ect to credit risk; therefore, we did not recognize any credit losses or non-credit-related impairments related to our
availabl
a e-for-sale marketable debt securities for the years ended Decembe
m
r 31, 2024, Decembe
m
r 31, 2023 and December 31,
2022. All unrealized losses were recognized in other comprehensive income (loss). Realized losses were immaterial for the
years ended December 31, 2024, Decembe
m
r 31, 2023 and Decembe
m
r 31, 2022.
The fol
f lowing tabl
a e is an analysis of our debt securities in unrealized loss positions (in thousands):
December 31, 2024
Unrealized Losses within 12
months
Unrealized Losses 12 months or
greater
Tot
T al
Fair Value
Unrealized
Losses
Fair Val
V ue
Unrealized
Losses
Fair Val
V ue
Unrealized
Losses
S. government notes
$
771,014
$
(4,598) $
61,043
$
(18) $
832,057
$
(4,616)
Corporate bonds
1,027,448
(6,463)
62,047
(28)
1,089,495
(6,491)
Agency securities
500,464
(2,418)
9,500
—
509,964
(2,418)
Total
$ 2,298,926
$
(13,479) $
132,590
$
(46) $ 2,431,516
$
(13,525)
As of Decembe
m
r 31, 2024, we had no marketable debt securities with contractua
t
l matur
t
ities that exceed 36 months.
The fai
f r values of marketabl
a e debt securities, by remaini g
ng contra
t ctua
t
l matur
t
ities, are as fol
f lows (in thousands):
December 31, 2024
Due in 1 year or less
$
2,749,020
Due in 1 year thr
t
ough 3 years
2,792,096
Total marke
r
tabl
a e securities
$
5,541,116
The weighted-average remaining dur
d
ation of our marketable debt securities is approximately 1.1 years as of December
31, 2024.
Assets measured at fair value on a non-recurri g
ng
i
basisi
Non-Market
k able Equity S
t
ec
S
urities
We have non-marketable equi
q
yty securities in privately-held companies that do not have readily-determinable fa rir
values. Their initial cost is adju
d sted to fair value on a non-recurring basis based on observa
r
bl
a e price changes fro
f
m order yly
transactions of identical or similar securities of the same issuer, or for impairment. These investments are classifie
f d within
Level III of the fai
f r value hierarchy as we estimate the value based on valuation metho
t
ds using the
t
observable transaction price
at the transaction date and other s gignificant unobserva
r
bl
a e inputs, such as volatility, rights, and obligations related to the
t
se
securities. In addition, the valuation requires management ju g
dgment due to the abs
a
ence of market price and lack of liquidity.
86
We did not record any realized gains for
f
our non-marketabl
a e equity securities during the three years ended December
31, 2024, 2023 and 2022. We r
W
ecorded immaterial amounts of unrealized gains, unrealized and realized losses duri g
ng the thr
t
ee
years ended December 31, 2024, 2023 and 2022. The unrealized gains were recorded on investments that were re-measured to
fair value as of the
t
date observable transactions occurred. We evaluate our non-marke
r
tabl
a e equi yty securities for impairment at
each reporting period via a qualitative assessment with various potential impairment indicators, including, but not limited to, an
assessment of a signific
f ant adverse cha g
nge in the economic environment, signific
f ant adverse changes in the general marke
r
t
condition of the ge g
ograph
a
ies and industries in which our investees operate, and other public yly-available information that m y
ay
affe
f ct the value of the non-marketabl
a e equity securities.
The fol
f lowi g
ng tabl
a e summarizes the activity related to our non-marke
r
tabl
a e equity securities as of December 31, 2024
and December 31, 2023 (in thousands):
December 31,
2024
December 31,
2023
Cost of investme
t
nts
$
38,284
$
31,656
Cumulative impa
m
irment and downward adjustments
—
—
Cumulative upward adjustments
43,032
30,632
Carryi
r ng amount of investments (included in other assets)
$
81,316
$
62,288
87
3.
Financial Statements Details
Inventories
Inventories consist of the fol
f lowing (in thousands):
December 31,
2024
2023
Raw materials
$
565,379
$
930,777
Finished goods(1)
1,269,193
1,014,403
Total inventories
$
1,834,572
$
1,945,180
(1) The balance as of December 31, 2024 includes evaluation inventory h
r
eld at customers or partners of $422.1 million. Evaluation inventory as of December
31, 2023 was not material.
Property and Equipment, n
t
et
Property and equipment, net consists of the following (in thousands):
December 31,
2024
2023
Land
$
47,189
$
44,645
Equi
q pment and machinery
r
160,673
144,850
Computer hardware and softw
f
are
63,941
57,761
Furnitur
t
e and fixtur
t
es
3,526
3,576
Leasehold improvements
34,712
34,584
Construc
r
tion-in-process
8,209
4,242
Property and equipment, gross
318,250
289,658
Less: accumulated depreciation
(219,405)
(188,078)
Property and equipment, net
$
98,845
$
101,580
Depreciation expense was $34.0 million, $31.7 million and $25.6 million for the years ended December 31, 2024,
2023 and 2022, respectively.
Accrued Liabili
i ti
i es
Accrue
r
d liabi
a lities consist of the following (in thousands):
December 31,
2024
2023
Accrue
r
d compe
m
nsation-related costs
$
147,847
$
134,225
Suppl
u
ier liabi
a lity
63,786
167,878
Accrue
r
d manufact
f
ur
t
ing costs
110,169
61,491
Other
113,475
43,708
Total accrued liabilities
$
435,277
$
407,302
88
Contra
t
ct Liab
i
ilit
l ie
t s, Defe
e rred Revenue and Other Perfor
f
ma
r
nce Oblig
l atio
t ns
Contra
t
ct Liabilities
A contract liabi
a lity is recognized when we have received customer paym
a
ents in advance of our satisfact
f
ion of a
perfor
f
mance obligation under a cancellabl
a e contract. The following table summarizes the activity related to our contract
liabilities (in thousands):
Year Ended December 31,
2024
2023
Contract liabilities, beginning balance
$
133,239
$
103,448
Less: Revenue recognized from beginning balance
(58,300)
(43,286)
Less: Beginning balance reclassified to deferred revenue
(3,772)
(3,185)
Add: Contract liabilities recognized
89,623
76,262
Contract liabilities, ending balance
$
160,790
$
133,239
As of Decembe
m
r 31, 2024 and 2023, $65.7 million and $59.2 million, respectively, of our contract liabi
a lities were
recorded within other current liabilities with the
t
remaining balance recorded within othe
t
r long-term liabilities in the
accompanying consolidated balance sheets.
Defe
e rred
r
Revenue
Deferred revenue is comprised mainly of unearned service revenue related to annual and multi-year PCS contracts, and
product defer
f ra
r ls related to contracts with acceptance clauses. The following table summarizes the
t
activity related to our
deferred revenue (in thousands):
Year Ended December 31,
2024
2023
Deferred revenue, beginning balance
$
1,506,204
$
1,041,246
Less: Revenue recognized from beginning balance
(860,187)
(615,681)
Add: Deferral of revenue in current period, excluding amounts recognized during the
t
period
2,145,398
1,080,639
Deferred revenue, ending balance
$
2,791,415
$
1,506,204
Othe
t
r Perfo
r rmance Obligat
g ions
Other performance obligations totaling $450.4 million as of December 31, 2024 include unbilled multi-year PCS and
service contract amounts of $388.8 million and $61.6 million of binding contra
t ctua
t
l agreements with certain customers that are
primarily related to future produc
d
t shipments.
Revenue from
r
Total Remaining Perfor
f
ma
r
nce Obligations
Total revenue from our contract liabilities, deferred revenue and other perfor
f
ma
r
nce obligations that is expected to be
recognized in future periods was $3.4 billion as of Decembe
m
r 31, 2024. Approximately 85% of this fut
f ur
t
e revenue is expected
to be recognized over the
t
next two years and the remaining 15% is expected to be recognized during the third to the fif
f th
f
year.
89
Other Income, Net
Other income, net consists of the following (in thousands):
Year Ended December 31,
2024
2023
2022
Other income (expense), net:
Interest income
$
310,998
$
152,421
$
27,556
Other income (expense)
9,420
12,356
27,134
Total other income, net
$
320,418
$
164,777
$
54,690
90
4.
Acquisition, Goodwill and Acquisition-Related Intangible Assets
Acquisitions and Goodwill
We had no material business acquisitions during the
t
years ended Decembe
m
r 31, 2024 and 2023.
There were no material cha g
nges t g
o goodwill for
f
th y
e years ended December 31, 2024 and 2023. The Company performed an
annual qualitative test for
f
goodwill impairme
r
nt in the fou
f
rth quarter of fiscal years ended Decembe
m
r 31, 2024 and 2023 and
determined that goodwill was not impa
m
ired.
Acquisition-Related Intangible Assets
The fol
f lowing tabl
a e presents details of our acqui
q sition-related intangible assets as of December 31, 2024 and 2023 (in
thousands, except for
f
years):
Gross Carrying Amount
Accumulated Amortization
Net Carrying Amount
Weighted
Average
Remaining
Useful
f
Life (in
years)
December
31, 2023
Additions
December
31, 2024
December
31, 2023
Amortizat
ion
December
31, 2024
December
31, 2023
December
31, 2024
Developed
technology
$ 154,930
$
—
$ 154,930
$
(102,493)
$ (16,780)
$ (119,273) $
52,437
$
35,657
3.5
Customer
relationships
54,620
—
54,620
(21,797)
(7,701)
(29,498)
32,823
25,122
3.9
Trade name
12,390
—
12,390
(8,882)
(2,279)
(11,161)
3,508
1,229
0.7
Total
$ 221,940
$
—
$ 221,940
$
(133 172)
$ (26,760)
$ (159,932) $
88,768
$
62,008
3.6
Amortization expense related to acqui
q sition-related intangible assets was $26.8 million, $33.4 million and $33.7 million for
f
the years ended Decembe
m
r 31, 2024, 2023 and 2022, respectively.
As of Decembe
m
r 31, 2024, fut
f ur
t
e estimated amortization expense related to the acqui
q red-related intangible assets is as
follows (in thousands):
Years Ending December 31,
Future
Amortization
Expense
2025
$
19,642
2026
17,260
2027
13,436
2028
10,037
2029
1,633
Total
$
62,008
91
5.
Commitments and Contingencies
Operating Leases
We lease various offi
f ces and data centers in North America, Europe, Asia and Australia under non-cancellabl
a e
operating lease arrangements that expire on various dates thr
t
ough 2031. Some of our leases include options to extend the term
of such leases for a period from three months to up t
u
o 10 years and/or options to early terminate the leases. As of December 31,
2024, we did not include any such options in determining the lease terms
r
because we were not reasonabl
a y certain that we would
exercise these options.
The fol
f lowing tabl
a e summarizes the supplemental balance sheet information related to our operating leases (in
thousands):
December 31, 2024
December 31, 2023
Right-of-u
f
se assets:
erating lease right-of-u
f
se assets (included in other assets)
$
51,956
$
55,890
Lease liabilities:
Operating lease liabilities, current (included in other curre
r nt liabi
a lities)
22,143
21,106
Operating lease liabilities, non-current (included in other long-term liabilities)
37,499
44,413
Total operating lease liabi
a lities
$
59,642
$
65,519
Maturities of operating lease liabi
a lities as of December 31, 2024 are presented in the tabl
a e below (in thousands):
Years ending December 31,
Amount
2025
$
24,704
2026
16,766
2027
12,238
2028
8,063
2029
2,695
2030 and thereafte
f r
841
Total undiscounted operating lease payments (excluding non-lease compo
m
nents)
65,307
Less: imputed interest
(5,665)
Present value of operating lease payments as of Decembe
m
r 31, 2024
$
59,642
Purchase Commitments
We outsource most of our manufactur
t
ing and supply chain management operations to third-party c
t
ontract
manufactur
t
ers, who procure components and assemble products on our behalf. A significant portion of our purchase orders to
our contract manufactur
t
ers for
f
finished products consists of non-cancellabl
a e purchase commitments. In addition, we purchase
strategic component inventory f
r
ro
f
m certain suppliers under non-cancellable purchase commitments, including integrated
circuits, which are consigned to our contract manufactur
t
ers. As of December 31, 2024, we had non-cancellabl
a e purchase
commitments not recorded on our balance sheet of $3.1 billion, of which $2.8 billion have confir
f me
r
d receipt dates within 12
months, and $0.3 billio
h
n
ave confirmed receipt date g
s greater than 12 months. These open purchase orders are consider d
ed
enforceabl
a e and legally bindi g
ng, and while we m y
ay have some limite a
d bi
a lity to reschedule, and adju
d st our requirements based
on our business needs prior to the delivery o
r
f goods or performance of services, thi
t s can only occur with the agreement of the
related supplier.
We also had deposits to our contract manufactur
t
ers to secure our purchase commitments in the
t
amount of $95.8
million and $133.3 million as of Decembe
m
r 31, 2024 and 2023, respectively, which were recorded within prepaid expenses and
other curre
r nt assets, as well as other assets in the consolidated balance sheets.
92
Property project
During the year ended December 31, 2021, we purchased land and the impr
m
ovements thereon in Santa Clara,
California to construc
r
t a building for offic
f e, lab a
a
nd data center space. The estimated capi
a tal expenditures related to this project
is expected to be approximately $235.0 million to $260.0 million thr
t
ough December 31, 2026 at which time construc
r
tion is
expected to be completed.
Guarantees
We have entered into agreements with some of our direct customers and channel partners that contain indemnification
provisions relating to potential situa
t
tions where claims could be alleged that our products infri
f nge the
t
intellectua
t
l property
rights of a third-party. We h
W
ave, at our option and expense, the abi
a lity to repair any infri
f ngement, replace product with a non-
infringing equi
q valent-in-function product or refun
f
d our customers all or a portion of the value of the product. Other guarantees
or indemnific
f ation agreements include guarantees of product and servi
r ce perfor
f
mance and standby letters of credit for leased
facilities and corpo
r
rate credit cards. We have not recorded a liability related to these indemnification and guarantee provisions,
and our guarantee and indemnific
f ation arrangements have not had any material impact on our consolidated fin
f ancial statements
to date.
Legal Proceedings
WSOU Investments, LLC
On November 25, 2020, WSOU Investments LLC ("WSOU") filed a lawsuit against us in the Wes
W tern District of
Texas asserting that certain of our products infri
f nge three WSOU patents. WSOU's allegations are directed to certain featur
t
es of
our wireless and switching products. WSOU seeks remedies including monetary damages, attorney's fees and costs. On
Februa
r
ry 4, 2021, we filed an answer denying WSOU's allegations. On Novembe
m
r 5, 2021, the case was transfer
f re
r d to the
t
Northern District of California. On March 30, 2022, WSOU dismissed one of the
t
patents with preju
e dice, removing Arista
wireless produc
d
ts from those accused of infringement. On July 1, 2022, the court stayed the case pending the resolution of an
inter partes review of one of the patents-in-suit. On May 3
a
0, 2023, the
t
US Patent Trial and Appeal Board (“PTAB”) rul
r ed all
challenged claims in the inter partes review unpa
n
tentable. The district court case remains st y
ayed pending app
a
eal and/or final
resolution of the PTAB rul
r ing.
We intend to vigorous yly defend g
against the
t
claims br
g
ought g
against us by WSOU; however, we cannot be certain th tat
any of WSOU's claims will be resolved in our favor, regardless of the merits of tho
t
se claims. A y
ny adverse lit gigation rul
r ing
could result in a signific
f ant dam g
ages award against us and i jnjunctive relief.
With respect to the legal proceedi g
ngs described above, it is our belief that while a loss is not probabl
a e, it may b
a
e
reasonab yly possible. Further, at this st g
age in the litigation, any possible loss or range of loss cannot be estimated; however, the
outcome of litigation is inherent yly uncertain. Therefor
f
e, if this legal matter were resolved against us in a reporti g
ng period for a
material amount, our consolidated fin
f ancial statements for that reporti g
ng period could be materially adverse yly affe
f cted.
Othe
t
r matters
In the ordinary course of business, we are a party t
t
o other claims and legal proceedings including matters relating to
commercial, employee relations, business practices and intellectua
t
l property.
We record a provision for contingent losses when it is both probabl
a e tha
t
t a liability has been incurred and the amount
of the loss can be reasonably estimated. As of Decembe
m
r 31, 2024, provisions recorded for contingent losses related to other
claims and matters have not been significant. Based on currently-availabl
a e infor
f
ma
r
tion, management does not believe that any
additional liabilities relating to other unresolved matters are probable or that the amount of any resulting loss is estimable, and
believes these other matters are not likely, i
y ndividua
d
lly and in the aggregate, to have a material adverse effect
f
on our fin
f ancial
position, results of operations or cash flows; however, litigation is subject to inherent uncertainties and our view of these
matters may change in the fut
f ur
t
e. Were an unfavorabl
a e outcome to occur, there exists the possibility of a material adverse
impact on our fin
f ancial position, results of operations or cash flows for
f
the period in which the unfav
f
orable outcome occurs,
and potentially in future periods.
6.
Stockholders' Equity and Stock-Based Compensation
Stock Repurchase Program
93
In April 2024, we completed repurchases under our previous $1.0 billion stock repurchase program (the “Prior
Repurchase Program”). In May 2024, our board of directors autho
t
rized a new $1.2 billion stock repurchase program (the “New
Repurchase Program” and together with the Prior Repurchase Program, the "Repurchase Programs"), which expires in May
2027. This autho
t
rization allows us to repurchase shares of our common stock that will be fund
f
ed from working capital.
Repurchases may be made at management's discretion from time to time on the open marke
r
t, through privately negotiated
transactions, transactions structur
t
ed through investment banking institut
t ions, block purchases, trading plans under Rul
R e 10b5-1
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or a combination of the foregoing. The Repurchase
Programs do not obligate us to acquire any of our common stock, and may be suspended or discontinued by the company at any
time without prior notice. During the
t
year ended Decembe
m
r 31, 2024, we repurchased a total of $279.0 million of our common
stock under our New Repurchase Program and $144.6 million of our common stock under our Prior Repurchase Program. As
of December 31, 2024, the remaining authorized amount for stock repurchases under the New Repurchase Program was
approximately $921.0 million.
A summary of the stock repurchase activities for the
t
years ended December 31, 2024 and 2023 is as fol
f lows, as
adju
d sted to give effe
f ct to the Stock Split (in thousands, except per share amounts):
Year Ended December 31,
2024
2023
Aggregate purchase price
$
423,619
$
112,279
Shares repurchased
5,492
3,816
Average price paid per share
$
77.13
$
29.43
The aggregate purchase price of repurchased shares of our common stock is recorded as a reduc
d
tion to retained
earnings in our consolidated statements of stockho
k
lders' equi
q ty. All shares repurchased have been retired.
2014 Equity
i
Incentiv
t e Pla
P n
On April 16, 2024, our board of directors adopted an amended and restated Arista Networks, Inc. 2014 Equ y
ity Plan
("Restated Plan"), effect
f
ive April 17, 2024 ("Effect
f
ive Date" s
) ubject to the approval of our stockhol
k
ders, which
a
was app
a
roved
at the 2024 Annual Meeting of Stockho
k
lders on June 7, 2024.
The Restated Plan provides for
f
the grant of equi
q ty-based awards, including stock options, restricted stock units,
restricted stock, stock app
a
reciation rights, and performance awards. The share pool availabl
a e under the prior version of the
Company's 2014 Equity Incentive Plan ("Prior Plan") was extinguished, and the Restated Plan provides for
f
a new share pool
not to exceed (i) 52,800,000 shares of our Common Stock (“Shares”), plus (ii) any Shares subj
u ect to awards under the Prior
Plan that, on or after the Effec
f
tive Date, expired or othe
t
rwise terminated without having been exercised in full, or that were
forfei
f ted to or repurchased by us, including net settlement of Shares subje
b ct to restri
t cted stock units, with the
t
maximum numbe
m
r
of Shares to be added to the Restated Plan as a result of clause (ii) equal to 40,158,628 Shares. The Restated Plan’s terms are
substantially similar to the
t
Prior Plan’s terms
r
, including with respect to treatment of equity awards in the
t
event of a “change in
contro
t
l” as defined under the Restated Plan, but with certain modifications, including the
t
elimination of the
t
automatic
“evergreen” share reserve increase provided for
f
under the
t
Prior Plan. As of Decembe
m
r 31, 2024, there remained appr
a
oximately
52.4 million shares available for grant under the Restated Plan, as adjusted to give effec
f
t to the Stock Split.
2014 Empl
m oy
l
ee Stoc
t
k Purchase Pla
P n
In April 2014, the board of directors and stockholders approved the 2014 Employee Stock Purchase Plan (“ESPP”).
The ESPP became effect
f
ive on the
t
first day that our common stock was publicly traded. The number of shares reserved for
issuance under the ESPP increases automatically on January 1 of each year by the number of shares equal to 1% of our shares
outstanding immediately preceding December 31, but not to exceed 40 million shares, unless the board of directors, in its
discretion, determines to make a smaller increase. Effe
f ctive January 1, 2024, our board of directors authorized an increase
of 12.5 million shares, as adju
d sted to give effe
f ct to the Stock Split, for fut
f ur
t
e issuance under the ESPP. A
P
s of December 31,
2024, the
t
re remained 104.9 million shares availabl
a e for
f
issuance under the ESPP.P
Under our ESPP, e
P
ligible employees are permitted to acquire shares of our common stock at 85% of the lower of the
fair market value of our common stock on the first trading day of each offer
f ing period or on the exercise date. Each offe
f ring
period lasts app
a
roximately two years starting on the fir
f st trading date after Februa
r
ry 15 and August 15 of each year, and
includes purchase dates every s
r
ix months
t
on or afte
f r February 15 and August 15 of each year. Participants may p
a
urchase shares
94
of common stock through payroll deduc
d
tions up t
u
o 15% of their eligible compensation, subj
u ect to Interna
r
l Revenue Service
mandated purchase limits.
During the year ended December 31, 2024, we issued 1.12 million shares at an average purchase price of $29.08 per
share under our ESPP, a
P
s adjusted to give effect
f
to the Stock Split.
Stoc
t
k Opt
O io
t n Activ
t itie
t s
The fol
f lowing tabl
a e summarizes the option activities and related information, as adju
d sted to give effe
f ct to the Stock
Split (in thousands, except years and per share amounts):
Number of
Shares
Underlying
Outstanding
Options
Weighted-
Average
Exercise
Price per
Share
Weighted-
Average
Remaining
Contractual
Term (In Years)
Aggregate
Intrinsic
Value
Balance—December 31, 2023
9,828
$
4.96
1.7
$
529,931
Options granted
—
—
Options exercised
(6,642)
4.14
Options canceled
(96)
5.02
Balance—December 31, 2024
3,090
$
6.71
1.5
$
320,854
Vested and exercisable—December 31, 2024
2,986
$
6.43
1.5
$
310,814
We did not grant any stock options during the years ended Decembe
m
r 31, 2024, 2023 and 2022. The aggregate intri
t nsic
value of options exercised dur
d
ing the years ended December 31, 2024, 2023 and 2022 was $495.1 million, $525.3 million and
$311.7 million, respectively. The total fair value of options vested for the years ended December 31, 2024, 2023 and 2022 was
approximately $5.6 million, $8.7 million and $16.6 million, respectively.
Restri
t cted
t
Stoc
t
k Uni
U
t (
i
RS
(
U) Activiti
i es
The fol
f lowing tabl
a e summarizes the RSU activities and related infor
f
mation, as adjusted to give effec
f
t to the Stock Split
(in tho
t
usands, except per share amounts):
Number of
Shares
Weighted-
Average Grant
Date Fair Value Per
Share
Balance—December 31, 2023
31,600
$
28.19
RSUs and PRSUs granted
10,142
72.61
RSUs and PRSUs vested
(10,731)
23.75
RSUs and PRSUs forfei
f ted/canceled
(2,402)
36.11
Unvested balance—Decembe
m
r 31, 2024
28,609
$
45.46
The weighted-average grant-date fai
f r value of RSUs granted dur
d
ing the years ended Decembe
m
r 31, 2024, 2023 and
2022 was $72.61, $39.49 and $25.34 per share, respectively, a
y
s adjusted to give effec
f
t to the Stock Split. The total fai
f r value of
RSUs vested for the years ended December 31, 2024, 2023 and 2022 was app
a
roximately $251.8 million, $225.5 million, and
$174.0 million, respectively.
95
Stoc
t
k-Ba
-
sed Com
C
pe
m
nsatio
t n Expe
E
nse
The fol
f lowing tabl
a e summarizes the stock-based compe
m
nsation expense related to our equi
q ty awards (in tho
t
usands):
Year Ended December 31,
2024
2023
2022
Cost of revenue
$
15,786
$
12,789
$
9,688
Research and development
211,807
172,177
130,897
Sales and marketing
78,762
71,074
57,571
General and administrative
49,009
40,716
32,778
Total stock-based compensation
$
355,364
$
296,756
$
230,934
Determinatio
t n of F
o
ai
F r V
i
al
V ue
We record stock-based compe
m
nsation awards based on fair value as of the
t
grant date. We value RSUs at the
t
market
close price of our common stock on the grant date. For option awards and ESPP offer
f ings, we use the Black-Scholes option
pricing model to determine fair value. We recognize such costs as compensation expense generally on a straight-line basis over
the requi
q site service period of the award.
As of Decembe
m
r 31, 2024, there were $1.0 billion of unrecognized compe
m
nsation costs related to all unvested awards.
The unamortized compensation costs are expected to be recognized over a weighted-average period of app
a
roximately 4.2 years.
7.
Net Income Per Share
Basic net income per share is computed using the weighted-average number of shares of common stock outstanding
during the period. Diluted net income per share is computed using the
t
weighted-average number of shares of common stock
outstanding during the period, including potential common shares assuming the dilutive effec
f
t of outstanding stock options,
restricted stock units, and the employee stock purchase plan using the
t
treasury stock method. Potential common shares whose
effe
f ct would have been antidilutive are excluded from the comput
m
ation of diluted net income per share. The fol
f lowing tabl
a e sets
forth the
t
computation of our basic and diluted net income per share attributable to common stockholders, as adju
d sted to give
effe
f ct to the Stock Split (in tho
t
usands, except per share amounts):
Year Ended December 31,
2024
2023
2022
Net income
$ 2,852,054
$ 2,087,321
$ 1,352,446
Basic weighted-average shares outstanding
1,256,303
1,237,417
1,225,891
Add weighted-average effec
f
ts of dilutive securities:
Stock options and RSUs
24,426
30,893
39,504
Employee stock purchase plan
348
228
440
Diluted weighted-average shares outstanding
1,281,077
1,268,538
1,265,835
Net income per share:
Basic
$
2.27
$
1.69
$
1.10
Diluted
$
2.23
$
1.65
$
1.07
e fol
f lowing weighted-average outstanding shares of common stock equi
q valents were excluded fro
f
m the computation
of diluted net income per share attributable to common stockholders becaus
a
e their effe
f cts would have been anti-dilutive for
f
the
periods presented, as adju
d sted to give effe
f ct to the Stock Split (in thousands):
Year Ended December 31,
2024
2023
2022
Stock options and RSUs
242
579
1,209
Employee stock purchase plan
26
412
800
Total
268
991
2,009
96
8.
Income Taxes
The compo
m
nents of income befor
f
e provision for income taxes are as fol
f lows (in tho
t
usands):
Year Ended December 31,
2024
2023
2022
Domestic
$ 2,635,557
$ 1,977,687
$ 1,260,614
Foreign
629,477
444,339
321,182
Income before income taxes
$ 3,265,034
$ 2,422,026
$ 1,581,796
The compo
m
nents of the provision for
f
income taxes are as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Current provision for income taxes:
Federal
$
751,279
$
574,449
$
359,158
State
114,731
106,866
76,321
Foreign
39,771
24,186
38,250
Total curre
r nt
905,781
705,501
473,729
Deferred tax expense (benefit):
Federal
(504,730)
(372,270)
(219,568)
State
(42,781)
(41,152)
(34,689)
Foreign
54,710
42,626
9,878
Total defer
f red tax expense (benefit)
(492,801)
(370,796)
(244,379)
Total provision for income taxes
$
412,980
$
334,705
$
229,350
The reconciliation of the statutory federal income tax rate and our effe
f ctive income tax rate is as follows (in
percentages):
Year Ended December 31,
2024
2023
2022
U.S. federal statutory income tax rate
21.00 %
21.00 %
21.00 %
State tax, net of federal benefit
f
1.75
2.13
2.09
Taxes on for
f
eign earnings differ
f ential
(2.38)
(1.96)
(2.24)
Tax credits
(2.79)
(2.74)
(2.24)
Stock-based compensation
(4.96)
(4.59)
(4.07)
Acquisition and integration costs
—
0.01
0.05
Other, net
0.03
(0.04)
(0.09)
Effe
f ctive tax rate
12.65 %
13.81 %
14.50 %
The change in our effe
f ctive tax rate was due to a fav
f
orable change in state taxes and tax benefits attributable to stock-
based compe
m
nsation. Excess tax benefit
f s resulting fro
f
m stock awards were $212.3 million, $151.2 million and $93.5 million for
the years ended Decembe
m
r 31, 2024, 2023 and 2022, respectively.
The tax effe
f cts of temporary d
r
iffe
f rences that give rise to signific
f ant portions of deferred tax assets (liabi
a lities) are as
follows (in thousands) :
97
December 31,
2024
2023
Deferred tax assets:
tangible assets
$
273,867
$
322,325
Reserves and accrua
r
ls not curre
r ntly deductible
135,167
120,973
Deferred revenue
566,273
295,268
Tax credits
130,188
118,123
Lease fin
f ancing obligation
13,719
15,485
Capi
a talized research and development expenses
634,534
417,095
Stock-based compensation
38,631
28,079
Net operating losses
25,916
34,274
Other
3,593
1,328
Gross defer
f re
r d tax assets
1,821,888
1,352,950
Valuation allowance
(179,789)
(146,268)
Total defer
f red tax assets
1,642,099
1,206,682
Deferred tax liabi
a lities:
US tax on for
f
eign earnings
(189,823)
(245,074)
Right of use asset
(11,571)
(12,935)
Other
(287)
(2,881)
Total defer
f red tax liabilities
(201,681)
(260,890)
Net defer
f re
r d tax assets
$
1,440,418
$
945,792
As of December 31, 2024 and 2023, $1.4 billion and $0.9 billion were recorded as deferred tax assets, non-current
respectively. We did not have any balance related to defer
f re
r d tax liabilities as of Decembe
m
r 31, 2024 and 2023.
As of Decembe
m
r 31, 2024, we had $225.1 million and $120.6 million of net operating loss carryfor
f
wa
r
rds for
f
federal
and state income tax purpo
r
ses, respectively, f
y
ro
f
m acquisitions. These federal and state losses will begin to expire in 2028 and
2029, respectively. We do not have any material foreign net operating losses.
As of Decembe
m
r 31, 2024, our state tax credit carryf
r
or
f
wa
r
rds for
f
income tax purpo
r
ses befor
f
e valuation allowances were
approximately $238.4 million, which can be carried over indefin
f itely. We have provided a valuation allowance of
$179.8 million for
f
deferred tax assets, primarily related to state carryforwards that we do not believe are more likely than not to
be realized.
Utilization of the net operating losses and tax credit carryf
r
or
f
wa
r
rds may be subj
u ect to limitations due to ownership
change limitations provided in the Internal Revenue Code and similar state or for
f
eign provisions.
U.S. tax law generally requi
q res U.S. shareholders of a controlled foreign corpo
r
ration (“CFC”) to include the annual
earnings of foreign subsidiaries into U.S. taxable income each year. Corre
r spondingly, most of the undistributed earnings are
deemed to be previously taxed for
f
U.S. tax purpo
r
ses and distributions of the
t
unremitted earnings do not have any significant
U.S. federal income tax impa
m
ct. We h
W
ave not provided for
f
any remaining tax effec
f
t, if any, of limited outside basis diffe
f rences
of our foreign subsidiaries based upon plans of fut
f ur
t
e reinvestment. The determination of the fut
f ur
t
e tax consequences of the
remittance of these earnings is not practicable.
98
Uncertain Tax
T
Positions
We recognize uncertain tax positions only to the
t
extent that management believes that it is more likely than not that the
t
position will be sustained. The reconciliation of the beginning and ending amount of gross unrecognized tax benefit
f s as of
Decembe
m
r 31, 2024, 2023 and 2022 is as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Gross unrecognized tax benefits—beginning balance
$
163,266
$
137,357
$
114,813
Increases related to tax positions taken in a prior year
294
4,690
1,566
Increases related to tax positions taken dur
d
ing current year
52,701
39,895
25,355
Decreases related to tax positions taken in a prior year
(8,624)
(513)
(3,781)
Decreases related to lapse of statut
t e of limitations
(26,010)
(18,163)
(596)
Decreases related to settlements with taxing authorities
(150)
—
—
Gross unrecognized tax benefits—ending balance
$
181,477
$
163,266
$
137,357
As of December 31, 2024, 2023 and 2022, the total amount of gross unrecognized tax benefits was $181.5 million,
$163.3 million and $137.4 million, respectively, of which $103.4 million, $90.0 million and $79.3 million would affe
f ct our
effe
f ctive tax rate if recognized.
Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a compo
m
nent of income
tax expense. For the years ended December 31, 2024 and 2023, the net expense for
f
interest and penalties and the recognized
liability for
f
interest and penalties were not material.
The statute of limitations for Federal and most states remains open for 2021 and forward. Some states have net
operating loss and tax credit carryforwards, and therefor
f
e remain open to examination. Our for
f
eign tax retur
t
ns
r
, where the
statut
t e of limitations have not yet laps
a
ed, are open to audit in the
t
respective foreign countri
t es where the
t
subsidiaries are located.
It is possible tha
t
t the amount of existing gross unrecognized tax benefits may decrease within the next 12 months as a result of
statut
t e of limitation lapses or payments to tax authorities in certain jurisdictions. However, any such changes are not anticipated
to be material.
9.
Segment and Geographical Infor
f
mation
We operate as one reportable segment. The accounting policies of the
t
reportable segment are the same as those
described in the
t
summary o
r
f significant accounting policies. The fin
f ancial information reviewed by the CODM reflects
quarterly and year-to-date operating results, with a primary focus on revenue, gross margin, operating margin and net income as
reported on the consolidated statements of income. Consolidated fin
f ancial information is used by the
t
CODM to evaluate
perfor
f
mance and make decisions regarding resource allocation and other strategic initiatives. This consolidated financial
information is also what is used to establish and approve operating budgets and forecasts. The measure of segment assets is
reported on the consolidated balance sheets in total. There was no change for each of the
t
periods presented in the measurement
methods used to determine reported segment profit and loss.
The CODM reviews the fol
f lowing signific
f ant segment expenses, which are presented separately on the Company’s
consolidated statements of income: cost of product, cost of services, selling and marke
r
ting expenses, general and administrative
expenses, and research and development expenses. Other segment items that are included in the calculation of the
t
Company’s
net income include othe
t
r income (expense), net, which is furthe
t
r described in Note 3. Financial Statements Details and income
taxes, which is fur
f
ther described in Note 8. Income Tax
T
es. Other segment disclosures such as depreciation and amortization and
stock-based compensation are disclosure in the Consolidated Statements of Cash Flows.
The fol
f lowing tabl
a e represents revenue based on customers' shipping addresses (in thousands):
99
Year Ended December 31,
2024
2023
2022
Americas(1)
$
5,729,039
$
4,651,193
$
3,462,621
Europe, Middle East and Afri
f ca
713,175
670,960
529,800
Asia Pacific
560,932
538,015
388,889
Total revenue
$
7,003,146
$
5,860,168
$
4,381,310
(1) Includes $5,663.0 million, $4,541.5 million and $3,424.8 million revenue generated fro
f
m the U.S. for the three years ended December 31,
2024, 2023 and 2022, respectively
Long-lived assets, excluding intercompa
m
ny receivables, investments in subsidiaries, investments in privately-held
companies and deferred tax assets, net by location are summarized as follows (in thousands):
December 31,
2024
2023
United States
$
83,520
$
79,728
International
15,325
21,852
Total
$
98,845
$
101,580
10.
Post-Employment Benefit
f s
We have a 401(k) Plan tha
t
t covers substantially all of our employees in the U.S. Effe
f ctive January 1, 2017, we have
elected to match 100% of employees' contributions up to a maximum of 3% of an employee's annual salary.
r
Matching
contri
t butions are immediately vested. For the years ended December 31, 2024, 2023 and 2022, the amounts we contributed for
the matching contri
t butions were not material.
100
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disc
i
losure Contro
t
ls and Pro
P
cedures
Management, with the participation of our Chief Executive Offi
f cer (“CEO”) and our Chief Financial Offi
f cer (“CFO”),
evaluated the effe
f ctiveness of our disclosure controls and procedures as of December 31, 2024. The term “disclosure controls
and procedur
d
es,” as defined in Rul
R es 13a-15(e) and 15d-15(e) under the
t
Exchange Act, means controls and other procedures of
a compa
m
ny that are designed to ensure that infor
f
ma
r
tion required to be disclosed by a compa
m
ny in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the
SEC’s rul
r es and for
f
ms
r
. Disclosure controls and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a compa
m
ny in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the company’s management, including its principal executive and principal financial
offi
f cers, as appropriate to allow timely decisions regarding required disclosure.
Based on the evaluation of our disclosure contro
t
ls and procedures as of Decembe
m
r 31, 2024, our CEO and CFO
concluded that, as of such date, our disclosure controls and procedures are designed at a reasonable assurance level and are
effe
f ctive to provide reasonable assurance tha
t
t infor
f
mation we are requi
q red to disclose in reports that we file or subm
u
it under the
Exchange Act is recorded, processed, summarized, and reported within the time periods specifie
f d in Securities and Exchange
Commission (SEC) rul
r es and for
f
ms
r
, and that such information is accumulated and communicated to our management,
including our CEO and CFO, as app
a
ropriate, to allow timely decisions regarding required disclosure.
Change
n
s in I
i
nt
I
er
t
nal Con
C
trol over Fina
i
ncial Reporting
i
There were no changes in our interna
r
l control over financial reporting identified in connection with the evaluation
required by Rule 13a-15(d) and 15d-15(d) of the Securities and Exchange Act of 1934, as amended, that occurred during the
quarter ended Decembe
m
r 31, 2024 that materially affe
f cted, or are reasonably likely to materially affect
f
, our internal contro
t
l over
financial reporting.
Inherent Limi
i
ta
i tions of I
o
nt
I
er
t
na
r
l Con
C
trolsl
Our management, including our CEO and CFO, does not expect that our disclosure contro
t
ls and procedures or our
internal contro
t
ls over financial reporting will prevent or detect all errors and all fraud. A contro
t
l system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the
t
contro
t
l system are met.
Because of the inherent limitations in all control systems, no evaluation of contro
t
ls can provide absolute assurance tha
t
t all
contro
t
l issues and instances of fra
f ud, if any, w
y
ithin the Company have been detected. These inherent limitations include the
t
realities that judgments in decision-making can be faulty, a
y
nd that breakdowns can occur because of a simple error or mistake.
Additionally, c
y
ontro
t
ls can be circumvented by the
t
individual acts of some persons, by collusion of two or more people, or by
management overri
r de of the contro
t
ls. The design of any system of controls also is based in part upo
u
n certain assumptions abo
a
ut
the likelihood of fut
f ur
t
e events, and there can be no assurance tha
t
t any design will succeed in achieving its stated goals under all
potential future conditions. Over time, controls may b
a
ecome inadequate because of changes in conditions, or the degree of
compliance with the policies or procedur
d
es may deteriorate. Because of the inherent limitations in a cost-effe
f ctive control
system, misstatements due to error or fraud may occur and not be detected.
Manage
a
ment's Repo
e
rt on Internal Contro
t
l over Fin
F
ancial
i
Repo
e
rtin
t
g
Our management is responsible for establishing and maintaining adequate internal control over fin
f ancial reporting as
defined in Rul
R es 13a-15(f) and 15d-15(f) under the Exchange Act. Our interna
r
l control over fin
f ancial reporting is a process
designed under the supervi
r sion of our principal executive and principal financial offic
f ers to provide reasonabl
a e assurance
regarding the
t
reliability of fin
f ancial reporting and the preparation of our fin
f ancial statements for externa
r
l purpo
r
ses in
accordance with U.S. generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedur
d
es that: (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide
101
reasonable assurance that tra
t nsactions are recorded as necessary to permit preparation of fin
f ancial statements in accordance
with U.S. generally accepted accounting principles, and that our receipts and expenditur
t
es are being made only in accordance
with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely
detection of unautho
t
rized acquisition, use, or disposition of our assets that could have a material effe
f ct on the Consolidated
Financial Statements.
Because of its inherent limitations, interna
r
l control over financial reporting may n
a
ot prevent or detect misstatements.
Also, proje
o ctions of any evaluation of effect
f
iveness to fut
f ur
t
e periods are subje
b ct to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may d
a
eteriorate.
Management assessed the effect
f
iveness of our internal control over fin
f ancial reporting as of December 31, 2024, based on the
framework s
r
et forth by the
t
Committee of Sponsoring Organizations of the Tre
T adway C
a
ommission (COSO) in Interna
r
l Control -
Integrated Framework (
r
2013 fra
f mework). Based on that assessment, management concluded that, as of December 31, 2024, its
internal control over fin
f ancial reporting was effe
f ctive to provide reasonable assurance regarding the reliabi
a lity of fin
f ancial
reporting and the preparation of financial statements in accordance with U.S. GAAP.
The effect
f
iveness of our internal contro
t
l over fin
f ancial reporting, as of December 31, 2024, has been audited by Ernst
& You
Y
ng LLP, the independent registered publ
u ic accounting fir
f m tha
t
t audits our Consolidated Financial Statements, as stated in
their report included in Item 8 of this Annual Report on Form 10-K, which expresses an unqualifie
f d opinion on the
effe
f ctiveness of our internal contro
t
l over fin
f ancial reporting as of Decembe
m
r 31, 2024.
Item 9B. Other Information
Securities Trading Plans of Directors and Executive Offi
f cers
During our last fiscal quarter, the fol
f lowing directors and offi
f cer, as defined in Rul
R e 16a-1(f),
f
adopted a “Rul
R e 10b5-1
trading arrangement” as defined in Regulation S-K Item 408, as fol
f lows:
On December 13, 2024, Jayshree Ullal, our Chairperson and Chief Executive Offi
f cer, adopted a Rule 10b5-1 trading
arrangement providing for
f
the sale fro
f
m time to time of an aggregate of: (
f
i) up to 7,349,668 shares of our common stock; and
(ii) a number of shares of our common stock that may b
a
e earned in connection with grants of performance-based restricted
stock units, which cannot be determined at this time. The trading arrangement is intended to satisfy the affir
f mative defense in
Rule 10b5-1(c). The duration of the trading arrangement is until April 17, 2026, or earlier if all transactions under the
t
trading
arrangement are compl
m eted.
No other offic
f ers or directors, as defined in Rul
R e 16a-1(f),
f
adopted or terminated a “Rul
R e 10b5-1 trading arrangement”
or a “non-Rule 10b5-1 trading arrangement,” as defin
f ed in Regulation S-K Item 408, during the last fiscal quarter.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
102
PART III
Item 10. Directors, Executive Offi
f cers, and Corporate Governance
Information required by this Item is incorpo
r
rated herein by refer
f ence to our defin
f itive proxy statement with respect to
our 2025 Annual Meeting of Stockho
k
lders to be fil
f ed with the SEC within 120 days after the end of the fis
f cal year covered by
this Annual Report on Form 10-K.
Item 11. Executive Compensation
Information required by this Item is incorpo
r
rated herein by refer
f ence to our defin
f itive proxy statement with respect to
our 2025 Annual Meeting of Stockho
k
lders to be fil
f ed with the SEC within 120 days after the end of the fis
f cal year covered by
this Annual Report on Form 10-K.
Item 12. Security Ownership of Certain Benefic
f ial Owners and Management and Related Stockholder Matters
Information required by this Item is incorpo
r
rated herein by refer
f ence to our defin
f itive proxy statement with respect to
our 2025 Annual Meeting of Stockho
k
lders to be fil
f ed with the SEC within 120 days after the end of the fis
f cal year covered by
this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions and Director Independence
Information required by this Item is incorpo
r
rated herein by refer
f ence to our defin
f itive proxy statement with respect to
our 2025 Annual Meeting of Stockho
k
lders to be fil
f ed with the SEC within 120 days after the end of the fis
f cal year covered by
this Annual Report on Form 10-K.
Item 14. Principal Accountant Fees and Services
Information required by this Item is incorpo
r
rated herein by refer
f ence to our defin
f itive proxy statement with respect to
our 2025 Annual Meeting of Stockho
k
lders to be fil
f ed with the SEC within 120 days after the end of the fis
f cal year covered by
this Annual Report on Form 10-K.
PART IV
Item 15. Exhibits and Financial Statement Schedules
Documents fil
f ed as part of this Annual Report on Form 10-K are as follows:
1.
Consolidated Financial Statements
Our Consolidated Financial Statements are listed in the “Index to Consolidated Financial Statements” under Part II,
Item 8 of thi
t s Annual Report on Form 10-K.
2.
Financial Statement Schedules
Financial statement schedules have been omitted becaus
a
e they are not required, not app
a
licabl
a e, not present in amounts
suffic
f ient to require submission of the schedule, or the required infor
f
mation is shown in the Consolidated Financial Statements
or Notes thereto.
3.
Exhibits
The exhibits listed in the following Exhibit Index are filed or incorpo
r
rated by refer
f ence into this report:
103
EXHIBIT INDEX
Incorporated by Reference
Exhibit
Number
Description
Form
File No.
Exhibit
Filing Date
Filed
Herewith
3.1
Amended and Restated Certificate of Incorporation of the
Registrant.
10-Q
001-36468
3.1
8/8/2014
3.2
Amended and Restated Bylaws of Arista Networks, Inc. dated
December 18, 2023
8-K
001-36468
3.1
12/20/2023
3.3
Certificate of Amendment to the Amended and Restated
Certificate of Incorporation of the Registrant
8-K
001-36468
3.1
12/3/2024
4.1
Form of the Registrant's common stock certificate.
S-1/A
333-194899
4.1
4/21/2014
4.2
Description of Registrant’s securities registered under Section
12 of the Exchange Act
10.1
Form of Indemnification Agreement between the Registrant and
each of its directors and executive officers.
10-Q
001-36468
10.1
11/1/2019
10.2 †
2004 Equity Incentive Plan.
S-1
333-194899
10.2
3/31/2014
10.3 †
2011 Equity Incentive Plan.
S-1
333-194899
10.3
3/31/2014
10.4 †
2014 Equity Incentive Plan.
10.5 †
2014 Employee Stock Purchase Plan.
10.6 †
Offer Letter, dated October 17, 2004, by and between the
Registrant and Kenneth Duda.
S-1
333-194899
10.6
3/31/2014
10.7 †
Offer Letter, dated June 8, 2007, by and between the Registrant
and Anshul Sadana.
S-1
333-194899
10.7
3/31/2014
10.8 †
Offer Letter, dated August 1, 2008, by and between the
Registrant and Jayshree Ullal.
S-1
333-194899
10.8
3/31/2014
10.9 †
Offer Letter, dated March 27, 2013, by and between the
Registrant and Charles Giancarlo.
S-1
333-194899
10.9
3/31/2014
10.11
Lease between Arista Networks, Inc. and The Irvine Company
LLC, dated August 10, 2012, as amended on February 28, 2013.
1
333-194899
10.15
3/31/2014
10.12
Second Amendment to Lease, by and between Arista Networks,
Inc. and The Irvine Company LLC, dated July 30, 2014.
10-Q
001-36468
10.1
8/8/2014
10.13
License Agreement, dated November 30, 2004, by and between
the Registrant and OptumSoft, Inc.
S-1
333-194899
10.16
3/31/2014
10.14‡
Manufacturing Services Letter Agreement, dated February 5,
2007, between the Registrant and Jabil Circuit, Inc.
S-1
333-194899
10.17
3/31/2014
10.15 †
Employee Incentive Plan.
S-1/A
333-194899
10.21
4/21/2014
10.16 †
Offer Letter, dated May 18, 2015, by and between the
Registrant and Ita Brennan.
8-K
001-36468
10.1
5/14/2015
10.17 †
Severance Agreement, effective May 18, 2015, by and between
the Registrant and Ita Brennan.
8-K
001-36468
10.2
5/14/2015
10.18 †
2015 Global Sales Incentive Plan.
10-Q
001-36468
10.3
5/5/2016
10.19 †
Offer letter, dated January 2, 2013, by and between the
Registrant and Marc Taxay.
10-Q
001-36468
10.1
5/8/2017
10.20 †
Severance Agreement, dated March 30, 2015, by and between
the Registrant and Marc Taxay.
10-Q
001-36468
10.2
5/8/2017
10.21 †
Offer letter, dated February 14, 2017, by and between the
Registrant and John McCool.
10-Q
001-36468
10.3
5/8/2017
10.22 †
Severance Agreement, dated March 20, 2017, by and between
the Registrant and John McCool.
10-Q
001-36468
10.4
5/8/2017
10.23 ‡
Term Sheet of Mutual Release and Settlement Agreement, dated
August 6, 2018, between the Registrant and Cisco Systems, Inc.
10-Q
001-36468
10.1
11/5/2018
10.24 ‡
Mutual Release and Settlement Agreement, dated August 6,
2018, by and between the Registrant and Cisco Systems, Inc.
K
001-36468
10.24
2/15/2019
104
Incorporated by Reference
Exhibit
Number
Description
Form
File No.
Exhibit
Filing Date
Filed
Herewith
10.25 †
Awake Security, Inc. 2014 Equity Incentive Plan
S-8
333-249591
99.1
10/22/2020
10.26
Third Amendment to Lease, by and between Arista Networks,
Inc. and The SANTA CLARA GATEWAY I LLC, dated
February 1, 2023
10-K
001-36468
10.1
2/13/2023
10.27
Letter Agreement by and between the Company and Chantelle
Breithaupt, dated October 15, 2023
8-K
001-36468
10.1
12/1/2023
10.28
Form of Severance Agreement by and between the Company
and Chantelle Breithaupt
10-K
001-36468
10.28
2/13/2024
10.29**
Consulting Agreement between the Company and Anshul
Sadana, dated May 21, 2024
19.0
Insider Trading Policy
21.1
List of Subsidiaries of the Registrant.
23.1
Consent of Independent Registered Public Accounting Firm.
24.1
Power of Attorney (contained on signature page hereto)
31.1
Certification of the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of the Chief Financial Officer pursuant to
Section 302(a) of the Sarbanes-Oxley Act of 2002.
32.1*
Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to section 906 of the Sarbanes-Oxley Act of 2002
97.1
Compensation Recovery Policy
10-K
001-36468
97.1
2/13/2024
101.INS
XBRL Instance Document.
101.SCH
XBRL Taxonomy Extension Schema Document.
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
104.0
Cover Page Interactive File (formatted as Inline XBRL and
contained in Exhibit 101)
____
_
___
_
___
_
___
_
_
_ _
_ __
_
__
_
___
_
† Indicates a management contract or compensatory plan or arrangement.
‡ Confid
f ential treatment has been requested for portions of this exhibit. These portions have been omitted and have been file
f
d separately with
the Securities and Exchange Commission.
* * Certain infor
f
ma
r
tion contained in this exhibit has been redacted pursuant to Item 601(a)(6) of Regulation S-K.
* The certific
f ations attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K are not deemed filed with the Securities and
Exchange Commission and are not to be incorporated by reference into any filing of Arista Networks
r
, Inc. under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, whether made befor
f
e or after the date of this Annual Report on Form 10-K,
irrespective of any general incorpor
r
ation language contained in such filing.
Item 16. Form 10-K Summary
None.
105
SIGNATURES
Pursuant to the requi
q rements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
t
registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly aut
a horized.
ARISTA NETWORKS
R
, INC.
(Registrant)
Dated:
Februa
r
ry 18, 2025
By:
/s/ JAYSHREE ULLAL
Jayshree Ullal
President, Chief Executive Offi
f cer and Chairpe
r
rson of the Board
(Principal Executive Offic
f er)
POWER OF ATT
A
ORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Jayshree Ullal and Chantelle Breithaupt
u , jointly and severally, h
y
is or her attorney-in-fac
f
t, with the power of
substitution, for him or her in any and all capacities, to sign any amendments to thi
t s Annual Report on Form 10-K and to file
the same, with exhibits thereto and other documents in connection therewith, with t
t
he
t
Securities and Exchange Commission,
hereby ratifying and confir
f ming all that each of said attorneys-in-fact, or his or her substitut
t e or substitut
t es, may do or cause to
be done by virtue
t
hereof.f
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ JAYSHREE ULLAL
President, Chief Executive Offi
f cer and
Chairperson of the Board (Principal
Executive Offic
f er)
Februa
r
ry 18, 2025
Jayshree Ullal
/s/ CHANT
A
ELLE BREITHAUPT
Chief Financial Offi
f cer (Senior Vice
President)
Februa
r
ry 18, 2025
Chantelle Breithaupt
/s/ KENNE
N
TH DUDA
Chief Tec
T
hnology Offic
f er, Senior Vic
V e
President, Director
Februa
r
ry 18, 2025
Kenneth Duda
/s/ KELLY B
L
ATTLES
Director
Februa
r
ry 18, 2025
Kelly Battles
/s/ LEWIS CHEW
Director
Februa
r
ry 18, 2025
Lewis Chew
/s/ CHARLES GIANCARLO
Director
Februa
r
ry 18, 2025
Charles Giancarlo
/s/ DAN SCHEINMAN
Director
Februa
r
ry 18, 2025
Dan Scheinman
/s/ MARK T
R
EMPLETON
Director
Februa
r
ry 18, 2025
Mark Templeton
/s/ YVONNE WAS
W
SENAAR
Director
Februa
r
ry 18, 2025
Yvonne Wassenaar
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
ARISTA NETWORKS | 5453 Great America Parkway, Santa Clara, CA 95054 | WWW.ARISTA.COM