Ciena · Risk factors

Prior heading: Our revenue, gross margin, and operating results can fluctuate significantly from quarter to quarter and, if we are not able to secure order growth, our revenue may not reach the levels we anticipate.

Our revenue, gross margin, and results of operations can fluctuate significantly from quarter to quarter. Our budgeted expense levels are based on our intent to invest to maintain or increase our technology advantage, our visibility into customer spending plans, and our projections of future revenue and gross margin. Visibility into customer spending levels can be uncertain, spending patterns are subject to change, significant, and reductions in our expense levels can take significant time often difficult to implement. Historically, predict, quarterly fluctuations due to a significant variety of factors. A portion of our quarterly revenue was is generated from customer orders received during that same quarter (which we refer to as “book to revenue”) and was therefore may be less predictable and subject to fluctuation due to a quarterly shortfall in orders from expectations. During fiscal 2022, however, we generated a significant backlog of customer orders as a result of supply chain constraints and, during fiscal 2023, certain. Additionally, our revenue grew as we consumed a significant portion of this backlog. Customer order volumes began to moderate in the fourth quarter of fiscal 2022, and we experienced order levels below revenue during fiscal 2023 customer contracts generally do not include minimum or guaranteed purchases and the first half of fiscal 2024 and, as a result, our backlog decreased. We expect our backlog to continue may allow customers to reduce in fiscal 2025. As modify or cancel purchase orders. We must regularly compete for business with existing customers and there is no assurance that happens, we expect our reliance upon securing quarterly book to revenue orders to grow and those orders to represent a more typical composition of will maintain our quarterly revenue over time. Our future incumbency or revenue growth will depend, level with any particular customer in part, on securing increased orders, particularly book to revenue orders. Within these dynamics, our future periods. Our results for a particular period can be difficult to predict and a range of factors, including those set forth below, can materially adversely affect quarterly revenue, gross margin, and operating results: •changes in spending levels or network deployment plans affected by customers, particularly with respect to our service provider and cloud provider customers; factors set forth in this “Risk Factors” section including: •order timing and volume, including book to revenue orders; •the timing of revenue recognition on sales, particularly relating to large orders; •availability of components and manufacturing capacity; •shipment and delivery timing, including any deferral of delivery; •backlog backlog levels; •the level of competition and pricing pressure in our industry; •the pace and impact of price erosion that we regularly encounter •changes in our markets; •the impact of commercial concessions or unfavorable commercial terms required to maintain incumbency spending or secure new opportunities with key deployment plans by customers; •the mix of revenue by product segment, geography, and customer in any particular quarter; •our level of success in achieving targeted cost reductions and improved efficiencies in our supply chain; •our incurrence of start-up costs, including lower margin phases of projects required to support initial deployments, to gain new customers, or to enter new markets; •our level of success in accessing new markets and obtaining new customers; •long- and short-term changing behaviors or customer needs that impact demand for our products and services, or the products and services of our customers; •technology-based price compression and our introduction of new platforms with improved price for performance; •changing market, economic, competition we face and political conditions, including the impact of tariffs and other trade restrictions or efforts to withdraw from or materially modify international trade agreements; •factors beyond our control such as natural disasters, climate change, acts of war unfavorable transactions or terrorism, commercial terms; •customer, product and public health emergencies, such as epidemics geographic mix; •supply chain performance and pandemics like the COVID-19 pandemic; costs; •the financial stability of our customers customers; and suppliers; •consolidation activity among involving us, our customers, suppliers, and competitors; •installation service availability and readiness of customer sites; •adverse impact of foreign exchange; and •any potential seasonal effects in our business. competitors. As a result of these factors and other conditions affecting our business and operating results, we believe that quarterly comparisons of result, our operating historical financial results are may not necessarily a good indication be indicative of future performance. Quarterly fluctuations from the above and other factors may cause in our revenue, gross margin, and results of operations could cause us to underperform in relation fail to meet our guidance, long-term financial targets guidance or the expectations of financial analysts or investors, which may cause volatility or decreases in our stock price.

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Prior heading: A small number of customers account for a significant portion of our revenue. The loss of one or more of these customers, or a significant reduction in their spending, could have a material adverse effect on our business and results of operations.

A significant portion of our revenue is concentrated among a small number of communications service provider and cloud provider customers. For example, in fiscal 2025, our ten five largest customers contributed 57.9% of our revenue for fiscal 2024 and 53.7% approximately 50% of our revenue for fiscal 2023. A revenue, a cloud provider customer accounted for approximately 13.3% of our total revenue for fiscal 2024 and 12.8% of our total revenue for fiscal 2023, and AT&T accounted for approximately 11.8% 18% of our total revenue for fiscal 2024 revenue, and 10.6% of our total revenue for fiscal 2023. As a result of efforts in recent years to diversify our business, the customer segments and geographies that comprise our customer base and top customers by revenue have changed. During fiscal 2024, four cloud providers were among our top ten customers. Cloud service provider customers have been important contributors to our revenue through both our direct sales to them, including accounted for data center interconnection, and their indirect impact on purchases by other network operators. Because of our concentration of revenue with communications service providers and cloud providers, our business and results of operations can be significantly affected by market, industry, regulatory, consolidation or competitive dynamics adversely affecting these customer segments. These dynamics have in the past had an adverse effect on network spending levels by certain approximately 11% of our largest customers and they could materially adversely affect our business and results of operations. revenue. Consequently, our financial results and our ability to grow our business are closely correlated with the spending of a relatively small number of customers. Our business and results of operations could be materially adversely impacted by the loss of or a significant reduction in spending of a large customer customer. Moreover, our revenue is concentrated within the cloud provider and service provider customer segments. Adverse economic, business or outside of regulatory dynamics within these customer industries or market segments as well as by reductions in affecting spending or capital expenditure budgets, changes in network deployment plans, or changes in consumption models for acquiring networking solutions by levels could materially adversely impact our largest customers.results of operations.

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Prior heading: As we introduce technologies that enable us to enter into new markets, we may experience difficulty monetizing these new solutions and be exposed to increased or new forms of competition.

Our growth depends on the successful execution of our business strategy and our ability to grow our addressable market, or to expand into new markets, technologies, or customer segments. A key part of our this strategy is to leverage our optical technology leadership and expand our addressable market into complementary and adjacent network applications markets by investing in new technologies, including solutions related to for applications inside and around the data center, PON, routing and switching, and automation software specifically for AI-driven use cases. Many of these markets are nascent or dynamic, and services. As we do so, we expect it is difficult to compete more directly with a broader range predict trends of suppliers, these markets, including IP router vendors, component vendors, software vendors, and integrators of networking technology.We any potential growth. Moreover, we have a more limited history in commercializing and selling these solutions and the market and competitive landscape for them is dynamic, and it is difficult to predict important trends, including the potential growth, if any, of certain of into these markets. This expansion strategy may require a significant investment of capital and human resources, may disrupt our operations, and could impose substantial demands on management time. If the markets relating to these solutions do not develop as we anticipate, or if we are unable to commercialize, increase market awareness of, or gain adoption of our solutions within those markets, revenue from these products may not grow, a key part of our strategy for business, financial performance, and long-term growth would prospects could be adversely affected and our financial results may suffer.affected.

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Prior heading: We face intense competition that could impact our sales and results of operations. We expect our competitive landscape to continue to broaden as we seek to expand our addressable market and solutions portfolio.

We face intense global competition on operate in a global basis, as highly competitive environment, where we and our competitors aggressively seek to capture market share and displace incumbent equipment vendors. Our industry has historically been dominated by a small number of very large vendors, some Many of which these competitors have substantially greater financial, marketing and research and development resources, broader product offerings and more established relationships with service providers and other customer segments relationships than we do. Moreover, acquisition activity among our competitors and peers has increased. For example, in 2024 Nokia announced its proposed acquisition have. Because of Infinera. Consolidation in our industry may result in competitors with greater their scale and resources, pricing flexibility, they may be perceived to be a better fit for the procurement or other competitive benefits. network strategies of larger network operators. We also compete with a number of face competition from certain smaller companies that provide significant competition for specific products, applications, customer segments segments, or geographic markets. Due to the narrower focus of their efforts, these competitors markets that may be more attractive to customers in a particular product niche or commercial opportunity. Generally, competition in our markets industry is based on any one or a combination of the following factors: •functionality, speed, capacity, scalability and performance of network solutions; •the ability to meet business needs and drive successful outcomes, including meeting customer delivery time requirements; various factors, including: •price for performance, cost per bit and total cost of ownership of network solutions; ownership; •product features and functionality; •incumbency and strength of existing business relationships; •technology roadmap and forward innovation capacity, including the ability to invest significant sums in research and development; •time-to-market in delivering products and features; •company roadmap; •financial stability and financial health; •ability to offer comprehensive networking solutions, consisting of hardware, software and services; •flexibility and openness of platforms, including ease of integration, interoperability and integrated management; investment capacity; •ability to offer solutions that accommodate a range of different address preferred customer consumption models; •operating costs and total cost of ownership; •software and network automation capabilities; •ability to manage challenging supply chain environments, including manufacturing •delivery lead-times; and lead-time capability; •services and support capabilities; •security of enterprise, product development, support processes, and products; •space requirements and power consumption of network solutions; and •ability to offer solutions that help customers manage the lifecycle impacts of their networks and achieve their sustainability goals. We expect the competition in our industry to continue to broaden and to intensify, particularly capabilities. Additionally, as we seek to address evolving customer consumption models or expand our addressable into adjacent market opportunities, and as network operators pursue segments, we expect to compete with a diverse broader range of network strategies, sourcing practices and consumption models. An increase suppliers, including existing business partners in our supply chain. Increases in the breadth or intensity of competition we face may adversely impact our business and results of operations.

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Prior heading: Strategic acquisitions and investments could disrupt our operations and may expose us to increased costs and unexpected liabilities.

From time to time, we acquire or make We may pursue strategic transactions, including mergers, acquisitions, investments in other technology companies, or enter into and other strategic relationships, partnerships, to expand the markets we address, diversify our customer base or acquire, or accelerate the development of, technology or products. To do so, we may use cash, issue equity that could dilute advance our current stockholders, or incur debt or assume indebtedness. Strategic business strategy. These transactions can inherently involve numerous additional risks, significant risks and uncertainties, including: •failure to consummate or delay in consummating such transactions; •failure to achieve the anticipated transaction intended benefits or the projected financial results and anticipated return on investment, including operational synergies; •greater than expected acquisition and integration costs; •disruption due to the integration and rationalization •significant use of operations, products, technologies and personnel; •diversion cash, assumption of management attention; •difficulty completing projects debt, or dilution of the acquired company and costs related stockholders; •exposure to in-process projects; •difficulty managing customer transitions unexpected costs or entering into new markets; •the liabilities; •challenges integrating technology, operations and personnel, and loss of key employees; •disruption or termination of business relationships with customers, suppliers, vendors, landlords, licensors and or other business partners; •ineffective internal controls over financial reporting; •dependence on unfamiliar suppliers or manufacturers; •assumption •diversion of or exposure to unanticipated liabilities, including intellectual property infringement management attention; •challenges obtaining required regulatory or other legal claims; third-party approvals; and •adverse tax tax, internal control or accounting impact. As a result of these financial reporting impacts. If we are unable to successfully execute acquisitions and other risks, our acquisitions, investments or strategic transactions may not realize the intended benefits and may ultimately have a negative impact on our business, results of operation operations, and financial condition.condition could be negatively impacted.

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Prior heading: Our failure to invest in the right technologies or to get an adequate return on such research and development investment could adversely affect our revenue and profitability.

The market for communications networking hardware success of our business depends on our ability to develop and software solutions is characterized by rapidly evolving technologies, changes in market demand deliver products that align with customer needs and increasing adoption of software-based networking solutions. demands, technological advancements, and market trends. We continually invest in research and development to sustain or enhance our solutions and to develop or acquire new technologies. There is often a lengthy period between commencing these development initiatives and bringing these solutions to market. Accordingly, there is no guarantee that our new products or product enhancements will achieve market acceptance or that the timing of market adoption will be as predicted. As a general matter, there is a significant possibility that acceptance, and some of our development decisions, including significant expenditures on acquisitions, research and development, or investments in technologies, will not meet our expectations, and that our investment in some projects decisions will be unprofitable. There is also a possibility that we may miss a market opportunity because we failed to invest or invested too late in a technology, product or enhancement sought by our customers or the markets into which we sell. Changes in market demand or investment priorities may also cause us to discontinue development for new products or features, which can have a disruptive effect on our relationships with customers. In addition, failure late. Failure to develop timely new, innovative solutions that are attractive to customers and profitable to us could have a material adverse effect on our business, competitive position and results of operations, financial condition and cash flows.operations.

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Prior heading: We may experience delays in the development and production of our products that may negatively affect our competitive position and business.

Our hardware and software networking solutions, including our WaveLogic modem technology and the components thereof, solutions are based on complex technology, hardware and software, and we can experience unanticipated challenges or delays in developing, manufacturing and introducing these solutions to market. Delays in product development efforts by us or our third-party partners may affect our reputation with customers, affect our ability to capture market opportunities and impact the timing and level of demand for our products. solutions. We are regularly introducing introduce new products and enhancements enhancements, and each step in their development cycle step presents serious risks of failure, rework or delay, any one of which could adversely affect the cost-effectiveness and timely development of our products. Reworks, in particular, if required, delay that can be a very expensive and time-consuming effort. time-consuming. We may encounter delays difficulties relating to engineering development activities and software, design, sourcing development, sourcing, and manufacture of critical components, and the development of prototypes. The development of new technologies may increase the complexity of supply chain management or require the acquisition, licensing or interworking with the technology of third parties. In addition, intellectual property disputes, failure of critical design elements and other execution risks may prototypes that delay or even prevent the release of these products. If we do not successfully develop or produce products Delays in a timely manner, our competitive position product development may suffer, affect our reputation with customers, affect our ability to capture market opportunities and ultimately impact our business, financial condition competitive position and results of operations could be harmed.operations.

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

The development and production of sophisticated hardware and software for communications network equipment is highly complex. Some of our products can be fully tested only when deployed in communications networks or when carrying traffic, and software products We may contain bugs that can interfere with expected performance. As a result, undetected experience defects or problems affecting quality, interoperability, reliability, security and performance are often more acute for initial deployments of new our products or enhancements. We have recently launched, or are in the process of launching, a number of new hardware third-party technologies and software offerings, including new evolutions of we incorporate in our WaveLogic coherent optical modem technology and new Routing and Switching platforms. Unanticipated product performance products. Such problems can could relate to the design, manufacturing, installation, operation and interoperability of our products. Undetected errors can also arise as a result of defects in third-party technologies, components or software, including open source software, or manufacturing, installation or maintenance services supplied by third parties. The introduction of new and complex technologies, such as AI, can also increase security risks and the risk of defects. From time to time, we We have had to replace certain components, provide software remedies updates or other remediation actions in response to defects or bugs, and we may have to do so again in the future. Such remediation costs could materially adversely impact our business and results of operations. In addition, we have encountered and may continue to further encounter unanticipated security vulnerabilities relating to our technology, including as a result of the activities of our supply chain and our use of third-party software. inputs. Communications technologies, given their capability to transmit sensitive information, have frequently been the target of attacks from a range of threat actors actors, including nation states and other malicious parties. Any actual or perceived exposure of our solutions to vulnerabilities, malicious software or cyber-attacks, as well as any product performance, reliability, security parties, and quality problems, may result in some or all of we expect these threats to increase with the following effects: growing prevalence of AI. These product-related risks could result in: •damage to our reputation, reduced demand, declining sales and or order cancellations; •increased costs to remediate defects or replace products; •payment of liquidated damages, contractual or similar penalties, or other claims for performance failures or delays; claims; •write-offs of inventory or property; •increased warranty expense or estimates resulting from higher failure rates, additional field service obligations or other rework costs related to defects; inventory; •regulatory enforcement penalties or settlements; •higher charges for increased inventory obsolescence; •disruption to the operation of our network operator customers; •reporting and other publication to customers or regulatory bodies; •costs, liabilities and claims that may not be covered by insurance coverage or recoverable from third parties; bodies; and •delays in introducing new products and services, products, recognizing revenue, or collecting accounts receivable. These and other consequences could negatively affect our business and results of operations.

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

We generally rely on a combination of patents, copyrights, trademarks and trade secret laws to establish and maintain proprietary rights in our products and technology. Although we own numerous patents, and other patent applications are currently pending, there There can be no assurance that any of these patents or other our proprietary rights will not be challenged, invalidated or circumvented, or that circumvented. Our intellectual property strategy must continually evolve to protect our rights will provide us with any competitive advantage. In addition, there proprietary rights. There can be no assurance that patents will be issued for our pending patent applications will succeed or that claims allowed on any our patents will be sufficiently broad to protect our technology. Further, technology, and the laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of in the United States. We are subject to the risk that third parties may attempt to access, divert or use our intellectual property without authorization. We are also vulnerable to third parties who illegally distribute or sell counterfeit, stolen, or unfit versions of our products, which could have a negative impact on our reputation and business. Protecting against the unauthorized use of our products, technology and other proprietary rights is difficult, time-consuming and expensive, and we cannot be certain that the steps that we are taking will detect, prevent or minimize the risks of such unauthorized use. In addition, our intellectual property strategy must continually evolve to protect our proprietary rights in new solutions, including our software solutions. Litigation may be necessary to enforce or defend our intellectual property rights or to determine the validity or scope of the proprietary rights of others. property. Such litigation could result in substantial cost and diversion of management time and resources, and there can be no assurance that we will obtain a successful result. Any inability to protect and enforce our intellectual property rights could harm our ability to compete effectively.

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Prior heading: We may incur significant costs in response to claims by others that we infringe upon their intellectual property rights.

From time to time third Third parties may assert claims or initiate litigation or other proceedings related to patent, copyright, trademark and other intellectual property rights to in technologies and related standards that are relevant to our business. We have been subject to several claims related to patent infringement, and we have been requested to indemnify customers pursuant to contractual indemnity obligations relating to infringement claims made by third parties. The rate of infringement assertions by patent assertion entities remains high, particularly in the United States. Generally, these patent owners neither manufacture nor use the patented invention directly, and they seek to derive value from their ownership solely through royalties from patent licensing programs. We could also be adversely affected by litigation, other proceedings intellectual property litigation or claims against us, as well as claims against our manufacturers, suppliers or customers, alleging infringement and the rate of third-party proprietary rights such claims by our products and technology, or components thereof. patent assertion entities remains high, particularly in the United States. Regardless of the merit of these claims, they can be time-consuming, divert the time and attention of our technical and management personnel, and result in costly litigation or otherwise require cause us to incur substantial costs, including legal fees. costs. These claims, if successful, could require us to: •pay substantial damages or royalties; •comply with an injunction or other court order that could prevent us from •stop offering certain of our products; •seek a license for the use of certain another’s intellectual property, which may not be available on commercially reasonable terms or at all; property; •develop non-infringing technology or modify certain products, services, or features, which could require significant effort and expense and ultimately may not be successful; products; and •indemnify our customers or other third parties pursuant to contractual obligations to hold them harmless or pay expenses or damages on parties. Third party claims and their behalf. Any of these events related consequences could adversely affect our business, results of operations and financial condition. Our exposure to risks associated with the use of intellectual property may increase as a result of acquisitions, as we would have a lower level of visibility into the development process with respect to the acquired technology and the steps taken to safeguard against the risks of infringing the rights of third parties.condition.

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Prior heading: We rely on third-party contract manufacturers, and our business and results of operations may be adversely affected by risks associated with their businesses, financial condition, and the geographies in which they operate.

We rely on third-party contract manufacturers, including those with facilities in Canada, Mexico, Thailand, Vietnam and the United States, to perform a substantial portion many of our critical supply chain activities, including component sourcing, manufacturing, product testing and quality, and fulfillment and logistics relating to the distribution and support of our products. activities. There are a number of risks associated with our dependence on contract these manufacturers, including: •reduced •constraints in their manufacturing capacity and other operational challenges; •logistics disruption and reduced control over delivery schedules and planning; •reliance on the their quality assurance procedures of third parties; •potential uncertainty and limited warranties provided to us; •uncertainty regarding manufacturing yields and costs; •availability of manufacturing capability and capacity, particularly during periods of high demand; •the impact of wage inflation and labor shortages on cost; •the impact of supply chain constraints on our contract manufacturers’ costs and business models; •risks associated with the ability of our contract manufacturers to perform to our manufacturing needs; •the impact of commercial or contractual disputes on our relationships with or the performance of our manufacturing partners; •risks and uncertainties associated with the locations or countries where our products are manufactured, including disruption of manufacturing, logistics, or transit to final destinations caused by factors such as natural and man-made disasters, severe weather events, information technology system failures, commercial disputes, economic, business, labor, political, social, geopolitical, environmental, trade, or public health; •risks associated with data security incidents, including disruptions, interdiction, or cyber-attacks targeting or affecting our third-party manufacturers, including manufacturing disruptions or unauthorized access •exposure to or acquisition of information; •changes in law their financial condition or policy governing tax, trade, manufacturing, development, and investment in the countries where we currently manufacture our products, including the World Trade Organization Information Technology Agreement labor practices; •natural disasters or other free trade agreements; •inventory liability for excess and obsolete supply; •limited warranties provided to us; and •potential misappropriation of our intellectual property. In addition, a range of physical and transitional risks related to climate change in the regions in which our contract manufacturers operate could have short-term or long-term adverse impacts on our business. Physical impacts could include severe weather events occurring more frequently or with more intensity, or changing weather patterns. This could they operate; •the impact the cost and availability of raw materials and other product inputs, disrupt our supply chain operations, manufacturing and distribution of our products, result in facilities closures, repairs commercial or retrofitting, that could have an adverse impact on our business, operating results, contractual disputes; and financial condition. If our contract manufacturers are unable or unwilling to manufacture our products or components •lack of our products to our expected level primary control of performance, or if we experience a disruption in manufacturing, we cyber and data security. We have previously and may be required in the future experience significant challenges that require us to identify and qualify seek alternative manufacturers. partners and transition manufacturing operations. The process of qualifying a new contract manufacturer and commencing volume production is complex and time-consuming, and such transitions can be disruptive and costly. There can be no assurance that such transitions would not result in significant business disruption, including shipment delays or Our inability to meet our customer requirements that impact our revenue. These and other effectively manage the risks associated with our third-party contract manufacturers’ businesses, financial condition, and the geographies in which they operate manufacturers could impair our ability to fulfill orders, harm our sales and impact our reputation with customers in ways that materially adversely impact our business and results of operations.

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Prior heading: Our reliance on third-party component suppliers, including sole and limited source suppliers, exposes our business to additional risk, including risk relating to our suppliers’ businesses and financial position and risks arising as a result of geopolitical events, and could limit our sales, increase our costs and harm our customer relationships.

We maintain a global sourcing strategy and depend rely on a diverse set global network of third-party suppliers in international markets that comprise our supply chain. We rely on these third parties for activities relating to product design, development and support, and in the sourcing of products, components, subcomponents and related raw materials. materials, and embedded software. Our products include optical and electronic components for which reliable, high-volume supply is often available only from sole or limited sources. We do not have any guarantees of supply from our third-party suppliers, and in certain cases we have limited contractual arrangements or are relying on standard purchase orders. In recent periods, delays and lower-than-expected deliveries from a small group of our suppliers of integrated circuit components that are essential for delivering finished products had a disproportionate, adverse impact Our reliance on our results of operations. There is no assurance that we will be able these suppliers exposes us to secure the components or subsystems that we require, in sufficient quantity and quality, within our preferred timelines and on reasonable terms. The loss of a source of supply, or lack of sufficient availability of key components, could require that we locate an alternate source or redesign our products, either risks of which could result in business interruption supply shortages, delays and increased costs. Increases in market demand or and scarcity of raw materials or and components have resulted, and may in the future result, in shortages in availability of important components for our solutions, supply allocation challenges, components, deployment delays and delays, increased cost, lead times and extended delivery cycle timelines. There are a number of significant technology trends or developments underway or emerging – including AI, For example, the IoT, autonomous vehicles, electro-optical component and advances in mobile communications such as 5G technologies – that semiconductor industries have previously resulted in, and we believe will continue to result in, been experiencing increased market demand for key raw materials or components upon which we rely. A number of our key technology vendors rely upon sales to customers, including our competitors, in China for a material portion of their revenue. There have been as a number of significant geopolitical events, including trade tensions and regulatory actions, involving the governments of the United States and China. In May 2019, the U.S. Department of Commerce amended the EAR by adding Huawei and certain affiliates to the “Entity List” for actions contrary to the national security and foreign policy interests result of the United States, imposing significant new restrictions on export, reexport and transfer of U.S. regulated technologies and products to Huawei. In August 2020, the U.S. Department of Commerce added additional Huawei affiliates to the Entity List, confirmed the expiration of a temporary general license applicable spending related to Huawei AI and amended the foreign direct product rule in a manner that represents a significant expansion of its application to Huawei. More recently, the U.S. Department of Commerce has expanded the scope of the EAR by amending the foreign direct product rule, resulting in more products made outside the United States becoming subject to the EAR for purposes of exports or transfers to certain countries and/or parties, other cloud-based applications, which increases compliance risks and licensing obligations for companies dealing with such products. Several of our third-party component suppliers, including certain sole and limited source suppliers, sell products has led to Huawei and, in some cases, Huawei is a significant customer for such suppliers. At this time, there can be no assurance regarding the scope or duration of these restrictions, including the foreign direct product rule, or further actions imposed on Huawei and other companies located constrained supply environment. These constraints have resulted, and operating could further result in China, and any future impact on our suppliers. Any continued restriction on our suppliers’ ability to make sales to Huawei and other companies may shortages, extended lead times, or increased costs that adversely impact their businesses our revenue and financial position. In addition, China is in the midst of executing a five-year plan to improve China’s capabilities in the optoelectronics industry. There can be no assurance that this initiative, or similar efforts in China such as the Made in China 2025 initiatives (and actions taken by the U.S. government in response gross margin. Our inability to such efforts), will not have an adverse impact on secure the business required volumes of our suppliers components or our access to necessary components. These and similar industry, market and regulatory disruptions affecting our suppliers could, in turn, expose our business to loss or lack of supply or discontinuation of components that licenses could result in lost revenue, additional product costs, increased lead times and deployment delays that could harm our business and customer relationships. Our business and results of operations would be negatively affected if we were to experience any significant disruption or difficulties with key suppliers affecting the price, quality, availability or timely delivery of required components.and customer relationships.

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Prior heading: Growth of our business is dependent on the proper functioning and scalability of our internal business processes and information systems. Adoption of new systems, modifications or interruptions of services may disrupt our business, processes and internal controls.

We rely on internal business processes and information systems to support key business functions, and the their efficient operation of these processes and systems is critical to managing our business. Our Additionally, our business processes and information systems must be sufficiently scalable to support the growth of our business and may require modifications or upgrades that expose us to operational risks. business. We regularly pursue initiatives to scale, transform and optimize our business operations and IT systems through the reengineering of certain processes, processes and investment in automation, and engagement of strategic partners or resources to assist with certain business functions. For example, to enhance operational efficiency and modernize our supply chain operations, we are pursuing a number of digital technology transformation efforts, including advanced analytics, automation, and other digital solutions. In addition, our business may begin to operate in new markets and through new supply chain models that may require different internal processes to manage. These changes require a significant investment the use of capital and human resources and AI. These initiatives may be costly and costly, disruptive to our operations, and they could impose substantial demands on management time. These changes may also require changes in our information systems, modification of operational risks, including the need for system upgrades, new internal control procedures controls, and significant training of employees or third-party resources. Our change management initiatives. In addition, our IT systems, and those of third-party IT providers or business partners, providers, may also be vulnerable to damage or disruption caused by circumstances beyond our control, including from catastrophic events, power anomalies or outages, natural disasters, severe weather events, or impacts of climate change, anomalies, data security related incidents, and computer system or network failures. There can be no assurance that Our inability to effectively manage risks associated with our business systems or those of our third-party business partners will not be subject to similar incidents, exposing us to could result in significant cost, reputational harm and operational disruption or and cost, which could damage our business and harm our ability to profitably grow our business.

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Prior heading: We rely on third-party resellers, distributors and service partners, and our failure to manage these relationships effectively could adversely affect our business, results of operations, and relationships with our customers.

To complement our global field resources, we We rely on a number of domestic and international third-party resellers, distributors distributors, and sales agents, both domestic and international, and we believe that these relationships are an important part of agents to extend our business. There can be no assurance that we will successfully identify and qualify these resources or that we will realize the expected benefits of these sales relationships. We also rely on a number of third-party service partners, both domestic reach, and international, to complement our global service and support resources. We rely on these partners for to perform certain installation, maintenance and support functions and may increasingly use them for an expanding range of design, construction, integration and operation of networks, to address customer requirements. functions. Certain service partners may also provide similar services for other companies, including our competitors. We may not be able to manage our relationships with our service partners these third parties effectively, and we cannot be certain that they will be able to perform their necessary services activities in the manner or time required, that we will be able to maintain the continuity of their services, or that they will adhere to ethical business practices. required. We may also be exposed to a number of risks or challenges relating to the performance of our service partners, including: •delays in recognizing revenue; •liability for injuries to persons, damage to property or other claims relating to the actions or omissions of our service partners; •our services revenue and gross margin may be adversely affected; and •our relationships with customers could suffer. We must assess and qualify distribution partners, third-party resellers, distributors, sales agents and service partners partners, including delays in order to ensure their understanding of, and willingness and ability to adhere to, our standards of conduct and business ethics. Certain third-party business partners may not have the same operational history, financial resources and scale that we have. We may be held responsible recognizing revenue or liable increased costs, liability for the their actions or omissions of these third parties or omissions, risks related to their violations of law. financial condition, risks related to anti-bribery risk and compliance matters. If we do not effectively manage our relationships with these third-party business partners, our business, financial results and relationships with customers could be adversely affected.

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Prior heading: If we are unable to attract and retain qualified personnel, we may be unable to manage our business effectively.

Our future success and ability to maintain a technology leadership position depend depends upon our ability to recruit and retain qualified people, particularly in talent segments critical to the services execution of executive, engineering, sales and marketing, and support personnel. our business strategy. Competition to attract and retain highly skilled technical, engineering and other personnel with experience in our industry is intense, and our employees have been the subject of targeted hiring by our competitors. Competition is particularly intense in certain jurisdictions geographies where we have research and development centers, including the Silicon Valley area of northern California, and for engineering talent generally. The lasting impact of the COVID-19 pandemic has resulted in higher employee costs, increased attrition, centers and significant shifts in the labor market and employee expectations. certain technology areas where we are looking to expand our business. We may experience difficulty retaining and motivating existing employees and attracting qualified personnel to fill key positions. In addition, labor shortages and employee mobility may make it more difficult to hire and retain employees. None of our executive officers is bound by an employment agreement for any specific term. Because we rely on equity awards as a significant component of compensation, particularly for our executive team, a lack of positive performance in our stock price, reduced grant levels, or changes to our compensation program may adversely affect our ability to attract and retain key employees. If we are unable to attract and retain qualified personnel, we may be unable to manage our business effectively, effectively and execute our strategy, and our operations and financial results could suffer. In addition, a number of our team members are foreign nationals who rely on visas or work-entry permits in order to legally work in the United States and other countries. Changes in government policy and global events, such as pandemics, may interfere with our ability to hire or retain personnel who require these visas or entry permits. Our business may be materially adversely affected if legislative or administrative changes to immigration or visa laws and regulations impair our hiring processes or projects involving personnel who are not citizens of the country where the work is to be performed. For example, potential changes in U.S. immigration policy and regulations, including potential changes following the recent U.S. federal elections, such as the implementation of restrictive interpretations by the U.S. Citizenship and Immigration Services of regulatory requirements for H-1B, L-1 and other U.S. work visa categories, may also adversely affect our ability to hire or retain key talent, which could have an impact on our business operations.suffer.

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Prior heading: Restructuring activities could disrupt our business and affect our results of operations.

We have taken steps, including reductions in force, office closures, taken, and internal reorganizations may in the future engage in, steps to reduce the cost of our operations, improve efficiencies, or realign our organization and staffing to better match our market opportunities and our technology development initiatives. We may take similar steps in the future as we seek to realize operating synergies, to achieve our target operating model and profitability objectives, or to reflect more closely changes in the strategic direction of our business or the evolution of our site strategy strategy, including reductions in force, office closures, and workplace. internal reorganizations. These changes could be disruptive to our business, including our research and development efforts, business and could result in significant expense, including accounting charges for employee-related costs, inventory and technology-related write-offs, workforce reduction costs and charges relating to consolidation of excess facilities. other charges. Substantial expense or charges resulting from restructuring activities could adversely affect our results of operations and use of cash in those periods in which we undertake such actions.

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Prior heading: Our business and operating results could be adversely affected by unfavorable changes in macroeconomic and market conditions and any reduction in the level of customer spending in response.

Our business and operating results depend significantly on general market and economic conditions. Market volatility and weakness in the regions in which we operate have previously resulted in sustained periods of decreased demand that have adversely affected our operating results. The current global macroeconomic environment is volatile and continues to can be significantly and adversely impacted by exchange rates, interest rates, inflation, public health emergencies, natural disasters and geopolitical trends adversely impacting customer spending, global supply chains, and a dynamic environment for customer spending. Market conditions could also be adversely affected by a variety of political, economic or other factors in the United States and international markets that could in turn adversely affect spending levels component costs, any of our customers and their end users, and which could create also have an adverse impact on us. Market volatility or deteriorating conditions and weakness in the markets regions in which we operate. Due to our concentration of revenue in the United States, we would expect to incur a more significant impact from any adverse change in the capital spending environment or market weakness operate have previously resulted in the United States. sustained periods of decreased demand that have adversely affected our operating results. Macroeconomic uncertainty volatility, instability, or weakness could also result in: •reductions in customer spending and delay, deferral or cancellation of network infrastructure initiatives; •increased competition for fewer network projects and sales opportunities; •increased competitive or pricing pressure that may adversely affect revenue, gross margin and profitability; pressure; •decreased ability to forecast operating results and make decisions about budgeting, planning budgeting and future investments; •increased overhead and production costs as a percentage of revenue; •tightening of credit markets needed to fund capital expenditures by us or our customers; •customer financial difficulty, including order cancellations, delivery deferrals, longer collection cycles and difficulties collecting accounts receivable or write-offs of receivables; receivable; and •business and financial difficulties faced by our suppliers or other partners, including impacts to material costs, sales, liquidity levels, ability to continue investing by, and changes in spending levels of, our customers, their businesses, ability to import end users, our suppliers, or export goods, ability other partners. Due to meet development commitments and manufacturing capability; and •increased risk our concentration of charges relating revenue in the United States, we would expect to excess and obsolete inventories and incur a more significant impact from any change impacting the write-off of other intangible assets. Reductions in customer capital spending environment or causing market weakness in response to the United States. Consequences of an unfavorable or uncertain macroeconomic and market conditions, environment, globally or in a particular region where we operate, would region, could adversely affect customer spending and our business, results of operations and financial condition.

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Prior heading: The international scale of our sales and operations exposes us to additional risk and expense that could adversely affect our results of operations.

We market, sell and service our products globally, maintain personnel in numerous countries, and rely on a global supply chain for sourcing important components and manufacturing our products. Our international sales and operations are subject to inherent risks, including: •adverse social, political and economic conditions, such as continued inflation and rising interest rates; •effects of adverse changes in currency exchange rates; •greater difficulty in collecting accounts receivable and longer collection periods; •difficulty and cost of staffing and managing foreign operations; •higher incidence and risk of corruption or unethical business practices; •less protection for intellectual property rights in some countries; •tax and customs changes that adversely impact our global sourcing strategy, manufacturing practices, transfer-pricing, or competitiveness of our products for global sales; •compliance with certain testing, homologation or customization of products to conform to local standards; •significant changes to free trade agreements, trade protection measures, tariffs and other import measures, such as those proposed by the incoming U.S. administration, export compliance, economic sanctions measures, domestic preference procurement requirements, qualification to transact business and additional regulatory requirements; •natural disasters and severe weather events (including related to climate change), acts of war or terrorism, and public health emergencies or pandemics; and •uncertain economic, legal and geopolitical conditions in Europe, Asia and other regions where we do business, including, for example, as a result of continued impacts of Brexit on the relationship between the United Kingdom and Europe, the ongoing military conflicts between both Russia and Ukraine and Israel and groups based in surrounding regions, including related maritime impacts in the Red Sea, and changes in China-Taiwan and U.S.-China relations. We utilize a sourcing strategy that emphasizes global procurement of materials, and that has direct or indirect dependencies upon a number of vendors with operations in the Asia-Pacific region. Our international operations are subject to complex foreign and U.S. laws and regulations, including trade regulations, anti-bribery and corruption laws, antitrust or competition laws, and data privacy laws, such as the GDPR, among others. In particular, recent years have seen a substantial increase in anti-bribery law enforcement activity by U.S. regulators, and we currently operate and seek to operate in many parts of the world that are recognized or perceived as having greater potential for corruption. Violations of any of these laws and regulations could result in fines and penalties, criminal sanctions against supply chain expose us or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in certain geographies, and significant harm to our business reputation. Our policies and procedures to promote compliance risks associated with these laws and regulations and, to mitigate these risks, may not protect us from all acts committed by our employees or third-party vendors, geopolitical developments, including contractors, agents and services partners or from the misinterpretation or changing application of such laws. Additionally, the costs of complying with these laws (including the costs of investigations, auditing and monitoring) could adversely affect our current instability or future business. Our business, operations and financial results could also be adversely impacted by instability, disruption or destruction in a significant geographic particular region, including as a result of war, terrorism, riot, civil insurrection or social unrest; natural or man-made disasters; severe weather events; public health emergencies; or economic instability or weakness. For example, in February 2022, armed conflict escalated between Russia and Ukraine. The United States and certain other countries have imposed sanctions on Russia (and Belarus for its support of Russia) insurrection, and could impose further sanctions, which could damage social or disrupt international commerce and the global economy. political unrest. We are complying with also exposed to a broad wide range of U.S. and international sanctions and export control requirements imposed on Russia and, in March 2022, we announced our decision to suspend our business operations in Russia. Although this decision did not materially impact our results of operations for fiscal 2022 shifting economic, regulatory or 2023 due to national security priorities in the limited amount of business that countries we conducted in Russia historically, it is not possible to predict operate. Increasing tensions between the broader or longer-term consequences of this conflict, which could include further sanctions, export control United States and import China—including tariffs, export controls, investment restrictions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, evolving data security conditions, currency exchange rates and financial markets. In addition, the conflict between Israel and groups based in surrounding regions, and related regional impacts have resulted in damage to submarine cables in the Red Sea and disruption of networks using those cables, which could impact future projects by or technology transfer requirements—could disrupt our customers in this region. Such supply chain. Any escalation of these tensions, or similar geopolitical instability and uncertainty could have a negative impact on our ability to sell to, ship products to, collect payments from, and support customers volatility in certain countries and regions based on trade restrictions, sanctions, embargoes and export control law restrictions, and logistics restrictions including closures of air space, and other regions, could increase the result in reduced demand, increased costs, risks and adverse impacts from supply chain and logistics challenges. The success of shortages, product delays or other adverse consequences to our International sales business and operations will depend, in large part, operations. Our success depends on our ability to anticipate and manage these risks effectively. Our failure Failure to manage any of mitigate these risks could harm our international operations, reduce our international sales, and could or give rise to liabilities, incremental costs or other business difficulties that could adversely affect our operations and financial results.results of operations.

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Prior heading: Data security breaches and cyber-attacks targeting our enterprise technology environment and assets could compromise our intellectual property, technology or other sensitive information and could cause significant damage to our business, reputation and operational capacity.

In the ordinary course of our business, our Our network environment and assets, and the networks and assets those of our third-party business partners, including our supply chain and other vendors, maintain certain information that is confidential, regulated, proprietary or otherwise sensitive in nature to our business. This information may include intellectual property and product information, personal data, financial information and other confidential business information relating to us and our employees, customers, suppliers and other business partners. The frequency, sophistication frequency and unpredictability sophistication of cybersecurity events globally have increased, and can be more acute during times continues to increase, including through the use of geopolitical tension or instability between countries. In addition, AI, with companies in our industry particularly targeted given the technology industry, and in particular, manufacturers nature of networking and the products that we sell. Companies in the technology, communications products, and networking industries have been increasingly subjected to a wide variety of data security incidents, including cyber-attacks, attacks against products, and other attempts to gain unauthorized access to network assets, infrastructure or sensitive information. Our network systems, devices, storage and other business applications, and those that we rely on, information. We and that are maintained by our third-party providers, business partners have been in the past, been, and may be in the future, subjected to security cybersecurity incidents including attack, ransomware attacks, exploitation, intrusion, disruption and other malfeasance or attempts to gain unauthorized access or conduct other unauthorized activities. Further, our network systems, devices, storage and other business applications may be targeted for data security incidents as a vicarious method to target our customers. Such data security incidents may be caused by malice or negligence from either third-party or internal actors. access. These threats arise from actions by nation states, independent hackers, hacktivist groups, organized cybercrime entities, and other third parties, as well as from malicious actors from within or supporting our organization. Further, evolving technologies, including AI, pose new threats. In some cases, it is difficult to anticipate, detect or identify indicators of such incidents and assess the damage caused thereby. If an actual or perceived data security incident affects our network or any of our third-party providers’ networks, we could cause us to incur significant costs, risk to our technology and operations could be impacted, technology, disruption of our operations, harm to customers and other stakeholders and/or their network environments could be impacted, our reputation could be harmed, stakeholders, and we may become involved in litigation, including with respect to allegations of breach of contract. reputational damage. We may also be subject to increased regulatory oversight, including scrutiny, governmental investigations, investigations or enforcement actions, and regulatory fines. We could also experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely produce, distribute, invoice, and collect payments for our products and services. Additionally, a data security incident may result in significant remediation expenses and increased cybersecurity protection and insurance costs. While we work to safeguard our enterprise network systems and products employ policies, training, controls, and to diligence the security of our third-party providers other safeguards to mitigate these potential risks, including through information security policies, employee awareness and training, and other technical, procedural and administrative controls, there is no assurance that such actions they will be sufficient to prevent future data security incidents or insider threats. We have been subjected in the past, experienced, and expect to be subjected in the future, to may further experience, a range of incidents incidents, including phishing, emails purporting to come from a company executive or vendor seeking payment requests, malware, and communications from look-alike corporate domains, as well as security-related risks created by from malicious internal actors internally insiders and our use of third-party software and services. We have also been subject to faced unauthorized access and exfiltration of confidential data as a result of the through exploitation of vulnerabilities involving our use of in third-party applications. While these types of incidents to which we have been subjected have not resulted in material cost or had a material effect on our business, operations, technology, operations or our network security data to date, future data security incidents they could compromise material confidential or otherwise protected information, seize, destroy or corrupt data, impact our customers’ data or systems through attacks on our products in our customers’ environments, or otherwise disrupt our operations or impact our customers or other stakeholders. We and our network environment may also be subject in the future to ransomware attacks, nation-state cyber attacks or other types of cyber attacks. A failure to promptly disclose such material incidents as required by law may result in additional financial or regulatory consequences. We have incurred, and will continue to incur, expenses to comply with cybersecurity, privacy, and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use and retention practices, and product security regulations, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation. And while we may be entitled to damages if our third-party providers fail to satisfy their security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. future. While we have purchased maintain cybersecurity insurance, there are is no assurances assurance that the coverage would be adequate in relation to any incurred losses or not subject sufficient to cover any exclusions. Moreover, as cyber-attacks increase in frequency and magnitude, we may be unable to obtain losses. Despite our cybersecurity insurance in amounts and on terms measures, we view as adequate for operate in an evolving threat landscape with growing regulatory expectations that increases the risk that a security incident could materially adversely affect our operations.business operations, reputation, or financial results.

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Prior heading: Changes in trade policy, including the imposition of tariffs and other import measures, increased export control, sanctions and investment restrictions, and efforts to withdraw from or materially modify international trade agreements, as well as other regulatory efforts impacting the import and sale of foreign equipment, may adversely affect our business, operations and financial condition.

The United States and various foreign governments have established certain Significant changes to trade and tariff requirements under which we policy, international trade agreements, export controls, sanctions, or tariffs have implemented a global approach to the sourcing adversely impacted and manufacture of could materially adversely impact our products, as well as distribution business, operations, and fulfillment to customers around the world. From time to time, the U.S. government financial results. The tariff policy environment has indicated a willingness to revise, renegotiate, or terminate various existing multilateral trade agreements been and is expected to impose new taxes and restrictions on certain goods imported into the U.S. Because we rely on a global sourcing strategy and third-party contract manufacturers in markets outside of the U.S. continue to perform substantially all of the manufacturing be dynamic. Our revenue is concentrated, with approximately 72% of our products, such steps, if adopted, revenue in fiscal 2025 coming from the United States. Tariffs recently implemented that have impacted or could adversely materially impact our business include tariffs on U.S. imports: •from Canada and operations, increase Mexico, as products making up a significant portion of our costs, revenue are manufactured in or distributed from Mexico, and make our we generally introduce new products less competitive and conduct related early volume manufacturing in the U.S. Canada; •of steel, aluminum, and other markets. For example, copper, including derivative goods that include certain of our products; •from China, as our supply chain includes certain direct and indirect suppliers based in China who supply goods to us, our manufacturers, or our third-party suppliers. Recently, there have been a number of significant geopolitical events, including trade tensions and regulatory actions, involving the governments of the United States and China. The U.S. government has raised tariffs, China-based suppliers; and imposed new tariffs, on •from a wide range of imports of Chinese products, countries globally, including component elements of our solutions Thailand and certain finished goods products that Vietnam, where we sell. For example, U.S. tariff policy involving imports from China was subject to a lengthy, now-completed review by the U.S. government in 2023 and the first three quarters of 2024, and the incoming U.S. administration has announced an intent to impose an additional 10% tariff on all imports from China. The U.S. government has also introduced broad new restrictions on imports from China allegedly manufactured with forced labor, and the EU and the UK have recently adopted similar restrictions. China has retaliated by raising tariffs, and imposing new tariffs, rely on certain exports of U.S. goods to China, introducing blocking measures to restrict the ability of domestic companies to comply with U.S. trade restrictions, and recently prohibiting the export third-party manufacturing operations for a significant portion of our revenue. Additionally, we currently rely upon certain rare minerals from China to the United States, trade agreements and could take further steps to retaliate against U.S. industries product or companies. In May 2020, the U.S. introduced significant further restrictions limiting access to controlled U.S. technology to additional Chinese government and commercial entities, including certain of technology-based exemptions that reduce our competitors based in China. More recently, in October 2022, tariff exposure. However, the U.S. Department of Commerce imposed additional export control restrictions targeting the provision government is currently investigating imports of certain products, including semiconductors and related technology to China that could further disrupt supply chains that could adversely impact our business. In addition, the U.S. Federal Communications Commission (the “FCC”) in November 2022 prohibited communications equipment deemed to pose an unacceptable risk to national security from obtaining the equipment authorization that allows the derivative products relevant to be imported, marketed, or sold our business, which could result in the U.S. This prohibition currently includes telecommunications equipment produced by Huawei, its affiliates and subsidiaries, and four other Chinese companies, and material additional entities may tariffs. There can be subsequently added to this list. In addition, U.S. Department of Treasury’s Office of Foreign Assets Control has increasingly designated no guarantee as Specially Designated Nationals and Blocked Persons (“SDNs”) companies in China for their alleged activities involving Russia, Iran, North Korea or forced labor practices in the Xinjiang province to which of China, and such SDN designation includes not only an asset freeze but also broad prohibitions on any direct or indirect dealings with designated SDNs, or non-designated entities owned our products will be impacted by one new or more SDNs at 50% changing tariffs, or greater level. The situation involving U.S.-China trade relations remains volatile and uncertain, and there can be no assurance that further actions by either country they will not remain eligible for exceptions under existing or future trade agreements or executive orders. We have an adverse impact on our business, operations taken steps, and access to technology, or components thereof, sourced from China. See also the risk factor with the caption beginning “Our reliance on third-party component suppliers…” above. At this time, it remains unclear what may take additional actions, if any, will be taken by the U.S. or other governments with respect steps, to international trade agreements, mitigate the imposition impact of tariffs on goods imported into the U.S., tax policy related to international commerce, increased export control, sanctions and investment restrictions, import or use our business, including: by availing ourselves of foreign communications equipment, or other trade matters. However, the incoming U.S. administration announced an intent certain exemptions to impose tariffs on imports from Canada, Mexico, and China. We estimate that products or components that make up a significant portion of tariffs; by making changes to our revenue are either manufactured in supply chain practices, sources of supply, or distributed from Mexico. Although the ultimate scope manufacturing locations; and timing by passing the cost of any such tariffs is indeterminable, if implemented, they could have a significant impact on our financial condition and results of operations. Based on our manufacturing practices and locations, there to customers. These mitigation strategies generally take considerable time to implement, can be no assurance that any future executive or legislative action result in the United States or other countries relating to tax policy significant costs, and trade regulation would not adversely affect can disrupt our business, operations and financial results. Government regulation of usage, import or export supply chain. Moreover, customer reaction to the imposition of our products, or our technology within our products, changes in that regulation, new tariffs, or our failure any tariff mitigation steps we elect to obtain required approvals for our products, could harm our international and domestic sales and adversely affect our revenue take is uncertain and costs of sales. Failure to comply with such regulations could may result in enforcement actions, fines, penalties reduced spending, deferred orders or restrictions on export privileges. In addition, costly tariffs on our equipment, restrictions on importation, trade protection measures and domestic preference requirements delivery of certain countries could limit our access to these markets and harm our sales. These regulations could adversely affect the sale existing orders, or use shifting of our products, substantially increase our cost purchases to other vendors, each of sales and which would adversely affect impact our business financial results and revenue.competitive position.

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

Our development and use of AI technology in our products and operations remains in the early phases. While we aim to develop and use AI responsibly and attempt to mitigate ethical and legal issues presented by its use, we may ultimately be unsuccessful in identifying or resolving issues before they arise. AI technologies are complex and rapidly evolving, and the technologies that we develop or use may ultimately be flawed. Moreover, AI technology is subject to rapidly evolving domestic and international laws and regulations, which could impose significant costs and obligations on the Company. For example, in 2023 including executive orders by the U.S. government issued an executive order on safe, secure and trustworthy AI, and the EU’s Artificial Intelligence Act, which establishes EU-wide rules on data quality, transparency, human oversight could impose significant costs and accountability with respect to obligations on the use of AI, was enacted in August 2024. Company. Emerging regulations may also pertain to data privacy, data protection, and the ethical use of AI, as well as clarifying intellectual property considerations. Our use of AI could give rise to legal or regulatory action or increased scrutiny or liability, and maydamage may damage our reputation or otherwise materially harm our business.

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Prior heading: We are a party to legal proceedings, investigations and other claims or disputes, which are costly to defend and, if determined adversely to us, could require us to pay fines or damages, undertake remedial measures, or prevent us from taking certain actions, any of which could adversely affect our business.

In the course of our business, we We are, and in the future may be, a party from time to legal proceedings, investigations and other claims or disputes, which have related and may relate time, subject to subjects including commercial transactions, intellectual property, securities, employee relations, or compliance with applicable laws claims, lawsuits, government investigations, and regulations. Legal other legal proceedings and investigations are inherently uncertain, and we cannot predict their duration, scope, outcome or consequences. There can be no assurance that these or any such matters that have been or may in the future be brought against us will be resolved favorably. In connection with any government investigations, arise in the event the government takes action against us or the parties resolve or settle the matter, we may be required to pay substantial fines or civil and criminal penalties and/or be subject to equitable remedies, including disgorgement or injunctive relief. Other legal or regulatory proceedings, including lawsuits filed by private litigants, may also follow as a consequence. ordinary course of business. These matters are likely to can be expensive and time-consuming to defend, settle and/or resolve, complex, involve uncertain outcomes, and may require us to implement certain remedial measures that could prove costly or disruptive to our business significant management time and operations. They may also cause damage resources. These proceedings could result in substantial costs to our business reputation. The unfavorable resolution of one defend, monetary damages, fines, penalties, or more of these matters injunctive relief, and could have a material adverse effect on adversely affect our business, results of operations, reputation, financial condition condition, or cash flows.operating results.

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

Our future effective tax rates could be We are subject to volatility or adversely affected by changes in tax laws, regulations, accounting principles, or interpretations thereof. The impact of income taxes on our business can also be affected by a number of items relating to our business. These may include estimates for, complex, evolving, and the actual, geographic mix of our earnings; changes in the valuation of our deferred sometimes conflicting tax assets; the use or expiration of net operating losses or research laws and development credit arrangements applicable to us regulations in certain geographies; and changes the jurisdictions where we operate. Changes in our methodology for transfer pricing, valuing developed technology tax legislation, interpretations, or conducting intercompany arrangements. The Organization for Economic Co-operation and Development (the “OECD”) has introduced a framework enforcement practices, including those related to implement a global minimum tax of 15% for certain highly profitable multinational companies, referred to as Pillar Two regimes, transfer pricing, or the minimum tax directive. While it is uncertain whether the United States will enact legislation to adopt Pillar Two, certain countries in which we operate have enacted legislation, and other countries are in the process of introducing draft legislation to implement the minimum tax directive. Many aspects allocation of Pillar Two will be profits among countries, could increase our effective for Ciena beginning tax rate, result in fiscal 2025 with additional components becoming effective beginning in fiscal 2026. Pillar Two taxes are considered an alternative minimum tax accounted for as a period cost that will liabilities, or impact the effective tax rate our profitability. Changes in the year the Pillar Two tax obligation arises. Therefore, deferred taxes will not be recognized or adjusted for the estimated effects of future minimum taxes. We have assessed the regulation could also adversely impact of Pillar Two and do not currently anticipate any material effect on our effective tax rate, financial results go-to-market approach, global sourcing strategy, manufacturing practices, or cash flows for fiscal 2025 based on currently enacted laws; however, our analysis is ongoing as the OECD continues to release additional guidance and countries enact legislation. To the extent additional legislative changes take place in the countries in which we operate, it is possible that these changes may yield an adverse impact on competitiveness of our effective tax rate, financial results and cash flows. products. We are subject to the continuous examination of our income and other tax returns by the Internal Revenue Service and other tax authorities globally, and we have a number of such reviews underway at any time. It is possible that tax authorities may disagree with certain positions we have taken, and an adverse outcome of such a review or audit could have a negative effect on our financial position and operating results. There can be no assurance that the outcomes from such examinations, or changes in tax law or regulation impacting our effective tax rates, will not have an adverse effect on our business, financial condition and results of operations.

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

Section 404 of the Sarbanes-Oxley Act of 2002 requires We cannot be certain that we include in our annual report a report containing management’s assessment of the effectiveness of our current design for internal controls control over financial reporting as of the end of our fiscal year and a statement as to whether reporting, or not such any future changes thereto, will be sufficient to enable management to determine that our internal controls are effective. Compliance with these requirements has resulted in, and is likely to continue to result in, significant costs and the commitment of time and operational resources. effective for any period, or on an ongoing basis. Certain ongoing initiatives, including efforts to transform business processes or processes, to transition certain functions to third-party resources or providers, and to enter new markets or geographies, will necessitate modifications to our internal control systems, processes and related information systems as we optimize our business and operations. Our expansion into new regions could pose further challenges to our internal control systems. We cannot be certain that our current design for internal control over financial reporting, or any additional changes to be made, will be sufficient to enable management to determine that our internal controls are effective for any period, or on an ongoing basis. If we are unable to assert that our internal controls over financial reporting are effective, market and customer perception of our financial condition and business may suffer and the trading price of our stock may be adversely affected, and customer perception of our business may suffer.affected.

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Prior heading: Our stock price is volatile.

The market price and trading volume of our securities has been and may be subject to significant volatility, influenced by a variety of factors, many of which are outside our control. Our common stock price has experienced substantial volatility significant fluctuations in the past and may remain volatile in the future. Volatility in our stock continue to do so. Stock price volatility can arise as a result of a number from any of the factors discussed in this “Risk Factors” section. From fiscal 2020 through fiscal 2024, our closing stock price ranged from a high of $77.60 per share to a low of $34.50 per share. The stock section, including overall market has experienced significant price and volume fluctuation that has affected the market price of many technology companies, with such volatility often unrelated to the economic conditions, industry trends, investor sentiment, variations in operating performance of these companies. Divergence between our actual results and our forward-looking guidance for such results, the published expectations of investment analysts, or the expectations of the market generally, can cause significant swings in our stock price. Our stock price can also be affected by market conditions in our industry as well as announcements that we, our competitors, vendors or our customers may make. These may include compared to expectations, announcements by us or our competitors of financial results or competitors, and changes in estimated financial results, technological innovations, the gain or loss of customers, forecasts or other strategic initiatives. Our common stock is also included guidance. Broader fluctuations in certain market indices, and any change equity markets, shifts in the composition of these indices to exclude our company could adversely affect our stock price. In addition, if the market for technology stocks indices, or the broader stock market experiences a loss of investor confidence, the trading price of our common stock confidence in a particular sector could decline for reasons unrelated to our business, financial condition or results of operations. These and other factors affecting macroeconomic conditions or financial markets may materially adversely also affect the market price for our securities, regardless of our common stock in the future.actual operating performance.

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Prior heading: Significant volatility and uncertainty in the capital markets may limit our access to funding on favorable terms or at all.

The operation of our business requires significant capital. We have accessed the capital markets in the past and have successfully raised funds, including through the issuance of equity, convertible notes and other indebtedness, to increase our cash position, support our operations and undertake strategic growth initiatives. indebtedness. We regularly evaluate our liquidity position, debt obligations and anticipated cash needs to fund our long-term operating plans, and we may consider it necessary or advisable to raise additional capital or incur additional indebtedness in the future. If we raise additional funds through further issuance of equity or securities convertible into equity, or undertake certain transactions intended to address our existing indebtedness, funds, our existing stockholders could suffer dilution in their percentage ownership of our company, or our leverage and outstanding indebtedness could increase. At times, capital market conditions, including the impact of inflation, have increased borrowing rates Our ability to access capital, and could significantly increase our the cost of capital should we seek additional funding. Moreover, global capital markets have undergone periods that capital, can be affected by a range of significant volatility and uncertainty in the past, factors, including market conditions, interest rates, inflation, and ratings agency evaluation of our company. As such, there can be no assurance that such financing alternatives will be available to us on favorable terms or at all, should we determine it necessary or advisable to seek additional capital.all.

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Prior heading: Outstanding indebtedness under our senior secured credit facilities and senior unsecured notes may adversely affect our liquidity and results of operations and could limit our business.

We are a party to credit agreements relating to governing a $300 million senior secured revolving credit facility, an outstanding senior secured a term loan with approximately $1.2 billion due 2030, loan, and an outstanding senior unsecured indenture pursuant to which we issued $400 million in aggregate principal amount of 4.00% senior notes due 2030. The notes. These agreements governing these credit facilities contain certain covenants that limit our ability, among other things, to incur additional debt, create liens operational flexibility and encumbrances, pay cash dividends, redeem or repurchase stock, enter into certain acquisition transactions or transactions with affiliates, repay certain indebtedness, make investments, or dispose of assets. The agreements also include customary remedies, including the right of the lenders to take action with respect to the collateral securing the loans, remedies that would apply should we default or otherwise be unable to satisfy on our obligations. We may also enter into additional debt obligations. transactions or credit facilities which may increase our indebtedness and result in additional restrictions on our business. Our indebtedness could have important negative consequences, including: •increasing including: increasing our vulnerability to adverse economic and industry conditions; •limiting conditions; limiting our ability to obtain additional financing, particularly in unfavorable capital and credit market conditions; •debt financing; debt service and repayment obligations that may adversely impact our results of operations and reduce the availability of cash resources for other business purposes; •limiting resources; limiting our flexibility in planning for, or reacting to, changes in our business and the markets; and •placing placing us at a possible competitive disadvantage to competitors that have better access to capital resources. We may also enter into additional debt transactions or credit facilities, including equipment loans, working capital lines of credit, senior notes, and other long-term debt, which may increase our indebtedness and result in additional restrictions on our business. In addition, major debt rating agencies regularly evaluate our debt based on a number of factors. There can be no assurance that we will be able to maintain our existing debt ratings, and failure to do so could adversely affect our cost of funds, liquidity and access to capital markets.competitors.

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Prior heading: We may be required to write down the value of certain significant assets, which would adversely affect our operating results.

We have a number of significant assets on our balance sheet as of November 2, 2024, the value of which with significant values that can be adversely impacted by factors related to our business and operating performance, as well as factors outside of our control. As of November 2, 2024, our balance sheet includes a net deferred tax asset control, including that: the value of $885.9 million. The receivables may be impacted by difficulty collecting amounts owed by customers, suppliers or partners due to their financial conditions; the value of certain fixed assets can be materially impacted by changes in our net business operations or strategy; the value of the deferred tax assets asset can be significantly impacted by changes in tax policy, changes in future tax rates, or by our tax planning strategy. If any write-downs are required, our operating results may be materially adversely affected. As of November 2, 2024, our balance sheet also includes $444.7 million of goodwill. We test each reporting unit for impairment of goodwill on an annual basis strategy; and between annual tests, if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. As of November 2, 2024, our balance sheet also includes $608.1 million in long-lived assets, which includes $165.0 million of intangible assets. Valuation of goodwill or our long-lived assets requires us to make assumptions about future sales prices and sales volumes for our products. These assumptions are used to forecast future, undiscounted cash flows on which our estimates are based. If may be impaired if market conditions or our forecasts for our business or any particular operating segment change, we may be required to reassess the value of these assets. change. We could be required to record an impairment charge against our goodwill and long-lived assets or a valuation allowance against our deferred tax assets. Any write-down of the value certain of these significant our assets which would have the effect of decreasing our earnings or increasing our losses in such period. If we are required to take create a substantial write-down or charge, loss and adversely affect our operating results would be materially adversely affected in such period.results.

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