Ciena Corporation

09/03/2026 | Press release | Distributed by Public on 09/03/2026 13:57

Quarterly Report for Quarter Ending August 1, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
This report contains statements that discuss future events or expectations, projections of results of operations or financial condition, changes in the markets for our products and services, trends in our business, operational matters including the expansion of manufacturing capacity and accumulation of inventory, business prospects and strategies and other "forward-looking" information. Forward-looking statements may appear throughout this report, including in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors." In some cases, you can identify "forward-looking statements" by words like "may," "will," "would," "can," "should," "could," "expects," "future," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "potential," "projects," "targets," "prepare," or "continue" or the negative of those words and other comparable words. You should be aware that the forward-looking statements contained in this report are based on our current views and assumptions, and are subject to known and unknown risks, uncertainties, and other factors that may cause actual events or results to differ materially.
For a discussion identifying some of the important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" in this report. For a more complete understanding of the risks associated with an investment in our securities, you should review these factors and the rest of this report in combination with the more detailed description of our business and management's discussion and analysis of financial condition and risk factors described in our Annual Report on Form 10-K for the fiscal year ended November 1, 2025, which we filed with the Securities and Exchange Commission (the "SEC") on December 12, 2025 (our "2025 Annual Report"). However, we operate in a very competitive and dynamic environment and new risks and uncertainties emerge, are identified, or become apparent from time to time, and therefore may not be identified in this report. We cannot predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. You should be aware that the forward-looking statements contained in this report are based on our current views and assumptions. We undertake no obligation to revise or to update any forward-looking statements made in this report to reflect events or circumstances after the date hereof or to reflect new information or the occurrence of unanticipated events, except as required by law. The forward-looking statements in this report are intended to be subject to protection afforded by the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Unless the context requires otherwise, references in this report to "Ciena," the "Company," "we," "us," and "our" refer to Ciena Corporation and its consolidated subsidiaries.
Overview
We are a network technology company, providing hardware, software, and services to a wide range of network operators and enabling enhanced network capacity, service delivery, and automation. Our solutions support network traffic across a wide range of applications, including cloud, voice, video, data, and artificial intelligence ("AI"). Our network solutions are used globally by cloud providers, service providers, and other network operators across multiple industry verticals.
The markets into which we sell are dynamic and characterized by a high rate of change. Networks continue to experience strong demand for increased bandwidth due to traffic growth, which is being driven by a diverse set of services, technologies, and customer needs.
Business Momentum
Our industry has been experiencing unprecedented increases in demand, in particular due to capital expenditures related to AI and other cloud-based applications. As a result, we experienced strong momentum and growth in fiscal 2025 that continued in the first three quarters of fiscal 2026. As our sales to cloud providers grow, we are seeing a small number of those customers become a larger portion of our business across multiple revenue segments. Our revenue increased by 37% to $1.7 billion in the third quarter of fiscal 2026 as compared to $1.2 billion in the third quarter of fiscal 2025, with orders for our products and services significantly exceeding our revenue. This dynamic, together with an industry-wide constrained supply environment, has resulted in historically high backlog. As part of our efforts to secure both long-term supply and demand, we have, and are seeking to continue to, enter into multi-year supply agreements with certain of our suppliers, some of which involve firm purchase commitments and prepayment arrangements, and long-term purchase arrangements with customers.
Gross Margin Dynamics
Our gross margin increased to 45.4% in the third quarter of fiscal 2026, compared to 41.3% in the third quarter of fiscal 2025, primarily due to higher product gross margin associated with cost reduction, pricing optimization, product mix, and tariff refunds.
Operating Expense and Investment in Technology Innovation
Our operating expense grew from $430 million in the third quarter of fiscal 2025 to $458 million in the third quarter of fiscal 2026. During the third quarter of fiscal 2026, we invested $237 million in research and development activities, an increase of 12% compared to the third quarter of fiscal 2025. We believe that our investment capacity and our efforts to push the pace of innovation are important competitive differentiators in our markets, which requires both investment capacity and expenditures. In particular, in an effort to capture certain market opportunities created by the impact of AI on networks, we continued to increase the performance of and enhance the capabilities for our leading WaveLogicTM coherent modem technology, through which we seek to extend our leadership in optical networking, and leverage it to expand our addressable market, including inside and around the data center.
Capital Allocation Strategy
During the third quarter of fiscal 2026, we completed a convertible note offering of $2.9 billion and immediately used the proceeds to repay our term loan as described in Note 13 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.
Our capital allocation strategy is focused on maintaining our significant innovation investment, investing in select transactions, and returning value to stockholders, while preserving our strategic and operational flexibility. We continuously work to improve our cash cycle and evaluate alternatives to manage our capital structure in order to enhance our liquidity. We ended the first nine months of fiscal 2026 with $2.8 billion of cash, cash equivalents, and investments. As of the end of the first nine months of fiscal 2026, cash generated from operations increased to $684 million as compared to $435 million as of the end of the first nine months of fiscal 2025. Consistent with our capital allocation priorities, during the first nine months of fiscal 2026, we invested $195 million in capital purchases, primarily for supply chain equipment and research and development, and $338 million and $278 million to repurchase shares through our share buyback program and for tax withholding purposes associated with employee stock awards, respectively.
For additional information regarding our business, industry, market opportunity, competitive landscape, and strategy, see our 2025 Annual Report.
Consolidated Results of Operations
Operating Segments
Our results of operations are presented based on our operating segments: (i) Networking Platforms; (ii) Platform Software and Services; (iii) Blue Planet Automation Software and Services; and (iv) Global Services. See Note 3 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.
Revenue
As a result of the increased demand described above, our revenue increased by approximately 37% in the third quarter and first nine months of fiscal 2026 as compared to the third quarter and first nine months of fiscal 2025, or $451.7 million and $1.3 billion, respectively.
Operating Segment Revenue
The table below sets forth the changes in our operating segment revenue for the periods indicated (in thousands, except percentage data):
Quarter Ended Nine Months Ended
August 1, 2026 August 2, 2025 %* August 1, 2026 August 2, 2025 %*
Revenue:
Networking Platforms
Optical Networking $ 1,191,307 $ 815,497 46.1 % $ 3,314,317 $ 2,317,062 43.0 %
%** 71.3 % 66.9 % 71.0 % 67.8 %
Routing and Switching 164,368 125,857 30.6 % 464,604 311,749 49.0 %
%** 9.8 % 10.3 % 10.0 % 9.1 %
Total Networking Platforms 1,355,675 941,354 44.0 % 3,778,921 2,628,811 43.8 %
%** 81.1 % 77.2 % 81.0 % 76.9 %
Platform Software and Services 98,657 89,961 9.7 % 285,919 270,469 5.7 %
%** 5.9 % 7.4 % 6.1 % 7.9 %
Blue Planet Automation Software and Services 23,205 27,805 (16.5) % 66,986 81,787 (18.1) %
%** 1.4 % 2.3 % 1.4 % 2.4 %
Global Services
Maintenance, Support, and Learning 89,851 80,743 11.3 % 266,687 234,758 13.6 %
%** 5.4 % 6.6 % 5.7 % 6.9 %
Implementation 87,871 65,878 33.4 % 235,522 171,735 37.1 %
%** 5.3 % 5.4 % 5.0 % 5.0 %
Advisory and Enablement 15,870 13,644 16.3 % 34,875 29,963 16.4 %
%** 0.9 % 1.1 % 0.8 % 0.9 %
Total Global Services 193,592 160,265 20.8 % 537,084 436,456 23.1 %
%** 11.6 % 13.1 % 11.5 % 12.8 %
Total revenue $ 1,671,129 $ 1,219,385 37.0 % $ 4,668,910 $ 3,417,523 36.6 %
_____________________________
* Denotes % change from fiscal 2025 to fiscal 2026
** Denotes % of total revenue
Quarter ended August 1, 2026 as compared to the quarter ended August 2, 2025
•Networking Platforms segment revenue increased by $414.3 million.
•Optical Networking products revenue increased by $375.8 million, primarily driven by increases in sales of our 6500 Reconfigurable Line Systems (RLS), Waveserver® systems, and coherent pluggable transceivers.
•Routing and Switching products revenue increased by $38.5 million, primarily driven by an increase in sales of our 3000 and 5000 series of service delivery and aggregation platforms in our DCOM solution, partially offset by a sales decrease in our virtualization software.
•Platform Software and Services segment revenue increased by $8.7 million, primarily reflecting a sales increase in our Navigator Network Control Suite ("NCS") software solution.
•Blue Planet Automation Software and Services segment revenue decreased by $4.6 million, primarily reflecting a sales decrease in our orchestration software.
•Global Services segment revenue increased by $33.3 million, primarily reflecting sales increases in our implementation services.
Nine months ended August 1, 2026 as compared to the nine months ended August 2, 2025
•Networking Platforms segment revenue increased by $1.2 billion.
•Optical Networking revenue increased by $997.3 million, primarily driven by increases in sales of our 6500 Reconfigurable Line Systems (RLS), Waveserver® systems, and coherent pluggable transceivers.
•Routing and Switching revenue increased by $152.9 million, primarily driven by increases in sales of our 3000 and 5000 series of service delivery and aggregation platforms, and 8100 Coherent IP networking platforms in our DCOM solution, partially offset by a sales decrease in our virtualization software.
•Platform Software and Services segment revenue increased by $15.5 million, primarily reflecting a sales increase in our Navigator NCS software solution, partially offset by decreases in sales of our software consulting services.
•Blue Planet Automation Software and Services segment revenue decreased by $14.8 million, primarily reflecting sales decreases in our unified assurance and analytics software and orchestration software.
•Global Services segment revenue increased by $100.6 million, primarily reflecting sales increases in our implementation services and maintenance support and learning services.
Revenue by Geographic Region
Our operating segments engage in business and operations across three geographic regions: the United States, Canada, the Caribbean and Latin America ("Americas"); Europe, Middle East and Africa ("EMEA"); and Asia Pacific, Japan and India ("APAC"). The geographic distribution of our revenue can fluctuate significantly from period to period, and the timing of revenue recognition for large network projects, particularly outside of the United States, can result in variations in geographic revenue results in any particular period.
The following table reflects our geographic distribution of revenue, principally based on the relevant location for our delivery of products and performance of services. The table sets forth the changes in geographic distribution of revenue for the periods indicated (in thousands, except percentage data):
Quarter Ended Nine Months Ended
August 1, 2026 August 2, 2025 %* August 1, 2026 August 2, 2025 %*
Americas $ 1,316,796 $ 923,627 42.6 % $ 3,637,233 $ 2,553,081 42.5 %
%** 78.8 % 75.7 % 77.9 % 74.7 %
EMEA 180,550 186,018 (2.9) % 577,175 535,519 7.8 %
%** 10.8 % 15.3 % 12.4 % 15.7 %
APAC 173,783 109,740 58.4 % 454,502 328,923 38.2 %
%** 10.4 % 9.0 % 9.7 % 9.6 %
Total $ 1,671,129 $ 1,219,385 37.0 % $ 4,668,910 $ 3,417,523 36.6 %
_____________________________________
* Denotes % change from fiscal 2025 to fiscal 2026
** Denotes % of total revenue
Quarter ended August 1, 2026 as compared to the quarter ended August 2, 2025
•Americas revenue increased by $393.2 million, primarily driven by increased sales to cloud provider customers in the United States.
•EMEA revenue decreased by $5.5 million, primarily driven by decreased sales to cloud provider customers in the Netherlands.
•APAC revenue increased by $64.0 million, primarily driven by increased sales in India, Singapore, and Australia.
Nine months ended August 1, 2026 as compared to the nine months ended August 2, 2025
•Americas revenue increased by $1.1 billion, primarily driven by increased sales to cloud provider customers and service provider customers in the United States.
•EMEA revenue increased by $41.7 million, primarily driven by increased sales to cloud provider customers in the Netherlands and service provider customers in Great Britain.
•APAC revenue increased by $125.6 million, primarily driven by increased sales in India, Singapore, and Australia.
Currency Fluctuations
During the third quarter and first nine months of fiscal 2026, approximately 10% and 9% of our revenue was non-U.S. Dollar-denominated, respectively. During the third quarter of fiscal 2026 as compared to the third quarter of fiscal 2025, and the first nine months of fiscal 2026 as compared to the first nine months of fiscal 2025, the U.S. Dollar fluctuated against other currencies with minimal impact.
Gross Margin
Gross margin is calculated as revenue less cost of goods sold, divided by revenue.
•Product cost of goods sold consists primarily of amounts paid to third-party contract manufacturers, component costs, employee-related costs, shipping, logistics, and tariff costs associated with manufacturing-related operations, warranty and other contractual obligations, royalties, license fees, amortization of intangible assets, cost of excess and obsolete inventory and, any estimated losses on committed customer contracts.
•Service cost of goods sold consists primarily of direct and third-party costs associated with our provision of services, including implementation, maintenance, support, learning, advisory and enablement activities, and any estimated losses on committed customer contracts. The majority of these costs relate to personnel, including employee and third-party contractor-related costs.
Gross margin can fluctuate due to a number of factors, including technology-based price changes, product and service mix, the lifecycle stage of our products and cost reductions.
The tables below set forth the changes in revenue and gross margin for the periods indicated (in thousands, except percentage data):
Quarter Ended
August 1, 2026 August 2, 2025
Revenue Gross Margin (%)** Revenue Gross Margin (%)** Revenue Change (%)* Gross Margin Change
Total $ 1,671,129 45.4 % $ 1,219,385 41.3 % 37.0 % 4.1 %
Products $ 1,390,274 44.7 % $ 976,801 40.6 % 42.3 % 4.1 %
Services $ 280,855 49.0 % $ 242,584 43.8 % 15.8 % 5.2 %
Nine Months Ended
August 1, 2026 August 2, 2025
Revenue Gross Margin (%)** Revenue Gross Margin (%)** Revenue Change (%)* Gross Margin Change
Total $ 4,668,910 44.5 % $ 3,417,523 41.8 % 36.6 % 2.7 %
Products $ 3,881,632 44.1 % $ 2,730,167 40.6 % 42.2 % 3.5 %
Services $ 787,278 46.5 % $ 687,356 46.3 % 14.5 % 0.2 %
_____________________________________
* Denotes % change from fiscal 2025 to fiscal 2026
** Denotes % of total revenue
Quarter ended August 1, 2026 as compared to the quarter ended August 2, 2025
•Gross margin increased by 410 basis points, reflecting increased product and services margin.
•Product gross margin increased by 410 basis points, primarily due to cost reductions, pricing optimization, product mix, and tariff recoveries, partially offset by lower manufacturing efficiencies and an increased provision for excess and obsolete inventory.
•Services gross margin increased by 520 basis points, primarily due to increased volume of higher margin implementation services.
Nine months ended August 1, 2026 as compared to the nine months ended August 2, 2025
•Gross margin increased by 270 basis points, primarily reflecting increased product margin.
•Product gross margin increased by 350 basis points, primarily due to pricing optimization, product mix, cost reductions, and tariff recoveries, partially offset by lower manufacturing efficiencies and increased provision for excess and obsolete inventory.
•Services gross margin remained relatively unchanged.
Operating Expense
The component elements that comprise each of our operating expense categories in the table below are set forth in the "Consolidated Results of Operations - Operating Expense" in Item 7 of Part II of our 2025 Annual Report. The table below sets forth the changes in operating expense for the periods indicated (in thousands, except percentage data):
Quarter Ended Nine Months Ended
August 1, 2026 August 2, 2025 %* August 1, 2026 August 2, 2025 %*
Research and development $ 236,673 $ 211,898 11.7 % $ 696,036 $ 619,429 12.4 %
%** 14.2 % 17.4 % 14.9 % 18.1 %
Selling and marketing 153,969 148,724 3.5 % 452,875 424,911 6.6 %
%** 9.2 % 12.2 % 9.7 % 12.4 %
General and administrative 62,844 60,596 3.7 % 183,308 171,450 6.9 %
%** 3.8 % 5.0 % 3.9 % 5.0 %
Significant asset impairments and restructuring costs 887 1,770 (49.9) % 3,190 5,262 (39.4) %
%** - % 0.1 % 0.1 % 0.2 %
Amortization of intangible assets 3,713 6,556 (43.4) % 12,162 19,646 (38.1) %
%** 0.2 % 0.5 % 0.3 % 0.6 %
Acquisition and integration costs - - - % 306 - 100.0 %
%** - % - % - % - %
Total operating expenses $ 458,086 $ 429,544 6.6 % $ 1,347,877 $ 1,240,698 8.6 %
%** 27.4 % 35.2 % 28.9 % 36.3 %
_____________________________________
* Denotes % change from fiscal 2025 to fiscal 2026
** Denotes % of total revenue
Quarter ended August 1, 2026 as compared to the quarter ended August 2, 2025
•Research and development expense increased by $24.8 million. Net of hedging, this primarily reflects higher employee headcount and related costs, including from our acquisition of Nubis Communications and engineering design and development costs, prototype costs and technology-related costs.
•Selling and marketing expense increased by $5.2 million, which primarily reflects increases in employee-related compensation costs.
•General and administrative expense increased by $2.2 million, which primarily reflects increases in professional services.
•Significant asset impairments and restructuring costs remained relatively unchanged.
•Amortization of intangible assets decreased by $2.8 million, primarily reflecting certain intangible assets having reached the end of their economic lives.
Nine months ended August 1, 2026 as compared to the nine months ended August 2, 2025
•Research and development expense increased by $76.6 million. Net of hedging, this primarily reflects higher employee headcount and related costs, including from our acquisition of Nubis Communications, engineering design and development costs and technology-related costs.
•Selling and marketing expense increased by $28.0 million, which primarily reflects increases in employee-related compensation costs.
•General and administrative expense increased by $11.9 million, which primarily reflects increases in employee-related compensation costs and professional services.
•Significant asset impairments and restructuring costs decreased by $2.1 million primarily related to higher facilities restructuring costs in fiscal 2025.
•Amortization of intangible assets decreased by $7.5 million, primarily reflecting certain intangible assets having reached the end of their economic lives.
•Acquisition and integration costs reflect financial, legal, and accounting advisory costs and certain employee-related costs related to our acquisition of Nubis Communications in the fourth quarter of fiscal 2025.
Currency Fluctuations
During both the third quarter and first nine months of fiscal 2026, approximately 51% of our operating expense was non-U.S. Dollar-denominated. During the third quarter and first nine months of fiscal 2026, as compared to the third quarter and first nine months of fiscal 2025, the U.S. Dollar fluctuated against other currencies. These currency fluctuations, net of hedging, had minimal impact.
Segment Profit (Loss)
The table below sets forth the changes in our segment profit (loss) for the periods indicated (in thousands, except percentage data):
Quarter Ended Nine Months Ended
August 1, 2026 August 2, 2025 %* August 1, 2026 August 2, 2025 %*
Segment profit (loss):
Networking Platforms $ 412,944 $ 199,445 107.0 % $ 1,091,125 $ 533,029 104.7 %
Platform Software and Services $ 66,690 $ 57,070 16.9 % $ 190,853 $ 175,490 8.8 %
Blue Planet Automation Software and Services $ 482 $ 6,366 (92.4) % $ (6,175) $ 19,342 (131.9) %
Global Services $ 79,142 $ 53,250 48.6 % $ 202,279 $ 152,289 32.8 %
_____________________________________
* Denotes % change from fiscal 2025 to fiscal 2026
Quarter ended August 1, 2026 as compared to the quarter ended August 2, 2025
•Networking Platforms segment profit increased by $213.5 million, primarily due to higher sales volume and improved gross margin as described above, partially offset by higher research and development costs.
•Platform Software and Services segment profit increased by $9.6 million, primarily due to higher product sales volume, as described above, and improved services gross margin.
•Blue Planet Automation Software and Services segment decreased by $5.9 million, primarily due to lower software sales volume as described above and reduced product gross margin.
•Global Services segment profit increased by $25.9 million, primarily due to increased implementation sales and improved services gross margin as described above.
Nine months ended August 1, 2026 as compared to the nine months ended August 2, 2025
•Networking Platforms segment profit increased by $558.1 million, primarily due to higher sales volume and improved gross margin as described above, partially offset by higher research and development costs.
•Platform Software and Services segment profit increased by $15.4 million, primarily due to higher product sales and higher gross margin, partially offset by lower services sales volume and increased research and development costs.
•Blue Planet Automation Software and Services segment primarily reflects lower software sales volume as described above and reduced gross margins and increased research and development costs.
•Global Services segment profit increased by $50.0 million, primarily due to increased implementation sales and improved services gross margin as described above.
Other Items
The table below sets forth the changes in other items for the periods indicated (in thousands, except percentage data):
Quarter Ended Nine Months Ended
August 1, 2026 August 2, 2025 %* August 1, 2026 August 2, 2025 %*
Interest and other income, net $ 22,388 $ 15,090 48.4 % $ 49,456 $ 34,539 43.2 %
%** 1.3 % 1.2 % 1.1 % 1.0 %
Interest expense $ 5,803 $ 22,806 (74.6) % $ 47,979 $ 67,421 (28.8) %
%** 0.3 % 1.9 % 1.0 % 2.0 %
Loss on extinguishment and modification of debt $ 7,143 $ - 100.0 % $ 7,143 $ 729 879.8 %
%** 0.4 % - % 0.2 % - %
Provision for income taxes $ 44,203 $ 15,511 185.0 % $ 87,875 $ 49,580 77.2 %
%** 2.6 % 1.3 % 1.9 % 1.5 %
_____________________________________
* Denotes % change from fiscal 2025 to fiscal 2026
** Denotes % of total revenue
Quarter ended August 1, 2026 as compared to the quarter ended August 2, 2025
•Interest and other income, net increased by $7.3 million, primarily resulting from higher interest income on our investments.
•Interest expense decreased by $17.0 million primarily due to refinancing of debt at a 0% interest rate, net of the effect of a related termination of interest rate swaps, see notes 12 and 13.
•Loss on extinguishment and modification of debt reflects the early extinguishment of our 2030 Term Loan in the third quarter of fiscal 2026, see note 13.
•Provision for income taxes increased by $28.7 million, primarily due to the increase in pre-tax book income.
Nine months ended August 1, 2026 as compared to the nine months ended August 2, 2025
•Interest and other income, net increased by $14.9 million, primarily resulting from higher interest income on our investments and the impact of foreign exchange rates on assets and liabilities denominated in a currency other than the relevant functional currency, net of hedging activity.
•Interest expense decreased by $19.4 million, primarily due to refinancing debt at 0% interest rate, net of the effect of a related termination of interest rate swaps, see notes 12 and 13.
•Loss on extinguishment and modification of debt reflects the early extinguishment of our 2030 Term Loan in the third quarter of fiscal 2026 and refinancing of our 2030 Term Loan in the first quarter of fiscal 2025, see note 13.
•Provision for income taxes increased by $38.3 million, primarily due to the increase in pre-tax book income.
Liquidity and Capital Resources
We regularly evaluate our capital structure, liquidity position, debt obligations, and anticipated cash needs to fund our operating or investment plans, and we will continue to consider capital raising and other market opportunities that may be available to us.
Principal Sources of Liquidity. Our principal sources of liquidity on hand include our cash, cash equivalents, and investments, which, as of August 1, 2026, totaled $2.8 billion, as well as our credit facility (the "Revolving Credit Facility"), to which we and certain of our subsidiaries are parties. The Revolving Credit Facility provides for a total commitment of $300.0 million with a maturity date of October 24, 2030. We principally use the Revolving Credit Facility to support the issuance of letters of credit that arise in the ordinary course of our business and for general corporate purposes. As of August 1, 2026, letters of credit totaling $40.7 million were issued under the Revolving Credit Facility. There were no borrowings outstanding under the Revolving Credit Facility as of August 1, 2026.
Financing Arrangements. On June 11, 2026, we closed a private offering of $2.9 billion aggregate principal amount of 2031 Notes to qualified institutional buyers. The 2031 Notes will mature on September 15, 2031 unless earlier converted, redeemed or repurchased. Concurrently with the issuance of the 2031 Notes, we entered into convertible note hedge transactions that reduce potential dilution upon conversion of the notes and entered into warrant transactions to raise additional capital to partially offset the costs of entering into the convertible note hedge transactions. See Note 13 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report
Foreign Liquidity. The amount of cash, cash equivalents and short-term investments held by our foreign subsidiaries was $245.3 million as of August 1, 2026. Approximately $92.3 million of undistributed earnings from these foreign subsidiaries is expected to be repatriated, with any remaining amount continuing to be indefinitely reinvested. A deferred tax liability has been accrued to account for the anticipated repatriation amount. There are no other significant temporary differences related to our investment in the foreign subsidiaries for which a deferred tax liability has not been recognized.
Stock Repurchases. On October 2, 2024, we announced that our Board of Directors authorized a program to repurchase up to $1.0 billion of our common stock, which replaced in its entirety the previous stock repurchase program authorized in fiscal 2022. During the first nine months of fiscal 2026, we repurchased $335.3 million of our common stock under the stock repurchase program, and $335.0 million remained under the current repurchase authorization as of August 1, 2026. The amount and timing of any further repurchases under our stock repurchase program are subject to a variety of factors including liquidity, cash flow, stock price, and general business and market conditions. The program may be modified, suspended, or discontinued at any time. During the first nine months of fiscal 2026, we also repurchased $278.3 million of our common stock in settlement of employee tax withholding obligations due upon the vesting of stock unit awards. See Note 17 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report as well as "Issuer Purchases of Equity Securities" in Item 2 of Part II of this report.
Cash Flows
The following table sets forth changes in our cash, cash equivalents, and investments in marketable debt securities for the periods indicated (in thousands):
August 1,
2026 		November 1,
2025 		Increase (Decrease)
Cash and cash equivalents $ 2,445,708 $ 1,091,952 $ 1,353,756
Short-term investments in marketable debt securities 184,293 216,148 (31,855)
Long-term investments in marketable debt securities 213,553 57,142 156,411
Total cash, cash equivalents, and investments in marketable debt securities $ 2,843,554 $ 1,365,242 $ 1,478,312
Cash, cash equivalents and investments increased by $1.5 billion during the first nine months of fiscal 2026. Operating activities generated $683.6 million of cash. In addition to the cash provided by operating activities, proceeds from the issuance of the 2031 Notes and the 2031 Warrants provided $1.6 billion in cash net of the following items: (i) repayment of the Refinanced 2030 Term Loan in full; (ii) 2031 Hedge Transaction purchase; and (iii) paid debt issuance costs. Proceeds from the issuance of equity under our employee stock purchase plan also provided $38.0 million in cash during the nine months ended August 1, 2026. The cash generated was partially offset by (i) cash used for stock repurchases under our stock repurchase program of $337.9 million; (ii) stock repurchases on vesting of our stock unit awards to employees relating to tax withholding of $278.3 million; and (iii) cash used to fund our investing activities for capital expenditures totaling $194.9 million during the nine months ended August 1, 2026.
For additional information about our debt transactions see Note 13 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.
Cash Provided By Operating Activities
The following sections set forth the components of our $683.6 million of cash provided by operating activities during the first nine months of fiscal 2026. Net income (adjusted for non-cash charges) provided cash of $1.1 billion, offset by cash used in operating assets and liabilities of $410.4 million.
Net income (adjusted for non-cash charges)
The following table sets forth our net income (adjusted for non-cash charges) during the period (in thousands):
Nine Months Ended
August 1, 2026
Net income $ 634,921
Adjustments for non-cash charges:
Loss on extinguishment of debt 7,143
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements 102,347
Share-based compensation expense 163,178
Amortization of intangible assets 35,386
Deferred taxes 49,266
Provision for inventory excess and obsolescence 72,428
Provision for warranty 30,050
Other (724)
Net income (adjusted for non-cash charges) $ 1,093,995
Operating Assets and Liabilities
Operating asset and liability requirements increased by $410.4 million during the period. The following table sets forth the major components of the cash changes in operating assets and liabilities (in thousands):
Nine Months Ended
August 1, 2026
Accounts receivable $ (251,531)
Inventories (118,334)
Prepaid expenses and other (111,567)
Accounts payable, accruals, and other obligations 66,956
Deferred revenue 6,764
Operating lease assets and liabilities, net (2,677)
Total cash consumed by operating assets and liabilities $ (410,389)
As compared to the end of fiscal 2025, for the first nine months of fiscal 2026:
•The change in accounts receivable primarily reflects increased sales volume and the timing of cash collections from customers;
•The change in inventory primarily reflects component purchases as part of our effort to optimize the cost and functioning of our supply chain;
•The change in prepaid expenses and other primarily reflects increases in non-trade receivables and prepaid income taxes;
•The change in accounts payable, accruals, and other obligations primarily reflects the timing of payments to suppliers, partially offset by the timing of payments associated with our annual incentive compensation plan;
•The change in deferred revenue primarily represents an increase in advanced payments received primarily on multi-year maintenance contracts from customers prior to revenue recognition; and
•The change in operating lease assets and liabilities, net, represents cash paid for operating lease payments in excess of operating lease costs.
Cash Paid for Interest, Net
The following table sets forth the cash paid for interest, net, during the period (in thousands):
Nine Months Ended
August 1, 2026
Refinanced 2030 Term Loan due October 28, 2030(1)
$ 40,991
2030 Senior Notes due January 31, 2030(2)
16,000
Interest rate swaps(3)
(1,703)
Revolving Credit Facility(4)
1,102
Finance leases 2,322
Cash paid during period $ 58,712
(1) The Refinanced 2030 Term Loan bore interest at SOFR for the chosen borrowing period plus a spread of 1.75% subject to a minimum SOFR rate of 0.00%. The Refinanced 2030 Term Loan terminated on June 11, 2026.
(2) The 2030 Notes bear interest at a rate of 4.00% per annum. Interest is payable on the 2030 Notes in arrears on January 31 and July 31 of each year.
(3) Our interest rate swaps fixed the SOFR rate for our Refinanced 2030 Term Loan through termination on June 11, 2026.
(4) During the first nine months of fiscal 2026, we utilized the Revolving Credit Facility to issue certain standby letters of credit and paid nominal commitment fees, interest expense and other administrative charges primarily relating to the Revolving Credit Facility.
For additional information about our debt and interest rate swaps, see Notes 12, 13, and 14 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.
Contractual Obligations
Our contractual obligations have not changed materially since November 1, 2025, except for the item listed below. For a summary of our contractual obligations, see "Liquidity and Capital Resources - Contractual Obligations" in Item 7 of Part II of our 2025 Annual Report.
Purchase Order Obligations. As of August 1, 2026, we had $3.3 billion in outstanding purchase order commitments to our contract manufacturers and component suppliers for inventory. In certain instances, we are permitted to cancel, reschedule or adjust these orders. Consequently, only a portion of this amount relates to firm, non-cancelable and unconditional obligations.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates have not changed materially since November 1, 2025. For a discussion of our critical accounting policies and estimates, see "Critical Accounting Policies and Estimates" in Item 7 of Part II of our 2025 Annual Report.
Effects of Recent Accounting Pronouncements
See Note 2 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report for information relating to our discussion of the effects of recent accounting pronouncements.
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