NETSCOUT SYSTEMS INC (NTCT) Risk Factors

Verbatim Item 1A Risk Factors from NETSCOUT SYSTEMS INC's latest 10-K. Filing date: 2026-05-14. Accession: 0001078075-26-000050.

This page reproduces the company's own Item 1A Risk Factors text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.

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Item 1A. Risk Factors.

You should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Annual Report and in our other SEC filings. The risks and uncertainties described below are those that we have identified as material; but they are not exhaustive; additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also impair our business, including our results of operations, liquidity, and financial condition.

Because of the following factors, as well as other variables affecting our results of operations, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

Summary of Risk Factors

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Unfavorable and uncertain conditions in our industry, our customers' industries, the global economy, or reductions in information technology spending could limit our ability to grow or maintain our business and negatively affect our results of operations.

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Potential product vulnerabilities or critical security defects, prioritization decisions regarding remedying vulnerabilities or security defects, or customers not deploying security releases or deciding not to upgrade products, services, or solutions could result in claims of liability against us, damage our reputation, or otherwise harm our business.

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If our products contain material errors or quality issues, such issues may be costly to correct, revenue may be delayed, we could be sued, and our reputation could be harmed.

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If our information technology systems, or those of third parties with whom we work, or our data are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences.

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If we fail to introduce new products and solutions or enhance our existing products and solutions to keep up with rapid technological change, demand for our products and solutions may decline.

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If we are unable to effectively use or integrate AI, or if our use of AI exposes us to significant risks, we may not achieve intended benefits and our results of operations could be adversely affected.

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Disruptions in our global supply chain and our reliance on sole or limited source suppliers could adversely impact our business.

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A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks.

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Increased customer demands on our technical support services may adversely affect our relationships with our customers and our financial results.

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The success of our business depends, in part, on the continued growth in the market for and the continued commercial demand for enterprise network observability, carrier service assurance, cybersecurity, and DDoS protection solutions.

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Failure to manage growth properly and to implement enhanced automated systems, including systems with AI, could adversely impact our business.

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Our success depends, in part, on our ability to manage and leverage our distribution channels. Disruptions to, or our failure to effectively develop and manage, these partners and the processes and procedures that support them could adversely affect our ability to generate revenues from the sale of our products and services. Managing these distribution channels and relationships requires experienced personnel, and lack of sufficient expertise could lead to a decrease in sales of our products and services, which could cause our operating results to suffer.

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International trade policies, including trade protection measures such as tariffs, sanctions, and trade barriers may adversely affect our business, financial condition, results of operations, and prospects.

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Our business and operations, and the operations of our customers, partners, and/or suppliers, may be adversely affected by significant business continuity events.

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Necessary licenses for third-party technology may not be available to us on commercially reasonable terms or at all.

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Our success depends on our ability to protect our intellectual property rights.

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Others may claim that we infringe on their intellectual property rights.

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Any current or future indebtedness may limit our operations and our use of our cash flow, and any failure to comply with

the covenants that apply to any indebtedness could adversely affect our liquidity and financial condition.

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Any failure to meet our debt obligations could damage our business.

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We may fail to secure necessary additional financing.

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The failure to recruit and retain qualified personnel and plan for and manage the succession of key executives could hinder our ability to successfully manage our business, which could have a material adverse effect on our financial position and operating results.

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We may not successfully complete acquisitions or integrate acquisitions we do make, which could impair our ability to compete and could harm our operating results.

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We face significant competition from other technology companies.

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Uncertainties in the regulation of the Internet could have a material and adverse impact on our financial condition and results of operations.

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We are subject to stringent and evolving U.S. state, local, and federal, and foreign laws, regulations, and rules, contractual obligations, industry standards, policies, and other obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations (or such failure by third parties with whom we work) could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business, results of operations; reputational harm; loss of revenue or profits; and other adverse business consequences.

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If we violate the U.S. Foreign Corrupt Practices Act or applicable anti-bribery laws in other countries, or if we fail to comply with U.S. export controls and government contracting laws, our business could be harmed.

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Our business is subject to laws, regulations and expectations relating to sustainability, human capital, governance and other corporate responsibility matters, which could increase costs and expose us to additional risks.

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Our actual operating results may differ significantly from our guidance.

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Our effective tax rate may fluctuate, which could increase our income tax expense and reduce our net income.

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We may be impacted by changes in taxation, trade, tariffs, and other regulatory requirements.

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Foreign currency exchange rates may adversely affect our financial statements.

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Our estimates and judgments related to critical accounting policies could be inaccurate.

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If we fail to maintain effective disclosure controls and procedures and internal control over financial reporting, investor confidence in our financial statements could decline, which could negatively impact the market price of our stock or our ability to raise capital.

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Our stock price has been subject to fluctuations, and will likely continue to be subject to fluctuations, which may be volatile and due to factors beyond our control.

Risks Related to Our Business and Industry

Unfavorable and uncertain conditions in our industry, our customers' industries, the global economy, or reductions in information technology spending could limit our ability to grow or maintain our business and negatively affect our results of operations.

Unfavorable and uncertain conditions in the economy both in the United States and abroad, including conditions resulting from financial and credit market fluctuations, high interest rates, inflation, international trade policies (including trade protection measures, such as tariffs, sanctions, and other trade barriers), domestic and international geopolitical unrest and turmoil, a shifting regulatory landscape, changes in government spending patterns, natural catastrophes, outbreaks of contagious diseases, armed conflicts or warfare, and terrorist attacks, could cause a decrease in business investments, including spending on information technology (IT), and negatively affect the growth of our business and our results of operations. In addition, we serve certain industries that have historically been cyclical and have experienced periodic downturns that have had a material adverse impact on demand for the products, software, and services that we offer. Many of our customers are concentrated in certain industries, including financial services, public sector, healthcare, and the service provider market. Furthermore, consolidation in certain industries may result in reduced overall spending on our products and solutions. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or how any such event may impact our business.

Potential product vulnerabilities or critical security defects, prioritization decisions regarding remedying vulnerabilities or security defects, or customers not deploying security releases or deciding not to upgrade products, services, or solutions could result in claims of liability against us, damage our reputation, or otherwise harm our business.

The products and services we sell or license to customers may contain vulnerabilities or critical security defects which have not been identified or remedied. We may also make prioritization decisions in determining which vulnerabilities or security defects to fix, and the timing of these fixes, which could result in exploitation that compromises security.

In addition, advances in tools and automation, including artificial intelligence (“AI”), may both increase the speed and sophistication with which vulnerabilities are identified or exploited and influence how vulnerabilities are detected, prioritized, and remediated.

Customers also sometimes need to test security releases before they can be deployed, which can delay implementation. In addition, we rely on third-party providers of software and cloud-based services, and we cannot control the rate at which they remedy vulnerabilities. Customers may also not deploy a security release or decide not to upgrade to the latest versions of our products or services leaving them vulnerable.

If our products contain material errors or quality issues, such issues may be costly to correct, revenue may be delayed, we could be sued, and our reputation could be harmed.

Our products are inherently complex, and, despite our quality assurance processes and testing by our customers and us, errors or quality issues may be found in our products after commencement of commercial shipments, especially when products are first introduced or when new versions are released. These errors may result from components supplied by third parties incorporated into our products, which makes us dependent upon the cooperation and expertise of such third parties for the diagnosis and correction of such errors. If errors are discovered, we may not be able to correct them in a timely manner or at all. In addition, we may need to make significant expenditures to eliminate errors and failures. Material errors and failures in our products could result in loss of or delay in market acceptance of our products and could damage our reputation. Regardless of the source of these defects or errors, we may need to divert the attention of our engineering personnel from our product development efforts to address the detection and correction of these errors and defects. If one or more of our products fail, a customer may assert warranty and other contractual claims for substantial damages against us. Our contracts with customers contain provisions relating to warranty disclaimers and liability limitations, which may not be upheld. Defending a lawsuit, regardless of its merit, is costly and may divert management's attention and harm the market's perception of us and our products. In addition, if our business liability insurance coverage proves inadequate or future coverage is unavailable on acceptable terms or at all, our business, operating results, and financial condition could be adversely impacted.

The occurrence or discovery of these types of errors or failures could have a material and adverse impact on our business, operating results, and financial condition. Any such errors, defects, or security vulnerabilities could also adversely affect the market's perception of our products and business.

If our information technology systems, or those of third parties with whom we work, or our data are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences.

Cyber-attacks, malicious internet-based activity, fraud, and similar activities threaten the confidentiality, integrity, and availability of our sensitive, proprietary, and confidential information, including personal information, business data, trade secrets, intellectual property, and confidential third-party data, and IT systems, and those of the third parties with whom we work. Such threats are prevalent and continue to rise, are increasingly difficult to detect and increasingly sophisticated, including through the use of automation and AI, and come from a variety of sources, including traditional computer "hackers," threat actors, "hacktivists" promoting certain causes, organized criminal threat actors, personnel (such as through theft or misuse or unintentional disclosure), sophisticated nation states, and nation-state-supported actors.

Increasingly, cyber-attacks are being used for geopolitical reasons and in conjunction with military conflicts and defense activities to drive strategic advantages for nation states and their supporters. During times of war and other major conflicts, we and the third parties with whom we work may be vulnerable to heightened risk of these attacks, including retaliatory cyber-attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.

We have experienced cyber incidents in the past, and we expect to continue to face such risks that could cause us to experience cyber incidents in the future. We and the third parties with whom we work have been, and continue to be, subject to a variety of evolving threats, including but not limited to social-engineering attacks (including phishing attacks), malicious code (such as viruses and worms), malware (including advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or human error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other IT assets, telecommunications failures, and other similar threats, including attacks enhanced or facilitated through the use of AI, such as AI-enabled social engineering attacks. Severe ransomware attacks are also prevalent and could lead to significant interruptions in our operations, ability to provide our products or services, loss of sensitive data and income, reputational harm, and diversion of funds for us and our customers.

In addition, some of our customers are subject to the EU's Digital Operational Resilience Act and similar UK regulatory requirements on operational resilience which may obligate such customers to impose contractual provisions on us, including certain mandatory third-party risk management provisions. If we fail to materially comply with these contractual requirements, we may be subject to investigations, audits, or other adverse consequences.

Additionally, future or past business transactions could expose us to additional cybersecurity risks, as our systems could be negatively affected by vulnerabilities present in acquired or integrated systems or technologies. Security issues not previously discovered during due diligence may arise in such systems or technologies.

Our reliance on third parties exposes us to cybersecurity risks and vulnerabilities, including supply-chain attacks, and other threats to our business operations due to security incidents or other interruptions they experience. For example, we rely on third parties and technologies to operate some of our business systems and process sensitive data in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other information systems. We also rely on third-party service providers to provide other products, services, or parts to our customers. Our ability to monitor these third parties' information security practices is limited. Third parties may not sufficiently maintain their information security measures or may change them without our knowledge or delay notification to us in a timely manner. If the third parties we rely on are subject to a security breach or otherwise suffer disruptions that affect the services we use, as has occurred in the past, the integrity and availability of our internal information could be compromised causing the loss of confidential or proprietary information, damage to our reputation, and economic loss. In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties' infrastructure in our supply chain or the supply chains of third parties with whom we work have not been compromised. If a third party with whom we work fails to satisfy their data privacy or security-related obligations to us, we cannot be certain that our applicable contracts with these third parties will adequately limit our data privacy or security-related liability to them or others, be sufficient to allow us to obtain indemnification or recovery from them, or be sufficient to cover all or any of our damages.

Although we have multiple and layered controls and security measures designed to prevent, detect, and respond to cyberattacks, experienced computer hackers are increasingly organized and sophisticated, and we cannot guarantee that our security measures will be sufficient to protect against unauthorized access to our IT networks, software, and systems. Malicious attack efforts operate on a large-scale and sometimes offer targeted attacks as a paid-for service. In addition, the techniques used to obtain access or sabotage networks change frequently, and we may be unable to anticipate such techniques, implement adequate preventative measures, or detect and stop security breaches that may arise from such techniques. As a provider of security solutions, we may be a more attractive target for such attacks. Other individuals or entities, including personnel or vendors, may also intentionally or unintentionally provide unauthorized access to our IT environments.

While we take steps to detect, mitigate, and remediate vulnerabilities in our information systems (such as hardware and/or software), vulnerabilities could be exploited and result in a security incident. We rely on third parties for vulnerability reporting including severity assessments that help prioritize patching. We may not, however, detect or remediate all such vulnerabilities including on a timely basis.

Any of the previously identified or similar threats can cause security incidents or other interruptions that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive data or our IT systems, or those of the third parties with whom we work. A security incident or other interruption could disrupt our ability (and that of third parties with whom we work) to provide our products and services.

Applicable data privacy and security obligations have required, and may in the future require us, or we may voluntarily choose, to notify relevant stakeholders, including affected individuals, customers, regulators and investors, of security incidents, or take other actions. Such disclosures and related actions could be costly, and the disclosure or the failure to comply with such applicable requirements could lead to adverse consequences.

If we, or a third party with whom we work, experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions; additional reporting, disclosure, notification and/or oversight requirements; restrictions on processing sensitive data; litigation; indemnification obligations; negative publicity; reputational harm; interruptions in our operations (including availability of data); financial loss; and other similar harms. Security incidents and attendant consequences may cause customers to stop using our services, deter new customers from using our services, and negatively impact our ability to grow and operate our business.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

If we fail to introduce new products and solutions or enhance our existing products and solutions to keep up with rapid technological change, demand for our products and solutions may decline.

The market enterprise network observability, carrier service assurance, cybersecurity, and DDoS protection solutions is highly competitive and characterized by rapid changes in technology, including AI, evolving industry standards, changes in customer requirements, a current high level of and increasing competition, and frequent product introductions and enhancements. Our success is dependent upon our ability to meet our customers' needs, which are driven by changes in technologies, new application technologies, new security risks and the emergence of new industry standards. In addition, new technologies may shorten the life cycle for our products and solutions or could render our existing or planned products and services less competitive or obsolete. We must address demand from our customers for advancements in our products and services applications to support our customers' growing needs and requirements in complex networks. To meet this challenge and remain competitive in the market, we must introduce new enhancements to our existing product lines and service offerings. If we are unable to develop, introduce and communicate new enterprise network observability, carrier service assurance, cybersecurity, and DDoS protection solutions or products ,or enhancements to existing solutions or products in a timely and successful manner, this inability could have a material and adverse impact on our business, operating results and financial condition.

As our success depends in part on our ability to develop product enhancements and new products and solutions that keep pace with continuing changes in technology, cyber risk and customer preferences, we must devote significant resources to research and development, development and introduction of new products and enhancements on a timely basis, and obtaining market acceptance for our existing products and new products. We have introduced and intend to continue to introduce new products and solutions. If the introduction of these products and solutions is significantly delayed or if we are unsuccessful in bringing these products and solutions to market, our business, operating results, and financial condition could be materially and adversely impacted. We are developing and are already deploying a number of new products as well as enhancements to our existing products and offerings, as well as additional software only solutions and products available in multiple form factors for most of our existing solutions.

We must invest in research and development to remain competitive in our industry. However, there can be no assurances that continued investment and increased research and development expenses will ultimately result in our maintaining or increasing our market share, which could result in a decline in our operating results. The process of developing new solutions is complex and uncertain; we must commit significant resources to developing new services or features without knowing whether our investments will result in services or features the market will accept. If our research and development expenses increase without a corresponding increase in our revenues, it could have a material adverse effect on our operating results. Also, we may not be able to successfully complete the development and market introduction of new products or product enhancements in a timely manner. If we fail to develop and deploy new products and product enhancements on a timely basis, or if we fail to gain market acceptance of our new products, our revenues will likely decline, and we may lose market share to our competitors.

If we are unable to effectively use or integrate AI, or if our use of AI exposes us to significant risks, we may not achieve intended benefits and our results of operations could be adversely affected.

We have integrated, and plan to further integrate, AI technologies developed by third parties and open-source communities into our products, services, and internal operations. These AI-related initiatives, whether successful or not, could require us to incur substantial costs and could result in delays in developing, enhancing, or releasing products and services.

In addition, AI algorithms and models may be flawed, and the datasets underlying them may be insufficient, outdated, or contain biased or otherwise problematic information. If AI tools that we develop, integrate, or use, including AI systems that operate with varying levels of autonomy and may interact with other systems or tools, generate outputs, analyses, or recommendations that are or are alleged to be deficient, inaccurate, or biased, our reputation, business, financial condition, and results of operations may be adversely affected.

AI technologies, including those integrated into our products, services or operations or used by our workforce or vendors, are subject to evolving laws and regulations and increased scrutiny, including with respect to data privacy, cybersecurity and intellectual property.

The use of AI by third parties or us may increase the risk of cybersecurity incidents or unauthorized access and could expose sensitive, confidential, proprietary, or personal data. In addition, while we have policies, protocols, and procedures in place, our use of AI may increase the risk of claims that our use of data, training materials, or outputs violates contractual, legal, or ethical standards, including with respect to intellectual property. Any legislation or regulatory requirements concerning AI adopted domestically or globally may require us to expend significant resources to comply, lead to regulatory investigations, fines, or penalties, require changes to our products, services, or business practices, or prevent or limit our use of AI. In addition, our use of third-party AI services may subject us to risks related to service availability, performance, and cost volatility.

In addition, if we are unable to effectively integrate AI into our products and services, or if our competitors adopt AI more rapidly or successfully, our competitive position may be adversely affected.

Disruptions in our global supply chain and our reliance on sole or limited source suppliers could adversely impact our business.

We rely on a global supply chain for the production of components for our products. Disruptions to the global supply chain generally and hardware shortages caused by the rapid build out of AI data centers have led to and could in the future continue to lead to delays, shortages, longer than normal lead times, unfavorable contractual terms relating to pricing and refundability and cancellation, discontinued components, and increased costs, which could negatively impact our revenue and our results of operations. Continued price increases across our supply chain may adversely affect our gross margins.

In response, we may take steps to mitigate supply-chain issues, including entering into additional or long‑term purchase commitments with suppliers or maintaining higher inventory levels. However, these actions could negatively impact our cash flow and financial results if we do not accurately forecast customer demand or if customers change their purchasing patterns in response to evolving supply‑chain conditions. We continue to monitor supply‑chain categories and key suppliers to manage these risks.

Specific components that are necessary for the hardware assembly of our instruments are obtained from separate sole source suppliers or a limited group of suppliers, including some with operations in locations with geopolitical uncertainty. These components include our network interface cards and proprietary hardware. Our reliance on sole or limited suppliers involves several risks, a lack of control over the manufacturing process and inventory management, potential inability to obtain an adequate supply of required components, and the inability to exercise control over pricing, quality, and timely delivery of components. For most of our products, we do not have the internal manufacturing capabilities to meet our customers' demands so we rely on third parties to supplement our capabilities. It is our practice to mitigate these risks by partnering with key suppliers, including distributors, to establish a variety of supply continuity practices. These practices may include, among other approaches, establishing buffer supply requiring suppliers to maintain adequate stocks of materials and use-based and kanban programs to set supply thresholds. We also maintain escrow arrangements for certain technologies. Where possible, we use widely available off-the-shelf hardware and work with large suppliers with multiple factories in diverse geographies. However, failure of supply, including because of a public health crisis, geopolitical conflicts, terrorism or war, tariffs and associated trade wars, sanctions or embargoes, or failure to execute effectively on any of our risk mitigation practices could result in our inability to obtain adequate supply or deliveries or to ship our products on a timely basis or

at all. Moreover, if we are unable to continue to acquire from these suppliers on acceptable terms or should any of these suppliers cease to supply us with components for any reason, we may not be able to identify and integrate an alternative source of supply in a timely fashion or at the same costs. Any transition to one or more alternate manufacturers could result in significant delays, operational problems, and increased costs, and may limit our ability to deliver our products to our customers on time for such transition period or, in extreme circumstances, at all. These risks could damage relationships with our current and prospective customers, cause shortfalls in expected revenue, and could materially and adversely impact our business, operating results and financial condition.

A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks.

Our public sector sales are conducted primarily through third‑party distribution and other intermediary arrangements or channel partners, which may limit our control over certain aspects of the sales process and increase our reliance on a limited number of such distributors or channel partners.

Selling to government entities can be highly competitive, expensive, and time-consuming, and often requires significant upfront time and expense without any assurance that we will win a sale. In addition, certain government customers require our products and service offerings to obtain and maintain specific certifications, authorizations, or accreditations, before they may be deployed. The process of obtaining and maintaining such certifications, authorizations, or accreditations can be costly, time-consuming and subject to evolving standards and ongoing compliance requirements, and there can be no assurance that we will obtain, maintain or timely renew any required certifications, authorizations, or accreditations. If we fail to do so, or if applicable requirements change, we may be unable to sell to certain government customers or may incur additional costs, which could adversely affect our public sector revenue.

Government demand and payment for our products and service offerings may also be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our offerings. Actual or threatened government shutdowns, continuing resolution, sequestration and other fiscal or budgetary disruptions may delay procurements, contract awards, renewals and payments, reduce spending on cybersecurity initiatives and otherwise adversely affect our public sector revenue and cash flows. Government entities may also have statutory, contractual or other legal rights to terminate contracts with us for convenience or due to a default, and any such termination may adversely affect our future operating results.

In the United States, federal government agencies may promulgate regulations, and the President may issue executive orders, requiring federal contractors to adhere to different or additional requirements after a contract is signed. Government contract laws and regulations affect how we do business with our customers and, in some instances, impose added costs on our business, including the establishment of compliance procedures and obtaining and maintaining required security clearances. If we do not meet applicable requirements of law or contract, we could be subject to fines and penalties, contract termination, suspension or debarment from government contracting, or other adverse consequences, which could materially and adversely affect our business, results of operations and financial condition.

Increased customer demands on our technical support services may adversely affect our relationships with our customers and our financial results.

We offer technical support services with many of our products. Our customers depend on our support organization to resolve issues relating to our products deployed on their networks. A high level of support is critical for continued relationships with our customers. If we or our channel partners do not effectively assist our customers in deploying our products, succeed in helping our customers quickly resolve post-deployment issues, and provide effective ongoing support, it could adversely affect our ability to sell our products to existing customers and could harm our reputation with existing and potential customers. Any failure to maintain high quality support and services could harm our operating results and reputation. Further, if customers demand these services, and we cannot adequately meet their demand, or if we cannot realize revenues in connection with our provision of services related to product support, it could have a material and adverse impact on our financial condition and results of operations.

The success of our business depends, in part, on the continued growth in the market for and the continued commercial demand for enterprise network observability, carrier service assurance, cybersecurity, and DDoS protection solutions.

We derive nearly all our revenue from the sale of products and services that are designed to protect our customers from cyberattacks and performance and availability disruptions. We have expanded our operations in the past through acquisitions and

organic growth and may continue to expand them in the future to gain share in the evolving markets in which we operate. Therefore, we must be able to predict the appropriate features and prices for future products and services to address the market, the optimal distribution strategy, and the future changes to the competitive environment. For us to be successful, our potential customers must recognize the value of more sophisticated solutions, decide to invest in the management of their networks and adopt our management solutions. Any failure of this market to continue to be viable would materially and adversely impact our business, operating results, and financial condition. Additionally, businesses may choose to outsource the operations and management of their networks to managed service providers. Our business may depend on our ability to continue to develop relationships with these service providers and successfully market our products to them.

Failure to manage growth properly and to implement enhanced automated systems, including systems with AI, could adversely impact our business.

The growth in size and complexity of our business and our customer base has been and will continue to be a challenge to our management and operations. Additional growth will place significant demands on our management, infrastructure, and other resources. To manage further growth effectively, we must increase management depth and enhance succession planning. It is also important to our continued success that we hire qualified employees, properly train them, and appropriately address underperformance issues, all while maintaining our corporate culture and spirit of innovation. If we are not successful at these efforts, our growth and operations could be adversely affected, and we may not be able to achieve our near- and long-term financial or operational goals. We will also need to maintain and continually improve our financial and management controls, reporting systems, and procedures as our business grows and evolves over time. If we are unable to manage our growth effectively, our costs, the quality of our products, the effectiveness of our sales organization, our ability to attract and retain key personnel, our business, our operating results and financial condition could be materially and adversely impacted. To manage our growth effectively, we may need to implement new or enhanced automated infrastructure technology and systems, including systems with AI.

Any disruptions or ineffectiveness relating to our systems implementations and enhancements could adversely affect our ability to process customer orders, ship products, provide services and support to our customers, bill and track our customers, fulfill contractual obligations, and otherwise run our business.

As our business evolves, we must also expand and adapt our IT and operational infrastructure. Our business relies on our data systems, billing systems and other operational and financial reporting and control systems. These systems have become increasingly complex due to the complexity of our business and acquisitions of new businesses with different systems. To manage our technical support infrastructure effectively and improve our sales efficiency, we will need to continue to upgrade and improve our data systems, billing systems, ordering processes, customer relationship management systems, and other operational and financial systems, procedures and controls. These upgrades and improvements may be difficult and costly, and they may require employees to dedicate a significant amount of time to implement. If we are unable to adapt our systems and organization in a timely, efficient, and cost-effective manner to accommodate changing circumstances, our business may be adversely affected.

Our success depends, in part, on our ability to manage and leverage our distribution channels. Disruptions to, or our failure to effectively develop and manage, these partners and the processes and procedures that support them could adversely affect our ability to generate revenues from the sale of our products and services. Managing these distribution channels and relationships requires experienced personnel, and lack of sufficient expertise could lead to a decrease in sales of our products and services, which could cause our operating results to suffer.

Our future growth and success may require us to increase the number and use of our indirect sales efforts through our distributors and channel partners and to leverage those relationships to expand these distribution channels and to develop new indirect distribution channels to increase revenue. Our channel partners have no obligation to purchase any products from us. Some of our distribution and channel partners also distribute and sell competitive products and services and the reduction in sales of our products by these partners could materially reduce our revenues. In addition, they could internally develop products that compete with our solutions or partner with our competitors and bundle or resell competitors' solutions, possibly at lower prices. The potential inability to develop relationships with new partners in new markets, expand and manage our existing partner relationships, the unwillingness of our partners to market and sell our products effectively or the loss of existing partnerships or experienced personnel could have a

material and adverse impact on our business, operating results and financial condition. Sales to customers outside the United States accounted for 45%, 43%, and 36% of our total revenue for the fiscal years ended March 31, 2026, 2025 and 2024, respectively.

The need to develop such relationships can be particularly acute in areas outside of the U.S. Recruiting and retaining qualified channel partners and training them in the use of our technology and services and ensuring that they comply with our legal and policy requirements requires significant time and resources throughout the relationship. If we are unable to retain and train such channel partners, our revenues could be negatively impacted.

International trade policies, including trade protection measures such as tariffs, sanctions, and trade barriers may adversely affect our business, financial condition, results of operations, and prospects.

Developments relating to tariffs and restrictive trade policies have created a dynamic trade landscape, which may adversely impact our business. In addition, many of our customers operate businesses that may be impacted by trade policies, which may result in decreased demand for our products and services or extended sales cycles as customers assess the impact of evolving trade policies on their operations and face increased costs or decreased revenue due to tariffs and trade restrictions.

Trade disputes, trade restrictions (including export control laws and regulations and tariffs) and political tensions between the U.S. and other countries may also exacerbate unfavorable macroeconomic conditions, including inflationary pressures, foreign exchange volatility, financial market instability and economic recessions or downturns, which may in turn negatively impact customer demand for our products and services, delay renewals, or limit expansion opportunities with existing customers or otherwise negatively impact our business and operations. Ongoing trade-related and macroeconomic uncertainty may contribute to volatility in the price of our common stock.

Although the ultimate impact of these risks has not significantly affected our business to date, it remains uncertain and any prolonged economic downturn or escalation in trade tensions could materially and adversely affect our business, results of operations, financial condition and prospects. In addition, tariffs and other international trade developments have heightened and may continue to heighten the risks related to the other risk factors described elsewhere in this report.

Our business and operations, and the operations of our customers, partners, and/or suppliers, may be adversely affected by significant business continuity events.

We face risks related to epidemics, pandemics, public health crises, natural disasters, acts of war or terrorism, and other significant business continuity events that could disrupt our operations and the operations of our customers, suppliers and other business partners. Such events may impair or prevent normal business activities for uncertain periods of time and could adversely affect commercial activity, supply chains, financial markets and the communities in which we operate.

We rely on third-party suppliers, manufacturers and service providers globally, and these parties may be impacted by such events, including through facility closures, workforce disruptions, transportation constraints, border closures, or restrictions on the export, import, or shipment of products. These disruptions may result in the delays or interruptions in product availability, increased costs, or reduced demand of our products and services, which could adversely affect our revenues and operating results.

In addition, our operations depend on the effective functioning of our technology infrastructure and systems, many of which are operated or hosted by third parties. The business continuity and disaster recovery programs we maintain may not anticipate or effectively address every risk scenario, and they may not always be fully or even partially successful or effective in preventing or mitigating third-party risks, which are out of our control, that could have a material impact on our business, operations and financial condition. A significant disruption could result in the loss of data, delays in completing sales or providing products and services, challenges in producing accurate and timely financial statements, or difficulties in meeting our disclosure obligations, which could adversely affect our reputation and the trading price of our common stock.

To the extent any such event adversely affects our business or financial results, it may also heighten many of the other risks described in this "Risk Factors" section, such as those relating to the estimates made for our critical accounting policies and the operation of internal controls over such estimates, as well as on our liquidity and on our ability to satisfy any indebtedness obligations and debt covenants.

Risks Related to Our Intellectual Property

Necessary licenses for third-party technology may not be available to us on commercially reasonable terms or at all.

We currently, and will in the future, license technology from third parties that we use to produce or embed in our products. Third-party licenses required in the future may not be available to us on commercially reasonable terms or at all. If we are unable to obtain any necessary third-party licenses, we would be required to redesign our product or obtain substitute technology, which may not perform as well, be of lower quality, or be more costly. The loss of these licenses or the inability to maintain any of them on commercially acceptable terms could delay development of future products or the enhancement of existing products. We may also choose to pay a premium price for such a license in certain circumstances where continuity of the licensed technology would outweigh the premium cost of the license. The unavailability of these licenses or the necessity of agreeing to commercially unreasonable terms for such licenses could materially adversely affect our business, financial condition, operating results, and cash flows.

Our success depends on our ability to protect our intellectual property rights.

Our business is heavily dependent on our intellectual property. We rely upon a combination of patent, copyright, trademark, and trade secret laws and registrations and non-disclosure and other contractual and license arrangements to protect our intellectual property rights. The reverse engineering, unauthorized copying, or other misappropriation of our intellectual property, including intentionally or unintentionally through AI, could enable third parties to benefit from our technology without compensating us or make claims on our intellectual property. Furthermore, the laws of some foreign jurisdictions do not offer the same protections for our proprietary rights as the laws of the United States, and we may be subject to unauthorized use of our products in those countries. Legal proceedings to enforce our intellectual property rights could be burdensome and expensive and could involve a high degree of uncertainty. In addition, legal proceedings may divert management's attention from growing our business. There can be no assurance that the steps we have taken to protect our intellectual property rights will be adequate to deter misappropriation or loss of proprietary information, or that we will be able to detect unauthorized use by third parties and take appropriate steps to enforce our intellectual property rights. The unauthorized copying or use of our products or proprietary information could result in reduced sales of our products and eventually harm our operating results.

Others may claim that we infringe on their intellectual property rights.

We have been and may continue to be subject to claims by others, whether valid or not, that our products infringe on their intellectual property rights, patents, copyrights, or trademarks. Further, intellectual property issues, such as ownership, copyright, and patentability, have not been fully settled with respect to AI technology. Inventions or works of authorship created through the use of AI technology may be based or rely on, or contain, materials that were used in the training of such technologies and which are subject to third-party intellectual property, which could further limit our ability to obtain intellectual property protection in such inventions or works of authorship.

These claims, whether valid or not, could require us to spend significant sums in litigation, pay damages or royalties, delay product shipments, reengineer our products, rename our products and rebuild name recognition, or acquire licenses to such third-party intellectual property. We may not be able to secure required licenses on commercially reasonable terms or secure them at all, which could force our customers to stop using our products, or in the case of resellers and others, stop selling our products. In some instances, we have defended against specious patent infringement claims by non-practicing or patent assertion entities and ultimately achieved successful outcomes. In some cases, we have agreed to contract terms that indemnify our customers and partners if our products or technology infringe or misappropriate third party intellectual property rights; therefore, we could become involved in litigation or claims brought against our customers or partners if our products or technology are the subject of such allegations. Any of these claims or resulting events could have a material and adverse impact on our business, operating results, and financial condition.

Risks Related to Our Liquidity and Financial Condition

Any current or future indebtedness may limit our operations and our use of our cash flow, and any failure to comply with the covenants that apply to any indebtedness could adversely affect our liquidity and financial condition.

We are party to a Third Amended and Restated Credit Agreement, which provides for a five-year $600 million senior secured revolving credit facility, including a letter of credit sub-facility of up to $75 million. We may elect to use the credit facility for working capital or for other capital allocation purposes. The commitments under the Third Amended and Restated Credit Agreement

will expire on October 4, 2029, and any outstanding loans will be due on that date. As of the date of this report, we did not have any amounts outstanding under the Third Amended and Restated Credit Agreement.

The revolving credit facility also imposes certain restrictions on us; for a more detailed description please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations." Upon an event of default, for example, the administrative agent, with the consent of, or at the request of, the holders of more than 50% in principal amount of the loans and commitments, may terminate the commitments and accelerate the maturity of the loans outstanding and enforce certain other remedies under the Third Amended and Restated Credit Agreement and other loan documents, which would adversely affect our liquidity and financial condition. If we take on additional indebtedness, the risks described above could increase.

Moreover, our debt level can have negative consequences, including exposing us to future interest rate risk. We may incur additional debt in the future, and there can be no assurance that our cost of funding will not substantially increase at that time.

Any failure to meet our debt obligations could damage our business.

Our ability to meet our obligations, if any, under the Third Amended and Restated Credit Agreement will depend on market conditions and our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. If we are unable to remain profitable, or if we use more cash than we generate in the future, our level of indebtedness at such time could adversely affect our operations by limiting or prohibiting our ability to obtain financing for additional capital expenditures, acquisitions and general corporate purposes. In addition, if we are unable to make payments as may be required under the Third Amended and Restated Credit Agreement, we would be in default under the terms of the loans, which could result in the acceleration of our indebtedness, restrictions on our operations, or the exercise of remedies by the lenders, and seriously harm our business. If we incur significantly more debt, this could intensify the risks described above.

We may fail to secure necessary additional financing.

Our future success may depend in part on our ability to obtain additional financing to support our continued growth and operations and any downgrades in our credit rating could affect our ability to obtain additional financing in the future or may affect the terms of any such financing. If our existing sources of liquidity are insufficient to satisfy our operating requirements, we may need to seek to raise capital by one or more of the following:

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issuing additional common stock or other equity instruments;

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acquiring additional bank debt;

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issuing debt securities; or

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obtaining lease financings.

However, we may not be able to obtain additional capital when we want or need it, or capital may not be available on satisfactory terms, including in light of current macroeconomic conditions, such as heightened inflation and increasing interest rates, stock price volatility, and the risk of a potential recession. Furthermore, any additional capital may have terms that adversely affect our business, such as new financial or operating covenants, or that may result in dilution to our stockholders.

We expect that existing cash, cash equivalents, marketable securities, cash provided from operations and our bank credit facilities will be sufficient to meet ongoing cash requirements. However, our failure to generate sufficient cash as our debt becomes due or to renew credit lines prior to their expiration could materially adversely affect our business, financial condition, operating results, and cash flows.

Other Risks Related to Our Business

The failure to recruit and retain qualified personnel and plan for and manage the succession of key executives could hinder our ability to successfully manage our business, which could have a material adverse effect on our financial position and operating results.

We operate in global markets where there is intense competition for experienced personnel. We depend on our ability to identify, recruit, hire, train, develop and retain qualified and effective professionals and to attract and retain talent needed to execute our business strategy. Our future success depends in large part upon our ability to attract, train, motivate and retain highly skilled employees, particularly executives, sales and marketing personnel, software engineers, and technical support personnel. The

complexity of our products, software systems and services require highly trained professionals. The labor market for these individuals has historically been very competitive due to the limited number of people available with the necessary technical skills and understanding. If we are unable to attract and retain the highly skilled technical personnel that are integral to our sales, marketing, product development and technical support teams, the rate at which we can generate sales and develop new products or product enhancements may be limited. This inability could have a material and adverse impact on our business, operating results, and financial condition.

In addition, we must maintain the size of our sales force to support our direct sales and indirect sales channels. Because our products are very technical, salespeople require a comparatively long period of time to become productive, typically three to twelve months. This lag in productivity, as well as the challenge of attracting qualified candidates, may make it difficult to maintain our sales force. If we are unable to maintain our sales capability, our business, operating results and financial condition could be materially and adversely impacted.

Loss of key personnel or a failure of our succession plan could adversely impact our business. Our future success depends to a significant degree on the skills, experience and efforts of Anil Singhal, our President, Chief Executive Officer, and co-founder, and our other key executive officers and senior managers to work effectively as a team. Effective succession planning is also important for our long-term success, and any future failure to ensure effective transfers of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution. The loss of one or more of our key personnel could have a material and adverse impact on our business, operating results, and financial condition. We must, therefore, continuously plan for and manage the succession of key executives due to retirement, illness, or competitive offers.

We may not successfully complete acquisitions or integrate acquisitions we do make, which could impair our ability to compete and could harm our operating results.

We may choose to acquire complementary businesses, products, or technologies to remain competitive or expand our business. We investigate and evaluate potential acquisitions of complementary businesses, products, and technologies in the ordinary course of business. We may compete for acquisition opportunities with entities having significantly greater resources than we have. As a result, we may not succeed in acquiring some or all businesses, products, or technologies that we seek to acquire. Our inability to effectively consummate acquisitions on favorable terms could significantly impact our ability to compete effectively in our targeted markets and could negatively affect our results of operations.

Acquisitions that we do complete could adversely impact our business. The potential adverse consequences from acquisitions include:

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the potentially dilutive issuance of common stock or other equity instruments;

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the incurrence of debt and amortization expenses related to acquired intangible assets;

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the potential litigation or other liabilities or claims or regulatory actions in connection with an acquisition;

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the incurrence of significant costs and expenses to complete the acquisition and integrate the acquired business; and

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the potentially negative impact of poor performance of an acquisition on our earnings per share.

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Acquisition transactions also involve numerous business risks. These risks from acquisitions include:

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difficulties in assimilating the acquired operations, technologies, personnel, and products;

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difficulties in assimilating diverse financial reporting and management information systems as well as differing ordering processes and customer relationship management systems;

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use of cash to pay for acquisitions that may limit other potential uses of our cash, including stock repurchases and repayment of outstanding indebtedness;

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substantial accounting charges for restructuring and related expenses, write-off of in-process research and development, impairment of goodwill, amortization or impairment of intangible assets and share-based compensation expense;

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the potential loss of key employees, customers, distributors, or suppliers; and

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the inability to generate sufficient revenue to offset acquisition or investment costs.

If we are not able to successfully manage these issues, the anticipated benefits and efficiencies of the acquisitions may not be realized fully or at all, or may take longer to realize than expected, and our ability to compete, our revenue and gross margins and our results of operations may be adversely affected.

We face significant competition from other technology companies.

The enterprise network observability, carrier service assurance, cybersecurity, and DDoS protection solutions markets are highly competitive, rapidly evolving, and fragmented markets that have overlapping technologies and competitors, both large and small, and we expect increasing competition on solutions offerings and pricing. We believe customers make purchasing decisions based primarily upon the following factors:

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product and service performance, functionality, and price;

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timeliness of new product and service introductions;

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network capacity;

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ease of installation, integration, and use;

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customer service and technical support;

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name and reputation of vendor;

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quality and value of the product and services; and

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alliances with industry partners.

We compete with a large and growing number of providers of enterprise network observability, carrier service assurance, cybersecurity, and DDoS protection solutions. In addition, leading network equipment, network security and service assurance and application technology vendors offer their own management solutions, including products which they license from other competitors. Some of our current and potential competitors have greater name recognition and substantially greater financial, management, marketing, service, support, technical, distribution and other resources than we do. Other competitors may take greater advantage of emerging new technologies and applications to compete with us. In addition, some of our customers develop their own in-house solutions to meet their technological needs. Further, in recent years some of our competitors have been acquired by larger companies that are seeking to enter or expand in the markets in which we operate. We expect this trend to continue as companies attempt to strengthen or maintain their market positions in an evolving industry. Therefore, given their larger size and greater resources, our competitors may be able to respond more effectively than we can to new or changing opportunities, technologies, standards and customer requirements, including by lowering prices to attract our customers, and may be less dependent on key industry events to generate sales for their products.

As a result of the competitive factors highlighted in this section and in other risk factors, including the introduction of disruptive technologies, we may not be able to compete effectively with our current or future competitors. If we are unable to anticipate or react to these competitive challenges or if existing or new competitors gain market share in any of our markets, our competitive position could weaken, and we could experience a decline in our sales that could adversely affect our business and operating results. This competition could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of market share, any of which would likely have a material and adverse impact on our business, operating results and financial condition.

Uncertainties in the regulation of the Internet could have a material and adverse impact on our financial condition and results of operations.

We could be materially adversely affected by increased regulation of the Internet in any country where we operate, as well as access to or commerce conducted on the Internet. Governments may change or increase regulations or impose restrictions on sales, licensing, distribution, and the exporting or importing of certain technologies to or from certain countries.

The adoption of additional regulations of the Internet could decrease demand for our products, and, at the same time, increase the cost of selling our products, which could have a material and adverse effect on our financial condition and results of operations. Our business is subject to regulation by various federal, state, local and foreign governments. In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States. These laws and regulations may also impact our innovation and business drivers in developing or using new and emerging technologies, including those related to AI and machine learning.

Failure to comply with applicable laws and regulations governing Internet access could subject us to investigations, sanctions, enforcement actions, lost profits, fines, damages, civil and criminal penalties, injunctions or other consequences, and could materially

adversely affect our business, reputation, results of operations and financial condition. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources.

We are subject to stringent and evolving U.S. state, local, and federal, and foreign laws, regulations, and rules, contractual obligations, industry standards, policies, and other obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations (or such failure by third parties with whom we work) could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business, results of operations; reputational harm; loss of revenue or profits; and other adverse business consequences.

Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security. The regulatory framework for data privacy and security issues worldwide has and will continue to evolve, and as a result, legal requirements and enforcement practices are likely to continue to impact business requirements regarding the processing of sensitive data. In many jurisdictions, enforcement activities and consequences for noncompliance are rising.

In the United States, federal, state, and local governments have enacted and are continuing to enact numerous data privacy and security laws, including data breach notification laws, personal information privacy laws, consumer protection laws, and other similar laws. Furthermore, under various privacy laws and other obligations, we may be required to obtain certain consents to process personal information. Our inability or failure to do so could result in adverse consequences.

Numerous U.S. states have enacted comprehensive data privacy and security laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal information, such as the right to access, correct, or delete certain personal information. As applicable, the exercise of these rights may impact our business and ability to provide our products and services. These state laws allow for statutory fines for noncompliance. These developments may further complicate compliance efforts and increase legal risk and compliance costs for us and the third parties with whom we work.

Outside the United States, a number of laws, regulations, and industry standards also govern data privacy and security. These and other obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions. For example, the EU GDPR, the United Kingdom's GDPR and similar laws in other countries impose strict requirements for processing personal information. Complying with these obligations requires us to devote resources and may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal information on our behalf.

In addition, we may be unable to transfer personal information from Europe and other jurisdictions to the United States or other countries due to data localization requirements or limitations on cross-border data transfers. The various legal mechanisms available to transfer personal information from Europe to the United States and other countries such as the European Economic Area’s standard contractual clauses, the UK's International Data Transfer Agreement/Addendum, and the EU-U.S. Data Privacy Framework, are subject to legal challenges, and there is no assurance that in the future we will be able to rely on these measures to lawfully transfer personal information to the United States. If there is no lawful manner for us to transfer personal information from Europe or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, fines and penalties, the inability to transfer data and work with resellers, vendors and other third parties, and injunctions against our processing or transferring of personal information necessary to operate our business.

In addition to data privacy and security laws, we are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.

We publish policies, marketing materials and other statements regarding our data privacy and security compliance activities. Regulators in the United States are increasingly scrutinizing these statements, and if these policies, materials or statements are found to be inaccurate, misleading, or incomplete we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.

We may at times fail, or be perceived to have failed, in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties with whom we work may fail to comply with such obligations, which could negatively impact our business operations. If we or the third parties with whom we work fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions; litigation; additional reporting requirements and/or oversight; bans on processing personal information; and orders to destroy or not use personal information. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to, loss of customers, inability to process personal information or to operate in certain jurisdictions, limited ability to develop or commercialize our products, expenditure of time and resources to defend any claim or inquiry, adverse publicity, or substantial changes to our business model or operations.

If we violate the U.S. Foreign Corrupt Practices Act or applicable anti-bribery laws in other countries, or if we fail to comply with U.S. export controls and government contracting laws, our business could be harmed.

A material portion of our revenue is derived from international sales. We must comply with foreign and U.S. laws and regulations, such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and other local laws prohibiting corrupt payments to government officials and others, as well as anti-competition regulations.

The U.S. Foreign Corrupt Practices Act (FCPA) prohibits U.S. companies and their intermediaries from making corrupt payments to foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment and requires companies to maintain appropriate record-keeping and internal accounting practices to accurately reflect the transactions of the company. Under the FCPA, U.S. companies may be held liable for actions taken by agents or local partners or representatives. In addition, regulators may seek to hold us liable for successor liability FCPA violations committed by companies which we acquire. We are also subject to the U.K. Bribery Act and may be subject to anti-corruption laws of other countries in which we do business.

In addition to anti-bribery and anti-corruption laws, we are also subject to the export and re-export control laws of the U.S., including the U.S. Export Administration Regulations (EAR) and the Office of Foreign Asset Control (OFAC), as well as to U.S. and state and local government contracting laws, complex procurement rules and regulations, and may be subject to government contracting laws of other countries in which we do business. If we or our distributors, resellers, agents, or other intermediaries fail to comply with the FCPA, the EAR, OFAC, or U.S. or state and local government contracting laws, or the anti-corruption, export or governmental contracting laws of other countries, governmental authorities in the U.S. or other countries could seek to impose civil and/or criminal penalties, which could have a material adverse effect on our business, results of operations, financial conditions and cash flows. Violations of these laws and regulations could result in fines and penalties, criminal sanctions, restrictions on our business conduct including suspension or debarment from future government business, and on our ability to offer our products and services in one or more countries. Such violations could also adversely affect our reputation with existing and prospective customers, which could negatively impact our operating results and growth prospects.

Our business is subject to laws, regulations and expectations relating to sustainability, human capital, governance and other corporate responsibility matters, which could increase costs and expose us to additional risks.

We and our suppliers are subject to evolving laws and regulations pertaining to identifying, measuring, and reporting sustainability, human capital, governance, and other corporate responsibility matters. In addition, regulators, customers, investors, employees, and other stakeholders remain focused on these matters and related disclosures. These changing rules, regulations, and requirements have resulted in, and are likely to continue to result in, expense, time, and attention spent complying with or meeting such regulations. We also communicate certain corporate responsibility initiatives and goals in our public disclosures. Statements about our initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. If our corporate responsibility-related data, processes and reporting are incomplete or inaccurate, or if we fail or are perceived to have failed to achieve progress with respect to our corporate responsibility goals on a timely basis, or at all, may expose us to government investigations, enforcement actions or private litigation, and our reputation, business, financial performance and growth could be adversely affected. The lack of harmonization in the legal and regulatory landscape across the jurisdictions in which we operate may also subject us to enhanced compliance risks and costs.

General Risk Factors

Our actual operating results may differ significantly from our guidance.

We generally release guidance regarding our future performance on our quarterly earnings conference calls, quarterly earnings releases, and otherwise. Such guidance, which includes forward-looking statements, reflects our management’s estimates as of the date of release and is based on projections prepared by our management. We may also decide not to release, or to defer, issuing guidance, where such guidance might not be appropriate or when we do not have sufficient visibility or clarity to issue such guidance. In those situations, we expect to communicate our reasons for not releasing or deferring release of guidance.

Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. The principal reason that we release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors. We are not responsible for any projections or reports published by any such analysts or investors.

Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results may vary from our guidance, and the variations may be material. In light of the foregoing, investors are urged not to rely solely upon our guidance in making an investment decision regarding our common stock.

Any failure to successfully implement or execute our operating strategy or the occurrence of any of the events or circumstances set forth in this "Risk Factors" section in this report could result in the actual operating results being different from our guidance, and the differences may be adverse and material.

Our effective tax rate may fluctuate, which could increase our income tax expense and reduce our net income.

Our effective tax rate or the taxes we owe could be adversely affected by several factors, many of which are outside of our control, including:

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changes in the relative proportions of revenues and income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;

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changing tax laws, regulations, and interpretations in multiple jurisdictions in which we operate as well as the requirements of certain tax rulings;

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changes in the research and development tax credit laws;

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earnings being lower than anticipated in jurisdictions where we have lower statutory rates and being higher than anticipated in jurisdictions where we have higher statutory rates;

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the valuation of generated and acquired deferred tax assets and the related valuation allowance on these assets;

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transfer pricing adjustments;

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the tax effects of purchase accounting for acquisitions and restructuring charges that may cause fluctuations between reporting periods; and

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tax assessments or any related tax interest or penalties that could significantly affect our income tax expense for the period in which the settlements take place.

We are subject to income taxes in the United States and in numerous foreign jurisdictions. From time to time, we may receive notices that a tax authority in a particular jurisdiction believes that we owe a greater amount of tax than we have reported to such authority. There can be no assurance that our provision for income taxes is sufficient and that a determination by a tax authority will not have an adverse effect on our results of operations. An adverse change in our effective tax rate could have a material and adverse effect on our financial condition and results of operations and the price of our common stock could decline if our financial results are materially affected by an adverse change in our effective tax rate.

We may be impacted by changes in taxation, trade, tariffs, and other regulatory requirements.

We are subject to income tax in local, national, and international jurisdictions. In addition, our products are subject to import and excise duties and/or sales or value-added taxes ("VAT") in many jurisdictions. We are also subject to the examination of our tax returns and other tax matters by the Internal Revenue Service and other tax authorities and governmental bodies. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes.

Additionally, changes in or the improper application of import and excise duties and or sales taxes or VAT may negatively impact our operating results. There can be no assurance as to the outcome of these examinations. Fluctuations in tax rates and duties, changes in tax legislation or regulation or adverse outcomes of these examinations could have a material adverse effect on our results of operations, financial condition, and cash flows.

There is increased uncertainty with respect to tax policy, continuing trade agreements, and trade relations between the U.S. and other countries. Major developments in tax policy or trade relations, such as the imposition of unilateral or retaliatory tariffs or international sanctions on imported products, could have a material adverse effect on our results of operations, financial condition, and cash flows.

Foreign currency exchange rates may adversely affect our financial statements.

A material portion of our revenue is derived from international operations. Our consolidated financial results are reported in U.S. dollars. Most of the expenses of our foreign subsidiaries are denominated in local currencies. Given that cash is typically received over an extended period of time for many of our license and support agreements and given that a material portion of our revenue is generated outside of the United States, fluctuations in foreign exchange rates (including the Euro, British Pound, Indian Rupee, and Canadian Dollar) against the U.S. dollar could result in substantial changes in reported revenues and operating results due to the foreign exchange impact upon translation of these transactions into U.S. dollars.

In the normal course of business, we employ various hedging strategies to partially mitigate these risks, including the use of derivative instruments. These strategies may not be effective in fully protecting us against the effects of fluctuations from movements in foreign exchange rates, including the increased volatility in foreign exchange rates relating to armed conflicts or wars, related geopolitical tensions, as well as public health crises. Fluctuations of the foreign exchange rates could materially adversely affect our business, financial condition, operating results, and cash flow.

Additionally, sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S. dollar and may adversely affect our financial statements. Increased strength of the U.S. dollar increases the effective price of our products sold in U.S. dollars into other countries, which may require us to lower our prices or adversely affect sales. Decreased strength of the U.S. dollar could adversely affect the cost of materials, products, and services we purchase overseas. Sales and expenses of our non-U.S. businesses are also translated into U.S. dollars for reporting purposes and the strengthening or weakening of the U.S. dollar could result in unfavorable translation effects. In addition, we may invoice customers in a currency other than the functional currency of our business, and movements in the invoiced currency relative to the functional currency could also result in unfavorable translation effects. We also face exchange rate risk from our investments in subsidiaries owned and operated in foreign countries.

Our estimates and judgments related to critical accounting policies could be inaccurate.

We consider accounting policies related to revenue recognition, and valuation of goodwill to be critical in fully understanding and evaluating our financial results. Management makes judgments and creates estimates when applying these policies. These estimates and judgments affect, among other things, the reported amounts of our assets, liabilities, revenue and expenses, the amounts of charges accrued by us, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances and at the time they are made. If our estimates or the assumptions underlying them are not correct, actual results may differ materially from our estimates and we may need to, among other things, accrue additional charges or impair assets that could adversely impact our business. As a result, our operating results and financial condition could be materially and adversely impacted in future periods.

If we fail to maintain effective disclosure controls and procedures and internal control over financial reporting, investor confidence in our financial statements could decline, which could negatively impact the market price of our stock or our ability to raise capital.

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with applicable accounting standards. Like all control systems, they are subject to inherent limitations and may not prevent or detect all errors, misstatements or intentional misconduct. These limitations may arise from, among other things, management judgments, human errors, misinterpretation of information or circumvention of controls.

Under Section 404 of the Sarbanes-Oxley Act, management is required to evaluate and determine the effectiveness of our internal control over financial reporting, which requires significant management attention and resources. As our business, operations, systems and regulatory requirements evolve, we may be required to modify or enhance our disclosure controls and procedures and internal control over financial reporting to address new or increased complexity. If we are unable to adapt our controls to such changes in the future, or if control deficiencies arise that are not adequately remediated, investor confidence in our reported financial information could decline, which could negatively impact the market price of our stock or our ability to access capital.

Our stock price has been subject to fluctuations, and will likely continue to be subject to fluctuations, which may be volatile and due to factors beyond our control.

The market price of our common stock is subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this "Risk Factors" section and elsewhere in this report, factors that could cause fluctuations in the market price of our common stock include the following:

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ratings changes by any securities analysts who follow our company;

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announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;

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changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

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changes in accounting standards, policies, guidelines, interpretations, or principles;

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actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;

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developments or disputes concerning our intellectual property or our products and platform capabilities, or third-party proprietary rights;

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cybersecurity attacks or incidents;

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announced or completed acquisitions of businesses or technologies by us or our competitors;

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changes in our board of directors or management;

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announced or completed equity or debt transactions involving our securities;

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sales of shares of our common stock by us, our officers, directors, or other stockholders; and

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other events or factors, including those resulting from global and macroeconomic conditions, including heightened inflation, rising interest rates, bank failures, and a potential recession, and speculation regarding the same, as well as public health crises, armed conflicts or wars, related geopolitical tensions, incidents of terrorism, or responses to these events.

In addition, the market for technology stocks and the stock markets in general have experienced extreme price and volume fluctuations. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business, results of operations, financial condition, and cash flows. A decline in the value of our common stock, including as a result of one or more factors set forth above, may result in substantial losses for our stockholders.

NETSCOUT SYSTEMS INC (NTCT) Risk Factors

Item 1A. Risk Factors.

Summary of Risk Factors

•Unfavorable and uncertain conditions in our industry, our customers' industries, the global economy, or reductions in information technology spending could limit our ability to grow or maintain our business and negatively affect our results of operations.

•If our products contain material errors or quality issues, such issues may be costly to correct, revenue may be delayed, we could be sued, and our reputation could be harmed.

•If we fail to introduce new products and solutions or enhance our existing products and solutions to keep up with rapid technological change, demand for our products and solutions may decline.

•If we are unable to effectively use or integrate AI, or if our use of AI exposes us to significant risks, we may not achieve intended benefits and our results of operations could be adversely affected.

•Disruptions in our global supply chain and our reliance on sole or limited source suppliers could adversely impact our business.

•A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks.

•Increased customer demands on our technical support services may adversely affect our relationships with our customers and our financial results.

•The success of our business depends, in part, on the continued growth in the market for and the continued commercial demand for enterprise network observability, carrier service assurance, cybersecurity, and DDoS protection solutions.

•Failure to manage growth properly and to implement enhanced automated systems, including systems with AI, could adversely impact our business.

•International trade policies, including trade protection measures such as tariffs, sanctions, and trade barriers may adversely affect our business, financial condition, results of operations, and prospects.

•Our business and operations, and the operations of our customers, partners, and/or suppliers, may be adversely affected by significant business continuity events.

•Necessary licenses for third-party technology may not be available to us on commercially reasonable terms or at all.

•Our success depends on our ability to protect our intellectual property rights.

•Others may claim that we infringe on their intellectual property rights.

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the covenants that apply to any indebtedness could adversely affect our liquidity and financial condition.

•Any failure to meet our debt obligations could damage our business.

•We may fail to secure necessary additional financing.

•We may not successfully complete acquisitions or integrate acquisitions we do make, which could impair our ability to compete and could harm our operating results.

•Uncertainties in the regulation of the Internet could have a material and adverse impact on our financial condition and results of operations.

•If we violate the U.S. Foreign Corrupt Practices Act or applicable anti-bribery laws in other countries, or if we fail to comply with U.S. export controls and government contracting laws, our business could be harmed.

•Our business is subject to laws, regulations and expectations relating to sustainability, human capital, governance and other corporate responsibility matters, which could increase costs and expose us to additional risks.

•Our actual operating results may differ significantly from our guidance.

•Our effective tax rate may fluctuate, which could increase our income tax expense and reduce our net income.

•We may be impacted by changes in taxation, trade, tariffs, and other regulatory requirements.

•Foreign currency exchange rates may adversely affect our financial statements.

•Our estimates and judgments related to critical accounting policies could be inaccurate.

•Our stock price has been subject to fluctuations, and will likely continue to be subject to fluctuations, which may be volatile and due to factors beyond our control.

Risks Related to Our Business and Industry

Unfavorable and uncertain conditions in our industry, our customers' industries, the global economy, or reductions in information technology spending could limit our ability to grow or maintain our business and negatively affect our results of operations.

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If our products contain material errors or quality issues, such issues may be costly to correct, revenue may be delayed, we could be sued, and our reputation could be harmed.

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If we fail to introduce new products and solutions or enhance our existing products and solutions to keep up with rapid technological change, demand for our products and solutions may decline.

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If we are unable to effectively use or integrate AI, or if our use of AI exposes us to significant risks, we may not achieve intended benefits and our results of operations could be adversely affected.

In addition, if we are unable to effectively integrate AI into our products and services, or if our competitors adopt AI more rapidly or successfully, our competitive position may be adversely affected.

Disruptions in our global supply chain and our reliance on sole or limited source suppliers could adversely impact our business.

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A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks.

Increased customer demands on our technical support services may adversely affect our relationships with our customers and our financial results.

The success of our business depends, in part, on the continued growth in the market for and the continued commercial demand for enterprise network observability, carrier service assurance, cybersecurity, and DDoS protection solutions.

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Failure to manage growth properly and to implement enhanced automated systems, including systems with AI, could adversely impact our business.

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International trade policies, including trade protection measures such as tariffs, sanctions, and trade barriers may adversely affect our business, financial condition, results of operations, and prospects.

Our business and operations, and the operations of our customers, partners, and/or suppliers, may be adversely affected by significant business continuity events.

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Risks Related to Our Intellectual Property

Necessary licenses for third-party technology may not be available to us on commercially reasonable terms or at all.

Our success depends on our ability to protect our intellectual property rights.

Others may claim that we infringe on their intellectual property rights.

Risks Related to Our Liquidity and Financial Condition

Any current or future indebtedness may limit our operations and our use of our cash flow, and any failure to comply with the covenants that apply to any indebtedness could adversely affect our liquidity and financial condition.

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Moreover, our debt level can have negative consequences, including exposing us to future interest rate risk. We may incur additional debt in the future, and there can be no assurance that our cost of funding will not substantially increase at that time.

Any failure to meet our debt obligations could damage our business.

We may fail to secure necessary additional financing.

Other Risks Related to Our Business

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We may not successfully complete acquisitions or integrate acquisitions we do make, which could impair our ability to compete and could harm our operating results.

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Uncertainties in the regulation of the Internet could have a material and adverse impact on our financial condition and results of operations.

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adversely affect our business, reputation, results of operations and financial condition. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources.

In addition to data privacy and security laws, we are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.

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If we violate the U.S. Foreign Corrupt Practices Act or applicable anti-bribery laws in other countries, or if we fail to comply with U.S. export controls and government contracting laws, our business could be harmed.

Our business is subject to laws, regulations and expectations relating to sustainability, human capital, governance and other corporate responsibility matters, which could increase costs and expose us to additional risks.

General Risk Factors

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Our actual operating results may differ significantly from our guidance.

Our effective tax rate may fluctuate, which could increase our income tax expense and reduce our net income.

•tax assessments or any related tax interest or penalties that could significantly affect our income tax expense for the period in which the settlements take place.

We may be impacted by changes in taxation, trade, tariffs, and other regulatory requirements.

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•
Unfavorable and uncertain conditions in our industry, our customers' industries, the global economy, or reductions in information technology spending could limit our ability to grow or maintain our business and negatively affect our results of operations.

•
If our products contain material errors or quality issues, such issues may be costly to correct, revenue may be delayed, we could be sued, and our reputation could be harmed.

•
If we fail to introduce new products and solutions or enhance our existing products and solutions to keep up with rapid technological change, demand for our products and solutions may decline.

•
If we are unable to effectively use or integrate AI, or if our use of AI exposes us to significant risks, we may not achieve intended benefits and our results of operations could be adversely affected.

•
Disruptions in our global supply chain and our reliance on sole or limited source suppliers could adversely impact our business.

•
A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks.

•
Increased customer demands on our technical support services may adversely affect our relationships with our customers and our financial results.

•
The success of our business depends, in part, on the continued growth in the market for and the continued commercial demand for enterprise network observability, carrier service assurance, cybersecurity, and DDoS protection solutions.

•
Failure to manage growth properly and to implement enhanced automated systems, including systems with AI, could adversely impact our business.

•
International trade policies, including trade protection measures such as tariffs, sanctions, and trade barriers may adversely affect our business, financial condition, results of operations, and prospects.

•
Our business and operations, and the operations of our customers, partners, and/or suppliers, may be adversely affected by significant business continuity events.

•
Necessary licenses for third-party technology may not be available to us on commercially reasonable terms or at all.

•
Our success depends on our ability to protect our intellectual property rights.

•
Others may claim that we infringe on their intellectual property rights.

•
Any failure to meet our debt obligations could damage our business.

•
We may fail to secure necessary additional financing.

•
We may not successfully complete acquisitions or integrate acquisitions we do make, which could impair our ability to compete and could harm our operating results.

•
Uncertainties in the regulation of the Internet could have a material and adverse impact on our financial condition and results of operations.

•
If we violate the U.S. Foreign Corrupt Practices Act or applicable anti-bribery laws in other countries, or if we fail to comply with U.S. export controls and government contracting laws, our business could be harmed.

•
Our business is subject to laws, regulations and expectations relating to sustainability, human capital, governance and other corporate responsibility matters, which could increase costs and expose us to additional risks.

•
Our actual operating results may differ significantly from our guidance.

•
Our effective tax rate may fluctuate, which could increase our income tax expense and reduce our net income.

•
We may be impacted by changes in taxation, trade, tariffs, and other regulatory requirements.

•
Foreign currency exchange rates may adversely affect our financial statements.

•
Our estimates and judgments related to critical accounting policies could be inaccurate.

•
Our stock price has been subject to fluctuations, and will likely continue to be subject to fluctuations, which may be volatile and due to factors beyond our control.

•
tax assessments or any related tax interest or penalties that could significantly affect our income tax expense for the period in which the settlements take place.