Fortinet, Inc.

Previous wording

•drivers of long-term growth and operating leverage, such as pricing of our products and services, sales productivity, pipeline and capacity, functionality, value and technology improvements in our service offerings;

Current wording

•drivers of long-term growth and operating leverage, such as pricing of our products and services, sales productivity, pipeline and capacity, functionality, value and technology improvements in our product and service offerings;

Previous wording

Fortinet is a leader in cybersecurity, driving the convergence of networking and security. Our mission is to secure people, devices and data everywhere. Our integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE and AI-driven security operations (“SecOps”). As of March 31, 2025, our end-customers were located in over 100 countries and included enterprises across a wide variety of market verticals, including financial services, retail, healthcare and operational technology (“OT”) market verticals, communication and security service providers, and government organizations. As of March 31, 2025, we had approximately 80% of the Fortune 100 companies and approximately 72% of the Global 2000 companies as customers. As a global company headquartered in Sunnyvale, California, our research and development is centered in the United States and Canada with a global footprint of support and centers of excellence around the world. As of March 31, 2025, we held 1,045 U.S. patents and 1,381 global patents, including 271 AI-related patents. We have been recognized in over 140 enterprise analyst reports demonstrating both our vision and execution across security and networking products.

Current wording

Fortinet is a leader in cybersecurity, driving the convergence of networking and security. Our mission is to secure people, devices and data everywhere. Our integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE and AI-driven security operations (“SecOps”). As of June 30, 2025, our end-customers were located in over 100 countries and included enterprises across a wide variety of market verticals, including financial services, retail, healthcare and operational technology (“OT”) market verticals, communication and security service providers, and government organizations. As a global company headquartered in Sunnyvale, California, our research and development is centered in the United States and Canada with a global footprint of support and centers of excellence around the world. As of June 30, 2025, we held 1,067 U.S. patents and 1,401 global patents, including 288 AI-related patents. We have been recognized in over 140 enterprise analyst reports demonstrating both our vision and execution across security and networking products.

Previous wording

•FortiOS—FortiOS enables the convergence of security and networking to enforce consistent security policies across form factors and edges. As the foundation of the Fortinet Security Fabric, FortiOS empowers organizations to unify management and analytics for comprehensive network visibility and control at scale. To further validate our strategy, FortiOS has been recognized across five Gartner Magic Quadrants, including Firewall, Software-Defined Wide-Area Network (“SD-WAN”), Security Service Edge (“SSE”), SASE Platforms and Wired and Wireless Local Area Network (“LAN”).

Current wording

•FortiOS—FortiOS enables the convergence of security and networking to enforce consistent security policies across form factors and edges. As the foundation of the Fortinet Security Fabric, FortiOS empowers organizations to unify management and analytics for comprehensive network visibility and control at scale. To further validate our strategy, FortiOS has been recognized across five Gartner Magic Quadrants, including Firewall, Software-Defined Wide-Area

Previous wording

•AI-Driven Security Operations (SecOps)—Our AI-Driven SecOps portfolio provides a comprehensive suite of cybersecurity solutions that identify, protect, detect, respond and recover from threats, all integrated within the Fortinet Security Fabric. At the core is FortiAnalyzer, which serves as the central SOC platform with its unified data lake that provides built-in SIEM, SOAR, XDR and threat intelligence, enabling centralized visibility, analytics and automation with complete control. FortiSIEM delivers robust security information and event management for more advanced SOC requirements, while FortiSOAR enables automated orchestration and playbook-driven response. This solution set also includes FortiEDR, FortiXDR, FortiNDR, FortiSandbox, FortiDeceptor, FortiDLP and FortiRecon, helping organizations achieve defense in depth, ensuring attackers face multiple layers of detection and mitigation across endpoints, networks, and applications. To bolster their security posture, organizations contending with staff shortages can tap into FortiGuard services, including SOC-as-a-Service, Managed detection and response, Security Posture Assessment and Incident Response. Finally, FortiAI generative AI assistance streamlines operations, helping security teams stay ahead of an ever-evolving threat landscape.

Current wording

•AI-Driven Security Operations (SecOps)—Our AI-Driven SecOps portfolio provides a comprehensive suite of cybersecurity solutions that identify, protect, detect, respond and recover from threats, all integrated within the Fortinet Security Fabric. At the core is FortiAnalyzer, which serves as the central SOC platform with its unified data lake that provides built-in Security information and event management (“SIEM”), Security, orchestration, automation, and response (“SOAR”), XDR and threat intelligence, enabling centralized visibility, analytics and automation with complete control. FortiSIEM delivers robust security information and event management for more advanced SOC requirements, while FortiSOAR enables automated orchestration and playbook-driven response. This solution set also includes FortiEDR, FortiXDR, FortiNDR, FortiSandbox, FortiDeceptor, FortiDLP and FortiRecon, helping organizations achieve defense in depth, ensuring attackers face multiple layers of detection and mitigation across endpoints, networks, and applications. To bolster their security posture, organizations contending with staff shortages can tap into FortiGuard services, including SOC-as-a-Service, Managed detection and response, Security Posture Assessment and Incident Response. Finally, FortiAI generative AI assistance streamlines operations, helping security teams stay ahead of an ever-evolving threat landscape.

Previous wording

FortiGuard Labs is our cybersecurity threat intelligence and research organization comprised of experienced threat hunters, researchers, analysts, engineers and data scientists who develop and utilize ML and AI technologies to provide timely protection updates and actionable threat intelligence for the benefit of our customers. Using millions of global network sensors, FortiGuard Labs monitors the worldwide attack surface and employs AI to mine that data for new threats.

Current wording

FortiGuard Labs is our cybersecurity threat intelligence and research organization comprised of experienced threat hunters, researchers, analysts, engineers and data scientists who develop and utilize Machine Learning (“ML”) and AI technologies to provide timely protection updates and actionable threat intelligence for the benefit of our customers. Using millions of global network sensors, FortiGuard Labs monitors the worldwide attack surface and employs AI to mine that data for new threats.

Previous wording

Additionally, we are committed to addressing the cybersecurity skills shortage through training and certification programs for customers, partners and employees. The Fortinet Training Institute’s ecosystem of public and private partnerships around the world extend to industry, academia, government and nonprofits to ensure we are reaching and increasing access of our cybersecurity certifications and training to all populations. The Fortinet Training Institute has issued over two million certifications to date.

Current wording

Additionally, we are committed to addressing the cybersecurity skills shortage through training and certification programs for customers, partners and employees. The Fortinet Training Institute’s ecosystem of public and private partnerships around the world extend to industry, academia, government and nonprofits to ensure we are reaching and increasing access of our cybersecurity certifications and training to all populations. The Fortinet Training Institute has issued approximately two million certifications to date.

Previous wording

•Total revenue was $1.54 billion during the three months ended March 31, 2025, an increase of 14%, compared to $1.35 billion in the same period last year. Product revenue was $459.1 million during the three months ended March 31, 2025, an increase of 12%, compared to $408.9 million in the same period last year. Service revenue was $1.08 billion during the three months ended March 31, 2025, an increase of 14%, compared to $944.4 million in the same period last year.

Current wording

•Total revenue was $1.63 billion and $3.17 billion during the three and six months ended June 30, 2025, an increase of 14% in each period, compared to $1.43 billion and $2.79 billion in the same periods last year. Product revenue was $508.9 million and $968.0 million during the three and six months ended June 30, 2025, an increase of 13% and 12%, respectively, compared to $451.9 million and $860.8 million in the same periods last year. Service revenue was $1.12 billion and $2.20 billion during the three and six months ended June 30, 2025, an increase of 14% in each period, compared to $982.4 million and $1.93 billion in the same periods last year.

Previous wording

•Total gross profit was $1.25 billion during the three months ended March 31, 2025, an increase of 19%, compared to $1.05 billion in the same period last year.

Current wording

•Total gross profit was $1.32 billion and $2.56 billion during the three and six months ended June 30, 2025, an increase of 13% and 16%, respectively, compared to $1.16 billion and $2.21 billion in the same periods last year.

Previous wording

•Operating income was $453.8 million and during the three months ended March 31, 2025, an increase of 41%, compared to $321.2 million in the same period last year.

Current wording

•Operating income was $458.0 million and $911.8 million and during the three and six months ended June 30, 2025, an increase of 5% and 20%, respectively, compared to $437.2 million and $758.4 million in the same periods last year.

Previous wording

•Cash, cash equivalents, short-term and long-term investments were $4.82 billion as of March 31, 2025.

Current wording

•Cash, cash equivalents, short-term and long-term investments were $4.67 billion as of June 30, 2025.

Previous wording

•Deferred revenue was $6.42 billion, including short-term deferred revenue of $3.34 billion, as of March 31, 2025.

Current wording

•Deferred revenue was $6.57 billion, including short-term deferred revenue of $3.41 billion, as of June 30, 2025.

Previous wording

•Cash flows from operating activities were $863.3 million, which includes $14.0 million of proceeds from a legal victory around an IP matter, during the three months ended March 31, 2025, an increase of $32.9 million, or 4%, compared to the same period last year.

Current wording

•Cash flows from operating activities were $1.32 billion during the six months ended June 30, 2025, an increase of $142.8 million, or 12%, compared to the same period last year.

Previous wording

Revenue continues to be diversified globally, which remains a key strength of our business. During the three months ended March 31, 2025, the Americas region, the Europe, Middle East and Africa region and the Asia Pacific region contributed 41%, 41% and 18% of our total revenue, respectively, and increased 13%, 16%, and 10% compared to the same period last year, respectively.

Current wording

Revenue continues to be diversified globally, which remains a key strength of our business. During the three months ended June 30, 2025, the EMEA region, the Americas region and the APAC region contributed 41%, 40% and 19% of our total revenue, respectively, and increased 18%, 11% and 11% compared to the same period last year, respectively. During the six months ended June 30, 2025, EMEA, the Americas and APAC regions contributed 41%, 41% and 18% of our total revenue, respectively, and increased by 17%, 12% and 10% compared to the same period last year, respectively.

Previous wording

Product revenue increased 12% during the three months ended March 31, 2025 compared to the same period last year. We experienced product revenue growth across our hardware products and software licenses, including secure networking hardware products and term licenses. We expect our product revenue to continue to grow for the remainder of 2025.

Current wording

Product revenue increased 13% and 12% during the three and six months ended June 30, 2025, respectively, compared to the same periods last year. We experienced product revenue growth across our hardware products and software licensing, mainly benefited from growth in secure networking hardware products and term licenses. We expect our product revenue to continue to grow for the remainder of 2025.

Previous wording

Service revenue growth during the three months ended March 31, 2025 was 14%, as compared to the same period last year, was primarily driven by the strength of our security subscription revenue, which grew 16%. The increase was primarily due to the recognition of service revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered to on-premise and cloud-based environments and strength in unified SASE and SecOps. We expect our service revenue to continue to grow for the remainder of 2025, with growth opportunities that include unified SASE and SecOps offerings as well as the year over year increase in current deferred revenue. While service revenue is expected to grow for the remainder of 2025, we anticipate that the growth rates will continue to decrease for the remainder of 2025 due to slowing short-term deferred revenue growth over thepast several quarters.

Current wording

Service revenue growth during the three and six months ended June 30, 2025 was 14% in each period, as compared to the same periods last year, primarily driven by the strength of our security subscription revenue, which grew 15% and 16%, respectively. The increase was primarily due to the recognition of service revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered to on-premise and cloud-based environments and strength in unified SASE and SecOps. We expect our service revenue to continue to grow for the remainder of 2025, with growth opportunities that include unified SASE and SecOps offerings as well as the year over year increase in current deferred revenue.

Previous wording

Our billings were diversified on a geographic basis. During the three months ended March 31, 2025, eight countries represented approximately 50% of our billings and the remaining approximately 50% in the aggregate were from over 100 countries that each individually contributed less than 3% of our billings.

Current wording

Our billings were diversified on a geographic basis. During the three months ended June 30, 2025, seven countries represented approximately 50% of our billings and the remaining approximately 50% in the aggregate were from over 100 countries that each individually contributed less than 3% of our billings.

Previous wording

Total gross margin increased 3.5 percentage points during the three months ended March 31, 2025 compared to the same period last year, primarily driven by increased product gross margin as inventory related reserves expense normalized in comparison to elevated levels we saw in the first half of 2024. Our overall gross margin for the full year of 2025 will be impacted by service and product revenue mix and their respective gross margins. We expect our product gross margin to slightly increase for the full year 2025 compared to 2024 as we continue to benefit from lower impact of inventory reserves expense. We expect our service gross margin to decrease for the full year of 2025 compared to 2024, as we expand our data center footprint and colocation and cloud hosting capacity to support the growth in our unified SASE and SecOps offerings. We currently do not expect the U.S. tariffs to have a meaningful impact on our gross margin. If tariffs increase in the future, we expect any resulting impact on our gross margin to mostly be on our hardware sales to U.S. customers.

Current wording

Total gross margin decreased 0.1 percentage points during the three months ended June 30, 2025 compared to the same period last year, primarily driven by increased cloud service costs, partially offset by the benefit from normalized inventory related reserves expense in comparison to elevated levels we saw in the same period in 2024. Total gross margin increased 1.6 percentage points during the six months ended June 30, 2025 compared to the same period last year, primarily driven by increased product gross margin benefiting from lower impact of inventory reserves expense in comparison to the first half of 2024. Our overall gross margin for the full year of 2025 will be impacted by service and product revenue mix and their respective gross margins. We do not expect our product gross margin to significantly change for the full year 2025 as compared to 2024. We expect our service gross margin to decrease for the full year of 2025 compared to 2024, as we expand our data center footprint and colocation and cloud hosting capacity to support the growth in our unified SASE and SecOps offerings. We currently do not expect the U.S. tariffs to have a meaningful impact on our gross margin. If tariffs increase in the future, we expect any resulting impact on our gross margin to mostly be on our hardware sales to U.S. customers.

Previous wording

Operating expenses as a percentage of revenue decreased 2.3 percentage points, during the three months ended March 31, 2025 compared to the same period last year, mainly because our revenue growth outpaced our personnel costs growth. Headcount increased to 14,556 employees as of March 31, 2025, an 8% increase compared to 13,522 as of March 31, 2024.

Current wording

Operating expenses as a percentage of revenue increased 2.3 and 0.1 percentage points during the three and six months ended June 30, 2025, respectively, compared to the same periods last year, mainly driven by an increase in personnel-related costs in research and development and sales and marketing. Headcount increased to 14,898 employees as of June 30, 2025, a 10% increase compared to 13,527 as of June 30, 2024.

Previous wording

Operating margin increased 5.8 percentage points during the three months ended March 31, 2025, as a result of improvement in gross margin and decrease in operating expenses as a percentage of revenue. We expect our operating margin to decrease for the full year of 2025 compared to 2024 as we grow our sales and marketing and research and development workforce organically and through acquisitions, increase our product development investments, and expand our data center footprint and our colocation and cloud hosting capacity to support business growth.

Current wording

Operating margin decreased 2.4 percentage points during the three months ended June 30, 2025, as a result of increase in operating expenses as a percentage of revenue and decreased gross margin. Operating margin increased 1.6 percentage points during the six months ended June 30, 2025, as a result of improvement in gross margin. We expect our operating margin to decrease for the full year of 2025 compared to 2024 as we grow our sales and marketing and research and development workforce organically and through acquisitions, increase our product development investments, and expand our data center footprint and our colocation and cloud hosting capacity to support business growth. In addition, we expect higher operating expenses driven in part by the weakening of the U.S. dollar compared to foreign currencies, as a portion of our expenses are incurred and paid in currencies other than the U.S. dollar.

Previous wording

Deferred revenue. Our deferred revenue consists of amounts that have been invoiced but that have not yet been recognized as revenue. The majority of our deferred revenue balance consists of the unrecognized portion of service revenue from FortiGuard and other security subscriptions and FortiCare technical support service contracts, which is recognized as revenue ratably over the service term. We monitor our deferred revenue balance, short-term and total deferred revenue growth and the mix of short-term and long-term deferred revenue because deferred revenue represents a significant portion of free cash flow and of revenue to be recognized in future periods. Deferred revenue was $6.42 billion as of March 31, 2025, an increase of $57.5 million, or 1%, from December 31, 2024. Short-term deferred revenue was $3.34 billion as of March 31, 2025, an increase of $63.2 million, or 2%, from December 31, 2024.

Current wording

Deferred revenue. Our deferred revenue consists of amounts that have been invoiced but that have not yet been recognized as revenue. The majority of our deferred revenue balance consists of the unrecognized portion of service revenue from FortiGuard and other security subscriptions and FortiCare technical support service contracts, which is recognized as revenue ratably over the service term. We monitor our deferred revenue balance, short-term and total deferred revenue growth and the mix of short-term and long-term deferred revenue because deferred revenue represents a significant portion of free cash flow and of revenue to be recognized in future periods. Deferred revenue was $6.57 billion as of June 30, 2025, an increase of $206.7 million, or 3%, from December 31, 2024. Short-term deferred revenue was $3.41 billion as of June 30, 2025, an increase of $136.3 million, or 4%, from December 31, 2024.

Previous wording

Billings (non-GAAP). We define billings as revenue recognized in accordance with GAAP plus the change in deferred revenue from the beginning to the end of the period less any deferred revenue balances acquired from business combination(s) during the period. We consider billings to be a useful metric for management and investors because billings drive current and future revenue, which is an important indicator of the health and viability of our business and cash flows. There are a number of limitations related to the use of billings instead of GAAP revenue. First, billings include amounts that have not yet been recognized as revenue and are impacted by the term of security and support agreements. Second, we may calculate billings in a manner that is different from peer companies that report similar financial measures. Management accounts for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with GAAP revenue. Total billings were $1.60 billion for the three months ended March 31, 2025, an increase of 14% compared to $1.41 billion in the same period last year.

Current wording

Billings (non-GAAP). We define billings as revenue recognized in accordance with GAAP plus the change in deferred revenue from the beginning to the end of the period less any deferred revenue balances acquired from business combination(s) during the period. We consider billings to be a useful metric for management and investors because billings drive current and future revenue, which is an important indicator of the health and viability of our business and cash flows. There are a number of limitations related to the use of billings instead of GAAP revenue. First, billings include amounts that have not yet been recognized as revenue and are impacted by the term of security and support agreements. Second, we may calculate billings in a manner that is different from peer companies that report similar financial measures. Management accounts for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with GAAP revenue. Total billings were $1.78 billion for the three months ended June 30, 2025, an increase of 15% compared to $1.54 billion in the same period last year.

Previous wording

There were no material changes to our critical accounting policies and estimates as of and for the three months ended March 31, 2025, as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K filed with the SEC on February 21, 2025 (the “Form 10-K”).

Current wording

There were no material changes to our critical accounting policies and estimates as of and for the six months ended June 30, 2025, as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K filed with the SEC on February 21, 2025 (the “Form 10-K”).

Previous wording

Total revenue increased $186.4 million, or 14%, during the three months ended March 31, 2025 compared to the same period last year. We continued to experience diversification of revenue geographically, and across customer and indu stry verticals. Revenue from all regions grew, with EMEA contributing the largest portion of the increase on an absolute dollar basis andon a percentage basis.

Current wording

Total revenue increased $195.7 million, or 14%, during the three months ended June 30, 2025 compared to the same period last year. We continued to experience diversification of revenue geographically, and across customer and industry verticals. Revenue from all regions grew, with EMEA contributing the largest portion of the increase on an absolute dollar basis and on a percentage basis.

Previous wording

Service revenue increased $136.2 million, or 14%, during the three months ended March 31, 2025 compared to the same period last year. Security subscription revenue increased $86.2 million, or 16%, and technical support and other services revenue increased $50.0 million, or 12%, during the three months ended March 31, 2025 compared to the same period last year. The increase was primarily due to the recognition of revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered to on-premise and cloud-based environments and growth in SaaS solutions, including unified SASE and SecOps.

Current wording

Service revenue increased $138.7 million, or 14%, during the three months ended June 30, 2025 compared to the same period last year. Security subscription revenue increased $85.7 million, or 15%, and technical support and other services revenue increased $53.0 million, or 13%, during the three months ended June 30, 2025 compared to the same period last year. The increase was primarily due to the reco gnition of revenue from our growing deferred revenue balance related to FortiGuard and other security subscriptions delivered to on-premise and cloud-based environments and growth in SaaS solutions, including unified SASE and SecOps.

Previous wording

Of the service revenue recognized during the three months ended March 31, 2025,90%was included in the deferred revenue balance as of December 31, 2024. Of the service revenue recognized during thethree months ended March 31, 2024, 90% was included in the deferred revenue balance as of December 31, 2023. We expect service revenue growth rates to continue to decrease for the remainder of 2025 due to slowing short-term deferred revenue growth over the past several quarters.

Current wording

Of the service revenue recognized during the three months ended June 30, 2025, 90% was included in the deferred revenue balance as of March 31, 2025. Of the service revenue recognized during thethree months ended June 30, 2024, 90% was included in the deferred revenue balance as of March 31, 2024.

Previous wording

Product gross margin increased 12.0 percentage points during the three months ended March 31, 2025 compared to the same period last year, as inventory related reserves expense normalized from the elevated levels we saw in the first half of 2024. Cost of product revenue was comprised primarily of third-party contract manufacturers’ costs, and costs of materials used in production.

Current wording

Product gross margin increased 1.7 percentage points during the three months ended June 30, 2025 compared to the same period last year, as inventory related reserves expense normalized from the elevated levels we saw in the first half of 2024. Cost of product revenue was comprised primarily of third-party contract manufacturers’ costs, and costs of materials used in production.

Previous wording

Research and development expense increased $25.6 million, or 15%, during the three months ended March 31, 2025 compared to the same period last year, primarily due to an increase of $20.7 million in personnel-related costs as a result of increased headcount and compensation rates to support the development of new products and continued enhancements to our existing products andthe impact of the recent acquisitions. In addition, non-personnel-related product development costs increased $7.2 million. We currently intend to continue investing in our research and development organization, and expect research and development expense to increase in absolute dollars year over year during the remainder of 2025.

Current wording

Research and development expense increased $44.1 million, or 27%, during the three months ended June 30, 2025 compared to the same period last year, primarily due to an increase of $31.3 million in personnel-related costs as a result of increased headcount and compensation rates to support the development of new products and continued enhancements to our existing products and the impact of the recent acquisitions. In addition, non-personnel-related product development costs increased $12.1 million. We currently intend to continue investing in our research and development organization, and expect research and development expense to increase in absolute dollars year over year during the remainder of 2025.

Previous wording

Sales and marketing expense increased $41.6 million, or 8%, during the three months ended March 31, 2025 compared to the same period last year, primarily due to an increase of $28.4 million in personnel-related costs. In addition, marketing program and related expenses increased $5.6 million and amortization expense of certain intangible assets increased $4.2 million, partially offset by the favorable impact of foreign currency fluctuations. We currently intend to continue to make investments in sales and marketing resources, which are critical to support our future growth, and expect our sales and marketing expense to increase in absolute dollars year over year during the remainder of 2025.

Current wording

Sales and marketing expense increased $90.7 million, or 18%, during the three months ended June 30, 2025 compared to the same period last year, primarily due to an increase of $71.8 million in personnel-related costs, an increase of $7.0 million in marketing program and related expenses and unfavorable impact of foreign currency fluctuations. We currently intend to continue to make investments in sales and marketing resources, which are critical to support our future growth, and expect our sales and marketing expense to increase in absolute dollars year over year during the remainder of 2025.

Previous wording

General and administrative expense increased $3.4 million, or 6%, during the three months ended March 31, 2025 compared to the same period last year, primarily due to an increase of $3.1 million in personnel-related costs. We currently expect general and administrative expense to increase in absolute dollars year over year during the remainder of 2025.

Current wording

General and administrative expense remained flat during the three months ended June 30, 2025 compared to the same period last year. We currently expect general and administrative expense to increase in absolute dollars year over year during the remainder of 2025.

Previous wording

The provision for income taxes for the three months ended March 31, 2024 was comprised of U.S. federal and state taxes, withholding taxes, and foreign taxes totaling$81.7 million, which were favorably affected by a tax benefit of$24.0 million from the FDII deduction, excess tax benefits from stock-based compensation expense of$18.2 million.

Current wording

The provision for income taxes for the three months ended June 30, 2024 was comprised of U.S. federal and state taxes, withholding taxes, and foreign taxes totaling $109.9 million, which were favorably affected by a tax benefit of $27.2 million from the FDII deduction and excess tax benefits from stock-based compensation expense of $6.2 million.

Previous wording

Service gross margin decreased 0.4 percentage points during the three months ended March 31, 2025 compared to the same period last year, primarily due to an increase in cloud service costs, partially offset by service revenue growth outpacing labor and replacement costs increase. Cost of service revenue was comprised primarily of personnel-related costs, replacement cost, cloud services costs from data centers, colocation provider and cloud providers, infrastructure, software and delivery costs, and facility-related costs.

Current wording

Service gross margin decreased 0.8 percentage points during the six months ended June 30, 2025 compared to the same period last year, primarily due to an increase in cloud service costs, partially offset by service revenue growth outpacing labor, replacement, and repair costs increase. Cost of service revenue was comprised primarily of personnel-related costs, replacement and repair costs, cloud services costs from data centers, colocation provider and cloud providers, infrastructure, software and delivery costs, and facility-related costs.

Previous wording

We generated operating income of $453.8 million during the three months ended March 31, 2025, an increase of $132.6 million, or 41%, compared to $321.2 million in the same period last year. Operating margin was 29.5% during the three months ended March 31, 2025, compared to 23.7% in the same period last year. The 5.8 percentage points increase in operating margin was primarily due to 3.5 percentage points increase in gross margin and 1.8 percentage points decrease in sales and marketing expense and a gain on intellectual property matters.

Current wording

We generated operating income of $911.8 million during the six months ended June 30, 2025, an increase of $153.4 million, or 20%, compared to $758.4 million in the same period last year. Operating margin was 28.8% during the six months ended June 30, 2025, compared to 27.2% in the same period last year. The 1.6 percentage points increase in operating margin was primarily due to 1.6 percentage points increase in gross margin.

Previous wording

Interest income increased $12.1 million during the three months ended March 31, 2025 compared to the same period last year, primarily as a result of higher investment balances. Interest income varies depending on our average investment balances during the period, types and mix of investments, and interest rates. Interest expense remained comparatively flat during the three months ended March 31, 2025 compared to the same period last year. The $29.0 million change in other income (expense)—net during the three months ended March 31, 2025 compared to the same period last year, was primarily due to a gain on bargain purchase of $39.9 million related to our acquisition of Linksys and a $4.5 million increase in foreign currency exchange gains, partially offset by an increase of $15.1 million loss on marketable equity securities.

Current wording

Interest income increased $18.8 million during the six months ended June 30, 2025 compared to the same period last year, primarily as a result of investment balances. Interest income varies depending on our average investment balances during the period, types and mix of investments, and interest rates. Interest expense remained comparatively flat during the six months ended June 30, 2025 compared to the same period last year. The $50.1 million change in other income (expense)—net during the six months ended June 30, 2025 compared to the same period last year, was primarily due to a gain on bargain purchase of $39.9 million related to our acquisition of Linksys in the first quarter of 2025 and a $12.1 million increase in foreign currency exchange gains.

Previous wording

Our effective tax rate was 19% for the three months ended March 31, 2025 compared to an effective tax rate of 11% for the same period last year. The provision for income taxes for the three months ended March 31, 2025 was primarily comprised of U.S. federal and state taxes, withholding taxes and foreign taxes totaling$128.5 million, which includeda tax provision of $30.6 million related to the derecognition of deferred tax assets from the business combination with Linksys, a tax benefit of $25.8 million from the foreign-derived intangible income deduction (the “FDII deduction”) and excess tax benefits from stock-based compensation expense of $36.8 million.

Current wording

Our effective tax rate was 17% for the six months ended June 30, 2025 compared to an effective tax rate of 14% for the same period last year. The provision for income taxes for the six months ended June 30, 2025 was primarily comprised of U.S. federal and state taxes, withholding taxes and foreign taxes that were $243.2 million and a tax provision of $30.6 million related to the derecognition of deferred tax assets from the business combination with Linksys. This provision for income taxes was favorably affected by a tax benefit of $50.9 million from the FDII deduction, and excess tax benefits from stock-based compensation expense of $49.3 million.

Previous wording

The$17.2 million change ingain (loss) from equity method investments during the three months ended March 31, 2025 compared to the same period last year was primarily driven by$10.8 million gain related to our acquisition of Linksys in the three months ended March 31, 2025 and $6.4 million loss due to our proportionate share of Linksys’ financial results including our share of the amortization of the basis differences in the three months ended March 31, 2024. Refer to Note 6. Business Combinations in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on our acquisition of Linksys.

Current wording

The $29.1 million change ingain (loss) from equity method investments during the six months ended June 30, 2025 compared to the same period last year was primarily driven by a $10.8 million gain related to our acquisition of Linksys in the first quarter of 2025 and a $10.2 million loss due to our proportionate share of Linksys’ financial results including our share of the amortization of the basis differences and an OTTI charge of $8.0 million during the six months ended June 30, 2024.

Previous wording

Liquidity and capital resources are primarily impacted by our operating activities, as well as real estate purchases, other capital expenditures and business acquisitions, payment of taxes in connection with the net settlement of equity awards and proceeds from the issuance of common stock and investment grade debt and repurchases of our common stock.

Current wording

Liquidity and capital resources are primarily impacted by our operating activities, as well as real estate purchases, other capital expenditures and business acquisitions, repurchases of our common stock, payment of taxes in connection with the net settlement of equity awards and proceeds from the issuance of common stock and investment grade debt.

Previous wording

In October 2024, our board of directors approved a $1.0 billion increase in the authorized stock repurchase amount under the Repurchase Program and extended the term of the Repurchase Program to February 28, 2026, bringing the aggregate amount authorized to be repurchased to $8.25 billion of our outstanding common stock through February 28, 2026. There were no shares repurchased under the Repurchase Program during the three months ended March 31, 2025. As of March 31, 2025, approximately $2.03 billion remained available for future share repurchases. Refer to Note 11. Equity Plans and Share Repurchase Program and Note 15. Subsequent Events in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our repurchases of 4.6 million shares of our common stock for an aggregate purchase price of $401.1 million under the Repurchase Program, subsequent to March 31, 2025 through the filing of this Quarterly Report on Form 10-Q.

Current wording

In October 2024, our board of directors approved a $1.0 billion increase in the authorized stock repurchase amount under the Repurchase Program and extended the term of the Repurchase Program to February 28, 2026, bringing the aggregate amount authorized to be repurchased to $8.25 billion of our outstanding common stock through February 28, 2026. During the six months ended June 30, 2025, we repurchased 4.6 million shares of common stock under the Repurchase program for an aggregate purchase price of $401.1 million. As of June 30, 2025, approximately $1.63 billion remained available for future share repurchases. Refer to Note 11. Equity Plans and Share Repurchase Program.

Previous wording

We expect to continue to increase our data centers, PoPs, office and warehouse capacity to support growth and the expansion of existing services or introduction of new services. As we purchase new properties, we will work to incorpo rate these properties into the environmental goals we have established. We estimate capital expenditures to be between approximately$380.0 million and$430.0 million in 2025.

Current wording

We expect to continue to increase our data centers, PoPs, office and warehouse capacity to support growth and the expansion of existing services or introduction of new services. As we purchase new properties, we will work to incorpo rate these properties into the environmental goals we have established. We estimate capital expenditures to be between approximately $146 million and $196 million insecond half of 2025.

Previous wording

We believe that our cash provided by operating activities, together with our existing cash, cash equivalents and investments will be sufficient to meet our anticipated cash needs and do not currently intend to retire our Senior Notes early. Refer to Note 9. Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on the Senior Notes. As of March 31, 2025, the current portion of long-term debt and long-term debt, net of unamortized discount and debt issuance costs, were $994.9 million.

Current wording

We believe that our cash provided by operating activities, together with our existing cash, cash equivalents and investments will be sufficient to meet our anticipated cash needs and do not currently intend to retire our Senior Notes early. Refer to Note 9. Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on the Senior Notes. As of June 30, 2025, the current portion of long-term debt and long-term debt, net of unamortized discount and debt issuance costs, were $995.3 million.

Previous wording

These inventory purchase commitments as of March 31, 2025 totaled $689.0 million, an increase of $97.9 million compared to $591.1 million as of December 31, 2024 due to fulfillment of customer demand as our supply availability improved and our continued efforts to work with contract manufacturers and suppliers to optimize our inventory and purchase commitments position. We record a liability for inventory purchase commitments in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. As of March 31, 2025 and December 31, 2024, the liability for these inventory purchase commitments was $47.5 million and $54.0 million, respectively, and was recorded in accrued liabilities on our condensed consolidated balance sheets.

Current wording

These inventory purchase commitments as of June 30, 2025 totaled $714.4 million, an increase of $123.3 million compared to $591.1 million as of December 31, 2024 due to fulfillment of customer demand as our supply availability improved and our continued efforts to work with contract manufacturers and suppliers to optimize our inventory and purchase commitments position. We record a liability for inventory purchase commitments in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. As of June 30, 2025 and December 31, 2024, the liability for these inventory purchase commitments was $41.9 million and $54.0 million, respectively, and was recorded in accrued liabilities on our condensed consolidated balance sheets.