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Risk Overview Q1, 2026
Risk Distribution
25% Finance & Corporate
21% Legal & Regulatory
16% Ability to Sell
15% Tech & Innovation
15% Macro & Political
9% Production
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
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Penguin Solutions Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q1, 2026
Main Risk Category
Finance & Corporate
With 17 Risks
Finance & Corporate
With 17 Risks
Number of Disclosed Risks
68
No changes from last report
S&P 500 Average: 31
68
No changes from last report
S&P 500 Average: 31
Recent Changes
0Risks added
0Risks removed
0Risks changed
Since Feb 2026
0Risks added
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Since Feb 2026
Number of Risk Changed
0
-15
From last reportS&P 500 Average: 1
0
-15
From last reportS&P 500 Average: 1
See the risk highlights of Penguin Solutions in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 68
Finance & Corporate
Total Risks: 17/68 (25%)Below Sector Average
Share Price & Shareholder Rights4 | 5.9%
Share Price & Shareholder Rights - Risk 1
exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act.Share Price & Shareholder Rights - Risk 2
Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could delay, defer, discourage, or prevent a takeover attempt.Our amended and restated certificate of incorporation and amended and restated bylaws contain, and the General Corporation Law of the State of Delaware (the "Delaware General Corporation Law") contains, provisions which could have the effect of delaying, deferring, discouraging or preventing acquisitions of the Company that some stockholders may favor. These provisions provide for the following:
- a classified board of directors with three-year staggered terms, who can only be removed for cause, and only by the affirmative vote of the holders of at least 66 2/3% of the voting power of all then-outstanding voting stock entitled to vote at an election of directors, which may delay the ability of stockholders to change the membership of a majority of our board of directors;- no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;- the exclusive right of our board of directors to set the size of the board of directors and to elect a director to fill a vacancy, however occurring, including by an expansion of the board of directors, which prevents stockholders from being able to fill vacancies on our board of directors;- the ability of our board of directors to authorize the issuance of shares of undesignated preferred stock and to determine the price and other terms of those shares, including voting or other rights or preferences, without stockholder approval, which could impede the success of any attempt to change control of the Company and be used to significantly dilute the ownership of a hostile acquirer;- the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval;- in addition to our board of directors' ability to adopt, amend, or repeal our amended and restated bylaws, our stockholders may adopt, amend, or repeal our amended and restated bylaws only with the affirmative vote of the holders of at least 66 2/3% of the voting power of the outstanding shares of voting stock of the Company entitled to vote generally in an election of directors;- the required approval of at least 66 2/3% of the voting power of all then outstanding shares of the Company entitled to vote thereon, voting together as a single class, to adopt, amend, or repeal certain provisions of our amended and restated certificate of incorporation;- the requirement that any action required or permitted to be taken by its stockholders must be effected at a duly called annual or special meeting of its stockholders and may not be taken by written consent in lieu of a meeting; however, any action required or permitted to be taken by the holders of our convertible preferred stock, voting separately as a series or class, may be taken by written consent;- the requirement that a special meeting of stockholders may be called only by or at the direction of our board of directors, the chairperson of our board of directors, or our chief executive officer or president, thus prohibiting a stockholder from calling a special meeting;- advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to bring other business before a stockholders' meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of us;- certain litigation against us can only be brought in Delaware; and - the limitation of liability of, and provision of indemnification to, our directors and officers.
These provisions, alone or together, could delay, defer, discourage or prevent hostile takeovers and changes in control or changes in our management. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire.
As a Delaware corporation, we are also subject to provisions of the Delaware General Corporation Law, including Section 203 thereof, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock.
Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or the Delaware General Corporation Law that has the effect of delaying, deferring, discouraging or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
Share Price & Shareholder Rights - Risk 3
Future sales of our common stock in the public market, or the perception that these sales may occur, could cause our stock price to fall.Sales of substantial amounts of our common stock in the public market, including sales of our common stock by our directors or officers, or sales by us or our affiliates pursuant to one or more effective registration statements or shares of common stock issuable upon conversion of our Issued CPS, or otherwise, or the perception that these sales may occur, could cause the market price of our common stock to decline. This could also impair our ability to raise additional capital through the sale of our equity securities. Under our amended and restated certificate of incorporation, we are authorized to issue up to 200 million shares of common stock, of which 52.7 million shares of common stock were outstanding as of August 29, 2025.
In addition, certain of our existing stockholders, convertible preferred stockholders, and holders of options, restricted stock unit awards or performance-based awards, in the event they become exercisable, have the right to demand that we file a registration statement covering the offer and sale of their common stock and shares issuable under such options and awards under the Securities Act and to require us to include their securities on a registration statement filed by us. For instance, on August 27, 2025, we filed a registration statement for the resale from time to time of up to 6,096,103 shares of our common stock by the selling securityholder (the "Selling Securityholder"), consisting of 6,096,103 shares of common stock initially issuable upon the conversion of the Issued CPS held by the Selling Securityholder. Pursuant to their registration rights, following the expiration of the initial lock-up term and subject to the terms of the lock-up provisions under the Investor Agreement (as defined below), the Selling Securityholder may, from time to time, sell, transfer, or otherwise dispose of any or all of their securities. The dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. In the future, we may also issue securities in connection with investments, acquisitions, or capital raising activities, which could constitute a material portion of our then-outstanding shares of common stock.
We cannot predict the size of any future sales or issuances of our common stock or the effect, if any, that such future sales and issuances would have on the market price of our common stock. Any such issuance of additional securities or any exercise of registration rights or the prospect of any such sales, could materially impact the market price of our common stock and could impair our ability to raise capital through future sales of equity securities.
Share Price & Shareholder Rights - Risk 4
The trading price of our common stock has been and may continue to be volatile.The market price of the securities of technology companies can be especially volatile. Broad market and industry factors may adversely affect the market price of our common stock regardless of our actual operating performance. The market price of our common stock has been in the past and could be in the future subject to wide fluctuations in response to the risk factors listed in this section and others beyond our control, including those risks described herein as well as:
- the failure of financial analysts to cover our company;- negative or inaccurate coverage by financial analysts;- changes in financial estimates by financial analysts, any failure by us to meet or exceed any of these estimates or changes in the recommendations of any financial analysts that elect to follow our company or our competitors;- changes in the market valuations of other companies operating in our industry;- announcement of, or expectation of, additional financing efforts or potential collaborations;- future sales of our common stock, including common stock issuable upon conversion of our Issued CPS;- stock price and volume fluctuations attributable to inconsistent trading volume levels of our common stock;- the impact of the U.S. Domestication; and - general economic and market conditions.
In addition, the stock market in general has experienced substantial price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies affected. These broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of certain companies' securities, securities class action litigation has been instituted against these companies. This litigation, if instituted against us, could adversely affect our financial condition or results of operations.
Accounting & Financial Operations5 | 7.4%
Accounting & Financial Operations - Risk 1
If our estimates or judgments relating to our critical accounting estimates are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.Accounting & Financial Operations - Risk 2
We do not anticipate paying any cash dividends on our common stock in the foreseeable future.We currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to fund the development and growth of our business. We do not intend to pay any dividends to holders of our common stock. In addition, certain of our agreements, including the 2025 Credit Agreement, the Securities Purchase Agreement that we entered into with SKT on July 14, 2024 (the "SKT Purchase Agreement") and the Certificate of Designation of Convertible Preferred Stock we executed and adopted on June 27, 2025 (the "CPS Delaware Certificate of Designation") contain restrictions on our ability to pay dividends. As a result, capital appreciation in the price of our common stock, if any, will be your only source of gain on an investment in our common stock. Holders of shares of Issued CPS are entitled to receive dividends of six percent per annum, cumulative, and payable quarterly in-kind or in cash at our option. Shares of Issued CPS are not redeemable upon or repurchased upon the election of the holders of Issued CPS.
Accounting & Financial Operations - Risk 3
We have incurred, and may in the future incur, impairment charges related to our goodwill, which could have a material adverse effect on our business, results of operations and financial condition.We have a significant amount of goodwill. As of August 29, 2025, we had goodwill of $145.9 million, which represented 9% of our total assets as of such date. This balance reflects the recent charges recognized for the full impairment of goodwill associated with our Penguin Edge business under our Advanced Computing segment. The carrying value of goodwill may be reduced if we determine that goodwill is impaired. We test goodwill for impairment in the fourth quarter of each year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. The testing of goodwill for impairment requires us to make significant estimates about future performance and cash flows, as well as other assumptions. These estimates can be affected by numerous factors, including potential changes in economic, industry or market conditions; changes in business operations; changes in competition or changes in the price of our common stock and market capitalization and other relevant events and factors affecting the fair value of the reporting unit. Changes in these factors, or changes in actual performance compared with estimates of our future performance, may affect the fair value of goodwill and could result in an impairment charge.
Accounting & Financial Operations - Risk 4
We have experienced losses in the past and may experience losses in the future.Our business has experienced quarterly and annual operating losses. For example, in 2024, we had a net loss of $52.5 million. Our ability to achieve or maintain profitability depends in part on revenue growth from, among other things, increased demand for our integrated memory solutions, products and related service offerings in our current markets, growth in our Advanced Computing and Optimized LED segments, the performance of our acquired companies, as well as our ability to expand into new markets, including those related to AI. We may not be successful in achieving the revenue and revenue growth necessary to achieve and maintain profitability. Moreover, as we continue to expend substantial funds for research and development projects, enhancements to sales and marketing efforts, integration of acquisitions and to otherwise operate our business, we cannot assure you that we will achieve or maintain profitability on an annual or quarterly basis even if our revenue does grow.
Accounting & Financial Operations - Risk 5
Our results of operations fluctuate from quarter to quarter, which make them difficult to predict.Our quarterly results of operations have fluctuated in the past and may fluctuate in the future. As a result, our past quarterly results of operations are not necessarily indicative of future performance. Furthermore, we may not be able to maintain the margins we have achieved in recent periods. Our results of operations in any given quarter can be and have been influenced by numerous factors, many of which we are unable to predict or are outside of our control, including:
- the loss of, significant reduction in, or variability in the timing of sales to, or demand from, one or more key customers, which can be affected by factors such as the timing of customer deployments or customer budget considerations;- customer churn rates, including discounting and churn of significant customers from whom we derive a significant percentage of our revenue;- changes in customer spending on our products and services;- the timing, size and effectiveness of our investment in research and development for new and innovative products, including AI solutions;- the timing, size and effectiveness of our marketing efforts;- the acquisition of other companies or technologies, the failure to successfully integrate and operate them, or customers' or suppliers' negative reactions to them;- a disruption in, or termination of, our supply relationship with one or more key suppliers;- supply shortages that may impact our ability to manufacture products for our customers and may result in rising prices of the materials we need to manufacture our products;- our failure to develop new or enhanced products and introduce them in a timely manner;- the wind down or discontinuation of products, such as products offered through our Penguin Edge business;- the timing of our entry into new contracts or timing of revenues recognized from our customers, which can be affected by factors such as singular large-scale projects in one period not recurring in subsequent periods or customer decisions as to the completion of delivery and system go-live events; and - other factors described in this "Risk Factors" section.
Due to the various factors mentioned above and other factors, the results of any prior quarterly or annual period should not be relied upon as an indication of our future operating performance. In one or more future periods, as has happened in the past, our results of operations may fall below the expectations of securities analysts and investors. In that event, the market price of our common stock would likely decline. In addition, the market price of our common stock may fluctuate or decline regardless of our operating performance.
Debt & Financing5 | 7.4%
Debt & Financing - Risk 1
We may need to raise additional funds, which may not be available on acceptable terms or at all.Debt & Financing - Risk 2
Our capped call transactions may affect the value of our debt and common stock.In connection with the pricing of the Convertible Senior Notes, we entered into privately-negotiated capped call transactions ("Capped Calls") with certain financial institutions. The Capped Calls are expected generally to reduce the potential dilution to our common stock upon any conversion of the Convertible Senior Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Convertible Senior Notes, as the case may be, with such reduction and/or offset subject to a cap.
In connection with establishing their initial hedges of the Capped Calls, the Capped Call counterparties or their respective affiliates likely purchased our common stock concurrently with the pricing of the Convertible Senior Notes. In addition, the Capped Call counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions and prior to the maturity of the Convertible Senior Notes (and are likely to do so during any Observation Period (as defined in the relevant indenture) related to a conversion of Convertible Senior Notes). This activity could cause or avoid an increase or a decrease in the market price of our common stock or the Convertible Senior Notes.
The potential effect, if any, of these transactions and activities on the trading price of our common stock or the Convertible Senior Notes will depend in part on market conditions. Any of these activities could adversely affect the trading price of our common stock or the Convertible Senior Notes.
Debt & Financing - Risk 3
Provisions in the Convertible Senior Notes and their respective indentures could delay or prevent an otherwise beneficial takeover of us.Certain provisions in the Convertible Senior Notes and their respective indentures could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a "fundamental change", then noteholders will have the right to require us to repurchase their Convertible Senior Notes for cash. In addition, if a takeover constitutes a "make-whole fundamental change" (as defined in the relevant indenture), then we may be required to temporarily increase the conversion rate. In either case, and in other cases, our obligations under the Convertible Senior Notes and their respective indentures could increase the cost of acquiring us or otherwise discourage a third party from acquiring us, including in a transaction that noteholders or holders of our common stock may view as favorable.
Debt & Financing - Risk 4
Our credit agreement may limit our flexibility in operating our business.Penguin Solutions Cayman, and certain of our subsidiaries, are party to a Credit Agreement dated as of June 24, 2025 (the "2025 Credit Agreement") as described in more detail in "PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt." This agreement contains, and future credit agreements may contain, restrictive covenants that limit our ability to engage in specified transactions and prohibit us from voluntarily prepaying certain of our other indebtedness. For instance, the covenants in the 2025 Credit Agreement limit the ability of Penguin Solutions Cayman and certain of its subsidiaries to, among other things:
- incur additional indebtedness;- create liens on assets;- engage in mergers or consolidations;- sell assets;- pay dividends, make distributions or repurchase capital stock;- make investments, loans or advances;- repay or repurchase certain subordinated debt (except as scheduled or at maturity);- create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries;- make certain acquisitions;- engage in certain transactions with affiliates; and - amend material agreements governing our subordinated debt and fundamentally change our business.
Under the 2025 Credit Agreement, we also are required to satisfy and maintain certain specified financial ratios. Our ability to meet those financial ratios could be affected by events beyond our control, and there can be no assurance that we will meet those ratios.
The failure to comply with any of these covenants would cause a default under the relevant credit agreement. A default, if not waived, could result in acceleration of the outstanding indebtedness under the 2025 Credit Agreement as well as under the Convertible Senior Notes, in which case such indebtedness would become immediately due and payable. If any default occurs, we may not be able to pay our debt or borrow sufficient funds to refinance it. Even if new financing is available, it may not be available on terms that are acceptable to us. Complying with these covenants may cause us to take actions that we otherwise would not take or not take actions that we otherwise would take.
Debt & Financing - Risk 5
Our indebtedness could impair our financial condition and harm our ability to operate our business.We have a significant amount of debt outstanding as of August 29, 2025, including the debt described in "PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt." Our indebtedness may have important consequences, including, but not limited to, the following:
- increasing our vulnerability to general economic downturns and adverse industry conditions;- limiting our ability to obtain additional financing;- requiring us to dedicate a significant portion of our cash flows from operations to the payment of interest and principal on our debt, which would reduce the funds available to us for our working capital, capital expenditures or other general corporate requirements;- increasing our exposure to rising interest rates from variable rate indebtedness;- diluting the interests of our existing stockholders to the extent common stock are issued upon conversion of our Convertible Senior Notes (as defined below);- limiting our flexibility in planning for, or reacting to, changes in our business and industry;- placing us at a competitive disadvantage compared to our competitors with less indebtedness or more liquidity; and - limiting our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes.
Our ability to make scheduled payments on, to refinance or to pay off our debt obligations when due depends on the financial condition and operating performance of our business. This, to a certain extent, is subject to prevailing economic and competitive conditions, including general conditions prevailing in the financial markets and global economy, and to certain financial, business, regulatory and other factors beyond our control, including the risks described herein. Our business may not generate sufficient cash flows from operations, and future borrowings may not be available to us under our debt arrangements, including the 2025 Credit Agreement (as defined below), in an amount sufficient to enable us to service our debt or to fund our other liquidity needs. In addition, certain of our debt is subject to terms that may require the use of significant cash in the future under certain circumstances.
For example, holders of our 2.25% Convertible Senior Notes due 2026 (the "2026 Notes"), our 2.00% Convertible Senior Notes due 2029 (the "2029 Notes") and our 2.00% Convertible Senior Notes due 2030 (the "2030 Notes," collectively, the "Convertible Senior Notes"), may, subject to a limited exception, require us to repurchase their Convertible Senior Notes following a "fundamental change," as described in more detail in "PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt – Convertible Senior Notes." In addition, all conversions of the Convertible Senior Notes will be settled partially or entirely in cash. We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the Convertible Senior Notes or pay the cash amounts due upon conversion. Applicable law, regulatory authorities and the agreements governing our other indebtedness, including the 2025 Credit Agreement, may restrict our ability to repurchase the Convertible Senior Notes. Our failure to repurchase the Convertible Senior Notes or to pay the cash amounts due upon conversion when required will constitute a default under the relevant indenture. A default under such indenture or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full. We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the Convertible Senior Notes.
If we are unable to meet our debt obligations or fund our other liquidity needs, we may need to restructure or refinance all or a portion of our debt or sell certain of our assets on or before the maturity of our debt. We may not be able to restructure or refinance any of our debt on commercially reasonable terms, or at all, which could cause us to default on our debt obligations and impair our liquidity, which in turn could cause the acceleration of other indebtedness under certain of our debt agreements which could exacerbate our liquidity problems. Any refinancing of our indebtedness will likely be at higher interest rates in the current environment and may require us to comply with more onerous covenants that could further restrict our business operations. If we are not able to repay our debt obligations as they become due, or if we are not able to refinance or restructure our debt obligations before they become due, this could cause us to default on our debt obligations and impair our liquidity.
In addition, if our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets or seek additional capital. These alternative measures may not be available to us, may not be successful and may not permit us to meet our scheduled debt service obligations, which could result in substantial liquidity problems. The 2025 Credit Agreement restricts our ability to dispose of our assets and use the proceeds from the disposition. We may not be able to consummate any such disposition or dispositions or to obtain the proceeds which we could realize from them, and these proceeds may not be adequate to meet any debt service obligations then due. Any of these circumstances could have a material adverse effect on our business, results of operations and financial condition.
Corporate Activity and Growth3 | 4.4%
Corporate Activity and Growth - Risk 1
We may not achieve the intended benefits of the sale of our Brazil business.Corporate Activity and Growth - Risk 2
We may fail to realize the anticipated benefits of our acquisitions.We closed the acquisition of Stratus Technologies in August 2022. As we continue to integrate this business into our operations and portfolio, our ability to realize some or all of the anticipated benefits of the acquisition may be impacted by the following:
- difficulties in the assimilation and successful integration of the operations, sales functions, technologies, products, systems, processes, personnel and development capabilities;- failure to maintain and expand the customer bases of our acquired business;- difficulties in leveraging the Stratus Technologies research and development and product development capabilities to expand our products portfolio;- our failure to protect and expand their intellectual property and patent portfolios;- unanticipated costs, including write-offs of tangible assets as well as goodwill or other intangible assets, litigation or other contingent liabilities associated with the acquisition;- the diversion of management's attention from other business concerns;- adverse effects on existing business relationships with suppliers and customers;- risks associated with entering markets in which we have little or no prior experience and markets with complex government regulations; and - loss of key employees of the acquired business.
Any of these risks or other risks arising from the integration of Stratus Technologies' business into our operations could have a material adverse effect on our business, financial condition or results of operations and could cause the impact of the acquisition to be dilutive to our company.
Corporate Activity and Growth - Risk 3
We have in the past made, and may in the future make, acquisitions, investments and/or alliances, which involve numerous risks.As part of our business and growth strategy, we have in the past and may in the future acquire or make significant investments in businesses, products or technologies, such as our acquisitions of Stratus Technologies, Cree's LED business, SMART EC, SMART Wireless and Penguin Computing. Any acquisitions or investments would expose us to the risks commonly encountered in acquisitions of businesses or technologies. Such risks include, among others:
- problems integrating the purchased operations, technologies, systems, processes, products or personnel;- unanticipated costs or expenses associated with an acquisition or investment, including write-offs of tangible assets as well as goodwill or other intangible assets;- negative effects on results of operations resulting from an acquisition or investment;- adverse effects on existing business relationships with suppliers and customers;- the risk that suppliers (such as Wolfspeed, Inc.) or customers of an acquired business are unable or unwilling to do business with us following the acquisition;- risks associated with entering markets in which we have little or no prior experience, such as the market for LED products that we entered following our acquisition of Cree's LED business and markets with complex government regulations;- loss of key employees of the acquired business; and - potential risks and liabilities associated with acquired businesses, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities, litigation or other claims in connection with the acquired company, including claims from terminated employees, former stockholders or other third parties, and other known and unknown liabilities.
Problems encountered in connection with an acquisition could divert the attention of management, utilize scarce corporate resources and otherwise harm our business. Acquisitions may also lead to increased operational complexity, and effectively streamlining operations and processes of acquired businesses or entities requires management attention and expenditures. To the extent that we make any future acquisitions, we could issue common stock that would dilute our existing stockholders' percentage ownership, incur substantial additional debt (such as the Purchase Price Note we issued in connection with the acquisition of Cree's LED business), expend cash and reduce our cash reserves or assume additional liabilities. Furthermore, acquisitions may require material charges and could result in adverse tax consequences, substantial depreciation, deferred compensation charges, liabilities under earnout provisions, the amortization of amounts related to deferred compensation and identifiable purchased intangible assets or impairment of goodwill or other intangibles, any of which could negatively impact our business, results of operations and financial condition. We are unable to predict whether or when any prospective acquisition candidate will become available or the likelihood that any acquisition will be completed. We may expend significant resources and management time pursuing an acquisition that we are unable to consummate, including for reasons outside of our control. Even if we do find suitable acquisition opportunities, we may not be able to consummate the acquisitions on commercially acceptable terms or at all, or may not realize the anticipated benefits of any acquisitions we do undertake, including our acquisition of Cree's LED business. Our investments in private companies are subject to risk of loss of investment capital. These investments are inherently risky because the markets for the technologies or products they may have under development are typically in the early stages and may never materialize. We could lose our entire investment in these companies.
Legal & Regulatory
Total Risks: 14/68 (21%)Above Sector Average
Regulation3 | 4.4%
Regulation - Risk 1
We are subject to a number of procurement laws and regulations.Regulation - Risk 2
We may have limited legal recourse under the laws of China if disputes arise under our agreements with third parties.The Chinese government has enacted certain laws and regulations dealing with matters such as corporate organization and governance, foreign investment, currency control, commerce, taxation and trade. However, the implementation, interpretation and enforcement of these laws and regulations is still evolving, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. If disputes arise under our agreements with other parties doing business in China, we face the risk that such party may breach any such agreement or otherwise engage in conduct relating to their relationship with us that could otherwise give rise to liability under U.S. law. The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the Chinese government. Any rights we may have to specific performance, or to seek an injunction under Chinese law, in either of these cases, may be limited, and without a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations.
Regulation - Risk 3
We and others are subject to a variety of laws, regulations, or industry standards that may have a material adverse effect on our business, results of operations or financial condition.Our business is subject to regulation by various U.S. federal and state governmental agencies. Such regulation includes, without limitation, the radio frequency emission regulatory activities of the Federal Communications Commission, the antitrust regulatory activities of the Federal Trade Commission (the "FTC") and the Department of Justice, the consumer protection laws of the FTC, the import/export regulatory activities of the Department of Commerce, the product safety regulatory activities of the Consumer Products Safety Commission, the regulatory activities of the Occupational Safety and Health Administration, the environmental regulatory activities of the Environmental Protection Agency, the labor regulatory activities of the Equal Employment Opportunity Commission, the export control regulatory activities of the Department of State and tax and other regulations by a variety of regulatory authorities in each of the areas in which we conduct business. We are also subject to similar, and in some cases additional, regulation in other countries where we conduct business, including import and export laws and foreign currency control. In certain jurisdictions, such regulatory requirements may be more stringent and complex than in the United States. We are also subject to a variety of U.S. federal and state employment and labor laws and regulations, including, without limitation, the Americans with Disabilities Act, the Federal Fair Labor Standards Act, the Worker Adjustment and Restructuring Notification Act and other regulations related to working conditions, wage-hour pay, overtime pay, employee benefits, anti-discrimination and termination of employment.
Like other companies operating or selling internationally, we face risks of non-compliance with the U.S. Foreign Corrupt Practices Act (the "FCPA") and other laws which generally prohibit direct and indirect improper payments to foreign government officials and political parties for the purpose of securing an unfair business advantage. In addition, because we have operations and suppliers in China and adjacent jurisdictions, we have exposure and risks associated with the Uyghur Forced Labor Prevention Act ("UFLPA") and other global laws against forced labor. The UFLPA prohibits the importation of articles, merchandise, apparel and goods mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region (Xinjiang) of the People's Republic of China (PRC), or by entities identified by the U.S. government on the UFLPA Entity List. Forced labor concerns have rapidly become a global area of interest and is a topic that will likely be subject to new regulations in the markets we operate within. If we fail to comply with these laws and regulations, we may be subject to detention, seizure and exclusion of imports, as well as penalties, costs and restrictions on export and import privileges that could have an adverse effect on our business, financial condition and results of operations. We are also subject to similar or even more restrictive anticorruption laws imposed by the governments of other countries where we do business, such as laws that prohibit commercial bribery, including the UK Bribery Act and the Malaysian Anticorruption Act. We make sales, are subject to government regulation and operate in countries known to present heightened risks of public corruption. Although we have implemented policies and controls to mitigate risks of non-compliance, our business activities create the risk of unauthorized conduct by one or more of our employees, consultants, customs brokers, freight forwarders, third party representatives or distributors that could be in violation of various laws including the FCPA or similar local regulations. In addition, we may be held liable for actions taken by such parties even if such parties themselves are not subject to the FCPA or similar laws. Investigations into allegations of such misconduct can be costly, and any determination that we have violated the FCPA or similar laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities that could have a material adverse effect on our business, results of operations and financial condition.
Our China operations are subject to national, regional and local regulation. The regulatory environment in China continues to evolve, and officials in the Chinese government exercise broad discretion in deciding how to interpret and apply regulations. It is possible that the Chinese government's current or future interpretation and application of existing or new regulations will negatively impact our China operations, result in regulatory investigations or lead to fines or penalties.
Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory product recalls, enforcement actions, disgorgement of profits, disbarment from government projects, fines, damages, civil and criminal penalties or injunctions and reputational damage that could harm our business, results of operations and financial condition. In addition, from time to time we have received, and may receive in the future, correspondence from former employees and parties with whom we have done business, threatening to bring claims against us alleging that we have violated one or more regulations related to customs, labor and employment, foreign currency control or other laws or regulations. An adverse outcome in any litigation or proceeding related to such matters could require us to pay damages, attorneys' fees and/or other costs.
If any governmental sanctions were to be imposed, or if we were not to prevail in any civil action or criminal proceeding, our business, results of operations and financial condition could be materially adversely affected. In addition, responding to any litigation or action would likely result in a significant diversion of management's attention and resources and a significant increase in professional fees.
Litigation & Legal Liabilities3 | 4.4%
Litigation & Legal Liabilities - Risk 1
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.Litigation & Legal Liabilities - Risk 2
Legal proceedings and claims could have a material adverse effect on our business, results of operations or financial condition.We are currently involved, and may in the future become involved, in legal proceedings, claims or government and administrative investigations, including any identified under "Item 3. Legal Proceedings." For example, from time to time, third parties may assert claims against us alleging infringement of their intellectual property rights on technologies that are important to our business. In addition, litigation or other actions may be necessary to protect our intellectual property rights, to determine the validity and scope of the proprietary rights of others or to defend against third party claims of infringement and/or invalidity. The steps we take to prevent misappropriation, infringement or other violations of the intellectual property of others may not be successful. For instance, there may be issued patents held by third parties of which we are not aware, that if found to be valid and enforceable, could be alleged to be infringed by our current or future technologies or products. There may also be pending patent applications of which we are not aware, that may result in issued patents, which could be alleged to be infringed by our current or future technologies or products. Litigation and other legal and administrative processes, whether as plaintiff, defendant or otherwise, could result in substantial costs and diversion of resources and management attention and could have a material adverse effect on our business, results of operations and financial condition, whether or not such litigation or other processes are ultimately determined in our favor. In the event of an adverse result in, or a settlement of, a litigation matter, we could be required to pay substantial damages or settlement amounts; cease the manufacture, use, import and sale of certain products or components; expend significant resources to develop or acquire rights to use non-infringing technology; and/or discontinue the use of certain processes or obtain licenses and pay one-time fees and/or on-going royalties to use the infringing or allegedly infringing technology. The occurrence of any of the foregoing could result in unexpected expenses or require us to recognize an impairment of our assets, which would reduce the value of our assets and increase our expenses.
Litigation & Legal Liabilities - Risk 3
Our indemnification obligations to our customers and suppliers could require us to pay substantial damages.A number of our product sales and product purchase agreements provide that we will defend, indemnify and hold harmless our customers and suppliers from damages and costs which may arise from various matters including, without limitation, product warranty claims or claims for injury or damage resulting from defects in, or usage of, our products or the products of our suppliers. In addition, we currently have in effect a number of agreements in which we agree to defend, indemnify and hold harmless our customers and suppliers from damages and costs which may arise from the infringement or alleged infringement by our products of third-party patents, trademarks or other intellectual property rights. We periodically have to respond to claims and may have to litigate indemnification obligations in the future.
Indemnification obligations could require us to expend significant amounts of money to defend claims and/or to pay damages or settlement amounts. We maintain insurance to protect against certain claims associated with the use of our products; however, our insurance may not cover all or any part of a claim asserted against us. Our insurance does not cover intellectual property infringement in most instances. A claim brought against us that is in excess of, or excluded from, our insurance coverage could adversely impact our business, results of operations and financial condition.
Taxation & Government Incentives6 | 8.8%
Taxation & Government Incentives - Risk 1
We may incur liabilities relating to additional Brazilian withholding tax in connection with the sale of our Brazil business.Taxation & Government Incentives - Risk 2
We are subject to the taxation requirements of the jurisdictions in which we operate, and if we fail to qualify for certain tax incentives or to comply with local tax regulations, we may suffer financial losses.We are subject to changes in tax laws, treaties and regulations or the interpretation or enforcement thereof in the Cayman Islands, United States, Malaysia, Ireland and other jurisdictions in which we or any of our subsidiaries operate or are resident. We have structured our operations in a manner designed to maximize our benefit from various government incentives and/or tax holidays extended to manufacturers in Malaysia to encourage investment and employment, and to minimize our tax liability in other jurisdictions such as the United States to the extent permitted by law. Our interpretations and conclusions regarding these tax incentives are not binding on any taxing authority. Additionally, we have been in the past and may in the future be subject to tax assessments by the relevant authorities in the jurisdictions in which we operate and we have been in the past and may in the future be involved in legal disputes with regulatory or governmental authorities relating to these assessments. If our assumptions about, or interpretation or implementation of, tax and other laws are incorrect; if tax laws or regulations are substantially modified or rescinded; if the tax incentives from which we benefit in the jurisdictions in which we operate are substantially modified or rescinded; if we fail to meet the conditions of any of the tax incentives; or if we do not prevail in disputes with tax authorities, we could suffer material adverse tax and other financial consequences including owing significant amounts of taxes and penalties that would increase our expenses, reduce our profitability and adversely affect our cash flows, results of operations and financial condition.
Taxation & Government Incentives - Risk 3
We reversed the valuation allowance for a significant portion of our deferred tax assets in the fourth quarter of 2023, and we may not be able to realize these assets in the future. Our deferred tax assets may also be subject to additional valuation allowances, which could have a material adverse effect on our business, results of operations, and financial condition.Determining whether a valuation allowance for deferred tax assets is appropriate requires significant judgment and an evaluation of all positive and negative evidence. At each reporting period, we assess the need for, or the adequacy of, a valuation allowance against our deferred tax assets.
In the fourth quarter of fiscal year 2025, based on the weight of all the positive and negative evidence, we concluded that it was more likely than not that we would be unable to realize the benefit of interest expense carryforward attributes inherited as part of the U.S. Domestication. Therefore, we recorded a valuation allowance against that deferred tax asset in the same period that it was inherited.
In the fourth quarter of fiscal year 2023, based on the weight of all the positive and negative evidence, we concluded that it was more likely than not that we will realize certain federal and state net deferred tax assets based on three significant pieces of positive evidence occurring during the year ended August 25, 2023: (1) achieving three-year cumulative earnings, (2) recent use of deferred tax assets including available tax attribute carryforwards and (3) forecasted growth and profitability. Therefore, we reversed the valuation allowance on those deferred tax assets in fiscal year 2023.
Our conclusion that it is more likely than not that we will realize certain federal and state net deferred tax assets considers our estimate of future taxable income. Our estimate of future taxable income is based on internal projections which primarily consider historical performance, but also include various internal estimates and assumptions as well as certain external data. We believe all of these inputs to be reasonable, although inherently subject to judgment. If actual results differ significantly from these estimates of future taxable income, we may need to reestablish a valuation allowance for some or all of our deferred tax assets. Establishing an allowance on our net deferred tax assets could have a material adverse effect on our business, results of operations and financial condition.
Taxation & Government Incentives - Risk 4
Our ability to use our tax attributes is limited.As of August 29, 2025, we had U.S. federal and state net operating loss carryforwards of $23.6 million and $36.2 million, respectively. If not utilized, the federal net operating loss carryforwards will begin to expire in 2027. State net operating loss carryforwards of $35.9 million will begin to expire in 2031, while the remaining state net operating loss carryforwards do not expire. In addition, we have U.S. federal and state research and development credit carryforwards of $8.5 million and $4.5 million, respectively, and $1.2 million of foreign tax credit carryforwards. If not utilized, the federal research and foreign tax credits will begin to expire in 2032. If not utilized, $2.0 million of state credits will begin to expire in 2030, while $2.5 million of state credits do not expire. In addition, we have Section 163(j) interest expense carryforwards of $99.0 million from the acquisition of Stratus Technologies and $318.5 million from the U.S. Domestication, both of which do not expire. Net operating loss carryforwards in Hong Kong of $29.6 million do not expire.
Federal and state tax attributes can be subject to an annual limitation under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), and applicable state tax laws. Under Sections 382 and 383 of the Code, if a corporation undergoes an "ownership change," the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change taxable income may be limited. In general, an "ownership change" occurs if there is a cumulative change in our ownership by certain "5-percent shareholders" (including groups of stockholders) that exceeds 50 percentage points (by value) over a rolling three-year period. Similar rules may apply under state tax laws. Our net operating loss, tax credit and Section 163(j) interest expense carryforwards are subject to limitations per Sections 382 and 383 of the Code. We have experienced ownership changes in the past and may experience ownership changes in the future as a result of transactions involving our common stock, some of which may be outside of our control. Consequently, our ability to utilize our pre-change net operating loss, tax credit, and Section 163(j) interest expense carryforwards to offset post-change U.S. federal and state taxable income could be further limited.
Taxation & Government Incentives - Risk 5
Changes in tax laws or potential adjustments by tax authorities could materially increase our tax expense.We are a multinational company subject to taxation in multiple jurisdictions. Our future effective tax rates could be adversely affected by various factors, including the resolution of tax audits with tax authorities in the United States and abroad; adjustments to income taxes upon finalization of various tax returns; increases in non-deductible expenses for tax purposes, such as write-offs of acquired in-process research and development or impairments of goodwill related to acquisitions; changes in available tax credits; changes in tax laws, regulations, or tax rates; changes in the interpretation or application of tax laws; fluctuations in the proportion of net sales or earnings generated in countries with particularly high or low statutory tax rates; changes in tax exemptions available in certain jurisdictions or in connection with certain transactions; or changes in the valuation of our deferred tax assets and liabilities.
Taxable income in any jurisdiction depends in part on whether local tax authorities accept our operational practices and intercompany transfer pricing as being conducted on an arm's-length basis. Due to inconsistencies in how taxing authorities apply the arm's-length standard and the limited protection provided by treaties, transfer pricing challenges by tax authorities could, if successful, substantially increase our income tax expense. While we currently benefit from preferential tax treatment in certain foreign jurisdictions, most notably Malaysia, such treatment is contingent upon our continued compliance with specific conditions and may be subject to change. Further changes in tax laws could arise as a result of the base erosion and profit shifting project that was undertaken by the Organisation for Economic Co-operation and Development ("OECD"). For example, the OECD introduced an international tax framework under Pillar Two, which establishes a global minimum tax rate of 15%. This framework has been adopted by several jurisdictions, including those in which we operate, effective January 1, 2024, with additional jurisdictions expected to implement similar measures. The effect of Pillar Two taxes is applicable for our fiscal year ended August 29, 2025. We continue to monitor developments in jurisdictions that are expected to implement Pillar Two in the future, and we have evaluated the potential impact of the enactment of Pillar Two by such jurisdictions on our consolidated financial statements.
We regularly assess the likelihood of outcomes resulting from tax examinations in the United States and abroad to determine the adequacy of our provision for taxes and have recorded reserves for potential adjustments that may result from ongoing examinations. We believe these estimates are reasonable; however, there can be no assurance that the final determination of any examinations will align with our estimates.
Any significant variance between the results of tax examinations and our estimates, any failure to continue to receive any beneficial tax treatment in any of our foreign locations or any increase in our future effective tax rates due to any of the factors set forth above or otherwise could reduce our net income and have a material adverse effect on our business, results of operations, and financial condition.
Taxation & Government Incentives - Risk 6
The U.S. Domestication may adversely impact our effective tax rate.Although we do not currently expect the U.S. Domestication to increase our effective tax rate, there is a risk that our effective tax rate may nonetheless increase following the U.S. Domestication. Our effective tax rate could change materially after the U.S. Domestication, which may adversely affect our financial results, including our earnings and cash flow in future periods, and may fluctuate significantly from period to period. Our effective tax rate is based upon the application of currently applicable income tax laws, regulations and treaties, as well as current judicial and administrative interpretations of those rules in various jurisdictions, including jurisdictions outside the United States.
In light of these factors, there can be no assurance that our effective tax rate will not increase in future periods, including as a result of and following the U.S. Domestication. Moreover, U.S. tax laws significantly limit the ability of U.S. corporations to redomicile outside of the United States. Accordingly, if our effective tax rate were to increase as a result of the U.S. Domestication, our business and financial performance could be adversely affected.
Environmental / Social2 | 2.9%
Environmental / Social - Risk 1
We could incur substantial costs or liabilities as a result of violations of environmental laws.Environmental / Social - Risk 2
Actual or perceived non-compliance with applicable data privacy and security laws, or that of our customers, suppliers or business partners, could expose us to losses.We are subject to laws, rules and regulations in the United States and other countries relating to the collection, use, transmission, processing and security of user and other data. Our ability to execute transactions and to possess, process, transmit and use personal information and data in conducting our business, for example with respect to our marketing efforts, which include email marketing and telemarketing, subjects us to legislative and regulatory obligations that, among other things, may require us to expend time, financial and other resources to monitor and interpret ever-evolving and complex data privacy and security laws.
In particular, certain states have adopted new or modified privacy and security laws and regulations that may apply to our business, for example, the California Consumer Privacy Act ("CCPA") imposes obligations on businesses that process personal information of California residents. Among other things, the CCPA: requires disclosures to such residents about the data collection, use and disclosure practices of covered businesses; provides such individuals expanded rights to access, delete and correct their personal information and opt-out of certain transfers of personal information; requires covered businesses enter into specific contractual provisions with service providers that process California resident personal information on the covered business's behalf; and provides such individuals with a private right of action and statutory damages for data breaches. The enactment of the CCPA has prompted a wave of similar laws being passed in the United States, which creates the potential for a patchwork of overlapping but different state laws. For example, since the CCPA went into effect, comprehensive privacy statutes that share similarities with the CCPA are now in effect and enforceable in numerous states. We cannot predict the full impact of these laws on our business or operations. Many other states are currently reviewing or proposing the need for greater regulation of the collection, sharing, use and other processing of information related to individuals for marketing purposes or otherwise, and there remains increased interest at the federal level as well. Additionally, other jurisdictions outside of the United States have or have recently enacted privacy and cybersecurity laws, such as the United Kingdom and the European Union that have enacted the UK General Data Protection Regulation and the EU General Data Protection Regulation respectively and Brazil which has enacted the Lei Geral de Proteção de Dados, creating the potential for a patchwork of overlapping but different laws.
We have incurred, and will continue to incur, significant expenses to comply with mandatory privacy and security standards and protocols under applicable laws, regulations, industry standards and contractual obligations. Despite such expenditures, we may face regulatory and other legal actions in the event of perceived or actual non-compliance with such applicable obligations. Many of these laws would also require us to notify regulators and customers, employees or other individuals of any data security breach as described above. The various data privacy enactments impose significant obligations and compliance with these requirements depends in part on how particular regulators apply and interpret them. In addition, as a contractor to the Department of Defense ("DoD"), we are contractually required to protect "controlled unclassified information" and comply with DoD cybersecurity requirements, including controls specified in the National Institute of Standards and Technology Special Publication 800-171. The DoD has implemented certain information security requirements and obligations relating to the Cybersecurity Maturity Model Certification ("CMMC"). When incorporated into our contracts or solicitations, we will need to comply with the CMMC and flow down such requirements, as appropriate, to our vendors and suppliers.
The laws, rules and regulations relating to privacy and data security are in some cases relatively new and the interpretation and application of these laws are uncertain. Any failure or perceived failure by us to comply with data privacy laws, rules, regulations, industry standards and other requirements could result in proceedings or actions against us by individuals, consumer rights groups, government agencies or others. We could incur significant costs in investigating and defending such claims and, if found liable, pay significant damages or fines or be required to make changes to our business. Further, these proceedings and any subsequent adverse outcomes may subject us to significant negative publicity and an erosion of trust. If any of these events were to occur, our business, results of operations and financial condition could be materially adversely affected.
Ability to Sell
Total Risks: 11/68 (16%)Above Sector Average
Competition3 | 4.4%
Competition - Risk 1
Open source software may make it easier for competitors, some of which may have greater resources than we have, to enter our markets and compete with us.Competition - Risk 2
The markets that we serve are highly competitive.The markets that we serve are characterized by intense competition. Our competitors include many large domestic and international companies that have substantially greater financial, technical, marketing, distribution and other resources, greater name recognition, broader product lines, lower cost structures and longer-standing relationships with customers and suppliers than we do. As a result, our competitors may be able to respond better to new or emerging technologies, such as generative AI, or standards and to changes in customer requirements. Further, some of our competitors are in better financial and marketing positions from which to influence industry acceptance of a particular product or service standard or competing technology than we are. Our competitors may also be able to devote greater resources to the development, promotion and sale of products and services, and may be able to deliver competitive products and services at a lower price than we can. In addition to competing with certain portions of our product and services offerings, certain of our competitors are also our significant customers, suppliers, or both. Finally, China's stated national policy to be a global leader in all segments of the semiconductor industry by 2030 has resulted in and may continue to cause increased competitive capability in China.
Across all of our markets, we also expect to face new companies that may enter our existing or future markets with similar or alternative offerings, which may be less costly or provide additional features. We also face competition from current and prospective customers that evaluate our capabilities against the merits of manufacturing products or developing solutions internally. Competition may also arise due to the development of cooperative relationships among our current and potential competitors and/or suppliers or third parties to increase the ability of their offerings to address the needs of our prospective customers. Accordingly, it is possible that new competitors or alliances among competitors and/or suppliers may emerge and acquire significant market share.
Competitive pressure has led in the past and may continue to lead to intensified price competition resulting in lower net sales and lower profit margins which could negatively impact our financial performance. Our efforts to maintain and improve our competitive position, or our failure to do so, could have a material adverse effect on our business, results of operations and financial condition.
Competition - Risk 3
We compete in historically cyclical markets.Historically, the markets in which we compete have been highly cyclical and have experienced significant downturns often connected with, or in anticipation of, maturing product lifecycles of both component suppliers and electronic equipment manufacturers and/or declines in general economic conditions. These downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of selling prices and inventory values. Our business depends on the continued growth of technology utilization, the electronics industry and on end-user demand for our customers' products. Economic downturns often have had an adverse effect upon manufacturers and end-users of electronics products. The timing of new product developments, the lifecycle of existing electronics products and the level of acceptance and growth of new products can also affect demand for our products. Downturns in the markets we serve could have a significant negative impact on the demand for our products. Additionally, due to changing conditions, our customers have experienced and may in the future experience periods of excess inventory that could have a significant adverse impact on our sales. During a downturn in any of the markets that we serve, there is also a higher risk that some of our trade receivables become delinquent or even uncollectible and that our inventory would decrease in value. We cannot predict the timing or the severity of the cycles within our industries. In particular, it is difficult to predict how long and to what levels any industry upturn or downturn, or general economic strength or weakness, will last or develop. Reduced demand for our products could have a material adverse effect on our business, results of operations and financial condition.
Demand4 | 5.9%
Demand - Risk 1
We depend on a select number of customers for a significant portion of our revenue.Demand - Risk 2
Contracts with the U.S. Government may be terminated, cancelled or modified.Certain of the U.S. Government programs in which we participate as a contractor or subcontractor may extend for several years and include one or more base years and one or more option years. Under some contracts, the government generally has the right not to exercise options to extend or expand our contracts and may otherwise terminate, cancel, modify or curtail our contracts at its convenience. Any decision by a government agency not to exercise contract options or to terminate, cancel, modify or curtail any major programs or contracts would adversely affect our revenues, revenue growth and our ability to achieve or maintain profitability. We may experience periodic performance issues under certain of our contracts. Depending on the nature and value of the contract, a performance issue or termination for default could cause our actual results to differ from those anticipated and could harm our reputation and our results of operations and financial condition.
Demand - Risk 3
If our OEM customers decide to utilize standardized solutions instead of our specialty products, our net sales and market share may decline.Many of our specialty products are specifically designed for our OEM customers' systems or products. In an effort to reduce costs, a number of our OEM customers design standardized or commodity components, modules or subsystems into their products. Although we also manufacture standard components, modules and subsystems, an increase in such efforts by our customers could reduce the demand for our higher priced specialized or customized solutions, which in turn would have a significant negative impact on our business, results of operations and financial condition. In addition, when customers utilizing custom solutions choose to adopt a standard instead of custom or specialty components, modules or subsystems, new competitors producing standard components, modules or subsystems may take a portion of our customers' business previously purchased from us.
Demand - Risk 4
The anticipated benefits of the U.S. Domestication may not be realized.On June 30, 2025, we consummated the U.S. Domestication. We may not realize the anticipated benefits of the U.S. Domestication. The achievement of such benefits is, in many significant respects, subject to factors beyond our control, including the responses of third parties with whom we conduct business, the terms of future contractual relationships, and the reactions of investors. Additionally, the anticipated benefits from the U.S. Domestication may not outweigh the direct and indirect costs and expenses incurred in connection with the transaction. Failure to realize those benefits could have a material and adverse effect on our business, results of operations, or financial condition.
Sales & Marketing3 | 4.4%
Sales & Marketing - Risk 1
We may be required to pay royalties or obtain licenses to sell certain products.Sales & Marketing - Risk 2
We may be unable to optimally match purchasing and production to customer demand, which may have a material adverse effect on our business, results of operations and financial condition.In most cases we do not obtain long-term purchase orders or commitments from our customers, but instead we work with our customers to develop non-binding estimates or forecasts of future requirements. Utilizing these non-binding estimates or forecasts, we make significant decisions based on our estimates of customer requirements including determining the levels of business that we will seek and accept, production scheduling, component purchasing and procurement commitments, inventory levels, product development or customization, personnel and production facility needs and other resource requirements. Customers may cancel, reduce or delay orders that were either previously made or anticipated, often with little or no notice to us, and generally without penalty, which can result in us having underutilized resources or excess materials. Conversely, customers may require rapid increases in production, which can challenge our resources and can reduce profit margins. We may not have sufficient capacity at any given time to meet our customers' demands. As many of our costs and operating expenses are relatively fixed, reduction in customer demand has had in the past, and could in the future have, a material adverse effect on our business, results of operations and financial condition.
Additionally, we have had in the past and expect we could again have in the future, inventory write-downs and/or write-offs due to obsolescence, excess quantities (including due to decreased demand) and declines in market value below our costs. In particular, if product obsolescence causes product demand to decrease or we fail to forecast demand accurately, we could be required to write-off inventory or record underutilization charges, which would have a negative impact on our profit margins and our profitability. Any one or more of these occurrences could have a negative impact on our results of operations and financial condition.
Sales & Marketing - Risk 3
Fluctuations in average selling prices may have a material adverse effect on our business, results of operations and financial condition.The markets for our Integrated Memory products have historically been characterized by declines in average selling prices. Our average selling prices may decline due to several factors, including general declines in demand for our products and excess supply of DRAM and flash memory components, including as a result of overcapacity. In the past, transitions to smaller design geometries and other factors causing overcapacity in memory markets have led to significant increases in the worldwide supply of memory components. If not accompanied by increases in demand, supply increases usually result in significant declines in component prices and, in turn, declines in the average selling prices and profit margins of our products. During periods of oversupply, our net sales may decline if we fail to increase sales volume of existing products or to introduce and sell new products in quantities sufficient to offset declines in selling prices. Our efforts to increase sales or to introduce new products to offset the impact of declines in average selling prices may not be successful. Furthermore, our competitors and customers also impose significant pricing pressures on us. Declines in average selling prices have in the past had, and may again in the future have, a material adverse effect on our business, results of operations and financial condition. Declines in average selling prices also might enable OEMs to pre-install higher density memory modules into new systems at existing price points, thereby reducing the demand for future memory upgrades. In addition, our net sales and gross profit may be negatively affected by shifts in our product mix during periods of declining average selling prices.
Brand / Reputation1 | 1.5%
Brand / Reputation - Risk 1
If we are not able to maintain, develop and enhance our brand and our reputation, our business and results of operations may be adversely affected.Tech & Innovation
Total Risks: 10/68 (15%)Below Sector Average
Innovation / R&D4 | 5.9%
Innovation / R&D - Risk 1
Our customers often require that our products undergo a lengthy and expensive process of evaluation and qualification without any assurance of net sales.Innovation / R&D - Risk 2
Our future success depends on our ability to develop new products and services.The markets that we serve are subject to rapid technological change, product obsolescence, frequent new product introductions and feature enhancements, changes in end-user requirements, evolving industry standards, and frequent innovations and disruptions in the markets in which we compete for products and services. Our ability to successfully compete and to continue to grow our business depends in significant part upon our ability to develop, introduce and sell new and enhanced products and services on a timely and cost-effective basis, and to anticipate and respond to changing customer requirements and competition. We have invested and expect to continue to invest heavily in research and development for new and innovative products, including AI solutions. In addition, we have invested and expect to continue to invest significant time and capital into developing infrastructure, employee training and marketing efforts to expand our services offerings. However, there can be no guarantee that our evolving business strategy or our efforts will be successful or that our new products or services will gain market acceptance, be price competitive or result in any significant increase in our net sales. If these investments fail to provide the expected returns, then such failure could have a material adverse effect on our business, results of operations and financial condition.
Additionally, we have experienced, and may experience in the future, delays and unanticipated expenses in the development and introduction of new products and services. A failure to develop products with required feature sets or performance standards, or delays in the development, introduction and qualification of new products or services, could significantly reduce our return on investment as well as our net sales, provide a competitor a first-to-market advantage and allow a competitor to achieve greater market share, or cause our customers to cancel their orders (generally without penalty), all of which would have a material adverse effect on our business, results of operations and financial condition.
Innovation / R&D - Risk 3
Issues in the development of, our investment in, and use of AI or AI technologies, combined with an uncertain regulatory environment, may result in a material adverse impact on our business, results of operations and financial condition, reputational harm, liability or other adverse consequences to our business operations.We are making significant investments in AI initiatives, including designing, building, deploying and managing AI and HPC infrastructure. AI and accelerated computing technologies, markets and related demand trends are complex and rapidly evolving, and we face significant competition from other companies, including companies with greater resources than ours, and an evolving regulatory landscape. If we do not develop and timely offer AI solutions or keep pace with the product offerings of our competitors, or if demand for such products does not grow as anticipated, our business could be adversely affected. We may incur significant costs, invest substantial resources, and experience delays without achieving a return on investment or capitalizing on opportunities presented by AI.
The introduction of AI technologies into our internal business practices and the use of our proprietary software to manage AI compute environments may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, or other complications that could materially and adversely affect our business, results of operations or financial condition. Existing laws and regulations may apply to us or our customers or partners in new ways, and new laws and regulations may be instituted, the effects of which are difficult to predict. The intellectual property ownership and license rights, including copyright, surrounding AI technologies has not been fully addressed by courts or national or local laws or regulations, and any use or adoption of third-party AI technologies into our products and services may result in exposure to claims of copyright infringement or other intellectual property misappropriation.
The evolution of the technology industry, including the formation of strategic alliances among major technology companies in the AI sector, can result in rapid and significant changes to market dynamics and the competitive landscape. Failure to anticipate, adapt to, or successfully implement business strategies in response to such industry shifts could affect our ability to serve our customers' evolving needs, maintain competitive positioning and achieve our business objectives, resulting in a material adverse effect on our business, results of operations and financial condition.
We are working to incorporate generative AI technologies for use by our personnel for internal business purposes, such as software coding tools. These generative AI technologies could generate output that is infringing, and we could be subject to claims or lawsuits, including for infringement of third-party intellectual property rights as a result of the output of such generative AI technologies. While some providers of AI technologies offer to indemnify their end users for any copyright or other intellectual property infringement claims arising from the output of their AI technologies, we may not be successful in adequately recovering our losses in connection with such claims.
In addition, we may experience difficulties in enforcing the intellectual property rights, to the extent we seek to protect output generated using generative AI technologies. The United States Copyright Office has previously denied copyright protection for content generated by AI technologies, and the United States Patent and Trademark Office (the "USPTO") has similarly stated that an AI tool cannot be an "inventor" of a patent, rendering it impossible to obtain patent protection for inventions created solely by AI technologies. The Supreme Court of the United Kingdom has reached a similar conclusion, stating that AI systems cannot be named as an "inventor" for UK patent law purposes.
The rapid evolution of AI technologies and regulations requires the application of resources to help to ensure that AI is implemented responsibly in order to minimize unintended, harmful impact. There is a risk that AI technologies could produce inaccurate or misleading content or other discriminatory or unexpected results or behaviors, such as hallucinatory behavior that can generate irrelevant, nonsensical, or factually incorrect results, all of which could harm our reputation, business, or customer relationships. The development and use of AI technologies presents emerging ethical and social issues, and if we enable or offer solutions that draw scrutiny or controversy due to their perceived or actual impact on customers or on society as a whole, we may experience brand or reputational harm, competitive harm and/or legal liability.
Innovation / R&D - Risk 4
We may be unable to successfully manage environmental or social sustainability initiatives, in whole or in part, which could lead to less opportunity for us to have sustainability investors and partners and could negatively impact our reputation or options for capital acquisition.There is scrutiny from investors, customers, policymakers, and other stakeholders regarding companies' management of climate change, human capital, and various other environmental and social sustainability matters, and we expect to be subject to further scrutiny as a listed company with growing operations. We engage in various voluntary initiatives (including disclosures) to manage such matters or to respond to stakeholder expectations, but such initiatives can be costly and may not have the desired effect. Our management of climate, human capital, and other sustainability matters continues to evolve rapidly, in many instances due to factors that are out of our control, and we cannot guarantee that our approach will align with the expectations or preferences of any particular stakeholder. For example, we may ultimately be unable to complete certain initiatives or reach certain targets or goals. Similarly, many sustainability actions or statements rely on methodologies, standards, technology, and data that continue to evolve, including in ways we cannot predict. In recent years, there have been increasingly sophisticated complaints against companies for alleged deficiencies in their disclosures, methodologies, or actions related to sustainability matters. Various stakeholders also have different, and at times conflicting, expectations.
From a regulatory perspective, various policymakers have adopted (or are considering adopting) requirements for companies to undertake various disclosures or other actions on climate, human capital or other sustainability matters. These requirements, however, are not uniform, which can increase the cost and complexity of compliance and associated risks. Moreover, some policymakers have sought to constrain companies' consideration of various environmental and social sustainability matters, Advocates and opponents of such matters are increasingly resorting to activism, including litigation, to advance their perspectives. Addressing stakeholder expectations and regulatory requirements entails costs and any failure to successfully navigate such expectations, including any evolving interpretations of existing governmental laws, may result in reputational harm (including under various ratings or certification programs), loss of customers or contracts, regulatory or investor engagement, or other adverse impacts to our business. Increased regulation and increased stakeholder expectations will likely lead to increased costs as well as scrutiny that could heighten all of the risks we face associated with environmental, social and regulatory matters. Additionally, many of our customers and suppliers are subject to similar expectations, which may augment or create additional risks, including risks that may not be known to us.
Trade Secrets3 | 4.4%
Trade Secrets - Risk 1
We may be unable to protect our intellectual property.Trade Secrets - Risk 2
The sale of our Brazil business could impair our ability to protect our trademarks and brand.In connection with the sale of our SMART Brazil business, we permitted Lexar Europe and the divested businesses to use of the word "SMART" in combination with pre-approved words and logos in trademarks, domain names, logos and other source identifiers solely in Brazil (the "New Marks"). To prevent potential consumer confusion and protect our brands, and as a closing condition to the sale of our SMART Brazil business, we entered into an agreement with Lexar Europe and the divested subsidiaries that includes a number of restrictions on Lexar Europe's and the divested business' use of the New Marks, including that: (i) the New Marks may not be used outside of Brazil or in connection with products that will be consumed or exported outside of Brazil, (ii) the New Marks may only be used in connection with certain business and products, (iii) the word "SMART" may not be used alone as a brand name or source identifier and (iv) the New Marks must comply with certain font, style, format and color restrictions to avoid similarity with our logos.
While we have the foregoing contractual protections, there are no assurances (i) that Lexar Europe and the divested businesses will adhere to the contract or (ii) that customers or potential customers of our products and of Lexar Europe's and its affiliates' products will not have confusion as to source given the joint use of "SMART," which could lead to dilution of our rights in our "SMART" marks and/or reputational harm. If disputes arise in the future with respect to the contractual restrictions, we may not be able to successfully resolve these types of conflicts to our satisfaction. Although we changed our name from SMART Global Holdings, Inc. to Penguin Solutions, Inc. on October 15, 2024, the "SMART" brand is critical to our business and any consumer confusion, tarnishing or dilution of the "SMART" brand may have a material impact on our business.
Trade Secrets - Risk 3
We could be prevented from selling or developing our software if our licenses are not enforceable or are modified so as to become incompatible with other open source licenses.A number of our Advanced Computing offerings have been developed and licensed under the GNU General Public License and similar open source licenses. These licenses state that any program licensed under them may be liberally copied, modified and distributed. It is possible that a court would hold these licenses to be unenforceable or that someone could assert a claim for proprietary rights in a program developed and distributed under them. Additionally, if any of the third-party open source components of our offerings may not be liberally copied, modified or distributed, then our ability to distribute or develop all or a portion of our offerings could be adversely impacted. In addition, licensors of open source software employed in our offerings may, from time to time, modify the terms of their license agreements in such a manner that those license terms may become incompatible with other open source licenses in our offerings or our end user license agreement, and thus could, among other consequences, prevent us from distributing the software code subject to the modified license.
Cyber Security1 | 1.5%
Cyber Security - Risk 1
Actual or perceived failures or breaches of our information and security systems, or those of our customers, suppliers or business partners, could expose us to losses.Technology2 | 2.9%
Technology - Risk 1
We may be unable to adapt to technological change.Technology - Risk 2
Some of our offerings utilize open source software, which may pose particular risks to our proprietary software, products and services in a manner that could harm our business.Many of our Advanced Computing offerings, including Linux-based products and Penguin Solutions' ClusterWare products, incorporate software components licensed under various open source licenses. Open source software is made available under licenses that in some instances may subject us to certain unfavorable conditions, including requirements that we offer our proprietary software, or portions of our proprietary software, which incorporates or links to such open source software, for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using such open source software, and that we license such modifications or derivative works under the terms of the applicable open source licenses. The terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. We could face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we developed using such software, which could implicate aspects of our proprietary code. These claims could result in litigation and could require us to make our software source code freely available to the public, purchase a costly license or cease offering the implicated products or services. Such claims may require us to re-engineer our offerings to avoid an undesirable open source license or infringement, which may be costly and time-consuming. Additionally, some open source software may include generative AI technologies or other software that incorporates or relies on generative AI models or other AI technologies. The use of such software may expose us to risks as the intellectual property ownership and license rights, including copyrights, surrounding AI technologies, has not been fully interpreted by courts or national or local laws or regulations, and any use or adoption of third-party AI technologies into our products and services may result in exposure to claims of copyright infringement or other intellectual property misappropriation. In addition, the use or modification of third-party generative AI models that are made available under an open source or similar license could introduce inaccuracies or vulnerabilities that we are unable to anticipate, detect, or control. If the licensor for such generative AI technologies developed their models by training on data that was inaccurate, biased or for which it did not have the appropriate rights, we could be subject to claims or lawsuits, including for infringement of third-party intellectual property. In addition, our usage of open-source generative AI technologies may require us to license our data or intellectual property to third parties and limit our ability to protect our intellectual property rights or proprietary data.
In addition to risks related to open source license requirements, usage of open source software can lead to greater risks than use of third-party commercial software. Increased risks arise in part because open source licensors generally do not provide updates, warranties, support, indemnities or other contractual protections regarding infringement claims or the quality of the code, including with respect to security vulnerabilities where open source software may be more susceptible. These third-party open source providers could experience service outages, data loss, privacy breaches, cyberattacks, ransomware and other events relating to the applications and services they provide that could diminish the utility of these services, which could harm our business as a result. To the extent that Advanced Computing offerings depend upon the successful operation and continued updates and support of the open source software it uses, any undetected errors or defects in this open source software could prevent the deployment or impair the functionality of Advanced Computing offerings, delay the release of new product solutions, result in a failure of our offerings and injure our reputation. If open source programmers fail to adequately further develop and enhance open source technologies, we would have to rely on other parties to develop and enhance our offerings or we would need to develop and enhance our offerings with our own resources. We cannot predict whether further developments and enhancements to these technologies would be available from reliable alternative sources. Moreover, if third-party software programmers fail to adequately further develop and enhance open source technologies, the development and adoption of these technologies could be stifled and our offerings could become less competitive. Any of these risks could be difficult to eliminate or manage and, if not addressed, could have a material adverse effect on our business, financial condition and results of operations.
We may also use AI technologies, including tools provided by third parties, to develop or assist in the development of our own software code. While use of such tools could make our development process more efficient, AI technologies have sometimes generated content that is "substantially similar" to open source code on which the AI tool was trained or which is used by the AI tool. If the AI technologies we use generate code that is the same or too similar to open source code, we risk not properly attributing the author of such code, we may not be abiding by the applicable licensing requirements and we may lose protection of our own proprietary code that is commingled with such code.
Macro & Political
Total Risks: 10/68 (15%)Above Sector Average
Economy & Political Environment4 | 5.9%
Economy & Political Environment - Risk 1
Worldwide political conditions and threats of terrorist attacks may adversely affect our operations and demand for our products.Economy & Political Environment - Risk 2
Worldwide economic and political conditions as well as other factors may adversely affect our operations and cause fluctuations in demand for our products.Uncertainty in global economic and political conditions poses a risk to the overall economy, as consumers and businesses have made it difficult for customers, suppliers and us to accurately forecast and plan future business activities. Declines in the worldwide semiconductor market, economic conditions or consumer confidence would likely decrease the overall demand for our products. Other factors that could cause demand for our products to fluctuate include:
- a downturn in the computing, networking, communications, storage, aerospace, government, mobile or industrial markets;- changes in consumer confidence caused by changes in market conditions, including changes in the credit markets, expectations for employment and inflation and energy prices;- changes in the level of customers' components inventory;- competitive pressures, including pricing pressures, from companies that have competing products, architectures, manufacturing technologies and marketing programs;- changes in technology or customer product needs;- strategic actions taken by our competitors;- market acceptance of our products;- changes in prevailing or available interest rates or liquidity of the domestic capital and lending markets;- exchange rates and currency controls and restrictions on the movement of capital out of country;- recent and potential bank failures;- inflation; and - changes to tax, trade and regulatory policies, including as a result of changes in administration.
If demand for our products decreases, our manufacturing or assembly and test capacity could be underutilized, and we may be required to record an impairment on our long-lived assets, including facilities and equipment, as well as intangible assets, which would increase our expenses. In addition, if product demand decreases or we fail to forecast demand accurately, we could be required to write-off inventory or record underutilization charges, which would have a negative impact on our profitability. If product demand increases more or faster than anticipated, we may not be able to add manufacturing or assembly and test capacity fast enough to meet market demand. These changes in demand for our products, and changes in our customers' product needs, could have a variety of negative effects on our competitive position and our financial results, and in certain cases, may reduce our net sales, increase our costs, lower our profit margins or require us to recognize impairments of our assets. The occurrence of any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.
Economy & Political Environment - Risk 3
High rates of inflation could have a material adverse effect on our business, results of operations and financial condition.If countries where we operate experience substantial inflation or deflation in the future, our business may be materially adversely affected. In addition, we may not be able to adjust the prices we charge our customers to offset the impact of inflation on our expenses, leading to an increase in our expenses and a reduction in our net operating margin. This could have a material adverse impact on our business, results of operations and financial condition.
Economy & Political Environment - Risk 4
Changing worldwide economic conditions could adversely affect our results of operations and financial condition.The United States and global economies are facing increased levels of inflation, higher interest rates and potential recession. Adverse changes in economic conditions could harm our results of operations and financial condition in a variety of ways. For example, regional or global economic downturns could have an impact on the financial condition of our customers, particularly in challenging macroeconomic environments, and adversely affect demand for our products, which could adversely affect our revenue and potentially result in write-offs of excess or obsolete inventory. Inflation could also drive increases in our costs of revenue and operations, which we may not be able to successfully pass along to our customers. Higher interest rates could result in increased cash usage to service our variable rate indebtedness and increase the cost to us of refinancing our indebtedness.
International Operations1 | 1.5%
International Operations - Risk 1
Our business is subject to the risks generally associated with international business operations.Natural and Human Disruptions2 | 2.9%
Natural and Human Disruptions - Risk 1
Public health crises, such as pandemics, epidemics, or widespread outbreaks of infectious disease, have had, and could in the future have, an adverse effect on our business, financial condition and results of operations.Natural and Human Disruptions - Risk 2
Our worldwide operations, and those of our suppliers, business partners and customers, may be disrupted by events outside of our control, including the effects of climate change, natural disasters, man-made disasters or other events, as well as societal and governmental responses to such events.Our operations in different parts of the world could be subject to natural disasters or severe weather conditions, or an accident that damages or otherwise adversely affects any of our operations, assets or infrastructure, or the operations, assets or infrastructure of one or more of our suppliers, business partners or customers. Earthquakes, hurricanes, monsoons, cyclones, droughts, extreme wind conditions, severe storms, heatwaves, wildfires and floods could damage our property and assets, require us to shut down operations or have either of those effects on third parties on whom we rely. For example, our U.S. headquarters in Fremont, California, manufacturing and research and development facility in Newark, California and our Penguin Computing operations in Fremont, California are located near major earthquake fault lines. Our manufacturing facility in Penang, Malaysia is located in an area that is also prone to natural disasters, such as cyclones, monsoons and floods. In the event of a major earthquake, cyclone, monsoon or other natural or man-made disaster, we could experience business interruptions, destruction of facilities and/or loss of life, any of which could materially adversely affect our business. In addition, the outbreak of war, political unrest or terrorist activity, diseases, epidemics or pandemics in any of the locations in which we conduct business could severely disrupt our business or the business of our customers and suppliers, which could in turn materially adversely affect our business. Since a large percentage of our production is done in a small number of facilities, a disruption to operations could have a material adverse effect on our business, results of operations and financial condition.
Climate change and other environmental and social pressures are expected to increase the intensity and frequency of many such disasters, as well as contribute to various chronic changes in the physical environment, such as sea-level rise or changes in ambient temperature or precipitation patterns, which may also adversely impact our or our third-parties' operations. While we may take various actions to mitigate our business risks associated with climate change and other natural and catastrophic events, this may require us to incur substantial costs and may not be successful, due to, among other things, the uncertainty associated with the longer-term projections associated with managing climate risk. For example, to the extent catastrophic events become more frequent, it may adversely impact the availability or cost of insurance.
Additionally, we may be subject to risks associated with societal efforts to mitigate or otherwise respond to climate change, including but not limited to increased regulations and evolving stakeholder expectations. Changing market dynamics, global and domestic policy developments, and the increasing frequency and impact of meteorological phenomena have the potential to disrupt our business, the business of our suppliers and/or customers, or otherwise adversely impact our business, financial condition, or results of operations.
Capital Markets3 | 4.4%
Capital Markets - Risk 1
If enacted, exchange controls may limit our ability to receive dividends and other distributions from our foreign subsidiaries.Capital Markets - Risk 2
Changes in foreign currency exchange rates could materially adversely affect our business, results of operations or financial condition.Our international sales and our operations in foreign countries expose us to certain risks associated with fluctuating currency values and exchange rates. Because some of our sales are denominated in U.S. dollars, increases in the value of the U.S. dollar could increase the price of our products so that they become relatively more expensive to customers in a particular country, possibly leading to a reduction in sales and profitability in that country. Volatility of currencies in countries where we conduct business, most notably the U.S. dollar, Chinese renminbi, Malaysian ringgit, Japanese yen, euro, British pound, South Korean won, New Taiwan dollar, Hong Kong dollar and South African rand have had and may in the future have an effect on our liquidity and results of operations. Gains and losses on the conversion to U.S. dollars of the associated monetary assets and liabilities, as well as profits and losses incurred in certain countries, may contribute to fluctuations in the value of our assets and our results of operations. We also have costs and expenses that are denominated in foreign currencies, and decreases in the value of the U.S. dollar could result in increases in such costs that could have a significant negative impact on our results of operations. In addition, fluctuating values between the U.S. dollar and other currencies can result in currency gains which are used in the computation of foreign taxes and can increase foreign taxable income.
Capital Markets - Risk 3
Tariffs or other trade restrictions or taxes have had in the past, and could have in the future, an adverse impact on our business, results of operations and financial condition.We source a significant portion of our materials from, manufacture products in, and sell products in foreign countries, including China, making the price and availability of our merchandise susceptible to international trade risks and other international conditions. The United States has implemented new tariffs and significant increases and changes to existing tariffs, including on goods from China, and has proposed further changes and new tariffs. In response to such tariffs announced by the United States, other countries have imposed or are considering imposing new or increased tariffs on certain imports from the United States. There is currently significant uncertainty about the future relationship between the United States and other countries with respect to tariffs, trade policies, taxes and other related government regulations, which have and will likely to continue to evolve rapidly and unpredictably, and we cannot predict whether, and to what extent, current tariffs will continue or trade policies will change in the future or their impact on our business. Economic and political uncertainty caused by the U.S. tariffs imposed on goods from China and other countries by the current administration, and any corresponding tariffs and related retaliatory actions or currency devaluations from China or such other countries in response, has negatively impacted and may in the future negatively impact our business. In addition, many of our customers also rely on international trade and may experience impacts similar to our own, which could in turn affect their relationship with us. Furthermore, the imposition of additional tariffs, duties, border adjustment taxes or other trade restrictions by the United States have resulted in the adoption of additional or increased tariffs or other trade restrictions by other countries. Tariffs have in the past increased, and may in the future, increase our cost of materials, particularly within our LED business, and have in the past caused us and may in the future cause us to increase prices to our customers, which we believe may have reduced or may in the future reduce demand for our products. Our price increases or other efforts to address these risks may not be sufficient to fully offset the impact of tariffs and may result in lowering our margin on products sold. The volatility and unpredictability of international trade policies and conditions add further complexity to our operations, making it challenging to forecast and plan effectively. The adoption and expansion of trade restrictions and tariffs, quotas and embargoes, the occurrence or threat of a trade war or other governmental action related to tariffs or trade agreements or policies, has the potential to adversely impact demand for our products, our costs, our customers, our suppliers and the world and U.S. economies, which in turn could have a material adverse effect on our business, results of operations and financial condition.
Production
Total Risks: 6/68 (9%)Below Sector Average
Manufacturing3 | 4.4%
Manufacturing - Risk 1
Disruption of our operations at any one of our manufacturing facilities would substantially harm our business.Manufacturing - Risk 2
We may not be able to maintain or improve our manufacturing efficiency.Our manufacturing efficiency can significantly affect our results of operations, and we cannot be sure that we will be able to maintain or increase our manufacturing efficiency to the same extent as our competitors. During periods when we are implementing new process technologies, manufacturing facilities may not be fully productive and may experience higher than acceptable defect rates. We may fail to achieve acceptable yields or may experience product delivery delays as a result of, among other things, capacity constraints, delays in the development of new process technologies, increased defect rates, changes in our process technologies, upgrades or expansion of existing facilities, impurities or other difficulties in the manufacturing process. Any of these occurrences could adversely impact our relationships with customers, cause harm to our reputation in the marketplace, cause customers to move future business to our competitors or cause us to make financial concessions to our customers. Improving our manufacturing efficiency in future periods is dependent on our ability to:
- develop advanced process technologies and advanced products that utilize those technologies;- successfully transition to more advanced process technologies;- continue to reduce test times;- ramp product and process technology improvements rapidly and effectively to commercial volumes across our facilities;- achieve acceptable levels of manufacturing output and yields, which may decrease as we implement more advanced technologies; and - maintain our quality controls and rely upon the quality and process controls of our suppliers.
Manufacturing - Risk 3
Products that fail to meet specifications, are defective or that are otherwise incompatible with end uses could impose significant costs on us.If our products are defectively manufactured, contain defective components or are used in defective or malfunctioning systems, we could be subject to warranty and product liability claims and product recalls, safety alerts or advisory notices. For example, certain of our products are used in transportation safety devices in the rail industry. These products are certified by independent auditors to safety integrity level 4 standards. In the event that our products fail to perform as expected, accidents and significant losses could occur. While our contracts for the sale of these products typically contain disclaimers, there can be no assurance that we would be insulated from liability in the event of an accident. While we have product liability insurance coverage, it may not be adequate to satisfy claims made against us. We also may be unable to obtain insurance in the future at satisfactory rates or in adequate amounts. Investigations, warranty and product liability claims and product recalls, regardless of their ultimate outcome, could have an adverse effect on our business, financial condition and reputation and on our ability to attract and retain customers. In addition, we may determine that it is in our best interest to accept product returns in circumstances where we are not contractually obligated to do so to maintain good relations with our customers. Accepting product returns may adversely impact our results of operations and financial condition. Further, quality issues in customer installations have occurred in the past and could occur in the future, which have in the past affected, and could possibly affect in the future, customer relationships, demand for products and our reputation. Quality issues and potential impact to our reputation may adversely affect our results of operations and financial condition.
Employment / Personnel1 | 1.5%
Employment / Personnel - Risk 1
Our success depends on our ability to attract, retain and motivate highly skilled employees.Supply Chain2 | 2.9%
Supply Chain - Risk 1
We rely on third parties to sell a portion of our products and services.Supply Chain - Risk 2
We depend on a small number of sole or limited source suppliers.We are dependent upon a small number of sole or limited source suppliers for certain materials, including certain critical components or subsystems, we use in manufacturing our products. Purchases from our two largest suppliers were $0.6 billion, $0.4 billion and $0.5 billion in each of 2025, 2024 and 2023, respectively. Certain of our suppliers also compete with us in one or more of our markets. We purchase almost all of our materials from our suppliers on a purchase order basis and generally do not have long-term commitments from suppliers. Our suppliers are not required to supply us with any minimum quantities, and there is no assurance that our suppliers will supply the quantities of components we may need to meet our production goals.
The markets in which we operate have in the past experienced, are currently experiencing, and may in the future experience, shortages, long lead times and price fluctuations in certain materials, including certain critical components and raw materials that we use in manufacturing our products. These shortages cause some suppliers to place their customers, including us, on supply allocation. As a result, we may not be able to obtain the materials that we need to fill customer orders in a timely fashion or at all. If any of our suppliers experience quality control or intellectual property infringement problems, this may further impact our ability to fill customer orders. Furthermore, our products that utilize that supplier's materials may be disqualified by one or more of our customers and we may not be able to fill their orders.
A disruption in or termination of our supply relationship with any of our significant suppliers or our inability to develop relationships with new suppliers, if required, would cause delays, disruptions or reductions in product manufacturing and shipments or require product redesigns which could damage relationships with our customers, increase our costs, reduce our margins or increase the prices we need to charge for our products and could materially and adversely affect our business, results of operations and financial condition.
Additionally, there are increasing expectations in various jurisdictions that companies monitor the environmental and social performance of their suppliers, including compliance with a variety of labor practices, as well as consider a wider range of potential environmental and social matters, including the end-of-life considerations for products. Compliance can be costly, require us to establish or augment programs to diligence or monitor our suppliers, or to design supply chains to avoid certain regions altogether. Failure to comply with such regulations can result in fines, reputational damage, or import ineligibility for our products or product components, or otherwise adversely impact our business, results of operations and financial condition.
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.