10-Q 1 anet-20220930.htm 10-Q anet-20220930
000159653212/312022Q3FALSE305,572,616On January 1, 2019, we adopted Accounting Standard Codification Topic 842 - Leases ("ASC 842"), which resulted in a cumulative-effect adjustment to the beginning balance of Retained Earnings for 2019. 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    
Commission File Number:
001-36468
Arista Networks, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 20-1751121
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
5453 Great America Parkway,Santa Clara,California95054
(Address of principal executive offices)
(Zip Code)
(408)
547-5500
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par valueANETNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ý
The number of shares outstanding of the registrant’s Common Stock, $0.0001 par value, as of October 26, 2022 was 305,572,616.



ARISTA NETWORKS, INC.
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
ARISTA NETWORKS, INC.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except par value)
September 30, 2022December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $716,253 $620,813 
Marketable securities2,263,818 2,787,502 
Accounts receivable, net651,512 516,509 
Inventories 1,100,550 650,117 
Prepaid expenses and other current assets 299,545 237,735 
Total current assets 5,031,678 4,812,676 
Property and equipment, net96,449 78,634 
Acquisition-related intangible assets, net131,520 93,555 
Goodwill271,018 188,397 
Investments39,677 20,247 
Operating lease right-of-use assets58,205 65,182 
Deferred tax assets 473,808 442,295 
Other assets59,655 33,443 
TOTAL ASSETS $6,162,010 $5,734,429 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $278,469 $202,636 
Accrued liabilities 240,609 226,643 
Deferred revenue 607,189 593,578 
Other current liabilities 128,645 86,972 
Total current liabilities 1,254,912 1,109,829 
Income taxes payable 82,167 69,916 
Operating lease liabilities, non-current47,067 56,527 
Deferred revenue, non-current 333,855 335,734 
Deferred tax liabilities, non-current 129,074 
Other long-term liabilities 58,791 54,749 
TOTAL LIABILITIES 1,776,792 1,755,829 
Commitments and contingencies (Note 5)
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.0001 par value—100,000 shares authorized and no shares issued and outstanding as of September 30, 2022 and December 31, 2021
  
Common stock, $0.0001 par value—1,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 305,515 and 307,681 shares issued and outstanding as of September 30, 2022 and December 31, 2021
3131 
Additional paid-in capital 1,717,6051,530,046 
Retained earnings 2,714,7112,456,823 
Accumulated other comprehensive income (loss) (47,129)(8,300)
TOTAL STOCKHOLDERS’ EQUITY 4,385,218 3,978,600 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $6,162,010 $5,734,429 
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
1

ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)


Three Months Ended September 30,

Nine Months Ended September 30,
2022202120222021
Revenue:
Product$1,008,689 $604,160 $2,619,213 $1,709,772 
Service 168,112 144,537 486,545 413,806 
Total revenue1,176,801 748,697 3,105,758 2,123,578 
Cost of revenue:
Product432,569 243,342 1,102,012 687,554 
Service 34,252 26,740 96,656 77,959 
Total cost of revenue466,821 270,082 1,198,668 765,513 
Gross profit 709,980 478,615 1,907,090 1,358,065 
Operating expenses:
Research and development 187,807 153,093 537,971 428,873 
Sales and marketing 81,401 69,740 241,512 211,385 
General and administrative 23,425 22,488 69,420 58,856 
Total operating expenses 292,633 245,321 848,903 699,114 
Income from operations417,347 233,294 1,058,187 658,951 
Other income (expense), net 6,817 1,346 37,764 4,640 
Income before income taxes424,164 234,640 1,095,951 663,591 
Provision for income taxes70,165 10,335 170,594 62,032 
Net income$353,999 $224,305 $925,357 $601,559 
Net income per share (1):
Basic $1.16 $0.73 $3.02 $1.96 
Diluted $1.13 $0.70 $2.92 $1.89 
Weighted-average shares used in computing net income per share (1):
Basic 304,931 307,456 306,576 306,176 
Diluted 314,401 319,636 316,745 318,976 
(1) Prior periods have been adjusted to reflect the four-for-one stock split effected in the form of a stock dividend in November 2021.

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).


2

ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited, in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net income$353,999 $224,305 $925,357 $601,559 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (2,574)(747)(5,306)(1,097)
Net change in unrealized gains (losses) on available-for-sale securities (3,236)(118)(33,523)(1,145)
Other comprehensive income (loss)(5,810)(865)(38,829)(2,242)
Comprehensive income$348,189 $223,440 $886,528 $599,317 

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

3

ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Stockholders Equity
(Unaudited, in thousands)
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
Common Stock  Additional
Paid-In Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’ Equity
Common Stock  Additional
Paid-In Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
SharesAmountSharesAmount
Balance at beginning of period304,455 $30 $1,638,787 $2,408,294 $(41,319)$4,005,792 307,681 $31 $1,530,046 $2,456,823 $(8,300)$3,978,600 
Net income — — — 353,999 — 353,999 — — — 925,357 — 925,357 
Other comprehensive loss, net of tax — — — — (5,810)(5,810)— — — — (38,829)(38,829)
Stock-based compensation — — 65,477 — — 65,477 — — 165,980 — — 165,980 
Issuance of common stock in connection with employee equity incentive plans 1,593 1 20,081 — — 20,082 4,451 1 43,072 — — 43,073 
Repurchase of common stock(479)— — (47,582)— (47,582)(6,433)(1)— (667,469)— (667,470)
Tax withholding paid for net share settlement of equity awards(54)— (6,740)— — (6,740)(217)— (25,542)— — (25,542)
Common stock issued for business acquisition— — — — — — 33 — 4,049 — — 4,049 
Balance at end of period305,515 $31 $1,717,605 $2,714,711 $(47,129)$4,385,218 305,515 $31 $1,717,605 $2,714,711 $(47,129)$4,385,218 

Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
Common Stock  Additional
Paid-In Capital (1)
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
Common Stock  Additional
Paid-In Capital (1)
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
Shares (1)Amount (1)Shares (1)Amount (1)
Balance at beginning of period306,660 $31 $1,395,436 $2,303,513 $(1,139)$3,697,841 304,696 $30 $1,292,409 $2,027,614 $238 $3,320,291 
Net income — — — 224,305 — 224,305 — — — 601,559 — 601,559 
Other comprehensive loss, net of tax — — — — (865)(865)— — — — (2,242)(2,242)
Stock-based compensation — — 53,135 — — 53,135 — — 135,632 — — 135,632 
Issuance of common stock in connection with employee equity incentive plans 2,436 — 29,270 — — 29,270 5,948 1 56,153 — — 56,154 
Repurchase of common stock(1,504)— — (134,157)— (134,157)(2,972)— — (235,512)— (235,512)
Tax withholding paid for net share settlement of equity awards(48)— (4,269)— — (4,269)(128)— (10,622)— — (10,622)
Balance at end of period307,544 $31 $1,473,572 $2,393,661 $(2,004)$3,865,260 307,544 $31 $1,473,572 $2,393,661 $(2,004)$3,865,260 
(1) Prior periods have been adjusted to reflect the four-for-one stock split effected in the form of a stock dividend in November 2021.

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
4

ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Nine Months Ended September 30,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$925,357 $601,559 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other45,169 37,864 
Stock-based compensation 165,980 135,632 
Noncash lease expense13,837 12,738 
Deferred income taxes (148,355)(573)
Unrealized gain on equity investments(24,121) 
Amortization of investment premiums 14,167 19,193 
Changes in operating assets and liabilities:
Accounts receivable, net(129,947)(6,050)
Inventories(449,792)(95,997)
Prepaid expenses and other current assets(68,996)(71,300)
Other assets(17,899)(2,915)
Accounts payable73,480 (1,075)
Accrued liabilities14,690 31,316 
Deferred revenue(1,245)149,613 
Income taxes payable41,074 (3,565)
Other liabilities(1,059)(15,820)
Net cash provided by operating activities452,340 790,620 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of marketable securities1,277,821 1,158,723 
Purchases of marketable securities(973,489)(1,974,853)
Purchases of property and equipment (34,184)(55,455)
Business acquisitions, net of cash acquired(145,087) 
Escrow receipts from past business acquisitions 1,299 
Investments and notes receivable in privately-held companies(12,691)(10,684)
Proceeds from sale of marketable securities 186,782 19,607 
Net cash provided by (used in) investing activities 299,152 (861,363)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under equity plans 43,073 56,154 
Tax withholdings paid on behalf of employees for net share settlement(25,542)(10,622)
Repurchases of common stock(667,470)(235,512)
Net cash used in financing activities(649,939)(189,980)
Effect of exchange rate changes (6,090)(1,513)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
95,463 (262,236)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —Beginning of period 625,050 897,454 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period $720,513 $635,218 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Right-of-use assets obtained in exchange for new operating lease liabilities$7,300 $4,824 
Property and equipment included in accounts payable and accrued liabilities5,704 3,849 
Common stock issued for business acquisition4,049  
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
5

ARISTA NETWORKS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1.    Organization and Summary of Significant Accounting Policies
Organization
    Arista Networks, Inc. (together with our subsidiaries, “we,” “our,” "Arista," "Company" or “us”) is a supplier of cloud networking solutions that use software innovations to address the needs of large-scale internet companies, cloud service providers and next-generation enterprises. Our cloud networking solutions consist of our Extensible Operating System ("EOS"), a set of network applications and our Gigabit Ethernet switching and routing platforms. We are incorporated in the state of Delaware. Our corporate headquarters are located in Santa Clara, California, and we have wholly-owned subsidiaries throughout the world, including North America, Europe, Asia and Australia.
Basis of Presentation and Principles of Consolidation
    The accompanying unaudited condensed consolidated financial statements include the accounts of Arista Networks, Inc. and its wholly-owned subsidiaries and have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial information. The results for the three and nine months ended September 30, 2022, are not necessarily indicative of the results expected for the full fiscal year. The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements. All significant inter-company accounts and transactions have been eliminated.
    Our condensed consolidated financial statements and related financial information in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 15, 2022.
Use of Estimates
    The preparation of the accompanying consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Those estimates and assumptions include, but are not limited to, valuation of inventory and contract manufacturer/supplier liabilities, accounting for income taxes, including the recognition of deferred tax assets and liabilities, valuation allowance on deferred tax assets and reserves for uncertain tax positions, revenue recognition and deferred revenue, allowance for doubtful accounts, sales rebates and return reserves, valuation of goodwill and acquisition-related intangible assets, estimate of useful lives of long-lived assets including intangible assets, and the recognition and measurement of contingent liabilities. We evaluate our estimates and assumptions based on historical experience and other factors and adjust these estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from these estimates.
Risks and Uncertainties
    Global economic and business activities continue to face widespread macroeconomic uncertainties, including supply chain and labor shortages, inflation and monetary policy shifts, recession risks, the ongoing global coronavirus ("COVID-19") pandemic and potential disruptions from the Russia-Ukraine conflict and the U.S. trade war with China.
    Our contract manufacturers and suppliers have experienced workforce disruptions, delays in component sourcing, production and export of their products and component shortages and increased component costs, which have disrupted our supply chain and have impacted and will likely continue to impact our ability to supply products to our customers on a timely basis. While overall demand remains strong across our customers base, we believe ongoing supply disruptions combined with other supply chain related constraints could impact our ability to fulfill this increased demand and as a result could negatively impact our business in future periods. In addition, inflation pressure in our supply chain and scarcity of some materials needed to build our products have increased our cost of revenue and have impacted, and may continue to negatively impact our gross margin. Our operating cash flows have also been and may continue to be negatively impacted by increased component inventories on hand or at our contract manufacturers, awaiting supply of a limited number of scarce components necessary to build and ship the completed product. The extent of the impact on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, and the impact of any initiatives and programs we may undertake to address financial and operational challenges, will depend on future developments, the impact to
6

our customers, partners, employees, contract manufacturers and supply chain, all of which continue to evolve and are unpredictable. Management continues to actively monitor the impact of these macroeconomic factors on the Company's financial condition, liquidity, operations, suppliers, industry, and workforce. As of the date of issuance of these condensed consolidated financial statements, the extent to which these factors may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.
Recently Adopted Accounting Pronouncements
    In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires companies to recognize and measure contract assets and contract liabilities relating to contracts with customers that are acquired in a business combination in accordance with ASC 606. Under previous GAAP, an acquirer generally recognized assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 results in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. The ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted this ASU as of January 1, 2022 on a prospective basis and the adoption impact was immaterial to the condensed consolidated financial statements. The standard did not impact acquired contract assets or liabilities from business combinations occurring prior to the adoption date.
2.    Fair Value Measurements
    Assets measured at fair values on a recurring basis
    We measure and report our cash equivalents, restricted cash, marketable equity securities and available-for-sale debt securities at fair value on a recurring basis. The following tables summarize the fair value of these financial assets by significant investment category and their levels within the fair value hierarchy (in thousands):
7

September 30, 2022December 31, 2021
Level ILevel IILevel IIITotal Level ILevel IILevel IIITotal
Financial Assets:
Cash Equivalents:
Money market funds $353,987 $ $ $353,987 $221,382 $ $ $221,382 
Certificate of deposits(1)
 14,556  14,556     
U.S. government notes23,368   23,368     
Agency securities 46,000  46,000     
377,355 60,556  437,911 221,382   221,382 
Marketable Securities:
Commercial paper 3,487  3,487  141,274  141,274 
Certificate of deposits(1)
 11,422  11,422  44,931  44,931 
U.S. government notes1,169,899   1,169,899 1,057,810   1,057,810 
Corporate bonds 883,784  883,784  1,252,226  1,252,226 
Agency securities 179,473  179,473  291,261  291,261 
Marketable equity securities(2)
15,753   15,753     
1,185,652 1,078,166  2,263,818 1,057,810 1,729,692  2,787,502 
Other Assets:
Money market funds - restricted4,260   4,260 4,237   4,237 
Total Financial Assets$1,567,267 $1,138,722 $ $2,705,989 $1,283,429 $1,729,692 $ $3,013,121 
______________________________________
(1) As of September 30, 2022 and December 31, 2021, all of our certificates of deposits were domestic deposits.
(2) The $15.8 million represents the fair value of marketable equity securities as of September 30, 2022. This amount includes $8.3 million that was reclassified from Investments on our condensed consolidated balance sheet following the commencement of public market trading of the issuer in January 2022. This publicly-traded equity investment generated an unrealized gain of $7.5 million for the nine months ended September 30, 2022, and an unrealized loss of $0.9 million for the three months ended September 30, 2022. The unrealized gains and losses are included in Other income (expense), net on the unaudited Condensed Consolidated Statements of Operations. Refer to Note 3. Financial Statements Details.
    During the three and nine months ended on September 30, 2022, the Company did not make any transfers between the levels of the fair value hierarchy.
    Marketable debt securities
    The following table summarizes the amortized cost, unrealized gains and losses, and fair value of our debt securities measured at fair value on a recurring basis (in thousands):
8

September 30, 2022December 31, 2021
Amortized CostUnrealized GainsUnrealized LossesFair ValueAmortized CostUnrealized GainsUnrealized LossesFair Value
Commercial paper$3,487 $ $ $3,487 $141,274 $ $ $141,274 
U.S. government1,187,901  (18,002)1,169,899 1,060,716 3 (2,909)1,057,810 
Corporate bonds902,133  (18,349)883,784 1,255,149 105 (3,028)1,252,226 
Agency securities182,771  (3,298)179,473 291,558 36 (333)291,261 
Total $2,276,292 $ $(39,649)$2,236,643 $2,748,697 $144 $(6,270)$2,742,571 
    For debt securities in unrealized loss positions, it is not likely that we will be required to sell such securities before recovery of their amortized cost basis nor do we have the intent to sell such securities before maturity; we invest in debt securities that have maximum maturities of two years and are generally deemed to be low risk based on their credit ratings from the major rating agencies. The longer the duration of these marketable securities, the more susceptible they are to changes in market interest rates and bond yields. Given the short-term and conservative nature of our portfolio, the unrealized losses are not related to credit risk; therefore, we did not recognize any credit losses or non-credit-related impairments related to our available-for-sale marketable debt securities for the three and nine months ended September 30, 2022. All unrealized losses were recognized in other comprehensive income (loss). Realized losses were immaterial for the three and nine months ended September 30, 2022.
    The following table is an analysis of our marketable debt securities in unrealized loss positions (in thousands):
September 30, 2022
Unrealized Losses within 12 months Unrealized Losses 12 months or greaterTotal
Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
U.S. government notes$877,442 $(13,026)$292,554 $(4,976)$1,169,996 $(18,002)
Corporate bonds625,577 (13,314)258,208 (5,035)883,785 (18,349)
Agency securities155,296 (2,807)24,176 (491)179,472 (3,298)
Total $1,658,315 $(29,147)$574,938 $(10,502)$2,233,253 $(39,649)
     As of September 30, 2022, we had no marketable debt securities with contractual maturities that exceed 24 months. The fair values of marketable debt securities, by remaining contractual maturities, are as follows (in thousands):
September 30, 2022
Fair Value
Due in 1 year or less$1,773,158 
Due in 1 to 2 years463,485 
Total debt securities $2,236,643 
    The weighted-average remaining duration of our marketable debt securities is approximately 0.6 years as of September 30, 2022. As we view these marketable debt securities as available to support current operations, we classify marketable debt securities with maturities beyond 12 months as current assets under the caption "Marketable securities" on the condensed consolidated balance sheets.
Assets measured at fair value on a non-recurring basis
    Non-Marketable Equity Securities
    We have non-marketable equity securities in privately-held companies that do not have readily-determinable fair values. These equity securities are included in Investments on the condensed consolidated balance sheets. Their initial cost is adjusted to fair value on a non-recurring basis based on observable price changes from orderly transactions of identical or similar securities of the same issuer, or for impairment. These investments are classified within Level III of the fair value hierarchy as we estimate the value based on valuation methods using the observable transaction price at the transaction date and other significant unobservable inputs, such as volatility, rights, and obligations related to these securities. In addition, the valuation requires management judgment due to the absence of market price and lack of liquidity.
9

    We did not record any realized gains or losses for our non-marketable equity securities measured at fair value on a non-recurring basis during the three and nine months ended September 30, 2022 and September 30, 2021. We recorded unrealized gains of $1.7 million and $16.7 million on non-marketable equity securities based on observable price changes from orderly transactions of identical or similar securities in three and the nine months ended September 30, 2022. We recorded immaterial unrealized losses in the three and nine months ended September 30, 2022. We evaluate our non-marketable equity securities for impairment at each reporting period via a qualitative assessment with various potential impairment indicators, including, but not limited to, an assessment of a significant adverse change in the economic environment, significant adverse changes in the general market condition of the geographies and industries in which our investees operate, and other publicly-available information that affected the value of the its non-marketable equity securities.
    The following table summarizes the activity related to our non-marketable equity securities as of September 30, 2022 and December 31, 2021 (in thousands):
September 30, 2022December 31, 2021
Cost of investments (1)$23,625 $14,933 
Cumulative impairment and downward adjustment(629) 
Cumulative upward adjustment (1)16,681 5,314 
Carrying amount of investments$39,677 $20,247 
(1) During the nine months ended September 30, 2022, $3.0 million previously included in the Cost of investments and $5.3 million previously included in the Cumulative upward adjustment, or $8.3 million in aggregate, were reclassified from Investments to Marketable securities on our condensed consolidated balance sheet following the commencement of public market trading of the issuer. There was no such activity in the three months ended September 30, 2022.
3.    Financial Statements Details
Cash, Cash Equivalents and Restricted Cash
    The reconciliation of cash, cash equivalents and restricted cash reported on the unaudited condensed consolidated balance sheets to the total of the same such amounts in the unaudited condensed consolidated statements of cash flows is as follows (in thousands):
September 30, 2022December 31, 2021
Cash and cash equivalents$716,253 $620,813 
Restricted cash included in other assets4,260 4,237 
 Total cash, cash equivalents and restricted cash$720,513 $625,050 
Accounts Receivable, net
    Accounts receivable, net consists of the following (in thousands):
September 30, 2022December 31, 2021
Accounts receivable $660,108 $521,597 
Allowance for doubtful accounts (215)(132)
Product sales rebate and returns reserve(8,381)(4,956)
   Accounts receivable, net $651,512 $516,509 
Inventories
    Inventories consist of the following (in thousands):
September 30, 2022December 31, 2021
Raw materials $629,058 $316,737 
Finished goods 471,492 333,380 
   Total inventories $1,100,550 $650,117 
10

Prepaid Expenses and Other Current Assets
    Prepaid expenses and other current assets consist of the following (in thousands):
September 30, 2022December 31, 2021
Inventory deposits$