Cognex Corp

Tax and financial reporting · Tax compliance and changes in tax law

We may have additional tax liabilities and our effective tax rate may increase or fluctuate, which could adversely affect our operating results and financial condition. As a multinational corporation, we are subject to income taxes, as well as non-income based taxes, in the United States and numerous foreign jurisdictions. Our effective income tax rate is dependent on the geographic distribution of our worldwide earnings or losses and the tax laws and regulations in each geographic region in which we operate.

Legal and litigation · Litigation and legal proceedings

Our Company may be subject to time-consuming and costly litigation or activist shareholder activities. From time to time, we may be subject to various claims, demands, and lawsuits by competitors, shareholders, customers, distributors, patent trolls, former employees, or other parties arising in the ordinary course of business, including lawsuits charging patent infringement, or claims and lawsuits instituted by us to protect our intellectual property and confidential information, or for other reasons.

International and currency · International operations and emerging markets

Economic, political, and other risks associated with international sales and operations could adversely affect our business and operating results. In 2025, approximately 67% of our revenue was derived from customers located outside of the United States. In addition, we source components from suppliers located outside of the United States, including China, utilize third-party contract manufacturers, primarily located in Indonesia and Malaysia, to assemble certain of our products, and manufacture optical components at in-house production plants located in China and Vietnam.

Market and investment · Asset valuation and impairment

We are at risk for impairment charges with respect to our investments or acquired intangible assets, which could have a material adverse effect on our operating results. As of December 31, 2025, we had approximately $81 million in acquired intangible assets, consisting primarily of customer relationships and completed technologies. The majority of these intangible assets were recorded in 2023 when Cognex acquired Moritex. These assets are susceptible to changes in fair value due to a decrease in the historical or projected cash flows from the use of these assets.

International and currency · Foreign exchange and currency exposure

Fluctuations in foreign currency exchange rates and the use of derivative instruments to hedge these exposures could adversely affect our reported results, liquidity, and competitive position. We face exposure to foreign currency exchange rate fluctuations, as a significant portion of our revenues, expenses, assets, and liabilities are denominated in currencies other than the functional currencies of our subsidiaries or the reporting currency of our company, which is the U.S. Dollar.

Core operations · Quality control and product defects

Our products may contain design or manufacturing defects, which could result in reduced demand, significant delays, substantial costs, or customer dissatisfaction and/or loss of sales. If flaws in either the design or manufacture of our products were to occur, we could experience a rate of failure in our products that could result in significant delays in shipment and material repair or replacement costs. Due, in part, to our focus on releasing new products as quickly as possible to satisfy customer demands, our release-to-market process may not be robust enough to detect significant design flaws or software bugs.

Supply chain and procurement · Supplier operation and dependance

Our failure to properly manage the distribution of our products and services could result in the loss of revenues and profits. We utilize a direct sales force, as well as a network of distribution, original equipment manufacturer, and integration partners, to sell our products and services. We are continually reviewing our go-to-market strategy to help ensure that we are reaching the most customers that we can and with the highest level of service.

Human capital and workforce · Talent acquisition and retention

If we fail to attract and retain key talent, effectively plan for and execute management succession, and maintain our unique corporate culture, our business and operating results could suffer. To support our growth and execute our operating plans and strategic initiatives, we must effectively attract, train, develop, motivate, and retain skilled employees, while maintaining our unique corporate culture. Technical personnel with experience in machine vision, and AI technology, are in high demand.

Core operations · Operational disruption and business continuity

If we are unable to effectively scale our operations and salesforce to support a significantly expanded customer base, our growth strategy and customer experience may be adversely affected. As part of our strategic priorities, we are focused on expanding our customer base and transforming our salesforce to better serve a broader range of customers. Successfully executing this strategy requires significant investments in sales, support, systems, processes, and personnel, as well as effective organizational change management.

Innovation and product development · Intellectual property protection and infringement

If we fail to successfully protect our intellectual property, our competitive position and operating results could suffer. We rely on our proprietary software technology and hardware designs, as well as the technical expertise, creativity, and knowledge of our personnel and third parties, to maintain our position as a leading provider of machine vision products. Software piracy and reverse engineering may result in counterfeit products that are misrepresented in the market as Cognex products or pirated products that contain stolen technology, such as software.

Innovation and product development · Time to market and commercialization risks

Our failure to introduce new products in a successful and timely manner could result in the loss of our market share and a decrease in our revenues and profits. The market for our products is characterized by rapidly changing technology and increasingly capable competitors. Accordingly, we believe that our future success will depend on our ability to accelerate time-to-market for new products with improved functionality, ease-of-use, performance, and price.

Market position and competition · Competitive pressure and market share loss

Increased competition may result in decreased demand or prices for our products and services and may harm our operating results. The machine vision market continues to be fragmented and competitive. Our competitors include primarily other vendors of machine vision systems, controllers, and components; manufacturers of image processing systems, sensors, and components; and system integrators.

Customer and revenue · Customer concentration and key customer dependence

The loss of, or significant curtailment of purchases by, large customers could have an adverse effect on our business. At different times over the past few years, we have had one customer that represented a material portion of our total revenue. Large customers may divert management's attention from other operational matters and pull resources from other areas of the business, resulting in potential loss of sales from other customers.

Economic and market conditions · Economic recession and downturns

Unfavorable global economic conditions may negatively impact our operating results. Our revenue levels are impacted by global economic conditions, as we have a significant business presence in many countries throughout the world. Unfavorable economic conditions, such as inflation, slower growth or recession, higher interest rates, tighter credit, and labor shortages, may cause companies to delay or reduce spending for automation projects, including those with machine vision, amid weaker general manufacturing confidence and heightened uncertainty around global trade.

Natural and catastrophic events · Pandemic and public health crises

Certain facets of our business operations, such as our third-party primary contractor manufacturers in Indonesia and Malaysia, are in locations that may be more prone to earthquakes and other natural disasters. Following a business disruption, the Company could be subject to production downtimes, operational delays, substantial recovery time, customer claims, significant expenditures to resume operations, the diversion of management's attention and resources, or loss of business, any of which could have a material adverse effect on our competitive position, financial condition, or operating results.

Geopolitical and trade · Trade policies tariffs and sanctions

In addition to the above, we face several risks related to conducting business in China. An escalation of the China-Taiwan conflict could lead to challenges procuring integrated circuit chips from Taiwan-based vendors that are fundamental to the design of our products. Furthermore, in recent years, trade tariffs imposed by the United States on certain components imported from Chinese suppliers resulted in higher costs for our products, which, to date, have not been material to our total cost of revenue. In addition to trade tariffs, U.S. export controls that place restrictions on the exportation of our products or a subset of our products, including applicable regulations promulgated by the U.S. Commerce Department's Bureau of Industry and Security, have had a negative impact on our revenue from customers based in China.

Social and demographic · Public perception and reputation

The price of the Company's stock is subject to volatility. We have experienced substantial stock price volatility in the past and may continue to do so in the future. The price of our stock may be affected by factors such as our financial performance, announcements of technological innovations or new products by us or our competitors, market conditions, and other factors.

Digital transformation and innovation · Artificial intelligence and automation

Changes in laws or regulations relating to artificial intelligence, data usage, or automated technologies, or any actual or perceived failure to develop, deploy, or govern such technologies responsibly, could harm our business. Our development and use of AI, machine learning, and related technologies may subject us to evolving legal, regulatory, operational, and cybersecurity risks. AI technologies are increasingly subject to regulatory scrutiny in the United States and internationally, including under emerging frameworks such as the European Union's AI Act, which may impose requirements related to transparency, bias mitigation, data governance, and ethical deployment.

Cybersecurity and data protection · Data breaches and cyber attacks

Information security breaches may adversely affect our business. We rely on our information technology systems, including third-party services, to effectively run our business. We may be subject to information security failures or breaches caused by social engineering, hacking, malicious software, acts of vandalism or terrorism, or other events. Cybersecurity threats are becoming increasingly sophisticated and frequent, with attackers employing new and varied methods such as ransomware, phishing, and advanced persistent threats.

Corporate governance · Shareholder rights and activism

In addition, activist investors may seek to influence our business strategy, capital allocation, governance, or leadership. While we evaluate all shareholder input, such activities can create increased costs, disruption, or uncertainty, including potential public campaigns, proxy contests, or proposals that may not align with our long-term objectives. These situations could divert management's focus, lead to volatility in our stock price, and have a material adverse effect on our operating results and ability to execute our strategic plan.