Coherent Corp. · 10-Q · Item 2 MD&A

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of Coherent’s financial statements with a narrative from the perspective of management. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes included under Item 1 of this Quarterly Report on Form 10-Q. Coherent’s MD&A is presented in the following sections:

•Forward-Looking Statements

•Overview

•Trends and Other Matters Affecting Our Business

•Critical Accounting Estimates

•Conversion of Series B Preferred Stock

•Results of Operations

•Liquidity and Capital Resources

Forward-looking statements in Item 2 may involve risks and uncertainties that could cause results to differ materially from those projected (refer to Part II Item 1A for discussion of these risks and uncertainties).

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q are forward-looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding projected growth rates, markets, product development, financial position, capital expenditures and foreign currency exposure. Forward-looking statements are also identified by words such as “expects,” “anticipates,” “intends,” “believes,” “plans,” “projects” or similar expressions.

Although our management considers the expectations and assumptions on which the forward-looking statements in this Quarterly Report on Form 10-Q are based to have a reasonable basis, there can be no assurance that management’s expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct. In addition to general industry and global economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to: (i) the failure of any one or more of the expectations or assumptions on which such forward-looking statements are based to prove to be correct; and (ii) the risks relating to forward-looking statements and other “Risk Factors” discussed in Item 1A in this Quarterly Report on Form 10-Q, the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025 and in the Company's other reports filed with the Securities and Exchange Commission. The Company disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events or developments, or otherwise.

In addition, we operate in a highly competitive and rapidly changing environment; new risk factors can arise, and it is not possible for management to anticipate all such risk factors, or to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statement. The forward-looking statements included in this Quarterly Report on Form 10-Q are based only on information currently available to us and speak only as of the date of this report. We do not assume any obligation, and do not intend, to update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by the securities laws.

Investors should, however, consult any further disclosures of a forward-looking nature that the Company may make in its subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, or other disclosures filed with or furnished to the SEC.

Investors should also be aware that, while the Company does communicate with securities analysts from time to time, such communications are conducted in accordance with applicable securities laws. Investors should not assume that the Company agrees with any statement, conclusion of any analysis, or report issued by any analyst irrespective of the content of the statement or report.

Overview

Coherent Corp. (“Coherent”, the “Company,” “we,” “us” or “our”) is a vertically integrated manufacturing company that develops, manufactures and markets lasers, transceivers, and other optical and optoelectronic devices, modules, and systems, as well as engineered materials, for use in communications, industrial, instrumentation and electronics applications. We generate nearly all of our revenues, earnings, and cash flows from developing, manufacturing, and marketing a wide range of products and services for our end markets. Coherent has broad technical expertise and a deep technology stack in areas of importance to our products, including materials growth and fabrication of specialty materials, semiconductor lasers, passive optics including isolators, transceivers, transport equipment, high power lasers for semiconductor capital equipment, display manufacturing, precision manufacturing, and scientific research.

Many of our products include custom integrated software that we develop internally, leveraging our deep domain expertise. Headquartered in Saxonburg, Pennsylvania, Coherent has research and development, manufacturing, sales, service, and distribution facilities worldwide.

Trends and Other Matters Affecting Our Business

Industry Conditions

Coherent is a global leader in photonic technology, which is foundational to the performance and scalability of AI datacenters and critical to many important industrial applications. We are at the center of a significant expansion in optical networking infrastructure, driven by the rapid growth of AI and the increasing need for bandwidth and energy efficiency. We continue to experience strong demand in our Datacenter and Communications markets. The increasing investments by hyperscale and other cloud providers in AI datacenter infrastructures have significantly boosted demand for our datacenter transceivers. Elevated demand for our new ZR/ZR+ transceivers and sustained growth in traditional telecom transport products drove higher shipment volumes for our telecom and other communications solutions.

T1We are investing in manufacturing capacity for the Datacenter and Communications markets, including expanding our indium phosphide capacity in Sherman, Texas, to address our increased customer demand and industry-wide shortage. In our Industrial markets, we are experiencing strong demand in semiconductor capital equipment.

Agreements with NVIDIA

On March 2, 2026, T2the Company entered into a multi-year strategic agreement with NVIDIA to advance the development of advanced optics technologies, including manufacturing capacity and research and development, to enable next-generation AI infrastructure. The non-exclusive agreement includes a multi-billion-dollar purchase commitment with NVIDIA, as well as future access and capacity rights for advanced laser and optical networking products. Separately, on March 2, 2026, NVIDIA made a $2 billion investment in the Company, through the purchase of shares of the Company’s Common Stock in a private placement. The proceeds from the investment will be used to support research and development, future capacity and operations as we build out our manufacturing capabilities. See Note 12. Equity and Redeemable Preferred Stock for further information.

Change in Reportable Segments

Operating segments are defined as components of a company that engage in business activities from which they may earn revenues and incur expenses, and for which discrete financial information is available and is evaluated regularly by the CODM in deciding how to allocate resources and in assessing performance. Aggregation of similar operating segments into reportable operating segments is permitted if the businesses have similar economic characteristics and meet established qualitative criteria. Effective July 1, 2025, we realigned our organizational structure and identified multiple operating segments which have been aggregated into two reportable segments based on our internal management structure and CODM oversight: (i) Datacenter & Communications, and (ii) Industrial. See Note 18. Segment Reporting for further information.

Restructuring Plans

On May 23, 2023, the Board of Directors approved the 2023 Plan which includes site consolidations, facilities moves and closures, as well as the relocation and requalification of certain manufacturing facilities. These restructuring actions were intended to realign our cost structure as part of a transformation to a simpler, more streamlined, resilient and sustainable business model.

In the three and nine months ended March 31, 2026, these activities resulted in net charges of $4 million and net recoveries of $2 million, respectively. The current quarter charges are primarily for site closure and move costs and employee termination costs and the current year-to-date recoveries are primarily for adjustments to employee termination costs partially offset by site move costs. In fiscal 2025, these activities resulted in charges of $53 million, primarily for impairment losses associated with the sale of our Newton Aycliffe business, impairment of right-of-use (“ROU”) assets, employee termination costs, site move costs and accelerated depreciation. In fiscal 2024, these activities resulted in $119 million of charges primarily for employee

termination costs, and the write-off of property and equipment, net of $65 million from reimbursement arrangements. See Note 10. Restructuring Plans for further information.

Commencing in the quarter ended March 31, 2025, and as part of the ongoing strategic review of the Company’s business, the Company’s management approved the 2025 Plan to take a number of restructuring actions, including site consolidations, facilities moves and closures, workforce reductions, contract terminations, and certain other associated cost reductions. The 2023 Plan and the 2025 Plan are collectively referred to as the “Restructuring Plans.”

In the three and nine months ended March 31, 2026, these activities resulted in $31 million and $59 million, respectively, of charges primarily related to write-off of property and equipment, employee termination and site closure costs. In fiscal 2025, these activities resulted in $107 million of charges primarily for the write-off of property and equipment and ROU assets, employee and contract termination costs. We expect the restructuring actions to be substantially completed by the end of fiscal 2026. However, the actual timing and costs associated with these restructuring actions may differ from our current expectations and estimates and such differences may be material. See Note 10. Restructuring Plans for further information.

Impairment of Assets Held-for-Sale and Sale of Business

In the fourth quarter of fiscal 2025, management entered into non-binding agreements to sell several entities. As a result of classifying these entities as held-for-sale, we recorded non-cash impairment charges of $85 million within the Industrial segment. These charges were recognized in Impairment of assets held-for-sale in our Consolidated Statements of Earnings (Loss) for the fourth quarter of fiscal 2025 to reduce the carrying values of the entities to their estimated fair value. In the nine months ended March 31, 2026, we recorded additional non-cash impairment charges of $20 million, within the Industrial segment. The charges were recorded in Impairment of assets held-for-sale in the Condensed Consolidated Statements of Earnings (Loss) to reduce the carrying values of the entities that continue to meet the held-for-sale criteria to their estimated fair value.

On September 2, 2025, we completed the sale of our aerospace and defense business, which is part of our Industrial segment, for approximately $400 million and recorded a gain of $115 million to Gain on sale of business in our Condensed Consolidated Statements of Earnings (Loss) for the first quarter of fiscal 2026.

On January 30, 2026, the Company completed the sale of its product division based in Munich, Germany and recorded a gain of $9 million within Gain on sale of business in the Condensed Consolidated Statements of Earnings (Loss) for the third quarter of fiscal 2026. The total loss associated with the sale was $96 million, substantially all of which was recognized through impairment charges within Impairment of assets held-for-sale in the Condensed Consolidated Statements of Earnings (Loss), including $81 million in the fourth quarter of fiscal 2025, $13 million in the first quarter of fiscal 2026 and $11 million in the second quarter of fiscal 2026.

See Note 7. Assets Held-for-Sale and Sale of Business for further information.

Macroeconomic Conditions - Tariffs and Export Controls

In early 2025, the United States implemented significant new tariffs and export restrictions affecting a broad range of countries, commodities and industries. These actions have prompted retaliatory measures from certain foreign governments, including the imposition of tariffs and export controls. On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (“EEPA”) were not authorized by the statute. The Company is the importer of record for certain raw materials and products that were previously subject to such tariffs under IEEPA. Significant uncertainty remains regarding how and when any amounts may be recovered. We are evaluating the ruling and potential actions available to us. Because the process, timing, and amount of any recovery are uncertain, we have not recorded any potential benefit from a refund at this time.

These tariffs and export restrictions did not have a material impact on our business, financial condition, operational results and/or cash flows in the third quarter of fiscal 2026.

As a global company with a substantial and diversified manufacturing footprint, this footprint provides us with some insulation against these tariffs, trade sanctions, and other geopolitical challenges. Our geographically diverse supply chain combined with the internal production of many of our most critical technological in-feeds provides adaptability and optionality that benefits our customers. As the tariff, trade sanctions, and export restrictions become clearer, we expect to identify opportunities to mitigate their impact. However, we operate in a dynamic geopolitical environment, and we are not immune to any sustained disruption in global trade conditions. Such disruptions could create future headwinds for the Company and may result in revenue reduction, cost increases on material used in our products or significant production delays, which could adversely affect our business, financial condition, results of operations and cash flows.

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Critical Accounting Estimates

The preparation of financial statements and related disclosures are in conformity with accounting principles generally accepted in the United States of America and the Company’s discussion and analysis of its financial condition and results of operations require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its Condensed Consolidated Financial Statements and accompanying notes.

Note 1 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025 describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.

New Accounting Standards

See Note 2. Recently Issued Financial Accounting Standards for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements.

Conversion of Series B Preferred Stock

All outstanding shares of Series B-1 and Series B-2 Preferred Stock were converted to Company Common Stock in the second quarter of fiscal 2026, and no shares of Preferred Stock are currently issued and outstanding. See Note 12. Equity and Redeemable Preferred Stock for further information.

Results of Operations

The following tables set forth select items from our Condensed Consolidated Statements of Earnings (Loss) for the three and nine months ended March 31, 2026 and 2025 ($ in millions, except per share data) (1):

Three Months Ended

Three Months Ended

% of

Revenues

% of

Revenues

Revenues

$

%

$

%

Cost of goods sold

Gross margin

Operating expenses:

Research and development

Selling, general and administrative

Restructuring charges

2

5

Gain on sale of business

(9)

—

—

—

Interest and other, net

1

4

Earnings Before Income Taxes

1

Income Tax Expense

3

—

8

1

Net Earnings

2

—

Net Loss Attributable to Noncontrolling Interests

(1)

(1)

Net Earnings Attributable to Coherent Corp.

$

%

$

1

%

Diluted earnings (loss) per share

$

$

(1) Some amounts may not add due to rounding.

Nine Months Ended

Nine Months Ended

% of

Revenues

% of

Revenues

Revenues

$

%

$

%

Cost of goods sold

Gross margin

Operating expenses:

Research and development

Selling, general and administrative

Restructuring charges

1

2

Impairment of assets held-for-sale

—

—

—

Gain on sale of business

(2)

—

—

Interest and other, net

1

3

Earnings Before Income Taxes

4

Income Tax Expense

—

1

Net Earnings

3

Net Loss Attributable to Noncontrolling Interests

—

—

Net Earnings Attributable to Coherent Corp.

$

%

$

3

%

Diluted earnings per share

$

$

(1) Some amounts may not add due to rounding.

Consolidated

Revenues. Revenues for the three months ended March 31, 2026 increased 21% to $1,806 million, compared to $1,498 million for the same period last fiscal year. Revenues increased $393 million, or 41%, in the Datacenter & Communications segment. T3Revenue growth in our Datacenter business was fueled by continued strong AI datacenter demand, while our Communications business benefited from increased demand in data center interconnect, scale across and traditional telecom applications. T4In the Industrial segment, revenue decreased $85 million, or 16%, primarily due to the divestitures of our aerospace and defense business on September 2, 2025 and our Munich, Germany business on January 30, 2026.

Revenues for the nine months ended March 31, 2026 increased 19% to $5,073 million, compared to $4,281 million for the same period last fiscal year. Revenues increased $923 million, or 34%, in the Datacenter & Communications segment. Revenue growth in our Datacenter business was fueled by continued strong AI datacenter demand, while our Communications business benefited from increased demand in data center interconnect, scale across and traditional telecom applications. In the Industrial segment, revenue decreased $131 million, or 8%, primarily due to the divestitures of our aerospace and defense business on September 2, 2025 and our Munich, Germany business on January 30, 2026.

Gross margin. Gross margin for the three months ended March 31, 2026 was $680 million, or 38% of revenues, compared to $528 million, or 35% of revenues, for the same period in the prior fiscal year, representing an increase of 243 basis points. The improvement in gross margin percentage was primarily driven by higher revenue volume, cost reductions in product input costs and efficiency gains from improved cycle times in the manufacturing process and yield improvements within the Datacenter & Communications segment. Gross margin also benefited from pricing optimization in the Datacenter & Communications segment, as well as the divestitures of our aerospace and defense business on September 2, 2025 and our Munich, Germany business on January 30, 2026.

Gross margin for the nine months ended March 31, 2026 was $1,882 million, or 37% of revenues, compared to $1,497 million, or 35% of revenues, for the same period in the prior year, representing an increase of 213 basis points. The increase was primarily driven by cost reductions in product input costs, efficiency gains from improved cycle times in the manufacturing process and yield improvements in the Datacenter & Communications segment. In addition, gross margin benefited from pricing optimization in both the Datacenter & Communications and Industrial segments and the divestitures of our aerospace and defense business on September 2, 2025 and our Munich, Germany business on January 30, 2026.

Research and development. Research and development (“R&D”) expenses for the three months ended March 31, 2026 were $186 million, or 10% of revenues, compared to $151 million, or 10% of revenues, for the same period last fiscal year. R&D expenses for the nine months ended March 31, 2026 were $507 million, or 10% of revenues, compared to $426 million, or 10% of revenues, for the same period last fiscal year. The increases in R&D expenses were primarily related to continued investment in our product portfolios, particularly in our Datacenter & Communications segment. We continue to prioritize R&D investments in projects with the highest expected return-on-investment, supporting our long-term growth strategy.

Selling, general and administrative. Selling, general and administrative (“SG&A”) expenses for the three months ended March 31, 2026 were $268 million, or 15% of revenues, compared to $231 million, or 15% of revenues, for the same period last fiscal year. SG&A expenses for the nine months ended March 31, 2026 were $778 million, or 15% of revenues, compared to $681 million, or 16% of revenues, for the same period last fiscal year. Although flat for the three months ended March 31, 2026 and slightly decreased for the nine months ended March 31, 2026 as a percentage of revenue, the increases in SG&A expenses in both periods were primarily driven by higher legal, integration and divestiture-related consulting costs, higher facility exit costs and higher share-based compensation expense, partially offset by efficiencies achieved from cost reduction initiatives.

Restructuring charges. T5Restructuring charges for the three and nine months ended March 31, 2026 were $34 million and $57 million, respectively, and consisted primarily of employee termination costs, asset write-offs and move and other costs due to the consolidation and closure of certain manufacturing sites. Restructuring charges for the three and nine months ended March 31, 2025 were $74 million and $106 million, respectively, and consisted of asset write-offs, employee termination costs, move costs and accelerated depreciation due to the consolidation of certain manufacturing sites as well as impairment losses associated with the sale of our Newton Aycliffe business. See Note 10. Restructuring Plans for further information.

Impairment of assets held-for-sale. Impairment of assets held-for-sale for the nine months ended March 31, 2026 was $20 million, and represented non-cash impairment charges to reduce our carrying value in entities that continue to meet the held-for-sale criteria at December 31, 2025 to their estimated fair value. See Note 7. Assets Held-for-Sale and Sale of Business for further information.

Gain on sale of business. Gain on sale of business for the three and nine months ended March 31, 2026 was $9 million and $124 million, respectively, and relates to the sales of our aerospace and defense and our Munich, Germany businesses. See Note 7. Assets Held-for-Sale and Sale of Business for further information.

Interest and other, net. Interest and other, net expense for the three months ended March 31, 2026 was $16 million, compared to $62 million for the same period in the prior fiscal year, representing a decrease of $45 million. Included in Interest and other, net, were interest expense on borrowings, foreign currency gains and losses, amortization of debt issuance costs, equity gains and losses from unconsolidated investments, and interest and dividend income on cash balances. For the three months ended March 31, 2026, the decrease of $45 million in comparison to the same period last fiscal year was driven by $16 million lower foreign exchange net losses, $14 million gains on sales from an equity investment and $13 million lower interest expense.

The $16 million lower foreign exchange net losses were primarily due to lower volatility of exchange rates during the three months ended March 31, 2026. The $13 million lower interest expense was primarily due to lower interest expense on our Term Loans resulting from lower balances and lower interest rates, partially offset by lower interest expense benefit from our interest rate cap. Interest and other, net expense for the nine months ended March 31, 2026 was $75 million, compared to $126 million for the same period in the prior fiscal year, a decrease of $52 million. Included in Interest and other, net, were interest expense on borrowings, foreign currency gains and losses, amortization of debt issuance costs, losses on debt extinguishment, equity gains and losses from unconsolidated investments, and interest and dividend income on cash balances.

For the nine months ended March 31, 2026, the decrease of $52 million in comparison to the same period last fiscal year was driven by $39 million lower interest expense and $36 million gains on sale from an equity investment, partially offset by $10 million lower interest income, $6 million lower foreign exchange net gains and $5 million higher debt extinguishment and debt transaction fees. The $39 million lower interest expense was primarily due to lower interest expense on our Term Loans resulting from lower balances and lower interest rates partially offset by lower interest expense benefit from our interest rate cap and swap. The $10 million lower interest and dividend income was primarily due to decreases in interest rates earned on investments as well as the decrease in average cash and restricted cash balances. The $6 million lower foreign exchange net gains were primarily due to lower volatility of exchange rates during the nine months ended March 31, 2026.

Income taxes. The Company’s year-to-date effective income tax rate at March 31, 2026 was 3% compared to 19% for the same period in the prior fiscal year. The variance from the U.S. statutory federal income tax rate of 21% was primarily driven by differences between U.S. and foreign tax rates, as well as discrete tax benefits related to changes in German tax law, releases of uncertain tax positions, and excess tax benefits associated with stock-based compensation.

Net loss attributable to noncontrolling interests. Net loss attributable to noncontrolling interests for the three and nine months ended March 31, 2026 was $10 million and $14 million, respectively, compared to $14 million and $17 million, respectively, in the same periods in the prior fiscal year. This amount represents the noncontrolling interest holders’ shares of losses of Silicon Carbide LLC. See Note 13. Noncontrolling Interests for further information.

Segment Reporting

Revenues and segment profit for the Company’s reportable segments are discussed below. Our CODM evaluates each segment’s operations for decision-making and performance assessment based on segment revenue and segment profit, as our CODM believes segment profit is a more comprehensive profitability measure for each operating segment. Segment profit includes operating expenses directly managed by operating segments, including research and development, direct sales, marketing and administrative expenses. Segment profit does not include share-based compensation, acquisition or integration related costs, amortization and impairment of acquisition-related intangible assets, restructuring charges, impairment charges on assets held-for-sale, gain on sale of businesses and certain other charges. Additionally, we do not allocate Corporate strategic research and development, strategic marketing and sales expenses and shared general and administrative expenses, as these expenses are not directly attributable to our operating segments.

Management believes segment profit to be a useful measure for investors, as it reflects the results of segment performance over which management has direct control and is used by management in its evaluation of segment performance. See Note 18. Segment Reporting for further information on the Company’s reportable segments and for the reconciliation of the Company’s segment profit to earnings (loss) before income taxes, which is incorporated herein by reference. Effective July 1, 2025, we report our financial results in the following two designated segments: (i) Datacenter & Communications and (ii) Industrial.

Comparative prior period segment information has been recast to conform to the new segments.

Datacenter & Communications ($ in millions)

Three Months Ended

% Increase

Nine Months Ended

% Increase

Revenues

$

$

$

$

Segment profit

$

$

$

$

Revenues for the three months ended March 31, 2026 increased 41% to $1,362 million, compared to $969 million for the same period in the prior fiscal year. Revenues for the nine months ended March 31, 2026 increased 34% to $3,660 million, compared to $2,737 million for the same period in the prior fiscal year. The increases in revenue of $393 million and $923 million during the three and nine months ended March 31, 2026, respectively, were primarily driven by growth in our Datacenter business reflecting continued strong AI datacenter demand as well as higher Communications business revenue due to increased demand for data center interconnect, scale across and traditional telecom applications.

Segment profit for the three months ended March 31, 2026 increased 49% to $348 million, compared to $233 million for the same period last fiscal year. Segment profit for the nine months ended March 31, 2026 increased 39% to $923 million, compared to $665 million for the same period last fiscal year. The increases in segment profit for the three and nine months ended March 31, 2026 were primarily driven by higher revenues, partially offset by increased R&D investments to support expansion of our product portfolio.

Industrial ($ in millions)

Three Months Ended

% Increase (Decrease)

Nine Months Ended

% Increase (Decrease)

Revenues

$

$

$

$

(8)%

Segment profit

$

$

$

$

Revenues for the three months ended March 31, 2026 decreased 16% to $444 million, compared to $529 million for the same period in the prior fiscal year. Revenues for the nine months ended March 31, 2026 decreased 8% to $1,413 million, compared to $1,544 million for the same period in the prior fiscal year. The decreases in revenue of $85 million and $131 million during the three and nine months ended March 31, 2026, respectively, were primarily attributable to the divestitures of our aerospace and defense business on September 2, 2025 and our Munich, Germany business on January 30, 2026.

Segment profit for the three months ended March 31, 2026 decreased 12% to $101 million, compared to $115 million for the same period last fiscal year, primarily driven by the divestiture of our aerospace and defense business on September 2, 2025 and our Munich, Germany business on January 30, 2026 as well as increased R&D investments to support our product portfolio, partially offset by lower manufacturing and SG&A costs. Segment profit for the nine months ended March 31, 2026 increased 10% to $329 million, compared to $300 million for the same period last fiscal year. The increase was primarily driven by lower manufacturing costs, favorable product mix and improvements in pricing optimization as well as lower SG&A costs partially offset by increased R&D investments.

Liquidity and Capital Resources

Historically, our primary sources of cash have been provided from operations, long-term borrowings, and advance funding from customers. Other sources of cash include proceeds from the issuance of equity, proceeds received from the exercises of stock options, and sale of equity investments and businesses. Our historic uses of cash have been for business acquisitions, capital expenditures, investment in research and development, payments of principal and interest on outstanding debt obligations, payments of debt and equity issuance costs to obtain financing and payments in satisfaction of employees’ minimum tax obligations. Supplemental information pertaining to our sources and uses of cash for the periods indicated is presented as follows:

Sources (uses) of cash ($ in millions):

Nine Months Ended

Net cash provided by operating activities

$

$

Proceeds from issuance of common shares

—

Proceeds from exercises of stock options and purchases of stock under employee stock purchase plan

Effect of exchange rate changes on cash and cash equivalents and other items

(2)

3

Proceeds from long-term borrowings and revolving credit facilities

Payment of dividends

—

Debt issuance costs

(9)

—

Purchases of short-term investments

—

Proceeds from the sale of business

Proceeds from sale of equity investment

—

Other items

(4)

(2)

Payments in satisfaction of employees’ minimum tax obligations

Payments on borrowings under revolving credit facilities

Payments on existing debt

Additions to property, plant & equipment

Operating activities:

Net cash provided by operating activities was $10 million for the nine months ended March 31, 2026 compared to $503 million for the same period in the prior fiscal year. The decrease in cash flows provided by operating activities during the nine months ended March 31, 2026 compared to the same period in the prior fiscal year was primarily driven by a significant increase in inventories to support higher revenue levels, which resulted in increased working capital usage. This impact was partially offset by higher accounts payable and higher net earnings.

Investing activities:

Net cash used in investing activities was $891 million for the nine months ended March 31, 2026, compared to net cash used of $284 million for the same period in the prior fiscal year. The increase was primarily due to $825 million purchases of short-term investments and higher cash used to fund capital expenditures partially offset by $437 million cash received from the sale of businesses, net of fees, and cash received from the sale of an equity investment.

Financing activities:

Net cash provided by financing activities was $1,476 million for the nine months ended March 31, 2026, compared to net cash used of $386 million for the same period in the prior fiscal year. The increase was primarily due to the $2 billion in proceeds from the issuance of Common Stock to NVIDIA, net of fees, partially offset by higher payments, net of borrowings, on existing debt obligations.

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Senior Credit Facilities

On September 26, 2025, the Company entered into Amendment No. 4 and Amendment No. 5 to the Credit Agreement. Under Amendment No. 4, (i) the existing revolving credit commitments were refinanced and replaced with the 2025 Revolving Loans, including the 2025 Incremental Term A Loans, the proceeds of which were used, in part, to repay all outstanding principal, interest and fees of the Existing Term A Loans. As amended, the 2025 Revolving Loans and the 2025 Incremental Term A Loans each bear interest at an adjusted SOFR rate subject to a 0.00% floor plus a range of 1.25% to 2.25% based on the Company’s total net leverage ratio. The interest rate applicable to the 2025 Revolving Loans and the 2025 Incremental Term A Loans is initially a SOFR-based rate plus 1.50% as of March 31, 2026.

The 2025 Revolving Loans and the 2025 Incremental Term A Loans mature on the earlier of September 26, 2030 or a “Springing Maturity Date,” which is a date that is 91 days prior to the stated maturity of either (i) the Company’s unsecured senior notes or (ii) the term B loans then outstanding if, on such 91st day, the applicable senior notes or term B loans remain outstanding and liquidity is less than (x) $250 million plus (y) the aggregate outstanding principal amount of such notes or term B loans, as applicable. Under Amendment No. 5, the outstanding New Term B-2 Loans were replaced with the New Term B-3 Loans having substantially similar terms as the New Term B-2 Loans, except with respect to the interest rate applicable to the New Term B-3 Loans and certain other provisions. As further amended, the New Term B-3 Loans bear interest at a SOFR-based rate (subject to a 0.50% floor) plus 1.75% as of March 31, 2026. The New Term B-3 Loans will mature on July 1, 2029.

In relation to the Term Facilities, the Company incurred expense of $32 million and $111 million, respectively, for the three and nine months ended March 31, 2026, which is included in Interest expense in the Condensed Consolidated Statements of Earnings (Loss). On July 1, 2023, our interest rate cap became effective, which reduced interest expense by $3 million and $14 million, respectively, during the three and nine months ended March 31, 2026.

During the nine months ended March 31, 2026, the Company made payments of $509 million for the Term Facilities, $502 million of which were voluntary payments.

As of March 31, 2026, the Company had no borrowings outstanding under the Revolving Credit Facility.

Our cash position, borrowing capacity and debt obligations are as follows (in millions):

Cash and cash equivalents

$

$

Restricted cash, current

9

Restricted cash, non-current

Short-term investments

—

Available borrowing capacity under Revolving Credit Facility

Total debt obligations

Other Liquidity

On March 2, 2026, NVIDIA made a $2 billion investment in the Company through the purchase of shares of the Company’s Common Stock. The proceeds from the investment will be used to support research and development, future capacity and operations as we build out our manufacturing capabilities. We also entered into a multi-year capacity agreement that may require incremental investments in equipment, labor, and working capital to support future production volumes through 2030. While no material liability was recorded at quarter-end solely as a result of entering into the agreement, the arrangement may result in material future cash requirements and could affect revenue concentration, gross margin, and capital expenditures as volumes ramp. See Note 12. Equity and Redeemable Preferred Stock for further information.

On December 4, 2023, the Company completed two investment agreements under which Silicon Carbide LLC, a Company subsidiary, received $1.0 billion cash in exchange for 25% of the equity of that entity. Such funds have and will continue to be used primarily to fund future capital expansion in our silicon carbide business and will enable us to increase our available free cash flow to provide greater financial and operational flexibility to execute our capital allocation priorities. See Note 13. Noncontrolling Interests included in Item 1 for further information.

The Company believes existing cash, cash flow from operations, and available borrowing capacity from its Senior Credit Facilities will be sufficient to fund its needs for working capital, capital expenditures, repayment of scheduled long-term borrowings and lease obligations, investments in R&D, and internal and external growth objectives at least through the next twelve months.

Table of Contents

Our cash and cash equivalent balances are generated and held in numerous locations throughout the world, including amounts held outside the United States. As of March 31, 2026, the Company held approximately $808 million of cash, cash equivalents and restricted cash outside of the United States. Generally, cash balances held outside the United States could be repatriated to the United States.

At March 31, 2026, we had $633 million of restricted cash, which includes $630 million at Silicon Carbide LLC that is restricted for use by only that subsidiary.