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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended August 2,2025orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number 1-7562THE GAP,INC.(Exact name of registrant as specified in its charter)Delaware 94-1697231(State or other jurisdiction ofincorporation or organization)(I.R.S.Employer IdentificationNo.)Two Folsom StreetSan Francisco,California 94105(Address of principal executive offices and zip code)Registrants telephone number,including area code:(415)427-0100Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading SymbolName of each exchange on whichregisteredCommon Stock,$0.05 par valueGAPThe New York Stock ExchangeIndicate 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 duringthe 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 forthe past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit suchfiles).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or anemerging 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 acceleratedfilerAccelerated filer Non-accelerated filer Smaller 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 orrevised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No The number of shares of the registrants common stock outstanding as of August 22,2025 was 371,047,226.FORWARD-LOOKING STATEMENTSThis Quarterly Report on Form 10-Q contains forward-looking statements within the“safe harbor”provisions of the Private Securities Litigation Reform Actof 1995.All statements other than those that are purely historical are forward-looking statements.Words such as“expect,”“anticipate,”“believe,”“estimate,”“intend,”“plan,”“project,”and similar expressions also identify forward-looking statements.Forward-looking statements include,but are not limited to,statements regarding the following:monitoring the impact of changes in U.S.trade policy and tariffs on the assumptions and estimates used when preparing our financial information;the impact of recent accounting pronouncements;the timing of revenue recognition of upfront payments related to our credit card program agreement;the timing of recognition in income of unrealized gains and losses from designated cash flow hedges;the impact of losses due to indemnification obligations on the Condensed Consolidated Financial Statements;the outcome of proceedings,lawsuits,disputes,and claims,including the impact of such actions on the Condensed Consolidated FinancialStatements and our financial results;the Gap Taiwan operations;our arrangements with third parties to operate stores and websites selling apparel and related products under our brand names;maintaining and building upon financial and operational rigor,through an optimized cost structure and disciplined inventory management;reinvigorating our brands to drive relevance and an engaging omni-channel experience;strengthening and evolving our operating platform with a digital-first mindset to drive scale and efficiency;energizing our culture by attracting and retaining strong talent;continuing to integrate sustainability into business practices to support long-term growth;continuing to monitor macroeconomic conditions and changes in U.S.trade policy and tariffs;the impact of changes in U.S.trade policy and tariffs on our merchandise costs and gross margins,and continuing to evaluate potential mitigatingactions;the impact of macroeconomic factors on consumer behavior and continued uncertainty related to the macroeconomic environment;our ability to supplement near-term liquidity,if necessary,with our ABL Facility(as defined below)or other available market instruments;the impact of the seasonality of our operations,in addition to the impact of macroeconomic factors,on certain cash inflows and outflows;the ability of our current balances of cash,cash equivalents,and short-term investments,along with our cash flows from operations,our ABLFacility,and other available market instruments to support our business operations and liquidity requirements;the importance of our sustained ability to generate free cash flow,which is a non-GAAP financial measure and is defined and discussed in moredetail in Part I,Item 2 of this Form 10-Q below;our dividend policy,including the potential timing and amounts of future dividends;andthe impact of changes in internal control over financial reporting.Because these forward-looking statements involve risks and uncertainties,there are important factors that could cause our actual results to differ materiallyfrom those in the forward-looking statements.These factors include,without limitation,the following risks,any of which could have an adverse effect on ourbusiness,financial condition,results of operations,or reputation:the overall global economic and geopolitical environment,uncertainties related to government fiscal,monetary,trade,and tax policies,andconsumer spending patterns;recent changes in U.S.trade policy and tariffs,and the risk of potential future changes or worsening trade tensions between the United States andother countries;the risk that trade matters,including tariffs on goods imported from our sourcing countries,could further increase our costs,or reduce the supplyof apparel available to us;the risk that our enterprise risk management efforts will not be successful in mitigating the negative impact of tariffs;the highly competitive nature of our business in the United States and internationally;the risk that we or our franchisees may be unsuccessful in gauging apparel trends and changing consumer preferences or responding withsufficient lead time;the risk that we fail to maintain,enhance and protect our brand image and reputation;the risk that we do not successfully implement our marketing efforts,or that our talent partnerships expose us to reputational or other risks;the risk that we fail to manage key executive succession and retention and to continue to attract qualified personnel;the risk that we may be unable to manage our inventory and fulfillment operations effectively and the resulting impact on our sales and results ofoperations;the risk that our investments in customer,digital,omni-channel,and other strategic initiatives may not deliver the results we anticipate;the risk that failures of,or updates or changes to,our digital and information technology systems,including our continued integration of datascience and artificial intelligence,may disrupt our operations;the risk of loss or theft of assets,including inventory shortage;the risks to our business,including our costs and global supply chain,associated with global sourcing and manufacturing;the risks of U.S.or foreign labor strikes,work stoppages,boycotts,port congestion,and other disruptions to our sourcing operations;the risks to our reputation or operations associated with importing merchandise from foreign countries,including failure of our vendors to adhereto our Code of Vendor Conduct;the risk that we or our franchisees may be unsuccessful in identifying,negotiating,and securing new store locations and renewing,modifying,orterminating leases for existing store locations effectively;the risk that our franchisees and licensees could impair the value of our brands;the risk that our efforts to expand internationally may not be successful;engaging in or seeking to engage in strategic transactions that are subject to various risks and uncertainties;the risk of information security breaches or vulnerabilities that may result in increased costs,violations of law,significant legal and financialexposure,and a loss of confidence in our security measures;the risk that our technology systems that support our e-commerce platform may not be effective or function properly;reductions in income and cash flow from our credit card programs;the risk of foreign currency exchange rate fluctuations;the risk that our comparable sales and margins may experience fluctuations or that we may fail to meet financial market expectations;evolving regulations and expectations with respect to environmental,social,and governance matters,and increased scrutiny of diversity,equity,and inclusion initiatives;the risk that our level of indebtedness may impact our ability to operate and expand our business;the risk that we and our subsidiaries may be unable to meet our obligations under our indebtedness agreements;the risk that covenants in our indebtedness agreements may restrict or limit our business;the risk that changes in our credit profile or deterioration in market conditions may limit our access to the capital markets;the adverse impacts of climate change on our business;natural disasters,public health crises,political crises,negative global climate patterns,or other catastrophic events;our failure to comply with applicable laws and regulations and changes in the regulatory or administrative landscape;the risk that we will not be successful in defending various proceedings,lawsuits,disputes,and claims;the risk that the assumptions and estimates used when preparing the Condensed Consolidated Financial Statements,including estimates andassumptions regarding inventory valuation,income taxes and valuation allowances,sales return and bad debt allowances,deferred revenue,andthe impairment of long-lived assets,are inaccurate or may change,and the resulting impact on our results of operations;the risk that changes in the geographic mix and level of income or losses,the expected or actual outcome of audits,changes in deferred taxvaluation allowances,and new legislation could impact our effective tax rate,or that we may be required to pay amounts in excess of establishedtax liabilities;andthe risk that the adoption of new accounting pronouncements will impact future results.Additional information regarding factors that could cause results to differ can be found in our Annual Report on Form 10-K for the fiscal year endedFebruary 1,2025,our Quarterly Report on Form 10-Q for the fiscal quarter ended May 3,2025,and our other filings with the U.S.Securities and ExchangeCommission.Future economic and industry trends that could potentially impact net sales and profitability are difficult to predict.These forward-looking statements are basedon information as of August 29,2025.We assume no obligation to publicly update or revise our forward-looking statements even if experience or futurechanges make it clear that any projected results expressed or implied therein will not be realized.We suggest that this document be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended February 1,2025.WHERE YOU CAN FIND MORE INFORMATIONInvestors and others should note that Gap Inc.announces material financial and operational information to its investors using its Investor Relations website,press releases,SEC filings,and public conference calls and webcasts.Gap Inc.and each of its brands also use LinkedIn and Instagram as a means of disclosinginformation about Gap Inc.and for complying with disclosure obligations under Regulation FD.The social media channels that Gap Inc.and its brands intendto use as a means of disclosing information described above may be updated from time to time as listed on Gap Inc.s Investor Relations website.Theinformation we post through these channels is not part of this Quarterly Report.THE GAP,INC.TABLE OF CONTENTS PagePART I-FINANCIAL INFORMATIONItem 1.Financial Statements1Condensed Consolidated Balance Sheets as of August 2,2025,February 1,2025,and August 3,20241Condensed Consolidated Statements of Operations for the 13 Weeks and 26 Weeks Ended August 2,2025 and August 3,20242Condensed Consolidated Statements of Comprehensive Income for the 13 Weeks and 26 Weeks Ended August 2,2025 and August 3,20243Condensed Consolidated Statements of Stockholders Equity for the 13 Weeks and 26 Weeks Ended August 2,2025 and August 3,20244Condensed Consolidated Statements of Cash Flows for the 26 Weeks Ended August 2,2025 and August 3,20246Notes to Condensed Consolidated Financial Statements7Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations16Item 3.Quantitative and Qualitative Disclosures About Market Risk22Item 4.Controls and Procedures22PART II-OTHER INFORMATIONItem 1.Legal Proceedings23Item 1A.Risk Factors23Item 2.Unregistered Sales of Equity Securities and Use of Proceeds24Item 5.Other Information24Item 6.Exhibits25PART I FINANCIAL INFORMATIONItem 1.Financial Statements.THE GAP,INC.CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)($and shares in millions except par value)August 2,2025February 1,2025August 3,2024ASSETSCurrent assets:Cash and cash equivalents$2,194$2,335$1,900 Short-term investments238 253 246 Merchandise inventory2,294 2,067 2,107 Other current assets651 548 556 Total current assets5,377 5,203 4,809 Property and equipment,net of accumulated depreciation of$5,008,$4,930,and$4,9262,478 2,496 2,525 Operating lease assets3,397 3,240 3,185 Other long-term assets894 946 990 Total assets$12,146$11,885$11,509 LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable$1,656$1,488$1,522 Accrued expenses and other current liabilities881 1,083 1,029 Current portion of operating lease liabilities631 632 613 Income taxes payable29 53 60 Total current liabilities3,197 3,256 3,224 Long-term liabilities:Long-term debt1,491 1,490 1,489 Long-term operating lease liabilities3,470 3,353 3,357 Other long-term liabilities555 522 538 Total long-term liabilities5,516 5,365 5,384 Commitments and contingencies(see Note 9)Stockholders equity:Common stock$0.05 par valueAuthorized 2,300 shares for all periods presented;Issued and Outstanding 371,374,and 376shares19 19 19 Additional paid-in capital48 146 159 Retained earnings3,325 3,039 2,672 Accumulated other comprehensive income41 60 51 Total stockholders equity3,433 3,264 2,901 Total liabilities and stockholders equity$12,146$11,885$11,509 See Accompanying Notes to Condensed Consolidated Financial Statements1THE GAP,INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)13 Weeks Ended26 Weeks Ended($and shares in millions except per share amounts)August 2,2025August 3,2024August 2,2025August 3,2024Net sales$3,725$3,720$7,188$7,108 Cost of goods sold and occupancy expenses2,189 2,137 4,204 4,128 Gross profit1,536 1,583 2,984 2,980 Operating expenses1,244 1,290 2,432 2,482 Operating income292 293 552 498 Interest expense23 24 46 45 Interest income(27)(27)(53)(51)Income before income taxes296 296 559 504 Income tax expense80 90 150 140 Net income$216$206$409$364 Weighted-average number of shares-basic373 376 374 375 Weighted-average number of shares-diluted379 383 381 383 Earnings per share-basic$0.58$0.55$1.09$0.97 Earnings per share-diluted$0.57$0.54$1.07$0.95 See Accompanying Notes to Condensed Consolidated Financial Statements2THE GAP,INC.CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Unaudited)13 Weeks Ended26 Weeks Ended($in millions)August 2,2025August 3,2024August 2,2025August 3,2024Net income$216$206$409$364 Other comprehensive income(loss),net of taxForeign currency translation and other,net of tax expense of$,$,$1,$(3)4(5)3 Change in fair value of derivative financial instruments,net of tax expense(taxbenefit)of$1,$4,$(1),$54(1)(10)6 Reclassification adjustment for(gains)losses on derivative financialinstruments,net of tax expense of$,$(5),$(1),$(5)1(4)(1)Other comprehensive income(loss),net of tax1 4(19)8 Comprehensive income$217$210$390$372 See Accompanying Notes to Condensed Consolidated Financial Statements3THE GAP,INC.CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY(Unaudited)Common StockAdditionalPaid-inCapitalRetainedEarningsAccumulatedOtherComprehensiveIncome($and shares in millions except per share amounts)SharesAmountTotalBalance as of May 3,2025374$19$91$3,171$40$3,321 Net income for the 13 weeks ended August 2,2025216 216 Other comprehensive income,net of tax1 1 Repurchases and retirement of common stock(3)(82)(82)Issuance of common stock related to stock options and employee stockpurchase plans 6 6 Issuance of common stock and withholding tax payments related to vesting ofstock units (1)(1)Share-based compensation,net of forfeitures34 34 Common stock dividends declared and paid($0.165 per share)(62)(62)Balance as of August 2,2025371$19$48$3,325$41$3,433 Balance as of May 4,2024375$19$119$2,522$47$2,707 Net income for the 13 weeks ended August 3,2024206 206 Other comprehensive income,net of tax4 4 Issuance of common stock related to stock options and employee stockpurchase plans 11 11 Issuance of common stock and withholding tax payments related to vesting ofstock units1 (2)(2)Share-based compensation,net of forfeitures31 31 Common stock dividends declared and paid($0.15 per share)(56)(56)Balance as of August 3,2024376$19$159$2,672$51$2,901 See Accompanying Notes to Condensed Consolidated Financial Statements4THE GAP,INC.CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY(Unaudited)Common StockAdditionalPaid-inCapitalRetainedEarningsAccumulatedOtherComprehensiveIncome($and shares in millions except per share amounts)SharesAmountTotalBalance as of February 1,2025374$19$146$3,039$60$3,264 Net income for the 26 weeks ended August 2,2025409 409 Other comprehensive income,net of tax(19)(19)Repurchases and retirement of common stock(7)(152)(152)Issuance of common stock related to stock options and employee stockpurchase plans1 12 12 Issuance of common stock and withholding tax payments related tovesting of stock units3 (29)(29)Share-based compensation,net of forfeitures71 71 Common stock dividends declared and paid($0.33 per share)(123)(123)Balance as of August 2,2025371$19$48$3,325$41$3,433 Balance as of February 3,2024372$19$113$2,420$43$2,595 Net income for the 26 weeks ended August 3,2024364 364 Other comprehensive income,net of tax8 8 Issuance of common stock related to stock options and employee stockpurchase plans1 21 21 Issuance of common stock and withholding tax payments related tovesting of stock units3 (33)(33)Share-based compensation,net of forfeitures58 58 Common stock dividends declared and paid($0.30 per share)(112)(112)Balance as of August 3,2024376$19$159$2,672$51$2,901 See Accompanying Notes to Condensed Consolidated Financial Statements5THE GAP,INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)26 Weeks Ended($in millions)August 2,2025August 3,2024Cash flows from operating activities:Net income$409$364 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization243 247 Share-based compensation71 58 Non-cash and other items4(1)Deferred income taxes62(8)Changes in operating assets and liabilities:Merchandise inventory(214)(118)Other current assets and other long-term assets(79)(33)Accounts payable137 155 Accrued expenses and other current liabilities(244)(88)Income taxes payable,net of receivables and other tax-related items(45)61 Other long-term liabilities7(7)Operating lease assets and liabilities,net(43)(51)Net cash provided by operating activities308 579 Cash flows from investing activities:Purchases of property and equipment(181)(182)Purchases of short-term investments(145)(276)Proceeds from sales and maturities of short-term investments162 33 Net cash used for investing activities(164)(425)Cash flows from financing activities:Proceeds from issuances under share-based compensation plans12 21 Withholding tax payments related to vesting of stock units(29)(33)Repurchases of common stock(152)Cash dividends paid(123)(112)Net cash used for financing activities(292)(124)Effect of foreign exchange rate fluctuations on cash,cash equivalents,and restricted cash5(2)Net increase(decrease)in cash,cash equivalents,and restricted cash(143)28 Cash,cash equivalents,and restricted cash at beginning of period2,365 1,901 Cash,cash equivalents,and restricted cash at end of period$2,222$1,929 Supplemental disclosure of cash flow information:Cash paid for interest during the period$32$31 Cash paid for income taxes during the period,net of refunds$142$97 See Accompanying Notes to Condensed Consolidated Financial Statements6THE GAP,INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)Note 1.Accounting PoliciesBasis of PresentationIn the opinion of The Gap,Inc.(Gap Inc.,the“Company,”“we,”and“our”)management,the accompanying unaudited Condensed Consolidated FinancialStatements contain all normal and recurring adjustments(except as otherwise disclosed)considered necessary to present fairly our financial position,results ofoperations,comprehensive income,stockholders equity,and cash flows as of August 2,2025 and August 3,2024 and for all periods presented.The CondensedConsolidated Balance Sheet as of February 1,2025 has been derived from our audited financial statements.The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securitiesand Exchange Commission.Accordingly,certain information and disclosures normally included in the notes to the annual financial statements prepared inaccordance with accounting principles generally accepted in the United States of America(“U.S.GAAP”)have been omitted from these interim financialstatements,although the Company believes that the disclosures made are adequate to make the information not misleading.We suggest that you read theseCondensed Consolidated Financial Statements in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report onForm 10-K for the fiscal year ended February 1,2025.Use of EstimatesThe preparation of financial statements in conformity with U.S.GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenueand expenses during the reporting period.Actual results could differ from these estimates.Our most significant accounting judgments include,but are notlimited to,estimates and assumptions used for inventory valuation,income taxes and valuation allowances,sales return and bad debt allowances,deferredrevenue,and the impairment of long-lived assets.The United States has recently enacted significant changes to its trade policy and imposed substantial tariffs on imported goods from a number of countries.Wewill continue to consider the impact of these developments on the assumptions and estimates used when preparing our quarterly financial statements.Restricted CashAs of August 2,2025,February 1,2025,and August 3,2024,restricted cash primarily included consideration that serves as collateral for our insuranceobligations and certain other obligations occurring in the normal course of business.The following table provides a reconciliation of cash,cash equivalents,andrestricted cash reported within our Condensed Consolidated Balance Sheets to the total shown on our Condensed Consolidated Statements of Cash Flows:($in millions)August 2,2025February 1,2025August 3,2024Cash and cash equivalents,per Condensed Consolidated Balance Sheets$2,194$2,335$1,900 Restricted cash included in other long-term assets28 30 29 Total cash,cash equivalents,and restricted cash,per Condensed Consolidated Statements of CashFlows$2,222$2,365$1,929 Accounting PronouncementsExcept as noted below,the Company has considered all recent accounting pronouncements and concluded that there are no recent accounting pronouncementsthat may have a material impact on our Condensed Consolidated Financial Statements and disclosures,based on current information.ASU No.2023-09,Improvements to Income Tax DisclosuresIn December 2023,the FASB issued ASU No.2023-09,Improvements to Income Tax Disclosures.The ASU is intended to improve the transparency of incometax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation,as well as income taxes paiddisaggregated by jurisdiction.The ASU is effective for annual periods beginning after December 15,2024 and should be applied on a prospective basis,butretrospective application is permitted.We are currently assessing the impact that this ASU will have on the Companys disclosures.ASU No.2024-03,Disaggregation of Income Statement ExpensesIn November 2024,the FASB issued ASU No.2024-03,Disaggregation of Income Statement Expenses.The ASU is intended to improve financial reporting byrequiring disaggregated disclosure of certain costs and expenses.The ASU is effective for fiscal years beginning after December 15,2026 and for interimperiods within fiscal years beginning after December 15,2027,with early adoption permitted.The ASU may be applied on either a prospective or retrospectivebasis.We are currently assessing the impact that this ASU will have on the Companys disclosures.Note 2.RevenueWe disaggregate our net sales by channel and also by brand and region.Net sales by region are allocated based on the location of the store where the customerpaid for and received the merchandise;the distribution center or store from which the products were shipped;or the region of the franchise or licensing partner.Net sales disaggregated by channel are as follows:13 Weeks Ended26 Weeks Ended($in millions)August 2,2025August 3,2024August 2,2025August 3,2024Store and franchise sales$2,440$2,476$4,547$4,582 Online sales(1)1,285 1,244 2,641 2,526 Total net sales$3,725$3,720$7,188$7,108 _(1)Online sales primarily include sales originating from our online channel including those that are picked up or shipped from stores and net sales from revenue-generating strategic initiatives.7Net sales disaggregated by brand and region are as follows:($in millions)Old Navy GlobalGap GlobalBanana RepublicGlobalAthleta GlobalOther(2)Total13 Weeks Ended August 2,2025U.S.(1)$1,978$581$408$290$28$3,285 Canada157 76 46 9 288 Other regions15 115 21 1 152 Total$2,150$772$475$300$28$3,725($in millions)Old Navy GlobalGap GlobalBanana RepublicGlobalAthleta GlobalOther(2)Total13 Weeks Ended August 3,2024U.S.(1)$1,953$579$414$327$14$3,287 Canada159 77 43 10 289 Other regions11 110 22 1 144 Total$2,123$766$479$338$14$3,720($in millions)Old Navy GlobalGap GlobalBanana RepublicGlobalAthleta GlobalOther(2)Total26 Weeks Ended August 2,2025U.S.(1)$3,804$1,126$781$589$50$6,350 Canada297 137 81 17 532 Other regions30 233 41 2 306 Total$4,131$1,496$903$608$50$7,188($in millions)Old Navy GlobalGap GlobalBanana RepublicGlobalAthleta GlobalOther(2)Total26 Weeks Ended August 3,2024U.S.(1)$3,714$1,092$797$645$28$6,276 Canada305 143 79 20 547 Other regions20 220 43 2 285 Total$4,039$1,455$919$667$28$7,108 _(1)U.S.includes the United States and Puerto Rico.(2)Primarily consists of net sales from revenue-generating strategic initiatives.We defer revenue when cash payments are received in advance of performance for unsatisfied obligations related to our gift cards,licensing agreements,outstanding loyalty points,and reimbursements of loyalty program rewards associated with our credit card agreement.For the 13 weeks ended August 2,2025,the opening balance of deferred revenue for these obligations was$249 million,of which$84 million was recognized as revenue during the period.For the 26weeks ended August 2,2025,the opening balance of deferred revenue for these obligations was$273 million,of which$137 million was recognized asrevenue during the period.The closing balance of deferred revenue for these obligations was$248 million as of August 2,2025.For the 13 weeks ended August 3,2024,the opening balance of deferred revenue for these obligations was$310 million,of which$116 million was recognizedas revenue during the period.For the 26 weeks ended August 3,2024,the opening balance of deferred revenue for these obligations was$337 million,of which$181 million was recognized as revenue during the period.The closing balance of deferred revenue for these obligations was$280 million as of August 3,2024.In April 2021,the Company entered into agreements with Barclays and Mastercard relating to a long-term credit card program.The Company received anupfront payment of$60 million related to the agreements prior to the program launch in May 2022,which is being recognized as revenue over the term of theagreements.We also receive revenue sharing from our credit card agreement for private label and co-branded credit cards.8Note 3.Income TaxesThe effective income tax rate was 27.0 percent for the 13 weeks ended August 2,2025,compared with 30.4 percent for the 13 weeks ended August 3,2024.The decrease in the effective tax rate is primarily due to prior year increases to certain income tax reserves,as well as changes in the amount and mix ofjurisdictional earnings.The effective income tax rate was 26.8 percent for the 26 weeks ended August 2,2025,compared with 27.8 percent for the 26 weeks ended August 3,2024.The decrease in the effective tax rate is primarily due to prior year increases to certain income tax reserves and changes in the amount and mix of jurisdictionalearnings,partially offset by less favorable impacts of stock-based compensation.On July 4,2025,the One Big Beautiful Bill Act of 2025(the“OBBBA”)was enacted in the United States.The OBBBA changes existing U.S.income tax lawand includes numerous provisions that affect corporations,such as permanently extending certain expiring provisions from the Tax Cuts and Jobs Act,modification of the international tax framework,and restoration of favorable tax treatment for certain business provisions such as bonus depreciation andSection 174 research and experimentation expensing.The legislation has multiple effective dates,with certain provisions effective in fiscal 2025 and othersimplemented through fiscal 2027.The Company included the impact of the OBBBA tax legislation in the second quarter of fiscal 2025,the period of enactment,and the impact was not materialto the Condensed Consolidated Financial Statements.Note 4.Debt and Credit FacilitiesLong-term debt recorded on the Condensed Consolidated Balance Sheets consists of the following:($in millions)August 2,2025February 1,2025August 3,20242029 Notes$750$750$750 2031 Notes750 750 750 Less:Unamortized debt issuance costs(9)(10)(11)Total long-term debt$1,491$1,490$1,489 The scheduled maturity of the Senior Notes is as follows:Scheduled Maturity($in millions)PrincipalInterest RateInterest PaymentsOctober 1,2029(1)$750 3.625%Semi-AnnualOctober 1,2031(2)750 3.875%Semi-AnnualTotal issuance$1,500 _(1)On or after October 1,2024,includes an option to redeem the 2029 Notes,in whole or in part at any time,at stated redemption prices.(2)Includes an option to redeem the 2031 Notes,in whole or in part at any time,subject to a make-whole premium,prior to October 1,2026.On or after October 1,2026,includes an option toredeem the 2031 Notes,in whole or in part at any time,at stated redemption prices.We have$1.5 billion aggregate principal amount of 3.625 percent senior notes due 2029(“2029 Notes”)and 3.875 percent senior notes due 2031(“2031Notes”)(the 2029 Notes and the 2031 Notes,collectively,the“Senior Notes”).As of August 2,2025,the aggregate estimated fair value of the Senior Noteswas$1.36 billion and was based on the quoted market prices for each of the Senior Notes(level 1 inputs)as of the last business day of the fiscal quarter.Theaggregate principal amount of the Senior Notes is recorded in long-term debt on the Condensed Consolidated Balance Sheets,net of the unamortized debtissuance costs.We also have a senior secured asset-based revolving credit agreement(the ABL Facility),which has a$2.2 billion borrowing capacity and generally bearsinterest at a per annum rate based on Secured Overnight Financing Rate(SOFR)(subject to a zero floor)plus a margin,depending on borrowing baseavailability.The ABL Facility is scheduled to expire in July 2027 and is available for working capital,capital expenditures,and other general corporatepurposes.There were no borrowings under the ABL Facility as of August 2,2025,February 1,2025,or August 3,2024.We also have the ability to issue letters of credit on our ABL Facility.As of August 2,2025,we had$46 million in standby letters of credit issued under theABL Facility.Note 5.Fair Value MeasurementsThe Company measures certain financial assets and liabilities at fair value on a recurring basis.The Company categorizes financial assets and liabilitiesrecorded at fair value based upon a three-level hierarchy that considers the related valuation techniques.There were no material purchases,sales,issuances,or settlements related to recurring level 3 measurements for the 13 and 26 weeks ended August 2,2025 orAugust 3,2024.9Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents are as follows:Fair Value Measurements at Reporting Date Using($in millions)August 2,2025Quoted Prices inActive Markets forIdentical Assets(Level 1)Significant OtherObservableInputs(Level 2)SignificantUnobservableInputs(Level 3)Assets:Cash equivalents$235$225$10$Short-term investments238 117 121 Derivative financial instruments9 9 Deferred compensation plan assets42 42 Other assets3 3 Total$527$384$140$3 Liabilities:Derivative financial instruments$6$6$Fair Value Measurements at Reporting Date Using($in millions)February 1,2025Quoted Prices inActive Markets forIdentical Assets(Level 1)Significant OtherObservableInputs(Level 2)SignificantUnobservableInputs(Level 3)Assets:Cash equivalents$310$302$8$Short-term investments253 132 121 Derivative financial instruments33 33 Deferred compensation plan assets36 36 Other assets3 3 Total$635$470$162$3 Liabilities:Derivative financial instruments$Fair Value Measurements at Reporting Date Using($in millions)August 3,2024Quoted Prices inActive Markets forIdentical Assets(Level 1)Significant OtherObservableInputs(Level 2)SignificantUnobservableInputs(Level 3)Assets:Cash equivalents$9$3$6$Short-term investments246 124 122 Derivative financial instruments16 16 Deferred compensation plan assets40 40 Other assets4 4 Total$315$167$144$4 Liabilities:Derivative financial instruments$3$3$We have highly liquid fixed and variable income investments classified as cash equivalents and short-term investments.All highly liquid investments withoriginal maturities of three months or less at the time of purchase are classified as cash and cash equivalents on the Condensed Consolidated Balance Sheets.Our cash equivalents are comprised of money market funds and time deposits recorded at amortized cost,which approximates fair value,as well as debtsecurities recorded at fair value using market prices for identical or similar assets.We also have highly liquid investments with original maturities of greaterthan three months and less than two years that are classified as short-term investments on the Condensed Consolidated Balance Sheets.These debt securitiesare also recorded at fair value using market prices for identical or similar assets.There were no material realized or unrealized gains or losses or impairment charges related to short-term investments during the 13 and 26 weeks endedAugust 2,2025 or August 3,2024.10Derivative financial instruments primarily include foreign exchange forward contracts.See Note 6 of Notes to Condensed Consolidated Financial Statementsfor information regarding currencies hedged against the U.S.dollar.We maintain the Gap Inc.Deferred Compensation Plan(“DCP”),which allows eligible employees to defer base compensation and bonus up to a maximumpercentage,and non-employee directors to defer receipt of a portion of their Board fees.Plan investments are directed by participants and are recorded atmarket value and designated for the DCP.The fair value of the Companys DCP assets is determined based on quoted market prices,and the assets are recordedin other long-term assets on the Condensed Consolidated Balance Sheets.Nonfinancial AssetsWe review the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an assetmay not be recoverable.The fair value of the long-lived assets is determined using level 3 inputs and based on discounted future cash flows of the asset or assetgroup using a discount rate commensurate with the risk.The asset group is defined as the lowest level for which identifiable cash flows are available andlargely independent of the cash flows of other groups of assets,which for our retail stores is at the store level.There were no material impairment charges recorded for long-lived assets during the 13 and 26 weeks ended August 2,2025 or August 3,2024.We review the carrying amount of goodwill and other indefinite-lived intangible assets for impairment annually and whenever events or changes incircumstances indicate that it is more likely than not that the carrying amount may not be recoverable.There were no impairment charges recorded for goodwill or other indefinite-lived intangible assets during the 13 and 26 weeks ended August 2,2025 orAugust 3,2024.Note 6.Derivative Financial InstrumentsWe operate in foreign countries,which exposes us to market risk associated with foreign currency exchange rate fluctuations.We use derivative financialinstruments to manage our exposure to foreign currency exchange rate risk and do not enter into derivative financial contracts for trading purposes.Consistentwith our risk management guidelines,we hedge a portion of our transactions related to merchandise purchases for foreign operations and certain intercompanytransactions using foreign exchange forward contracts.These contracts are entered into with large,reputable financial institutions that are monitored forcounterparty risk.The currencies hedged against changes in the U.S.dollar are the Canadian dollar,Japanese yen,British pound,New Taiwan dollar,and Euro.Cash flows from derivative financial instruments are classified as cash flows from operating activities on the Condensed Consolidated Statements of CashFlows.Derivative financial instruments are recorded at fair value on the Condensed Consolidated Balance Sheets as other current assets,other long-term assets,accrued expenses and other current liabilities,or other long-term liabilities.Cash Flow HedgesWe designate foreign exchange forward contracts used to hedge forecasted merchandise purchases and related costs denominated in U.S.dollars made by ourinternational subsidiaries whose functional currencies are their local currencies as cash flow hedges.The foreign exchange forward contracts entered into tohedge forecasted merchandise purchases and related costs generally have terms of up to 24 months.The effective portion of the gain or loss on the derivativefinancial instruments is reported as a component of other comprehensive income(loss)and is recognized into net income during the period in which theunderlying transaction impacts the Condensed Consolidated Statements of Operations.Other Derivatives Not Designated as Hedging InstrumentsWe use foreign exchange forward contracts to hedge our market risk exposure associated with foreign currency exchange rate fluctuations for certainintercompany balances denominated in currencies other than the functional currency of the entity with the intercompany balance.The gain or loss on thederivative financial instruments that represent economic hedges,as well as the remeasurement impact of the underlying intercompany balances,is recorded inoperating expenses on the Condensed Consolidated Statements of Operations in the same period and generally offset each other.11Outstanding Notional AmountsWe had foreign exchange forward contracts outstanding in the following notional amounts:($in millions)August 2,2025February 1,2025August 3,2024Derivatives designated as cash flow hedges$527$363$457 Derivatives not designated as hedging instruments422 419 410 Total$949$782$867 Quantitative Disclosures about Derivative Financial InstrumentsThe fair values of foreign exchange forward contracts are as follows:($in millions)August 2,2025February 1,2025August 3,2024Derivatives designated as cash flow hedges:Other current assets$4$20$8 Other long-term assets2 2 Accrued expenses and other current liabilities1 2 Other long-term liabilities 1 Derivatives not designated as hedging instruments:Other current assets3 13 6 Accrued expenses and other current liabilities5 Total derivatives in an asset position$9$33$16 Total derivatives in a liability position$6$3 The majority of the unrealized gains and losses from designated cash flow hedges as of August 2,2025 will be recognized in income within the next 12 monthsat the then-current values,which may differ from the fair values as of August 2,2025 shown above.Our foreign exchange forward contracts are subject to master netting arrangements with each of our counterparties and such arrangements are enforceable inthe event of default or early termination of the contract.We do not elect to offset the fair values of our derivative financial instruments on the CondensedConsolidated Balance Sheets,and as such,the fair values shown above represent gross amounts.The amounts subject to enforceable master nettingarrangements were not material for all periods presented.See Note 5 of Notes to Condensed Consolidated Financial Statements for disclosures on the fair value measurements of our derivative financial instruments.The pre-tax amounts recognized in net income related to derivative instruments are as follows:Location and Amount of GainRecognized in Net Income13 Weeks EndedAugust 2,202513 Weeks EndedAugust 3,2024($in millions)Cost of goods soldand occupancyexpensesOperatingexpensesCost of goods soldand occupancyexpensesOperatingexpensesTotal amount of expense line items presented in the Condensed ConsolidatedStatements of Operations in which the effects of derivatives are recorded$2,189$1,244$2,137$1,290 Gain recognized in net incomeDerivatives designated as cash flow hedges (4)Derivatives not designated as hedging instruments(1)(6)Total gain recognized in net income$(1)$(4)$(6)12Location and Amount of(Gain)LossRecognized in Net Income26 Weeks EndedAugust 2,202526 Weeks EndedAugust 3,2024($in millions)Cost of goods soldand occupancyexpenseOperatingexpensesCost of goods soldand occupancyexpenseOperatingexpensesTotal amount of expense line items presented in the Condensed ConsolidatedStatements of Operations in which the effects of derivatives are recorded$4,204$2,432$4,128$2,482(Gain)loss recognized in net incomeDerivatives designated as cash flow hedges(5)(6)Derivatives not designated as hedging instruments 20 (13)Total(gain)loss recognized in net income$(5)$20$(6)$(13)Note 7.Share RepurchasesShare repurchase activity is as follows:13 Weeks Ended26 Weeks Ended($and shares in millions except average per share cost)August 2,2025August 3,2024August 2,2025August 3,2024Number of shares repurchased(1)3 7 Total cost$82$152$Average per share cost including commissions$23.67$21.41$_(1)Excludes shares withheld to settle employee tax withholding payments related to the vesting of stock units.In February 2019,the Companys Board of Directors(the Board)approved a$1.0 billion share repurchase authorization(the February 2019 repurchaseprogram).The February 2019 repurchase program had$249 million remaining as of August 2,2025.All common stock repurchased is immediately retired.Note 8.Earnings Per ShareWeighted-average number of shares used for earnings per share is as follows:13 Weeks Ended26 Weeks Ended(shares in millions)August 2,2025August 3,2024August 2,2025August 3,2024Weighted-average number of shares-basic373 376 374 375 Common stock equivalents6 7 7 8 Weighted-average number of shares-diluted379 383 381 383 The anti-dilutive shares related to stock options and other stock awards excluded from computations of weighted-average number of shares diluted exclude 2million for each of the 13 weeks ended August 2,2025 and August 3,2024,and 2 million and 3 million for the 26 weeks ended August 2,2025 and August 3,2024,respectively,as their inclusion would have an anti-dilutive effect on earnings per share.13Note 9.Commitments and ContingenciesWe are a party to a variety of contractual agreements under which we may be obligated to indemnify the other party for certain matters.These contractsprimarily relate to our commercial contracts,operating leases,trademarks,intellectual property,financial agreements,and various other agreements.Underthese contracts,we may provide certain routine indemnifications relating to representations and warranties(e.g.,ownership of assets,environmental or taxindemnifications),or personal injury matters.The terms of these indemnifications range in duration and may not be explicitly defined.Generally,the maximumobligation under such indemnifications is not explicitly stated,and as a result,the overall amount of these obligations cannot be reasonably estimated.Historically,we have not made significant payments for these indemnifications.We believe that if we were to incur a loss in any of these matters,the losswould not have a material effect on our Condensed Consolidated Financial Statements taken as a whole.As a multinational company,we are subject to various proceedings,lawsuits,disputes,and claims(Actions)arising in the ordinary course of our business.Many of these Actions raise complex factual,tax,and legal issues and are subject to uncertainties.As of August 2,2025,Actions filed against us includedcommercial,intellectual property,customer,employment,securities,and data privacy claims,including class action lawsuits.The plaintiffs in some Actionsseek unspecified damages or injunctive relief,or both.Actions are in various procedural stages and some are covered in part by insurance.As of August 2,2025,February 1,2025,and August 3,2024,we recorded a liability for an estimated loss if the outcome of an Action is expected to result in a loss that isconsidered probable and reasonably estimable.The liability recorded was not material for any individual Action or in total for all periods presented.Subsequentto August 2,2025,and through the filing date of this Quarterly Report on Form 10-Q,no information has become available that indicates a change is requiredthat would be material to our Condensed Consolidated Financial Statements taken as a whole.We cannot predict with assurance the outcome of Actions brought against us.However,we do not believe that the outcome of any current Action would have amaterial effect on our Condensed Consolidated Financial Statements taken as a whole.Note 10.Segment InformationWe identify our operating segments according to how our business activities are managed and evaluated.As of August 2,2025,our operating segmentsincluded:Old Navy Global,Gap Global,Banana Republic Global,and Athleta Global.Each of our brands serves customer demand through our store andfranchise channel and our online channel,leveraging our omni-channel capabilities that allow customers to shop seamlessly across all of our brands.Additionally,our products,suppliers,customers,methods of distribution,and regulatory environment are similar across our brands.We have determined thateach of our operating segments share similar qualitative and economic characteristics,and therefore the results of our operating segments are aggregated intoone reportable segment as of August 2,2025.We continually monitor and review our segment reporting structure in accordance with authoritative guidance todetermine whether any changes have occurred that would impact our reportable segments.Gap Inc.s chief operating decision maker(CODM)is our President and Chief Executive Officer.The CODM reviews measures of segment profit or loss bycomparing budgeted versus actual and forecasted results for purposes of assessing performance,allocating resources,and making decisions.The measure ofsegment assets is reported on the Condensed Consolidated Balance Sheets in total.The following table presents information for segment profit and significant expenses:13 Weeks Ended26 Weeks Ended($in millions)August 2,2025August 3,2024August 2,2025August 3,2024Net sales$3,725$3,720$7,188$7,108 Cost of goods sold1,725 1,668 3,279 3,189 Occupancy expenses(1)464 469 925 939 Operating expenses(2)1,244 1,290 2,432 2,482 Operating income$292$293$552$498 _(1)Occupancy expenses include lease and other occupancy related cost,depreciation,and amortization related to our store operations,distribution centers,information technology,and certaincorporate functions.(2)Operating expenses primarily include payroll and benefits expenses,advertising expenses,information technology expenses and maintenance costs,and other administrative expenses.See Note 2 of Notes to Condensed Consolidated Financial Statements for disaggregation of revenue by channel and by brand and region.14Note 11.DivestituresAs previously disclosed,on November 7,2022,we signed agreements to transition our Gap China and Gap Taiwan(Gap Greater China)operations to a thirdparty,Baozun Inc.(Baozun),to operate Gap Greater China stores and the in-market website as a franchise partner,subject to regulatory approvals andclosing conditions.On January 31,2023,the Gap China transaction closed with Baozun.Recently,the parties reached a decision to not proceed with thetransition of Gaps operations in Taiwan.The Gap Taiwan operations will continue to operate as usual.Note 12.Supply Chain Finance ProgramOur voluntary supply chain finance(SCF)program provides certain suppliers with the opportunity to sell their receivables due from us to participatingfinancial institutions at the sole discretion of both the suppliers and the financial institutions.We are not a party to the agreements between our suppliers andthe financial institutions and our payment terms are not impacted by whether a supplier participates in the SCF program.The Companys outstanding obligations under the SCF program were$392 million,$387 million,and$412 million as of August 2,2025,February 1,2025,andAugust 3,2024,respectively,and were included in accounts payable on the Condensed Consolidated Balance Sheets.15Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations.OUR BUSINESSWe are a house of iconic brands offering apparel,accessories,and personal care products for men,women,and children under the Old Navy,Gap,BananaRepublic,and Athleta brands.Our products are available to customers both in stores and online,through Company-operated and franchise stores,websites,andthird-party arrangements.We have Company-operated stores in the United States,Canada,Japan,and Taiwan.We also have franchise agreements to operateOld Navy,Gap,Banana Republic,and Athleta throughout Asia,Europe,Latin America,the Middle East,and Africa.Under these agreements,third partiesoperate,or will operate,stores and websites that sell apparel and related products under our brand names.In addition to operating in the specialty,outlet,online,and franchise channels,we use our omni-channel capabilities to bridge the digital world and physical stores.The shopping experience is furtherenhanced by our omni-channel services,including buy online pick-up in store,order-in-store,and ship-from-store,as well as enhanced mobile-enabledexperiences,which allow our customers to shop seamlessly across our brands and channels.Our brands have shared investments in supply chain and inventorymanagement,which allows us to optimize efficiency and responsiveness in our operations.Most of the products sold under our brand names are designed by usand manufactured by independent sources globally.OVERVIEWFinancial results for the second quarter of fiscal 2025 are as follows:Net sales for the second quarter of fiscal 2025 were flat compared with the second quarter of fiscal 2024.Store and franchise sales for the second quarter of fiscal 2025 decreased 1 percent compared with the second quarter of fiscal 2024,and onlinesales for the second quarter of fiscal 2025 increased 3 percent compared with the second quarter of fiscal 2024.Gross profit for the second quarter of fiscal 2025 was$1.54 billion compared with$1.58 billion for the second quarter of fiscal 2024.Grossmargin for the second quarter of fiscal 2025 was 41.2 percent compared with 42.6 percent for the second quarter of fiscal 2024.Operating income for the second quarter of fiscal 2025 was$292 million compared with$293 million for the second quarter of fiscal 2024.The effective income tax rate for the second quarter of fiscal 2025 was 27.0 percent compared with 30.4 percent for the second quarter of fiscal2024.Net income for the second quarter of fiscal 2025 was$216 million compared with$206 million for the second quarter of fiscal 2024.Diluted earnings per share was$0.57 for the second quarter of fiscal 2025 compared with$0.54 for the second quarter of fiscal 2024.Merchandise inventory as of the second quarter of fiscal 2025 increased 9 percent compared with the second quarter of fiscal 2024.We remain focused on the following strategic priorities while we continue to transform:maintaining and building upon financial and operational rigor,through an optimized cost structure and disciplined inventory management;reinvigorating our brands to drive relevance and an engaging omni-channel experience;strengthening and evolving our operating platform with a digital-first mindset to drive scale and efficiency;energizing our culture by attracting and retaining strong talent;andcontinuing to integrate sustainability into business practices to support long-term growth.Macroeconomic factors,including uncertainty surrounding global geopolitical instability,inflationary pressures,foreign currency fluctuations,and changes ininterest rates,duties,tariffs,tax laws,and other restrictions as a result of government fiscal,monetary,trade,and tax policies,continue to create a complex andchallenging retail environment.The United States has recently enacted significant changes to its trade policy and imposed substantial tariffs on imported goodsfrom a number of countries.Uncertainty surrounding changes in U.S.trade policy and tariffs is contributing to overall macroeconomic volatility.The Companycontinues to monitor the expected outcome of the trade policy which has increased the cost of our merchandise and therefore may negatively impact our grossmargins in future quarters.The Company also continues to evaluate potential mitigating actions including adjustments to our sourcing,manufacturing,assortments,and pricing.16The macroeconomic environment has had and may continue to have an impact on consumer behavior,and we anticipate continued uncertainty related to themacroeconomic environment during fiscal 2025.We will continue to monitor macroeconomic conditions and evaluate potential mitigating actions.Foradditional information on risks related to macroeconomic conditions and our supply chain,see the section entitled“Risk FactorsRisks Related to OurBusiness OperationsTrade matters,including the impact of current or potential tariffs by the United States,may disrupt our supply chain and adversely affectour business,financial condition,and results of operations”in Part II,Item 1A,Risk Factors,of this Form 10-Q,and the section entitled“Risk FactorsRisksRelated to Macroeconomic ConditionsGlobal economic conditions have and could continue to adversely affect our business,financial condition,and resultsof operations”in Part II,Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended May 3,2025.RESULTS OF OPERATIONSNet SalesSee Note 2 of Notes to Condensed Consolidated Financial Statements included in Part I,Item 1 of this Form 10-Q,for net sales disaggregation.Comparable Sales(Comp Sales)Comp Sales include the results of Company-operated stores and sales through our online channel.The calculation of Comp Sales excludes the results of ourfranchise and licensing business.A store is included in the Comp Sales calculations when it has been open and operated by the Company for at least one year and the selling square footage hasnot changed by 15 percent or more within the past year.A store is included in the Comp Sales calculations on the first day it has comparable prior year sales.Stores in which the selling square footage has changed by 15 percent or more as a result of a remodel,expansion,or reduction are excluded from the CompSales calculations until the first day they have comparable prior year sales.A store is considered non-comparable(Non-comp)when it has been open and operated by the Company for less than one year or has changed its sellingsquare footage by 15 percent or more within the past year.A store is considered Closed if it is temporarily closed for three or more full consecutive days or it is permanently closed.When a temporarily closed storereopens,the store will be placed in the Comp/Non-comp status it was in prior to its closure.If a store was in Closed status for three or more days in the prioryear,the store will be in Non-comp status for the same days the following year.Current year foreign exchange rates are applied to both current year and prior year Comp Sales to achieve a consistent basis for comparison.The percentage change in Comp Sales by global brand and for The Gap,Inc.,as compared with the preceding year,is as follows:13 Weeks Ended26 Weeks Ended August 2,2025August 3,2024August 2,2025August 3,2024Old Navy Global2%5%2%4%Gap Global4%3%4%3nana Republic Global4%2%1%Athleta Global(9)%(4)%(9)%The Gap,Inc.1%3%2%3Store count,net openings/closings,and square footage for our stores are as follows:February 1,202526 Weeks EndedAugust 2,2025August 2,2025 Number ofStore LocationsNet Number of StoresOpened/(Closed)Number ofStore LocationsSquare Footage(in millions)Old Navy North America1,249(9)1,240 19.6 Gap North America453 453 4.8 Gap Asia122 3 125 1.1 Banana Republic North America380(9)371 3.1 Banana Republic Asia42 42 0.1 Athleta North America260(5)255 1.0 Company-operated stores total2,506(20)2,486 29.7 February 3,202426 Weeks EndedAugust 3,2024August 3,2024 Number ofStore LocationsNet Number of StoresOpened/(Closed)Number ofStore LocationsSquare Footage(in millions)Old Navy North America1,243 5 1,248 19.8 Gap North America472(12)460 4.9 Gap Asia134(7)127 1.1 Banana Republic North America400(7)393 3.3 Banana Republic Asia43(1)42 0.2 Athleta North America270 1 271 1.1 Company-operated stores total2,562(21)2,541 30.4 Outlet and factory stores are reflected in each of the respective brands.As of August 2,2025 and August 3,2024,the Companys franchise partners operated approximately 1,000 franchise stores.18Net SalesOur net sales increased$5 million during the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024,driven primarily by an increase inComp Sales,offset by incremental income in the second quarter of fiscal 2024 related to the revenue sharing arrangement from our credit card agreement.Ournet sales increased$80 million,or 1 percent,during the first half of fiscal 2025 compared with the first half of fiscal 2024,driven primarily by an increase inonline sales.Cost of Goods Sold and Occupancy Expenses 13 Weeks Ended26 Weeks Ended($in millions)August 2,2025August 3,2024August 2,2025August 3,2024Cost of goods sold and occupancy expenses$2,189$2,137$4,204$4,128 Gross profit$1,536$1,583$2,984$2,980 Cost of goods sold and occupancy expenses as a percentage of net sales58.8W.4X.5X.1%Gross margin41.2B.6A.5A.9%Cost of goods sold and occupancy expenses increased 1.4 percentage points as a percentage of net sales in the second quarter of fiscal 2025 compared with thesecond quarter of fiscal 2024.Cost of goods sold increased 1.5 percentage points as a percentage of net sales in the second quarter of fiscal 2025 compared with the secondquarter of fiscal 2024,primarily driven by incremental income during the second quarter of fiscal 2024 related to the revenue sharing arrangementfrom our credit card agreement.The estimated impact of tariff increases was minimal for the second quarter of fiscal 2025.Occupancy expenses decreased 0.1 percentage points as a percentage of net sales in the second quarter of fiscal 2025 compared with the secondquarter of fiscal 2024,primarily driven by an increase in online sales without a corresponding increase in occupancy expenses.Cost of goods sold and occupancy expenses increased 0.4 percentage points as a percentage of net sales in the first half of fiscal 2025 compared with the firsthalf of fiscal 2024.Cost of goods sold increased 0.7 percentage points as a percentage of net sales in the first half of fiscal 2025 compared with the first half of fiscal2024,primarily due to higher promotional activity at Athleta.Occupancy expenses decreased 0.3 percentage points as a percentage of net sales in the first half of fiscal 2025 compared with the first half offiscal 2024,primarily driven by an increase in online sales without a corresponding increase in occupancy expenses.Uncertainty surrounding changes in U.S.trade policy and tariffs is contributing to overall macroeconomic volatility.The Company continues to monitor theexpected outcome of the trade policy which will increase cost of goods sold and therefore may negatively impact our gross margins in future quarters.19Operating Expenses 13 Weeks Ended26 Weeks Ended($in millions)August 2,2025August 3,2024August 2,2025August 3,2024Operating expenses$1,244$1,290$2,432$2,482 Operating expenses as a percentage of net sales33.44.73.84.9%Operating margin7.8%7.9%7.7%7.0%Operating expenses decreased$46 million,or 1.3 percentage points as a percentage of net sales during the second quarter of fiscal 2025 compared with thesecond quarter of fiscal 2024,and decreased$50 million,or 1.1 percentage points as a percentage of net sales during the first half of fiscal 2025 compared withthe first half of fiscal 2024,primarily due to a decrease in performance-based compensation.Interest Expense 13 Weeks Ended26 Weeks Ended($in millions)August 2,2025August 3,2024August 2,2025August 3,2024Interest expense$23$24$46$45 Interest expense primarily includes interest on outstanding borrowings and obligations mainly related to our Senior Notes and tax-related interest expense.Interest Income 13 Weeks Ended26 Weeks Ended($in millions)August 2,2025August 3,2024August 2,2025August 3,2024Interest income$(27)$(27)$(53)$(51)Interest income was flat during the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 and increased slightly during the first half offiscal 2025 compared with the first half of fiscal 2024,primarily due to higher cash balances,partially offset by lower interest rates.Income Taxes 13 Weeks Ended26 Weeks Ended($in millions)August 2,2025August 3,2024August 2,2025August 3,2024Income tax expense$80$90$150$140 Effective tax rate27.00.4&.8.8%The decrease in the effective tax rate for the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 is primarily due to prior yearincreases to certain income tax reserves,as well as changes in the amount and mix of jurisdictional earnings.The decrease in the effective tax rate for the first half of fiscal 2025 compared with the first half of fiscal 2024 is primarily due to prior year increases to certainincome tax reserves and changes in the amount and mix of jurisdictional earnings,partially offset by less favorable impacts of stock-based compensation.On July 4,2025,the OBBBA was enacted in the United States.The OBBBA changes existing U.S.income tax law and includes numerous provisions thataffect corporations,such as permanently extending certain expiring provisions from the Tax Cuts and Jobs Act,modification of the international tax framework,and restoration of favorable tax treatment for certain business provisions such as bonus depreciation and Section 174 research and experimentation expensing.The legislation has multiple effective dates,with certain provisions effective in fiscal 2025 and others implemented through fiscal 2027.The Company included the impact of the OBBBA tax legislation in the second quarter of fiscal 2025,the period of enactment,and the impact was not materialto the Condensed Consolidated Financial Statements.20LIQUIDITY AND CAPITAL RESOURCESIn addition to our cash flows from operating activities,our primary sources of liquidity include cash and cash equivalents,short-term investments,and our ABLFacility.As of August 2,2025,we had cash and cash equivalents of$2.19 billion and short-term investments of$238 million.We hold our cash,cashequivalents,and short-term investments across a diversified set of reputable financial institutions and monitor the credit standing of those financial institutions.In addition,we are also able to supplement near-term liquidity,if necessary,with our ABL Facility or other available market instruments.There were noborrowings under the ABL Facility as of August 2,2025.See Note 4 of Notes to Condensed Consolidated Financial Statements included in Part I,Item 1 of thisForm 10-Q,for disclosures on our debt and credit facilities.Our largest source of operating cash flows is cash collections from the sale of our merchandise.Our primary uses of cash include merchandise inventorypurchases,lease and occupancy costs,personnel-related expenses,purchases of property and equipment,shipping costs,and payment of taxes.In addition,wemay have dividend payments and share repurchases.The seasonality of our operations,in addition to the impact of macroeconomic factors,may lead tosignificant fluctuations in certain asset and liability accounts as well as cash inflows and outflows between fiscal year-end and subsequent interim periods.These macroeconomic factors include uncertainty surrounding global geopolitical instability,inflationary pressures,foreign currency fluctuations,and changesin interest rates,duties,tariffs,tax laws,and other restrictions as a result of government fiscal,monetary,trade,and tax policies.We believe our existing balances of cash,cash equivalents,and short-term investments,along with our cash flows from operations,and instruments mentionedabove,provide sufficient funds for our business operations as well as capital expenditures,dividends,share repurchases,and other liquidity requirementsassociated with our business operations over the next 12 months and beyond.Cash Flows from Operating ActivitiesNet cash provided by operating activities decreased$271 million during the first half of fiscal 2025 compared with the first half of fiscal 2024,primarily due tothe following:a decrease of$156 million related to accrued expenses and other current liabilities primarily due to higher payments for fiscal 2024 performance-based compensation made during the first half of fiscal 2025 as well as a decrease in the current period performance-based compensation;anda decrease of$96 million related to merchandise inventory primarily due to timing of receipts and higher inventory cost during the first half offiscal 2025.Cash Flows from Investing ActivitiesNet cash used for investing activities decreased$261 million during the first half of fiscal 2025 compared with the first half of fiscal 2024,primarily due to$260 million fewer net purchases of short-term investments.Cash Flows from Financing ActivitiesNet cash used for financing activities increased$168 million during the first half of fiscal 2025 compared with the first half of fiscal 2024,primarily due to$152 million in repurchases of common stock during the first half of fiscal 2025 compared with no repurchases during the first half of fiscal 2024.21Free Cash FlowFree cash flow is a non-GAAP financial measure.We believe free cash flow is an important metric because it represents a measure of how much cash acompany has available for discretionary and non-discretionary items after the deduction of capital expenditures.We require regular capital expendituresincluding technology investments as well as building and maintaining our stores and distribution centers.We use this metric internally,as we believe oursustained ability to generate free cash flow is an important driver of value creation.However,this non-GAAP financial measure is not intended to supersede orreplace our GAAP results.The following table reconciles free cash flow,a non-GAAP financial measure,from a GAAP financial measure.26 Weeks Ended($in millions)August 2,2025August 3,2024Net cash provided by operating activities$308$579 Less:Purchases of property and equipment(181)(182)Free cash flow$127$397 Dividend PolicyIn determining whether and at what level to declare a dividend,our Board considers a number of factors including sustainability,operating performance,liquidity,and market conditions.We paid a dividend of$0.165 per share during the second quarter of fiscal 2025.In August 2025,the Board authorized a dividend of$0.165 per share for thethird quarter of fiscal 2025.Share RepurchasesCertain information about the Companys share repurchases is set forth in Note 7 of Notes to Condensed Consolidated Financial Statements included in Part I,Item 1 of this Form 10-Q.Summary Disclosures about Contractual Cash Obligations and Commercial CommitmentsThere have been no material changes to our contractual obligations and commercial commitments as disclosed in our Annual Report on Form 10-K as ofFebruary 1,2025,other than those which occur in the normal course of business.See Note 9 of Notes to Condensed Consolidated Financial Statementsincluded in Part I,Item 1 of this Form 10-Q,for disclosures on commitments and contingencies.Critical Accounting Policies and EstimatesThere have been no significant changes to our critical accounting policies and estimates as discussed in our Annual Report on Form 10-K for the fiscal yearended February 1,2025.See Note 1 of Notes to Condensed Consolidated Financial Statements included in Part I,Item 1 of this Form 10-Q,for disclosures onaccounting policies.Item 3.Quantitative and Qualitative Disclosures About Market Risk.Our market risk profile as of February 1,2025 is disclosed in our Annual Report on Form 10-K and has not significantly changed.See Notes 4,5,and 6 ofNotes to Condensed Consolidated Financial Statements included in Part I,Item 1 of this Form 10-Q,for disclosures on our debt and credit facilities,investments,and derivative financial instruments.Item 4.Controls and Procedures.Evaluation of Disclosure Controls and ProceduresWe carried out an evaluation,under the supervision and with the participation of management,including the Chief Executive Officer and Chief FinancialOfficer,of the effectiveness of the design and operation of our disclosure controls and procedures(as defined in Rule 13a-15(e)under the Securities ExchangeAct of 1934,as amended)as of the end of the period covered by this Quarterly Report on Form 10-Q.Based upon that evaluation,the Chief Executive Officerand Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective.Changes in Internal Control over Financial ReportingThere was no change in the Companys internal control over financial reporting that occurred during the Companys second quarter of fiscal 2025 that hasmaterially affected,or is reasonably likely to materially affect,the Companys internal control over financial reporting.22PART II OTHER INFORMATIONItem 1.Legal Proceedings.As a multinational company,we are subject to various proceedings,lawsuits,disputes,and claims(Actions)arising in the ordinary course of our business.Many of these Actions raise complex factual,tax,and legal issues and are subject to uncertainties.Actions filed against us from time to time includecommercial,intellectual property,customer,employment,securities,and data privacy claims,including class action lawsuits.The plaintiffs in some Actionsseek unspecified damages or injunctive relief,or both.Actions are in various procedural stages,and some are covered in part by insurance.We cannot predict with assurance the outcome of Actions brought against us.Accordingly,developments,settlements,or resolutions may occur and impactoperations in the quarter of such development,settlement,or resolution.However,we do not believe that the outcome of any current Action would have amaterial effect on our financial results.Item 1A.Risk Factors.The following risk factor appearing in Part II,Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended May 3,2025,has been updated.Risks Related to Our Business OperationsTrade matters,including the impact of current or potential tariffs by the United States,may disrupt our supply chain and adversely affect our business,financial condition,and results of operations.Our operations are subject to complex trade and customs laws,regulations,and tax requirements.The countries in which our products are manufactured orimported,or may be manufactured or imported in the future,may from time to time impose duties,tariffs,or other restrictions on our imports or adverselychange existing restrictions.The United States has recently enacted significant changes to its trade policy and imposed or proposed imposing substantial tariffs on imported goods from anumber of countries,which have increased our costs and could significantly impact our future operating margins.Following recent trade announcements andnegotiations,unless otherwise exempted or subject to a different rate,all imports into the United States are currently subject to a reciprocal tariff of at least 10percent,and many of our sourcing countries are currently subject to significantly higher country-specific reciprocal tariffs,including Vietnam(currently 20percent)and Indonesia(currently 19 percent).Imports to the United States from China are currently subject to an additional 20 percent special tariff while tradenegotiations with China continue.The United States has also imposed a 40 percent tariff on goods deemed to have been transshipped to avoid applicablereciprocal tariffs.In fiscal 2024,approximately 27 percent and approximately 19 percent of our merchandise,by dollar value,was purchased from factories in Vietnam andIndonesia,respectively.In fiscal 2024,less than 10 percent of our merchandise,by dollar value,was purchased from factories in China.There is currently significant uncertainty about the future relationship between the United States and many other countries with respect to tariffs and tradepolicies.The situation regarding U.S.tariffs and trade policies has been fluid and may continue to change.For example,it is possible that the United Statesmay take additional trade actions with respect to goods deemed to have been transshipped or raw materials purchased from other countries,including China,by our suppliers.The risk of future changes may be particularly acute should trade tensions between the United States and other countries worsen,which couldresult in,among other things,increased tariffs and other trade restrictions,increased product costs,disruptions in the availability of goods,or a breakdown ofinternational supply chains.Through enterprise risk management,we continue to evaluate the impact of current and potential tariffs on our supply chain,costs,sales,and profitability,aswell as our strategies to mitigate negative impacts.We can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or othertrade actions will be successful in whole or in part.To the extent that our supply chain,costs,sales,or profitability are negatively impacted by these tariffs orother trade actions,or if there is an escalation of tariffs or other trade restrictions,our business,financial condition and results of operations may be adverselyaffected.Our sourcing operations could also be adversely affected by geopolitical and financial instability in our sourcing countries,as well as U.S.or foreign laborstrikes,work stoppages,boycotts,or port congestion,resulting in the disruption of trade from our sourcing countries,significant fluctuations in the value of theU.S.dollar against foreign currencies,restrictions on the transfer of funds,or other trade disruptions.Disruptions to our sourcing operations in our sourcingcountries could increase the cost or reduce the supply of apparel available to us and adversely affect our business,financial condition and results of operations.There have been no other material changes in our risk factors from those disclosed in Part I,Item 1A of our Annual Report on Form 10-K for the fiscal yearended February 1,2025,and Part II,Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended May 3,2025.23Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.The following table presents information with respect to purchases of common stock of the Company made for the 13 weeks ended August 2,2025 by theCompany or any affiliated purchaser,as defined by Rule 10b-18(a)(3)under the Securities Exchange Act of 1934,as amended:Total Numberof SharesPurchased(1)AveragePrice PaidPer ShareIncludingCommissionsTotal Numberof SharesPurchased asPart of PubliclyAnnouncedPlans orProgramsMaximum Number(or approximatedollar amount)ofShares that MayYet be PurchasedUnder the Plans orPrograms(2)Month#1(May 4-May 31)1,122,800$27.82 1,122,800$300 millionMonth#2(June 1-July 5)1,283,791$21.64 1,283,791$272 millionMonth#3(July 6-August 2)1,027,900$21.67 1,027,900$249 millionTotal3,434,491$23.67 3,434,491 _(1)Excludes shares withheld to settle employee tax withholding payments related to the vesting of stock units.(2)In February 2019,the Board approved a$1 billion share repurchase authorization,which has no expiration date.Item 5.Other Information.During the 13 weeks ended August 2,2025,none of our directors or Section 16 officers adopted,modified,or terminated a Rule 10b5-1 trading arrangementor non-Rule 10b5-1 trading arrangement,as those terms are defined in Item 408(a)of Regulation S-K,except as follows:On July 11,2025,Julie Gruber,Chief Legal and Compliance Officer and Corporate Secretary,adopted a trading plan intended to satisfy the affirmative defenseof Rule 10b5-1(c)to sell up to 537,160 shares of Gap Imon stock(including 379,788 shares pursuant to unexercised stock options granted from 2016 to2022).Unless otherwise terminated pursuant to its terms,the plan will terminate on July 10,2026,or when all shares under the plan are sold.On June 13,2025,Mark Breitbard,President and CEO of Gap brand,adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c)to sellup to 1,251,398 shares of Gap Imon stock(including 947,863 shares pursuant to unexercised stock options granted from 2017 to 2022).Unlessotherwise terminated pursuant to its terms,the plan will terminate on December 31,2026,or when all shares under the plan are sold.On June 12,2025,Katrina OConnell,Chief Financial Officer,adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c)to sell up to442,529 shares of Gap Imon stock(including 139,801 shares pursuant to unexercised stock options granted from 2016 to 2022).Unless otherwiseterminated pursuant to its terms,the plan will terminate on June 12,2026,or when all shares under the plan are sold.On June 6,2025,Sarah(Sally)Gilligan,Chief Supply Chain and Transformation Officer,adopted a trading plan intended to satisfy the affirmative defense ofRule 10b5-1(c)to sell up to 303,882 shares of Gap Imon stock(including 174,595 shares pursuant to unexercised stock options granted from 2016 to2022).Unless otherwise terminated pursuant to its terms,the plan will terminate on April 1,2026,or when all shares under the plan are sold.24Item 6.Exhibits.Incorporated by ReferenceExhibit No.Exhibit DescriptionFormFile No.ExhibitFiling DateFiled/FurnishedHerewith3.1Restated Certificate of Incorporation10-Q1-75623.1August 30,20243.2Amended and Restated Bylaws(effective August 15,2022)10-Q1-75623.3August 26,202210.1The Gap,Inc.Senior Executive Severance Plan(effective August 12,2025)X10.22025 Form of Deferred Restricted Stock Unit Award Agreement underthe 2016 Long-Term Incentive PlanX10.3Deferral Election Form for Deferred Restricted Stock Units under the2016 Long-Term Incentive PlanX10.42025 Form of Deferred Performance Share Award Agreement underthe 2016 Long-Term Incentive PlanX10.5Deferral Election Form for Deferred Performance Shares under the2016 Long-Term Incentive PlanX31.1Rule 13a-14(a)/15d-14(a)Certification of the Chief Executive Officerof The Gap,Inc.(Section 302 of the Sarbanes-Oxley Act of 2002)X31.2Rule 13a-14(a)/15d-14(a)Certification of the Chief Financial Officerof The Gap,Inc.(Section 302 of the Sarbanes-Oxley Act of 2002)X32.1Certification of the Chief Executive Officer of The Gap,Inc.pursuantto 18 U.S.C.Section 1350,as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002X32.2Certification of the Chief Financial Officer of The Gap,Inc.pursuantto 18 U.S.C.Section 1350,as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002X101The following materials from The Gap,Inc.s Quarterly Report onForm 10-Q for the quarter ended August 2,2025,formatted in InlineXBRL(eXtensible Business Reporting Language):(i)the CondensedConsolidated Balance Sheets,(ii)the Condensed ConsolidatedStatements of Operations,(iii)the Condensed Consolidated Statementsof Comprehensive Income,(iv)the Condensed ConsolidatedStatements of Stockholders Equity;(v)the Condensed ConsolidatedStatements of Cash Flows;and(vi)Notes to Condensed ConsolidatedFinancial StatementsX104Cover Page Interactive Data File(formatted in Inline XBRL andcontained in Exhibit 101)X_ Indicates management contract or compensatory plan or arrangement.25SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersignedthereunto duly authorized.THE GAP,INC.Date:August 29,2025By/s/Richard DicksonRichard DicksonPresident and Chief Executive Officer(Principal Executive Officer)Date:August 29,2025By/s/Katrina OConnellKatrina OConnellExecutive Vice President and Chief Financial Officer(Principal Financial and Accounting Officer)26Exhibit 10.1THE GAP,INC.SENIOR EXECUTIVE SEVERANCE PLAN(As amended and restated effective August 12,2025)TABLE OF CONTENTSPage1.Events That Trigger Benefits12.Plan Eligibility13.Benefits Ineligibility2(a)Ineligible Classification2(b)Other Ineligible Terminations3(c)Failure to Perform Satisfactorily3(d)Successor Employment and Other Professional Relationships4(e)Other Professional Relationships5(f)Changed Decisions54.Severance Benefits5(a)Termination not within the Change in Control Period5(b)Termination within the Change in Control Period8(c)Definitions105.Agreement And Release116.Clawback117.Other Plan Provisions11(a)Death11(b)Withholding for Taxes and Debt12(c)Level of Benefits-Eligible Expatriate Executive12(d)Internal Revenue Code Section 409A12(e)Compliance with Code Section 280G13(f)Sole Source of Benefits14(g)Failure to Adhere to Commitments14(h)Reemployment by the Company14(i)Employment At-Will14(j)Right of Setoff14(k)Source of Payments15(l)Expenses15(m)Plan Overpayments15(n)Plan Sponsor and Administrator15(o)Named Fiduciary16(p)Allocation and Delegation of Responsibilities16(q)No Individual Liability17(r)Amendment of Plan178.Claims and Review Procedures17(a)Claims17(b)Review of Denied Claims18-i-TABLE OF CONTENTS(continued)Page(c)Litigation of Claims Denied on Review199.Your Rights Under ERISA19(a)Receive Information About Your Plan and Benefits19(b)Enforce Your Rights20(c)Assistance with Your Questions20-ii-THE GAP,INC.SENIOR EXECUTIVE SEVERANCE PLANThe Gap,Inc.established The Gap,Inc.Senior Executive Severance Plan(the“Plan”),effective July 1,2024,to provideseverance benefits for certain eligible U.S.executives whose employment is terminated by The Gap,Inc.and its subsidiaries(collectively,the“Company”).The Plan was amended and restated effective May 12,2025,and again effective August 12,2025.The Plan provides for cash payments,certain other benefits and outplacement assistance.The Plan will remain in effect through June30,2029,unless the Company adopts a written amendment extending the term of the Plan.This document constitutes both the Plans formal plan document and summary plan description.The Plan is intended to be a“top hat”welfare benefit plan within the meaning of section 3(1)of the Employee Retirement Income Security Act of 1974,asamended(“ERISA”),29 U.S.C.1002(1),and 29 C.F.R.2520.104-24.Your ERISA rights are described at the end of thedocument.This document is provided in accordance with ERISA.It should be kept for future reference.1.Events That Trigger BenefitsThis Plan provides severance benefits for certain executives whose employment with the Company is terminated by theCompany for reasons other than“For Cause.”An executive only will be entitled to receive Plan benefits if the Plan Administratordetermines,in its sole discretion that the executive is an Eligible Executive or Eligible Expatriate Executive,as defined in Section 2,is not ineligible under Section 3,and has otherwise satisfied all Plan requirements.2.Plan EligibilityOnly Eligible Executives and Eligible Expatriate Executives are participants in the Plan and eligible for Plan benefits.An“Eligible Executive”is an executive who is provided and executes a participation agreement in the form attached hereto as ExhibitA and the Plan Administrator determines in its sole discretion(i)had the executives employment terminated by the Company otherthan“For Cause”;(ii)is regularly employed by the Company in the United States,on the Companys United States payroll;(iii)wasclassified by the Company as being a full-time executive employed in a grade classification of 14 or 15 at the time of termination;and(iv)is not excluded from participation under Section 3.An“Eligible Expatriate Executive”is an Expatriate Executive who thePlan Administrator determines in its sole discretion is eligible to participate in the Plan.An Expatriate Executive is an executive whothe Plan Administrator determines in its sole discretion(i)has accepted a short term assignment with the Company outside of theU.S.;(ii)had the executives employment terminated by the Company other than for“For Cause”;(iii)was classified by theCompany as being a full-time executive employed in a grade classification of 14 or 15 at the time of termination;and(iv)is notexcluded from participation under Section 3.“For Cause”means that the Company has determined in good faith that the executive was terminated for any of thefollowing reasons:(i)indictment,conviction or admission of any crimes involving theft,fraud,or moral turpitude;(ii)engaging ingross neglect of duties including,but not limited to,willfully failing or refusing to implement or follow direction of theCompany;or(iii)breach of the Companys policies and procedures,including,but not limited to,the Code of Business Conduct,Securities Law Compliance Manual,or any other Company policy or agreement between the Company and the executive,providedthat where applicable,the Company shall provide reasonable notice of any such breach and opportunity to remediate.If an executiveis terminated for any reason other than Cause,but at a time when the Company had Cause to terminate the executive(or would havehad Cause if it knew all relevant facts),the termination shall be treated as having been for Cause.3.Benefits Ineligibility or Reduction(a)Ineligible ClassificationAn executive will not be an Eligible Executive or Eligible Expatriate Executive(and thus,will not be eligible for the Plan)ifthe Plan Administrator determines in its sole discretion that the executive is classified by the Company as being in one or more of thefollowing ineligible categories when notified of the executives termination without For Cause:(1)Part-Time Employees,i.e.,persons whom the Company classifies either as(i)non-exempt employees who areregularly scheduled to work less than 40 hours per week;or(ii)exempt employees who regularly work less than a 75%schedule.(2)Project Employees,i.e.,persons employed to work on discrete projects,except to the extent the Company,bywritten notice,elects to extend Plan participation to the individual.(3)Independent Contractors,i.e.,persons who have been classified by the Company as an independentcontractor for purposes of Federal income taxes,even if it is subsequently determined that the person fails to qualify as anindependent contractor for any or all purposes under applicable Federal,state,local or foreign law or regulation.If a person isdetermined to be an Independent Contractor in accordance with the preceding sentence,a subsequent determination by the Company,or any governmental agency or court that the individual was instead a common law employee of the Company at the time of thepersons termination without For Cause will not have a retroactive effect for purposes of eligibility to participate in the Plan.(4)Contractors Employees,i.e.,persons who(i)are employed by an entity other than the Company(includingtemporary employment)for payroll and compensatory purposes,and(ii)pursuant to a contractual agreement between such entityand the Company,provides services to the Company.If a person is determined to be a Contractors Employee in accordance with thepreceding sentence,a subsequent determination by the Company or any governmental agency or court that the individual wasinstead a common law employee of the Company at the time of the persons International Assignment Termination or PositionElimination will not have a retroactive effect for purposes of eligibility to participate in the Plan.(5)Leased Employees,i.e.,persons who are the Companys leased employees,within the meaning of Section414(n)of the Internal Revenue Code of 1986,as amended(the“Code”).2(6)Persons Waiving Participation,i.e.,persons who agree verbally or in writing to such non-participant status,regardless of when such persons agreed to non-participant status.(7)Persons on Personal Leaves of Absence,i.e.,persons who are absent from work on personal leaves ofabsence,except to the extent eligibility is required by applicable law.(8)Individuals With Written Employment Agreements Providing For Severance Benefits,unless the PlanAdministrator or the Compensation and Management Development Committee of the Board of Directors of the Company,in its solediscretion,extends,in whole or in part,Plan benefits to that individual in writing,subject to any conditions imposed by the PlanAdministrator in its sole discretion.If an individual receives payments or benefits under the Plan in lieu of the rights under suchagreement,to the extent the rights under such agreement are not exempt from Section 409A of the Code(“Section 409A”),thennotwithstanding anything set forth in the Plan,payments and benefits paid under the Plan shall be paid at the same and in the sameform as under such agreement to the extent required to comply with Section 409A.(9)Temporary Employees,i.e.,persons whom the Company classifies as temporary employees,regardless of howlong they have held that status,or employees hired for a specified duration.(10)Seasonal Employees,i.e.,persons whom the Company classifies as seasonal employees,regardless of howlong they have held that status.(b)Other Ineligible TerminationsEven if an otherwise Eligible Executive or Eligible Expatriate Executive is on notice of an impending termination other thanFor Cause,the executive will not be eligible for benefits under this Plan if the Plan Administrator determines,in its sole discretion,that the executives active employment was terminated by:(1)resignation(even if the executive felt compelled to resign);(2)retirement;(3)death;(4)discharge“For Cause;”or(5)disability.(c)Failure to Perform SatisfactorilyAn otherwise Eligible Executive or Eligible Expatriate Executive will not be eligible for benefits under this Plan if theCompany determines,in its sole discretion,that the executive did3not perform the executives job satisfactorily until the date the executive actually was terminated by the Company.(d)Successor EmploymentAn Eligible Executive or Eligible Expatriate Executive shall be ineligible for Plan participation if the Plan Administratordetermines that the Eligible Executive or Eligible Expatriate Executive falls into any of the ineligibility categories in subsections(1)and(2)below at any point between the time the Eligible Executive or Eligible Expatriate Executive is notified of the individualstermination of employment and the commencement of the Severance Benefits Period(as defined in Section 4).Likewise,an EligibleExecutive or Eligible Expatriate Executive shall become ineligible for,and shall permanently cease receiving,Plan benefits if thePlan Administrator determines that,at any point during the Severance Benefits Period,the Eligible Executive or Eligible ExpatriateExecutive falls into one of the ineligibility categories in subsections(1)and(2)below.If an Eligible Executive or Eligible ExpatriateExecutive becomes ineligible under subsection(2)below,in addition to other repayment obligations under the Plan,the EligibleExecutive or Eligible Expatriate Executive will be required to repay the monetary Plan benefits that the Eligible Executive orEligible Expatriate Executive already has received,as set forth under such section.(1)Individuals Who Have Received A Comparable Job Offer With the Company or a Successor Employer,i.e.,individuals whom have been offered a“Comparable Job”with the Company or any“Successor Employer”,whether the executiveaccepts that job or not,unless the Plan Administrator determines,in its sole discretion,that the individual should nonetheless receivePlan benefits.A“Comparable Job”for an Eligible Executive is a job that(i)has an Annual Base Salary rate(as defined in Section 4(c)that is at least equal to the executives Annual Base Salary rate on the date the executive was notified of the executives termination;(ii)is either(x)in a reasonably related functional area to the position the executive held when notified of the executives termination,or(y)has responsibilities reasonably related to those of the position the executive held when notified of the executives termination;and(iii)is based at a location that is within a reasonable commuting distance of the location at which the executive was based on thedate the executive originally was notified of the executives termination.A“Comparable Job”for an Eligible Expatriate Executiveis a job that(i)complies with the requirements of clause(i)of the foregoing sentence;(ii)is either(x)in a reasonably relatedfunctional area to the position the executive held when notified of the executives termination or to the position the executive heldimmediately prior to the date the executive accepted the short term assignment with the Company outside the U.S.,or(y)hasresponsibilities reasonably related to those of the position the executive held when notified of the executives termination or theposition the executive held immediately prior to the date the executive accepted the short term assignment with the Company outsidethe U.S.;and(iii)is based at a location that is within a reasonable commuting distance of the location at which the executive wasbased immediately prior to the date the executive accepted the short term assignment with the Company outside of the U.S.A“Successor Employer”is(i)any affiliate of the Company;(ii)any entity that assumes operations or functions formerlycarried out by the Company,including an entity to whom the4Companys operations or any portion of its operations is outsourced or sold;(iii)any entity making the job offer at the request of theCompany;or(iv)any acquiring or resulting company in connection with a sale,spin-off,merger or other corporate reorganization.(2)Individuals Who Fail To Provide Requested Information.Executives who fail to provide all documentation and otherinformation requested by the Plan Administrator(for example,notification upon acceptance of new employment,or proof as towhether and where they are working,how much they have earned from working,etc.)within the time and in the form requested bythe Plan Administrator shall thereafter be ineligible for any further Plan benefits and,where the obligation was to inform theCompany upon acceptance of new work or where false or misleading information was provided,must repay all Plan benefits inexcess of$1,000.(e)Other Professional RelationshipsAn Eligible Executive or Eligible Expatriate Executive who enters into an employment or other professional relationshipwith any entity or entities shall not become ineligible to participate in the Plan,but shall have the payments under Section 4(a)of thePlan reduced by the amount of compensation(including,but not limited to,base salary,wages,consulting fees,commissions,bonuses,severance,equity/phantom equity and other forms of compensation)the individual receives(as received)from such entityor entities during the Severance Benefits Period or for services rendered during the Severance Benefits Period,in a method to bedetermined solely by the Plan Administrator and subject to the requirements of Section 409A.(f)Changed DecisionsThe Company has the right to cancel or reschedule an executives termination before it actually terminates the executivesemployment.An executive will not be eligible for any benefits under this Plan if the executives termination is canceled or if theexecutive resigns before the executives scheduled(or rescheduled)employment termination date.The date the Company actuallyterminates an executive is referred to as the“Termination Date.”4.Severance BenefitsAn Eligible Executive or Eligible Expatriate Executive who satisfies the conditions of this Plan(each a“Participant”)shallbe eligible to receive the severance benefits as set forth below in either subsection(a)or(b)as applicable(but not both),and shall beeligible to receive any other payments and benefits extended to the Participant under this Plan by the Plan Administrator in its solediscretion.(a)Termination not within the Change in Control PeriodIf the Participants termination of employment is not within the Change in Control Period(as defined below),the Participantshall be eligible to receive the severance benefits as set forth below in this Section 4(a).5(1)Severance PayThe Participant will be eligible to receive a severance pay benefit equal to 18 months of the Participants Base Salaryin income continuation as described below.All severance pay benefits under this Section 4(a)(1)will be paid in the form of incomecontinuation in accordance with the Companys normal payroll practices,beginning within sixty(60)days following the executivesTermination Date and continuing until such severance pay benefits are exhausted or the executive otherwise ceases to remain eligibleto receive Plan ben
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Earnings Release Q3 FY 2025 April 1 to June 30,2025 Munich,Germany,August 7,2025 Robust results continue Outlook confirmed “Our third-quarter performance demonstrates that Siemens is delivering robust results despite the volatile global market.Were posting sustained growth momentum in orders,revenue and net income.Digitalization and sustainability continue to be our growth drivers.In addition,with the closing of our acquisition of Dotmatics,were opening up new markets in life sciences and are combining scientific intelligence with our industrial AI technologies,”said Roland Busch,President and Chief Executive Officer of Siemens AG.“In the third quarter,we posted an excellent 2.9 billion in Free cash flow,and we are again aiming to achieve a double-digit Free-cash-flow return for the full fiscal year.Looking ahead,we remain highly confident that we will deliver sustainable and profitable growth.We confirm our outlook for fiscal 2025,”said Ralf P.Thomas,Chief Financial Officer of Siemens AG.Orders grew 28%on a comparable basis,excluding currency translation and portfolio effects,driven by sharply higher volume from large orders at Mobility,and revenue was up 5%on increases in most industrial businesses On a nominal basis,orders grew 25%to 24.7 billion,and revenue rose 3%to 19.4 billion;the book-to-bill ratio was strong at 1.28 Profit Industrial Business came in at 2.8 billion with a profit margin of 14.9%Net income increased to 2.2 billion;corresponding basic earnings per share(EPS)were 2.61,and EPS before purchase price allocation accounting(EPS pre PPA)were 2.78;effects related to Altair and Dotmatics,which we successfully acquired ahead of schedule at the end of Q2 FY 2025 and the beginning of Q4 FY 2025,respectively,burdened EPS pre PPA by 0.15 Excellent Free cash flow from continuing and discontinued operations of 2.9 billion(Q3 FY 2024:2.1 billion),including improvements in all industrial businessesEarnings Release Q3 FY 2025|Siemens 2 Siemens Q3%Change(in millions of)FY 2025 FY 2024 Actual Comp.Orders 24,719 19,782 25(%Revenue 19,377 18,900 3%5%Profit Industrial Business 2,820 3,033(7)%therein:severance(120)(62)Profit margin Industrial Business 14.9.5%excl.severance 15.6.9%Income from continuing operations 2,222 2,158 3%therein:severance(143)(76)Income(loss)from discontinued operations,net of income taxes 21(25)n/a Net income 2,243 2,133 5sic EPS(in)2.61 2.51 4%EPS pre PPA(in)2.78 2.66 5%Free cash flow(continuing and discontinued operations)2,918 2,121 38sh conversion rate 1.30 0.99 31%ROCE 14.6.3%Orders at Mobility more than tripled due to a sharply higher volume from large orders,while Smart Infrastructure and Digital Industries reported moderate declines compared to strong prior-year quarter Revenue growth in most industrial businesses,led by significant increase at Mobility;Digital Industries saw a decline in its software business from a very high basis of comparison Currency translation effects took four percentage points from order growth and three percentage points from revenue growth;overall,portfolio transactions had a minimal effect on volume development Profit Industrial Business:sharp decline at Digital Industries after exceptionally strong results in the software business in Q3 FY 2024;the other industrial businesses all increased profit and profitability,with the highest contribution coming from Smart Infrastructure Results outside Industrial Business benefited from,among other factors,a 0.2 billion gain from closing the sale of a part of the airport logistics business Industrial Business generated strong third-quarter Free cash flow of 3.0 billion,up from 2.5 billion in Q3 FY 2024,with improvements in all industrial businesses;cash outflows for tax payments were 0.8 billion compared to 1.2 billion in the prior-year quarter Siemens issued US$7.0 billion and 4.0 billion in bonds with varied maturities of up to 40 years;payments are not part of Free cash flow Provisions for pensions and similar obligations as of June 30,2025,amounted to 0.8 billion,the same low level as of March 31,2025 Return on capital employed(ROCE)declined as higher net income was more than offset by a substantial increase in average capital employed,mostly resulting from the acquisition of Altair Earnings Release Q3 FY 2025|Digital Industries,Smart Infrastructure,Mobility 3 Digital Industries Q3%Change(in millions of)FY 2025 FY 2024 Actual Comp.Orders 4,383 4,540(3)%(4)%Revenue 4,421 4,893(10)%(10)%therein:software business 1,540 2,067(25)%(30)%Profit 642 1,121(43)%therein:severance(70)(20)Profit margin 14.5.9%excl.severance 16.1#.3%Orders in the automation business were up from a low prior-year basis on higher demand in all three reporting regions,including substantial growth in China and the U.S.;this increase was more than offset by a decline in the software business,where orders came in below the exceptionally strong Q3 FY 2024,which had included a number of large contract wins for licensed software The substantial revenue decline in the software business was also largely due to the high level of licensed software contracts in Q3 FY 2024;in contrast,revenue in the automation business increased year-over-year for the first time since Q4 FY 2023,mainly driven by China Profit and profitability decreased due predominately to lower revenue in the software business;higher severance charges were mainly related to the automation business;effects related to Altair and Dotmatics totaled a negative 30 million(including severance)and reduced profit margin by 1.2 percentage points;profit in Q3 FY 2024 had benefited from a 70 million gain from the sale of a businessSmart Infrastructure Q3%Change(in millions of)FY 2025 FY 2024 Actual Comp.Orders 5,731 5,993(4)%(1)%Revenue 5,711 5,416 5%9%therein:service business 1,193 1,132 5%8%Profit 1,071 923 16%therein:severance(14)(10)Profit margin 18.8.0%excl.severance 19.0.2%Orders on a comparable basis came in close to the strong Q3 FY 2024 level,which had included a number of larger orders from data center and energy customers Revenue increase was led by the electrification business,which continued to execute strongly on its large order backlog from data center and energy customers;excluding currency headwinds and negative portfolio effects,revenue was up in all businesses and reporting regions Smart Infrastructure again grew profit and profitability year-over-year on higher revenue,increased capacity utilization and ongoing productivity improvementsMobility Q3%Change(in millions of)FY 2025 FY 2024 Actual Comp.Orders 7,940 2,399 200 0%Revenue 3,073 2,608 18%therein:service business 580 489 19 %Profit 286 227 26%therein:severance(5)(4)Profit margin 9.3%8.7%excl.severance 9.5%8.9%Orders rose on a sharply higher volume from large orders,including an order worth 3.5 billion from an existing framework agreement for a turnkey rail system in Egypt as well as a 1.7 billion order for high-speed trains and service in the U.S.Revenue rose in all businesses,with the strongest growth contributions coming from the rolling stock and the customer services businesses Broad-based increases in profit and profitability on higher revenueEarnings Release Q3 FY 2025|Siemens Healthineers,Siemens Financial Services,Reconciliation to Consolidated Financial Statements 4 Siemens Healthineers Q3%Change(in millions of)FY 2025 FY 2024 Actual Comp.Orders 6,024 6,079(1)%2%Revenue 5,662 5,423 4%8%Profit 821 762 8%therein:severance(31)(27)Profit margin 14.5.1%excl.severance 15.1.6%Volume development influenced by negative currency translation effects;revenue growth driven mainly by the imaging business Higher profit year-over-year,most notably at the imaging business on higher revenue;profit and profitability declined in the diagnostics business,primarily due to higher year-over-year charges related to its transformation program Siemens Financial Services Q3(in millions of)FY 2025 FY 2024 Earnings before taxes(EBT)112 131 therein:equity business 2 23 therein:severance 2(1)ROE(after taxes)10.3.8%Jun 30,Sep 30,(in millions of)2025 2024 Total assets 32,044 32,841 Siemens Financial Services recorded a solid earnings contribution with the debt business on the prior-year level and with lower income from the equity business,which included a revaluation loss Negative currency translation effects led to a decrease in total assets compared to the end of fiscal 2024Reconciliation to Consolidated Financial Statements Profit Q3(in millions of)FY 2025 FY 2024 Innovation(181)(28)Governance(18)(46)Amortization of intangible assets acquired in business combinations(210)(181)Financing,eliminations and other items 368(57)Reconciliation to Consolidated Financial Statements (41)(313)Innovation expenses increased in connection with activities related to our ONE Tech Company program Financing,eliminations and other items included a 154 million gain from closing the sale of the airport logistics business in Europe,Asia and the Middle East;closing the sale of this business in the U.S.is subject to regulatory approvals and expected in calendar 2026;additionally,this item included a positive result of 121 million from revised estimates related to provisions for a legacy project and a revaluation gain of 85 million on an equity investment Earnings Release Q3 FY 2025|Outlook 5 Outlook We confirm our outlook for fiscal 2025.Digital Industries expects for fiscal 2025 a change in comparable revenue,net of currency translation and portfolio effects,in a range of(6)%to 1%and a profit margin of 15%to 19%.Smart Infrastructure expects for fiscal 2025 comparable revenue growth of 6%to 9%and a profit margin of 17%to 18%,excluding a gain of 315 million recorded in Q2 FY 2025 from exiting its wiring accessories business.Mobility expects for fiscal 2025 comparable revenue growth of 8%to 10%and a profit margin of 8%to 10%.For the Siemens Group,we expect comparable revenue growth in the range of 3%to 7%and a book-to-bill ratio above 1.We expect basic EPS from net income before purchase price allocation accounting(EPS pre PPA)for fiscal 2025 in a range of 10.40 to 11.00.Effects related to Altair and Dotmatics,which we successfully acquired ahead of schedule,as well as the gain from the sale of Innomotics,are not included in this outlook.During the first nine months of fiscal 2025,these effects contributed,in total,a positive 2.44 per share to basic EPS pre PPA.This outlook also excludes burdens from legal and regulatory matters.Earnings Release Q3 FY 2025|Notes and forward-looking statements 6 Notes and forward-looking statements Starting today at 08:00 a.m.CEST,the press conference call on Siemens third-quarter results for fiscal 2025 will be broadcast live at today at 09:30 a.m.CEST,you can also follow the conference call for analysts and investors live at of both conference calls will be made available afterwards.The financial publications can be downloaded at: document contains statements related to our future business and financial performance and future events or developments involving Siemens that may constitute forward-looking statements.These statements may be identified by words such as“expect,”“look forward to,”“anticipate,”“intend,”“plan,”“believe,”“seek,”“estimate,”“will,”“project”or words of similar meaning.We may also make forward-looking statements in other reports,in prospectuses,in presentations,in material delivered to shareholders and in press releases.In addition,our representatives may from time to time make oral forward-looking statements.Such statements are based on the current expectations and certain assumptions of Siemens management,of which many are beyond Siemens control.These are subject to a number of risks,uncertainties and factors,including,but not limited to those described in disclosures,in particular in the chapter Report on expected developments and associated material opportunities and risks in the Combined Management Report of the Siemens Report( in the Interim Group Management Report of the Half-year Financial Report(provided that it is already available for the current reporting year),which should be read in conjunction with the Combined Management Report.Should one or more of these risks or uncertainties materialize,should decrees,decisions,assessments or requirements of regulatory or governmental authorities deviate from our expectations,should events of force majeure,such as pandemics,unrest or acts of war,occur or should underlying expectations including future events occur at a later date or not at all or assumptions prove incorrect,actual results,performance or achievements of Siemens may(negatively or positively)vary materially from those described explicitly or implicitly in the relevant forward-looking statement.Siemens neither intends,nor assumes any obligation,to update or revise these forward-looking statements in light of developments which differ from those anticipated.This document includes in the applicable financial reporting framework not clearly defined supplemental financial measures that are or may be alternative performance measures(non-GAAP-measures).These supplemental financial measures should not be viewed in isolation or as alternatives to measures of Siemens net assets and financial positions or results of operations as presented in accordance with the applicable financial reporting framework in its Consolidated Financial Statements.Other companies that report or describe similarly titled alternative performance measures may calculate them differently.Due to rounding,numbers presented throughout this and other documents may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.This document is a Quarterly Statement according to Section 53 of the Exchange Rules for the Frankfurter Wertpapierbrse.Address Siemens AG Werner-von-Siemens-Str.1 80333 Munich Germany Internet Phone 49 89 7805-33443(Media Relations) 49 89 7805-32474(Investor Relations)E-Mail 2025 by Siemens AG,Berlin and Munich Financial Results Third Quarter and First Nine Months of Fiscal 2025 II Key figures (in millions of,except where otherwise stated)Volume Q3%Change Q1-Q3%Change FY 2025 FY 2024 Actual Comp.FY 2025 FY 2024 Actual Comp.Orders 24,719 19,782 25(f,427 61,123 9%9%Revenue 19,377 18,900 3%5W,488 55,118 4%5%Book-to-bill ratio 1.28 1.16 Order backlog(in billions of)117 117 Profitability and Capital efficiency Q3 Q1-Q3 FY 2025 FY 2024%Change FY 2025 FY 2024%Change Industrial Business Profit 2,820 3,033 (7)%8,576 8,270 4%Profit margin 14.9.5.4.5%Continuing operations EBITDA 3,540 3,429 3,192 10,061 1%Income from continuing operations 2,222 2,158 3%6,464 6,731 (4)sic EPS(in)2.58 2.54 2%7.52 7.92 (5)%Discontinued operations Income(loss)from discontinued operations,net of income taxes 21(25)n/a 2,087 146 200sic EPS(in)0.03(0.03)n/a 2.65 0.19 200%Continuing and discontinued operations Net income 2,243 2,133 5%8,550 6,878 24sic EPS(in)2.61 2.51 4.18 8.11 26%EPS pre PPA(in)2.78 2.66 5.64 8.58 24%Return on capital employed(ROCE)14.6.3.9.6pital structure and Liquidity Jun 30,2025 Sep 30,2024 Total equity 66,040 56,231 Industrial net debt 13,719 9,421 Industrial net debt/EBITDA 1.0 0.7 Q3 FY 2025 Q3 FY 2024 Q1-Q3 FY 2025 Q1-Q3 FY 2024 Free cash flow Continuing operations 3,001 2,168 5,737 4,686 Discontinued operations (83)(47)(233)(172)Continuing and discontinued operations 2,918 2,121 5,505 4,513 Cash conversion rate Continuing and discontinued operations 1.30 0.99 0.64 0.66 Employees Jun 30,2025 Sep 30,2024 (in thousands)Continuing operations Total Continuing operations Total Total 315 315 312 327 Germany 86 86 85 89 Outside Germany 229 229 227 238 Throughout excluding currency translation and portfolio effects.Basic EPS attributable to shareholders of Siemens AG.For fiscal 2025 and 2024 weighted average shares outstanding(basic)(in thousands)for the third quarter amounted to 785,203 and 789,181 and for the first nine months to 786,194 and 789,395 shares,respectively.Accumulative EBITDA of the previous four quarters until the reporting date.Continuing and discontinued operations.III Consolidated Statements of Income Q3 Q1-Q3(in millions of,per share amounts in)FY 2025 FY 2024 FY 2025 FY 2024 Revenue 19,377 18,900 57,488 55,118 Cost of sales(11,840)(11,152)(35,192)(33,222)Gross profit 7,537 7,748 22,295 21,897 Research and development expenses(1,650)(1,561)(4,815)(4,625)Selling and general administrative expenses(3,571)(3,571)(10,729)(10,313)Other operating income 362 136 863 403 Other operating expenses(64)(139)(268)(421)Income(loss)from investments accounted for using the equity method,net 36 39 382 775 Interest income 670 703 2,123 2,119 Interest expenses(450)(447)(1,206)(1,314)Other financial income(expenses),net 21(56)(199)(197)Income from continuing operations before income taxes 2,890 2,852 8,445 8,325 Income tax expenses(668)(694)(1,981)(1,594)Income from continuing operations 2,222 2,158 6,464 6,731 Income(loss)from discontinued operations,net of income taxes 21(25)2,087 146 Net income 2,243 2,133 8,550 6,878 Attributable to:Non-controlling interests 197 154 549 477 Shareholders of Siemens AG 2,046 1,980 8,001 6,401 Basic earnings per share Income from continuing operations 2.58 2.54 7.52 7.92 Income(loss)from discontinued operations 0.03(0.03)2.65 0.19 Net income 2.61 2.51 10.18 8.11 Diluted earnings per share Income from continuing operations 2.55 2.51 7.43 7.82 Income(loss)from discontinued operations 0.03(0.03)2.62 0.18 Net income 2.58 2.48 10.06 8.00 Consolidated Statements of Comprehensive Income Q3 Q1-Q3(in millions of)FY 2025 FY 2024 FY 2025 FY 2024 Net income 2,243 2,133 8,550 6,878 Remeasurements of defined benefit plans(33)419(116)625 therein:Income tax effects(38)(54)(93)115 Remeasurements of equity instruments 1,625 995 4,530 1,782 therein:Income tax effects 1 Income(loss)from investments accounted for using the equity method,net (18)Items that will not be reclassified to profit or loss 1,592 1,414 4,414 2,389 Currency translation differences(3,506)439(2,453)(297)Derivative financial instruments 129(4)91 79 therein:Income tax effects(46)(8)(28)(27)Income(loss)from investments accounted for using the equity method,net(24)6(2)(66)Items that may be reclassified subsequently to profit or loss(3,401)442(2,365)(284)Other comprehensive income,net of income taxes(1,809)1,855 2,050 2,106 Total comprehensive income 434 3,988 10,600 8,983 Attributable to:Non-controlling interests(251)197 212 467 Shareholders of Siemens AG 684 3,791 10,388 8,516 IV Consolidated Statements of Financial Position Jun 30,Sep 30,(in millions of)2025 2024 Assets Cash and cash equivalents 14,641 9,156 Trade and other receivables 17,043 16,963 Other current financial assets 11,369 10,492 Contract assets 8,091 7,985 Inventories 11,165 10,923 Current income tax assets 1,786 1,767 Other current assets 1,676 1,632 Assets classified as held for disposal 19 2,433 Total current assets 65,791 61,353 Goodwill 38,021 31,384 Other intangible assets 10,472 9,593 Property,plant and equipment 12,647 12,242 Investments accounted for using the equity method 926 980 Other financial assets 30,166 27,388 Deferred tax assets 2,349 2,677 Other assets 2,084 2,196 Total non-current assets 96,665 86,459 Total assets 162,455 147,812 Liabilities and equity Short-term debt and current maturities of long-term debt 10,242 6,598 Trade payables 8,573 8,843 Other current financial liabilities 1,238 2,006 Contract liabilities 12,790 12,855 Current provisions 2,414 2,730 Current income tax liabilities 1,581 1,805 Other current liabilities 7,126 7,833 Liabilities associated with assets classified as held for disposal 3 1,245 Total current liabilities 43,969 43,913 Long-term debt 46,446 41,321 Provisions for pensions and similar obligations 783 912 Deferred tax liabilities 1,459 1,483 Provisions 1,183 1,120 Other financial liabilities 688 864 Other liabilities 1,888 1,968 Total non-current liabilities 52,447 47,667 Total liabilities 96,416 91,581 Equity Issued capital 2,400 2,400 Capital reserve 7,646 7,757 Retained earnings 47,198 39,657 Other components of equity 6,112 3,615 Treasury shares,at cost (2,769)(2,165)Total equity attributable to shareholders of Siemens AG 60,587 51,264 Non-controlling interests 5,452 4,967 Total equity 66,040 56,231 Total liabilities and equity 162,455 147,812 V Consolidated Statements of Cash Flows Q3 Q1-Q3(in millions of)FY 2025 FY 2024 FY 2025 FY 2024 Cash flows from operating activities Net income 2,243 2,133 8,550 6,878 Adjustments to reconcile net income to cash flows from operating activities continuing operations (Income)loss from discontinued operations,net of income taxes(21)25(2,087)(146)Amortization,depreciation and impairments 890 777 2,465 2,345 Income tax expenses 668 694 1,981 1,594 Interest(income)expenses,net(220)(256)(916)(805)(Income)loss related to investing activities(245)(35)(796)(730)Other non-cash(income)expenses(219)261 448 244 Change in operating net working capital from Contract assets(63)(221)(395)(563)Inventories(44)(204)(491)(1,118)Trade and other receivables(252)(208)(379)(256)Trade payables 59(176)(162)(1,095)Contract liabilities(112)(137)320 930 Additions to assets leased to others in operating leases(96)(114)(320)(281)Change in other assets and liabilities 1,034 582(711)(282)Income taxes paid(768)(1,187)(2,366)(2,846)Dividends received 67 80 196 205 Interest received 633 671 2,008 2,022 Cash flows from operating activities continuing operations 3,556 2,687 7,346 6,095 Cash flows from operating activities discontinued operations(83)(28)(233)(135)Cash flows from operating activities continuing and discontinued operations 3,472 2,659 7,113 5,961 Cash flows from investing activities Additions to intangible assets and property,plant and equipment (554)(519)(1,609)(1,410)Acquisitions of businesses,net of cash acquired(862)(7)(9,967)(396)Purchase of investments and financial assets for investment purposes(424)(279)(925)(658)Change in receivables from financing activities(277)(51)(514)(284)Disposal of intangibles and property,plant and equipment 24(1)87 44 Disposal of businesses,net of cash disposed 148 94 558 70 Disposal of investments and financial assets for investment purposes 544 342 3,736 760 Cash flows from investing activities continuing operations(1,402)(421)(8,634)(1,873)Cash flows from investing activities discontinued operations 152(33)3,219(54)Cash flows from investing activities continuing and discontinued operations(1,250)(454)(5,415)(1,927)Cash flows from financing activities Purchase of treasury shares(827)(339)(1,455)(993)Re-issuance of treasury shares and other transactions with owners 123 1,502(2,139)Issuance of long-term debt 10,121 10,881 6,688 Repayment of long-term debt(including current maturities of long-term debt)(1,522)(1,192)(4,835)(5,371)Change in short-term debt and other financing activities(7,368)58 3,439 851 Interest paid(287)(305)(1,147)(1,115)Dividends paid to shareholders of Siemens AG (4,093)(3,709)Dividends attributable to non-controlling interests(53)(279)(381)(355)Cash flows from financing activities continuing operations 187(2,057)3,912(6,141)Cash flows from financing activities discontinued operations 1 (14)Cash flows from financing activities continuing and discontinued operations 187(2,056)3,912(6,155)Effect of changes in exchange rates on cash and cash equivalents(455)19(337)(73)Change in cash and cash equivalents 1,955 168 5,273(2,195)Cash and cash equivalents at beginning of period 12,686 7,721 9,368 10,084 Cash and cash equivalents at end of period 14,641 7,889 14,641 7,889 Less:Cash and cash equivalents of assets classified as held for disposal and discontinued operations at end of period 131 131 Cash and cash equivalents at end of period(Consolidated Statements of Financial Position)14,641 7,758 14,641 7,758 VI Overview of Segment figures Orders Revenue Profit(SFS:EBT)Profit margin(SFS:ROE)Net capital employed(SFS:Total assets)Free cash flow Q3%Change Q3%Change Q3 Q3 Jun 30,Sep 30,Q3(in millions of)FY 2025 FY 2024 Actual Comp.FY 2025 FY 2024 Actual Comp.FY 2025 FY 2024 FY 2025 FY 2024 2025 2024 FY 2025 FY 2024 Digital Industries 4,383 4,540(3)%(4)%4,421 4,893(10)%(10)d2 1,121 14.5.9,921 10,476 1,103 951 Smart Infrastructure 5,731 5,993(4)%(1)%5,711 5,416 5%9%1,071 923 18.8.0%7,044 6,650 1,011 1,007 Mobility 7,940 2,399 200 0%3,073 2,608 18(6 227 9.3%8.7%3,194 2,018(115)(263)Siemens Healthineers 6,024 6,079(1)%2%5,662 5,423 4%81 762 14.5.12,715 33,457 1,007 838 Industrial Business 24,079 19,011 270,866 18,340 3%5%2,820 3,033 14.9.5a,874 52,601 3,005 2,532 Siemens Financial Services(SFS)92 88 92 88 112 131 10.3.82,044 32,841 175 236 Reconciliation to Consolidated Financial Statements 549 683 419 471 (41)(313)68,538 62,369(178)(600)Siemens(continuing operations)24,719 19,782 25(,377 18,900 3%5%2,890 2,852 162,455 147,812 3,001 2,168 Orders Revenue Profit (SFS:EBT)Profit margin (SFS:ROE)Net capital employed (SFS:Total assets)Free cash flow Q1-Q3%Change Q1-Q3%Change Q1-Q3 Q1-Q3 Jun 30,Sep 30,Q1-Q3(in millions of)FY 2025 FY 2024 Actual Comp.FY 2025 FY 2024 Actual Comp.FY 2025 FY 2024 FY 2025 FY 2024 2025 2024 FY 2025 FY 2024 Digital Industries 12,866 12,770 1%1,757 13,961(9)%(9)%1,864 2,757 14.6.7,921 10,476 2,253 2,122 Smart Infrastructure 17,893 17,917 0%0,741 15,392 9%9%3,339 2,662 19.9.3%7,044 6,650 2,629 2,066 Mobility 14,472 11,191 291%9,228 8,130 146 715 8.9%8.8%3,194 2,018(334)11 Siemens Healthineers 18,894 17,399 9%9,053 16,034 6%7%2,547 2,135 14.9.32,715 33,457 2,293 1,714 Industrial Business 64,125 59,278 8%9U,780 53,516 4%4%8,576 8,270 15.4.5a,874 52,601 6,842 5,913 Siemens Financial Services(SFS)280 309 280 309 531 540 20.1 .12,044 32,841 559 587 Reconciliation to Consolidated Financial Statements 2,023 1,536 1,428 1,293 (662)(485)68,538 62,369(1,663)(1,815)Siemens(continuing operations)66,427 61,123 9%9W,488 55,118 4%5%8,445 8,325 162,455 147,812 5,737 4,686 VII EBITDA Reconciliation Profit Amortization of intangible assets acquired in business combinations Financial income(expenses),net EBIT Amortization,depreciation and impairments EBITDA Q3 Q3 Q3 Q3 Q3 Q3(in millions of)FY 2025 FY 2024 FY 2025 FY 2024 FY 2025 FY 2024 FY 2025 FY 2024 FY 2025 FY 2024 FY 2025 FY 2024 Digital Industries 642 1,121(76)(44)566 1,077 154 123 719 1,200 Smart Infrastructure 1,071 923(21)(25)1,050 898 101 101 1,151 999 Mobility 286 227(25)(26)261 202 67 63 328 265 Siemens Healthineers 821 762(87)(86)734 677 370 294 1,105 971 Industrial Business 2,820 3,033(209)(180)2,611 2,853 692 581 3,303 3,435 Siemens Financial Services 112 131 196 236(84)(105)34 39(50)(66)Reconciliation to Consolidated Financial Statements(41)(313)210 181 45(36)123(96)163 157 287 61 Siemens(continuing operations)2,890 2,852 241 200 2,650 2,652 890 777 3,540 3,429 Profit Amortization of intangible assets acquired in business combinations Financial income(expenses),net EBIT Amortization,depreciation and impairments EBITDA Q1-Q3 Q1-Q3 Q1-Q3 Q1-Q3 Q1-Q3 Q1-Q3(in millions of)FY 2025 FY 2024 FY 2025 FY 2024 FY 2025 FY 2024 FY 2025 FY 2024 FY 2025 FY 2024 FY 2025 FY 2024 Digital Industries 1,864 2,757(148)(145)1,716 2,612 376 372 2,092 2,984 Smart Infrastructure 3,339 2,662(64)(74)3,275 2,588 300 292 3,575 2,880 Mobility 826 715(77)(76)749 639 200 187 949 826 Siemens Healthineers 2,547 2,135(266)(268)2,281 1,867 988 913 3,269 2,780 Industrial Business 8,576 8,270(554)(563)8,022 7,707 1,863 1,764 9,885 9,470 Siemens Financial Services 531 540(1)(1)579 659(49)(119)108 120 59 1 Reconciliation to Consolidated Financial Statements(662)(485)555 564 139(50)(245)128 494 461 249 589 Siemens(continuing operations)8,445 8,325 717 609 7,727 7,716 2,465 2,345 10,192 10,061 VIII Orders&Revenue by region Orders Revenue Q3%Change Q3%Change(in millions of)FY 2025 FY 2024 Actual Comp.FY 2025 FY 2024 Actual Comp.Europe,C.I.S.,Africa,Middle East 12,483 8,305 50Q%9,085 8,247 10%therein:Germany 2,822 2,609 8%8%2,782 2,599 7%7%Americas 7,898 6,648 19%6,347 6,063 5%9%therein:U.S.7,061 5,611 261%5,479 5,116 7%Asia,Australia 4,337 4,829(10)%(5)%3,945 4,589(14)%(10)%therein:China 1,705 2,327(27)%(21)%1,791 2,479(28)%(23)%Siemens(continuing operations)24,719 19,782 25(,377 18,900 3%5%Orders Revenue Q1-Q3%Change Q1-Q3%Change(in millions of)FY 2025 FY 2024 Actual Comp.FY 2025 FY 2024 Actual Comp.Europe,C.I.S.,Africa,Middle East 31,962 29,986 7%6&,869 25,684 5%4%therein:Germany 8,649 8,355 4%3%8,423 8,144 3%3%Americas 21,799 18,929 15,815 16,939 11%therein:U.S.18,397 15,846 16,150 14,193 14%Asia,Australia 12,666 12,208 4%5,804 12,496(6)%(4)%therein:China 5,345 5,653(5)%(4)%5,284 6,200(15)%(14)%Siemens(continuing operations)66,427 61,123 9%9W,488 55,118 4%5%
2025-10-15
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Robust results continue Outlook confirmedRoland Busch,CEO Siemens AGRalf P.Thomas,CFO Siemens AGUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Notes and forward-looking statements This document contains statements related to our future business and financial performance and future events or developments involving Siemens that may constitute forward-looking statements.These statements may be identified by words such as“expect,”“look forward to,”“anticipate,”“intend,”“plan,”“believe,”“seek,”“estimate,”“will,”“project”or words of similar meaning.We may also make forward-looking statements in other reports,in prospectuses,in presentations,in material delivered to shareholders and in press releases.In addition,our representatives may from time to time make oral forward-looking statements.Such statements are based on the current expectations and certain assumptions of Siemens management,of which many are beyond Siemens control.These are subject to a number of risks,uncertainties and factors,including,but not limited to those described in disclosures,in particular in the chapter Report on expected developments and associated material opportunities and risks in the Combined Management Report of the Siemens Report( in the Interim Group Management Report of the Half-year Financial Report(provided that it is already available for the current reporting year),which should be read in conjunction with the Combined Management Report.Should one or more of these risks or uncertainties materialize,should decrees,decisions,assessments or requirements of regulatory or governmental authorities deviate from our expectations,should events of force majeure,such as pandemics,unrest or acts of war,occur or should underlying expectations including future events occur at a later date or not at all or assumptions prove incorrect,actual results,performance or achievements of Siemens may(negatively or positively)vary materially from those described explicitly or implicitly in the relevant forward-looking statement.Siemens neither intends,nor assumes any obligation,to update or revise these forward-looking statements in light of developments which differ from those anticipated.This document includes in the applicable financial reporting framework not clearly defined supplemental financial measures that are or may be alternative performance measures(non-GAAP-measures).These supplemental financial measures should not be viewed in isolation or as alternatives to measures of Siemens net assets and financial positions or results of operations as presented in accordance with the applicable financial reporting framework in its Consolidated Financial Statements.Other companies that report or describe similarly titled alternative performance measures may calculate them differently.Due to rounding,numbers presented throughout this and other documents may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.Unrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Page 2Robust results in Q3Business highlightsUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07STRONG TOPLINEBook-to-bill at 1.28x Backlog at 117bnOrders up 28%to 24.7bn Major contracts drive MO SI close to PY level on tough comps DI up sequentially;SW very tough comps y-o-y;AUT up broad-basedRevenue up 5%to 19.4bn Strong contribution by MO,SI&SHS;DI AUT returned to growth Electrification up 16%STRINGENT EXECUTIONIB margin at 14.9%SI,MO,SHS with margin expansion DI lower on tough comps in SW IB profit of 2.8bnEPS pre PPA excl.Altair and Dotmatics of 2.93 Altair&Dotmatics effect of-0.15Excellent free cash flow 3.0bn for IB,2.9bn for all-inPage 3 Ongoing uncertainty in the economic environment Effects related to Altair and Dotmatics excluded from guidanceOUTLOOK CONFIRMEDNote:Growth rates are comparable,excl.FX and portfolioShaping the future through stringent execution of ONE Tech Company program Unrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Page 4Stronger customer focusFaster innovations Higher profitable growthINVESTMENTPRODUCTIVITY Closing of Dotmatics acquisition to expand AI-powered SW-portfolio to Life Sciences Acquisition of ebm-papsts IDT business completed Listing of Siemens Energy India Opening high-tech train factory&service center in Munich Continuing efforts to further optimize global footprint and localize value chains Agreement in Germany for DI AUT competitivenessPUBLIC BUILDINGSFEDERAL GOVERNMENT Heritage building with cutting-edge techBerlin State Library transformed into smart,sustainable landmark with 50%less energy consumption through advanced building technologyand digital platformSiemens Xcelerator and vertical know-how drive customer valueUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07AEROSPACE&DEFENSENORTHROP GRUMMANDesign&simulation of complex systemsRenewal of long-standing collaboration for digital engineering ecosystem:real-time collaboration,rapid development&digital-first approachGREEN ENERGYTURN2XScale up renewable natural gasComprehensive use of technology from digital twin,automation,instrumentation&energy management for remote operation of production process MOBILITYTURNKEY EGYPTModern rail system Turnkey order based on existing framework agreement to create 6th largest high-speed rail network and cut carbon emissions by 70%compared to current car or bus transport Verticaldomainknow-howCrosscollaborationFoundationalTechnologiesPage 5 50,000 products have earned certification since Siemens EcoTech launch in 2024 Environmental impact independently verified by TV Rheinland First electric locomotive of 1,200 in total flagged off 90%of technology made in India Potential to replace up to 800,000 trucks over its 35 years lifecycle Siemens Railigent X platform for predictive maintenance Scaling sustainability impact for customers Unrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Decarbonization&energy efficiencyIndia Freight locomotivesFoundation of ethics&governanceEcoTech LabelPage 6Resource efficiency&circularityTechnology partnership Modular edge data center,engineered with partners Cadolto and Legrand for speed,scalability and sustainability Customizable,prefabricated modules tailored to specific operational needs 30%less CO2-emissions during construction,90%recycling rate,fully reusable componentsDI SW Annual Recurring Revenue(ARR)Q3 2333%Q1 2437%Q2 2439%Q3 2442%Q4 2442%Q3 2543%Q2 2545%Q1 253.73.94.14.24.44.64.54.927% 15%1) 12%2)SaaS transition with high momentum1 ARR:FX comparable 2 ARR:comparable(excluding FX and Altair)Share of Cloud ARRbnCloud ARR:Up 1.3x y-o-y to 2.1bn 50%Cloud ARR target by end of FY25 confirmed(excluding Altair and Dotmatics)#Customers(accumulated):Customer transformation rate to SaaS:Share of renewals based on total contract value(TCV)Therein 68%new customersUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Combining the real and digital worldsContinuing strong growth momentum with double-digit ARR growth94x%Q3 23Q1 24Q2 24Q3 24Q4 24Q1 25Q2 25Q3 2582%Q3 2384%Q1 2485%Q2 2485%Q3 2486%Q4 2486%Q1 2587%Q2 2587%Q3 259,26012,59014,76016,55018,43020,130 21,72022,840SME customersPage 7Rolling 4Q47%excl.AltairDigital Industries(DI)Automation recovery continuing,Software with very tough comps,free cash flow a stand-outUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07 Significant order growth in Automation,up 19%SW lower due to exceptionally large license deals in prior year Book-to-bill at 0.99x Backlog 9.0bn,therein 5.5bn SW,3.5bn AUT Automation up 4%,supported by discrete automation,up 5%SW down-30%due to large license contracts in EDA and PLM in prior year&temporary EDA restrictions in China Robust Automation margin,progress in adjusting capacity SW sharply below prior year Altair effects and Dotmatics transaction costs of-120bps Effect from FX-40bps Broad-based strong cash conversion OrdersbnRevenuebnProfit marginFree cash flowmx.xProfit margin excl.severancex.xsh Conversion Ratex.xxtherein SoftwareQ3 FY 24Q3 FY 254.54.4-4%1)2.12.8Q3 FY 241.52.9Q3 FY 254.94.4-10%1)Q3 FY 24Q3 FY 25-840bps14.5#.3.1-23.91Q3 FY 24Q3 FY 251,103 16%0.851.721 Comparable,excl.FX and portfoliox.xPage 8Excl.Altair&Dotmatics 15.7%Digital Industries(DI)Unrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Marginal sequential order improvement in Q3;pace of recovery rather muted due to the volatile macro environment Revenue growth in Automation driven by China,while Germany still flat 31% 19%OrdersRevenueQ3 FY 25 Key regions AutomationChina 2%0%Germany 80% 15%Italy 28% 4%U.S.Q3 FY 25 Software-30%GlobalSubstantially down due to extraordinarily tough comps from large license dealsOrder momentum in core industries subdued on soft macro;Revenue lower sequentiallyOrders sharply up on easy comps;Revenue further up sequentiallyOrders up substantially y-o-y on easy comps;Revenue up from low levels,sequential improvementOrders up sequentially;Revenue for both,Process and Discrete,moderately upNote:Growth rates comparable,excl.FX and portfolioPage 9Smart Infrastructure(SI)Strong revenue growth and record profitability,1bn free cash flow again a highlightUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07 Book-to-bill at 1.00 x Electrification up 2%Electrical Products down-2%Buildings down-3%Large orders below strong PYQ,base business clearly up Strong backlog 18.7bn Strong momentum at Electrification with further outstanding growth of 16%Electrical Products up 6%Buildings up 5%Service business up 8th consecutive quarter with margin expansion Strong margin conversion,increased capacity utilization and ongoing productivity improvements Continuing strong cash conversionOrdersbnRevenuebnProfit marginFree cash flowm1 Comparable,excl.FX and portfolioProfit margin excl.severancex.xsh Conversion Ratex.xxtherein ServiceQ3 FY 24Q3 FY 256.05.7-1%1)1.14.3Q3 FY 241.24.5Q3 FY 255.45.7 9%1)Q3 FY 24Q3 FY 251,0071,0110%1.090.94Q3 FY 24Q3 FY 25 180bps17.2.0-20.8%x.xx.xPage 1017.0%Smart Infrastructure(SI)Unrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Strong orders from Electrification and Electrical Products base businessBroad-based revenue growth driven by backlog and strong momentum in the U.S.and GermanyOrders RevenueQ3 FY 25 Key regions Q3 FY 25 Service 8%GlobalClear revenue growth across all key regions,led by Americas0% 12%U.S.Orders up DD in Electrification,lower large data center orders in EP;Revenue fueled by backlog execution,especially in Electrification 6% 11%GermanyOrders driven by Electrification with large project wins in power utilities;Revenue up in all businesses driven by Electrification 11% 3%ChinaOrders up by strength in Electrification&EP;Revenue up in Electrification and EP,Buildings soft-8% 7%Europeincl.CAME,excl.GermanyDD order growth in EP,offset by lower large order wins in Electrification,Buildings stable;Backlog execution drives revenue in Electrification&Buildings,EP up modestlyNote:Growth rates comparable,excl.FX and portfolioPage 11Mobility(MO)Major orders,high-teens revenue growth and strong margin performanceUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07 Book-to-bill at excellent 2.58x Strong momentum across businesses driven by major and large orders Backlog at 52bn with further improved gross margin,therein 15bn Customer Services Rolling Stock up 33%on very easy comps Rail Infrastructure up 3%Therein Customer Services up 20%Broad-based increases on higher revenue Stringent project executionOrdersbnRevenueProfit marginFree cash flowmCash Conversion Ratex.xxtherein Customer ServicesQ3 FY 24Q3 FY 252.47.9 240%1)0.52.1Q3 FY 240.62.5Q3 FY 252.63.1 19%1)-263-115Q3 FY 24Q3 FY 25n/a-1.16-0.40Q3 FY 24Q3 FY 25 60bps9.3-13%8.7%1 Comparable,excl.FX and portfoliox.xx.xRevenuebn8.9%9.5%Profit margin excl.severancex.x%Page 12 Significant catch-up in Q4 expectedBelow Industrial BusinessFinancing,Elimination,Others with several portfolio related effectsUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07m11236821Industrial BusinessSFSDisc.Ops.Net Income-18Governance-181InnovationFinancing,Elimination,Others-210PPA-668Tax2,8202,2222,243Income Cont.Ops.Minorities197mTax Rate 23.1%Q3 FY 25Page 13Note:As of FY 25,“Financing,Elim.,Other”contains the following items,as previously included:POC effects(mainly Siemens Energy India),GBS,Advanta,Treasury and other items.In addition,SRE,Pensions and Next47 are now included.154m gain from partial divestment of Airport Logistics 121m effect from revised provisions for a legacy project 85m revaluation gain from an equity investmentStrong free cash flow performance clearly ahead over prior yearHighly confident to achieve double-digit FCF return for 6th year in a rowUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07FCF Industrial BusinessbnFCF“all in”bnStrong contribution from businessesCash outflows for tax payments 0.4bn lower y-o-yQ3 cash performancePage 14Capital allocation for shareholdersShare buyback program very well on track after 18 months9M FY 24Q1 FY 25Q2 FY 25Q3 FY 259M FY 255,9131,7322,1043,0056,842 16%0.710.690.650.801.079M FY 24Q1 FY 25Q2 FY 25Q3 FY 259M FY 254,5131,5841,0032,9185,505 22%0.660.410.410.641.302.9bnFeb 2024-up to 5 yrs6.0bnAs of August 1,2025x.xxCash Conversion Rate Consistent cash generation underpins very strong balance sheetSound basis for stringent capital allocation,balancing investments and shareholder returnsUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Capital structure0.8x0.6x0.7x1.1x1.0 x0.7x0.4x1.1x1.0 xQ3 23 Q4 23 Q1 24 Q2 24 Q3 24 Q4 24 Q1 25 Q2 25 Q3 25Industrial net debt/EBITDA(c/o)Consistent strong cash generation in first nine months Pension deficit remains at historic low of 0.8bn Capital structure will be well within target corridor after closing of Dotmatics acquisition for an enterprise value of US$5.1bn early in Q4 25 Excellent financial position confirmed with industry leading credit ratings Successful refinancing through dual bond issuance of 4bn and US$7bn at attractive interest rates Continued commitment to progressive dividend policy and accelerated share buyback programTargetUp to 1.5xFinancial strengthPage 15Outlook FY 2025 confirmedUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Effects related to Altair and Dotmatics,which we successfully acquired ahead of schedule,as well as the gain from the sale of Innomotics,are not included in this outlook.During the first nine months of fiscal 2025,these effects contributed,in total,a positive 2.44 per share to basic EPS pre PPA.This outlook also excludes burdens from legal and regulatory matters.Siemens Group Actuals YTD 9M FY 25Siemens BusinessesRevenue growthComparable Profit marginDigital Industriesexcl.Altair&Dotmatics effects-6%1%-9.3%Smart Infrastructureexcl.Wiring Accessories gain6%9%9.1%Mobility8%8%8.9%Book-to-bill11.16Revenue growthComparable3%7%5%EPS pre PPA10.40 11.008.20Page 16Unrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Questions and AnswersPage 17Unrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07AppendixPage 18Digital Industries(DI)Trends in vertical end marketUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Market recovery muted due to uncertain macro environmentAutomotiveMachine BuildingFood&BeveragePharma&ChemicalsAerospace&DefenseElectronics&SemiconductorsVertical end marketsRevenueexposureMarket trend1Q2 FY 25Market trend1Q3 FY 2520%5%1 Y-o-Y industry revenue development for next 6 months based on industry production data from statistical office sources(e.g.NBoS,US Fed,Eurostat)Page 19Smart Infrastructure(SI)Trends in vertical end marketsUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Key verticals with consistent market trendsData Center and Power Utilities remain growth engines Commercial BuildingsData CenterHealthcarePublic Sector/EducationPower UtilitiesIndustrialVertical end marketsRevenueexposureMarket trend1Q2 FY 25Market trend1Q3 FY 2515%5%1 Trend next 4 quarters,Y-o-Y vertical market development Page 20Financial Services:Strong FY 25 YTD performance on prior year levelUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Page 21m9Q1 FY 25231Q2 FY 252Q3 FY 25113306112bnDecrease in total assets compared to September 30,2024,driven by negative currency translation effectsStrong 9M performance of the equity business driven by a major gain from a sale in Q2Solid result of the debt business 1.8Q1 FY 252.1Q2 FY 252.0Q3 FY 2533.633.332.0Earnings before Taxes(EBT)Total AssetsROE:2259M FY 242429M FY 25540531-2%2.0Q4 FY 242.0Q3 FY 2532.832.020.1 .1%therein Equity business Order backlog as a source of strength and resilienceUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-0765350345219962Order backlog June 20253FY 2025eFY 2026eAfter FY 2026e1171854Expected revenue generation from backlogKey developmentsbnStrong book-to-bill at 1.28 Material negative currency translation effectsBacklog at DI on normal levelsStrong backlog level in systems,solution and service business of SI providing sound basis for revenue growth trajectory MO with high visibility;stringent execution is key to deliver on further improved backlog quality Attractive long-term share in SHS backlogDIMOSHSSIOtherPage 22Decrease in Net Debt on strong operating cash flows Capital Structure improves and continues to be well within target rangeUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Net Debt Q2 20254.0-0.4 OWC-1.4Cash flows from investing activities0.0Financing and other topicsNet Debt Q3 202526.9Net Debt adjustmentsInd.Net Debt Q3 202542.840.613.7Q3 Q2 SFS debt 28.0-1.1 Provisions for pensions-0.8 0.0 Credit guarantees-0.3 0.0Ind.Net Debt/EBITDA(c/o)1.0 x(Q2 FY25:1.1x)Cash&cash equiv.13.8bn1)Cash&cash equiv.15.6bn2)Operating ActivitiesbnCash flows from operating activities(w/o OWC)1 Sum Cash&cash equivalents of 13.8bn incl.current interest bearing debt securities of 1.1bn2 Sum Cash&cash equivalents of 15.6bn incl.current interest bearing debt securities of 1.0bn3 Remaining liabilities incl.convertible bondtherein:Inventories 0.0 Trade and other receivables-0.3 Trade payables 0.1 Contract assets/liabilities-0.2therein:Share buyback-0.8 Interest paid-0.3 Sale of stake in SHS 0.3 FX 1.2therein:Altair3)-0.6 CAPEX-0.6 SFS-0.3 Sale of stake in SE 0.2Page 23Provisions for pensions remain stable on historic low level despite volatile market environmentUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Page 241)All figures are reported on a continuing basis(w/o Liabilities held for disposal)2)Fair value of plan assets including effects from asset ceiling(Q3 2025:-0.7bn);Difference between DBO and fair value of plan assets additionally resulted in net defined benefit assets(Q3 2025:0.6bn)in bnFY 2022FY 2023Q1 FY 2024Q2 FY 2024Q3 FY 2024Q4 FY 2024Q1 FY 2025Q2 FY 2025Q3 FY 2025Defined benefit obligation(DBO)-27.8-26.6-28.8-28.3-27.6-28.4-28.3-27.2-26.9Fair value of plan assets25.925.527.727.927.628.328.027.026.7Provisions for pensions and similar obligations-2.3-1.4-1.5-1.4-1.3-0.9-0.9-0.8-0.8Discount rate3.9%4.6%3.5%3.7%3.8%3.5%3.6%3.9%3.8%Interest income0.31.00.30.30.30.30.20.20.2Actual return on plan assets-6.70.21.70.70.31.0-0.2-0.40.4Bondholders value strong Siemens rating and sound refinancing profileUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Page 25Long TermShort TermOutlookAa3P-1stableLong TermShort TermOutlookAA-A-1 stableFY 2039FY 2041FY 2042FY 2043FY 2044FY 2045FY 2046FY 20470.76.46.24.84.03.13.52.9FY 20321.02.01.51.30.81.30.80.81.52.00.91.3FY 2025FY 2026FY 2027FY 2028FY 2029FY 2030FY 2055FY 20651.11.5FY 2031FY 2033FY 2034FY 2035FY 2036FY 20370.6Loan and bond maturity profile as of June 30,2025in EUR bnTotal loan and bond debt of around 49.9bnProfit Bridge from SHS disclosure to SAG disclosureDifferent profit definitions at SHS and SAG to be considered in modelsUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Page 26mQ3 FY 259M FY 25SHS EBIT(adjusted)95316.8%2,75716.2%PPA(SHS logic)1-88-271Transaction,integration,retention,carve-out cost-13-22Gains and losses from divestments00Severance-31-64Expenses for other portfolio-related measures00Other restructuring expenses-87-128SHS EBIT(as reported)73312.9%2,27213.3%PPA(SAG logic)2 87 266Consolidation/Accounting Differences 1 9SAG Profit(as reported)82114.5%2,54714.9%Severance 31 64SAG Profit(excl.severance)85215.1%2,61015.3%1PPA on intangible assets as well as other effects from IFRS 3 PPA adjustments2 PPA on intangible assetsUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08-07Outlook FY 2025 as presented by Siemens Healthineers on July 30,2025 Page 27Tobias ANikola PChristopher HJulia BFinancial calendarUnrestricted|Siemens 2025|Investor Relations|Q3 Analyst Call|2025-08- 89 7805-32474Investor Relations ContactsMartin BNico ZAugust 7,2025Q3 Earnings ReleaseSeptember 3,2025Morgan Stanley Conference(London)Cinzia FSeptember 23,2025Goldman Sachs/Berenberg Conference(Munich)November 13,2025Q4 Earnings ReleasePage 28December 9,2025Capital Market Day
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GapInc.ReportsSecondQuarterFiscal2025ResultsNetsalesflatversuslastyear,withcomparablesalespositiveforthe6thconsecutivequarterDilutedearningspershareof$0.57up6%versuslastyearCash,cashequivalentsandshort-terminvestmentsof$2.4billionup13%versuslastyearReaffirmsoutlookforfiscal2025netsalesgrowthSANFRANCISCOAugust28,2025GapInc.(NYSE:GAP),thelargestspecialtyapparelcompanyintheU.S.withapurpose-drivenhouseoficonicbrandsincludingOldNavy,Gap,BananaRepublic,andAthleta,todayreportedfinancialresultsforitssecondquarterendedAugust2,2025.“Inthesecondquarter,GapInc.overdeliveredonprofitexpectationsandachievedourtoplinegoals.Withpositivecompsforthesixthconsecutivequarter,fueledbyourthreelargestbrandsOldNavy,GapandBananaRepublic,itsclearourstrategyisworking,saidPresidentandChiefExecutiveOfficer,RichardDickson.Twoyearsago,IsharedmyvisionforleadingGapInc.intoanexcitingnewchapter.Sincethen,wevebuiltastrongerfoundationwithmorerelevantbrands,asharperoperatingplatform,andamoreunifiedculturewhileconsistentlydemonstratingagilityandresilienceindynamicenvironments.Weareadvancingourtransformationwithdiscipline,clarity,andmomentumandremaincommittedtobuildingahigh-performingcompanythatdeliverssustainable,long-termvalueforourshareholders.”SecondQuarterFiscal2025FinancialResultsNetsalesof$3.7billionwereflatcomparedtolastyear.Comparablesaleswereup1%year-over-year.Storesalesdecreased1%comparedtolastyear.Thecompanyendedthequarterwithabout3,500storelocationsinover35countries,ofwhich2,486werecompanyoperated.Onlinesalesincreased3%comparedtolastyearandrepresented34%oftotalnetsales.Grossmarginof41.2creased140basispointsversuslastyear.Merchandisemargindecreased150basispointsversuslastyearprimarilydrivenbylappingthebenefitofincrementalsalesinthesecondquarteroffiscal2024relatingtothecompanysrevenuesharingagreementwithitscreditcardpartner.Rent,occupancy,anddepreciation(ROD)asapercentofsalesleveraged10basispointsversuslastyear.Operatingexpensewas$1.2billion.Operatingincomewas$292million;operatingmarginof7.8%.Theeffectivetaxratewas27.0%.Netincomeof$216million;dilutedearningspershareof$0.57.BalanceSheetandCashFlowHighlightsEndedthequarterwithcash,cashequivalentsandshort-terminvestmentsof$2.4billion,anincreaseof13%fromtheprioryear.Netcashfromoperatingactivitieswas$308million.Freecashflow,definedasnetcashfromoperatingactivitieslesspurchasesofpropertyandequipment,was$127million.Endinginventoryof$2.3billionwasup9%comparedtolastyearprimarilyasaresultofacceleratedreceiptsandhighercostduetotariffs.Capitalexpenditureswere$181million.Returned$144millionofcashtoshareholdersintheformofdividendsandsharerepurchasesduringthesecondquarteroffiscal2025inclusiveof:Asecondquarterdividendof$0.165pershare,totaling$62million;and3millionsharesrepurchasedfor$82million,endingthesecondquarteroffiscal2025 with371millionsharesoutstanding.TheCompanysBoardofDirectorsapprovedathirdquarterfiscal2025dividendof$0.165pershare.Additionalinformationregardingfreecashflow,whichisanon-GAAPfinancialmeasure,isprovidedattheendofthispressreleasealongwithareconciliationofthismeasurefromthemostdirectlycomparableGAAPfinancialmeasurefortheapplicableperiod.SecondQuarterFiscal2025GlobalBrandResultsComparableSales:Q22025Q22024OldNavy 2%5%Gap 4%3nanaRepublic 4%Athleta(9)%(4)%GapInc.1%3%OldNavy:Secondquarternetsalesof$2.2billionwereup1%comparedtolastyear.Comparablesaleswereup2%.OldNavycontinuestodemonstrateconsistencyinexecutionwithreinvigorationeffortscontinuingtoprogress.Gap:Secondquarternetsalesof$772millionwereup1%comparedtolastyear.Comparablesaleswereup4hievingpositivecomparablesalesforthe7thconsecutivequarter.Gapcontinuestodemonstratethepowerofthereinvigorationplaybookinactionwiththerelentlessrepetitionoftheframeworkdrivingmomentumandsustainedcomparablesalesgrowth.BananaRepublic:Secondquarternetsalesof$475millionweredown1%comparedtolastyear.Comparablesaleswereup4%.BananaRepublicsfoundationalworktore-establishthebrandisresonatingwithconsumersandbeginningtoshowupintheresults.Athleta:Secondquarternetsalesof$300millionweredown11%comparedtolastyear.Comparablesalesweredown9%.Thebrandcontinuestofocusonresettingforthelongtermandimprovingitsproductandmarketing,whichwilltaketime.Fiscal2025OutlookThebelowfiscal2025andthirdquarter2025outlookincludestheestimatedeffectoftariffsbasedonthelatesttradepolicieseffectiveAugust7th.FullYearFiscal2025CurrentFY2025OutlookFY2024ResultsNetsales1%to2%growth$15.1billionOperatingmargin6.7%to7.0%includinganestimated100-110bpsofnettariffimpact7.4%NetinterestincomeApproximately$15million$25millionEffectivetaxrateApproximately27&pitalexpendituresApproximately$500to$550million$447millionNetstoreclosures1Approximately3556ThirdQuarterFiscal2025Q32025OutlookQ32024ResultsNetsales1.5%-2.5%growth$3.8billionGrossmarginApproximately150to170bpsofdeleverageincludinganestimated200bpsofnettariffimpact42.7%Operatingexpense(%ofnetsales)Slightdeleverageduetoshiftintimingofinvestments33.4%1 Referstocompany-operatedstores.WebcastandConferenceCallInformationWhitneyNotaro,HeadofInvestorRelationsatGapInc.,willhostaconferencecalltoreviewthecompanyssecondquarterfiscal2025resultsbeginningatapproximately2:00p.m.PacificTimetoday.Ms.NotarowillbejoinedbyPresidentandChiefExecutiveOfficer,RichardDicksonandChiefFinancialOfficer,KatrinaOConnell.A.Areplayofthewebcastwillbeavailableatthesamelocation.Non-GAAPDisclosureThispressreleaseandrelatedconferencecallincludefinancialmeasuresthathavenotbeencalculatedinaccordancewithU.S.generallyacceptedaccountingprinciples(GAAP)andarethereforereferredtoasnon-GAAPfinancialmeasures.Thenon-GAAPmeasuresdescribedbelowareintendedtoprovideinvestorswithadditionalusefulinformationaboutthecompanysfinancialperformance,toenhancetheoverallunderstandingofitspastperformanceandfutureprospects,andtoallowforgreatertransparencywithrespecttoimportantmetricsusedbymanagementforfinancialandoperatingdecision-making.Thecompanypresentsthesenon-GAAPfinancialmeasurestoassistinvestorsinseeingitsfinancialperformancefrommanagementsviewandbecauseitbelievestheyprovideanadditionaltoolforinvestorstouseincomputingthecompanyscorefinancialperformanceovermultipleperiodswithothercompaniesinitsindustry.Additionalinformationregardingtheintendeduseofnon-GAAPmeasuresincludedinthispressreleaseandrelatedconferencecallisprovidedinthetablestothispressrelease.Thenon-GAAPmeasureincludedinthispressreleaseandrelatedconferencecallisfreecashflow.Thisnon-GAAPmeasureexcludestheimpactofcertainitems.AreconciliationoffreecashflowfromthemostdirectlycomparableGAAPmeasureissetforthinthetablestothispressrelease.Thenon-GAAPmeasuresusedbythecompanyshouldnotbeconsideredasasubstitutefor,orsuperiorto,measuresoffinancialperformancepreparedinaccordancewithGAAPandmaynotbethesameassimilarlytitledmeasuresusedbyothercompaniesduetopossibledifferencesinmethodandinitemsoreventsbeingadjusted.Thecompanyurgesinvestorstoreviewthereconciliationofnon-GAAPfinancialmeasurestothemostdirectlycomparableGAAPfinancialmeasuresincludedinthetablestothispressreleasebelow,andnottorelyonanysinglefinancialmeasuretoevaluateitsbusiness.Thenon-GAAPfinancialmeasuresusedbythecompanyhavelimitationsintheirusefulnesstoinvestorsbecausetheyhavenostandardizedmeaningprescribedbyGAAPandarenotpreparedunderanycomprehensivesetofaccountingrulesorprinciples.Forward-LookingStatementsThispressreleaseandrelatedconferencecallandaccompanyingmaterialscontainforward-lookingstatementswithinthe“safeharbor”provisionsofthePrivateSecuritiesLitigationReformActof1995.Allstatementsotherthanthosethatarepurelyhistoricalareforward-lookingstatements.Wordssuchas“expect,”“anticipate,”“believe,”“estimate,”“intend,”“plan,”“project,”andsimilarexpressionsalsoidentifyforward-lookingstatements.Forward-lookingstatementsincludestatementsregardingthefollowing:ourstrategicprioritiesincludingmaintainingfinancialandoperationalrigor,reinvigoratingourbrands,strengtheningourplatform,andenergizingourculture;buildingmomentumwithinourcore;exploringopportunitiestofuelprofitablegrowthoverthelong-term;investingincapabilities,infrastructure,andourbrandstodriveshareholdervaluecreationovertime;OldNavysleadershipinkeycategories;unlockinggrowthpotentialatOldNavythroughstrategicpartnerships;momentumatGapbrand;fuelingsustainedgrowthatGapbrandovertime;activationsatBananaRepublicinthesecondhalfoffiscal2025;newleadershipatAthletastabilizingthebrandandputtingitonapathtogrowth;maintainingadisciplinedinventoryapproachatAthletainthesecondhalfoffiscal2025;prioritizingtechnologyinvestmentstodriveefficiency,elevatethecustomerexperience,andpositionthecompanyforlong-termgrowth;strengtheningtechnologycapabilitiesandinfrastructure;buildingouremployeecultureintoasuperpowerandenablerofourlong-termsuccess;navigatingmacroeconomicdynamics;executingwithexcellenceinthesecondhalfoffiscal2025;resettingAthletaforthelong-termandthetimelinetoimproveproductandmarketing;theexpectingtimingoftechnologyinvestmentsinthethirdquarteroffiscal2025;ourdisciplinedinventorymanagementprinciples;ourdividendsandsharerepurchases;focusingoncapitalallocationtoenhancelong-termshareholdervalueandinvestingforgrowth;themacroeconomicenvironmentinthesecondhalfoffiscal2025;controllingthecontrollables;expectedfiscal2025netsales;theexpectedimpactoftariffsonfiscal2025grossmargin;thetimingofexpectedincreasesinunitcostsinfiscal2025;expectedfiscal2025SG&A/operatingexpense;drivingcostsavingsinourcoreoperations;reinvestingcostsavingsintofuturegrowthprojectsandtooffsetinflation;expectedfiscal2025operatingmargin;theexpectedimpactoftariffsonfiscal2025operatingmargin;theexpectedimpactoftariffsonfiscal2026operatingincome;ourtariffmitigationplansandthetimingthereof;sustainingmomentumandmarketsharegains;drivingAURgrowthinthesecondhalfoffiscal2025;ourapproachtoinventoryforthesecondhalfoffiscal2025;usingourbalancesheettoinvestinorganicopportunitiesforvaluecreation;expectedfiscal2025capitalexpenditures;expectedthirdquarterfiscal2025netsales;expectedthirdquarterfiscal2025grossmargin;theexpectedimpactoftariffsonthirdquarterfiscal2025grossmargin;expectedthirdquarterfiscal2025SG&A/operatingexpense;expectedfiscal2025netinterestincome;expectedfiscal2025effectivetaxrate;andexpectedfiscal2025netstoreclosures.Becausetheseforward-lookingstatementsinvolverisksanduncertainties,thereareimportantfactorsthatcouldcauseouractualresultstodiffermateriallyfromthoseintheforward-lookingstatements.Thesefactorsinclude,withoutlimitation,thefollowingrisks,anyofwhichcouldhaveanadverseeffectonourbusiness,financialcondition,resultsofoperations,orreputation:theoverallglobaleconomicandgeopoliticalenvironment,uncertaintiesrelatedtogovernmentfiscal,monetary,trade,andtaxpolicies,andconsumerspendingpatterns;recentchangesinU.S.tradepolicyandtariffs,andtheriskofpotentialfuturechangesorworseningtradetensionsbetweentheUnitedStatesandothercountries;theriskthattradematters,includingtariffsongoodsimportedfromoursourcingcountries,couldfurtherincreaseourcosts,orreducethesupplyofapparelavailabletous;theriskthatourenterpriseriskmanagementeffortswillnotbesuccessfulinmitigatingthenegativeimpactoftariffs;thehighlycompetitivenatureofourbusinessintheUnitedStatesandinternationally;theriskthatweorourfranchiseesmaybeunsuccessfulingaugingappareltrendsandchangingconsumerpreferencesorrespondingwithsufficientleadtime;theriskthatwefailtomaintain,enhanceandprotectourbrandimageandreputation;theriskthatwedonotsuccessfullyimplementourmarketingefforts,orthatourtalentpartnershipsexposeustoreputationalorotherrisks;theriskthatwefailtomanagekeyexecutivesuccessionandretentionandtocontinuetoattractqualifiedpersonnel;theriskthatwemaybeunabletomanageourinventoryandfulfillmentoperationseffectivelyandtheresultingimpactonoursalesandresultsofoperations;theriskthatourinvestmentsincustomer,digital,omni-channel,andotherstrategicinitiativesmaynotdelivertheresultsweanticipate;theriskthatfailuresof,orupdatesorchangesto,ourdigitalandinformationtechnologysystems,includingourcontinuedintegrationofdatascienceandartificialintelligence,maydisruptouroperations;theriskoflossortheftofassets,includinginventoryshortage;theriskstoourbusiness,includingourcostsandglobalsupplychain,associatedwithglobalsourcingandmanufacturing;therisksofU.S.orforeignlaborstrikes,workstoppages,boycotts,portcongestion,andotherdisruptionstooursourcingoperations;theriskstoourreputationoroperationsassociatedwithimportingmerchandisefromforeigncountries,includingfailureofourvendorstoadheretoourCodeofVendorConduct;theriskthatweorourfranchiseesmaybeunsuccessfulinidentifying,negotiating,andsecuringnewstorelocationsandrenewing,modifying,orterminatingleasesforexistingstorelocationseffectively;theriskthatourfranchiseesandlicenseescouldimpairthevalueofourbrands;theriskthatoureffortstoexpandinternationallymaynotbesuccessful;engaginginorseekingtoengageinstrategictransactionsthataresubjecttovariousrisksanduncertainties;theriskofinformationsecuritybreachesorvulnerabilitiesthatmayresultinincreasedcosts,violationsoflaw,significantlegalandfinancialexposure,andalossofconfidenceinoursecuritymeasures;theriskthatourtechnologysystemsthatsupportoure-commerceplatformmaynotbeeffectiveorfunctionproperly;reductionsinincomeandcashflowfromourcreditcardprograms;theriskofforeigncurrencyexchangeratefluctuations;theriskthatourcomparablesalesandmarginsmayexperiencefluctuationsorthatwemayfailtomeetfinancialmarketexpectations;evolvingregulationsandexpectationswithrespecttoenvironmental,social,andgovernancematters,andincreasedscrutinyofdiversity,equity,andinclusioninitiatives;theriskthatourlevelofindebtednessmayimpactourabilitytooperateandexpandourbusiness;theriskthatweandoursubsidiariesmaybeunabletomeetourobligationsunderourindebtednessagreements;theriskthatcovenantsinourindebtednessagreementsmayrestrictorlimitourbusiness;theriskthatchangesinourcreditprofileordeteriorationinmarketconditionsmaylimitouraccesstothecapitalmarkets;theadverseimpactsofclimatechangeonourbusiness;naturaldisasters,publichealthcrises,politicalcrises,negativeglobalclimatepatterns,orothercatastrophicevents;ourfailuretocomplywithapplicablelawsandregulationsandchangesintheregulatoryoradministrativelandscape;theriskthatwewillnotbesuccessfulindefendingvariousproceedings,lawsuits,disputes,andclaims;theriskthattheassumptionsandestimatesusedwhenpreparingourfinancialinformation,includingestimatesandassumptionsregardinginventoryvaluation,incometaxesandvaluationallowances,salesreturnandbaddebtallowances,deferredrevenue,andtheimpairmentoflong-livedassets,areinaccurateormaychange,andtheresultingimpactonourresultsofoperations;theriskthatchangesinthegeographicmixandlevelofincomeorlosses,theexpectedoractualoutcomeofaudits,changesindeferredtaxvaluationallowances,andnewlegislationcouldimpactoureffectivetaxrate,orthatwemayberequiredtopayamountsinexcessofestablishedtaxliabilities;theriskthattheadoptionofnewaccountingpronouncementswillimpactfutureresults;andtheriskthatadditionalinformationmayariseduringourcloseprocessorasaresultofsubsequenteventsthatwouldrequireustomakeadjustmentstoourfinancialinformation.AdditionalinformationregardingfactorsthatcouldcauseresultstodiffercanbefoundinourAnnualReportonForm10-KfiledwiththeSecuritiesandExchangeCommissiononMarch18,2025,ourQuarterlyReportonForm10-QfiledwiththeSecuritiesandExchangeCommissiononMay30,2025,andoursubsequentfilingswiththeSecuritiesandExchangeCommission.Theseforward-lookingstatementsarebasedoninformationasofAugust28,2025.Weassumenoobligationtopubliclyupdateorreviseourforward-lookingstatementsevenifexperienceorfuturechangesmakeitclearthatanyprojectedresultsexpressedorimpliedthereinwillnotberealized.AboutGapInc.GapInc.,apurpose-drivenhouseoficonicbrands,isthelargestspecialtyapparelcompanyinAmerica.ItsOldNavy,Gap,BananaRepublic,andAthletabrandsofferclothing,accessories,andlifestyleproductsformen,womenandchildrenavailableworldwidethroughcompany-operatedandfranchisestores,ande-commercesites.Since1969,GapInc.hascreatedproductsandexperiencesthatshapeculture,whiledoingrightbyemployees,communitiesandtheplanetthroughitscommitmenttobridgegapstocreateabetterworld.Formoreinformation,.InvestorRelationsContact:WhitneyNotaroInvestor_MediaRelationsContact:PThe Gap,Inc.CONDENSED CONSOLIDATED BALANCE SHEETSUNAUDITED($in millions)August 2,2025August 3,2024ASSETSCurrent assets:Cash and cash equivalents$2,194$1,900 Short-term investments 238 246 Merchandise inventory 2,294 2,107 Other current assets 651 556 Total current assets 5,377 4,809 Property and equipment,net of accumulated depreciation 2,478 2,525 Operating lease assets 3,397 3,185 Other long-term assets 894 990 Total assets$12,146$11,509 LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable$1,656$1,522 Accrued expenses and other current liabilities 881 1,029 Current portion of operating lease liabilities 631 613 Income taxes payable 29 60 Total current liabilities 3,197 3,224 Long-term liabilities:Long-term debt 1,491 1,489 Long-term operating lease liabilities 3,470 3,357 Other long-term liabilities 555 538 Total long-term liabilities 5,516 5,384 Total stockholders equity 3,433 2,901 Total liabilities and stockholders equity$12,146$11,509 The Gap,Inc.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSUNAUDITED13 Weeks Ended26 Weeks Ended($and shares in millions except per share amounts)August 2,2025August 3,2024August 2,2025August 3,2024Net sales$3,725$3,720$7,188$7,108 Cost of goods sold and occupancy expenses 2,189 2,137 4,204 4,128 Gross profit 1,536 1,583 2,984 2,980 Operating expenses 1,244 1,290 2,432 2,482 Operating income 292 293 552 498 Interest,net(4)(3)(7)(6)Income before income taxes 296 296 559 504 Income tax expense 80 90 150 140 Net income$216$206$409$364 Weighted-average number of shares-basic 373 376 374 375 Weighted-average number of shares-diluted 379 383 381 383 Earnings per share-basic$0.58$0.55$1.09$0.97 Earnings per share-diluted$0.57$0.54$1.07$0.95 The Gap,Inc.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSUNAUDITED26 Weeks Ended($in millions)August 2,2025(a)August 3,2024(a)Cash flows from operating activities:Net income$409$364 Depreciation and amortization 243 247 Change in merchandise inventory(214)(118)Change in accrued expenses and other current liabilities(244)(88)Other,net 114 174 Net cash provided by operating activities 308 579 Cash flows from investing activities:Purchases of property and equipment(181)(182)Purchases of short-term investments(145)(276)Proceeds from sales and maturities of short-term investments 162 33 Net cash used for investing activities(164)(425)Cash flows from financing activities:Proceeds from issuances under share-based compensation plans 12 21 Withholding tax payments related to vesting of stock units(29)(33)Repurchases of common stock(152)Cash dividends paid(123)(112)Net cash used for financing activities(292)(124)Effect of foreign exchange rate fluctuations on cash,cash equivalents,and restricted cash 5 (2)Net increase(decrease)in cash,cash equivalents,and restricted cash(143)28 Cash,cash equivalents,and restricted cash at beginning of period 2,365 1,901 Cash,cash equivalents,and restricted cash at end of period$2,222$1,929 _(a)For the twenty-six weeks ended August 2,2025 and August 3,2024,total cash,cash equivalents,and restricted cash includes$28 million and$29 million,respectively,of restricted cash recorded within other long-term assets on the Condensed Consolidated Balance Sheets.The Gap,Inc.NON-GAAP FINANCIAL MEASURESUNAUDITEDFREE CASH FLOWFree cash flow is a non-GAAP financial measure.We believe free cash flow is an important metric because it represents a measure of how much cash a company has available for discretionary and non-discretionary items after the deduction of capital expenditures.We require regular capital expenditures including technology investments as well as building and maintaining our stores and distribution centers.We use this metric internally,as we believe our sustained ability to generate free cash flow is an important driver of value creation.However,this non-GAAP financial measure is not intended to supersede or replace our GAAP results.26 Weeks Ended($in millions)August 2,2025August 3,2024Net cash provided by operating activities$308$579 Less:Purchases of property and equipment(181)(182)Free cash flow$127$397 The Gap,Inc.NET SALES RESULTSUNAUDITEDThe following table details the Companys second quarter fiscal year 2025 and 2024 net sales(unaudited):($in millions)Old Navy GlobalGap GlobalBananaRepublic GlobalAthleta GlobalOther(2)Total13 Weeks Ended August 2,2025U.S.(1)$1,978$581$408$290$28$3,285 Canada 157 76 46 9 288 Other regions 15 115 21 1 152 Total$2,150$772$475$300$28$3,725($in millions)Old Navy GlobalGap GlobalBananaRepublic GlobalAthleta GlobalOther(2)Total13 Weeks Ended August 3,2024U.S.(1)$1,953$579$414$327$14$3,287 Canada 159 77 43 10 289 Other regions 11 110 22 1 144 Total$2,123$766$479$338$14$3,720 _(1)U.S.includes the United States and Puerto Rico.(2)Primarily consists of net sales from revenue-generating strategic initiatives.The Gap,Inc.REAL ESTATEStore count,net openings/closings,and square footage for our company-operated stores are as follows:February 1,202526 Weeks Ended August 2,2025August 2,2025Number ofStore LocationsNet Number of Stores Opened/(Closed)Number ofStore LocationsSquare Footage(in millions)Old Navy North America 1,249 (9)1,240 19.6 Gap North America 453 453 4.8 Gap Asia 122 3 125 1.1 Banana Republic North America 380 (9)371 3.1 Banana Republic Asia 42 42 0.1 Athleta North America 260 (5)255 1.0 Company-operated stores total 2,506 (20)2,486 29.7 _As of August 2,2025,the Companys franchise partners operated approximately 1,000 franchise stores.
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