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Table of ContentsUNITED 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 June 30,2025OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number 000-52423_AECOM(Exact name of registrant as specified in its charter)Delaware61-1088522State or Other Jurisdiction OfIncorporation or OrganizationI.R.S.Employer Identification Number13355 Noel RoadDallas,Texas75240Address of Principal Executive OfficesZip Code(972)788-1000Registrants Telephone Number,Including Area Code_Former Name,Former Address and Former Fiscal Year,if Changed Since Last ReportSecurities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,$0.01 par valueACMNew 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 during thepreceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes 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 an emerging growthcompany.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial 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 As of July 31,2025,132,446,101 shares of the registrants common stock were outstanding.Table of ContentsAECOMINDEXPART I.FINANCIAL INFORMATIONItem 1.Financial Statements1Consolidated Balance Sheets as of June 30,2025(unaudited)and September 30,20241Consolidated Statements of Operations for the Three and Nine Months Ended June 30,2025(unaudited)and June 30,2024(unaudited)2Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended June 30,2025(unaudited)andJune 30,2024(unaudited)3Consolidated Statements of Stockholders Equity for the Three and Nine Months Ended June 30,2025(unaudited)andJune 30,2024(unaudited)5Consolidated Statements of Cash Flows for the Nine Months Ended June 30,2025(unaudited)and June 30,2024(unaudited)6Notes to Consolidated Financial Statements(unaudited)7Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations29Item 3.Quantitative and Qualitative Disclosures About Market Risk44Item 4.Controls and Procedures45PART II.OTHER INFORMATION46Item 1.Legal Proceedings46Item 1A.Risk Factors46Item 2.Unregistered Sales of Equity Securities and Use of Proceeds46Item 3.Defaults Upon Senior Securities46Item 4.Mine Safety Disclosure46Item 5.Other Information47Item 6.Exhibits48SIGNATURES49Table of ContentsPART I.FINANCIAL INFORMATIONItem 1.Financial StatementsAECOMConsolidated Balance Sheets(unaudited-in thousands,except share data)June 30,2025September 30,2024ASSETSCURRENT ASSETS:Cash and cash equivalents$1,539,369$1,316,945 Cash in consolidated joint ventures254,708 263,932 Total cash and cash equivalents1,794,077 1,580,877 Accounts receivablenet2,597,746 2,793,307 Contract assets1,922,253 1,806,458 Prepaid expenses and other current assets854,896 758,693 Current assets held for sale 77,224 Income taxes receivable98,061 159,500 TOTAL CURRENT ASSETS7,267,033 7,176,059 PROPERTY AND EQUIPMENTNET403,936 354,377 DEFERRED TAX ASSETSNET339,855 326,685 INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES149,195 138,067 GOODWILL3,486,713 3,480,155 INTANGIBLE ASSETSNET5,183 6,932 OTHER NON-CURRENT ASSETS120,475 147,228 OPERATING LEASE RIGHT-OF-USE ASSETS462,863 432,166 NON-CURRENT ASSETS HELD FOR SALE16,892 TOTAL ASSETS$12,252,145$12,061,669 LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Short-term debt$4,676$3,080 Accounts payable2,451,248 2,560,122 Accrued expenses and other current liabilities2,498,168 2,385,731 Income taxes payable40,341 27,418 Contract liabilities1,165,044 1,298,327 Current liabilities held for sale 35,559 Current portion of long-term debt68,499 63,844 TOTAL CURRENT LIABILITIES6,227,976 6,374,081 OTHER LONG-TERM LIABILITIES158,597 156,406 OPERATING LEASE LIABILITIES,NON-CURRENT521,492 510,573 DEFERRED TAX LIABILITY-NET44,576 27,509 PENSION BENEFIT OBLIGATIONS145,044 172,360 LONG-TERM DEBT2,455,855 2,450,330 TOTAL LIABILITIES9,553,540 9,691,259 COMMITMENTS AND CONTINGENCIES(Note 15)AECOM STOCKHOLDERS EQUITY:Common stock-authorized,300,000,000 shares of$0.01 par value as of June 30,2025 and September 30,2024;issued and outstanding 132,318,294 and 132,552,407 shares as of June 30,2025 and September 30,2024,respectively1,323 1,326 Additional paid-in capital4,426,087 4,347,197 Accumulated other comprehensive loss(874,861)(882,671)Accumulated deficits(1,060,209)(1,281,647)TOTAL AECOM STOCKHOLDERS EQUITY2,492,340 2,184,205 Noncontrolling interests206,265 186,205 TOTAL STOCKHOLDERS EQUITY2,698,605 2,370,410 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY$12,252,145$12,061,669 See accompanying Notes to Consolidated Financial Statements.1Table of ContentsAECOMConsolidated Statements of Operations(unaudited-in thousands,except per share data)Three Months EndedNine Months EndedJune 30,2025June 30,2024June 30,2025June 30,2024Revenue$4,178,440$4,151,251$11,964,205$11,995,004 Cost of revenue3,851,490 3,866,207 11,078,090 11,204,816 Gross profit326,950 285,044 886,115 790,188 Equity in earnings(losses)of joint ventures5,290 7,647 21,707(1,835)General and administrative expenses(38,163)(36,209)(118,676)(116,619)Restructuring costs(29,025)(80,670)Income from operations294,077 227,457 789,146 591,064 Other income(loss)823 963(1,001)6,154 Interest income14,063 15,817 45,157 43,341 Interest expense(40,198)(51,370)(125,437)(140,350)Income from continuing operations before taxes268,765 192,867 707,865 500,209 Income tax expense for continuing operations65,148 46,035 145,618 118,078 Net income from continuing operations203,617 146,832 562,247 382,131 Net(loss)income from discontinued operations(43,880)5,677(63,766)(104,998)Net income159,737 152,509 498,481 277,133 Net income attributable to noncontrolling interests from continuingoperations(28,771)(17,355)(55,953)(44,585)Net income attributable to noncontrolling interests from discontinuedoperations(881)(1,126)(2,830)Net income attributable to noncontrolling interests(28,771)(18,236)(57,079)(47,415)Net income attributable to AECOM from continuing operations174,846 129,477 506,294 337,546 Net(loss)income attributable to AECOM from discontinued operations(43,880)4,796(64,892)(107,828)Net income attributable to AECOM$130,966$134,273$441,402$229,718 Net income(loss)attributable to AECOM per share:Basic continuing operations per share$1.32$0.95$3.82$2.48 Basic discontinued operations per share$(0.33)$0.04$(0.49)$(0.79)Basic earnings per share$0.99$0.99$3.33$1.69 Diluted continuing operations per share$1.31$0.95$3.80$2.47 Diluted discontinued operations per share$(0.33)$0.03$(0.49)$(0.79)Diluted earnings per share$0.98$0.98$3.31$1.68 Weighted average shares outstanding:Basic132,301136,025132,411135,976Diluted133,078136,790133,281136,868See accompanying Notes to Consolidated Financial Statements.2Table of ContentsAECOMConsolidated Statements of Comprehensive Income(unauditedin thousands)Three Months EndedNine Months EndedJune 30,2025June 30,2024June 30,2025June 30,2024Net income$159,737$152,509$498,481$277,133 Other comprehensive income(loss),net of tax:Net unrealized loss on derivatives,net of tax(3,769)(375)(1,816)(9,776)Foreign currency translation adjustments85,389(4,422)14,394 28,613 Pension adjustments,net of tax(13,263)(260)(4,868)(7,250)Other comprehensive income(loss),net of tax68,357(5,057)7,710 11,587 Comprehensive income,net of tax228,094 147,452 506,191 288,720 Noncontrolling interests in comprehensive income of consolidatedsubsidiaries,net of tax(28,862)(18,198)(56,979)(47,414)Comprehensive income attributable to AECOM,net of tax$199,232$129,254$449,212$241,306 See accompanying Notes to Consolidated Financial Statements.3Table of ContentsAECOMConsolidated Statements of Stockholders Equity(unauditedin thousands)Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitsTotal AECOM Stockholders EquityNon-Controlling InterestsTotal Stockholders EquityBALANCE AT SEPTEMBER 30,2024$1,326$4,347,197$(882,671)$(1,281,647)$2,184,205$186,205$2,370,410 Net income 441,402 441,402 57,079 498,481 Dividends declared (104,427)(104,427)(104,427)Other comprehensive income 7,810 7,810(100)7,710 Issuance of stock10 51,297 51,307 51,307 Repurchases of stock(13)(18,470)(115,537)(134,020)(134,020)Stock-based compensation 46,063 46,063 46,063 Effect of deconsolidation of a joint venture (13,768)(13,768)Contributions from noncontrolling interests 2,350 2,350 Distributions to noncontrolling interests (25,501)(25,501)BALANCE AT JUNE 30,2025$1,323$4,426,087$(874,861)$(1,060,209)$2,492,340$206,265$2,698,605 Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitsTotal AECOM Stockholders EquityNon-Controlling InterestsTotal Stockholders EquityBALANCE AT SEPTEMBER 30,2023$1,362$4,241,523$(926,577)$(1,103,976)$2,212,332$171,379$2,383,711 Net income 229,718 229,718 47,415 277,133 Dividends declared (91,194)(91,194)(91,194)Other comprehensive income 11,588 11,588(1)11,587 Issuance of stock13 53,597 53,610 53,610 Repurchases of stock(18)(21,179)(141,345)(162,542)(162,542)Stock-based compensation 44,814 44,814 44,814 Contributions from noncontrolling interests 8,529 8,529 Distributions to noncontrolling interests (26,972)(26,972)BALANCE AT JUNE 30,2024$1,357$4,318,755$(914,989)$(1,106,797)$2,298,326$200,350$2,498,676 4Table of ContentsAECOMConsolidated Statements of Stockholders Equity(unauditedin thousands)Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitsTotal AECOM Stockholders EquityNon-Controlling InterestsTotal Stockholders EquityBALANCE AT MARCH 31,2025$1,320$4,378,663$(943,127)$(1,151,420)$2,285,436$180,851$2,466,287 Net income 130,966 130,966 28,771 159,737 Dividends declared (35,040)(35,040)(35,040)Other comprehensive loss 68,266 68,266 91 68,357 Issuance of stock3 32,140 32,143 32,143 Repurchases of stock(22)(4,715)(4,737)(4,737)Stock-based compensation 15,306 15,306 15,306 Effect of deconsolidation of a joint venture Contributions from noncontrolling interests 15 15 Distributions to noncontrolling interests (3,463)(3,463)BALANCE AT JUNE 30,2025$1,323$4,426,087$(874,861)$(1,060,209)$2,492,340$206,265$2,698,605 Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitsTotal AECOM Stockholders EquityNon-Controlling InterestsTotal Stockholders EquityBALANCE AT MARCH 31,2024$1,359$4,267,719$(909,970)$(1,160,441)$2,198,667$195,688$2,394,355 Net loss 134,273 134,273 18,236 152,509 Dividends declared (30,338)(30,338)(30,338)Other comprehensive income (5,019)(5,019)(38)(5,057)Issuance of stock3 36,887 36,890 36,890 Repurchases of stock(5)(54)(50,291)(50,350)(50,350)Stock-based compensation 14,203 14,203 14,203 Contributions from noncontrolling interests 3,037 3,037 Distributions to noncontrolling interests (16,573)(16,573)BALANCE AT JUNE 30,2024$1,357$4,318,755$(914,989)$(1,106,797)$2,298,326$200,350$2,498,676 See accompanying Notes to Consolidated Financial Statements.5Table of ContentsAECOMConsolidated Statements of Cash Flows(unaudited-in thousands)Nine Months Ended June 30,20252024CASH FLOWS FROM OPERATING ACTIVITIES:Net income$498,481$277,133 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization128,375 133,873 Equity in(earnings)losses of unconsolidated joint ventures(15,555)5,235 Distribution of earnings from unconsolidated joint ventures52,144 15,141 Non-cash stock compensation46,063 44,814 Loss on sale of discontinued operations 90,412 Foreign currency translation5,604 3,670 Other9,452 4,652 Changes in operating assets and liabilities,net of effects of acquisitions:Accounts receivable and contract assets96,518(514,407)Prepaid expenses and other assets(61,362)20,613 Accounts payable(160,641)290,587 Accrued expenses and other current liabilities167,562 164,926 Contract liabilities(133,282)72,917 Other long-term liabilities(7,887)(80,852)Net cash provided by operating activities625,472 528,714 CASH FLOWS FROM INVESTING ACTIVITIES:Payments for business acquisition,net of cash acquired(2,786)(18,686)Cash outflow from deconsolidation of a joint venture(45,352)Investment in unconsolidated joint ventures(30,438)(48,352)Return of investment in unconsolidated joint ventures3,042 Proceeds from sale of investments 3,180 Other investing activities16,625(27,100)Proceeds from disposal of property and equipment236 343 Payments for capital expenditures(74,639)(95,280)Net cash used in investing activities(133,312)(185,895)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from borrowings under credit agreements1,931,502 5,319,563 Repayments of borrowings under credit agreements(1,958,842)(5,017,837)Cash paid for debt issuance costs(687)(16,573)Dividends paid(99,149)(85,391)Proceeds from issuance of common stock22,445 25,629 Payments to repurchase common stock(138,324)(163,147)Net distributions to noncontrolling interests(33,313)(18,443)Other financing activities(5,235)573 Net cash(used in)provided by financing activities(281,603)44,374 EFFECT OF EXCHANGE RATE CHANGES ON CASH(1,342)(1,154)NET INCREASE IN CASH AND CASH EQUIVALENTS209,215 386,039 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD1,584,862 1,262,152 CASH AND CASH EQUIVALENTS AT END OF PERIOD1,794,077 1,648,191 LESS CASH AND CASH EQUIVALENTS INCLUDED IN CURRENT ASSETS HELD FOR SALE(3,379)CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS AT END OF PERIOD$1,794,077$1,644,812 See accompanying Notes to Consolidated Financial Statements.6Table of ContentsAECOMNotes to Consolidated Financial Statements(unaudited)1.Basis of PresentationThe accompanying consolidated financial statements of AECOM(the Company)are unaudited and,in the opinion of management,include alladjustments,including all normal recurring items necessary for a fair statement of the Companys financial position and results of operations for the periodspresented.All intercompany balances and transactions are eliminated in consolidation.The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in theCompanys Form 10-K for the fiscal year ended September 30,2024(the Annual Report).The accompanying unaudited consolidated financial statements andrelated notes have been prepared in accordance with generally accepted accounting principles(GAAP)in the United States(U.S.)for interim financial informationand with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.Accordingly,they do not include all of the information and footnotes required by GAAPfor complete financial statements.The consolidated financial statements included in this report have been prepared consistently with the accounting policies described in the Annual Report,except as noted,and should be read together with the Annual Report.The results of operations for the three and nine months ended June 30,2025 are not necessarily indicative of the results to be expected for the fiscal yearending September 30,2025.As discussed in more detail in Note 3,the Company concluded that its self-perform at-risk construction businesses met the criteria for held for salebeginning in the first quarter of fiscal 2020 and met the criteria for discontinued operation classification.As a result,the self-perform at-risk construction businessesare presented in the consolidated statements of operations as discontinued operations for all periods presented.Current and non-current assets and liabilities of thesebusinesses are presented in the consolidated balance sheets as assets and liabilities held for sale.The Company reports its annual results of operations based on 52-or 53-week periods ending on the Friday nearest September 30.The interimconsolidated financial statements are presented for the periods ending on June 27,2025 and June 28,2024.For clarity of presentation,all periods are presented as ifthe periods ended on September 30 and June 30.2.New Accounting Pronouncements and Changes in AccountingIn November 2023,the Financial Accounting Standards Board(FASB)amended the guidance of Accounting Standards Codification(ASC)280,SegmentReporting,requiring public entities to disclose significant segment expenses and other segment items on an interim basis.The new guidance is effective for theCompany for its annual financial statements in fiscal year 2025 and for its interim financial statements in fiscal year 2026,with early adoption permitted.TheCompany is currently evaluating the impact that the adoption of this new guidance will have on its financial statement presentation.In December 2023,the FASB issued ASU 2023-09,Income Taxes(Topic 740):Improvements to Income Tax Disclosures,which includes amendments thatfurther enhance the income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid.Theupdate also includes certain other amendments to improve the effectiveness of income tax disclosures.The amendments are effective for the Companys annualperiods beginning October 1,2025,with early adoption permitted.The Company is currently evaluating the impact that the adoption of this new guidance will haveon its financial statement presentation.In November 2024,the FASB issued ASU 2024-03 requiring public entities to provide disaggregated disclosures in the notes of the financial statements ofcertain categories of expenses that are included in expense line items on the face of the income statement on an interim basis.The new guidance is effective for theCompany for its annual financial statements in fiscal year 2027 and for its interim financial statements in fiscal year 2028,with early adoption permitted.TheCompany is currently evaluating the impact that the adoption of this new guidance will have on its financial statements.7Table of Contents3.Discontinued Operations,Goodwill and Intangible AssetsIn the first quarter of fiscal 2020,management approved a plan to dispose of via sale the Companys self-perform at-risk construction businesses.Thesebusinesses include the Companys civil infrastructure,power,and oil and gas construction businesses that were previously reported in the Companys ConstructionServices segment.After consideration of the relevant facts,the Company concluded the assets and liabilities of its self-perform at-risk construction businesses metthe criteria for classification as held for sale.The Company concluded the actual and proposed disposal activities represented a strategic shift that would have amajor effect on the Companys operations and financial results and qualified for presentation as discontinued operations in accordance with FASB ASC 205-20.Accordingly,the financial results of the self-perform at-risk construction businesses are presented in the Consolidated Statement of Operations as discontinuedoperations for all periods presented.Current and non-current assets and liabilities of these businesses not sold as of the balance sheet date are presented in theConsolidated Balance Sheets as assets and liabilities held for sale for both periods presented.The Company completed the sale of its power and oil and gas construction businesses in fiscal 2021 and fiscal 2022,respectively.The Companycompleted the sale of its civil infrastructure construction business to affiliates of Oroco Capital in the second quarter of fiscal 2021.In the second quarter of fiscal2024,the Company recorded a$103.1 million loss related to a revised estimate of its contingent consideration receivable recognized in its civil infrastructureconstruction business.During the third quarter of fiscal 2024,the Company resolved contingencies related to the sale of its civil infrastructure construction business and receivedequity in the counterparty,and the Company recorded a$12.7 million gain based on the fair value of the equity received.Concurrently,the Company participated asa member of a lending group in a revolving credit facility for the counterparty,committing to fund$30 million that matures in May 2029.At June 30,2025,thecounterparty had$4.4 million outstanding under the credit facility,and all cash flows were classified as other investing activities.During the second quarter of fiscal 2025,the Company and its joint venture counterparty amended the joint venture agreement for a business classified asheld for sale.In connection with the amendment and consistent with ASC 810,Consolidation,the Company reconsidered whether it remained the primarybeneficiary under the variable interest model and concluded it was no longer the primary beneficiary.As such,the Company deconsolidated the joint venture as ofthe amendment date.The Company continues to present its retained noncontrolling interest as held for sale and equity in earnings from the joint venture arereported in net loss from discontinued operations.No gain or loss was recognized in the deconsolidation of the joint venture during the second quarter of fiscal2025.Department of Energy Deactivation,Demolition,and Removal ProjectA former affiliate of the Company,Amentum Environment&Energy,Inc.,f/k/a AECOM Energy and Construction,Inc.(“Former Affiliate”),executed acost-reimbursable task order with the Department of Energy(DOE)in 2007 to provide deactivation,demolition and removal services at a New York State projectsite that,during 2010,experienced contamination and performance issues.In February 2011,the Former Affiliate and the DOE executed a Task Order Modificationthat changed some cost-reimbursable contract provisions to at-risk.The Task Order Modification,including subsequent amendments,required the DOE to pay allproject costs up to$106 million,required the Former Affiliate and the DOE to equally share in all project costs incurred from$106 million to$146 million,andrequired the Former Affiliate to pay all project costs exceeding$146 million.Due to unanticipated requirements and permitting delays by federal and state agencies,as well as delays and related ground stabilization activities causedby Hurricane Irene in 2011,the Former Affiliate was required to perform work outside the scope of the Task Order Modification.In December 2014,the FormerAffiliate submitted an initial set of claims against the DOE pursuant to the Contracts Disputes Acts seeking recovery of$103 million,including additional fees onchanged work scope(the“2014 Claims”).On December 6,2019,the Former Affiliate submitted a second set of claims against the DOE seeking recovery of anadditional$60.4 million,including additional project costs and delays outside the scope of the contract as a result of differing site and ground conditions(the“2019Claims”).The Former Affiliate also submitted three alternative breach of contract claims to the 2014 Claims and the 2019 Claims that may entitle the FormerAffiliate to recovery of$148.5 million to$329.4 million.On December 30,2019,the DOE denied the Former Affiliates 2014 Claims.On September 25,2020,theDOE denied the Former Affiliates 2019 Claims.The Company filed an appeal of these decisions on December 20,2020 in the Court of Federal Claims.Deconstruction,decommissioning and site restoration activities are complete.8Table of ContentsOn January 31,2020,the Company completed the sale of its Management Services business,including the Former Affiliate who worked on the DOEproject,to Maverick Purchaser Sub LLC(“MS Purchaser”),an affiliate of American Securities LLC and Lindsay Goldberg LLC.The Company and the MSPurchaser agreed that all future DOE project claim recoveries and costs will be split 10%to the MS Purchaser and 90%to the Company with the Companyretaining control of all future strategic legal decisions.The Company intends to vigorously pursue all claimed amounts but can provide no certainty that the Company will recover 2014 Claims and 2019 Claimssubmitted against the DOE,or any additional incurred claims or costs,which could have a material adverse effect on the Companys results of operations.Refinery Turnaround ProjectA former affiliate of the Company,which was sold in a series of transactions to effectuate the sale of the selfperform at-risk construction businesses,entered into an agreement to perform turnaround maintenance services in Montana in December 2017.The former affiliate performed additional work outside of theoriginal contract and became entitled to payment from the refinery owner.As part of the sale of the former affiliate,the refinery turnaround project,includingrelated claims,were retained by the Company.The former affiliates claims against the refinery owner and the refinery owners crossclaims against the Companysformer affiliate moved to federal court.A jury trial was completed on February 1,2025,resulting in a favorable verdict for the Company.As a result of unfavorablecourt orders on post-trial motions during the third quarter of fiscal 2025,including pre-judgment interest and prompt payment interest,and issuance of theassociated judgment,the Company recorded a$53.0 million loss from the reduction in the expected future net cash proceeds the Company would receive as a resultof the trial verdict.The Company has appealed the judgment.The loss is reported in discontinued operations as the project was completed prior to the sale of theformer affiliate.The following table represents summarized balance sheet information of assets and liabilities held for sale(in millions):June 30,2025September 30,2024Cash and cash equivalents$4.0 Receivables and contract assets 73.2 Current assets held for sale$77.2 Investment in unconsolidated joint venture$16.9$Property and equipment,net 16.7 Other 1.2 Write-down of assets to fair value less cost to sell(17.9)Non-current assets held for sale$16.9$Accounts payable and accrued expenses$35.6 Current liabilities held for sale$35.6 9Table of ContentsThe following table represents summarized income statement information of discontinued operations(in millions):Three Months EndedNine Months EndedJune 30,2025June 30,2024June 30,2025June 30,2024Revenue$37.3$102.7$138.4 Cost of revenue 41.8 106.6 139.5 Gross loss(4.5)(3.9)(1.1)Equity in losses of joint ventures(0.1)(6.1)(3.4)(Loss)income on disposal activities(58.3)12.7(75.0)(100.4)Transaction costs (0.2)(Loss)income from operations(58.4)8.2(85.0)(105.1)Other expense(0.4)(0.6)(0.8)(1.7)(Loss)income before taxes(58.8)7.6(85.8)(106.8)Income tax(benefit)expense(14.9)1.9(22.0)(1.8)Net(loss)income from discontinuing operations$(43.9)$5.7$(63.8)$(105.0)The significant components included in our Consolidated Statement of Cash Flows for the discontinued operations are as follows(in millions):Three Months EndedNine Months EndedJune 30,2025June 30,2024June 30,2025June 30,2024Payments for capital expenditures$(0.3)$(2.4)Noncash increase in noncurrent assets held for sale due todeconsolidation of a joint venture$41.6$Noncash decrease in noncontrolling interest due to deconsolidation ofa joint venture$(13.8)$The changes in the carrying value of goodwill by reportable segment for the nine months ended June 30,2025 were as follows:September 30,2024Foreign Exchange ImpactAcquiredJune 30,2025(in millions)Americas$2,625.7$(2.2)$2,623.5 International854.5 7.4 1.3 863.2 Total$3,480.2$5.2$1.3$3,486.7 The gross amounts and accumulated amortization of the Companys acquired identifiable intangible assets with finite useful lives as of June 30,2025 andSeptember 30,2024,included in intangible assetsnet,in the accompanying consolidated balance sheets,were as follows:June 30,2025September 30,2024Gross AmountAccumulated AmortizationIntangible Assets,NetGross AmountAccumulated AmortizationIntangible Assets,NetAmortization Period(in millions)(years)Backlog and Customerrelationships$7.4$(2.2)$5.2$671.7$(664.8)$6.9 1-1110Table of ContentsAmortization expense of acquired intangible assets included within cost of revenue was$1.8 million and$14.1 million for the nine months ended June 30,2025 and 2024,respectively.The following table presents estimated amortization expense of existing intangible assets for the remainder of fiscal 2025 and for thesucceeding years:Fiscal Year(in millions)2025(three months remaining)$0.4 20261.5 20271.5 20281.5 20290.3 Total$5.2 4.Revenue RecognitionThe Company follows accounting principles for recognizing revenue upon the transfer of control of promised goods or services to customers,in an amountthat reflects the expected consideration received in exchange for those goods or services.The Company generally recognizes revenues over time as performanceobligations are satisfied.The Company generally measures its progress to completion using an input measure of total costs incurred divided by total costs expectedto be incurred,which it believes to be the best measure of progress towards completion of the performance obligation.In the course of providing its services,theCompany routinely subcontracts for services and incurs other direct costs on behalf of its clients.These costs are passed through to clients and,in accordance withGAAP,are included in the Companys revenue and cost of revenue.These pass-through revenues for the nine months ended June 30,2025 and 2024 were$6.4 billion and$6.6 billion,respectively.Recognition of revenue and profit is dependent upon a number of factors,including the accuracy of a variety of estimates made at the balance sheet date,such as engineering progress,material quantities,the achievement of milestones,penalty provisions,labor productivity and cost estimates.Additionally,theCompany is required to make estimates for the amount of consideration to be received,including bonuses,awards,incentive fees,claims,unpriced change orders,penalties,and liquidated damages.Variable consideration is included in the estimate of the transaction price only to the extent that a significant reversal would notbe probable.Management continuously monitors factors that may affect the quality of its estimates,and material changes in estimates are disclosed accordingly.Costs attributable to claims are treated as costs of contract performance as incurred.The following summarizes the Companys major contract types:Cost Reimbursable ContractsCost reimbursable contracts include cost-plus fixed fee,cost-plus fixed rate,and time-and-materials price contracts.Under cost-plus contracts,theCompany charges clients for its costs,including both direct and indirect costs,plus a negotiated fee or rate.The Company recognizes revenue based on actual directcosts incurred and the applicable fixed rate or portion of the fixed fee earned as of the balance sheet date.Under time-and-materials price contracts,the Companynegotiates hourly billing rates and charges its clients based on the actual time that it expends on a project.In addition,clients reimburse the Company for materialsand other direct incidental expenditures incurred in connection with its performance under the contract.The Company may apply a practical expedient to recognizerevenue in the amount in which it has the right to invoice if its right to consideration is equal to the value of performance completed to date.Guaranteed Maximum Price Contracts(GMP)GMP contracts share many of the same contract provisions as cost-plus and fixed-price contracts.As with cost-plus contracts,clients are provided adisclosure of all the project costs,and a lump sum or percentage fee is separately identified.The Company provides clients with a guaranteed price for the overallproject(adjusted for change orders issued by clients)and a schedule including the expected completion date.Cost overruns or costs associated with project delaysin completion could be the Companys responsibility.For many of the Companys GMP contracts,the final price is generally not established until the Company hassubcontracted a substantial percentage of the trade contracts with terms consistent with the master contract,and it has negotiated additional contractual limitations,such as waivers of consequential damages as well as aggregate caps on liabilities and liquidated damages.Revenue is recognized for GMP contracts as project costsare incurred relative to total estimated project costs.11Table of ContentsFixed-Price ContractsFixed-price contracts include both lump-sum and fixed-unit price contracts.Under lump-sum contracts,the Company performs all the work under thecontract for a specified fee.Lump-sum contracts are typically subject to price adjustments if the scope of the project changes or unforeseen conditions arise.Underfixed-unit price contracts,the Company performs a number of units of work at an agreed price per unit with the total payment under the contract determined by theactual number of units delivered.Revenue is recognized for fixed-price contracts using the input method measured on a cost-to-cost basis as the Company believesthis is the best measure of progress towards completion.Disaggregated RevenueThe following tables present the Companys revenues disaggregated by revenue sources:Three Months EndedNine Months EndedJune 30,2025June 30,2024June 30,2025June 30,2024(in millions)Cost reimbursable$1,619.1$1,594.7$4,588.4$4,817.0 Guaranteed maximum price1,575.8 1,597.5 4,446.8 4,433.1 Fixed-price983.5 959.0 2,929.0 2,744.9 Total revenue$4,178.4$4,151.2$11,964.2$11,995.0 Three Months EndedNine Months EndedJune 30,2025June 30,2024June 30,2025June 30,2024(in millions)Americas$3,277.2$3,247.0$9,286.2$9,325.0 Europe,Middle East,India,Africa536.4 530.1 1,604.7 1,645.3 Asia-Australia-Pacific364.8 374.1 1,073.3 1,024.7 Total revenue$4,178.4$4,151.2$11,964.2$11,995.0 Remaining Unsatisfied Performance ObligationsAs of June 30,2025,the Company had allocated$17.9 billion of transaction price to unsatisfied or partially satisfied performance obligations,of whichapproximately 59%is expected to be satisfied within the next twelve months.The majority of remaining performance obligation after the first 12 months areexpected to be recognized over a two-year period.Contract liabilities represent billings as of the balance sheet date,as allowed under the terms of a contract,but not yet recognized as contract revenuepursuant to the Companys revenue recognition policy.The Company recognized revenue of$859.9 million and$764.7 million during the nine months endedJune 30,2025 and 2024,respectively,that was included in contract liabilities as of September 30,2024 and 2023,respectively.The Companys timing of revenue recognition may not be consistent with its rights to bill and collect cash from its clients.Those rights are generallydependent upon advance billing terms,milestone billings based on the completion of certain phases of work or when services are performed.The Companysaccounts receivables represent amounts billed to clients that have yet to be collected and represent an unconditional right to cash from its clients.Contract assetsrepresent the amount of contract revenue recognized but not yet billed pursuant to contract terms or accounts billed after the balance sheet date.12Table of ContentsNet accounts receivable consisted of the following:June 30,2025September 30,2024(in millions)Billed$2,012.3$2,184.9 Contract retentions674.1 696.3 Total accounts receivablegross2,686.4 2,881.2 Allowance for doubtful accounts and credit losses(88.7)(87.9)Total accounts receivablenet$2,597.7$2,793.3 Substantially all contract assets as of June 30,2025 and September 30,2024 are expected to be billed and collected within twelve months,except forclaims.Significant claims recorded in contract assets and other non-current assets were approximately$320 million and$180 million as of June 30,2025 andSeptember 30,2024,respectively.The asset related to the Deactivation,Demolition,and Removal Project retained from the MS Purchaser as defined in anddiscussed in Note 3 is presented in prepaid expense and other current assets from continuing operations in the Consolidated Balance Sheet.Contract retentionsrepresent amounts invoiced to clients where payments have been withheld from progress payments until the contracted work has been completed and approved bythe client but nonetheless represent an unconditional right to cash.The Company considers a broad range of information to estimate expected credit losses including the related ages of past due balances,projections ofcredit losses based on historical trends,and collection history and credit quality of its clients.Negative macroeconomic trends or delays in payment of outstandingreceivables could result in an increase in the estimated credit losses.No single client accounted for more than 10%of the Companys outstanding receivables at June 30,2025 and September 30,2024.The Company sold trade receivables to financial institutions,of which$355.6 million and$319.5 million were outstanding as of June 30,2025 andSeptember 30,2024,respectively.The Company does not retain financial or legal obligations for these receivables that would result in material losses.TheCompanys ongoing involvement is limited to the remittance of customer payments to the financial institutions with respect to the sold trade receivables.5.Joint Ventures and Variable Interest EntitiesThe Companys joint ventures provide architecture,engineering,program management,construction management,operations and maintenance services,and invest in real estate projects.Joint ventures,the combination of two or more partners,are generally formed for a specific project.Management of the jointventure is typically controlled by a joint venture executive committee,comprised of representatives from the joint venture partners.The joint venture executivecommittee normally provides management oversight and controls decisions which could have a significant impact on the joint venture.Some of the Companys joint ventures have no employees and minimal operating expenses.For these joint ventures,the Companys employees performwork for the joint venture,which is then billed to a third-party customer by the joint venture.These joint ventures function as pass-through entities to bill the third-party customer.For consolidated joint ventures of this type,the Company records the entire amount of the services performed and the costs associated with theseservices,including the services provided by the other joint venture partners,in the Companys result of operations.For certain of these joint ventures where a fee isadded by an unconsolidated joint venture to client billings,the Companys portion of that fee is recorded in equity in earnings of joint ventures.The Company also has joint ventures that have their own employees and operating expenses,and to which the Company generally makes a capitalcontribution.The Company accounts for these joint ventures either as consolidated entities or equity method investments based on the criteria further discussedbelow.13Table of ContentsThe Company follows guidance on the consolidation of variable interest entities(VIEs)that requires companies to utilize a qualitative approach todetermine whether it is the primary beneficiary of a VIE.The process for identifying the primary beneficiary of a VIE requires consideration of the factors thatindicate a party has the power to direct the activities that most significantly impact the joint ventures economic performance,including powers granted to the jointventures program manager,powers contained in the joint venture governing board and,to a certain extent,a companys economic interest in the joint venture.TheCompany analyzes its joint ventures and classifies them as either:a VIE that must be consolidated because the Company is the primary beneficiary or the joint venture is not a VIE and the Company holds the majorityvoting interest with no significant participative rights available to the other partners;ora VIE that does not require consolidation and is treated as an equity method investment because the Company is not the primary beneficiary or thejoint venture is not a VIE and the Company does not hold the majority voting interest.As part of the above analysis,if it is determined that the Company has the power to direct the activities that most significantly impact the joint ventureseconomic performance,the Company considers whether or not it has the obligation to absorb losses or rights to receive benefits of the VIE that could potentially besignificant to the VIE.Contractually required support provided to the Companys joint ventures is further discussed in Note 15.Summary of financial information of the consolidated joint ventures is as follows:June 30,2025 (unaudited)September 30,2024(in millions)Current assets$805.6$836.9 Non-current assets87.4 83.1 Total assets$893.0$920.0 Current liabilities$630.4$763.6 Non-current liabilities6.2 1.5 Total liabilities636.6 765.1 Total AECOM equity(deficit)51.5(17.2)Noncontrolling interests204.9 172.1 Total owners equity256.4 154.9 Total liabilities and owners equity$893.0$920.0 Total revenue of the consolidated joint ventures was$1,260.1 million and$1,799.2 million for the nine months ended June 30,2025 and 2024,respectively.The assets of the Companys consolidated joint ventures are restricted for use only by the particular joint venture and are not available for the generaloperations of the Company.14Table of ContentsSummary of unaudited financial information of the unconsolidated joint ventures,as derived from their unaudited financial statements,was as follows:June 30,2025September 30,2024(in millions)Current assets$1,441.4$1,379.0 Non-current assets748.5 799.9 Total assets$2,189.9$2,178.9 Current liabilities$1,047.5$976.3 Non-current liabilities92.0 114.8 Total liabilities1,139.5 1,091.1 Joint ventures equity1,050.4 1,087.8 Total liabilities and joint ventures equity$2,189.9$2,178.9 AECOMs investment in unconsolidated joint ventures$149.2$138.1 Nine Months EndedJune 30,2025June 30,2024(in millions)Revenue$2,108.1$1,562.8 Cost of revenue2,058.2 1,495.3 Gross profit$49.9$67.5 Net income$47.8$63.9 Summary of AECOMs equity in earnings of unconsolidated joint ventures is as follows:Nine Months EndedJune 30,2025June 30,2024(in millions)Pass-through joint ventures$21.6$24.7 Other joint ventures0.1(26.5)Total$21.7$(1.8)6.Pension Benefit ObligationsIn the U.S.,the Company sponsors various qualified defined benefit pension plans.Benefits under these plans generally are based on the employees yearsof creditable service and compensation;however,all U.S.defined benefit plans are closed to new participants and have frozen accruals.The Company also sponsors various non-qualified plans in the U.S.;all of these plans are frozen.Outside the U.S.,the Company sponsors various pensionplans,which are appropriate to the country in which the Company operates,some of which are government mandated.15Table of ContentsThe components of net periodic benefit cost other than the service cost component are included in other income in the consolidated statement ofoperations.The following table details the components of net periodic benefit cost for the Companys pension plans for the three and nine months ended June 30,2025 and 2024:Three Months EndedNine Months EndedJune 30,2025June 30,2024June 30,2025June 30,2024U.S.Intl U.S.Intl U.S.Intl U.S.Int(in millions)Components of net periodic benefit cost:Service costs$0.1$0.1$Interest cost on projected benefitobligation2.0 10.2 2.4 10.8 5.9 29.7 7.3 Expected return on plan assets(1.2)(13.3)(1.3)(14.3)(3.6)(38.6)(4.1)Amortization of prior service cost 0.1 0.1 0.1 Amortization of net loss(gain)0.9(0.4)0.8(0.6)2.8(1.0)2.3 Net periodic benefit cost(credit)$1.7$(3.4)$1.9$(3.9)$5.1$(9.7)$5.5$The total amounts of employer contributions paid for the nine months ended June 30,2025 were$7.7 million for U.S.plans and$17.2 million for non-U.S.plans.The expected remaining scheduled annual employer contributions for the fiscal year ending September 30,2025 are$3.5 million for U.S.plans and$7.6 million for non-U.S.plans.7.DebtDebt consisted of the following:June 30,2025September 30,2024(in millions)Credit Agreement$1,441.6$1,446.6 2027 Senior Notes997.3 997.3 Other debt109.3 95.9 Total debt2,548.2 2,539.8 Less:Current portion of debt and short-term borrowings(73.2)(66.9)Less:Unamortized debt issuance costs(19.1)(22.6)Long-term debt$2,455.9$2,450.3 The following table presents,in millions,scheduled maturities of the Companys debt as of June 30,2025:Fiscal Year2025(three months remaining)$22.5 202659.4 20271,025.7 202819.0 2029758.7 Thereafter662.9 Total$2,548.2 16Table of ContentsCredit AgreementOn April 19,2024,the Company entered into Amendment No.14 to Syndicated Facility Agreement(as amended,modified or otherwise supplemented,the Credit Agreement),pursuant to which the Company obtained a new$1,500,000,000 revolving credit facility(the“New Revolving Credit Facility”),a new$750,000,000 term loan A facility(the“New Term A Facility”and,together with the New Revolving Credit Facility,the“New Pro Rata Facilities”)and a new$700,000,000 term loan B facility(the“New Term B Facility”and,together with the New Pro Rata Facilities,the“New Credit Facilities”).The New RevolvingCredit Facility and the New Term A Facility mature on April 19,2029.The New Term B Facility matures on April 19,2031.The New Term A Facility and the NewTerm B Facility were borrowed in full on April 19,2024 in U.S.dollars.Loans under the New Revolving Credit Facility may be borrowed,and letters of creditthereunder may be issued,in U.S.dollars or in certain foreign currencies.The New Credit Facilities replace in full the Companys existing revolving credit facility,term loan A facility and term loan B facility,and borrowings under the New Credit Facilities were used to refinance in full the Companys existing credit facilitiesand for general corporate purposes.The Credit Agreement permits the Company to designate certain of its subsidiaries as additional co-borrowers from time totime.Currently,there are no co-borrowers under the New Credit Facilities.On October 29,2024,the Company entered into Amendment No.15 to SyndicatedFacility Agreement,pursuant to which the Company reduced the interest rate spread applicable to its New Term B Facility.Borrowings under(a)the New Revolving Credit Facility(in U.S.dollars)and the New Term A Facility bear interest at a rate per annum equal to,at theCompanys option,(i)a Term SOFR rate(with a 0%floor and SOFR adjustment of 0.10%)or(ii)a base rate(with a 0%floor),in each case,plus an applicablemargin of 1.225%in the case of the Term SOFR rate and 0.225%in the case of the base rate,and(b)the New Revolving Credit Facility in currencies other thanU.S.dollars bear interest at a rate per annum equal to the applicable reference rate for such currency(including any related adjustments),plus an applicable marginof 1.225%.The applicable margin is subject,in each case,to adjustment based on the Companys consolidated leverage ratio from time to time.Borrowings under the New Term B Facility,after giving effect to Amendment No.15 to Syndicated Facility Agreement,bear interest at a rate per annumequal to,at the Companys option,(a)a Term SOFR rate(with a 0%floor and a SOFR adjustment of 0%)or(b)a base rate(with a 0%floor),in each case,plus anapplicable margin of 1.75%in the case of the Term SOFR rate and 0.75%in the case of the base rate.Certain of the Companys material subsidiaries(the“Guarantors”)have guaranteed the Companys obligations of the borrowers under the CreditAgreement,subject to certain exceptions.The borrowers obligations under the Credit Agreement are secured by a lien on substantially all of the Companys assetsand its Guarantors assets,subject to certain exceptions.The Credit Agreement contains customary negative covenants that include,among other things,limitations on the ability of the Company and certain of itssubsidiaries,subject to certain exceptions,to incur liens and debt,make investments,dispositions,and restricted payments,change the nature of their business,consummate mergers,consolidations and the sale of all or substantially all of their respective assets and transact with affiliates.The Company is also required tomaintain a consolidated leverage ratio of less than or equal to 4.00 to 1.00(subject to certain adjustments in connection with permitted acquisitions),tested on aquarterly basis(the“Financial Covenant”).The Financial Covenant does not apply to the New Term B Facility.As of June 30,2025,the Company was incompliance with the covenants of the Credit Agreement.The Credit Agreement contains customary affirmative covenants,including,among other things,compliance with applicable law,preservation ofexistence,maintenance of properties and of insurance,and keeping proper books and records.The Credit Agreement contains customary events of default,including,among other things,nonpayment of principal,interest or fees,cross-defaults to other debt,inaccuracies of representations and warranties,failure toperform covenants,events of bankruptcy and insolvency,change of control and unsatisfied judgments,subject in certain cases to notice and cure periods and otherexceptions.At June 30,2025 and September 30,2024,letters of credit totaled$4.4 million and$4.4 million,respectively,under the Companys New Revolving CreditFacility.As of June 30,2025 and September 30,2024,the Company had$1,495.6 million and$1,495.6 million,respectively,available under its New RevolvingCredit Facility.2027 Senior NotesOn February 21,2017,the Company completed a private placement offering of$1,000,000,000 aggregate principal amount of its unsecured 5.125%SeniorNotes due 2027(the“2027 Senior Notes”).On June 30,2017,the Company completed an exchange offer to exchange the unregistered 2027 Senior Notes forregistered notes,as well as related guarantees.17Table of ContentsAs of June 30,2025,the estimated fair value of the 2027 Senior Notes was approximately$993.6 million.The fair value of the 2027 Senior Notes as ofJune 30,2025 was derived by taking the mid-point of the trading prices from an observable market input(Level 2)in the secondary bond market and multiplying itby the outstanding balance of the 2027 Senior Notes.Interest was payable on the 2027 Senior Notes at a rate of 5.125%per annum.Interest on the 2027 SeniorNotes was payable semi-annually on March 15 and September 15 of each year,commencing on September 15,2017.The 2027 Senior Notes were set to mature onMarch 15,2027.At any time and from time to time prior to December 15,2026,the Company may redeem all or part of the 2027 Senior Notes,at a redemption price equalto 100%of their principal amount,plus a“make whole”premium as of the redemption date,and accrued and unpaid interest to the redemption date.The indenture pursuant to which the 2027 Senior Notes were issued contained customary events of default,including,among other things,paymentdefault,exchange default,failure to provide notices thereunder and provisions related to bankruptcy events.The indenture also contained customary negativecovenants.The Company was in compliance with the covenants relating to the 2027 Senior Notes as of June 30,2025.Other Debt and Other ItemsOther debt consists primarily of obligations under capital leases and loans,and unsecured credit facilities.The Companys unsecured credit facilities areprimarily used for standby letters of credit issued in connection with general and professional liability insurance programs and for contract performance guarantees.At June 30,2025 and September 30,2024,these outstanding standby letters of credit totaled$895.2 million and$934.5 million,respectively.As of June 30,2025,the Company had$376.7 million available under these unsecured credit facilities.Effective Interest RateThe Companys average effective interest rate on its total debt,including the effects of the interest rate swap and interest rate cap agreements,during thenine months ended June 30,2025 and 2024 was 5.1%and 5.5%,respectively.Interest expense in the consolidated statements of operations included amortization of deferred debt issuance costs for the three and nine months endedJune 30,2025 of$1.2 million and$3.9 million,respectively,and for the three and nine months ended June 30,2024 of$4.0 million and$6.4 million,respectively.Subsequent Events2033 Senior NotesOn July 22,2025,the Company completed an offering of$1,200,000,000 aggregate principal amount of its 6.000%Senior Notes due 2033(the“2033Senior Notes”).Interest will be payable on the 2033 Senior Notes at a rate of 6.000%per annum.Interest on the 2033 Senior Notes will be payable semi-annually inarrears on February 1 and August 1 of each year,commencing on February 1,2026.The 2033 Senior Notes will mature on August 1,2033.Prior to August 1,2028,the Company may redeem all or part of the 2033 Senior Notes at a redemption price equal to 100%of the principal amount to beredeemed,plus a“make whole”premium as of the redemption date,and accrued and unpaid interest to,but excluding,the redemption date.In addition,prior toAugust 1,2028,the Company may redeem up to 40%of the aggregate principal amount of the 2033 Senior Notes with proceeds from certain equity offerings at aredemption price equal to 106%of the principal amount to be redeemed,plus accrued and unpaid interest to,but excluding,the redemption date.Furthermore,atany time on or after August 1,2028,the Company may redeem on one or more occasions all or part of the 2033 Senior Notes at the redemption prices set forthbelow,plus accrued and unpaid interest thereon to,but excluding,the redemption date,if redeemed during the 12-month period beginning on August 1 of each ofthe years indicated below:Percentage2028.103.000 29.101.500 30 and thereafter.100.000Table of ContentsThe indenture pursuant to which the 2033 Senior Notes were issued contains customary events of default,including,among other things,payment default,failure to provide certain notices thereunder and certain provisions related to bankruptcy events.The indenture also contains customary negative covenants.2027 Senior NotesOn July 22,2025,the Company used a portion of the net proceeds of the offering of the 2033 Senior Notes to purchase$732,914,000 in principal amountof the 2027 Senior Notes that were validly tendered and not validly withdrawn at or prior to the July 21,2025 expiration date of its previously announced tenderoffer for the 2027 Senior Notes.The purchase included a make whole payment of$6.4 million.In addition,the Company also issued a redemption notice to noteholders to redeem on August 14,2025 the remaining 2027 Senior Notes that areoutstanding and not tendered in the tender offer.The redemption is expected to include a make whole payment of$2.3 million.8.Derivative Financial Instruments and Fair Value MeasurementsThe Company uses interest rate derivative contracts to hedge interest rate exposures on the Companys variable rate debt.The Company enters into foreigncurrency derivative contracts with financial institutions to reduce the risk that its cash flows and earnings will be adversely affected by foreign currency exchangerate fluctuations.The Companys hedging program is not designated for trading or speculative purposes.The Company recognizes derivative instruments as either assets or liabilities on the accompanying consolidated balance sheets at fair value.The Companyrecords changes in the fair value(i.e.,gains or losses)of the derivatives that have been designated as accounting hedges in the accompanying consolidatedstatements of operations as cost of revenue,interest expense or to accumulated other comprehensive loss in the accompanying consolidated balance sheets.Cash Flow HedgesThe Company uses interest rate swap and interest rate cap agreements designated as cash flow hedges to limit exposure to variable interest rates onportions of the Companys debt.The Company initially reports any gain on the effective portion of a cash flow hedge as a component of accumulated othercomprehensive loss.Depending on the type of cash flow hedge,the gain is subsequently reclassified against interest expense when the interest expense on thevariable rate debt is recognized.If the hedged transaction becomes probable of not occurring,any gain or loss related to interest rate swap or interest rate capagreements would be recognized in other income.The notional principal,fixed rates and related effective and expiration dates of the Companys outstanding interest rate swap agreements were as follows:June 30,2025Notional Amount CurrencyNotional Amount(in millions)Fixed RateEffective DateExpiration DateUSD400.01.283bruary 2023March 2028September 30,2024Notional Amount CurrencyNotional Amount(in millions)Fixed RateEffective DateExpiration DateUSD400.01.283bruary 2023March 2028In the fourth quarter of fiscal 2021,the Company entered into interest rate swap agreements with a notional value of$400.0 million to manage the interestrate exposure of its variable rate loans.The swaps became effective February 2023 and terminate in March 2028.By entering into the swap agreements,theCompany converted a portion of the SOFR rate-based liability into a fixed rate liability.The Company will pay a fixed rate of 1.283%and receive payment at theprevailing one-month SOFR.In the third quarter of fiscal 2022,the Company purchased interest rate cap agreements with a notional value of$300.0 million to manage interest rateexposure of its variable rate loans.The caps became effective on June 30,2022 and terminate in March 2028.The caps reduce the Companys exposure to one-month SOFR.In the event one-month SOFR exceeds 3.465%,the Company will receive the spread between prevailing one-month SOFR and 3.465%.19Table of ContentsSee Note 14 for accumulated balances and reporting period activities of derivatives related to reclassifications out of accumulated other comprehensiveloss for the nine months ended June 30,2025 and 2024.Additionally,there were no material losses recognized in income due to amounts excluded fromeffectiveness testing from the Companys interest rate swap agreements.Other Foreign Currency Forward ContractsThe Company uses foreign currency forward contracts which are not designated as accounting hedges to hedge intercompany transactions and othermonetary assets or liabilities denominated in currencies other than the functional currency of a subsidiary.Gains and losses on these contracts were not material forthe nine months ended June 30,2025 and 2024.Fair Value MeasurementsThe fair values of the interest rate swap and interest rate cap agreements were derived by taking the net present value of the expected cash flows usingobservable market inputs(Level 2)such as SOFR rate curves,futures,volatilities and basis spreads(when applicable).As discussed in Note 3,the Company received an equity investment in the civil infrastructure construction business buyer and concurrently participated asa member of a lending group in a revolving credit facility.The Company elected the fair value option for its equity investment due to the availability of quotedprices of identical assets.The fair value option was also elected for the credit facility investment.Changes in fair value of both investments are classified withinother income on the consolidated statements of operations.The Company records interest income at the stated coupon rate of the credit facility and classifies itwithin interest income on the consolidated statement of operations.Fair value for the equity investment is determined using Level 1 inputs,and fair value of thecredit facility investment is determined using Level 3 inputs,such as estimated cash flows and estimated discount rates.The Company recorded a loss of$6.9 million and$1.6 million in other income in the first nine months of fiscal 2025 and 2024,respectively,representing the decrease in fair value of theseinvestments.Below are the Companys non-pension financial assets and liabilities recorded at fair value on a recurring basis within the ASC 820-10 fair valuehierarchy:June 30,2025Balance Sheet LocationQuoted Prices inActive Markets forIdentical Assets(Level1)SignificantObservable Inputs(Level 2)SignificantUnobservable Inputs(Level 3)Total Fair ValueInterest rate contractsOther current assets$9.5$9.5 Interest rate contractsOther non-current assets 12.9 12.9 Interest rate contractsOther current liabilities(0.9)(0.9)Interest rate contractsOther long-term liabilities(2.7)(2.7)Credit facility investmentOther non-current assets 5.4 5.4 Equity investmentOther non-current assets13.2 13.2 Total net assets at fair value$13.2$18.8$5.4$37.4 September 30,2024Balance Sheet LocationQuoted Prices inActive Markets forIdentical Assets(Level1)SignificantObservable Inputs(Level 2)SignificantUnobservable Inputs(Level 3)Total Fair ValueInterest rate contractsOther current assets$9.2$9.2 Interest rate contractsOther non-current assets 16.5 16.5 Interest rate contractsOther current liabilities(0.9)(0.9)Interest rate contractsOther long-term liabilities(3.6)(3.6)Credit facility investmentOther non-current assets 21.9 21.9 Equity investmentOther non-current assets19.4 19.4 Total net assets at fair value$19.4$21.2$21.9$62.5 20Table of ContentsThe table below sets forth a summary of changes in the fair value of the Companys Level 3 investment assets:Nine Months Ended June 30,2025Beginning BalanceInvestmentGains/(Losses)Interest EarnedLoansCollectionsEnding BalanceCredit facility investment including accruedinterest$21.9(0.7)0.8 8.0(24.6)$5.4 9.Share-based PaymentsThe Company grants stock units to employees under its Performance Earnings Program(PEP),whereby units are earned and issued dependent uponmeeting established cumulative performance objectives and vest over a three-year service period.Additionally,the Company issues restricted stock units toemployees and directors which are earned based on service conditions.The grant date fair value of PEP awards and restricted stock unit awards is primarily basedon that days closing market price of the Companys common stock.Restricted stock units and PEP unit activity for the nine months ended June 30 was as follows:20252024Restricted Stock UnitsWeighted Average Grant-Date Fair ValuePEP UnitsWeighted Average Grant-Date Fair ValueRestricted Stock UnitsWeighted Average Grant-Date Fair ValuePEP UnitsWeigAverGrantFair V(in millions)(in millions)(in millions)(in millions)Outstanding at September 30,0.8$83.96 0.7$95.38 0.8$68.34 0.7$Granted0.2$110.58 0.2$129.24 0.3$92.30 0.2$PEP units earned$0.1$85.46$0.2$Vested(0.2)$75.70(0.3)$85.46(0.3)$50.04(0.4)$Cancelled(0.1)$95.96 0.0$0.0$0.0$Outstanding at June 30,0.7$95.58 0.7$109.67 0.8$83.95 0.7$Total compensation expense related to these share-based payments including stock options was$46.1 million and$44.8 million during the nine monthsended June 30,2025 and 2024,respectively.Unrecognized compensation expense related to total share-based payments outstanding as of June 30,2025 andSeptember 30,2024 was$89.7 million and$68.7 million,respectively,to be recognized on a straight-line basis over the awards respective vesting periods whichare generally three years.10.Income TaxesThe Companys effective tax rate was 20.6%and 23.6%for the nine months ended June 30,2025 and 2024,respectively.The most significant itemscontributing to the difference between the statutory U.S.federal corporate tax rate of 21.0%and the Companys effective tax rate for the nine-month period endedJune 30,2025 were a tax benefit of$47.2 million related to income tax credits and incentives,tax expense of$45.6 million related to foreign residual income,a taxbenefit of$20.1 million related to deferred tax assets recognized due to legal entity restructuring,and tax expense of$19.6 million related to state income taxes.Allthese items,except for the deferred tax assets benefit,are expected to have a continuing impact on the effective tax rate for the remainder of the fiscal year.The most significant items contributing to the difference between the statutory U.S.federal corporate tax rate of 21.0%and the Companys effective taxrate for the nine-month period ended June 30,2024 were a tax benefit of$46.1 million related to income tax credits and incentives,tax expense of$39.7 millionrelated to foreign residual income,tax expense of$18.2 million related to state income taxes,a tax benefit of$8.4 million related to the exclusion of tax on non-controlling interests,tax expense of$7.4 million related to changes in valuation allowances,a tax benefit of$6.9 million related to an audit settlement,and taxexpense of$5.6 million related to nondeductible costs.During the first quarter of fiscal 2025,the Company recognized deferred tax assets of$20.1 million related to legal entity restructuring.The restructuringresulted in the recognition of deferred tax assets related to tax attributes that are expected to be utilized against future taxable income.21Table of ContentsDuring the first quarter of fiscal 2024,the Company settled its tax audit in Hong Kong for fiscal year 2011 through fiscal year 2021 and recorded a taxbenefit of$6.9 million due primarily to changes in uncertain tax positions.The Company is utilizing the annual effective tax rate method under ASC 740 to compute its interim tax provision.The Companys effective tax ratefluctuates from quarter to quarter due to various factors including the change in the mix of global income and expenses,outcomes of administrative audits,changesin the assessment of valuation allowances due to managements consideration of new positive or negative evidence during the quarter,and changes in enacted taxlaws.The U.S.and many international legislative and regulatory bodies have proposed legislation that could significantly impact how our business activities aretaxed.These proposed changes could have a material impact on the Companys income tax expense and deferred tax balances.The Company is currently under tax audit in several jurisdictions including the U.S.where its federal income tax returns for fiscal 2017 through 2020 arebeing examined by the IRS.Disputes can arise with tax authorities involving issues related to the timing of deductions,the calculation and use of credits,and thetaxation of income in various tax jurisdictions because of differing interpretations or application of tax laws,regulations,and relevant facts.The IRS is currentlyauditing certain tax credits and the methodology for calculating the credits.While the Company has historically been able to sustain the credits in previous auditcycles without adjustment,the Company believes its reasonably possible there could be an adjustment to the liability for uncertain tax positions within the nexttwelve months related to this issue.However,the Company is not able to reasonably estimate the range of potential outcomes.Generally,the Company does not provide for U.S.taxes or foreign withholding taxes on gross book-tax differences in its non-U.S.subsidiaries becausesuch basis differences of approximately$1.2 billion are able to and intended to be reinvested indefinitely.If these basis differences were distributed,foreign taxcredits could become available under current law to partially or fully reduce the resulting U.S.income tax liability.There may also be additional U.S.or foreignincome tax liability upon repatriation,although the calculation of such additional taxes is not practicable.11.Earnings Per ShareBasic earnings per share(EPS)excludes dilution and is computed by dividing net income attributable to AECOM by the weighted average number ofcommon shares outstanding for the period.Diluted EPS is computed by dividing net income attributable to AECOM by the weighted average number of commonshares outstanding and potential common shares for the period.The Company includes as potential common shares the weighted average dilutive effects of equityawards using the treasury stock method.For the three and nine months ended June 30,2025 and 2024,equity awards excluded from the calculation of potentialcommon shares were not significant.The following table sets forth a reconciliation of the denominators for basic and diluted earnings per share:Three Months EndedNine Months EndedJune 30,2025June 30,2024June 30,2025June 30,2024(in millions)Denominator for basic earnings per share132.3136.0132.4136.0Potential common shares0.80.80.90.9Denominator for diluted earnings per share133.1136.8133.3136.912.LeasesThe Company and its subsidiaries are lessees in non-cancelable leasing agreements for office buildings and equipment.Substantially all of the Companysoffice building leases are operating leases,and its equipment leases are both operating and finance leases.The Company groups lease and non-lease components forits equipment leases into a single lease component but separates lease and non-lease components for its office building leases.The Company recognizes a right-of-use asset and lease liability for its operating leases at the commencement date equal to the present value of thecontractual minimum lease payments over the lease term.The present value is calculated using the rate implicit in the lease,if known,or the Companysincremental secured borrowing rate.The discount rate used for operating leases is primarily determined based on an analysis of the Companys incremental securedborrowing rate,while the discount rate used for finance leases is primarily determined by the rate specified in the lease.22Table of ContentsThe related lease payments are expensed on a straight-line basis over the lease term,including,as applicable,any free-rent period during which theCompany has the right to use the asset.For leases with renewal options where the renewal is reasonably assured,the lease term,including the renewal period,isused to determine the appropriate lease classification and to compute periodic rental expense.Leases with initial terms shorter than 12 months are not recognized onthe balance sheet,and lease expense is recognized on a straight-line basis.The components of lease expenses are as follows:Three Months EndedNine Months EndedJune 30,2025June 30,2024June 30,2025June 30,2024(in millions)Operating lease cost$36.6$37.1$109.7$112.2 Finance lease cost:Amortization of right-of-use assets8.5 7.2 24.8 21.3 Interest on lease liabilities0.9 0.7 2.7 2.2 Variable lease cost8.0 8.6 24.2 26.1 Total lease cost$54.0$53.6$161.4$161.8 Additional balance sheet information related to leases is as follows:As ofAs of(in millions except as noted)Balance Sheet ClassificationJune 30,2025September 30,Assets:Operating lease assetsOperating lease right-of-use assets$462.9$Finance lease assetsProperty and equipment net71.6 Total lease assets$534.5$Liabilities:Current:Operating lease liabilitiesAccrued expenses and other current liabilities$133.2$Finance lease liabilitiesCurrent portion of long-term debt30.0 Total current lease liabilities163.2 Non-current:Operating lease liabilitiesOperating lease liabilities,noncurrent521.5 Finance lease liabilitiesLong-term debt42.9 Total non-current lease liabilities$564.4$As ofAs ofJune 30,2025September 30,2024Weighted average remaining lease term(in years):Operating leases6.26.2Finance leases2.62.6Weighted average discount rates:Operating leases5.2%5.1%Finance leases4.7%4.4#Table of ContentsAdditional cash flow information related to leases is as follows:Nine Months EndedJune 30,2025June 30,2024(in millions)Cash paid for amounts included in the measurement of lease liabilities:Operating cash flows from operating leases$128.4$140.8 Operating cash flows from finance leases2.7 2.3 Financing cash flows from finance leases23.8 22.3 Right-of-use assets obtained in exchange for new operating leases104.5 60.7 Right-of-use assets obtained in exchange for new finance leases35.0 21.3 Total remaining lease payments under both the Companys operating and finance leases are as follows:Operating LeasesFinance LeasesFiscal Year(in millions)2025(three months remaining)$42.3$8.8 2026156.5 31.7 2027126.8 22.9 2028110.0 12.7 202992.4 2.0 Thereafter240.1 Total lease payments$768.1$78.1 Less:Amounts representing interest$(113.4)$(5.2)Total lease liabilities$654.7$72.9 13.Other Financial InformationAccrued expenses and other current liabilities consist of the following:June 30,2025September 30,2024(in millions)Accrued salaries and benefits$686.7$620.4 Accrued contract costs1,455.4 1,354.7 Other accrued expenses356.1 410.6 Total$2,498.2$2,385.7 Accrued contract costs above include balances related to professional liability accruals of$835.5 million and$831.8 million as of June 30,2025 andSeptember 30,2024,respectively.The remaining accrued contract costs primarily relate to costs for services provided by subcontractors and other non-employees.Liabilities recorded related to accrued contract losses were not material as of June 30,2025 and September 30,2024.The Company did not have material revisionsto estimates for contracts where revenue is recognized using the input method during the nine months ended June 30,2025 and 2024.During the first nine monthsof fiscal 2025,the Company did not initiate any new transformational restructuring activities.During the first nine months of fiscal 2024,the Company incurredrestructuring expenses of$80.7 million,including personnel and other costs of$15.1 million and real estate costs of$65.6 million,of which$22.4 million wasaccrued and unpaid at June 30,2024.On June 4,2025,the Companys Board of Directors declared a quarterly cash dividend of$0.26 per share,which was paid on July 18,2025 tostockholders of record as of the close of business on July 2,2025.As of June 30,2025,accrued and unpaid dividends totaled$37.1 million and were classifiedwithin other accrued expenses on the consolidated balance sheet.24Table of Contents14.Reclassifications out of Accumulated Other Comprehensive LossThe accumulated balances and reporting period activities for the three and nine months ended June 30,2025 and 2024 related to reclassifications out ofaccumulated other comprehensive loss are summarized as follows(in millions):Pension Related AdjustmentsForeign Currency Translation AdjustmentsGain/(Loss)on Derivative InstrumentsAccumulatOther ComprehenLossBalances at March 31,2025$(243.6)$(717.3)$17.8$Other comprehensive(loss)income before reclassification(13.7)85.3(1.5)Amounts reclassified from accumulated other comprehensive(loss)income0.4 (2.3)Balances at June 30,2025$(256.9)$(632.0)$14.0$Pension Related AdjustmentsForeign Currency Translation AdjustmentsGain/(Loss)on Derivative InstrumentsAccumulatOther ComprehenLossBalances at March 31,2024$(233.0)$(706.7)$29.7$Other comprehensive(loss)income before reclassification(0.4)(4.4)3.0 Amounts reclassified from accumulated other comprehensive(loss)income0.2 (3.4)Balances at June 30,2024$(233.2)$(711.1)$29.3$Pension Related AdjustmentsForeign Currency Translation AdjustmentsGain/(Loss)on Derivative InstrumentsAccumulatOther ComprehenLossBalances at September 30,2024$(252.0)$(646.5)$15.8$Other comprehensive(loss)income before reclassification(6.2)14.5 5.5 Amounts reclassified from accumulated other comprehensive(loss)income1.3 (7.3)Balances at June 30,2025$(256.9)$(632.0)$14.0$Pension Related AdjustmentsForeign Currency Translation AdjustmentsGain/(Loss)on Derivative InstrumentsAccumulated Other Comprehensive LossBalances at September 30,2023$(226.0)$(739.7)$39.1$(926.6)Other comprehensive(loss)income before reclassification(7.6)28.6 0.7 21.7 Amounts reclassified from accumulated other comprehensive(loss)income0.4 (10.5)(10.1)Balances at June 30,2024$(233.2)$(711.1)$29.3$(915.0)25Table of Contents15.Commitments and ContingenciesThe Company records amounts representing its probable estimated liabilities relating to claims,guarantees,litigation,audits and investigations.TheCompany relies in part on qualified actuaries to assist it in determining the level of reserves to establish for insurance-related claims that are known and have beenasserted against it,and for insurance-related claims that are believed to have been incurred based on actuarial analysis,but have not yet been reported to theCompanys claims administrators as of the respective balance sheet dates.The Company includes any adjustments to such insurance reserves in its consolidatedresults of operations.The Companys reasonably possible loss disclosures are presented on a gross basis prior to the consideration of insurance recoveries.TheCompany does not record gain contingencies until they are realized.In the ordinary course of business,the Company may not be aware that it or its affiliates areunder investigation and may not be aware of whether or not a known investigation has been concluded.In the ordinary course of business,the Company may enter into various arrangements providing financial or performance assurance to clients,lenders,orpartners.Such arrangements include standby letters of credit,surety bonds,and corporate guarantees to support the creditworthiness or the project executioncommitments of its affiliates,partnerships and joint ventures.The Companys unsecured credit arrangements are used for standby letters of credit issued inconnection with general and professional liability insurance programs and for contract performance guarantees.At June 30,2025 and September 30,2024,theseoutstanding standby letters of credit totaled$895.2 million and$934.5 million,respectively.As of June 30,2025,the Company had$376.7 million available underthese unsecured credit facilities.Performance arrangements typically have various expiration dates ranging from the completion of the project contract andextending beyond contract completion in some circumstances such as for warranties.The Company may also guarantee that a project,when complete,will achievespecified performance standards.If the project subsequently fails to meet guaranteed performance standards,the Company may incur additional costs,payliquidated damages or be held responsible for the costs incurred by the client to achieve the required performance standards.The potential payment amount of anoutstanding performance arrangement is typically the remaining cost of work to be performed by or on behalf of third parties.Generally,under joint venturearrangements,if a partner is financially unable to complete its share of the contract,the other partner(s)may be required to complete those activities.At June 30,2025,the Company was contingently liable in the amount of approximately$899.6 million in issued standby letters of credit and$4.9 billionin issued surety bonds primarily to support project execution.In the ordinary course of business,the Company enters into various agreements providing financial or performance assurances to clients on behalf ofcertain unconsolidated partnerships,joint ventures and other jointly executed contracts.These agreements are entered into primarily to support the project executioncommitments of these entities.The Companys investment adviser jointly manages and sponsors the AECOM-Canyon Equity Fund,L.P.(the“Fund”),in which the Company indirectlyholds an equity interest and has an ongoing capital commitment to fund investments.At June 30,2025,the Company has capital commitments of$5.1 million to theFund over the next 4 years.In addition,in connection with the investment activities of AECOM Capital,the Company provides guarantees of certain contractual obligations,includingguarantees for completion of projects,limited debt repayment,environmental indemnity obligations and other lender required guarantees.In February 2024,the Company was informed of a potential liability as one of the indemnitors on a divested business surety bonds.The Company doesnot have sufficient information to determine the range of potential impacts;however,it is reasonably possible that the Company may incur additional costs relatedto these bonds.In connection with the resolution of contingencies related to the sale of the civil infrastructure construction business,the Company agreed to act as anadditional guarantor on the counterpartys existing debt,which was extended to March 2028.26Table of Contents16.Reportable SegmentsThe Company manages its operations under three reportable segments according to their geographic regions and business activities.In identifying itsreportable segments,the Company considered the financial information provided to its chief operating decision maker(CODM),who is the chief executive officer.The financial data is organized by geographic region and global business lines.The CODM uses this information to allocate resources and assess the performanceof the segments primarily based on revenue less pass-through revenue and attributable earnings before interest,tax,and amortization expense.After consideringvarious factors,including the development and utilization of financial data to the CODM,the Company concluded that identifying its operating segments bygeography was consistent with the objectives of ASC 280-10.Certain operating segments have been aggregated based on similar characteristics,including long-term financial performance,the nature of services provided,internal process for delivering those services,and types of customers,to arrive at the Companysreportable segments.The Companys Americas reportable segment provides planning,consulting,architectural and engineering design services,and constructionmanagement services to public and private clients in the United States,Canada,and Latin America and is comprised of the Design and Consulting ServicesAmericas and Construction Management operating segments.The Companys International reportable segment provides similar professional services to public andprivate clients in Europe and India,the Middle East and Africa,Asia,and Australia and New Zealand and is comprised of the operating segments in thosegeographic regions.The Companys AECOM Capital(ACAP)operating segment is its own reportable segment and primarily invests in and develops real estateprojects.Certain expenses that are determined to be related to the Company as a whole are not deemed to be part of an operating segment but are reported withinCorporate.27Table of ContentsThe following tables set forth summarized financial information concerning the Companys reportable segments:Reportable Segments:AmericasInternationalAECOM CapitalCorporateTotal($in millions)Three Months Ended June 30,2025:Revenue$3,277.2$901.1$0.1$4,178.4 Gross profit238.8 88.0 0.1 326.9 Equity in earnings of joint ventures2.2 2.1 1.0 5.3 General and administrative expenses (2.3)(35.9)(38.2)Restructuring costs Operating income(loss)241.0 90.1(1.2)(35.9)294.0 Gross profit as a%of revenue7.3%9.8%7.8%Three Months Ended June 30,2024:Revenue$3,246.9$904.2$0.1$4,151.2 Gross profit203.9 81.1 0.1 285.1 Equity in earnings of joint ventures3.5 3.5 0.7 7.7 General and administrative expenses (0.6)(35.6)(36.2)Restructuring costs (29.1)(29.1)Operating income207.4 84.6 0.2(64.7)227.5 Gross profit as a%of revenue6.3%9.0%6.9%Nine Months Ended June 30,2025:Revenue$9,285.9$2,677.9$0.4$11,964.2 Gross profit641.5 244.2 0.4 886.1 Equity in earnings of joint ventures12.6 9.0 0.1 21.7 General and administrative expenses (7.5)(111.2)(118.7)Restructuring costs Operating income(loss)654.1 253.2(7.0)(111.2)789.1 Gross profit as a%of revenue6.9%9.1%7.4%Nine Months Ended June 30,2024:Revenue$9,324.2$2,670.0$0.8$11,995.0 Gross profit559.3 230.1 0.8 790.2 Equity in earnings(losses)of joint ventures11.9 12.8(26.5)(1.8)General and administrative expenses (12.7)(103.9)(116.6)Restructuring costs (80.7)(80.7)Operating income(loss)571.2 242.9(38.4)(184.6)591.1 Gross profit as a%of revenue6.0%8.6%6.6%Total assetsJune 30,2025$7,864.3$2,830.8$46.8$1,493.4 September 30,2024$7,988.1$2,734.5$53.2$1,208.7 28Table of ContentsItem 2.Managements Discussion And Analysis Of Financial Condition And Results Of OperationsForward-Looking StatementsThis Quarterly Report contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation ReformAct of 1995 that are not limited to historical facts,but reflect the Companys current beliefs,expectations or intentions regarding future events.These statementsinclude forward-looking statements with respect to the Company,including the Companys business,operations and strategy,and infrastructure consulting industry.Statements that are not historical facts,without limitation,including statements that use terms such as“anticipates,”“believes,”“expects,”“estimates,”“intends,”“may,”“plans,”“potential,”“projects,”and“will”and that relate to our future revenues,expenditures and business trends;future reduction of our self-perform at-risk construction exposure;future accounting estimates;future contractual performance obligations;future conversions of backlog;future capital allocationpriorities,including common stock repurchases,future trade receivables,future debt pay downs;future post-retirement expenses;future tax benefits and expenses,and the impact of future tax laws;future compliance with regulations;future legal claims and insurance coverage;future effectiveness of our disclosure and internalcontrols over financial reporting;future costs savings;and other future economic and industry conditions,are forward-looking statements.In light of the risks anduncertainties inherent in all forward-looking statements,the inclusion of such statements in this Quarterly Report should not be considered as a representation by usor any other person that our objectives or plans will be achieved.Although management believes that the assumptions underlying the forward-looking statementsare reasonable,these assumptions and the forward-looking statements are subject to various factors,risks and uncertainties,many of which are beyond our control,including,but not limited to,our business is cyclical and vulnerable to economic downturns and client spending reductions;potential government shutdowns;changes in administration or other funding directives and circumstances may cause governmental agencies to modify,curtail or terminate our contracts;governmentcontracts are subject to audits and adjustments of contractual terms;long-term government contracts and subject to uncertainties related to government contractappropriations;losses under fixed-price contracts;limited control over operations run through our joint venture entities;liability for misconduct by our employeesor consultants;changes in government laws,regulations and policies,including failure to comply with laws or regulations applicable to our business;maintainingadequate surety and financial capacity;potential high leverage and inability to service our debt and guarantees;ability to continue payment of dividends;exposureto political and economic risks in different countries,including tariffs and trade policies,geopolitical events,and conflicts;inflation,currency exchange rates andinterest rate fluctuations;changes in capital markets and stock market volatility;retaining and recruiting key technical and management personnel;legal claims andlitigation;inadequate insurance coverage;environmental law compliance and inadequate nuclear indemnification;unexpected adjustments and cancellations relatedto our backlog;partners and third parties who may fail to satisfy their legal obligations;managing pension costs;AECOM Capitals real estate development;cybersecurity issues,IT outages and data privacy;risks associated with the benefits and costs of the sale of our Management Services and self-perform at-risk civilinfrastructure,power construction,and oil and gas construction businesses,including the risk that any purchase adjustments from those transactions could beunfavorable and any future proceeds owed to us as part of the transactions could be lower than we expect;as well as other additional risks and factors discussed inthis Quarterly Report on Form 10Q and any subsequent reports we file with the SEC.Accordingly,actual results could differ materially from those contemplatedby any forward-looking statement.All subsequent written and oral forward-looking statements concerning the Company or other matters attributable to the Company or any person acting onits behalf are expressly qualified in their entirety by the cautionary statements above.You are cautioned not to place undue reliance on these forward-lookingstatements,which speak only to the date they are made.The Company is under no obligation(and expressly disclaims any such obligation)to update or revise anyforward-looking statement that may be made from time to time,whether as a result of new information,future developments or otherwise.Please review“Part II,Item 1ARisk Factors”in this Quarterly Report for a discussion of the factors,risks and uncertainties that could affect our future results.OverviewWe are a leading global provider of professional infrastructure consulting and advisory services for governments,businesses and organizations throughoutthe world.We provide advisory,planning,consulting,architectural and engineering design,construction and program management services,and investment anddevelopment services to public and private clients worldwide in major end markets such as transportation,facilities,water,environmental,and energy.Our business focuses primarily on providing fee-based knowledge-based services.We primarily derive income from our ability to generate revenue andcollect cash from our clients through the billing of our employees time spent on client projects and our ability to manage our costs.AECOM Capital primarilyderives its income from real estate development sales and management fees.29Table of ContentsWe report our continuing business through three segments,each of which is described in further detail below:Americas,International,and AECOMCapital(ACAP).Such segments are organized by the differing specialized needs of the respective clients and how we manage the business.We have aggregatedvarious operating segments into our reportable segments based on their similar characteristics,including similar long-term financial performance,the nature ofservices provided,internal processes for delivering those services,and types of customers.Americas:Planning,advisory,consulting,architectural and engineering design,construction management and program management services to publicand private clients in the United States,Canada,and Latin America in major end markets such as transportation,water,government,facilities,environmental,and energy.International:Planning,advisory,consulting,architectural and engineering design services,site supervision and program management to public andprivate clients in Europe,the Middle East,India,Africa and the Asia-Australia-Pacific regions in major end markets such as transportation,water,government,facilities,environmental,and energy.AECOM Capital(ACAP):Primarily invests in and develops real estate projects.Our revenue is dependent on our ability to attract and retain qualified and productive employees,identify business opportunities,allocate our laborresources and capital to profitable and high growth markets,secure new contracts,and renew existing client agreements.Demand for our services may bevulnerable to sudden economic downturns and reductions in government and private industry spending,which may result in clients delaying,curtailing or cancelingproposed and existing projects.Moreover,as a professional services company,maintaining the high quality of the work generated by our employees is integral toour revenue generation and profitability.Given the global nature of our business,our revenue is exposed to currency rate fluctuations that could change from periodto period and year to year.Our costs consist primarily of the compensation we pay to our employees,including salaries,fringe benefits,the costs of hiring subcontractors,otherproject-related expenses and sales,general and administrative costs.At June 30,2025,we had approximately$894.5 million remaining of the Boards stock repurchase authorization.On November 14,2024,the Boardapproved an increase in our stock repurchase authorization to$1.0 billion.We intend to deploy future available cash towards dividends and stock repurchasesconsistent with our returns driven capital allocation policy.We have exited substantially all of our self-perform at-risk construction businesses.As part of our ongoing plan to improve profitability and maintain areduced risk profile,we continuously evaluate our business portfolio.We completed a transaction that transitioned the AECOM Capital team to a new third-party platform in the third quarter of fiscal 2024.The team willcontinue to support AECOM Capitals investment vehicles pursuant to certain advisory agreements in a manner consistent with their current obligations.30Table of ContentsResults of OperationsThree and nine months ended June 30,2025 compared to the three and nine months ended June 30,2024Consolidated ResultsThree Months EndedNine Months EndedJune 30,2025June 30,2024ChangesJune 30,2025June 30,2024Changes$%$%($in millions)Revenue$4,178.4$4,151.2$27.2 0.7%$11,964.2$11,995.0$(30.8)(0.3)%Cost of revenue3,851.5 3,866.1(14.6)(0.4)11,078.1 11,204.8(126.7)(1.1)Gross profit326.9 285.1 41.8 14.7 886.1 790.2 95.9 12.1 Equity in earnings(losses)of jointventures5.3 7.7(2.4)(31.2)21.7(1.8)23.5(1305.6)General and administrative expenses(38.2)(36.2)(2.0)5.5(118.7)(116.6)(2.1)1.8 Restructuring costs(29.1)29.1(100.0)(80.7)80.7(100.0)Income from operations294.0 227.5 66.5 29.2 789.1 591.1 198.0 33.5 Other income(loss)0.8 1.0(0.2)(20.0)(1.0)6.2(7.2)(116.1)Interest income14.1 15.8(1.7)(10.8)45.2 43.3 1.9 4.4 Interest expense(40.1)(51.4)11.3(22.0)(125.4)(140.4)15.0(10.7)Income from continuing operationsbefore taxes268.8 192.9 75.9 39.3 707.9 500.2 207.7 41.5 Income tax expense for continuingoperations65.1 46.1 19.0 41.2 145.6 118.1 27.5 23.3 Net income from continuingoperations203.7 146.8 56.9 38.8 562.3 382.1 180.2 47.2 Net(loss)income from discontinuedoperations(43.9)5.7(49.6)(870.2)(63.8)(105.0)41.2(39.2)Net income159.8 152.5 7.3 4.8 498.5 277.1 221.4 79.9 Net income attributable tononcontrolling interests fromcontinuing operations(28.8)(17.4)(11.4)65.5(56.0)(44.6)(11.4)25.6 Net income attributable tononcontrolling interests fromdiscontinued operations(0.8)0.8(100.0)(1.1)(2.8)1.7(60.7)Net income attributable tononcontrolling interests(28.8)(18.2)(10.6)58.2(57.1)(47.4)(9.7)20.5 Net income attributable to AECOMfrom continuing operations174.9 129.4 45.5 35.2 506.3 337.5 168.8 50.0 Net(loss)income attributable toAECOM from discontinuedoperations(43.9)4.9(48.8)(995.9)(64.9)(107.8)42.9(39.8)Net income attributable to AECOM$131.0$134.3$(3.3)(2.5)%$441.4$229.7$211.7 92.21Table of ContentsThe following table presents the percentage relationship of statement of operations items to revenue:Three Months EndedNine Months EndedJune 30,2025June 30,2024June 30,2025June 30,2024Revenue100.00.00.00.0%Cost of revenue92.2 93.1 92.6 93.4 Gross profit7.8 6.9 7.4 6.6 Equity in earnings(losses)of joint ventures0.1 0.2 0.2 0.0 General and administrative expenses(0.9)(0.9)(1.0)(1.0)Restructuring costs0.0(0.7)0.0(0.7)Income from operations7.0 5.5 6.6 4.9 Other income(loss)0.0 0.0 0.0 0.1 Interest income0.3 0.4 0.4 0.4 Interest expense(0.9)(1.3)(1.1)(1.2)Income from continuing operations before taxes6.4 4.6 5.9 4.2 Income tax expense for continuing operations1.5 1.1 1.2 1.0 Net income from continuing operations4.9 3.5 4.7 3.2 Net(loss)income from discontinued operations(1.1)0.2(0.5)(0.9)Net income3.8 3.7 4.2 2.3 Net income attributable to noncontrolling interests from continuingoperations(0.7)(0.4)(0.5)(0.4)Net income attributable to noncontrolling interests from discontinuedoperations0.0 0.0 0.0 0.0 Net income attributable to noncontrolling interests(0.7)(0.4)(0.5)(0.4)Net income attributable to AECOM from continuing operations4.2 3.1 4.2 2.8 Net(loss)income attributable to AECOM from discontinued operations(1.1)0.2(0.5)(0.9)Net income attributable to AECOM3.1%3.3%3.7%1.9%RevenueOur revenue for the three months ended June 30,2025 increased$27.2 million,or 0.7%,to$4,178.4 million as compared to$4,151.2 million for thecorresponding period last year.Our revenue for the nine months ended June 30,2025 decreased$30.8 million,or 0.3%,to$11,964.2 million as compared to$11,995.0 million for thecorresponding period last year.The Companys portion of revenue excluding pass-through revenue attributable to subcontractors increased for both the three-and nine-month periodsending June 30,2025.Underlying revenue excluding pass-through revenues increased across most of our end markets as a result of increased investment by large,publicly financed,global infrastructure programs including the Infrastructure Investment and Jobs Act in the U.S.and similar large programs in our largest endmarkets globally.Our Water end market has been benefiting from increased investment to address drought,flooding,emerging contaminant remediation,waterstorage,and clean and safe drinking water.Our Transportation end market has been benefiting from incremental investments across the globe to modernizetransportation infrastructure and address growth and urbanization trends,while our Environment end market has been benefiting from infrastructure that requirespermitting,compliance,and remediation as well as investments in energy.Our Facilities end market has been benefiting from positive public sector investment,trends in asset maintenance and repositioning as well as demand for modern,efficient facilities.The quantification of the impact of these trends by end market isnoted within our Americas and International reportable segments discussion below,where applicable,and represents substantially all of our revenue change.32Table of ContentsIn the course of providing our services,we routinely subcontract for services and incur other direct costs on behalf of our clients.These costs are passedthrough to clients and,in accordance with industry practice and GAAP,are included in our revenue and cost of revenue.Because these pass-through revenues canchange significantly from project to project and period to period,changes in revenue may not be indicative of business trends.Pass-through revenues for thequarters ended June 30,2025 and 2024 were$2.2 billion and$2.3 billion,respectively.Pass-through revenue as a percentage of total revenue was 54%and 56%during the three months ended June 30,2025 and 2024,respectively.Pass-through revenues for the nine months ended June 30,2025 and 2024 were$6.4 billionand$6.6 billion,respectively.Pass-through revenue as a percentage of total revenue was 53%and 55%during the nine months ended June 30,2025 and 2024,respectively.Cost of RevenueOur cost of revenue decreased to$3,851.5 million for the three months ended June 30,2025 compared to$3,866.1 million for the corresponding
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,DC 20549FORM 10-QQUARTERLY REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period endedJuly 25,2025Transition report pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934.For the transition period from _ to _Commission File Number 001-36820Medtronic plc(Exact name of registrant as specified in its charter)Ireland98-1183488(State of incorporation)(I.R.S.Employer Identification No.)Building Two,Parkmore Business Park WestGalway,Ireland(Address of principal executive offices) 353 1 438-1700(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading SymbolName of each exchange on which registeredOrdinary shares,par value$0.0001 per shareMDTNew York Stock Exchange0.000%Senior Notes due 2025MDT/25ANew York Stock Exchange2.625%Senior Notes due 2025MDT/25BNew York Stock Exchange1.125%Senior Notes due 2027MDT/27New York Stock Exchange0.375%Senior Notes due 2028MDT/28New York Stock Exchange3.000%Senior Notes due 2028MDT/28ANew York Stock Exchange3.650%Senior Notes due 2029MDT/29New York Stock Exchange1.625%Senior Notes due 2031MDT/31New York Stock Exchange1.000%Senior Notes due 2031MDT/31ANew York Stock Exchange3.125%Senior Notes due 2031MDT/31BNew York Stock Exchange0.750%Senior Notes due 2032MDT/32New York Stock Exchange3.375%Senior Notes due 2034MDT/34New York Stock Exchange3.875%Senior Notes due 2036MDT/36New York Stock Exchange2.250%Senior Notes due 2039MDT/39ANew York Stock Exchange1.500%Senior Notes due 2039MDT/39BNew York Stock Exchange1.375%Senior Notes due 2040MDT/40ANew York Stock Exchange4.150%Senior Notes due 2043MDT/43ANew York Stock Exchange1.750%Senior Notes due 2049MDT/49New York Stock Exchange1.625%Senior Notes due 2050MDT/50New York Stock Exchange4.150%Senior Notes due 2053MDT/53New 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 1934during the preceding 12 months(or for such shorter period that the Registrant was required to file such reports)and(2)has been subject to such filingrequirements for the 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 and postsuch files).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 growthcompany in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerEmerging growth companyNon-accelerated filerSmaller Reporting CompanyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any newor revised financial accounting standards provided pursuant to Section 1(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 As of August 20,2025,1,282,685,882 ordinary shares,par value$0.0001,of the registrant were outstanding.TABLE OF CONTENTSItem Description Page PART I 1.Financial Statements(unaudited)12.Managements Discussion and Analysis of Financial Condition and Results of Operations 293.Quantitative and Qualitative Disclosures About Market Risk 474.Controls and Procedures 48 PART II 1.Legal Proceedings 482.Unregistered Sales of Equity Securities and Use of Proceeds 485.Other Information486.Exhibits 49Signature50PART I FINANCIAL INFORMATIONItem 1.Financial StatementsMedtronic plcConsolidated Statements of Income(Unaudited)Three months ended(in millions,except per share data)July 25,2025July 26,2024Net sales$8,578$7,915 Costs and expenses:Cost of products sold,excluding amortization of intangible assets3,001 2,761 Research and development expense726 676 Selling,general,and administrative expense2,806 2,655 Amortization of intangible assets459 414 Restructuring charges,net45 47 Certain litigation charges,net27 81 Other operating expense,net70 1 Operating profit1,445 1,278 Other non-operating income,net(33)(157)Interest expense,net176 167 Income before income taxes1,302 1,268 Income tax provision255 220 Net income1,047 1,049 Net income attributable to noncontrolling interests(7)(6)Net income attributable to Medtronic$1,040$1,042 Basic earnings per share$0.81$0.81 Diluted earnings per share$0.81$0.80 Basic weighted average shares outstanding1,281.6 1,293.3 Diluted weighted average shares outstanding1,287.1 1,296.5 The accompanying notes are an integral part of these consolidated financial statements.1Medtronic plcConsolidated Statements of Comprehensive Income(Unaudited)Three months ended(in millions)July 25,2025July 26,2024Net income$1,047$1,049 Other comprehensive income(loss),net of tax:Unrealized gain on investment securities19 76 Translation adjustment349 102 Net investment hedges(559)(206)Net change in retirement obligations1 1 Unrealized loss on cash flow hedges(128)(66)Other comprehensive loss(318)(92)Comprehensive income including noncontrolling interests729 957 Comprehensive income attributable to noncontrolling interests(8)(6)Comprehensive income attributable to Medtronic$720$950 The accompanying notes are an integral part of these consolidated financial statements.2Medtronic plcConsolidated Balance Sheets(Unaudited)(in millions)July 25,2025April 25,2025ASSETS Current assets:Cash and cash equivalents$1,273$2,218 Investments6,848 6,747 Accounts receivable,less allowances and credit losses of$204 and$199,respectively6,263 6,515 Inventories5,886 5,476 Other current assets2,952 2,858 Total current assets23,223 23,814 Property,plant,and equipment,net7,006 6,837 Goodwill42,007 41,737 Other intangible assets,net11,223 11,667 Tax assets3,929 4,040 Other assets3,585 3,584 Total assets$90,972$91,680 LIABILITIES AND EQUITY Current liabilities:Current debt obligations$2,430$2,874 Accounts payable2,555 2,449 Accrued compensation2,017 2,514 Accrued income taxes933 1,358 Other accrued expenses3,596 3,683 Total current liabilities11,530 12,879 Long-term debt26,179 25,642 Accrued compensation and retirement benefits1,179 1,158 Accrued income taxes1,722 1,574 Deferred tax liabilities416 403 Other liabilities1,813 1,769 Total liabilities42,839 43,424 Commitments and contingencies(Note 16)Shareholders equity:Ordinary shares par value$0.0001,2.6 billion shares authorized,1,281,869,213 and 1,281,934,628 shares issuedand outstanding,respectively Additional paid-in capital20,891 20,833 Retained earnings31,606 31,476 Accumulated other comprehensive loss(4,604)(4,284)Total shareholders equity47,893 48,024 Noncontrolling interests240 232 Total equity48,133 48,256 Total liabilities and equity$90,972$91,680 The accompanying notes are an integral part of these consolidated financial statements.3Medtronic plcConsolidated Statements of Equity(Unaudited)Ordinary SharesAdditionalPaid-inCapitalRetainedEarningsAccumulatedOther Comprehensive LossTotal Shareholders EquityNoncontrollingInterestsTotalEquity(in millions)NumberPar ValueApril 25,20251,282$20,833$31,476$(4,284)$48,024$232$48,256 Net income 1,040 1,040 7 1,047 Other comprehensive(loss)income (319)(319)1(318)Dividends to shareholders($0.71 perordinary share)(910)(910)(910)Issuance of shares under stock purchaseand award plans1 93 93 93 Repurchase of ordinary shares(1)(120)(120)(120)Stock-based compensation 86 86 86 July 25,20251,282$20,891$31,606$(4,604)$47,893$240$48,133 Ordinary SharesAdditionalPaid-inCapitalRetained EarningsAccumulated Other Comprehensive LossTotal Shareholders EquityNoncontrollingInterestsTotalEquity(in millions)NumberPar ValueApril 26,20241,311$23,129$30,403$(3,318)$50,214$206$50,420 Net income 1,042 1,042 6 1,049 Other comprehensive loss (92)(92)(92)Dividends to shareholders($0.70 perordinary share)(898)(898)(898)Issuance of shares under stock purchaseand award plans1 87 87 87 Repurchase of ordinary shares(30)(2,489)(2,489)(2,489)Stock-based compensation 83 83 83 July 26,20241,282$20,810$30,547$(3,410)$47,947$213$48,160 The accompanying notes are an integral part of these consolidated financial statements.4Medtronic plcConsolidated Statements of Cash Flows(Unaudited)Three months ended(in millions)July 25,2025July 26,2024Operating Activities:Net income$1,047$1,049 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization748 662 Provision for credit losses28 18 Deferred income taxes167 88 Stock-based compensation86 83 Other,net159(9)Change in operating assets and liabilities,net of acquisitions and divestitures:Accounts receivable,net288 110 Inventories(373)(217)Accounts payable and accrued liabilities(598)(604)Other operating assets and liabilities(464)(194)Net cash provided by operating activities1,088 986 Investing Activities:Additions to property,plant,and equipment(504)(520)Purchases of investments(2,100)(1,879)Sales and maturities of investments2,010 2,157 Other investing activities,net(125)(17)Net cash used in investing activities(719)(259)Financing Activities:Change in current debt obligations,net649(624)Issuance of long-term debt 3,209 Payments on long-term debt(1,162)Dividends to shareholders(910)(898)Issuance of ordinary shares95 89 Repurchase of ordinary shares(123)(2,492)Other financing activities,net70(15)Net cash used in financing activities(1,381)(731)Effect of exchange rate changes on cash and cash equivalents67 31 Net change in cash and cash equivalents(945)27 Cash and cash equivalents at beginning of period2,218 1,284 Cash and cash equivalents at end of period$1,273$1,311 Supplemental Cash Flow Information Cash paid for:Income taxes$402$394 Interest81 119 The accompanying notes are an integral part of these consolidated financial statements.5Medtronic plcNotes to Consolidated Financial Statements(Unaudited)1.Basis of PresentationThe accompanying unaudited consolidated financial statements of Medtronic plc and its subsidiaries(Medtronic plc,Medtronic,or the Company)havebeen prepared in accordance with accounting principles generally accepted in the United States of America(U.S.)(U.S.GAAP)for interim financialinformation and with the instructions to Form 10-Q and Article 10 of Regulation S-X.In the opinion of management,the consolidated financial statementsinclude all the adjustments necessary for a fair statement in conformity with U.S.GAAP.Certain reclassifications have been made to prior year financialstatements to conform to classifications used in the current year.Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.The preparation of thefinancial statements in conformity with U.S.GAAP requires management to make estimates and assumptions that affect the reported amounts of assets,liabilities,revenues,expenses,and the related disclosures at the date of the financial statements and during the reporting period.Actual results couldmaterially differ from these estimates.The accompanying unaudited consolidated financial statements include the accounts of Medtronic plc,its wholly-owned subsidiaries,entities for which theCompany has a controlling financial interest,and variable interest entities for which the Company is the primary beneficiary.Intercompany transactionsand balances have been eliminated in consolidation.Amounts reported in millions within this quarterly report are computed based on the amounts inthousands,and therefore,the sum of the components may not equal the total amount reported in millions due to rounding.Additionally,certain columnsand rows within tables may not sum due to rounding.The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the audited consolidated financialstatements of the Company and related notes included in the Companys Annual Report on Form 10-K for the fiscal year ended April 25,2025.TheCompanys fiscal years 2026,2025,and 2024 will end or ended on April 24,2026,April 25,2025,and April 26,2024,respectively.There have been no material changes to our significant accounting policies,as disclosed in Note 1 included in the Companys Annual Report on Form 10-Kfor the fiscal year ended April 25,2025.In May 2025,the Company announced its intent to separate the Diabetes business,with the intention to create a new independent,publicly traded company.The separation is expected to be completed within 18 months of the initial announcement.2.New Accounting PronouncementsRecently Adopted Accounting StandardsFor the three months ended July 25,2025,there have been no newly adopted accounting pronouncements that materially impact our consolidated financialstatements.Refer to the Companys Annual Report on Form 10-K for the fiscal year ended April 25,2025 for pronouncements recently adopted.Not Yet Adopted Accounting StandardsIncome TaxesIn December 2023,the FASB issued ASU 2023-09,Improvements to Income Tax Disclosures(Topic 740),which requires incremental annual disclosureson income taxes,including rate reconciliations,income taxes paid,and other disclosures.The Company will adopt this guidance beginning in the fourthquarter of fiscal year 2026 for our annual report.We are currently evaluating the potential effect that the updated standard will have on our financialstatement disclosures.Disaggregation of Income Statement ExpensesIn November 2024,the FASB issued ASU 2024-03,Disaggregation of Income Statement Expenses(Topic 220-40),which requires tabular disclosuresdisaggregating certain costs and expenses within relevant income statement captions.The Company will adopt this guidance beginning in the fourth quarterof fiscal year 2028 for our annual report and for interim periods starting in fiscal year 2029.We are currently evaluating the potential effect that the updatedstandard will have on our financial statement disclosures.6Medtronic plcNotes to Consolidated Financial Statements(Unaudited)3.RevenueThe Companys revenues are principally derived from device-based medical therapies and services related to cardiac rhythm disorders,cardiovasculardisease,hypertension,neurological surgery technologies,neurological disorders and diseases,spinal conditions and musculoskeletal trauma,chronic pain,ear,nose,and throat conditions,urological and digestive disorders,advanced and general surgical care products,respiratory and monitoring solutions,anddiabetes conditions.The Companys primary customers include healthcare systems,clinics,third-party healthcare providers,distributors,and otherinstitutions,including governmental healthcare programs and group purchasing organizations.Refer to Note 17 to the consolidated financial statements foradditional information regarding the Companys reporting structure.The table below illustrates net sales by segment and division and by market geography for the three months ended July 25,2025 and July 26,2024.TheU.S.revenue includes United States and U.S.territories,and the international revenue includes all other non-U.S.countries.Worldwide Three months ended(in millions)July 25,2025July 26,2024Cardiac Rhythm&Heart Failure$1,712$1,535 Structural Heart&Aortic930 856 Coronary&Peripheral Vascular643 616 Cardiovascular3,285 3,007 Cranial&Spinal Technologies1,211 1,147 Specialty Therapies702 713 Neuromodulation504 457 Neuroscience2,416 2,317 Surgical&Endoscopy1,612 1,544 Acute Care&Monitoring471 452 Medical Surgical2,083 1,996 Diabetes721 647 Reportable segment net sales8,506 7,967 Other operating segment33 38 Other adjustments39(90)Total net sales$8,578$7,915 U.S.InternationalThree months ended(in millions)July 25,2025July 26,2024July 25,2025July 26,2024Cardiovascular$1,479$1,403$1,806$1,604 Neuroscience1,624 1,565 792 752 Medical Surgical884 881 1,199 1,115 Diabetes217 215 504 432 Reportable segment net sales4,205 4,064 4,301 3,903 Other operating segment20 18 14 19 Other adjustments 39(90)Total net sales$4,224$4,082$4,354$3,832(1)Includes operations and ongoing transition agreements from businesses the Company has exited or divested.(2)Reflects adjustments to the Companys Italian payback accruals as further described below.The amount of revenue recognized is reduced by sales rebates,distributor chargebacks,and returns.Adjustments to rebates,distributor chargebacks,andreturns reserves are recorded as increases or decreases to revenue.At July 25,2025,$952 million of rebates were(1)(2)(1)(2)7Medtronic plcNotes to Consolidated Financial Statements(Unaudited)classified as other accrued expenses,and$683 million of distributor chargebacks were classified as a reduction of accounts receivable in the consolidatedbalance sheet.At April 25,2025,$983 million of rebates were classified as other accrued expenses,and$680 million of distributor chargebacks wereclassified as a reduction of accounts receivable in the consolidated balance sheet.During the three months ended July 26,2024,the Company recognized$90 million of incremental Italian payback accruals resulting from the July 22,2024 rulings by the Constitutional Court of Italy relating to certain prioryears since 2015.During the three months ended July 25,2025,the Company decreased its accrual for the Italian payback by$39 million resulting fromthe June 30,2025 legislative decree published by the Italian government and formalized into law in August 2025 confirming a reduction of the amountsdue for years 2015 to 2018.The changes in estimates related to the Italian payback accruals were recognized as adjustments to net sales in the consolidatedstatements of income.Refer to Note 16 for additional information.Other adjustments to variable consideration during the three months ended July 25,2025and July 26,2024 were not material.Deferred Revenue and Remaining Performance ObligationsDeferred revenue at July 25,2025 and April 25,2025 was$442 million and$446 million,respectively.At July 25,2025 and April 25,2025,$352 millionand$354 million was included in other accrued expenses,respectively,and$91 million and$92 million was included in other liabilities,respectively.During the three months ended July 25,2025,the Company recognized$135 million of revenue that was included in deferred revenue as of April 25,2025.During the three months ended July 26,2024,the Company recognized$108 million of revenue that was included in deferred revenue as of April 26,2024.Remaining performance obligations include goods and services that have not yet been delivered or provided under existing,noncancellable contracts withminimum purchase commitments.At July 25,2025,the estimated revenue expected to be recognized in future periods related to unsatisfied performanceobligations for executed contracts with an original duration of one year or more was approximately$0.4 billion.The Company expects to recognizerevenue on the majority of these remaining performance obligations over the next three years.4.Acquisitions,Dispositions,and Funded Research and Development ArrangementsAcquisition ActivityDuring the three months ended July 25,2025,the Company had no acquisitions that were accounted for as business combinations.During the fiscal yearended April 25,2025 the Company had acquisitions that were accounted for as business combinations.For the three months ended July 25,2025 and thefiscal year ended April 25,2025,purchase price allocation adjustments were not significant.Fiscal Year 2025The acquisition date fair value of net assets acquired during fiscal year 2025 was$128 million,consisting of$159 million of assets acquired and$31 million of liabilities assumed.Assets acquired were primarily comprised of$108 million of goodwill and$50 million of IPR&D.The goodwill is notdeductible for tax purposes.The Company recognized$20 million of non-cash contingent consideration liabilities in connection with these businesscombinations during fiscal year 2025,which were comprised of other milestone-based payments.Funded Research and Development ArrangementsThe Company has entered into various arrangements with affiliates of Blackstone Life Sciences Advisors L.L.C.(collectively,Blackstone)to receivefunding related to the development of certain products within the Cardiovascular Portfolio and Diabetes Operating Unit.As there is substantive andgenuine transfer of risk to Blackstone,the development funding is recognized by Medtronic as an obligation to perform contractual services.The Companyrecognizes the funding as income within other operating expense,net as the research and development costs are incurred and funding payments becomedue.Under these arrangements,the Company recognized income of$36 million and$38 million during the three months ended July 25,2025 and July 26,2024,respectively.As of July 25,2025,the Company is eligible to receive additional funding of$355 million under these arrangements.Following potential U.S.regulatory approval and commercial launch of each product covered by the Blackstone agreements,Blackstone will earn acombination of fixed regulatory and commercial milestone payments up to$1.2 billion and royalties based on percent of sales of such products.Undercertain termination provisions,the Companys payment obligation will survive,and in certain termination circumstances,a payment to Blackstone of amultiple of the funded amounts may be required.At the time of executing these contracts,the occurrence of such circumstances was deemed to be remote.5.Restructuring ChargesRestructuring,associated,and other costs for the three months ended July 25,2025 and July 26,2024 were$67 million and$62 million respectively,whichprimarily related to employee termination benefits provided to employees who have been involuntarily terminated and facility related and contracttermination costs.8Medtronic plcNotes to Consolidated Financial Statements(Unaudited)The following table presents the classification of restructuring,associated,and other costs in the consolidated statements of income:Three months ended(in millions)July 25,2025July 26,2024Cost of products sold$16$9 Selling,general,and administrative expenses5 5 Restructuring charges,net45 47 Total restructuring,associated,and other costs$67$62 The following table summarizes the activity for the three months ended July 25,2025:(in millions)EmployeeTerminationBenefitsAssociated andOther CostsTotalApril 25,2025$132$18$150 Charges52 21 73 Cash payments(70)(25)(95)Settled non-cash(2)(2)Accrual adjustments(7)(7)July 25,2025$107$12$119(1)Accrual adjustments primarily relate to certain employees identified for termination finding other positions within the Company.(1)9Medtronic plcNotes to Consolidated Financial Statements(Unaudited)6.Financial InstrumentsDebt SecuritiesThe Company holds investments in marketable debt securities that are classified and accounted for as available-for-sale and are remeasured on a recurringbasis.The following tables summarize the Companys investments in available-for-sale debt securities by significant investment category and the relatedconsolidated balance sheet classification at July 25,2025 and April 25,2025:July 25,2025ValuationBalance Sheet Classification(in millions)CostUnrealized GainsUnrealized LossesFair ValueInvestmentsOther AssetsLevel 1:U.S.government and agency securities$476$(6)$469$469$Level 2:Corporate debt securities3,628 23(25)3,626 3,626 U.S.government and agency securities803 (18)785 785 Mortgage-backed securities897 4(26)875 875 Non-U.S.government and agency securities6 6 6 Other asset-backed securities1,066 6(6)1,066 1,066 Total Level 26,400 33(76)6,357 6,357 Level 3:Auction rate securities36 (2)34 34 Total available-for-sale debt securities$6,911$33$(84)$6,860$6,827$34 April 25,2025ValuationBalance Sheet Classification(in millions)CostUnrealized GainsUnrealized LossesFair ValueInvestmentsOther AssetsLevel 1:U.S.government and agency securities$417$(7)$410$410$Level 2:Corporate debt securities3,540 17(36)3,521 3,521 U.S.government and agency securities835 (20)814 814 Mortgage-backed securities948 4(29)923 923 Non-U.S.government and agency securities6 6 6 Other asset-backed securities1,044 5(6)1,044 1,044 Total Level 26,373 26(91)6,308 6,308 Level 3:Auction rate securities36 (3)33 33 Total available-for-sale debt securities$6,826$26$(100)$6,752$6,719$33 The amortized cost of debt securities excludes accrued interest,which is reported in other current assets in the consolidated balance sheets.10Medtronic plcNotes to Consolidated Financial Statements(Unaudited)The following tables present the gross unrealized losses and fair values of the Companys available-for-sale debt securities that have been in a continuousunrealized loss position deemed to be temporary,aggregated by investment category at July 25,2025 and April 25,2025:July 25,2025 Less than 12 monthsMore than 12 months(in millions)Fair ValueUnrealized LossesFair ValueUnrealized LossesCorporate debt securities$606$(7)$977$(18)U.S.government and agency securities127(1)669(23)Mortgage-backed securities2(1)540(25)Other asset-backed securities 213(6)Auction rate securities 34(2)Total$735$(9)$2,433$(75)April 25,2025 Less than 12 monthsMore than 12 months(in millions)Fair ValueUnrealized LossesFair ValueUnrealized LossesCorporate debt securities$702$(7)$1,235$(29)U.S.government and agency securities110(1)641(25)Mortgage-backed securities2(1)614(28)Other asset-backed securities 469(6)Auction rate securities 33(3)Total$814$(9)$2,993$(91)The Company reviews the fair value hierarchy classification on a quarterly basis.Changes in the ability to observe valuation inputs may result in areclassification of levels for certain securities within the fair value hierarchy.There were no transfers into or out of Level 3 during the three months endedJuly 25,2025 and July 26,2024.When a determination is made to classify an asset or liability within Level 3,the determination is based upon thesignificance of the unobservable inputs to the overall fair value measurement.Gains and losses on available-for-sale debt securities are recognized in other non-operating income,net in the consolidated statements of income.Duringthe three months ended July 25,2025 and July 26,2024,gross realized gains and losses on available-for-sale debt securities were not significant.Duringthe three months ended July 25,2025 and July 26,2024,proceeds from sales of available-for-sale debt securities were$2.0 billion and$2.2 billion,respectively.The contractual maturities of available-for-sale debt securities at July 25,2025 are shown in the following table.Within the table,maturities of mortgage-backed securities have been allocated based upon timing of estimated cash flows assuming no change in the current interest rate environment.Actualmaturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepaymentpenalties.(in millions)Amortized CostFair ValueDue in one year or less$1,432$1,423 Due after one year through five years3,037 3,016 Due after five years through ten years1,105 1,109 Due after ten years1,337 1,312 Total$6,911$6,860 Interest income,which includes income on marketable debt securities and the global liquidity structures,is recognized in other non-operating income,net,in the consolidated statements of income.During the three months ended July 25,2025 and July 26,2024,there was$120 million and$112 million,respectively,of interest income.11Medtronic plcNotes to Consolidated Financial Statements(Unaudited)Equity Securities,Equity Method Investments,and Other InvestmentsThe following table summarizes the Companys equity and other investments at July 25,2025 and April 25,2025,which are classified as primarily otherassets in the consolidated balance sheets:(in millions)July 25,2025April 25,2025Investments with readily determinable fair value(marketable equity securities)$20$17 Investments for which the fair value option has been elected50 140 Investments without readily determinable fair values697 705 Equity method and other investments83 89 Total equity and other investments$850$951 Gains and losses on equity and other investments are recognized in other non-operating income,net in the consolidated statements of income.During thethree months ended July 25,2025,there were$87 million of net unrealized losses on equity securities and other investments still held at July 25,2025.During the three months ended July 26,2024,there were$17 million of net unrealized gains on equity securities and other investments still held at July 26,2024.Mozarc Medical InvestmentIn May 2022,the Company and DaVita Inc.(DaVita)entered into a definitive agreement for the Company to sell half of its RCS business,and in April2023,completed the transaction.This sale was part of an agreement between Medtronic and DaVita to form a new,independent kidney care-focusedmedical device company(“Mozarc Medical”or Mozarc)with equal equity ownership.At closing,the Company retained a 50%non-controlling equityinterest in Mozarc valued at$307 million.Although the equity investment provides the Company with the ability to exercise significant influence overMozarc,the Company has elected the fair value option to account for this equity investment.The Company believes the fair value option best reflects theeconomics of the underlying transaction.Under the fair value option,changes in the fair value of the investment are recognized through earnings each reporting period in other non-operatingincome,net in the consolidated statements of income.During the three months ended July 25,2025,the Company recognized a loss of$90 millionprimarily driven by historical financial results and projections of future cash flows.During the three months ended July 26,2024,the change in fair valuewas not significant.The following table provides a reconciliation of the beginning and ending balances of the Mozarc investment for which the fair value option has beenelected:Three months ended(in millions)July 25,2025July 26,2024Beginning Balance$140$311 Change in fair value(90)Ending Balance$50$311 7.Financing ArrangementsCommercial PaperThe Company maintains commercial paper programs that allow the Company to issue U.S.dollar or Euro-denominated unsecured commercial paper notes.The aggregate amount outstanding at any time under the commercial paper programs may not exceed the equivalent of$3.5 billion.There was$649 millionof commercial paper outstanding at July 25,2025.During the three months ended July 25,2025,the commercial paper outstanding had a weighted averageoriginal maturity of 13 days and a weighted average interest rate of 4.43 percent.There was no commercial paper outstanding at April 25,2025.Duringfiscal year 2025,the weighted average original maturity of the commercial paper outstanding was approximately 13 days and the weighted average interestrate was 5.02 percent.The issuance of commercial paper reduces the amount of credit available under the Companys existing Credit Facility,as definedbelow.Line of CreditThe Company has a$3.5 billion five-year unsecured revolving credit facility(Credit Facility),which provides back-up funding for the commercial paperprograms described above.The Credit Facility includes a multi-currency borrowing feature for certain specified foreign currencies.At July 25,2025 andApril 25,2025,no amounts were outstanding under the Credit Facility.12Medtronic plcNotes to Consolidated Financial Statements(Unaudited)Interest rates on advances on the Credit Facility are determined by a pricing matrix,based on the Companys long-term debt ratings,assigned by Standard&Poors Ratings Services and Moodys Investors Service.Facility fees are payable on the Credit Facility and are determined in the same manner as theinterest rates.The Company is in compliance with the covenants under the Credit Facility.Debt ObligationsThe Companys debt obligations consisted of the following:(in millions)Maturity by Fiscal YearJuly 25,2025April 25,2025Current debt obligations2026-2027$2,430$2,874 Long-term debt1.125 percent eight-year 2019 senior notes20271,762 1,714 4.250 percent five-year 2023 senior notes20281,000 1,000 3.000 percent six-year 2022 senior notes20291,175 1,142 0.375 percent eight-year 2020 senior notes20291,175 1,142 3.650 percent five-year 2024 senior notes2030999 971 1.625 percent twelve-year 2019 senior notes20311,175 1,142 1.000 percent twelve-year 2019 senior notes20321,175 1,142 3.125 percent nine-year 2022 senior notes20321,175 1,142 0.750 percent twelve-year 2020 senior notes20331,175 1,142 4.500 percent ten-year 2023 senior notes20331,000 1,000 3.375 percent twelve-year 2022 senior notes20351,175 1,142 4.375 percent twenty-year 2015 senior notes20351,932 1,932 3.875 percent twelve-year 2024 senior notes2037999 971 6.550 percent thirty-year 2007 CIFSA senior notes2038253 253 2.250 percent twenty-year 2019 senior notes20391,175 1,142 6.500 percent thirty-year 2009 senior notes2039158 158 1.500 percent twenty-year 2019 senior notes20401,175 1,142 5.550 percent thirty-year 2010 senior notes2040224 224 1.375 percent twenty-year 2020 senior notes20411,175 1,142 4.500 percent thirty-year 2012 senior notes2042105 105 4.000 percent thirty-year 2013 senior notes2043305 305 4.150 percent nineteen-year 2024 senior notes2044705 685 4.625 percent thirty-year 2014 senior notes2044127 127 4.625 percent thirty-year 2015 senior notes20451,813 1,813 1.750 percent thirty-year 2019 senior notes20501,175 1,142 1.625 percent thirty-year 2020 senior notes20511,175 1,142 4.150 percent twenty-nine-year 2024 senior notes2054822 800 Finance lease obligations2027-204051 52 Debt discount,net2027-2054(61)(59)Deferred financing costs2027-2054(113)(117)Total long-term debt$26,179$25,642 Interest expense on outstanding borrowings,including amortization of debt issuance costs and debt discounts and premiums,and the global liquiditystructures is recognized in interest expense,net in the consolidated statements of income.During the three months ended July 25,2025 and July 26,2024,there was$217 million of interest expense on outstanding borrowings,including amortization of debt issuance costs and debt discounts and premiums,andthe global liquidity structures.13Medtronic plcNotes to Consolidated Financial Statements(Unaudited)Senior NotesThe Company has outstanding unsecured senior obligations,described as senior notes in the tables above(collectively,the Senior Notes).The Senior Notesrank equally with all other unsecured and unsubordinated indebtedness of the Company.The Company is in compliance with all covenants related to theSenior Notes.In June 2024,Medtronic Inc.issued four tranches of Euro-denominated Senior Notes with an aggregate principal of 3.0 billion,with maturities rangingfrom fiscal year 2030 to 2054,resulting in cash proceeds of approximately$3.2 billion,net of discounts and issuance costs.In anticipation of the Euro-denominated debt issuance,the Company entered into forward currency exchange rate contracts to manage the exposure to exchange rate movements.These contracts were settled in conjunction with the issuance of the June 2024 Notes.Financial Instruments Not Measured at Fair ValueAt July 25,2025,the estimated fair value of the Companys Senior Notes was$25.6 billion compared to a principal value of$28.1 billion.At April 25,2025,the estimated fair value was$26.2 billion compared to a principal value of$28.6 billion.The fair value was estimated using quoted market prices forthe publicly registered Senior Notes,which are classified as Level 2 within the fair value hierarchy.The fair values and principal values consider the termsof the related debt and exclude the impacts of debt discounts and hedging activity.8.Derivatives and Currency Exchange Risk ManagementThe Company uses derivative instruments and foreign currency denominated debt to manage the impact that currency exchange rate and interest ratechanges have on reported financial statements.The Company does not enter into derivative contracts for speculative purposes.Fair Value HedgesIn fiscal year 2025,the Company began using foreign currency forward contracts designated as fair value hedges to manage its exposure to changes in thefair value of a fixed-rate debt obligation.The contracts matured during the first quarter of fiscal year 2026.At inception,foreign currency forward contracts are designated as fair value hedges.Changes in the fair value of these derivatives are reported as acomponent of other operating expense,net.Amounts excluded from the assessment of effectiveness are recognized in interest expense,net on a straight-line basis over the term of the hedge and were not significant for the three months ended July 25,2025 and July 26,2024.Cash flows related to theCompanys derivative instruments designated as fair value hedges are reported as financing activities in the consolidated statements of cash flows.Cashflows attributed to amounts excluded from the assessment of effectiveness are reported as operating activities in the consolidated statements of cash flows.Cash Flow HedgesThe Company uses foreign currency forward and option contracts designated as cash flow hedges to manage its exposure to the variability of future cashflows that are denominated in a foreign currency.At inception,foreign currency forward and option contracts are designated as cash flow hedges.Changes in the fair value of these derivatives are reportedas a component of accumulated other comprehensive loss until the hedged transaction affects earnings.When the hedged transaction affects earnings,thegain or loss on the derivative is reclassified to earnings.Amounts excluded from the measurement of hedge effectiveness are recognized in earnings on astraight-line basis over the term of the hedge.Cash flows are reported as operating activities in the consolidated statements of cash flows.The Companys cash flow hedges will mature within the subsequent two-year period.At July 25,2025 and April 25,2025,the Company had$276 millionand$149 million in after-tax unrealized losses,respectively,associated with cash flow hedging instruments recorded in accumulated other comprehensiveloss.The Company expects that$154 million of after-tax net unrealized losses at July 25,2025 will be recognized in the consolidated statements of incomeover the next 12 months.Net Investment HedgesThe Company uses derivative instruments and foreign currency denominated debt to manage foreign currency risk associated with its net investment inforeign operations.The derivative instruments that the Company uses for this purpose may include foreign currency forward exchange contracts used on astandalone basis or in combination with option collars and standalone cross currency interest rate contracts.For instruments that are designated as net investment hedges,the gains or losses are reported as a component of accumulated other comprehensive loss.The gains or losses are reclassified into earnings upon a liquidation event or deconsolidation of the foreign subsidiary.Amounts excluded from theassessment of effectiveness are recognized in interest expense,net on a straight-line basis over the term of the hedge.During the three months endedJuly 25,2025 and July 26,2024,the Company recognized$45 million and$50 million,respectively,of after-tax unrealized gains representing excludedcomponents in interest expense,net.The cash flows related to the Companys derivative instruments designated as net investment hedges are reported asinvesting activities in the consolidated statements of cash flows.Cash flows14Medtronic plcNotes to Consolidated Financial Statements(Unaudited)attributable to amounts excluded from the assessment of effectiveness are reported as operating activities in the consolidated statements of cash flows.Undesignated DerivativesThe Company uses foreign currency forward exchange contracts to offset the Companys exposure to the change in the value of non-functional currencydenominated assets,liabilities,and cash flows.These foreign currency forward exchange rate contracts are not designated as hedges at inception,and therefore,changes in the fair value of these contractsare recognized in the consolidated statements of income.Cash flows related to the Companys undesignated derivative contracts are reported in theconsolidated statements of cash flows based on the nature of the derivative instrument.Outstanding InstrumentsThe following table presents the contractual amounts of the Companys outstanding instruments:As of(in billions)DesignationJuly 25,2025April 25,2025Currency exchange rate contractsFair value hedge$1.1 Currency exchange rate contractsCash flow hedge10.4 10.6 Currency exchange rate contractsNet investment hedge6.6 8.0 Foreign currency-denominated debtNet investment hedge21.1 20.6 Currency exchange rate contractsUndesignated4.2 3.9(1)At July 25,2025,includes derivative contracts with a notional value of 4.0 billion,or$4.7 billion,designated as hedges of a portion of our net investment in certainEuropean operations and derivative contracts with a notional value of 286 billion,or$2.0 billion,designated as hedges of a portion of our net investment in certainJapanese operations.These derivative contracts mature in fiscal years 2027 through 2033.(2)At July 25,2025,includes 18.0 billion,or$21.1 billion,of outstanding Euro-denominated debt designated as hedges of a portion of our net investment in foreignoperations.This debt matures in fiscal years 2026 through 2054.Gains and Losses on Hedging Instruments and Derivatives not Designated as Hedging InstrumentsThe amount of the gains and losses on hedging instruments and the classification of those gains and losses within our consolidated financial statements forthe three months ended July 25,2025 and July 26,2024 were as follows:(Gain)Loss Recognized inAccumulated OtherComprehensive Loss(Gain)Loss Reclassified intoIncomeThree months endedThree months endedLocation of(Gain)Loss in IncomeStatement(in millions)July 25,2025July 26,2024July 25,2025July 26,2024Fair value hedgesCurrency exchange rate contracts$1$(20)$(1)Other operating expense,netCash flow hedgesCurrency exchange rate contracts97 43 20(36)Other operating expense,netCurrency exchange rate contracts38(20)(19)(17)Cost of products soldNet investment hedgesForeign currency-denominated debt582 246 N/ACurrency exchange rate contracts(1)(41)N/ATotal$717$229$(18)$(55)(1)(2)15Medtronic plcNotes to Consolidated Financial Statements(Unaudited)The amount of the gains and losses on our derivative instruments not designated as hedging instruments and the classification of those gains and losseswithin our consolidated financial statements during the three months ended July 25,2025 and July 26,2024 were as follows:(Gain)Loss Recognized in IncomeThree months endedLocation of(Gain)Loss in Income Statement(in millions)July 25,2025July 26,2024Currency exchange rate contracts$(2)$(8)Other operating expense,netBalance Sheet PresentationThe following table summarizes the balance sheet classification and fair value of derivative instruments included in the consolidated balance sheets atJuly 25,2025 and April 25,2025.The fair value amounts are presented on a gross basis,and are segregated between derivatives that are designated andqualify as hedging instruments and those that are not designated and do not qualify as hedging instruments,and are further segregated by type of contractwithin those two categories.Fair Value-AssetsFair Value-Liabilities(in millions)July 25,2025April 25,2025Balance Sheet ClassificationJuly 25,2025April 25,2025Balance Sheet ClassificationDerivatives designated as hedging instruments Currency exchange rate contracts$133$269 Other current assets$271$200 Other accrued expensesCurrency exchange rate contracts159 57 Other assets245 196 Other liabilitiesTotal derivatives designated as hedging instruments293 326 516 396 Derivatives not designated as hedging instruments Currency exchange rate contracts17 7 Other current assets7 5 Other accrued expensesTotal return swaps26 Other current assets 16 Other accrued expensesTotal derivatives not designated as hedging instruments43 7 7 21 Total derivatives$335$334$523$417 The following table provides information by level for the derivative assets and liabilities that are measured at fair value on a recurring basis.July 25,2025April 25,2025(in millions)Derivative AssetsDerivativeLiabilitiesDerivative AssetsDerivativeLiabilitiesLevel 1$309$523$334$401 Level 226 16 Total$335$523$334$417 The Company has elected to present the fair value of derivative assets and liabilities within the consolidated balance sheets on a gross basis,even whenderivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation.The cash flows related to collateralposted and received are reported gross as investing and financing activities,respectively,in the consolidated statements of cash flows.16Medtronic plcNotes to Consolidated Financial Statements(Unaudited)The following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments,netted inaccordance with various criteria as stipulated by the terms of the master netting arrangements with each of the counterparties.Derivatives not subject tomaster netting arrangements are not eligible for net presentation.July 25,2025Gross Amount Not Offset on the BalanceSheet(in millions)Gross Amount ofRecognized Assets(Liabilities)FinancialInstrumentsCash Collateral(Received)PostedNet AmountDerivative assets:Currency exchange rate contracts$309$(181)$128 Total return swaps26 26 335(181)154 Derivative liabilities:Currency exchange rate contracts(523)181 194(148)Total$(188)$194$6 April 25,2025Gross Amount Not Offset on the BalanceSheet(in millions)Gross Amount ofRecognized Assets(Liabilities)FinancialInstrumentsCash Collateral(Received)PostedNet AmountDerivative assets:Currency exchange rate contracts$334$(195)$139 Derivative liabilities:Currency exchange rate contracts(401)195 125(82)Total return swaps(16)(16)(417)195 125(97)Total$(84)$125$42 9.InventoriesInventory balances were as follows:(in millions)July 25,2025April 25,2025Finished goods$4,022$3,779 Work-in-process792 744 Raw materials1,072 953 Total$5,886$5,476 10.Goodwill and Other Intangible AssetsGoodwillThe following table presents the changes in the carrying amount of goodwill by segment:(in millions)CardiovascularNeuroscienceMedical SurgicalDiabetesTotalApril 25,2025$8,017$11,716$19,748$2,255$41,737 Currency translation28 38 203 269 July 25,2025$8,045$11,754$19,952$2,255$42,007 No goodwill impairment was recognized during the three months ended July 25,2025 and July 26,2024.17Medtronic plcNotes to Consolidated Financial Statements(Unaudited)The following table presents the gross carrying amount and accumulated amortization of intangible assets:July 25,2025April 25,2025(in millions)Gross CarryingAmountAccumulatedAmortizationGross CarryingAmountAccumulatedAmortizationDefinite-lived:Customer-related$16,561$(9,892)$16,550$(9,650)Purchased technology and patents11,615(7,736)11,600(7,514)Trademarks and tradenames422(286)421(283)Other356(107)355(101)Total$28,954$(18,021)$28,925$(17,547)Indefinite-lived:IPR&D$290$289$The Company did not recognize any definite-lived or indefinite-lived intangible asset impairment charges during the three months ended July 25,2025 andJuly 26,2024.Due to the nature of IPR&D projects,the Company may experience future delays or failures to obtain regulatory approvals to conductclinical trials,failures of clinical trials,delays or failures to obtain required market clearances,other failures to achieve a commercially viable product,orthe discontinuation of certain projects,and as a result,may recognize impairment losses in the future.Amortization ExpenseIntangible asset amortization expense for the three months ended July 25,2025 was$459 million,including$45 million of accelerated amortization oncertain intangible assets within the Cardiovascular Portfolio.Intangible asset amortization expense for the three months ended July 26,2024 was$414 million.Estimated aggregate amortization expense by fiscal year based on the carrying value of definite-lived intangible assets at July 25,2025,excluding any possible future amortization associated with acquired IPR&D which has not yet met technological feasibility,is as follows:(in millions)AmortizationExpenseRemaining 2026$1,303 20271,605 20281,555 20291,477 20301,345 20311,267 11.Income TaxesOn July 4,2025,the U.S.Government enacted The One Big Beautiful Bill Act of 2025 which includes,among other provisions,changes to the U.S.corporate income tax system including the allowance of immediate expensing of qualifying research and development expenses and permanent extensionsof certain provisions within the Tax Cuts and Jobs Act.Certain provisions are effective for the Company beginning fiscal year 2026 and the impact for thethree months ended July 25,2025 was not significant.The Organization for Economic Co-operation and Development(OECD)published Pillar Two Model Rules defining the global minimum tax,which callsfor the taxation of large multinational corporations at a minimum rate of 15%in each jurisdiction in which the group operates.The OECD has since issuedadministrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax.A number ofcountries,including Ireland,have enacted legislation to implement the core elements of Pillar Two,which were effective for Medtronic in fiscal year 2025.The Companys effective tax rate for the three months ended July 25,2025 was 19.6%as compared to 17.4%for the three months ended July 26,2024.Theincrease in the effective tax rate for the three months ended July 25,2025 primarily relates to an increase in the Pillar Two global minimum tax impact andyear-over-year changes in operational results by jurisdiction.At both July 25,2025 and April 25,2025,the Companys gross unrecognized tax benefits were$2.9 billion.In addition,the Company had accrued grossinterest and penalties of$99 million at July 25,2025.If all of the Companys unrecognized tax benefits were recognized,approximately$2.7 billion wouldimpact the Companys effective tax rate.At July 25,2025 and April 25,2025,the amount of the18Medtronic plcNotes to Consolidated Financial Statements(Unaudited)Companys gross unrecognized tax benefits,net of cash advance,recorded as a noncurrent liability within accrued income taxes on the consolidatedbalance sheets was$2.0 billion and$1.9 billion,respectively.The Company recognizes interest and penalties related to income tax matters within incometax provision in the consolidated statements of income and records the liability within either current or noncurrent accrued income taxes on theconsolidated balance sheets.Refer to Note 16 to the consolidated financial statements for additional information regarding the status of current tax audits and proceedings.12.Earnings Per ShareBasic earnings per share is computed based on the weighted average number of ordinary shares outstanding.Diluted earnings per share is computed basedon the weighted number of ordinary shares outstanding,increased by the number of additional shares that would have been outstanding had the potentiallydilutive ordinary shares been issued,and reduced by the number of shares the Company could have repurchased with the proceeds from issuance of thepotentially dilutive shares.Potentially dilutive ordinary shares include stock-based awards granted under stock-based compensation plans and sharescommitted to be purchased under the employee stock purchase plan.The table below sets forth the computation of basic and diluted earnings per share:Three months ended(in millions,except per share data)July 25,2025July 26,2024Numerator:Net income attributable to ordinary shareholders$1,040$1,042 Denominator:Basic weighted average shares outstanding1,281.6 1,293.3 Effect of dilutive securities:Employee stock options0.2 0.5 Employee restricted stock units3.1 2.0 Employee performance share units2.2 0.8 Diluted weighted average shares outstanding1,287.1 1,296.5 Basic earnings per share$0.81$0.81 Diluted earnings per share$0.81$0.80 The calculation of weighted average diluted shares outstanding excludes stock awards of approximately 24 million and 27 million ordinary shares for thethree months ended July 25,2025 and July 26,2024,respectively,because their effect would have been anti-dilutive on the Companys earnings per share.19Medtronic plcNotes to Consolidated Financial Statements(Unaudited)13.Stock-Based CompensationThe following table presents the components and classification of stock-based compensation expense for stock options,restricted stock,performance shareunits,and employee stock purchase plan shares recognized for the three months ended July 25,2025 and July 26,2024:Three months ended(in millions)July 25,2025July 26,2024Stock options$10$13 Restricted stock49 43 Performance share units16 15 Employee stock purchase plan11 12 Total stock-based compensation expense$86$83 Cost of products sold$10$9 Research and development expense11 10 Selling,general,and administrative expense65 64 Total stock-based compensation expense86 83 Income tax benefits(15)(13)Total stock-based compensation expense,net of tax$71$70 14.Retirement Benefit PlansThe Company sponsors various retirement benefit plans,including defined benefit pension plans,post-retirement medical plans,defined contributionsavings plans,and termination indemnity plans,covering substantially all U.S.employees and many employees outside the U.S.The net periodic benefitcost of the defined benefit pension plans included the following components for the three months ended July 25,2025 and July 26,2024:U.S.Non-U.S.Three months ended(in millions)July 25,2025July 26,2024July 25,2025July 26,2024Service cost$12$13$11$11 Interest cost42 43 12 13 Expected return on plan assets(64)(66)(18)(17)Amortization of prior service cost(1)(1)Amortization of net actuarial loss5 4 1 Net periodic benefit(credit)cost$(6)$(7)$6$7 Components of net periodic benefit(credit)cost other than the service component are recognized in other non-operating income,net in the consolidatedstatements of income.20Medtronic plcNotes to Consolidated Financial Statements(Unaudited)15.Accumulated Other Comprehensive LossThe following table provides changes in accumulated other comprehensive loss(AOCI),net of tax,and by component:(in millions)Unrealized(Loss)Gain onInvestmentSecuritiesCumulativeTranslationAdjustmentsNet InvestmentHedgesNet Change inRetirementObligationsUnrealized(Loss)Gain on CashFlow HedgesTotal AccumulatedOtherComprehensive(Loss)IncomeApril 25,2025$(63)$(2,835)$(597)$(640)$(149)$(4,284)Other comprehensive income(loss)beforereclassifications18 348(559)(1)(134)(327)Reclassifications1 2 5 8 Other comprehensive income(loss)19 348(559)1(128)(319)July 25,2025$(44)$(2,487)$(1,156)$(641)$(276)$(4,604)(in millions)Unrealized(Loss)Gain onInvestmentSecuritiesCumulativeTranslationAdjustmentsNet InvestmentHedgesNet Change inRetirementObligationsUnrealized Gain(Loss)on CashFlow HedgesTotal AccumulatedOtherComprehensive(Loss)IncomeApril 26,2024$(212)$(3,686)$878$(529)$229$(3,318)Other comprehensive income(loss)beforereclassifications70 102(206)(27)(60)Reclassifications6 1(39)(32)Other comprehensive income(loss)76 102(206)1(66)(92)July 26,2024$(136)$(3,584)$672$(529)$165$(3,410)The income tax on gains and losses on investment securities in other comprehensive income before reclassifications during the three months ended July 25,2025 and July 26,2024 was an expense of$4 million and$14 million,respectively.During the three months ended July 25,2025 and July 26,2024,realized gains and losses on investment securities reclassified from AOCI were reduced by an insignificant amount of income taxes.When realized,gainsand losses on investment securities reclassified from AOCI are recognized within other non-operating income,net.Refer to Note 6 to the consolidatedfinancial statements for additional information.For the three months ended July 25,2025 and July 26,2024,there was no income tax on cumulative translation adjustments.The income tax on net investment hedges in other comprehensive income before reclassifications during the three months ended July 25,2025 and July 26,2024,was a benefit of$23 million and$4 million,respectively.Refer to Note 8 to the consolidated financial statements for additional information.The net change in retirement obligations in other comprehensive income includes amortization of net actuarial losses included in net periodic benefit cost.During the three months ended July 25,2025,the tax impact on retirement obligations in other comprehensive income before reclassifications was notsignificant.During the three months ended July 26,2024,there were no tax impacts on retirement obligations in other comprehensive income beforereclassifications.During the three months ended July 25,2025 and July 26,2024,the gains and losses on defined benefit and pension items reclassifiedfrom AOCI were reduced by an insignificant amount of income taxes.When realized,net gains and losses on defined benefit and pension items reclassifiedfrom AOCI are recognized within other non-operating income,net.Refer to Note 14 to the consolidated financial statements for additional information.The income tax on unrealized gains and losses on cash flow hedges in other comprehensive income before reclassifications during the three months endedJuly 25,2025 and July 26,2024,was a benefit of$1 million and an expense$3 million,respectively.During the three months ended July 25,2025 andJuly 26,2024,gains and losses on cash flow hedges reclassified from AOCI were reduced by income taxes of$3 million and$14 million,respectively.When realized,gains and losses on currency exchange rate contracts reclassified from AOCI are recognized within other operating expense,net or cost ofproducts sold.Refer to Note 8 to the consolidated financial statements for additional information.21Medtronic plcNotes to Consolidated Financial Statements(Unaudited)16.Commitments and ContingenciesLegal MattersThe Company and its affiliates are involved in a number of legal actions from time to time involving product liability,employment,intellectual propertyand commercial disputes,shareholder-related matters,environmental proceedings,tax disputes,and governmental proceedings and investigations,including those described below.With respect to governmental proceedings and investigations,like other companies in our industry,the Company issubject to extensive regulation by national,state,and local governmental agencies in the United States and in other jurisdictions in which the Company andits affiliates operate.As a result,interaction with governmental agencies is ongoing.The Companys standard practice is to cooperate with regulators andinvestigators in responding to inquiries.With respect to intellectual property disputes,the Company is involved in litigation relating to patents,trademarks,copyrights,trade secrets,and other intellectual property(IP)rights,and licenses,acquisitions or other agreements relating to such rights.This litigationincludes,but is not limited to,alleged infringement or misappropriation of IP rights,or breach of obligations related to IP rights,or other claims asserted bycompetitors,individuals,or,consistent with a growing trend across technology-intensive industries,other entities created specifically to fund IP litigation.With respect to commercial disputes,antitrust and competition issues have gained increased prominence,enforcement and private litigation have increasedglobally,and the Company is involved in or at risk for antitrust litigation,investigations or enforcement actions regarding a range of commercial activities,including challenges to mergers and acquisition transactions,joint ventures,co-development or co-marketing arrangements,contracting practices,distribution agreements and employment agreements.The outcomes of legal actions are not within the Companys complete control and may not be knownfor prolonged periods of time.In some actions,the enforcement agencies or private claimants seek significant monetary damages and/or royalty payments,as well as other civil or criminal remedies(including injunctions barring or restricting the sale of products that are the subject of the proceeding,placingrestrictions on competitive strategies or practices,or unwinding consummated transactions),any or all of which could have a material adverse impact onthe Companys consolidated earnings,financial position,and/or cash flows.The Company records a liability in the consolidated financial statements on an undiscounted basis for loss contingencies related to legal actions when a lossis known or considered probable and the amount may be reasonably estimated.If the reasonable estimate of a known or probable loss is a range,and noamount within the range is a better estimate than any other,the minimum amount of the range is accrued.If a loss is reasonably possible but not known orprobable,and may be reasonably estimated,the estimated loss or range of loss is disclosed.When determining the estimated loss or range of loss,significant judgment is required.Estimates of probable losses resulting from litigation and governmental proceedings involving the Company are inherentlydifficult to predict,particularly when the matters are in early procedural stages with incomplete scientific facts or legal discovery,involve unsubstantiatedor indeterminate claims for damages,potentially involve penalties,fines or punitive damages,or could result in a change in business practice.TheCompany classifies certain specified litigation charges and gains related to significant legal matters as certain litigation charges,net in the consolidatedstatements of income.The Company recognized$27 million and$81 million of certain litigation charges during the three months ended July 25,2025,andJuly 26,2024,respectively.At July 25,2025 and April 25,2025,accrued litigation was approximately$0.2 billion and$0.4 billion,respectively.Theultimate cost to the Company with respect to accrued litigation could be materially different than the amount of the current estimates and accruals andcould have a material adverse impact on the Companys consolidated earnings,financial position,and/or cash flows.The Company includes accruedlitigation in other accrued expenses and other liabilities on the consolidated balance sheets.While it is not possible to predict the outcome for most of thelegal matters discussed below,the Company believes it is possible that the costs associated with these matters could have a material adverse impact on theCompanys consolidated earnings,financial position,and/or cash flows.Intellectual Property MattersColibriThe Company is a defendant in patent litigation brought by Colibri Heart Valve LLC(Colibri)in the U.S.District Court for the Central District ofCalifornia.Colibri alleges infringement of one patent by the Companys Evolut family of transcatheter aortic valve replacement devices.The patentasserted by Colibri has expired.On February 8,2023,a jury returned a verdict against the Company for approximately$106 million.In July 2023,theCompany filed its appeal with the U.S.Court of Appeals for the Federal Circuit.On July 18,2025,the U.S.Court of Appeals for the Federal Circuit ruledin favor of the Company and reversed the lower court,vacating the jury verdict and ruling that Medtronic did not infringe the Colibri patent.The Companywill continue to monitor the case until all additional appellate periods have expired.Product Liability MattersHernia Mesh LitigationStarting in fiscal year 2020,plaintiffs began filing lawsuits against certain subsidiaries of the Company in U.S.state and federal courts that allege personalinjury from hernia mesh products sold by those subsidiaries.As of July 30,2025,the Company and certain of its22Medtronic plcNotes to Consolidated Financial Statements(Unaudited)subsidiaries have been named as defendants in lawsuits filed on behalf of approximately 9,350 individual plaintiffs,and certain plaintiffs law firms haveadvised the Company that they may file additional cases in the future.Approximately 6,950 plaintiffs have pending lawsuits in a coordinated proceeding inMassachusetts state court,where they have been consolidated before a single judge.Approximately 500 plaintiffs have pending lawsuits in a coordinatedaction in Minnesota state court,and there are approximately 1,900 actions coordinated in a federal Multidistrict Litigation in the U.S.District Court for theDistrict of Massachusetts plus fewer than ten one-off cases filed in other courts.The pending lawsuits relate almost entirely to hernia mesh products thathave not been subject to recalls,withdrawals,or other adverse regulatory action.The Company has not recorded an expense related to damages inconnection with these matters because any potential loss is not currently probable and reasonably estimable.Additionally,the Company is unable toreasonably estimate the range of loss,if any,that may result from these matters.Diabetes Pump Retainer Ring LitigationStarting in fiscal year 2021,plaintiffs began filing lawsuits against the Diabetes operating unit in U.S.state and federal courts alleging personal injury fromSeries 600 insulin pumps with allegedly defective clear retainer rings that were subject to field corrective actions in 2019 and 2021.As of August 4,2025,after a number of recent dismissals,there are nine lawsuits filed on behalf of 20 individuals.Plaintiffs firms previously notified the Company that theymay file additional lawsuits in the future on behalf of several thousand additional claimants.Most of the filed suits are coordinated in California state court.The Company recognized certain litigation charges in the first quarter of fiscal year 2026 in connection with these matters,and the Companys accruedexpenses for these matters are included within accrued litigation as of July 25,2025 as discussed above.Antitrust MattersApplied MedicalThe Company is a defendant in civil antitrust litigation brought by Applied Medical Resources Corporation in the U.S.District Court for the CentralDistrict of California,alleging that the Company has engaged in anticompetitive and monopolistic conduct relating to its sales of advanced bipolar devices,including under contracts with group purchasing organizations.On August 15,2025,the court denied the Companys motion for summary judgmentconcluding that there are disputed factual issues to be resolved at trial.The court has not yet set a trial date.The Company has substantial legal and factualdefenses and intends to defend itself vigorously.The Company has not recorded an expense related to damages in connection with this matter because anypotential loss is not currently probable and reasonably estimable.Additionally,the Company is unable to reasonably estimate the range of loss,if any,thatmay result from this matter.Environmental ProceedingsThe Company is a successor to several investigation and cleanup actions at various stages related to environmental remediation matters at a number ofsites,including in Orrington,Maine.These projects relate to a variety of activities,including removal of solvents,metals and other hazardous substancesfrom soil and groundwater.The ultimate cost of site cleanup and timing of future cash flows is difficult to predict given uncertainties regarding the extentof the required cleanup,the interpretation of applicable laws and regulations,and alternative cleanup methods.The Company is also a successor to a party named in a lawsuit filed in the U.S.District Court for the District of Maine in the early 2000s by the NaturalResources Defense Council and the Maine Peoples Alliance relating to mercury contamination of the Penobscot River and Bay and options for remediatingsuch contamination.In October 2022,the court issued a final order approving the settlement and the parties are working with consultants onimplementation of remedial activities.The final court order did not result in a change to the Companys previous accrual for this matter.The Companys accrued expenses for these various environmental proceedings are included within accrued litigation as discussed above.Anti-Corruption MattersThe Company has regular and ongoing interactions with governmental agencies,and its practice is to cooperate with such inquiries.In addition,from timeto time,the Company self-discloses potential concerns to governmental regulators.Like many in the medical device industry or with internationaloperations,the Company engages in periodic discussions with the U.S.Securities and Exchange Commission,U.S.Department of Justice,and variousauthorities in other countries regarding certain activities in different global markets.The Company is committed to regularly evaluating and,as appropriate,strengthening its anti-corruption compliance programs and practices.Any possible future determination that certain of our operations and activities,and/orthose of our third-party distributors,are not in compliance with existing laws could result in the imposition of fines,penalties,and equitable remedies in theUnited States or in other jurisdictions.The Company has not recorded an expense in connection with these matters because any potential loss is notcurrently probable and reasonably estimable.Additionally,the Company is unable to reasonably estimate the range of loss,if any,that may result fromthese matters.23Medtronic plcNotes to Consolidated Financial Statements(Unaudited)Other MattersItalian PaybackIn 2015,“payback”legislation was enacted in Italy requiring companies selling medical devices to make payments to the Italian state if Italys medicaldevice expenditures exceed annual regional maximum ceilings.The payment amounts are calculated based upon the amount by which the regional ceilingswere exceeded for any given year.There has been significant scrutiny on the legality and enforceability of the payback law since its inception,andlitigation challenging the law has been proceeding through the Italian Courts.Since the law was enacted,the Company has recognized an estimate for theamount of variable consideration but has not made any payments under the payback law.In July 2024,two rulings by the Constitutional Court of Italy found that the medical device payback law is constitutional.Therefore,the Companyincreased its liability pertaining to certain prior years since 2015 by$90 million during the three months ended July 26,2024,as a reduction to net sales inthe consolidated statements of income.In June 2025,the Italian government published a legislative decree confirming a reduction of the amounts due for years 2015 to 2018.The decree wasformalized into law in August 2025.As a result,the Company decreased its liability pertaining to these years by$39 million during the three months endedJuly 25,2025,as an increase to net sales in the consolidated statements of income.Litigation before Italian Courts is still pending for years 2019 andbeyond,as such,it is possible that the amount of the Companys liability could materially differ from the amount currently accrued.Contract Termination with BlackstoneAs described in Note 4,the Company is party to various research and development funding arrangements with Blackstone,which are subject to certaintermination provisions.During fiscal year 2025,the parties negotiated a contractual dispute resolution under one of the funding arrangements.As a result,the Company recognized certain litigation charges in connection with the resolution and included the accrued litigation charge in other accrued expenses onthe consolidated balance sheets as of April 25,2025.Termination charges related to one of the Blackstone Agreements were paid in the first quarter offiscal year 2026.Mallinckrodt Bankruptcy LitigationCertain of the Companys affiliates are defendants in a lawsuit brought by a trust created in the bankruptcy of Mallinckrodt PLC(the“Trust”)in Delawarebankruptcy court.The Trust claims that Covidien spun off its pharmaceuticals business,Mallinckrodt,in 2013 to avoid potential liability relating toopioids.In January 2024,the Delaware bankruptcy court granted in part and denied in part an early-stage motion to dismiss all claims,finding that theclaims alleging actual fraudulent transfer and alter ego or related liability could go forward,while dismissing the claims alleging constructive fraudulenttransfer and breaches of fiduciary duty.In August 2025,the court granted in part and denied in part a motion for summary judgment filed by theCompanys affiliates arguing the Trusts claims should be dismissed as a matter of law based on application of a safe harbor provision of the bankruptcycode.The case will now proceed to discovery into the merits of the Trusts intentional fraudulent transfer and related claims.The Companys affiliatesbelieve they have substantial legal and factual defenses and intend to defend themselves vigorously.The Company has not recorded a liability inconnection with this matter because any potential loss is not currently probable and reasonably estimable.Additionally,the Company is unable toreasonably estimate the range of loss,if any,that may result from this matter.Income TaxesIn March 2009,the IRS issued its audit report on Medtronic,Inc.for fiscal years 2005 and 2006.Medtronic,Inc.reached agreement with the IRS on some,but not all matters related to these fiscal years.The remaining unresolved issue for fiscal years 2005 and 2006 relates to the allocation of income betweenMedtronic,Inc.and its wholly-owned subsidiary operating in Puerto Rico,which is one of the Companys key manufacturing sites.The Tax Court reviewedthis dispute,and in June 2016,issued an opinion with respect to the allocation of income between the parties for fiscal years 2005 and 2006 whereby itgenerally rejected the IRSs position,but also made certain modifications to the Medtronic,Inc.tax returns as filed.In April 2017,the IRS filed a Notice ofAppeal to the U.S.Court of Appeals for the Eighth Circuit regarding the Tax Court opinion.The U.S.Court of Appeals issued its opinion in August 2018and remanded the case back to the Tax Court for additional factual findings.The Tax Court issued its second opinion in August 2022,the IRS filed a Noticeof Appeal to the U.S.Court of Appeals for the Eighth Circuit in September 2023,and Medtronic subsequently filed a cross-appeal in October 2023.Oralargument for the Appeal occurred in May 2025.The IRS has issued its audit reports on Medtronic,Inc.for fiscal years 2007 through 2016.Medtronic,Inc.and the IRS have reached agreement on allsignificant issues except for the allocation of income between Medtronic,Inc.and its wholly-owned subsidiary operating in Puerto Rico for the businessesthat are the subject of the U.S.Tax Court matter for fiscal years 2005 and 2006.Medtronic,Inc.s fiscal years 2017 through 2023 U.S.federal income tax returns are currently being audited by the IRS.24Medtronic plcNotes to Consolidated Financial Statements(Unaudited)Covidien LP(a wholly owned subsidiary of Medtronic plc)has either reached agreement with the IRS or the statute of limitations has lapsed on its U.S.federal income tax returns through fiscal year 2021.Covidien LPs fiscal year 2023 federal income tax return is currently being audited by the IRS.Although it is not possible to predict the outcome for most of the income tax matters discussed above,the Company believes it is possible that chargesassociated with these matters could have a material adverse impact on the Companys consolidated earnings,financial position,and/or cash flows.Refer to Note 11 for additional discussion of income taxes.GuaranteesIn the normal course of business,the Company and/or its affiliates periodically enter into agreements that require one or more of the Company and/or itsaffiliates to indemnify customers or suppliers for specific risks,such as claims for injury or property damage arising as a result of the Company or itsaffiliates products,the negligence of the Companys personnel,or claims alleging that the Companys products infringe on third-party patents or otherintellectual property.The Company also offers warranties on various products.The Companys maximum exposure under these guarantees is unable to beestimated.Historically,the Company has not experienced significant losses on these types of guarantees.We also enter into standby letters of credit agreements,bank guarantees,and surety bonds with financial institutions to support various performance andother obligations,as well as ongoing tax matters.As of July 25,2025,the aggregated amount outstanding under these instruments was approximately$1.2 billion.The Company believes the ultimate resolution of the above guarantees is not expected to have a material effect on the Companys consolidated earnings,financial position,and/or cash flows.17.Segment and Geographic InformationThe Company has four reportable segments:Cardiovascular Portfolio,Neuroscience Portfolio,Medical Surgical Portfolio,and Diabetes Operating Unit.The chief operating decision maker(CODM)is our Chief Executive Officer(CEO)and has chosen to organize the entity based upon therapy solutionsprovided by each segment.The four reportable segments are strategic businesses that are managed separately,as each one develops and manufacturesproducts and provides services oriented toward targeted therapy solutions.The CODM measures and evaluates segment performance and allocates resources based on net sales and segment operating profit.Net sales include end-customer revenues from products developed,manufactured,and distributed by the segments.Significant expense categories include cost of products soldexcluding amortization of intangible assets,research and development expense,and selling,general,and administrative expenses.The CODM usessegment operating profit in the budget and forecasting process and to monitor budget and forecast variances versus actual when assessing segmentperformance and allocating capital resources to each segment.Segment operating profit excludes interest income and expense,amortization of intangible assets,currency impact of remeasurement and hedging recordedin other operating expense,net,non-operating income or expense items,and other items not allocated to the segments.During the first quarter of fiscalyear 2026,the segment operating profit utilized by the CODM to evaluate segment performance and allocate resources changed to include allocations ofcertain corporate expenses,stock-based compensation,and centralized distribution expenses.For the three months ended July 26,2024,segment operatingprofit includes allocations of$0.9 billion of corporate,stock-based compensation and centralized distribution expenses that were previously excluded fromsegment operating profit.Prior period information has been recast to conform to the current classification.The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in Note 1 to theconsolidated financial statements included in the Companys Annual Report on Form 10-K for the fiscal year ended April 25,2025.Certain depreciableassets may be recorded by one segment,while the depreciation expense is allocated to another segment.The allocation of depreciation expense is based onthe proportion of the assets used by each segment.25Medtronic plcNotes to Consolidated Financial Statements(Unaudited)The following tables present reconciliations of financial information from the segments to the applicable line items in the Companys consolidated financialstatements:Segment Operating ProfitThree months ended July 25,2025(in millions)CardiovascularNeuroscienceMedical SurgicalDiabetesTotalNet sales$3,285$2,416$2,083$721$8,506 Reconciliation of revenuesOther operating segment net sales33 Other adjustments39 Total consolidated net sales$8,578 Less:Cost of products sold,excluding amortization of intangibleassets1,132 721 814 304 2,972 Research and development expense280 157 169 120 725 Selling,general,and administrative expense1,060 831 605 274 2,771 Other segment items(15)2 1(3)(15)Reportable segment operating profit$828$705$494$26$2,053 Reconciliation of segment profit/(loss)Other operating segment profit11 Currency and other(47)Interest expense,net(176)Other non-operating income,net33 Amortization of intangible assets(459)Restructuring and associated costs(67)Acquisition and divestiture-related items(58)Certain litigation charges,net(27)Other adjustments39 Income before income taxes$1,302 (1)(2)(3)(1)(2)26Medtronic plcNotes to Consolidated Financial Statements(Unaudited)Three months ended July 26,2024(in millions)CardiovascularNeuroscienceMedical SurgicalDiabetesTotalNet sales$3,007$2,317$1,996$647$7,967 Reconciliation of revenuesOther operating segment net sales38 Other adjustments(90)Total consolidated net sales$7,915 Less:Cost of products sold,excluding amortization of intangibleassets998 657 778 272 2,706 Research and development expense257 153 162 101 673 Selling,general,and administrative expense978 808 591 259 2,637 Other segment items(6)11 5(9)1 Reportable segment operating profit$780$687$459$24$1,950 Reconciliation of segment profit/(loss)Other operating segment profit13 Currency and other(10)Interest expense,net(167)Other non-operating income,net157 Amortization of intangible assets(414)Restructuring and associated costs(62)Acquisition and divestiture-related items(12)Certain litigation charges,net(81)Medical device regulations(14)Other adjustments(90)Income before income taxes$1,268(1)Includes the operations and ongoing transition agreements from businesses the Company has exited or divested.(2)Includes adjustments to the Companys Italian payback accruals resulting from the two July 22,2024 rulings by the Constitutional Court and the Legislative Decreepublished by the Italian government on June 30,2025 for certain prior years since 2015.(3)Other segment items for the Cardiovascular,Neuroscience,and Medical Surgical segments include royalty expense.The Cardiovascular segment for both periods andthe Diabetes segment for the three months ended July 26,2024 also include income from funded research and development arrangements.(1)(2)(3)(1)(2)27Medtronic plcNotes to Consolidated Financial Statements(Unaudited)Total Assets(in millions)July 25,2025April 25,2025Cardiovascular$16,573$16,548 Neuroscience18,433 18,476 Medical Surgical33,326 33,317 Diabetes4,209 4,136 Total reportable segments72,542 72,476 Other operating segment202 296 Corporate18,228 18,906 Total$90,972$91,680(1)Includes the operations and ongoing transition agreements from businesses the Company has exited or divested.Depreciation ExpenseThree months ended(in millions)July 25,2025July 26,2024Cardiovascular$64$55 Neuroscience77 65 Medical Surgical54 49 Diabetes31 24 Total reportable segments225 194 Corporate64 53 Total$289$248 Geographic InformationNet sales are attributed to the country based on the location of the customer taking possession of the products or in which the services are rendered.Thefollowing table presents net sales for the three months ended July 25,2025 and July 26,2024 for the Companys country of domicile,countries withsignificant concentrations,and all other countries:Three months ended(in millions)July 25,2025July 26,2024Ireland$33$30 United States4,224 4,082 Rest of world4,321 3,803 Total other countries,excluding Ireland8,545 7,885 Total$8,578$7,915 (1)28Item 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsUNDERSTANDING OUR FINANCIAL INFORMATIONThe following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results ofoperations of Medtronic plc and its subsidiaries(Medtronic plc,Medtronic,or the Company,or we,us,or our).For a full understanding of financialcondition and results of operations,you should read this discussion along with Managements Discussion and Analysis of Financial Condition and Resultsof Operations in our Annual Report on Form 10-K for the fiscal year ended April 25,2025.In addition,you should read this discussion along with ourconsolidated financial statements and related notes thereto at and for the three months ended July 25,2025.Amounts reported in millions within thisquarterly report are computed based on the amounts in thousands,and therefore,the sum of the components may not equal the total amount reported inmillions due to rounding.Additionally,certain columns and rows within tables may not sum due to rounding.Financial TrendsThroughout this Managements Discussion and Analysis,we present certain financial measures that facilitate managements review of the operationalperformance of the Company and as a basis for strategic planning;however,such financial measures are not presented in our financial statements preparedin accordance with accounting principles generally accepted in the United States(U.S.)(U.S.GAAP).These financial measures are considered non-GAAP financial measures and are intended to supplement,and should not be considered as superior to,financial measures presented in accordance withU.S.GAAP.We believe that non-GAAP financial measures provide information useful to investors in understanding the Companys underlying operationalperformance and trends and may facilitate comparisons with the performance of other companies in the medical technologies industry.As presented in the GAAP to Non-GAAP Reconciliations section on the following pages,our non-GAAP financial measures exclude the impact ofamortization of intangible assets and certain charges or benefits that contribute to or reduce earnings and that may affect financial trends and include certaincharges or benefits that result from transactions or events that we believe may or may not recur with similar materiality or impact to our operations in futureperiods(Non-GAAP Adjustments).In the event there is a Non-GAAP Adjustment recognized in our operating results,the tax cost or benefit attributable to that item is separately calculatedand reported.Because the effective rate can be significantly impacted by the Non-GAAP Adjustments that take place during the period,we often refer toour tax rate using both the effective rate and the non-GAAP nominal tax rate(Non-GAAP Nominal Tax Rate).The Non-GAAP Nominal Tax Rate iscalculated as the income tax provision,adjusted for the impact of Non-GAAP Adjustments,as a percentage of income before income taxes,excluding Non-GAAP Adjustments.Free cash flow is a non-GAAP financial measure calculated by subtracting property,plant,and equipment additions from operating cash flows.Refer to the“GAAP to Non-GAAP Reconciliations,Income Taxes,and Free Cash Flow sections for reconciliations of the non-GAAP financialmeasures to their most directly comparable financial measures prepared in accordance with U.S.GAAP.29EXECUTIVE LEVEL OVERVIEWMedtronic is the leading global healthcare technology company alleviating pain,restoring health,and extending life for millions of people around theworld.Our primary products include those for cardiac rhythm disorders,cardiovascular disease,neurological disorders and diseases,spinal conditions andmusculoskeletal trauma,ear,nose,and throat conditions,urological and digestive disorders,advanced and general surgical care,respiratory and monitoringsolutions,and diabetes conditions.The following is a summary of net sales,diluted earnings per share,and operating cash flow for the three months ended July 25,2025 and July 26,2024:30GAAP to Non-GAAP ReconciliationsThe tables below present our GAAP to Non-GAAP reconciliations for the three months ended July 25,2025 and July 26,2024:Three months ended July 25,2025(in millions,except per share data)Income BeforeIncome TaxesIncome Tax Provision(Benefit)Net IncomeAttributable toMedtronicDiluted EPSEffective Tax RateGAAP$1,302$255$1,040$0.81 19.6%Non-GAAP Adjustments:Amortization of intangible assets459 85 374 0.29 18.5 Restructuring and associated costs67 15 51 0.04 22.4 Acquisition and divestiture-related items58 10 48 0.04 17.2 Certain litigation charges,net27 6 21 0.02 22.2(Gain)/loss on minority investments113 7 107 0.08 6.2 Other(39)(8)(30)(0.02)20.5rtain tax adjustments,net(16)16 0.01 Non-GAAP$1,987$354$1,626$1.26 17.8%Three months ended July 26,2024(in millions,except per share data)Income BeforeIncome TaxesIncome Tax Provision(Benefit)Net IncomeAttributable toMedtronicDiluted EPSEffective Tax RateGAAP$1,268$220$1,042$0.80 17.4%Non-GAAP Adjustments:Amortization of intangible assets414 75 340 0.26 18.1 Restructuring and associated costs62 12 51 0.04 19.4 Acquisition and divestiture-related items12 1 11 0.01 8.3 Certain litigation charges,net81 13 68 0.05 16.0(Gain)/loss on minority investments(17)(17)(0.01)Medical device regulations14 3 11 0.01 21.4 Other90 20 70 0.05 22.2 Certain tax adjustments,net(17)17 0.01 Non-GAAP$1,925$327$1,592$1.23 17.0%(1)The Company recognized$45 million of accelerated amortization on certain intangible assets within the Cardiovascular Portfolio.(2)The charges primarily relate to employee termination benefits and facility related and contract termination costs.(3)The charges primarily include business combination costs,changes in fair value of contingent consideration,and exit of business-related charges.For the three months ended July 25,2025,exit of business-related charges primarily relate to the impending separation of the Diabetes business and costs associated with the Companys June 2021 decision to stop the distribution andsale of the Medtronic HVAD System.(4)We exclude unrealized and realized gains and losses on our minority investments as we do not believe that these components of income or expense have a direct correlation to our ongoingor future business operations.(5)Reflects adjustments to the Companys Italian payback accruals resulting from the two July 22,2024 rulings by the Constitutional Court and the Legislative Decree published by the Italiangovernment on June 30,2025 for certain prior years since 2015.(6)The charges represent incremental costs of complying with the new European Union(E.U.)medical device regulations for previously registered products and primarily include charges forcontractors supporting the project and other direct third-party expenses.We consider these costs to be duplicative of previously incurred costs and/or one-time costs.(1)(1)(2)(3)(4)(5)(2)(3)(4)(6)(5)31Free Cash FlowFree cash flow,a non-GAAP financial measure,is calculated by subtracting additions to property,plant,and equipment from net cash provided byoperating activities.Management uses this non-GAAP financial measure,in addition to U.S.GAAP financial measures,to evaluate our operating results.Free cash flow should be considered supplemental to,and not a substitute for,our reported financial results prepared in accordance with U.S.GAAP.Reconciliations between net cash provided by operating activities(the most comparable U.S.GAAP measure)and free cash flow are as follows:Three months ended(in millions)July 25,2025July 26,2024Net cash provided by operating activities$1,088$986 Additions to property,plant,and equipment(504)(520)Free cash flow$584$466 Refer to the Summary of Cash Flows section for drivers of the change in cash provided by operating activities.Macroeconomic TrendsLooking ahead,a number of macroeconomic and geopolitical factors could negatively impact our business,including without limitation:Competitive product launches and pricing pressure,geographic macroeconomic developments including changes in global trade policies andfluctuations in currency exchange rates,general price inflation,changes in interest rates,reimbursement challenges,impacts from changes in themix of our product offerings,delays in product registration approvals,national and provincial tender pricing for certain products,particularly inChina,replacement cycle challenges,and supply chain challenges from time to time.Recent developments in global trade policy have introduced new uncertainties for our business.The U.S.,China,and other jurisdictions haverecently imposed or proposed additional tariffs on imported goods.Based on current rates as of August 19,2025,we estimate the pre-tax net tariffimpact to be$185 million in fiscal year 2026,with the majority recognized in the consolidated statements of income in the second half of thefiscal year.The actual amount could vary based on changes in tariff rates,duration of tariffs,scope of tariffs,and potential countermeasures ormitigation actions.The impact of the tariffs on the financial results for the three months ended July 25,2025 was not material.While we are takingproactive steps to mitigate the effects of these tariffs,the evolving nature of international trade policy continues to present a risk to our coststructure and financial performance.Further escalation or expansion of trade barriers could have a material adverse effect on our results ofoperations.The sanctions and other measures being imposed in response to the Russia-Ukraine conflict are having and could continue to have impacts onrevenue and supply chain.The financial impact of the conflict for the three months ended July 25,2025,including on accounts receivable andinventory reserves,was not material.For the three months ended July 25,2025,the business of the Company in these countries represented lessthan 1%of the Companys consolidated revenues and assets.Although the long-term implications of Israels conflict are difficult to predict at this time,the financial and operational impact of the conflict forthe three months ended July 25,2025,including on accounts receivable and inventory reserves,was not material.As of July 25,2025,theCompany had 6 facilities and approximately 1,300 employees in Israel and the business of the Company represented less than 1%of theCompanys consolidated revenues and assets.32NET SALESThe charts below illustrate the percent of net sales by segment for the three months ended July 25,2025 and July 26,2024:33The table below illustrates net sales by segment and division and market geography for the three months ended July 25,2025 and July 26,2024:Three months ended(in millions)July 25,2025July 26,2024%ChangeCardiac Rhythm&Heart Failure$1,712$1,535 12%Structural Heart&Aortic930 856 9 Coronary&Peripheral Vascular643 616 5 Cardiovascular3,285 3,007 9 Cranial&Spinal Technologies1,211 1,147 6 Specialty Therapies702 713(2)Neuromodulation504 457 10 Neuroscience2,416 2,317 4 Surgical&Endoscopy1,612 1,544 4 Acute Care&Monitoring471 452 4 Medical Surgical2,083 1,996 4 Diabetes721 647 12 Reportable segment net sales8,506 7,967 7 Other operating segment33 38(13)Other adjustments39(90)(143)Total net sales$8,578$7,915 8%U.S.InternationalThree months endedThree months ended(in millions)July 25,2025July 26,2024%ChangeJuly 25,2025July 26,2024%ChangeCardiovascular$1,479$1,403 6%$1,806$1,604 13%Neuroscience1,624 1,565 4 792 752 5 Medical Surgical884 881 1,199 1,115 8 Diabetes217 215 1 504 432 17 Reportable segment net sales4,205 4,064 4 4,301 3,903 10 Other operating segment20 18 6 14 19(26)Other adjustments 39(90)(143)Total net sales$4,224$4,082 4%$4,354$3,832 14%(1)Includes operations and ongoing transition agreements from businesses the Company has exited or divested.(2)Reflects adjustments to the Companys Italian payback accruals as further described below.The increase in net sales for the three months ended July 25,2025,as compared to the corresponding period in the prior fiscal year,was driven primarily bygrowth in most businesses,including strong growth in Cardiac Ablation Solutions,TAVR,Neuromodulation,Diabetes,and Cardiac Pacing Therapies.Inaddition,the net sales increase was driven by impacts of foreign currency fluctuations and changes in estimates relating to our Italian payback accrualresulting from the two July 2024 rulings by the Constitutional Court and the Legislative Decree published by the Italian government in June 2025 andformalized into law in August 2025 for certain prior years since 2015.For the three months ended July 25,2025,the impact of the Italian paybackadjustment was an increase to net sales of$39 million as compared to a decrease in net sales of$90 million for the three months ended July 26,2024.CardiovascularCardiovascular products include pacemakers,insertable cardiac monitors,cardiac resynchronization therapy devices,implantable cardioverterdefibrillators,leads and delivery systems,products for the treatment of atrial fibrillation,information systems for the management of patients with CardiacRhythm&Heart Failure devices,products designed to reduce surgical site infections,coronary and peripheral stents and related delivery systems,balloonsand related delivery systems,endovascular stent graft systems,heart valve replacement technologies,cardiac tissue ablation systems,open heart andcoronary bypass grafting surgical products,and renal denervation systems for the treatment of hypertension.Cardiovascular also includes CareManagement Services and Cath Lab Managed Services(1)(2)(1)(2)34(CLMS)within the Cardiac Rhythm&Heart Failure division.Cardiovasculars net sales for the three months ended July 25,2025 was$3.3 billion,anincrease of 9 percent,as compared to the corresponding period in the prior fiscal year,resulting from growth across most businesses and the impacts offoreign currency fluctuations.The graphs below illustrate the percent of Cardiovascular net sales by division for the three months ended July 25,2025 and July 26,2024:Cardiac Rhythm&Heart Failure(CRHF)net sales for the three months ended July 25,2025 increased 12 percent as compared to the corresponding periodin the prior fiscal year.Cardiac Ablation Solutions experienced strong growth in PulseSelect and Affera Sphere-9 pulsed field ablation with partiallyoffsetting declines in cryoablation.The net sales increase within Cardiac Rhythm Management was driven by growth in Micra leadless pacemakers,Auroraextravascular implantable cardioverter defibrillator(EV-ICD)system,SelectSure 3830 lead,and TYRX.Structural Heart&Aortic(SHA)net sales for the three months ended July 25,2025 increased 9 percent as compared to the corresponding period in theprior fiscal year.The net sales increase was driven by continued growth in Structural Heart from Evolut FX TAVR system and in Cardiac Surgery drivenby growth in Perfusion and Surgical Valves.Coronary&Peripheral Vascular(CPV)net sales for the three months ended July 25,2025 increased 5 percent as compared to the corresponding period inthe prior fiscal year.The net sales increase was driven by growth in the Symplicity Spyral renal denervation system,guide catheters and balloons,as well asgrowth in Peripheral Vascular Health from endovenous.In addition to the macroeconomic and geopolitical factors described in the Executive Level Overview,looking ahead,we expect Cardiovascular could beaffected by the following:Continued global penetration of our Micra transcatheter pacing portfolio.Continued acceptance and growth from the Azure XT and Azure S SureScan pacing systems and the 3830 lead.Global adoption of Aurora EV-ICD.Growth of the Cobalt and Crome portfolio of ICDs and CRT-Ds.Growth of the CRT-P quadripolar pacing system.Continued growth and utilization of the TYRX Envelope for implantable devices.Continued use and acceptance of Reveal LINQ and expansion of the LINQ II card
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EarningsQ1 FY26|August 19,2025Contact:2Earnings Report|Q1 FY26Forward Looking StatementsThis present.
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Corrected Transcript 1-877-FACTSET Total Pages:17 Copyright 2001-2025 FactSet CallStreet,LLC 05-Aug.
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2025 Fluor Corporation.All Rights Reserved.Fluor is a registered service mark of Fluor Corporation.
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Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q QUARTE.
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Press Release Investor Contact:Will Gabrielski Senior Vice President,Finance,Treasurer 213.593.8208.
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Third Quarter Fiscal 2025NETWORK RAIL,SOUTHERN REGIONUnited KingdomAECOM was appointed as an ecosyst.
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NEWS RELEASE FOR IMMEDIATE RELEASE Medtronic reports first quarter fiscal 2026 financial results 11.
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Corrected Transcript 1-877-FACTSET Total Pages:17 Copyright 2001-2025 FactSet CallStreet,LLC 01-Aug.
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UNITED STATES SECURITIES 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 1934 For the quarterly period ended June 30,2025ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from toCommission file number 001-14905BERKSHIRE HATHAWAY INC.(Exact name of Registrant as specified in its charter)Delaware47-0813844(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification Number)3555 Farnam Street,Omaha,Nebraska 68131(Address of principal executive office)(Zip Code)(402)346-1400(Registrants telephone number,including area code)(Former name,former address and former fiscal year,if changed since last report)Securities registered pursuant to Section 12(b)of the Act:Title of each class Trading Symbols Name of each exchange on which registered Class A Common StockClass B Common Stock1.125%Senior Notes due 20272.150%Senior Notes due 20281.500%Senior Notes due 20302.000%Senior Notes due 20341.625%Senior Notes due 20352.375%Senior Notes due 20390.500%Senior Notes due 20412.625%Senior Notes due 2059BRK.ABRK.BBRK27BRK28BRK30BRK34BRK35BRK39BRK41BRK59New York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew 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 during the preceding 12 months(or for such shorter period that the Registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the Registrant was required to submit such files).Yes No Indicate by check mark whether the Registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,smaller reporting company,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the Registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No Number of shares of common stock outstanding as of July 21,2025:Class A 519,193 sharesClass B 1,378,545,639 shares1BERKSHIRE HATHAWAY INC.Page No.Part I Financial Information 2Item 1.Financial Statements 2 Consolidated Balance SheetsJune 30,2025 and December 31,20242 Consolidated Statements of EarningsSecond Quarter and First Six Months 2025 and 20244 Consolidated Statements of Comprehensive IncomeSecond Quarter and First Six Months 2025 and 20245 Consolidated Statements of Changes in Shareholders EquitySecond Quarter and First Six Months 2025 and 20245 Consolidated Statements of Cash FlowsFirst Six Months 2025 and 20246 Notes to Consolidated Financial Statements7Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations31Item 3.Quantitative and Qualitative Disclosures About Market Risk48Item 4.Controls and Procedures48Part II Other Information 48Item 1.Legal Proceedings48Item 1A.Risk Factors48Item 2.Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities48Item 3.Defaults Upon Senior Securities48Item 4.Mine Safety Disclosures49Item 5.Other Information49Item 6.Exhibits49Signature 49 2Part I Financial InformationItem 1.Financial StatementsBERKSHIRE HATHAWAY INC.and SubsidiariesCONSOLIDATED BALANCE SHEETS(dollars in millions)June 30,2025December 31,2024(Unaudited)Assets:Insurance and Other:Cash and cash equivalents*$96,193$44,333Short-term investments in U.S.Treasury Bills243,605286,472Investments in fixed maturity securities15,08415,364Investments in equity securities267,923271,588Equity method investments25,32331,134Loans and finance receivables28,72227,798Other receivables47,47343,887Inventories24,37124,008Property,plant and equipment30,37430,071Equipment held for lease18,12317,828Goodwill57,09656,860Other intangible assets34,07934,638Deferred charges-retroactive reinsurance8,4748,797Other25,69924,994 922,539917,772Railroad,Utilities and Energy:Cash and cash equivalents*4,2933,396Receivables4,3234,503Property,plant and equipment179,366175,030Goodwill27,15527,020Regulatory assets5,2415,349Other21,05120,811 241,429236,109Total assets$1,163,968$1,153,881*Includes U.S.Treasury Bills with maturities of three months or less when purchased of$67.0 billion at June 30,2025 and$14.4 billion at December 31,2024.See accompanying Notes to Consolidated Financial Statements3BERKSHIRE HATHAWAY INC.and SubsidiariesCONSOLIDATED BALANCE SHEETS(dollars in millions)June 30,2025December 31,2024(Unaudited)Liabilities:Insurance and Other:Unpaid losses and loss adjustment expenses$118,788$115,151Unpaid losses and loss adjustment expenses-retroactive reinsurance contracts31,73332,443Unearned premiums32,41430,808Life,annuity and health insurance benefits17,86517,616Other policyholder liabilities10,63410,703Accounts payable,accruals and other liabilities36,98837,489Payable for purchases of U.S.Treasury Bills12,769Aircraft repurchase liabilities and unearned lease revenues9,7479,356Notes payable and other borrowings45,04044,885 303,209311,220Railroad,Utilities and Energy:Accounts payable,accruals and other liabilities18,38218,226Regulatory liabilities7,1307,033Notes payable and other borrowings81,98079,877 107,492105,136Income taxes,principally deferred82,99185,870Total liabilities493,692502,226Shareholders equity:Common stock88Capital in excess of par value35,62435,665Accumulated other comprehensive income(1,895)(3,584)Retained earnings713,191696,218Treasury stock,at cost(78,939)(78,939)Berkshire shareholders equity667,989649,368Noncontrolling interests2,2872,287Total shareholders equity670,276651,655Total liabilities and shareholders equity$1,163,968$1,153,881See accompanying Notes to Consolidated Financial Statements 4BERKSHIRE HATHAWAY INC.and SubsidiariesCONSOLIDATED STATEMENTS OF EARNINGS(dollars in millions except per share amounts)(Unaudited)Second QuarterFirst Six Months2025202420252024Revenues:Insurance and Other:Insurance premiums earned$22,195$21,953$43,999$43,427Sales and service revenues49,65851,84197,473101,774Leasing revenues2,5092,3084,9404,530Interest,dividend and other investment income6,0025,28411,6349,622 80,36481,386158,046159,353Railroad,Utilities and Energy:Freight rail transportation revenues5,7185,72011,38911,357Utility and energy operating revenues5,1185,10310,61210,336Service revenues and other income1,3151,4442,1932,476 12,15112,26724,19424,169Total revenues92,51593,653182,240183,522Investment gains(losses)6,36423,857(71)25,733Costs and expenses:Insurance and Other:Insurance losses and loss adjustment expenses14,07314,10728,71927,555Life,annuity and health benefits1,1329542,2001,899Insurance underwriting expenses4,4564,0468,8247,799Cost of sales and services39,61642,08278,16782,874Cost of leasing1,8871,7393,7743,430Selling,general and administrative expenses7,9316,03315,61211,574Interest expense318336658742 69,41369,297137,954135,873Railroad,Utilities and Energy:Freight rail transportation expenses3,7293,9127,6027,850Utility and energy cost of sales and other expenses4,1564,2908,2478,393Other expenses1,1511,2321,9972,237Interest expense9358941,8521,804 9,97110,32819,69820,284Total costs and expenses79,38479,625157,652156,157Earnings before income taxes and equity method earnings19,49537,88524,51753,098Equity method earnings(losses)(4,745)252(4,619)745Earnings before income taxes14,75038,13719,89853,843Income tax expense2,2937,6392,76910,513Net earnings12,45730,49817,12943,330Earnings attributable to noncontrolling interests87150156280Net earnings attributable to Berkshire shareholders$12,370$30,348$16,973$43,050Net earnings per average equivalent Class A share$8,601$21,122$11,801$29,936Net earnings per average equivalent Class B share*$5.73$14.08$7.87$19.96Average equivalent Class A shares outstanding1,438,2231,436,7901,438,2231,438,080Average equivalent Class B shares outstanding2,157,335,1392,155,185,2832,157,335,1392,157,120,209*Net earnings per average equivalent Class B share outstanding are equal to one-fifteen-hundredth of the equivalent Class A amount.See Note 18.See accompanying Notes to Consolidated Financial Statements 5BERKSHIRE HATHAWAY INC.and SubsidiariesCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(dollars in millions)(Unaudited)Second QuarterFirst Six Months2025202420252024Net earnings$12,457$30,498$17,129$43,330Other comprehensive income:Unrealized gains(losses)on investments11710158(25)Applicable income taxes(18)(3)(29)3Foreign currency translation1,108(222)1,590(761)Applicable income taxes(52)(8)(54)(8)Long-duration insurance contract discount rate changes115508154859Applicable income taxes(25)(108)(36)(175)Defined benefit pension plans(65)(5)(105)1Applicable income taxes15117(1)Other,net41710(13)Other comprehensive income,net1,1991901,705(120)Comprehensive income13,65630,68818,83443,210Comprehensive income attributable to noncontrolling interests97145172252Comprehensive income attributable to Berkshire shareholders$13,559$30,543$18,662$42,958CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY(dollars in millions)(Unaudited)Berkshire shareholders equityCommon stockand capital inexcess of parvalueAccumulatedothercomprehensiveincomeRetainedearningsTreasurystockNon-controllinginterestsTotal2025Balance at December 31,2024$35,673$(3,584)$696,218$(78,939)$2,287$651,655Net earnings4,603694,672Other comprehensive income,net5006506Transactions with noncontrolling interests and other(91)(91)Balance at March 31,2025$35,673$(3,084)$700,821$(78,939)$2,271$656,742Net earnings12,3708712,457Other comprehensive income,net1,189101,199Transactions with noncontrolling interests and other(41)(81)(122)Balance at June 30,2025$35,632$(1,895)$713,191$(78,939)$2,287$670,276 2024Balance at December 31,2023$34,488$(3,763)$607,350$(76,802)$6,236$567,509Net earnings12,70213012,832Adoption of ASU 2023-02(127)(127)Other comprehensive income,net(287)(23)(310)Acquisitions of common stock(2,573)(2,573)Transactions with noncontrolling interests and other502(48)454Balance at March 31,2024$34,990$(4,050)$619,925$(79,375)$6,295$577,785Net earnings30,34815030,498Other comprehensive income,net195(5)190Acquisitions of common stock(345)(345)Transactions with noncontrolling interests and other9(166)(157)Balance at June 30,2024$34,999$(3,855)$650,273$(79,720)$6,274$607,971See accompanying Notes to Consolidated Financial Statements6BERKSHIRE HATHAWAY INC.and SubsidiariesCONSOLIDATED STATEMENTS OF CASH FLOWS(dollars in millions)(Unaudited)First Six Months20252024Cash flows from operating activities:Net earnings$17,129$43,330Adjustments to reconcile net earnings to operating cash flows:Investment(gains)losses71(25,733)Depreciation and amortization6,5946,366Discount accretion on investments,principally U.S.Treasury Bills(6,169)(4,475)Other7,826(999)Changes in operating assets and liabilities:Unpaid losses and loss adjustment expenses2,144690Deferred charges-retroactive reinsurance323431Unearned premiums1,5121,735Receivables and originated loans(4,234)(1,145)Inventories(122)456Other assets(740)(836)Other liabilities(370)(3,782)Income taxes(2,976)8,130Net cash flows from operating activities20,98824,168Cash flows from investing activities:Purchases of equity securities(7,092)(4,306)Sales of equity securities11,59297,123Purchases of U.S.Treasury Bills and fixed maturity securities(249,863)(229,505)Sales of U.S.Treasury Bills and fixed maturity securities18,20315,018Redemptions and maturities of U.S.Treasury Bills and fixed maturity securities268,859120,480Purchases of property,plant and equipment and equipment held for lease(9,139)(8,928)Other397(533)Net cash flows from investing activities32,957(10,651)Cash flows from financing activities:Proceeds from borrowings of insurance and other businesses7231,692Repayments of borrowings of insurance and other businesses(2,653)(6,968)Proceeds from borrowings of railroad,utilities and energy businesses3,5706,617Repayments of borrowings of railroad,utilities and energy businesses(2,569)(1,396)Changes in short-term borrowings,net570(3,161)Acquisitions of treasury stock(2,918)Other,principally transactions with noncontrolling interests(754)(2,814)Net cash flows from financing activities(1,113)(8,948)Effects of foreign currency exchange rate changes20(141)Increase in cash and cash equivalents and restricted cash52,8524,428Cash and cash equivalents and restricted cash at the beginning of the year*48,37638,643Cash and cash equivalents and restricted cash at the end of the second quarter*$101,228$43,071*Cash and cash equivalents and restricted cash are comprised of:Beginning of the yearInsurance and Other$44,333$34,268Railroad,Utilities and Energy3,3963,754Restricted cash included in other assets647621$48,376$38,643End of the second quarterInsurance and Other$96,193$36,968Railroad,Utilities and Energy4,2935,356Restricted cash included in other assets742747$101,228$43,071See accompanying Notes to Consolidated Financial Statements 7BERKSHIRE HATHAWAY INC.and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTSJune 30,2025Note 1.General The accompanying unaudited Consolidated Financial Statements include the accounts of Berkshire Hathaway Inc.(“Berkshire”or“Company”)consolidated with the accounts of all subsidiaries and affiliates in which Berkshire holds a controlling financial interest as of the financial statement date.In these notes,the terms“us,”“we”or“our”refer to Berkshire and its consolidated subsidiaries.Reference is made to Berkshires most recently issued Annual Report on Form 10-K(“Annual Report”),which includes information necessary or useful to understanding Berkshires businesses and financial statement presentations.Our significant accounting policies and practices were presented as Note 1 to the Consolidated Financial Statements included in the Annual Report.Financial information in this Quarterly Report reflects all adjustments that are,in the opinion of management,necessary to a fair statement of results for the interim periods in accordance with accounting principles generally accepted in the United States(“GAAP”).For several reasons,our results for interim periods may not be indicative of results to be expected for the year.The timing and magnitude of catastrophe losses incurred by insurance subsidiaries and the estimation error inherent to the process of determining liabilities for unpaid losses of insurance subsidiaries can be more significant to results of interim periods than to results for a full year.Changes in market prices of our investments in equity securities and the related changes in unrealized gains and losses will produce significant volatility in our interim and annual earnings.In addition,gains and losses from the periodic revaluation of certain assets and liabilities denominated in foreign currencies and asset impairment charges may cause significant variations in periodic net earnings.Significant estimates are used in the preparation of our Consolidated Financial Statements,including those associated with evaluations of long-lived assets,goodwill and other intangible assets for impairment,expected credit losses on the amounts owed to us and the estimation of certain losses assumed under insurance and reinsurance contracts.These estimates may be subject to significant adjustments in future periods.Changes in macroeconomic conditions and geopolitical events,including changes in international trade policies and tariffs,may negatively affect our operating results and the values of our investments in equity securities and of our operating businesses.We are currently unable to reliably predict the nature,timing or magnitude of the potential economic consequences of any such changes or the impacts on our Consolidated Financial Statements.As described in Note 1 to the Consolidated Financial Statements in the Annual Report,we reclassified the asset,liability,revenue and expense balances of Pilot Travel Centers LLC(“Pilot”)from the Railroad,Utilities and Energy sections to the Insurance and Other sections of our Consolidated Balance Sheets and Statements of Earnings.Accordingly,we reclassified the Pilot balances in the accompanying Consolidated Statements of Earnings for the second quarter and first six months of 2024 from the Railroad,Utilities and Energy section to the Insurance and Other section to conform with current presentations for comparability purposes.These reclassifications had no effect on consolidated revenues,expenses or net earnings from the amounts previously reported.The reclassifications to the amounts previously reported in our Consolidated Statement of Earnings are summarized below(in millions).Second Quarter 2024First Six Months 2024As previously reportedReclassificationAs reclassifiedAs previously reportedReclassificationAs reclassifiedRevenues:Insurance and Other:Sales and service revenues$38,892$12,949$51,841$76,364$25,410$101,774Interest,dividend and other investment income5,249355,2849,554689,622Railroad,Utilities and Energy:Utility and energy operating revenues18,048(12,945)5,10335,738(25,402)10,336Service revenues and other income1,483(39)1,4442,552(76)2,476Costs and expenses:Insurance and Other:Cost of sales and services30,39111,69142,08259,78623,08882,874Selling,general and administrative expenses5,1958386,0339,9681,60611,574Interest expense330633664696742Railroad,Utilities and Energy:Utility and energy cost of sales and other expenses16,819(12,529)4,29033,087(24,694)8,393Interest expense900(6)8941,900(96)1,8048Notes to Consolidated Financial Statements Note 2.New accounting and financial reporting pronouncements In December 2023,the FASB issued Accounting Standards Update 2023-09,“Improvements to Income Tax Disclosures”(“ASU 2023-09”),which provides for additional income tax rate reconciliation and income taxes paid disclosures in annual financial statements.ASU 2023-09 may be adopted prospectively or retrospectively and is effective for annual reporting periods beginning after December 15,2024.In November 2024,the FASB issued Accounting Standards Update 2024-03,“Disaggregation of Income Statement Expenses”(“ASU 2024-03”),which requires disclosure in the notes to the financial statements of specific categories underlying certain expense captions on the income statement.ASU 2024-03 may be adopted prospectively or retrospectively and is effective for annual reporting periods beginning after December 15,2026,with early adoption permitted.We are evaluating the impacts these pronouncements will have on disclosures in our Consolidated Financial Statements.Note 3.Investments in fixed maturity securities Investments in fixed maturity securities are summarized as follows(in millions).AmortizedCostUnrealizedGainsUnrealizedLossesFairValueJune 30,2025U.S.Treasury,U.S.government corporations and agencies$3,845$13$(1)$3,857Foreign governments9,67486(24)9,736Corporate and other1,257237(3)1,491$14,776$336$(28)$15,084December 31,2024U.S.Treasury,U.S.government corporations and agencies$4,447$16$(4)$4,459Foreign governments9,44316(97)9,362Corporate and other1,324225(6)1,543$15,214$257$(107)$15,364As of June 30,2025,approximately 93%of our foreign government holdings were rated AA or higher by at least one of the major rating agencies.The amortized cost and estimated fair value of fixed maturity securities at June 30,2025 are summarized below by contractual maturity dates(in millions).Actual maturities may differ from contractual maturities due to prepayment rights held by issuers.Due in oneyear or lessDue after one year throughfive yearsDue after five years throughten yearsDue afterten yearsMortgage-backedsecuritiesTotalAmortized cost$11,145$2,814$586$116$115$14,776Fair value11,2622,78877912712815,084Note 4.Investments in equity securities Investments in equity securities are summarized as follows(in millions).Cost BasisNet Unrealized GainsFair ValueJune 30,2025Banks,insurance and finance$14,080$79,344$93,424Consumer products13,41878,05791,475Commercial,industrial and other51,90031,12483,024$79,398$188,525$267,923December 31,2024Banks,insurance and finance$15,707$75,936$91,643Consumer products12,65892,091104,749Commercial,industrial and other47,14128,05575,196$75,506$196,082$271,5889Notes to Consolidated Financial Statements Note 4.Investments in equity securitiesOur investments in equity securities over the years have been concentrated in relatively few companies.The fair value of our five largest holdings at June 30,2025 and December 31,2024 represented 67%and 71%,respectively,of the aggregate fair value of our equity securities shown in the preceding tables.The five largest holdings at each date were American Express Company,Apple Inc.,Bank of America Corporation,The Coca-Cola Company and Chevron Corporation.Additionally,we own shares of Occidental Petroleum Corporation(“Occidental”)common stock,which we account for under the equity method.See Note 5.Since 2019,we have also owned non-voting Cumulative Perpetual Preferred Stock of Occidental and Occidental common stock warrants.Our investments in the Occidental preferred stock and Occidental common stock warrants are recorded at fair value and included as equity securities in our Consolidated Balance Sheets,as such investments are not in-substance common stock under GAAP and are not eligible for the equity method.The Occidental preferred stock accrues dividends at 8%per annum and is redeemable at the option of Occidental commencing in 2029 at a redemption price equal to 105%of the liquidation value.As of June 30,2025,our investment in Occidental preferred stock had an aggregate liquidation value of approximately$8.5 billion.To date,Occidental has redeemed approximately$1.5 billion of the aggregate liquidation value due to excess distributions,as defined under the terms of the Occidental preferred stock certificate of designations,to its common stockholders.The Occidental common stock warrants currently allow us to purchase up to 83.9 million shares of Occidental common stock at an exercise price of$59.59 per share.The warrants are exercisable in whole or in part until one year after the date the preferred stock is fully redeemed.As of June 30,2025,we owned 151.6 million shares of American Express Company(“American Express”)common stock representing 21.8%of the outstanding common stock of American Express.Since 1995,we have been party to an agreement with American Express whereby we agreed to vote a significant portion of our shares in accordance with the recommendations of the American Express Board of Directors.We have also agreed to passivity commitments as requested by the Board of Governors of the Federal Reserve System,which collectively,in our judgment,restrict our ability to exercise significant influence over the operating and financial policies of American Express.Accordingly,we do not use the equity method with respect to our investment in American Express common stock,and we continue to record our investment at fair value.Note 5.Equity method investments Berkshire and its subsidiaries hold investments that are accounted for pursuant to the equity method.The most significant of these are our investments in the common stock of The Kraft Heinz Company(“Kraft Heinz”)and Occidental.As of June 30,2025,we owned 27.4%of the outstanding Kraft Heinz common stock and 28.1%of the outstanding Occidental common stock,which excludes the potential effect of the exercise of Occidentals outstanding common stock warrants.Kraft Heinz manufactures and markets food and beverage products,including condiments and sauces,cheese and dairy,meals,meats,refreshment beverages,coffee and other grocery products.Occidental is an international energy company,whose activities include oil and natural gas exploration,development and production,and chemicals manufacturing businesses.We also own a 50%interest in Berkadia Commercial Mortgage LLC(“Berkadia”).Jefferies Financial Group Inc.(“Jefferies”)owns the other 50%interest.Berkadia engages in mortgage banking,investment sales and servicing commercial/multi-family real estate loans.Berkadias commercial paper borrowing capacity(limited to$1.5 billion)is supported by a surety policy issued by a Berkshire insurance subsidiary.Jefferies is obligated to indemnify us for one-half of any losses incurred under the policy.Our investments in Kraft Heinz,Occidental and Berkadia are summarized as follows(in millions).Carrying ValueFair ValueJune 30,2025December 31,2024June 30,2025December 31,2024Kraft Heinz$8,408$13,395$8,408$9,994Occidental16,45817,28711,13013,053Berkadia457452$25,323$31,13410Notes to Consolidated Financial Statements Note 5.Equity method investmentsOur equity in earnings and distributions received from equity method investments are as follows(in millions).Equity in EarningsDistributions ReceivedSecond QuarterFirst Six MonthsSecond QuarterFirst Six Months20252024202520242025202420252024Kraft Heinz*$(4,991)$27$(4,796)$242$130$130$260$260Occidental*216200134463645512096Berkadia3025434029143818$(4,745)$252$(4,619)$745$223$199$418$374*We report our equity earnings in Occidentals earnings on a one-quarter lag and,as indicated below,in the second quarter of 2025 we began reporting our equity earnings in Kraft Heinzs earnings on a one-quarter lag.Kraft Heinz common stock is publicly traded and its fair values shown on the preceding page were based upon quoted market prices.In evaluating our investment in Kraft Heinz for other-than-temporary impairment in the second quarter of 2025,we considered our ability and intent to hold the investment until the fair value exceeds carrying value,the magnitude and duration of the decline in fair value,and the operating results and financial condition of the company.We also considered certain changes in circumstances that occurred in the second quarter of 2025.Berkshires representatives on the Kraft Heinz Board of Directors stepped down on May 19,2025,and the timing and extent of financial information Berkshire receives is now limited to the information that Kraft Heinz makes available to the public.On May 20,2025,Kraft Heinz announced that it was evaluating potential strategic transactions to enhance shareholder value,although Kraft Heinz indicated there was no assurance that its process will result in a transaction or assurance to its outcome or timing.Given these factors,as well as prevailing economic and other uncertainties,we concluded that the unrealized loss,represented by the difference between the carrying value of our investment and its fair value,was other-than-temporary.Accordingly,in the second quarter we recorded a pre-tax impairment loss of approximately$5.0 billion as a component of our equity in the earnings of Kraft Heinz,which reduced the carrying value of our investment in Kraft Heinz to fair value.As the timing and extent of financial information we receive from Kraft Heinz is now limited to the information Kraft Heinz makes publicly available,we believe that such information will no longer be available in time for concurrent inclusion in our Consolidated Financial Statements.Therefore,beginning with our second quarter of 2025,we are recognizing the equity method effects attributable to our investment in Kraft Heinz on a one-quarter lag.The carrying value of our investment in Kraft Heinz at June 30,2025 was less than our proportionate share of Kraft Heinz shareholders equity.Summarized financial information of Kraft Heinz follows(in millions).March 29,2025December 28,2024Assets$90,274$88,287Liabilities40,66938,962Quarter Ended March 29,2025Quarter Ended June 29,2024Six Months Ended June 29,2024Sales$5,999$6,476$12,887Net earnings attributable to common shareholders712102903Occidental common stock is also publicly traded and its fair values shown on the preceding page were based upon quoted market prices.As of June 30,2025,the excess of the carrying value over the fair value of our investment in Occidental common stock was$5.3 billion(or 32%of our carrying value).In evaluating the investment in Occidental for other-than-temporary impairment as of June 30,2025,we considered our ability and intent to hold the investment until the fair value exceeds carrying value,the magnitude and duration of the decline in fair value,and the operating results and financial condition of the company,as well as our current expectations and other factors.Based on the prevailing facts and circumstances,we concluded the recognition of an impairment charge in earnings for Occidental was not required as of June 30,2025.However,our current expectations and intentions concerning this investment may change in the future,which may result in the recognition of an impairment loss at that time.Our carrying value in Occidental common stock as of June 30,2025 exceeded our share of Occidental common shareholders equity as of March 31,2025 by approximately$9.0 billion.11Notes to Consolidated Financial Statements Note 5.Equity method investmentsSummarized financial information of Occidental follows(in millions).March 31,2025September 30,2024Assets$84,967$85,803Liabilities49,86250,869Quarter Ended March 31,Six Months Ended March 31,2025202420252024Total revenues and other income$6,843$6,010$13,680$13,539Net earnings attributable to common shareholders7667184691,747Note 6.Investment gains(losses)Investment gains(losses)are summarized as follows(in millions).Second QuarterFirst Six Months2025202420252024Investment gains(losses):Equity securities:Increase in unrealized investment gains during the period on securities held at the end of the period$7,593$17,252$1,236$29,711Investment gains(losses)on securities sold during the period(370)6,633(417)(3,948)7,22323,88581925,763Fixed maturity securities:Gross realized gains811614Gross realized losses(8)(28)(55)(40)Other(859)(1)(851)(4)$6,364$23,857$(71)$25,733Equity securities gains and losses include unrealized gains and losses from changes in fair values during the period on equity securities we owned at the end of the period,as well as gains and losses on securities we sold during the period.Proceeds from sales of equity securities were approximately$11.6 billion in the first six months of 2025 and$97.1 billion in 2024.In the preceding table,investment gains and losses on equity securities sold during the period represent the difference between the sales proceeds and the fair value of the equity securities sold at the beginning of the applicable period or,if later,the purchase date.Taxable gains and losses on equity securities sold are generally the difference between the proceeds from sales and cost at the acquisition date.Equity securities sold produced taxable gains of$5.3 billion in the second quarter and$8.4 billion in the first six months of 2025 compared to gains of$59.6 billion in the second quarter and$73.7 billion in the first six months of 2024.Note 7.Loans and finance receivables Loans and finance receivables are principally manufactured home loans,and to a lesser extent,commercial loans and site-built home loans and are summarized as follows(in millions).June 30,2025December 31,2024Loans and finance receivables,before allowances and discounts$30,819$29,700Allowances for credit losses(1,307)(1,134)Unamortized acquisition discounts and points(790)(768)$28,722$27,798Reconciliations of the allowance for credit losses on loans and finance receivables follow(in millions).20252024Balance at the beginning of the year$1,134$950Provision for credit losses253116Charge-offs,net of recoveries(80)(51)Balance at June 30$1,307$1,01512Notes to Consolidated Financial Statements Note 7.Loans and finance receivables As of June 30,2025,substantially all manufactured and site-built home loans were evaluated collectively for impairment,and we considered approximately 97%of these loans to be current as to payment status.A summary of performing and non-performing home loans before discounts and allowances by year of loan origination as of June 30,2025 follows(in millions).Origination Year 20252024202320222021PriorTotalPerforming$3,193$5,651$4,738$3,499$2,911$9,899$29,891Non-performing21519181662132$3,195$5,666$4,757$3,517$2,927$9,961$30,023Note 8.Other receivables Other receivables are summarized as follows(in millions).June 30,2025December 31,2024Insurance and other:Insurance premiums receivable$20,504$18,548Reinsurance recoverables5,2705,177Trade receivables17,15615,638Other5,2355,199Allowances for credit losses(692)(675)$47,473$43,887Railroad,utilities and energy:Trade receivables$3,727$3,764Other686862Allowances for credit losses(90)(123)$4,323$4,503Provisions for credit losses with respect to other receivables were$245 million in the first six months of 2025 compared to$233 million in 2024.Charge-offs,net of recoveries,were$268 million in the first six months of 2025 compared to$230 million in 2024.Note 9.InventoriesInventories of our insurance and other businesses are comprised of the following(in millions).June 30,2025December 31,2024Raw materials and supplies$5,588$5,421Work in process and other3,3933,150Finished manufactured goods5,2164,898Goods acquired for resale10,17410,539$24,371$24,008Inventories,materials and supplies of our railroad,utilities and energy businesses are included in other assets and were approximately$3.1 billion as of June 30,2025 and$3.0 billion as of December 31,2024.Note 10.Property,plant and equipment A summary of property,plant and equipment of our insurance and other businesses follows(in millions).June 30,2025December 31,2024Land,buildings and improvements$21,287$20,735Machinery and equipment33,23532,475Furniture,fixtures and other5,9155,501 60,43758,711Accumulated depreciation(30,063)(28,640)$30,374$30,07113Notes to Consolidated Financial Statements Note 10.Property,plant and equipmentA summary of property,plant and equipment of our railroad,utilities and energy businesses follows(in millions).The utility generation,transmission and distribution systems and interstate natural gas pipeline assets are owned by regulated public utility and natural gas pipeline subsidiaries.June 30,2025December 31,2024Railroad:Land,track structure and other roadway$75,413$74,093Locomotives,freight cars and other equipment15,51315,766Construction in progress2,0411,813 92,96791,672Accumulated depreciation(21,459)(20,411)71,50871,261Utilities and energy:Utility generation,transmission and distribution systems106,067103,015Interstate natural gas pipeline assets20,43220,237Independent power plants and other15,57814,840Construction in progress10,8928,793 152,969146,885Accumulated depreciation(45,111)(43,116)107,858103,769$179,366$175,030Property,plant and equipment depreciation expense for the first six months of 2025 and 2024 is summarized below(in millions).20252024Insurance and other$1,568$1,535Railroad,utilities and energy3,4143,244$4,982$4,779Note 11.Equipment held for lease Equipment held for lease includes railcars,aircraft and other equipment,including over-the-road trailers,intermodal tank containers,cranes,storage units and furniture.Equipment held for lease is summarized below(in millions).June 30,2025December 31,2024Railcars$10,299$10,137Aircraft14,89414,201Other5,7135,686 30,90630,024Accumulated depreciation(12,783)(12,196)$18,123$17,828Depreciation expense on equipment held for lease in the first six months was$749 million in 2025 and$695 million in 2024.Fixed and variable operating lease revenues are summarized below(in millions).Second QuarterFirst Six Months2025202420252024Fixed lease revenue$1,737$1,612$3,420$3,164Variable lease revenue7726961,5201,366$2,509$2,308$4,940$4,53014Notes to Consolidated Financial Statements Note 12.Goodwill and other intangible assets Reconciliations of the changes in the carrying value of goodwill for the first six months of 2025 and for the year ended December 31,2024 follow(in millions).June 30,2025December 31,2024Balance at the beginning of the year*$83,880$84,626Business acquisitions6187Other,including foreign currency translation310(833)Balance at the end of the period*$84,251$83,880*Net of accumulated goodwill impairments of$11.5 billion as of June 30,2025 and December 31,2024 and$11.1 billion as of December 31,2023.Other intangible assets are summarized below(in millions).June 30,2025December 31,2024GrosscarryingamountAccumulatedamortizationNetcarryingvalueGrosscarryingamountAccumulatedamortizationNetcarryingvalueInsurance and other:Customer relationships$30,939$9,224$21,715$30,941$8,840$22,101Trademarks and trade names9,0311,1117,9209,0071,0417,966Patents and technology5,5724,5799935,3754,3591,016Other5,6072,1563,4515,5511,9963,555$51,149$17,070$34,079$50,874$16,236$34,638Railroad,utilities and energy:Customer relationships and contracts$1,540$762$778$1,553$728$825Other443130313437126311$1,983$892$1,091$1,990$854$1,136Intangible asset amortization expense in the first six months was$863 million in 2025 and$892 million in 2024.Intangible assets with indefinite lives were$18.9 billion as of June 30,2025 and December 31,2024 and primarily related to certain customer relationships and trademarks and trade names.Railroad,utilities and energy intangible assets are included in other assets.Note 13.Unpaid losses and loss adjustment expenses Reconciliations of the changes in unpaid losses and loss adjustment expenses(“claim liabilities”),excluding liabilities under retroactive reinsurance contracts(see Note 14)follow(in millions).20252024Balance at the beginning of the year:Gross liabilities$115,151$111,082Reinsurance recoverable on unpaid losses(4,593)(4,893)Net liabilities110,558106,189Losses and loss adjustment expenses incurred:Current accident year28,60728,359Prior accident years(240)(1,167)Total28,36727,192Losses and loss adjustment expenses paid:Current accident year(9,253)(9,491)Prior accident years(16,283)(15,626)Total(25,536)(25,117)Foreign currency effect712(110)Balance at June 30:Net liabilities114,101108,154Reinsurance recoverable on unpaid losses4,6874,650Gross liabilities$118,788$112,80415Notes to Consolidated Financial Statements Note 13.Unpaid losses and loss adjustment expenses Our claim liabilities under property and casualty insurance and reinsurance contracts are based upon estimates of the ultimate claim costs associated with claim events that have occurred as of the balance sheet date and include estimates for incurred-but-not-reported(“IBNR”)claims.Losses and loss adjustment expenses incurred in the preceding table related to events occurring in the current year(“current accident year”)and events occurring in all prior years(“prior accident years”).Losses and loss adjustment expenses incurred and paid are net of reinsurance recoveries.Current accident year incurred losses from significant catastrophe events(losses exceeding$150 million per event)in the first six months of 2025 were$1.1 billion from the Southern California wildfires,which occurred in the first quarter.We experienced no significant catastrophe events in the first six months of 2024.We recorded net reductions of estimated ultimate claim liabilities for prior accident years claims of$240 million in the first six months of 2025 and$1.2 billion in the first six months of 2024,which reduced losses and loss adjustment expenses incurred in those periods.These reductions,as percentages of the net liabilities at the beginning of each year,were 0.2%in 2025 and 1.1%in 2024.Our primary insurance businesses recorded net increases in prior accident years estimated ultimate claim liabilities of$266 million in the first six months of 2025,primarily attributable to increases for casualty exposures,partly offset by decreases for property coverages.Our primary insurance businesses reduced estimated losses for prior accident years in the first six months of 2024 by$433 million,which derived primarily from reduced estimates for property and medical professional liability coverages.Our reinsurance businesses recorded net reductions of estimated ultimate claim liabilities for prior accident years in the first six months of$506 million in 2025 and$734 million in 2024.These reductions were primarily attributable to lower estimates for property coverages.Note 14.Retroactive reinsurance contracts Retroactive reinsurance policies provide indemnification of losses and loss adjustment expenses of short-duration insurance contracts with respect to underlying loss events that occurred prior to the contract inception date.Exposures include significant asbestos,environmental and other mass tort claims.Retroactive reinsurance contracts are generally subject to aggregate policy limits and our exposure to such claims under these contracts is likewise limited.Reconciliations of the changes in estimated liabilities for retroactive reinsurance unpaid losses and loss adjustment expenses follow(in millions).20252024Balance at the beginning of the year$32,443$34,647Losses and loss adjustment expenses incurred29(68)Losses and loss adjustment expenses paid(867)(1,066)Foreign currency effect128(19)Balance at June 30$31,733$33,494Losses and loss adjustment expenses incurred$29$(68)Deferred charge adjustments323431Losses and loss adjustment expenses incurred,including deferred charge adjustments$352$363We classify incurred and paid losses and loss adjustment expenses based on the inception dates of the contracts,which reflect when our exposure to losses began.Substantially all of the losses and loss adjustment expenses incurred and paid related to contracts written in prior years.Losses and loss adjustment expenses incurred include changes in estimated ultimate liabilities and related adjustments to deferred charge assets arising from the changes in the estimated timing and amount of loss payments.Deferred charge assets on retroactive reinsurance contracts were$8.5 billion at June 30,2025 and$8.8 billion at December 31,2024.Note 15.Long-duration insurance contracts A summary of our long-duration life,annuity and health insurance benefits liabilities disaggregated by our principal product categories follows(in millions).June 30,20252024Periodic payment annuity(“Annuities”)$10,457$10,378Life and health4,5044,167Other2,9042,955$17,865$17,50016Notes to Consolidated Financial Statements Note 15.Long-duration insurance contractsReconciliations of the liabilities for each of our principal product categories follow(in millions).The information reflects the changes in discounted present values of expected future policy benefits and expected future net premiums before reinsurance ceded.Net premiums represent the portion of expected gross premiums that are required to provide for future policy benefits and variable expenses.AnnuitiesLife and health2025202420252024Expected future policy benefits:Balance at the beginning of the year$10,276$11,212$43,784$52,665Balance at the beginning of the year-original discount rates11,75711,68155,17065,871Effect of cash flow assumption changes(98)(324)Effect of actual versus expected experience(20)4246(12,836)Change in benefits,net(240)(235)(887)(943)Interest accrual277273646575Foreign currency effect136151,489(459)Balance at June 30-original discount rates11,91011,73856,56651,884Effect of changes in discount rate assumptions(1,453)(1,360)(12,232)(12,739)Balance at June 30$10,457$10,378$44,334$39,145Expected future net premiums:Balance at the beginning of the year$39,294$46,916Balance at the beginning of the year-original discount rates49,50058,731Effect of cash flow assumption changes(66)(326)Effect of actual versus expected experience204(11,225)Change in premiums,net(884)(876)Interest accrual579507Foreign currency effect1,395(436)Balance at June 30-original discount rates50,72846,375Effect of changes in discount rate assumptions(10,898)(11,397)Balance at June 30$39,830$34,978Liabilities for future policy benefits:Balance at June 30$10,457$10,378$4,504$4,167Reinsurance recoverables(51)(49)Balance at June 30,net of reinsurance recoverables$10,457$10,378$4,453$4,118Expected future policy benefits and expected future net premiums declined in the first six months of 2024,primarily attributable to the commutations of certain life reinsurance contracts.The impacts of these contract commutations were included in the effects of actual versus expected experience.Other information relating to our long-duration insurance liabilities follows(dollars in millions).AnnuitiesLife and healthJune 30,June 30,2025202420252024Undiscounted expected future gross premiums$103,580$94,942Discounted expected future gross premiums60,95155,787Undiscounted expected future benefits30,67030,86794,17386,253Weighted average discount rate5.7%5.7%5.2%5.2%Weighted average accretion rate4.8%4.8%2.7%2.7%Weighted average duration16 years16 years13 years13 years17Notes to Consolidated Financial StatementsNote 15.Long-duration insurance contractsGross premiums earned and interest expense before reinsurance ceded for the first six months of 2025 and 2024 were as follows(in millions).Gross premiumsInterest expense2025202420252024Annuities$277$273Life and health1,9611,8706768Note 16.Notes payable and other borrowings Notes payable and other borrowings of our insurance and other businesses are summarized below(dollars in millions).The weighted average interest rates and maturity date ranges are based on borrowings as of June 30,2025.WeightedAverageInterest RateJune 30,2025December 31,2024Insurance and other:Berkshire Hathaway Inc.(“Berkshire”):U.S.Dollar denominated due 2026-20473.5%$3,546$3,749Euro denominated due 2027-20411.4%4,2144,733Japanese Yen denominated due 2025-20601.1,10112,609Berkshire Hathaway Finance Corporation(“BHFC”):U.S.Dollar denominated due 2027-20523.6,47214,469Great Britain Pound denominated due 2039-20592.5%2,3672,156Euro denominated due 2030-20341.8%1,4691,290Other subsidiary borrowings due 2025-20515.0%3,5724,564Short-term subsidiary borrowings6.3%1,2991,315$45,040$44,885Berkshire borrowings consist of senior unsecured debt.Berkshire repaid approximately$1.6 billion of maturing debt in the first six months of 2025.In April 2025,Berkshire issued 90 billion($632 million)of senior notes with maturity dates ranging from 2028 to 2055 and a weighted average interest rate of 1.637%.Additionally,at the end of July 2025,Berkshire issued 151.5 billion($1.0 billion)of senior notes with maturity dates ranging from 2030 to 2040 and a weighted average interest rate of 2.306%.Borrowings of BHFC,a wholly-owned finance subsidiary of Berkshire,consist of senior unsecured notes used to fund manufactured housing loans originated or acquired and equipment held for lease of certain subsidiaries.BHFC borrowings are fully and unconditionally guaranteed by Berkshire.Berkshire also guarantees certain debt of other subsidiaries,aggregating approximately$1.7 billion at June 30,2025.Generally,Berkshires guarantee of a subsidiarys debt obligation is an absolute,unconditional and irrevocable guarantee for the full and prompt payment when due of all payment obligations.The carrying values of Berkshire and BHFC non-U.S.Dollar denominated senior notes(4.85 billion,1.75 billion and 2,036 billion par at June 30,2025)reflect the applicable exchange rates as of each balance sheet date.The effects of changes in foreign currency exchange rates during the period on these borrowings are recorded in earnings as a component of selling,general and administrative expenses.Changes in the exchange rates produced pre-tax losses of$1.2 billion in the second quarter and$2.1 billion in the first six months of 2025 and pre-tax gains of$588 million in the second quarter and$1.4 billion in the first six months of 2024.Notes payable and other borrowings of our railroad,utilities and energy businesses are summarized below(dollars in millions).The weighted average interest rates and maturity date ranges are based on borrowings as of June 30,2025.WeightedAverageInterest RateJune 30,2025December 31,2024Railroad,utilities and energy:Berkshire Hathaway Energy Company(“BHE”)and subsidiaries:BHE senior unsecured debt due 2028-20534.4%$11,459$13,107Subsidiary and other debt due 2025-20644.7D,98242,150Short-term borrowings5.1%1,6871,123Burlington Northern Santa Fe(“BNSF”)and subsidiaries due 2025-20974.8#,85223,497$81,980$79,87718Notes to Consolidated Financial Statements Note 16.Notes payable and other borrowings BHE subsidiary debt represents amounts issued pursuant to separate financing agreements.Substantially all of the assets of certain BHE subsidiaries are,or may be,pledged or encumbered to support or otherwise secure such debt.These borrowing arrangements generally contain various covenants,including those which pertain to leverage ratios,interest coverage ratios and/or debt service coverage ratios.In the first six months of 2025,BHE subsidiaries issued$2.7 billion of term debt,with a weighted average interest rate of 6.5%and maturity dates ranging from 2035 to 2055,and BHE and its subsidiaries repaid term debt of$2.0 billion and increased short-term borrowings by$564 million.BNSFs borrowings are primarily senior unsecured debentures.In the first six months of 2025,BNSF repaid approximately$530 million of term debt and in June 2025,issued$900 million of 5.8bentures due in 2056.As of June 30,2025,BHE,BNSF and their subsidiaries were in compliance with all applicable debt covenants.Berkshire does not guarantee any debt,borrowings or lines of credit of BHE,BNSF or their subsidiaries.Unused and available lines of credit and commercial paper capacity to support operations and provide additional liquidity for our subsidiaries were approximately$11.0 billion at June 30,2025,of which approximately$9.8 billion related to BHE and its subsidiaries.Note 17.Fair value measurements Our financial assets and liabilities are summarized below,with fair values shown according to the fair value hierarchy(in millions).The carrying values of cash and cash equivalents,U.S.Treasury Bills,other receivables and accounts payable,accruals and other liabilities are considered to be reasonable estimates of or otherwise approximate the fair values.CarryingValueFair ValueLevel 1Level 2Level 3June 30,2025Investments in fixed maturity securities:U.S.Treasury,U.S.government corporations and agencies$3,857$3,857$3,823$34$Foreign governments9,7369,7369,601135Corporate and other1,4911,4911,015476Investments in equity securities267,923267,923258,484109,429Investments in Kraft Heinz&Occidental common stock24,86619,53819,538Loans and finance receivables28,72228,74439628,348Derivative contract assets(1)1971972915216Derivative contract liabilities(1)21821811105102Notes payable and other borrowings:Insurance and other45,04040,31940,28435Railroad,utilities and energy81,98075,38775,387December 31,2024Investments in fixed maturity securities:U.S.Treasury,U.S.government corporations and agencies$4,459$4,459$4,425$34$Foreign governments9,3629,3629,199163Corporate and other1,5431,5431,041502Investments in equity securities271,588271,588261,910109,668Investments in Kraft Heinz&Occidental common stock30,68223,04723,047Loans and finance receivables27,79827,57981026,769Derivative contract assets(1)2012013315810Derivative contract liabilities(1)2342341514376Notes payable and other borrowings:Insurance and other44,88540,18140,15823Railroad,utilities and energy79,87772,50672,506(1)Assets are included in other assets,and liabilities are included in accounts payable,accruals and other liabilities.19Notes to Consolidated Financial Statements Note 17.Fair value measurementsThe fair values of substantially all of our financial instruments were measured using market or income approaches.The hierarchy for measuring fair value consists of Levels 1 through 3,which are described below.Level 1 Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.Level 2 Inputs include directly or indirectly observable inputs(other than Level 1 inputs)such as quoted prices for similar assets or liabilities exchanged in active or inactive markets;quoted prices for identical assets or liabilities exchanged in inactive markets;other inputs that may be considered in fair value determinations of the assets or liabilities,such as interest rates and yield curves,volatilities,prepayment speeds,loss severities,credit risks and default rates;and inputs that are derived principally from or corroborated by observable market data by correlation or other means.Pricing evaluations generally reflect discounted expected future cash flows,which incorporate yield curves for instruments with similar characteristics,such as credit ratings,estimated durations and yields for other instruments of the issuer or entities in the same industry sector.Level 3 Inputs include unobservable inputs used in the measurement of assets and liabilities.Management is required to use its own assumptions regarding unobservable inputs because there is little,if any,market activity in the assets or liabilities and it may be unable to corroborate the related observable inputs.Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in valuing assets or liabilities.Reconciliations of significant assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs(Level 3)follow(in millions).Balance atJanuary 1Gains(losses)in earningsBalance at June 30Investments in equity securities:2025$9,663$(240)$9,423202410,468(114)10,354Quantitative information as of June 30,2025 for the significant assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs(Level 3)follows(dollars in millions).FairValuePrincipal ValuationTechniquesUnobservableInputsWeightedAverageInvestments in equity securities:Preferred stock$8,635Discounted cash flowExpected duration4 years Discounts for liquidity and subordination325 bpsCommon stock warrants790Warrant pricing modelExpected duration5 years Volatility42%Investments in equity securities in the preceding table include our investments in certain preferred stock and common stock warrants that do not have readily determinable market values as defined by GAAP.These investments are private placements and are not traded in securities markets.We applied discounted cash flow techniques in valuing the preferred stock and we made assumptions regarding the expected duration of the investment and the effects of illiquidity and subordination in liquidation.In valuing the common stock warrants,we used a warrant valuation model.While most of the inputs to the warrant model are observable,we made assumptions regarding the expected duration and volatility.Note 18.Common stock Changes in shares of Berkshires common stock are shown in the table below.In addition to our common stock,one million shares of preferred stock are authorized and none are issued.Class A,$5 Par Value(1.65 million shares authorized)Class B,$0.0033 Par Value(3.225 billion shares authorized)IssuedTreasuryOutstandingIssuedTreasuryOutstandingBalance at December 31,2024623,902(76,340)547,5621,551,291,352(215,299,213)1,335,992,139Conversions of Class A to Class B common stock(16,093)(16,093)24,139,50024,139,500Balance at June 30,2025607,809(76,340)531,4691,575,430,852(215,299,213)1,360,131,63920Notes to Consolidated Financial Statements Note 18.Common stock Each Class A common share is entitled to one vote per share.Class B common stock possesses dividend and distribution rights equal to one-fifteen-hundredth(1/1,500)of such rights of Class A common stock.Each Class B common share possesses voting rights equal to one-ten-thousandth(1/10,000)of the voting rights of a Class A share.Unless otherwise required under Delaware General Corporation Law,Class A and Class B common shares vote as a single class.Each share of Class A common stock is convertible,at the option of the holder,into 1,500 shares of Class B common stock.Class B common stock is not convertible into Class A common stock.On an equivalent Class A common stock basis,there were 1,438,223 shares outstanding as of June 30,2025 and December 31,2024.Since we have two classes of common stock,we provide earnings per share data on the Consolidated Statements of Earnings for average equivalent Class A shares outstanding and average equivalent Class B shares outstanding.Average equivalent Class A shares outstanding represents average Class A shares outstanding plus one-fifteen-hundredth(1/1,500)of the average Class B shares outstanding.Average equivalent Class B shares outstanding represents average Class B shares outstanding plus 1,500 times the average Class A shares outstanding.Berkshires common stock repurchase program permits Berkshire to repurchase its shares any time that Warren Buffett,Berkshires Chairman of the Board and Chief Executive Officer,believes that the repurchase price is below Berkshires intrinsic value,conservatively determined.The program allows share repurchases in the open market or through privately negotiated transactions and does not specify a maximum number of shares to be repurchased.However,repurchases will not be made if they would reduce the value of Berkshires consolidated cash,cash equivalents and U.S.Treasury Bill holdings below$30 billion.Berkshire is not obligated to repurchase any specific dollar amount or number of Class A or Class B shares under the program and there is no expiration date to the program.There were no share repurchases during the first six months of 2025.Note 19.Income taxes Our consolidated effective income tax rates were 15.5%in the second quarter and 13.9%in the first six months of 2025 compared to 20.0%in the second quarter and 19.5%in the first six months of 2024.Our effective income tax rate normally reflects recurring benefits from dividends-received deductions applicable to investments in certain equity securities and production tax credits related to wind-powered electricity generation placed in service in the U.S.Our periodic effective income tax rate will also vary due to the changes in mix of pre-tax earnings,including realized and unrealized investment gains or losses on our investments in equity securities,the amount of non-deductible goodwill impairment charges and other expenses and the underlying income tax rates applicable in the various taxing jurisdictions.The Organization for Economic Co-operation and Development issued Pillar Two model rules introducing a global minimum tax of 15%.While the U.S.has not adopted the Pillar Two rules,various countries are enacting legislation to adopt the rules.We do not currently have material operations in jurisdictions with income tax rates lower than the Pillar Two minimum tax rate,and we do not currently expect these rules will materially increase our global tax costs.There remains uncertainty as to the final Pillar Two rules.Note 20.Accumulated other comprehensive income A summary of the net changes in after-tax accumulated other comprehensive income attributable to Berkshire shareholders follows(in millions).Unrealized investment gains(losses)Foreign currency translationLong-duration insurance contractsDefined benefit pension plansOtherTotal2025Balance at the beginning of the year$117$(7,039)$2,015$1,148$175$(3,584)Other comprehensive income1291,521118(87)81,689Balance at June 30,2025$246$(5,518)$2,133$1,061$183$(1,895)2024 Balance at the beginning of the year$190$(5,393)$1,353$(97)$184$(3,763)Other comprehensive income(22)(747)684(1)(6)(92)Balance at June 30,2024$168$(6,140)$2,037$(98)$178$(3,855)21Notes to Consolidated Financial Statements Note 21.Supplemental cash flow information A summary of supplemental cash flow information for the first six months of 2025 and 2024 follows(in millions).20252024Cash paid during the period for:Income taxes$5,869$2,159Interest:Insurance and other719790Railroad,utilities and energy1,8781,678Note 22.Contingencies and commitments We are parties in a variety of legal actions that routinely arise out of the normal course of business,including legal actions seeking to establish liability directly through insurance contracts or indirectly through reinsurance contracts issued by Berkshire subsidiaries.Plaintiffs occasionally seek punitive or exemplary damages.We do not currently believe that such normal and routine litigation will have a material effect on our financial condition or results of operations.PacifiCorp,a wholly-owned subsidiary of Berkshire Hathaway Energy Company(“BHE”),operates as a regulated electric utility in Utah,Oregon,Wyoming and other Western states.HomeServices of America,Inc.(“HomeServices”)is also a wholly-owned subsidiary of BHE.Certain legal matters related to these entities are described below.PacifiCorp In September 2020,a severe weather event with high winds,low humidity and warm temperatures contributed to several major wildfires,which resulted in real and personal property and natural resource damage,personal injuries,loss of life and widespread power outages in Oregon and Northern California.These wildfires spread across certain parts of PacifiCorps service territory and surrounding areas across multiple counties in Oregon and California,including Siskiyou County,California;Jackson County,Oregon;Douglas County,Oregon;Marion County,Oregon;Lincoln County,Oregon;and Klamath County,Oregon,burning over 500,000 acres in aggregate and included the Santiam Canyon,Beachie Creek,South Obenchain,Echo Mountain Complex,242,Archie Creek,Slater and other fires.The Slater fire occurred in both Oregon and California.Third-party reports for these wildfires(the“2020 Wildfires”)indicate over 2,000 structures destroyed,including residences,several other structures damaged,multiple individuals injured,and several fatalities.A significant number of complaints and demands alleging similar claims have been filed in Oregon and California,including a class action complaint in Oregon associated with the 2020 Wildfires for which certain jury verdicts were issued as described below.The plaintiffs seek damages for economic losses,noneconomic losses,including mental suffering,emotional distress,personal injury and loss of life,as well as punitive damages,other damages and attorneys fees.Several insurance carriers have filed subrogation complaints in Oregon and California with allegations similar to those made in the aforementioned complaints.Additionally,PacifiCorp received correspondence from the U.S.and Oregon Departments of Justice regarding the potential recovery of certain costs and damages alleged to have occurred on federal and state lands in connection with certain of the 2020 Wildfires.In December 2024,the United States of America filed a complaint against PacifiCorp in conjunction with the correspondence from the U.S.Department of Justice.The civil cover sheet accompanying the complaint demands damages estimated to exceed$900 million.PacifiCorp is actively cooperating with the U.S.and Oregon Departments of Justice on resolving these alleged claims.Amounts sought in outstanding complaints and demands filed in Oregon and in certain demands in California approximate$54 billion,excluding any doubling or trebling of damages or punitive damages included in the complaints.Generally,the complaints filed in California do not specify damages sought and are excluded from this amount.Of the$54 billion,$51 billion represents the economic and noneconomic damages sought in the James mass complaints described below.Oregon law provides for doubling of economic and property damages in the event the defendant is found to have acted with gross negligence,recklessness,willfulness or malice.Oregon law provides for trebling of damages associated with timber,shrubs and produce in the event the defendant is determined to have willfully and intentionally trespassed.The 2020 Wildfires and 2022 Wildfire discussed below are referred to as the“Wildfires.”Based on available information to date,we believe it is probable that losses will be incurred associated with the Wildfires.Final determinations of liability will only be made following the completion of comprehensive investigations,litigation and similar processes.Investigations into the cause and origin of each of the 2020 Wildfires are complex and ongoing and have been or are being conducted by various entities,including the U.S.Department of Agriculture Forest Service(“USFS”),the California Public Utilities Commission,the Oregon Department of Forestry(“ODF”),the Oregon Department of Justice,PacifiCorp and various experts engaged by PacifiCorp.22Notes to Consolidated Financial Statements Note 22.Contingencies and commitmentsIn May 2022,the USFS issued its report of investigation into the Archie Creek fire concluding that the probable cause of the fire was power lines owned and operated by PacifiCorp.The report also states that evidence indicates failure of power line infrastructure.The USFS report of investigation into the Slater fire for the investigation period from October 5,2020 to December 8,2020 concluded that the fire was caused by a downed power line owned and operated by PacifiCorp.The report states that evidence indicates a tree fell onto the power line and that wind blew over the 137-foot tree with internal rot that showed no outward signs of distress and would not have been classified or identified as a hazard tree.Settlements have been reached with substantially all individual plaintiffs,timber companies and insurance subrogation plaintiffs in both the Archie Creek and Slater fires,with government timber and suppression cost claims remaining.In April 2023,the USFS issued its report of investigation into a wildland fire that began in the Opal Creek wilderness outside of the Santiam Canyon that was first reported on August 16,2020(“Beachie Creek Fire”),approximately three weeks prior to the September 2020 wind event described above.In March 2025,PacifiCorp received the ODFs final investigation report on the Santiam Canyon fires(“ODFs Report”),which concluded that embers from the pre-existing Beachie Creek Fire caused 12 fires within the Santiam Canyon.The ODFs Report also found that PacifiCorps power lines did not contribute to the overall spread of fire into the Santiam Canyon,even though its power lines ignited seven spot fires within the Santiam Canyon that were each suppressed.The Beachie Creek fire that spread into the Santiam Canyon burned approximately 193,000 acres;the South Obenchain fire burned approximately 33,000 acres;the Echo Mountain Complex fire burned approximately 3,000 acres;and the 242 fire burned approximately 14,000 acres.The James cases described below are associated with the Beachie Creek(Santiam Canyon),South Obenchain,Echo Mountain Complex and 242 fires,which were four distinct fires located hundreds of miles apart.On September 30,2020,a class action complaint against PacifiCorp was filed captioned Jeanyne James et al.v.PacifiCorp et al.(“James”),in Oregon Circuit Court in Multnomah County,Oregon(the“Multnomah Court”)in connection with the 2020 Wildfires.In November 2021,the plaintiffs filed an amended complaint to limit the class to include Oregon citizens allegedly impacted by the Santiam Canyon,Echo Mountain Complex,South Obenchain and 242 wildfires,as well as to add claims for noneconomic damages.The amended complaint alleged that PacifiCorps assets contributed to the Oregon wildfires occurring on or after September 7,2020,and that PacifiCorp acted with gross negligence,among other things,seeking damages not less than$600 million of economic damages and in excess of$1 billion of noneconomic damages for the plaintiffs and the class.Numerous cases were consolidated into the original James complaint.Between April 2024 and May 2025,seven separate mass complaints against PacifiCorp naming 1,690 individual class members were filed in the Multnomah Court referencing the James case as the lead case.Complaints for ten of the plaintiffs in the mass complaints were subsequently dismissed.These James case mass complaints make damages-only allegations seeking economic,noneconomic and punitive damages,as well as doubling of economic damages.In December 2024,two additional complaints were filed in Multnomah Court on behalf of eight plaintiffs also referencing the James case as the lead case.PacifiCorp believes the magnitude of damages sought by the class members in the James case mass complaints and additional two complaints to be of remote likelihood of being awarded based on the amounts awarded in the jury verdicts described below that are being appealed.In June 2023,a jury verdict was issued in the first James trial finding PacifiCorps conduct grossly negligent,reckless and willful as to each of the 17 named plaintiffs and the entire class.The jury awarded economic and noneconomic damages.After the jury verdict,the Multnomah Court doubled the economic damages,in accordance with Oregon law,and added punitive damages by applying a 0.25 multiplier to the awarded economic and noneconomic damages.PacifiCorp filed a motion with the Multnomah Court requesting the court offset the damage awards by deducting insurance proceeds received by any of the plaintiffs.Net damages awarded to the 17 plaintiffs were$93 million.In January 2024,PacifiCorp filed a notice of appeal associated with the June 2023 verdict,including whether the case can proceed as a class action.Subsequent to the June 2023 jury verdict,eight damages phase trials with up to eleven plaintiffs in each trial have been held with separate jury verdicts issued and damages awarded for each on a basis consistent with the initial trial.Aggregate net damages awarded in these trials,including estimates for additional damages expected to be awarded by the Multnomah Court for certain of these trials consistent with other awards are$370 million.PacifiCorp amended its January 2024 appeal of the June 2023 James verdict to include certain jury verdicts.The appeals process and further actions could take several years.For each limited judgment entered in the court,PacifiCorp has posted or expects to post a supersedeas bond,which stays any effort to seek payment of the judgments pending final resolution of any appeals.Under Oregon Revised Statutes 82.010,interest at a rate of 9%per annum will accrue on the judgments commencing at the date the judgments were entered until the entire money award is paid,amended or reversed by an appellate court.23Notes to Consolidated Financial Statements Note 22.Contingencies and commitments The remaining damages phase trials ordered under the October 2024 case management order are scheduled to begin September 8,October 6 and December 1,2025.In March 2025,PacifiCorp filed a motion to stay the remaining James damages phase trials in consideration of the ODFs Report.The motion was heard by the court and was denied in April 2025.A hearing was held in May 2025 to evaluate scheduling additional damages phase trials in 2026.In April 2025,PacifiCorp filed its opening brief with the Oregon Court of Appeals in connection with its appeal of the June 2023 James verdict and the January and March 2024 verdicts for the first two James damages phase trials.In the opening brief,PacifiCorp addressed numerous procedural and legal issues,including that the class certification is improper due to the plaintiffs being impacted by distinct fires with independent ignition points that were hundreds of miles apart;awarding of noneconomic damages is not allowed under Oregon law;plaintiffs failed to prove that PacifiCorp caused harm to every class member;and jury instructions applied incorrect legal standards in assessing class-wide evidence and individual claims.Additionally,PacifiCorp incorporated the ODFs Report into its opening appellate brief.Various parties who are not party to the James case have filed supportive amicus briefs with the court.The plaintiffs reply brief and cross-appeal was originally due in May 2025 but was extended to August 21,2025.According to the California Department of Forestry and Fire Protection,a wildfire began on July 29,2022,in the Oak Knoll Ranger District of the Klamath National Forest in Siskiyou County,California located in PacifiCorps service territory(the“2022 Wildfire”)burning over 60,000 acres.Third-party reports indicate that the 2022 Wildfire resulted in 11 structures damaged,185 structures destroyed,12 injuries and four fatalities.The USFS issued a Wildland Fire Origin and Cause Supplemental Incident Report.The report concluded that a tree coming in contact with a power line is the probable cause of the 2022 Wildfire.A provision for a loss contingency is recorded when it is probable a liability has been incurred and the amount of loss can be reasonably estimated.PacifiCorp evaluates the related range of reasonably estimated losses and records a loss based on its best estimate within that range or the lower end of the range if there is no better estimate.Estimated probable losses associated with the Wildfires were based on the information available to the date of this filing,including(i)ongoing cause and origin investigations;(ii)ongoing settlement and mediation discussions;(iii)other litigation matters and upcoming legal proceedings;and(iv)the status of the James case.Estimated losses on the Wildfires include estimates for fire suppression costs,real and personal property damages,natural resource damages and noneconomic damages such as personal injury damages and loss of life damages that are considered probable of being incurred and that it is able to reasonably estimate at this time,and which is subject to change as additional relevant information becomes available.Through June 30,2025,PacifiCorp recorded cumulative estimated probable Wildfire losses,before taxes and expected related insurance recoveries,of approximately$2.75 billion,of which approximately$1.37 billion has been paid in connection with settlements.There were no Wildfire loss accruals recorded in the first six months of 2025 and$251 million was accrued in the second quarter of 2024.Estimated unpaid liabilities were approximately$1.38 billion at June 30,2025.Insurance recoveries received to date in connection with the Wildfires were$530 million,which were recorded prior to 2024.No further insurance recoveries are expected to become available.It is reasonably possible PacifiCorp will incur significant additional losses beyond the amounts currently accrued;however,we are currently unable to reasonably estimate the range of possible additional losses that could be incurred due to the number of properties and parties involved,including claimants in the class to the James case and the 2022 Wildfire,the variation in the types of properties and damages and the ultimate outcome of legal actions,including mediation,settlement negotiations,jury verdicts and the appeals process.HomeServices of America,Inc.HomeServices is currently defending against several antitrust cases,all in federal district courts.In each case,plaintiffs claim HomeServices and certain of its subsidiaries(and in one case,BHE)conspired with co-defendants to artificially inflate real estate commissions by following and enforcing multiple listing service(“MLS”)rules that require listing agents to offer a commission split to cooperating agents in order for the property to appear on the MLS(“Cooperative Compensation Rule”).None of the complaints specify damages sought.However,two cases also allege Texas state law deceptive trade practices claims,for which plaintiffs have asserted damages totaling approximately$9 billion by separate written notice as required by Texas law.24Notes to Consolidated Financial Statements Note 22.Contingencies and commitments In one of these cases,Burnett(formerly Sitzer)et al.v.HomeServices of America,Inc.et al.(the“Burnett case”),a jury trial in the U.S.District Court for the Western District of Missouri(“U.S.District Court”)returned a verdict for the plaintiffs on October 31,2023,finding that the named defendants participated in a conspiracy to follow and enforce the Cooperative Compensation Rule,which conspiracy had the purpose or effect of raising,inflating,or stabilizing broker commission rates paid by home sellers.The jury further found that the class plaintiffs had proved damages of$1.8 billion.Joint and several liability applies for the co-defendants.Federal law authorizes trebling of damages and the award of pre-judgment interest and attorney fees.To date,all defendants have reached settlements with the plaintiffs.The U.S.District Court approved these settlements in May and November 2024.The U.S.District Court entered a final judgment on the HomeServices settlement on January 15,2025.All settlements have been appealed to the U.S.Court of Appeals for the Eighth Circuit.The initial briefing on all appeals was filed on April 21,2025 and response briefs were filed on July 21,2025.The final HomeServices settlement agreement reached with the plaintiffs in April 2024 settles all claims asserted against HomeServices and certain of its subsidiaries in the Burnett case and effectuates a nationwide class settlement.The final settlement agreement includes scheduled payments over four years and aggregating$250 million.HomeServices has made payments in escrow of$67 million through June 30,2025.If the settlement is not affirmed by the U.S.Court of Appeals for the Eighth Circuit,HomeServices intends to vigorously appeal on multiple grounds the jurys findings and damage award in the Burnett case,including whether the case can proceed as a class action.The appeals process and further actions could take several years.Other legal matters In September 2024,National Indemnity Company(“NICO”)entered into a settlement agreement reached concerning certain non-insurance affiliates that filed voluntary petitions under Chapter 11 of the bankruptcy code in the United States Bankruptcy Court for the District of New Jersey(the“Court”)in 2023.Under the terms of the settlement agreement,NICO agreed to pay$535 million to the bankruptcy estate in consideration of a release of all estate causes of action against NICO and its affiliates.In connection with the settlement agreement,NICO recorded a pre-tax charge of$490 million in September 2024,which is net of$45 million from a third party that was covered under the release.The Courts approval of the settlement agreement over the objections of certain creditors is pending,as are appeals by certain creditors of prior rulings in favor of the bankruptcy estate.Berkshire and certain of its subsidiaries are also involved in other kinds of legal actions,some of which assert or may assert claims or seek to impose fines and penalties.We currently believe that liabilities that may arise as a result of such other pending legal actions will not have a material effect on our consolidated financial condition or results of operations.CommitmentsIn January 2024,we acquired the remaining noncontrolling interests in Pilot for$2.6 billion.On September 30,2024,BHE repurchased 5.85%of its outstanding common stock held by certain noncontrolling BHE shareholders for$2.9 billion.Additionally,in September and October 2024,Berkshire acquired the remaining 2.12%of BHEs outstanding common stock held by noncontrolling shareholders in exchange for 2,291,631 shares of Berkshire Class B common stock valued at$1.045 billion.The acquisitions of these noncontrolling interests represented equity transactions.We recorded the differences between the consideration paid and the carrying values of the noncontrolling interests,net of deferred income tax liabilities,if applicable,to capital in excess of par value.Pilot and BHE are now wholly-owned subsidiaries.25Notes to Consolidated Financial Statements Note 23.Revenues from contracts with customers The following tables summarize customer contract revenues disaggregated by reportable segment and the source of the revenue(in millions).Other revenues,which are not considered to be revenues from contracts with customers under GAAP,are primarily insurance premiums earned,interest,dividend and other investment income and leasing revenues.BNSFBHEManufacturingServiceandRetailingPilotMcLaneInsurance,Corporateand otherTotalThree months ended June 30,2025Manufactured products:Industrial and commercial$7,702$45$7,747Building5,1235,123Consumer4,3614,361Grocery and convenience store distribution7,5167,516Food and beverage distribution4,6634,663Auto sales2,9112,911Other retail and wholesale distribution9523,7859,99614,733Service5,7001,1754291,747682089,327Electricity and natural gas5,0255,025Total5,7006,20018,5678,48810,06412,38761,406Other revenues462051,3732,183311227,25931,109$5,746$6,405$19,940$10,671$10,095$12,399$27,259$92,515Six months ended June 30,2025Manufactured products:Industrial and commercial$15,055$118$15,173Building9,7119,711Consumer8,6218,621Grocery and convenience store distribution14,95814,958Food and beverage distribution9,0369,036Auto sales5,6125,612Other retail and wholesale distribution1,8297,35420,14929,332Service11,3531,9667123,38613140117,949Electricity and natural gas10,37110,371Total11,35312,33735,92816,47020,28024,395120,763Other revenues924122,7644,3132372053,63961,477$11,445$12,749$38,692$20,783$20,517$24,415$53,639$182,24026Notes to Consolidated Financial Statements Note 23.Revenues from contracts with customers BNSFBHEManufacturingServiceandRetailingPilotMcLaneInsurance,Corporateand otherTotalThree months ended June 30,2024Manufactured products:Industrial and commercial$7,459$55$7,514Building5,2335,233Consumer4,5884,588Grocery and convenience store distribution7,5007,500Food and beverage distribution4,4784,478Auto sales2,7142,714Other retail and wholesale distribution8433,74112,87717,461Service5,6981,2044021,437682459,054Electricity and natural gas4,9774,977Total5,6986,18118,5257,94712,94512,22363,519Other revenues892991,2821,975394826,40230,134$5,787$6,480$19,807$9,922$12,984$12,271$26,402$93,653Six months ended June 30,2024Manufactured products:Industrial and commercial$14,669$107$14,776Building9,9079,907Consumer8,7818,781Grocery and convenience store distribution15,10215,102Food and beverage distribution8,9148,914Auto sales5,2665,266Other retail and wholesale distribution1,6627,50925,27034,441Service11,3162,0107792,81413246617,517Electricity and natural gas10,10610,106Total11,31612,11635,79815,69625,40224,482124,810Other revenues1086292,5203,898768951,39258,712$11,424$12,745$38,318$19,594$25,478$24,571$51,392$183,522A summary of the transaction price allocated to the significant unsatisfied remaining performance obligations related to contracts with expected durations exceeding one year as of June 30,2025 and the timing of when the performance obligations are expected to be satisfied follows(in millions).Less than12 monthsGreater than12 monthsTotalElectricity and natural gas$3,475$18,653$22,128Other sales and service contracts3,4754,6868,161Note 24.Business segment data Berkshires numerous and diverse businesses are managed on an unusually decentralized basis.These businesses are aggregated into operating segments in a manner that reflects how Berkshire views the business activities.The tabular information that follows shows data of Berkshires reportable business segments reconciled to amounts reflected in our Consolidated Financial Statements.Intersegment transactions are not eliminated from segment results when those transactions are considered in assessing the results of the respective segments.Furthermore,investment gains and losses,goodwill and indefinite-lived intangible asset impairments and amortization of certain acquisition accounting adjustments or certain other corporate income and expense items are not considered in assessing the financial performance of operating businesses.Collectively,these items are included in corporate,eliminations and other to reconcile segment totals to consolidated amounts.The information in the following tables includes additional disclosures pursuant to ASU 2023-07,which we adopted as of December 31,2024.27Notes to Consolidated Financial Statements Note 24.Business segment data We view our insurance segment as possessing two distinct activities underwriting and investing.Our underwriting activities are summarized for GEICO,Berkshire Hathaway Primary Group(“BH Primary”)and Berkshire Hathaway Reinsurance Group(“BHRG”).Earnings data of our business segments are shown in the following tables(in millions).Second Quarter 2025GEICOBH PrimaryBHRGTotal UnderwritingInvestment IncomeTotalRevenues$11,064$4,677$6,454$22,195$4,053$26,248Costs and expenses:Losses and LAE7,9453,1932,93514,07314,073Life,annuity and health benefits1,1321,1321,132Other segment items1,2981,4211,7374,456504,506Total costs and expenses9,2434,6145,80419,6615019,711Earnings before income taxes$1,821$63$650$2,534$4,003$6,537First Six Months 2025GEICOBH PrimaryBHRGTotal UnderwritingInvestment IncomeTotalRevenues$21,816$9,254$12,929$43,999$7,624$51,623Costs and expenses:Losses and LAE15,3696,6456,70528,71928,719Life,annuity and health benefits2,2002,2002,200Other segment items2,4532,6903,6818,824608,884Total costs and expenses17,8229,33512,58639,7436039,803Earnings before income taxes$3,994$(81)$343$4,256$7,564$11,820Second Quarter 2024 GEICOBH PrimaryBHRGTotal UnderwritingInvestment IncomeTotalRevenues$10,469$4,656$6,828$21,953$4,077$26,030Costs and expenses:Losses and LAE7,7553,0933,25914,10714,107Life,annuity and health benefits954954954Other segment items9281,2841,8334,04594,054Total costs and expenses8,6834,3776,04619,106919,115Earnings before income taxes$1,786$279$782$2,847$4,068$6,915First Six Months 2024GEICOBH PrimaryBHRGTotal UnderwritingInvestment IncomeTotalRevenues$20,703$9,197$13,527$43,427$7,241$50,668Costs and expenses:Losses and LAE15,1695,9056,48127,55527,555Life,annuity and health benefits1,8991,8991,899Other segment items1,8202,5273,4537,800217,821Total costs and expenses16,9898,43211,83337,2542137,275Earnings before income taxes$3,714$765$1,694$6,173$7,220$13,393Other segment items related to insurance underwriting include commissions and brokerage expenses and other insurance underwriting expenses.28Notes to Consolidated Financial Statements Note 24.Business segment data BNSFSecond QuarterFirst Six Months2025202420252024Revenues$5,769$5,805$11,489$11,465Costs and expenses:Compensation and benefits1,3721,3212,7592,733Fuel6988221,4681,676Depreciation and amortization6796631,3501,320Interest expense270267542532Other segment items9411,1101,9582,063Total costs and expenses3,9604,1838,0778,324Earnings before income taxes$1,809$1,622$3,412$3,141Other segment items of BNSF include purchased services,equipment rents and materials expenses.BHESecond QuarterFirst Six Months2025202420252024Revenues$6,418$6,492$12,774$12,769Costs and expenses:Energy cost of sales1,4341,5272,9653,197Energy operations and maintenance1,3921,5622,6412,797Energy depreciation and amortization1,0549762,0631,958Real estate operating costs and expenses1,2101,2402,0812,326Interest expense6646251,3101,270Other segment items279236606463Total costs and expenses6,0336,16611,66612,011Earnings before income taxes$385$326$1,108$758Other segment items of BHE primarily consist of property taxes and other expenses.Energy operations and maintenance includes losses associated with the 2020 and 2022 Wildfires.See Note 22.ManufacturingService and retailingSecond QuarterFirst Six MonthsSecond QuarterFirst Six Months20252024202520242025202420252024Revenues$19,969$19,840$38,735$38,369$10,688$9,947$20,825$19,650Costs and expenses:Cost of sales and services12,98013,05825,30925,2906,3945,95912,45811,745Cost of leasing3052875995301,5871,4573,1762,905Interest expense29819558339329295658Other segment items3,1393,1716,2816,1131,5731,5333,0893,065Total costs and expenses16,72216,71132,77232,3269,5838,97818,77917,773Earnings before income taxes$3,247$3,129$5,963$6,043$1,105$969$2,046$1,877Other segment items of the manufacturing,service and retailing segments primarily consist of selling,general and administrative expenses.29Notes to Consolidated Financial Statements Note 24.Business segment data PilotMcLaneSecond QuarterFirst Six MonthsSecond QuarterFirst Six Months20252024202520242025202420252024Revenues$10,109$12,999$20,539$25,502$12,601$12,458$24,776$24,933Costs and expenses:Cost of sales and services9,01011,89318,29423,45011,50511,43022,60622,873Depreciation and amortization26025151749647499699Other segment items7206561,4411,2878738371,7171,654Total costs and expenses9,99012,80020,25225,23312,42512,31624,41924,626Earnings before income taxes$119$199$287$269$176$142$357$307Other segment items of Pilot primarily consist of store operating,interest and general and administrative expenses.Other segment items of McLane include general and administrative expenses.Reconciliations of revenues and earnings before income taxes of our business segments to the consolidated amounts follow(in millions).RevenuesEarnings before income taxesSecond QuarterFirst Six MonthsSecond QuarterFirst Six Months20252024202520242025202420252024Total operating businesses$91,802$93,571$180,761$183,356$13,378$13,302$24,993$25,788Investment gains(losses)6,36423,857(71)25,733Equity method investments(4,745)252(4,619)745Corporate,eliminations and other713821,479166(247)726(405)1,577$92,515$93,653$182,240$183,522$14,750$38,137$19,898$53,843Additional segment data follows(in millions).Interest expenseIncome tax expense(benefit)Second QuarterFirst Six MonthsSecond QuarterFirst Six Months20252024202520242025202420252024Business segmentsInsurance$1,177$1,332$2,231$2,614BNSF270267542532343395732771BHE6646251,3101,270(357)(434)(779)(827)Manufacturing2981955833937017271,3121,411Pilot498312117726286327McLane65131043348876Service and retailing29295658243244468458 1,3161,2042,6252,4402,1762,3264,1154,530Reconciliation to consolidated amountInvestment gains(losses)1,3795,082(11)5,476Equity method investments(1,170)32(1,159)120Corporate,eliminations and other(63)26(115)106(92)199(176)387$1,253$1,230$2,510$2,546$2,293$7,639$2,769$10,51330Notes to Consolidated Financial Statements Note 24.Business segment data Capital expendituresDepreciation and amortizationSecond QuarterFirst Six MonthsSecond QuarterFirst Six Months20252024202520242025202420252024Business segmentsInsurance$11$14$35$49$110$100$217$198BNSF9471,0341,5991,7556796631,3501,320BHE2,4451,9754,5734,1281,0649882,0831,982Manufacturing6036511,3101,3596126131,2221,214Pilot254224458396260251517496McLane4554677947499699Service and retailing5535831,0971,162404376803743$4,858$4,535$9,139$8,9283,1763,0406,2886,052Reconciliation to consolidated amountCorporate,eliminations and other153158306314$3,329$3,198$6,594$6,366GoodwillIdentifiable assetsJune 30,2025December 31,2024June 30,2025December 31,2024Business segmentsInsurance$16,557$16,557$537,326$539,884BNSF15,35115,35181,27780,813BHE11,80411,669132,997128,276Manufacturing27,95127,716122,431119,860Pilot6,4786,47719,41019,652McLane2322327,1857,165Service and retailing5,8785,87838,35637,198$84,251$83,880938,982932,848Reconciliation to consolidated amountCorporate and other140,735137,153Goodwill84,25183,880$1,163,968$1,153,88131Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net earnings attributable to Berkshire shareholders are disaggregated in the table that follows.Amounts are after deducting income taxes and exclude earnings attributable to noncontrolling interests(in millions).Second QuarterFirst Six Months2025202420252024Insurance underwriting$1,992$2,263$3,328$4,861Insurance investment income3,3673,3206,2605,918BNSF1,4661,2272,6802,370Berkshire Hathaway Energy(“BHE”)7026551,7991,372Manufacturing,service and retailing3,6013,3806,6616,468Investment gains(losses)4,97018,750(68)20,230Other-than-temporary impairment of investment in Kraft Heinz(3,760)(3,760)Other32753731,831Net earnings attributable to Berkshire shareholders$12,370$30,348$16,973$43,050Through our subsidiaries,we engage in numerous diverse business activities.The business segment data(Note 24 to the accompanying Consolidated Financial Statements and Note 26 to the Consolidated Financial Statements included in Form 10-K for the year ended December 31,2024)should be read in conjunction with this discussion.Our periodic operating results may be affected in future periods by the impacts of ongoing macroeconomic and geopolitical conflicts and events,as well as changes in industry or company-specific factors or events.The pace of changes in these events,including tensions from developing international trade policies and tariffs,accelerated through the first six months of 2025.Considerable uncertainty remains as to the ultimate outcome of these events.We are currently unable to reliably predict the ultimate impact on our businesses,whether through changes in the availability of products,supply chain costs and efficiency,and customer demand for our products and services.It is reasonably possible there could be adverse consequences on most,if not all,of our operating businesses,as well as on our investments in equity securities,which could significantly affect our future results.Insurance underwriting after-tax earnings decreased$271 million in the second quarter and$1.5 billion in the first six months of 2025 compared to 2024.Underwriting results in the first six months of 2025 included after-tax losses of approximately$850 million from the Southern California wildfires,which occurred in the first quarter.After-tax earnings from insurance investment income increased$47 million(1.4%)in the second quarter and$342 million(5.8%)in the first six months of 2025 compared to 2024,attributable to higher average short-term investment balances,partially offset by lower interest rates and dividend income,as well as the impact of capital distributions to Berkshire in the fourth quarter of 2024.The subsequent investment income earned on such distributions is included in other earnings in the above table.After-tax earnings of BNSF increased$239 million(19.5%)in the second quarter and$310 million(13.1%)in the first six months of 2025 compared to 2024,primarily from improved operating efficiencies and productivity and from lower effective income tax rates.After-tax earnings of BHE increased$47 million(7.2%)in the second quarter and$427 million(31.1%)in the first six months of 2025 compared to 2024.The earnings increases reflected higher earnings from the U.S.utilities and lower earnings attributable to noncontrolling interests and reduced losses from the real estate brokerage businesses,primarily due to the impact of litigation settlement charges in the first quarter of 2024,partially offset by lower earnings from the natural gas pipelines and other energy businesses.After-tax earnings from our manufacturing,service and retailing businesses increased$221 million(6.5%)in the second quarter and$193 million(3.0%)in the first six months of 2025 compared to 2024.Results in 2025 among our numerous operations were mixed.Investment gains(losses)derive from our investments in equity securities and can include significant unrealized gains and losses from changes in market prices and foreign currency exchange rates applicable to certain of our investments.We believe that investment gains and losses,whether realized from dispositions or unrealized from changes in market prices,are generally meaningless in understanding our reported periodic results or evaluating the economic performance of our operating businesses.These gains and losses have caused and will continue to cause significant volatility in our periodic earnings.32Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations After-tax other earnings include corporate investment income not allocated to operating businesses,earnings from equity method investments and foreign currency exchange rate gains and losses related to non-U.S.Dollar denominated debt.Other earnings declined$721 million in the second quarter and$1.76 billion in the first six months of 2025,reflecting foreign currency exchange rate losses in the second quarter and first six months of 2025 versus gains in 2024,partially offset by increased corporate investment income.After-tax foreign currency exchange rate losses were$877 million in the second quarter and$1.6 billion in the first six months of 2025 compared to gains of$446 million and$1.0 billion in the corresponding 2024 periods.After-tax corporate investment income increased$1.1 billion in the first six months of 2025 compared to 2024,primarily attributable to the impact of increased investments derived from subsidiary capital distributions to Berkshire.InsuranceUnderwriting Our periodic underwriting earnings may be subject to considerable volatility from the timing and magnitude of significant property catastrophe loss events.Further,we generally do not retrocede the risks we assume.We currently consider consolidated pre-tax losses exceeding$150 million from an event occurring in the current year to be significant.We incurred significant losses in 2025 from the Southern California wildfires in the first quarter,while we experienced no significant catastrophe events in the first six months of 2024.Changes in estimates for unpaid losses and loss adjustment expenses,including amounts established for occurrences in prior years,and foreign currency transaction gains and losses arising from the remeasurement of non-U.S.Dollar denominated assets and liabilities can also significantly affect our periodic underwriting results.We write primary insurance and reinsurance policies covering property and casualty risks,as well as life and health risks.Our insurance and reinsurance businesses are GEICO,Berkshire Hathaway Primary Group(“BH Primary”)and Berkshire Hathaway Reinsurance Group(“BHRG”).We strive to generate pre-tax underwriting earnings(defined as premiums earned less insurance losses/benefits incurred and underwriting expenses)over the long term in all business categories,except in our retroactive reinsurance and periodic payment annuity businesses.Time-value-of-money concepts are important considerations in establishing premiums for these policies,which are recognized as charges to earnings over the claim settlement periods.Underwriting results of our insurance businesses are summarized below(dollars in millions).Second QuarterFirst Six Months2025202420252024Pre-tax underwriting earnings:GEICO$1,821$1,786$3,994$3,714Berkshire Hathaway Primary Group63279(81)765Berkshire Hathaway Reinsurance Group6507823431,694Pre-tax underwriting earnings2,5342,8474,2566,173Income taxes5425849281,312Net underwriting earnings$1,992$2,263$3,328$4,861Effective income tax rate21.4 .5!.8!.3%GEICO GEICO writes property and casualty insurance policies,primarily private passenger automobile insurance,in all 50 states and the District of Columbia.GEICO offers its policies mainly by direct response methods where most customers apply for insurance coverage directly to the company.GEICO also operates an
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